Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 2)

The appeal in *Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 2)* concerned a dispute between a contractor, Valmont Interiors Pty Ltd, and a principal, Giorgio Armani Australia Pty Ltd, regarding payment for works and materials supplied under a building contract. The primary judge had found in favour of the principal on the contractor's claim and in favour of the contractor on the principal's cross-claim. The appeal was heard by Bell P, Macfarlan and Leeming JJA.

The central legal issues before the Court of Appeal were whether the contractor was responsible for defects in materials supplied by a third party, despite a contractual warranty limited to works performed by the contractor; whether the contract precluded the contractor from claiming payment for certain works on a quantum meruit basis, particularly where the contractor had incurred liability for materials prior to the principal's insistence on strict contractual adherence; and whether certain works constituted "variations" under the contract, giving rise to an implied promise to pay, especially when the principal had requested the contractor supply materials the principal had initially intended to supply itself. The court also considered whether the principal's conduct gave rise to a promissory estoppel, preventing it from resisting payment for works where it had encouraged the contractor to complete them after a purported departure from an assumption that the principal had approved those works.

The Court of Appeal reasoned that the contractual warranty regarding defects was confined to the contractor's own works and did not extend to materials supplied by a third party, particularly where the principal had directed the contractor to use those materials. The court found that the principal's conduct, in encouraging the contractor to complete works involving materials the principal had originally agreed to supply, and in failing to clearly communicate any departure from the assumption that these works were approved, created a situation where it would be unconscionable to deny payment. This was particularly so as the contractor had incurred detriment by becoming liable for the cost of those materials. The court applied the principles of promissory estoppel, holding that the principal had a duty to clearly inform the contractor of any material change to the basis of the contractor's assumption, and that the communication in this instance was insufficient to discharge that duty.

The Court of Appeal allowed the appeal with costs, setting aside the primary judge's orders. In lieu, judgment was entered for the plaintiff (contractor) in the amount of $255,493 and for the defendant (principal) on the cross-claim in the amount of $219,083.29. Leave was granted for parties to file submissions regarding costs at first instance.