Woolcock Eng PL v SWF Hoists & Industrial Equip Pty Ltd

[2000] SASC 120

WOOLCOCK ENGINEERING PTY LTD v SWF HOISTS & INDUSTRIAL EQUIPMENT PTY LTD
[2000] SASC 120

Full Court:  Doyle CJ, Mullighan and Bleby JJ

1. DOYLE CJ       For the reasons given by Mullighan J, I agree that the appeal should be allowed, that the decision allowing the appeal to this Court should be set aside, and that the appeal to this Court against the decision by the Magistrate should be dismissed.  There is nothing that I wish add to those reasons.

2. MULLIGHAN J       This is an appeal against an order of a Judge of this Court allowing an appeal from the judgment of a Magistrate on 11th June 1999 in the Civil Jurisdiction of the Magistrates Court against SWF Hoists for the sum of $12,830.00. To avoid confusion I shall refer to the parties to this appeal by abbreviations of their names. The appellant is Woolcock Engineering and the respondent is SWF Hoists.

3. SWF Hoists brought an action against Woolcock Engineering in the Magistrates Court to recover money due under a contract between the parties whereby SWF Hoists agreed to design, manufacture, deliver, install, commission and test three overhead travelling cranes. At the middle of 1995 Woolcock Engineering entered into an agreement with Atlas Steels (Australia) Pty Ltd (“Atlas”) to build for Atlas a factory at Wingfield for its business operations which was to be owned by a company associated with Woolcock Engineering and leased to Atlas.  The business of Atlas included the supply of special types of steel to engineering firms and the cranes were to be installed at the new premises. They were crucial for the operation of aspects of the business of Atlas and were incorporated into the design of the factory premises.

4. SWF Hoists carried on the business of manufacturing cranes of this nature and it entered into a contract with Woolcock Engineering to supply the three cranes for a total price of about $99,335 plus sales tax.  Atlas required at least two of the cranes to be installed at the new factory by December 1995 as it proposed to move soon after the building was completed. It had given notice to the landlord of the premises which it leased at Richmond that it would vacate those premises by the end of the third week in November 1995. If at least two cranes were not installed by that time, Atlas could not operate its business effectively in the new premises and would incur additional operating expenses, including rent. The terms of the contract between Woolcock Engineering and Atlas required the factory, with the cranes, to be completed on time and available to Atlas by about the end of November 1995.

5. It was a term of the contract between Woolcock Engineering and SWF Hoists that the three cranes would be made and delivered within eight to ten weeks from the receipt by SWF Hoists from Woolcock Engineering of approved assembly drawings. These drawings were sent to Woolcock Engineering on 10th August 1995 and approval was given on 11th August 1995. On my calculations, the period of ten weeks would expire on 20th October 1995. Among the specifications, as approved, was a crane span of 24552 millimetres. It was common ground that Woolcock Engineering was to install runway beams upon which the cranes would run. SWF Hoists manufactured the cranes and Woolcock Engineering made progress payments as required under the contract. The cranes were delivered and there was a balance due to SWF Hoists, under the contract, of $19,000 which is not disputed. However, Woolcock Engineering asserted that the cranes were not delivered within the time specified in the contract which caused loss and expense. This loss and expense was incurred by Atlas and, pursuant to its contract with Woolcock Engineering, the latter had to bear the loss and expense. It made a counterclaim for damages. The learned Magistrate found in favour of Woolcock Engineering and awarded damages of $7,170 on the counterclaim. The judgment entered in favour of SWF Hoists by the learned Magistrate is for the difference between the admitted claim and the counterclaim.

6. The learned Magistrate found, in effect, that SWF Hoists was aware of the time constraints upon Atlas, including the deadline to vacate the premises at Richmond, and that at least two of the cranes were essential for the running of the business of Atlas. SWF Hoists conceded that the cranes were not delivered within the specified eight to ten weeks, but contended that the reason for the delay was the failure of Woolcock Engineering to provide it with the runway beam span dimensions with the consequence that the cranes could not be completed. It was the case of Woolcock Engineering that a ten millimetres tolerance was allowed on the runway beams which would enable adjustments to be made to accommodate the cranes if built in accordance with the 24552 millimetres specification.  This was acknowledged in evidence by the contracts manager of SWF Hoists. It was his view that, in these circumstances, the cranes could only have been installed if the runway beams were more accurately aligned so that the distance between them was constant throughout their length. It appears that the learned Magistrate accepted that the use of a laser would ensure that the beams were erected accordingly.

7. The learned Magistrate found that SWF Hoists could have delivered the cranes within the specified time and should have done so. He held that SWF Hoists was only obliged to manufacture the cranes in accordance with the specifications and to carry out its other tasks pursuant to the contract and it had not done so. It was the case of Woolcock Engineering that SWF Hoists had not made and delivered the cranes in time because it gave priority to other work. The learned Magistrate found that the first crane should have been delivered by 11th October 1995 at the latest and was not delivered until 7th November 1995 and not installed until late November 1995. The second crane was delivered and installed late in December 1995.

8. Mr McCulloch was the service engineer of SWF Hoists. He inspected the Wingfield factory site from time to time and had discussions with Mr Woolcock of Woolcock Engineering about progress of the work generally and the runway beams in particular.  According to Mr McCulloch, the runway beams were not completed by 12th October 1995. He again visited the site on 18th October 1995 and took measurements of the runway beams which revealed differences along the spans of between 60 and 80 millimetres. He discussed the matter with Mr Woolcock. According to him, it was agreed that the specifications of the cranes should be altered to provide a span of 24562, an increase of ten millimetres. SWF Hoists had earlier stopped work on the cranes because of the uncertainty about the measurement of the runway beam spans. Mr Anderson, the contracts manager of SWF Hoists, had sent a note by facsimile transmission to Woolcock Engineering on 20th September 1995 in the following terms:

   “Further to your fax dated 11th August 1995, approving the crane General Arrangement and Site Plan drawings, we wish to advise that we are commencing assembly of the first crane in the near future and therefore seek your further confirmation of the crane span, in light of the problems with the crane runway beam alignment.

   In addition, please confirm when you expect to have the Runway Beams aligned and the building ready to accept the cranes.

   Should you have any queries please do not hesitate to contact us.”

He did not receive a reply.

1. Upon SWF Hoists being informed on about 18th October 1995 of the new measurement, work did not re-commence immediately. The learned Magistrate does not appear to have made any finding about aspects of this evidence and I return to it later.

2. On appeal by SWF Hoists, the learned Judge allowed the appeal and entered judgment in its favour on the counterclaim. The learned Judge accepted the submissions that it was implicit in the findings of the learned Magistrate that the runway beams were not correctly aligned and within dimensions which would carry the rail and cranes before 18th October 1995. Further, he accepted the submission that agreement was reached on that date to alter the spans in accordance with the evidence which I have mentioned. He accepted that Woolcock Engineering had not, in that respect, complied with its obligation under the contract to provide runway beams upon which the rails and cranes could be installed.

3. The learned Judge rejected the finding of the learned Magistrate that the cranes could have been installed on the runway beams if the cranes were manufactured in accordance with the originally approved specifications as to span, provided that the beams were aligned so that the distance between them was constant along their length. He concluded that such a finding was inconsistent with the evidence of Mr Anderson and other witnesses.

4. As to the conclusion of the learned Magistrate that the responsibility of SWF Hoists under the contract was to supply the cranes to specifications within time and if they did not fit the runway beams, that problem was the concern of Woolcock Engineering, the learned Judge said:

   “The approach overlooks the totality of the contract. The magistrate could not properly consider the case on the basis that the obligation [of SWF Hoists] was limited to the delivery of cranes to the site. The contract extended to an obligation to install, commission and test the cranes. [SWF Hoist’s] contractual obligations were subject to [Woolcock Engineering] meeting its obligations. Where each party’s obligation ‘is conditional on performance by the other, neither can complain of non-performance by the other when the condition governing the other’s obligation goes unfulfilled: Foran v Wight (1989) 168 CLR 385 at 417.”

He went on to say:

“The evidence clearly established that the obligation [of SWF Hoists] to install was incapable of being discharged within the time specified for delivery. Thus [Woolcock Engineering] was not entitled to complain of the failure to deliver within 10 weeks because it had failed to provide runway beams in a position to take the cranes as initially specified with a span of 24.552 metres.”

1. The learned Judge said that evidence of particular significance was that when SWF Hoists was about to commence assembly of the first crane, it sought from Woolcock Engineering, in the facsimile transmission which I have mentioned, confirmation of the length of crane span and did not receive a response. He concluded that:

   “[SWF Hoists] was discharged from any obligation then fairly dependent upon [Woolcock Engineering] discharging its obligation to locate runway beams complying with the drawings. The time for delivery was no longer eight to 10 weeks from 11 August given [Woolcock Engineering’s] continuing failure to discharge its obligation. [Woolcock Engineering] had not performed its concurrent obligation. Therefore [SWF Hoists] was not in breach of the obligation to deliver in eight to 10 weeks ((1989) 168 CLR 385 at 433). By its own conduct [Woolcock Engineering] had lost the right to rely on the essentiality of the time set for completion of the contract which, though speaking of delivery within eight to 10 weeks had to be understood as a reference to time within which the vendor’s entire obligations under the contract would be discharged. This was a case of mutual or concurrent obligations. Performance by [SWF Hoists] of its obligations was conditioned upon the performance by [Woolcock Engineering] of its obligation with respect to the beams ((1989) 168 CLR 385 at 450). Time was plainly an essential aspect to the obligations on each of the parties ((1989) 168 CLR 385 at 451). [Woolcock Engineering] could not sue for an alleged breach of the time clause because of its failure to carry out its part of the bargain ((1989) 168 CLR 385 at 452). The evidence clearly established that [SWF Hoists] was ‘not presently incapacitated from future performance and (was) not indisposed to do, when the time (came), what the contract (required)’ (Psaltis v Schultz (1948) 76 CLR 547 at 560; Foran v Wight (1989) 168 CLR 385 at 453). A variation of the contract occurred on 18 October. Before then there was not a substantial incapacity on [SWF Hoists’] part or a definitive resolve or decision against the performance of its obligations ((1989) 168 CLR 385 at 454). Thus the counter-claim, based upon the failure to deliver, failed. The magistrate was in error in finding [SWF Hoists] in breach of its obligations given [Woolcock Engineering’s] omission.”

2. These conclusions are challenged on this appeal. It is unnecessary to set out the various grounds of appeal or to consider them individually. The point raised by the appeal is whether SWF Hoists was obliged to deliver, install, commission and test the cranes, or at least two of them, before Atlas left the Richmond premises and took occupation of the Wingfield premises given the evidence before the learned Magistrate and, in particular, the agreed variation of the span on 18th October 1995.

3. Woolcock Engineering submitted that there are two reasons for so concluding.  The first is the evidence, to which I have referred, that the runway beams of the factory could have been moved, in accordance with their design characteristics, so as to accommodate the span specified in the original drawings had the cranes been manufactured in accordance with that span and delivered within the eight to ten week period. The other reason is that if the event on 18th October is to be regarded as a variation of the contract, the time thereafter for delivery of the cranes was to be a reasonable time after that variation.  The case of SWF Hoists is that the period of eight to ten weeks is to run from 18th October 1995 because that is when, in effect, the relevant drawings were approved.  It is argued that whilst the initial drawings were approved at the earlier time on 11th August 1995, the agreed alteration of the span on 18th October 1995 should be regarded as when the drawings were approved and the delivery time of eight to ten weeks should run from that date so delivery was made well within time. In the alternative, if the position is that SWF Hoists is to have a reasonable time from 18th October 1995, the evidence does not establish that delivery was outside a reasonable time.

4. The learned Magistrate did not make any findings as to whether the runway beams could be altered so as to accommodate the rails for the cranes at a span of the original dimension. He did not make findings as to credit of the witnesses which would enable this Court at this stage of the appeal process safely to make such a finding. However, in my view, it is unnecessary to do so in order to dispose of the appeal.

5. The evidence clearly establishes that there was a variation to the contract on 18th October 1995 when Mr McCulloch and Mr Woolcock agreed the change in width of the spans for the cranes. Whilst that variation was significant in that the cranes had to be manufactured accordingly, it was not a major variation. A substantial part of the work to be undertaken by SWF Hoists under the contract had already been completed.  Whilst the evidence does not permit findings as to precisely what work had been done and what work remained to be done, it was established that the major part of the construction of at least two cranes had been completed.

6. Evidence of progress payments made by Woolcock Engineering to SWF Hoists pursuant to the contract establishes that the value of the work completed by 29th September 1995 was $47,600. By some unknown date in October 1995, the value of the completed work was $59,110. An invoice was sent out on the 31st October 1995 and it may be assumed that the work referred to in it had been completed before that date.  By the end of November 1995, the value of the work done was $80,860, leaving a balance with respect to the entire contract for the cranes of a little over $20,000. It is not possible, from this evidence, to specify the state of construction of each of the cranes because the invoices for progress payments do not specify the work done. The quote forming part of the contract provides for monthly progress payments “for the full value of materials purchased or allocated and the full value of labour expended during the period” was payable at 14 days from the date of the invoice. Despite the lack of detail, it is safe to conclude that a substantial part of the work had been completed by the time, SWF Hoists ceased work on the cranes prior to the end of September 1995 well before 18th October 1995. The variation of the span did not require any major alteration, if any, to the work already done.

7. Furthermore, the evidence of Mr Anderson is of assistance. He described the general nature of the work in building the cranes and said that the work had proceeded with a view to completion and installation of each crane within a week of each other. By about 4th October 1995, or a few days later, SWF Hoists had all of the components to complete at least two cranes. He said that at least two of the cranes were close to completion about the time SWF Hoists stopped work on them. At that time, the work required to finish them could have been completed in about seven days’ time, and not necessarily seven full working days. He accepted that if the work had been undertaken, the cranes could have been supplied within two weeks. It may be accepted that if work had been resumed on the cranes shortly after 18th October 1995, at least two of them could have been completed, delivered and installed by the middle of November 1995, at the latest, and have been ready for use well before Atlas was due to vacate the Richmond premises and take occupation of the Wingfield premises. Should that have occurred, Atlas would not have incurred the expenses and suffered the loss which had to be paid by Woolcock Engineering and which is the subject of the counterclaim.

8. I have not overlooked the earlier evidence of Mr Anderson. He said that SWF Hoists had recommended work on the cranes, or at least one of them, on about 25th October 1995. Production had stopped when SWF Hoists had not received a reply to the facsimile transmission of 20th September 1995 which has been mentioned. It introduced other work into its production schedule. He said that once that had occurred, SWF Hoists did not have the opportunity to “chop and change”. Consequently, he said, once the variation of the span was made, work on the other jobs could not be stopped to allow resumption of work on the cranes. He went on to say that because of this other work, the first crane could not have been delivered until about two or three weeks after 25th October 1995 and the second crane could not have been delivered until after another three or four weeks. On this basis, the first two cranes could not have been delivered until about the middle of December 1995. I return to the significance of this evidence shortly.

9. In my view, there is no basis to conclude that the agreed variation of the distance of the span on 18th October 1995 should be regarded as the date upon which the assembly drawings were approved. The variation was only to the span not to any feature of the design or manufacture of the cranes. The eight to ten week period should not be held to run from that date.

10. However, there was a variation and the time for manufacture, delivery, installation, commissioning and testing of the cranes should be a reasonable time after the variation. An effect of the variation is that the initial time for delivery and the other matters of eight to ten weeks did not continue to apply. The position is analogous to when the contractor fixes no time for the completion of an obligation in which case the “condition must be fulfilled” within a reasonable time: Aberfoyle Plantations Ltd v Cheng [1960] AC 115 per Lord Jenkins at p124 and Perri & Anor v Coolangatta Investments Proprietary Limited (1982) 149 CLR 537 per Brennan J at p567. In the latter case, Brennan J said at pp567-568:

    “What is a reasonable time is a question of fact and depends upon the circumstances. Its limit is determined by reference to what is fair to both parties.”

See also Postlethwaite v Freeland& Freeland (1880) 5 AC 599 at p608 and Carter & Harland Contract Law in Australia (3rd Ed) para 1804. In that paragraph the authors, by way of example, express the view that “where a contract for the sale of goods states no time for delivery, reasonable time expires when, in the actual circumstances, the seller has had sufficient time to make delivery”.

1. In my view, it is beyond question that, in the circumstances, if the other work commitments of SWF Hoists are ignored, a reasonable time expired by the time Atlas had to vacate the Richmond premises by the end of the third week in November 1995. By that time, SWF Hoists had had about four weeks to complete the manufacture of the cranes and to deliver, install, commission and test them. If two cranes had been installed and were operating by that time, the loss and expense, the subject of the counterclaim, would not have been incurred. The installation and alignment of the runway beams had been completed on or before 18th October 1995.

2. SWF Hoists was aware of the time constraints imposed upon Woolcock Engineering by its contractual arrangements with Atlas and of the need for at least two cranes to be installed by the time Atlas was to move into the Wingfield premises. Whilst it is the case that SWF Hoists had sought confirmation of the span for the cranes by the facsimile message on 20th September 1995 and did not receive a reply, it was aware of the required width of the span on 18th October 1995 within ample time to deliver at least two cranes before the end of the third week in November 1995. It is reasonable to infer that it did not do so because of priority given to other work. Fairness to SWF Hoists does not require time to run from when it chose to prefer the cranes to other work.

3. The suspension of the work on the cranes after not receiving a reply to the facsimile transmission, and the undertaking of other work, does not alter the position. At no time did SWF Hoists inform Woolcock Engineering that it proposed to do so if information as to the span was not provided and it did not do so when the information was not given. As has been mentioned, Mr McCulloch inspected the factory from time to time and had discussions with Mr Woolcock. He did not mention that the work was to be stopped, or that it had ceased. Mr Anderson did not inform Woolcock Engineering of those matters. When it comes to consider what is a reasonable time, it must be accepted that if SWF Hoists had informed Woolcock Engineering of these matters, a reasonable time would not be determined merely upon objective considerations without reference to the other work commitments of SWF Hoists. What would be fair to SWF Hoists would involve consideration of those other commitments if they were disclosed to Woolcock Engineering. The parties could then consider what should be done. Woolcock Engineering may have been able to adjust its arrangements with Atlas, so that Atlas could avoid loss caused by the failure to complete that contract on time. However, the failure to mention the matter at all left Woolcock Engineering unable to take any steps to resolve the problems and I do not think it can be said that it was fair to both parties to determine as a reasonable time, the period when the cranes could be completed and delivered, having postponed resumption of the work until the completion of other work.

4. What is a reasonable time for completion, or what is fair to both parties, requires the Court to determine the time where the parties themselves have omitted to do so. What is fair to the parties will be what they could reasonably have expected to agree upon by reference to the facts as then known by both of them, not by reference to the facts known by only one party which had not been disclosed to the other. The common knowledge in this case included the fact of substantial completion of the cranes at the time of the variation, the relatively minor nature of variation and the date by which Woolcock Engineering was required to allow Atlas to occupy the factory. What was not known by Woolcock Engineering, and what had never been disclosed by SWF Hoists, was the nature of any other commitments of SWF Hoists and the effect of any delay on its production schedules. It cannot now seek to rely on that in the determination of what is a reasonable time.

5. In my view, SWF Hoists was in breach of the contract by not performing its obligations within a reasonable time and that breach was causative of the loss incurred by Woolcock Engineering which is the subject of the counterclaim.

6. Given the alteration on 18th October 1995, which should be regarded as a variation of the contract, I think the learned Magistrate erred in concluding that the obligation of SWF Hoists was to deliver the cranes in accordance with the original span specification. As has been mentioned, the contract had been varied and the obligation was to manufacture the cranes in accordance with the new specification. In my view, the learned Judge erred in his conclusion that the obligation of SWF Hoists to deliver and install the cranes could not be discharged because of the failure of Woolcock Engineering to perform its obligations under the contract. Whatever may have been the position prior to 18th October 1995, SWF Hoists knew as at that date the span at which the cranes were to be built.  From that time, it was obliged to build the cranes accordingly and carry out its other obligations under the contract within a reasonable time.  It did not do so and consequently was in breach of the contract.

7. The consequence is that Woolcock Engineering should succeed on the counterclaim as was decided by the learned Magistrate, but for a different reason.

8. I would allow the appeal and restore the judgment of the learned Magistrate.

9. BLEBY J          I agree with the orders proposed by Mullighan J and with the reasons that he has given.