AGK Pacific (NG) Pty Ltd v ET Taylor Construction Pty Ltd [1990] PGNC 26; N871 (20 April 1990)

Unreported National Court Decisions

N871

PAPUA NEW GUINEA

[NATIONAL COURT OF JUSTICE]

W.S. 741 OF 1989
BETWEEN: AGK PACIFIC (NG) PTY LTD
PLAINTIFF
AND: E T TAYLOR CONSTRUCTIONS PTY LTD
DEFENDANT

Lae

Doherty AJ
20-21 March 1990
23 March 1990
20 April 1990

BREACH CONTRACT - implied terms - terms of a contract between a builder and his client not binding on a supplier unless the terms were expressly or impliedly incorporated - contract completed when goods accepted - costs.

The plaintiff contracted with the defendant to construct timber counters and stairs for use in buildings the defendants were erecting for their clients. There was no written contract between the parties other than a drawing of the design of the counters and stairs and an order which stated goods were “ex workshop”. The defendants collected the goods from the plaintiffs workshop and installed them but failed to pay. After several months they complained of defects and purported to reduce payment to account for costs of remedial work after issue of the writ.

Held

(1) &&#160 plaentiffntiffs were were a supplier and not subject to the terms and conditions of the contract between defendant builder and his client.

(2)ـ҈& Terms as to workmanship and condition tion of tiof timber mber may be incorporated if stated on the drawings handed to the joiner.

(3) ـ Contrac was compleompleted when the goods were accepted at the workshop and any rejection due to defect should have been made there.

Counsel

K Gamoga, for the plaintiff.

P Kowa, for the defendant.

DOHERTY AJ: The plaintlaims a total ofal of K15,836.00 from the defendant company for two contracts for the supply of goods in or about July and August 1988.

The defendant says that it paid part of these accounts, after the issue of the writ to an amount of K12,660.00 and that it disputes the balance of K3,170.00 on the basis of defects of workmanship. The plaintiff did not accept the sum of K12,660.00 as it was tendered as a full and final settlement of the claim and the hearing proceeded for the total amount of K15,836.00.

There had been various dealings between the two companies over an unspecified number of years. There is no suggestion or evidence that there had been prior conflicts nor was there any written or oral contractual terms between the parties in the past that applies to these contracts.

The claim involves two separate supplies of timber products. The first were counters for the Westpac Bank at Wau and the Westpac Bank at Bulolo (hereinafter the Wau/Bulolo contract) the total of this claim was K13,514.00. The second contract was for the supply of stairs to a residential property (hereinafter the stair contract) in Lae. There is no connection between these two contracts and I find that they were separate contracts, which took place at different times, that the parties intended them to be two different contracts and the terms of the contract were not intended by the parties to be the same.

There is ample evidence, and it is undisputed, that there was offer and acceptance between the parties and it was intended that the parties be contractually and legally bound. However there is little evidence as to the exact terms of the contract and it is those terms that have lead to the present dispute. Two witnesses gave evidence on behalf of the plaintiff as to the negotiation and the implementation of the contract.

Two witnesses gave evidence on behalf of the defendant on the remedial work that had to be carried out by the defendant to rectify defects they alleged were present in the goods supplied and the price and cost of those remedial works. Neither of these witnesses for the defence was present or employed by the defendant at the time when the contracts were entered into with the plaintiff. As a result, the evidence by the plaintiffs on the terms and conditions and negotiations which took place between the parties and the condition of the goods when they passed from plaintiff to the defendant are unrebutted.

THE WAU/BULOLO CONTRACT

The plaintiff states that he was requested to build counters, writing slopes and cupboards for the Westpac Bank and agreed to do so. The first approach was the request for a quotation for the cost of the supply and the plaintiff gave a hand-written quotation “Our price to supply only, ex workshop, joinery units as follows for Westpac Bank:

Bulolo J1-J9	K8,686.00
Wau J1-J5	K4,828.00.”

The calculation includes a statement “note ex works, Krommelie whatever available in Lae.” The plaintiff states that the defendant accepted that quotation and I find that prior to that quotation there was an invitation to treat (i.e the request for a quotation) and the quotation constituted an offer which was accepted by the defendant.

The evidence shows that the works were completed in accordance with a drawing which the plaintiff says was part of a working drawing given to them by the defendant and which they followed. It would appear this was part of the construction drawings although this is not clear from either party. In any event the drawing was not produced in court nor any other specifications that went with the drawing. The workshop manager of the plaintiff company said in evidence that the counters were completed in accordance with the drawing given and were collected by the employees of the defendant company in their own vehicle and he presumed transported to Wau and Bulolo viz “ex workshop” as stated in the offer. He was unsure of the date of collection but it was prior to the issue of an invoice dated the 31st of August 1989. No evidence in rebuttal of this was adduced. The manager states that he made numerous attempts to collect the amount of K13,514.00 due for the supply of the counters etc. It was not until April 1989 that he received a letter dated in March 1989 from the defendant stating there were defects in the counters. He had not been aware of this prior to that letter.

It would appear from the evidence by the defendant that the complaint arose following the issue of the notice by the architects of a remedial work required in the buildings at Wau and Bulolo. Notices were issued by the architect in December 1988 and in April 1989.

The contract for supply of the building was between the defendant E T Taylor and the company Westpac Bank. It would appear, there is no clear evidence, that the building was to be in accordance with the drawings and specifications by the architect retained by the Westpac Bank. The plaintiff company was not a party to that contract. The plaintiff company was not a nominated or named subcontractor of the defendant contractor in that building contract. It had no contractual relationship between it and the Westpac Bank or between it and the architect who, in a building contract, is an agent for a client or person requiring the building. The plaintiff’s status was as a supplier of the main contractor that is the defendant. As such it is not bound by any terms or conditions between the construction company, the architect and the Westpac Bank. As a supplier its contractual relationship is solely with the constructing company, in this instance the defendant. Any terms or conditions relating to the joinery or carpentry work must be between the plaintiff supplier and the defendant constructing company. The terms and conditions of the contract between the main contractor and the main contractor’s client are not terms of the contract between supplier and contractor unless expressly or impliedly incorporated into that contract with the intention of both parties.

Hence, any objection or requirements for remedial action between the construction company and the architect do not directly affect the plaintiff who is not a party to the main contract unless that was a term of the contract between the supplier and the construction company.

There is no evidence before me that the terms and the conditions of the construction contract between E T Taylor Construction Pty Ltd and the Westpac Bank were incorporated into the relationship between E T Taylor Constructions Pty Ltd and AGK Pacific (NG) Pty Ltd. Therefore the terms and conditions between the plaintiff and defendant were those reached by themselves. There is no evidence adduced by the defendant of those terms and the only evidence given by the plaintiff is that the supply was to be “ex workshop” and the only evidence adduced in court by the plaintiff’s manager was “I suppose it would be in a workman-like manner”.

Counsel for plaintiff has argued that s 15 of the Goods Act (Ch No 251) applies to the contract. The definition of “goods” in the Goods Act (Ch No 251) includes stairs, counters etc. of the type before me but these goods are not general goods nor goods where the buyer relied solely on the supplier’s skill or judgement that they were fit for a particular purpose. They were goods constructed at the defendant’s direction and the defendant was given ample opportunity to examine the goods. Sections 15(4) and 34(1) apply.

However if a specification by the architect or designer specifying certain standards or terms were on the drawing handed to the plaintiff (or supplier) then I find those specifications or terms would for part of the contract between the parties and the parties would be bound by those terms or specifications.

As I have noted there were numerous dealings between the parties prior to the contract for the supply of the counters. There is no suggestion or evidence that the prior contracts were part of an on-going contractual to relationship or the terms of the previous contracts were incorporated into the arrangements before me. I therefore find that the contract for the supply of counters at Wau and Bulolo was a separate contract in and the terms have no relationship or any other dealings between the parties, nor E T Taylor and Westpac.

I find that the contract was for the supply of goods in accordance with a drawing ex workshop. I find that the defendant by its employees collected those goods from the plaintiff company’s workshop in or about July or August 1988 and at the time of collection it made no objection to the state or condition of those goods but accepted those goods at the workshop.

I find further that, on the evidence before me, that the counters were covered in Laminex which is a product that can chip easily, that it was transported over an unsealed road by the defendant to Wau and Bulolo respectively and were installed by the defendant at some period between August 1988 and December 1988. The counters were solely within the power and control of the defendant, (and presumably the customers and staff of the Westpac Bank after they occupied the building). I do not intend to speculate as to what could have happened to the counters in that period but I wonder why, if they were so badly marked the defendant nailed them to the floor. I find that the contract between the plaintiff and the defendant was completed when the defendant collected the counters from the workshop of the plaintiff company, it was for them to check and examine the counters to ensure that they were constructed in a workman-like manner in accordance with the specification and terms (if any). There is no evidence that they did so; they merely accepted the goods. The goods wee not subject to any retention period. The term dealing with retention is a term in the main contract between the defendant and the Westpac Bank and not binding on the plaintiff unless an express term. The defendant, if they intended to reject on the basis of defects the goods should have done so at the point of collection or at a reasonable time thereafter and I find seven months is not a reasonable period in the contract before me.

I therefore order that the defendant pay the plaintiff the full amount of this contract.

THE STAIRCASE CONTRACT

The defendant and the plaintiff contracted for a “construction of stairs and handrails for three x units all out of laminated anisoptera”. They were asked to quote a price (which I again find was an invitation to treat). The price offered by AGK Pacific was K2,322.00 the only other term in their offer was “delivery six weeks minimum”. This constituted an offer which the defendant accepted. There was a previous approach by the defendant to the plaintiff to construct the three staircases but at that time there was no anisoptera available for the manufacture and the plaintiff quoted on a “labour only” basis K1500. The evidence on behalf of the plaintiff is that they were informed that laminated anisoptera was the timber specified by the architect for the manufacture of the staircases. They subsequently received anisoptera and quoted again for the manufacture and construction (as quoted above) on the 15th of July 1988. The defendant subsequently replied accepting the quotation, viz the offer of the plaintiff. Their acceptance was as follows:

“Attached is order for construction of staircases. Delivery is required a.s.a.p. and deliver before quoted date would be appreciated.” Annexed to that document is an order no. 52464 stating “construct for staircases as per quotation.” Nothing is stated in the order or the acceptance advice concerning the quality or type of wood but I find that these parties knew it was to be laminated anisoptera and delivery would take six weeks minimum.

The plaintiff knew they were contracting for the supply as part of a building contract undertaken by the defendant. They were aware that anisoptera was the timber specified by the architect.

I again find the plaintiffs were not nominated or named subcontractors in the building contract between the defendant, E T Taylor Construction Pty Ltd and the building owner. As such, they were not bound by the terms and conditions of that contract and, following the rules of privity of contract, they cannot be made liable for any breach of the contract between E T Taylor Construction Pty Ltd and the building owner. The evidence of the plaintiff’s manager shows that the manager of the defendant company phoned regularly to ask that the stairs be completed urgently. That evidence is unrebutted by the defendant and urgency is noted in the wording of the acceptance by the defendant to the plaintiff quoted above.

The timber acquired by the plaintiff was new and according to the evidence was not dried properly at the required time before it could be cut and laminated into the stairs. The plaintiff states, and it is unrebutted, that they informed the defendant of this fact.

The evidence shows the anisoptera, while green, has a lot of moisture in it and that it is not a good wood for lamination as it is full of silicone. The defendants were informed that the timber would require drying and the timber was subsequently sent to another company in Lae to be kiln dried. However when it was cut it was found it was not completely dry in the centre and work of lamination ceased temporarily. The witness states that about that time the manager of the defendant company was “putting a fair amount of pressure on (the plaintiff) to finish the job as soon as possible. (The plaintiff) told the (defendant) the timber was still wet and not really suitable for laminating” but they were told by the manager of the defendant company to “carry on with the job as their contract to build the town houses in which the staircases were needed was falling behind”.

It would appear, though there is no clear evidence, that the defendant had a contract that was to be completed by a specified date.

As a result, the plaintiff’s manager ordered his workshop to complete the staircases without waiting further and this was done. The defendant’s staff collected the staircases and they were installed in the building.

Some six months later after failure to pay the account, a complaint was received by the plaintiffs from the defendant that the lamination on the stair rail and the staircases were coming apart. The reason for this was the peeling of the laminations as it dried by natural exposure.

As in the other contract the request to repair followed from defects brought to the defendant’s attention by the architect when issuing his certificate.

Evidence shows that such peeling of lamination will occur after a period because of the natural drying of the timber and, unlike scratch marks etc. (as in the counter), is not immediately apparent on delivery.

There is no evidence that the defendant company specified the extent of the seasoning or treatment of the wood prior to the construction of the staircases. The only terms shown before me are those as quoted above. It appears from the evidence that the parties assumed that the wood would be seasoned but this is not stated in the terms. A drawing was given to the plaintiff company, but there is no evidence to show that a specification of the condition of the wood was stated in the drawing. I again find if such a specification or term was on the drawing handed to the plaintiff it would form part of the drawing and part of the terms and conditions of the contract between the defendants and the plaintiffs.

Since there no term was it implied that the wood would be seasoned by trade practice? In my research I am unable to find any “standard” clause in a building contract about the condition of timber. I found the following:

“Moisture content of weather-boards, flooring mouldings and joinery timbers shall not exceed 18% as determined by the electrical method.”

“Timbers throughout must conform to the Strength Group and “Durability Class” respectively as set out hereunder, each being the minimum acceptable.”

“All timbers used in this contract shall be treated with preservatives by a method licensed by the PNG Department of Forest.”

Anisoptera is given “middle” strength. I find that there was no specific term that the wood be completely seasoned and I further find, even if it was in the mind of both parties to fully season the wood that was over ridden by the express directive of the defendant’s manager that the work proceed quickly. By so doing the defendant changed the term of the contract that it would require six weeks minimum for completion. Since they changed this term they cannot now come to complain of the consequences of their contractual variation.

The defendants have sought to say in evidence that the plaintiffs assumed liability for the defects because their workshop supervisor or manager fixed some of the rails but was prevented from remedying all of them by the manager. There is no evidence to suggest that the workshop supervisor is a director or officer of the company capable of binding the company. Having seen and heard the workshop manager I note that he has been a craftsman since 1952 and find his remedial work was not because of contractual obligation but rather a pride in his work. I do not find the plaintiff assumed liability as alleged.

I find the defendant, having given instruction that work proceed must accept full responsibility for that directive and I order that they pay the sum of K2,322.

I further order that interest at 8% on the total of the two contracts in accordance with the Interest of Debts and Damages (Judicial Proceedings) Act. Mr Dowa has submitted that interest should be on the lesser amount of K3,170 to take account of the sum of K12,660 tendered. On the evidence before me that cheque was not presented and the amount remains in the defendant’s credit. The plaintiff has not had the benefit of it. For this reason, I order interest on the full amount.

I have given consideration to O 25, r 1 of the National Court Rules relating to costs although this was not argued fully before me. The total sum less the amount tendered is K3,170 and this is within the District Court scale of fees. No payment had been tendered when the writ was issued in June 1989. The defence dated, 12th September 1989, states payment was made on about 1st September 1989 in full and final settlement.

Hence at the date of issue of the writ, the plaintiff had no choice but to commence this matter in the National Court and hence incur costs on a National Court scale. The tender was as “full and final settlement” and intended to be a bar to further proceedings.

Having made an order in excess of K10,000, I further order the defendant to pay the plaintiff’s costs in accordance with the National Court scale as agreed or to be taxed if not agreed.

Lawyer for the plaintiff: Warner Shand

Lawyer for the defendant: Henao Cunningham Priestley