Nivani Ltd v China Jiangsu International (PNG) Ltd (2007) N3147

• Jurisdiction: Papua New Guinea
• Judge: Lay J
• Judgment Date: 10 August 2007
• Citation: (2007) N3147
• Docket Number: WS 838 OF 2001
• Court: National Court
• Year: 2007
• Judgement Number: N3147

Full Title: WS 838 OF 2001; Nivani Ltd v China Jiangsu International (PNG) Ltd (2007) N3147

National Court: Lay J

Judgment Delivered: 10 August 2007

N3147

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

WS 838 OF 2001

BETWEEN

NIVANI LTD

Plaintiff

AND

CHINA JIANGSU INTERNATIONAL (PNG) LTD

Defendant

Kokopo: Lay J.

2007: 8 &18 May

10 August

CIVIL- construction contract - variation by conduct - conduct inconsistent with terms of written contract - intention of parties to be inferred.

CONTRACT - variation where no provision for variation - variation contract required.

REPUDIATION OF CONTRACT - contractor entitled to perform all works included in contract - termination of contract by employer before works complete is a repudiation.

DAMAGES - claim for delay caused by design change - claim for loss on repudiation of contract - claim for office overheads - all facts giving rise to calculation of claims must be proven.

Facts

The defendant was the principal contractor to the Waterboard for the construction of a building and an extension of a road. It sub-contracted the earthworks to the plaintiff for a lump sum not subject to alteration for variations in quantities. The sub-contract was a written agreement annexing drawings and specifications for the work. Shortly after the work commenced the defendant provided the plaintiff with revised drawings which, amongst other things, increased some of the earthworks. The defendant claimed payment on a rate for work done basis and was paid on the basis. Some six weeks after the contract commenced the defendant provided the plaintiff with further drawings and invited the plaintiff to provide a price for the work in those drawings which included thickening and widening the pavement, curb and channel, concrete footpath and bitumen sealing. The defendant did not accept the plaintiff's price and later performed this work itself and by others. The works being performed by the plaintiff were suspended when they were nearing completion and 11 months later the defendant informed the plaintiff that the sub contract was terminated. The plaintiff claimed damages, for unpaid completed work, for delay in the initial works because of the design change, for being prevented from completing the work contracted, and for office overheads during the period of suspension of the work. Some of the facts necessary for a proper calculation of damages were not proven.

Held

1. Parties may by agreement, vary a contract made by them;

2. where a contract makes no provision for variation there must be a contract of variation to bind the parties;

3. a contract of variation can be formed by the conduct of the parties;

4. a contractor is entitled to perform all of the works contained in his contract but is not entitled to perform any new and additional works which the employer may decide upon, except by agreement;

5. all of the facts necessary to establish a claim for damages must be proven;

6. a claim for loss of profit or overheads must include proof of the actual percentage of profit or overhead applicable to the contractor as a percentage of gross turnover;

7. the facts established that the lump sum contract was amended by the conduct of the parties to be a contract to be paid by rates against measured work;

8. the contract included work which had not been completed when the works were suspended and subsequently the contract was terminated by the defendant. Consequently the defendant repudiated the contract.

9. The claim for work done but not paid for was not proven. The other heads of damage were only partially proven.

10. The court can make an award of damages where the evidence establishes that a loss has been sustained but the evidence is inadequate to calculate a specific figure.

Cases Cited

PNG Cases

National Housing Commission v Queensland Insurance (PNG) Pty Ltd [1988-89] PNGLR 474

Curtain Brothers v The State [1993] PNGLR 285

Yange Langan v Independent State of Papua New Guinea, (1999)N 1369

Overseas Cases Cited

Thorn v London Corporation (1876) 1 App. Cas. 120

Gallagher v Hirsch (1899) NY45 App. Div. 467

Morris v Barron and Company [1918] AC 1

Sunney v Cunard White Star [1940] 1 KB 740

Carr v J. A. Berryman Pty Ltd (1953) 27 ALJ 273

British and Bennington Ltd v NW Cocher Tea Co & Ors [1923] AC 48

Chittick & Tailor (1954) 12 WWR 653 (Canada) 655

Shore v Horwitz [1964] SCR 588 (Canada)

United Dominion Corporation (Jamaica) Ltd v Shocar [1969] AC 340

Jones v Schiffman (1971) 124 CLR 303

Commonwealth v Crothall Hospital Services (Australia) Ltd (1981) 54 FLR 439

Tallerand Co. Pty. Ltd v Nathans Merchandise (Victoria) Pty. Ltd [1957]

Dai v Barclay Brothers Australia (1983) 57 ALJR 442

Integrated Computer Services Pty Ltd v Digital Equipment Corp., (Australia) Pty Ltd (1988) 5 BPR 11 110

HCA 10; 98 CLR 144

The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

Commissioner of Taxation V Sara Lee Household and Body Products (2000) 201 CLR 520

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153

Eldridge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264

References

Judicial Proceedings (Interest on Debts and Damages) Act

Hudson's Building and Engineering Contracts, 10th edition by L. N. Wallace

Counsel

D. Lidgett, for the Plaintiff

J. Latu, for the Respondent

10 August, 2007

1 LAY J.: The plaintiff China Jiangsu had a contract with the Papua New Guinea Water Board for the construction of a building and the extension of Adima Street in Kokopo East New Britain. On 14 March, 2000 it entered into a sub contract with the defendant Nivani to carry out certain earthworks for the building and for the Adima Street extension. It was a term of the sub contract that there would be no variation to the price if the earthwork quantities varied. Annexed to the sub contract were the drawings and specifications provided to Nivani by China Jiangsu.

2 A few days after China Jiangsu asked Nivani to commence the works under the sub contract, China Jiangsu gave Nivani revised drawings for the work, which had been given to it by its principal.

3 Nivani's case is that the whole basis of the contract was altered by the revised drawings provided at the end of March. Nivani, by letter dated 3 April 2000, told China Jiangsu that Nivani would have to use a different construction method, and that it would cost more. Nivani proceeded to construct the works in accordance with the new drawings, the work done was measured in accordance with the letter sent by Nivani to China Jiangsu, and an interim payment made based on rates provided by Nivani. This payment included quantities never contemplated in the original contract. In late April 2000, a further set of amended drawings making substantial changes to the works was given to Nivani by China Jiangsu. Part of the original works were completed by the 30th of April 2000. Works were suspended on the road to permit laying of drains by others and Nivani never received notice to resume the work. In March 2001, it received notice that the contract was terminated. It therefore lost amongst other things, the profit it would have earned for the balance of the contract.

4 China Jiangsu, has argued that the contract was never varied, Nivani carried out all of the works required of it under the original sub contract agreement, those works were measured, agreed and paid for. Nivani submitted a price for the varied works but that price was never accepted. It argues Nivani has no claim.

5 It is necessary therefore for me to identify what were the terms of the contract between Nivani and China Jiangsu under which Nivani carried out the work, whether China Jiangsu is in breach of that contract and whether any sum is due to Nivani under the contract or in damages.

6 The first observation I make is that the main contention by China Jiangsu set out above cannot be right. The term of the written sub contract, that there would be no variation in price for variation in quantity of earthworks, cannot operate only to fix the price against Nivani. It must also operate to fix the price against China Jiangsu. There was no provision in the signed sub contract for payment by measurement of the works. That is, if as China Jiangsu claims, there was no variation and Nivani performed all of the work required of it under the signed sub contract, then Nivani must be entitled to the agreed contract price of K95,968.62 excluding VAT. Of that total amount K75,319.23 related to the Adima Street extension works. China Jiangsu on its own submissions only paid Nivani K 64,738.60, for all the works for the Adima Street extension. Therefore, if I accept China Jiangsu's contention that there was no variation to the original sub contract agreement, there must be due to Nivani the sum of K 10,580.63 being the balance of the agreed price for the sub contract. This I consider must follow from what I have said and from submission of counsel for China Jiangsu in which he said "... the price was...