On 23 March 2020, Wholers Construction Pty Ltd (the head contractor) entered into a head construction contract

Question 2      (20 marks)

On 23 March 2020, Wholers Construction Pty Ltd (the head contractor) entered into a head construction contract with Gray Investments Pty Ltd (Gray) to construct a $15 million warehouse and office building in Glenelg, South Australia.

On 13 March 2020, Wholers wrote to Backer Civil Pty Ltd (Backer) – a piling and foundation specialist trade contractor – inviting them to submit a quotation for ground treatment and piling works at the warehouse and office building in Glenelg. Documents were enclosed with the letter, such as a site plan layout and copies of the borehole logs. The letter stated that the subcontract would be let on the basis of an amended AS 4901 Standard Form of Subcontract although the amendments were not detailed in the letter.

Backer replied in a letter dated 21 March 2020 enclosing its quote for the work in the amount of $1,365,850 plus GST. The letter stated:

Our offer comprises this letter, together with our Standard Terms and Conditions of Contract, our Bill of Quantities and attached appendices A, B, C and D, the FPS Schedule of Attendances, Ground Improvement Protection Document and Completion Certificate.

We trust that our offer is of interest. Any works undertaken shall be carried out under our Standard Terms and Conditions. Our Standard terms and Conditions are to prevail over any other terms and conditions in any subsequent order.

Backer’s standard terms and conditions were attached to the quote.

On 9 April 2020, Wholers sent a purchase order to Backer instructing for the works to be carried out as per Backer’s quote in the amount of $1,365,850 plus GST. The following statement was included on the purchase order:

The ground treatment and piling work to be based on an amended AS 4901 subcontract conditions. Amendments as per the special conditions of contract attached to this order.

Please acknowledge this purchase order by signing and returning to us the acknowledgment slip below. A formal contract incorporating the attached special conditions will then follow in due course for execution.

At the bottom of the purchase order was a tear-off acknowledgement slip which contained a space for signature by Backer under the words "We hereby accept your order on the terms and conditions stated therein."

A copy of Wholers special conditions was attached to the purchase order.

Upon receipt of the purchase order, Backer signed the acknowledgement slip and returned it by registered mail to Wholers head office.

Backer commenced works at the Glenelg site on 16 April 2020. The ground treatment and piling works were completed at the end of May 2020. No formal contract for the works was ever sent by Wholers to Backer.

Practical completion of the warehouse and office building was achieved on 22 March 2021.

In November 2021, the sub-tenant in occupation of the warehouse and office building complains of settlement of the slab beneath the warehouse which had caused significant structural damage to the building. Gray commences litigation against Wholers to recover damages. Wholers, claiming that Backer’s poor workmanship caused the

settlement, obtains the court’s permission to join Backer as a co-defendant in the law suit. Wholers relies on Clause 11 of their Special Conditions which states:

"Clause 11: Liabilities and Insurance

The Subcontractor shall maintain insurance and indemnify Wholers Construction Ltd against liability at law for death or injury to persons or loss of or damage to property (including consequential loss flowing therefrom) arising out of the performance of the Subcontract."

Backer relies on Clause 12 of their standard terms and conditions which states:

"Clause 12: Warranty, limitation of liability and notice of complaint

• We warrant that we shall carry out the Works in a proper workmanlike manner based upon the information provided to us and in accordance with the knowledge and standards commonly available to and used by the building industry at the date of the Contract. All other warranties, except those given in writing and signed by a Director for and on behalf of the Company, whether purportedly express or implied (whether by statute or otherwise) in relation to the quality or fitness for purpose of the Works or in relation to our performance of the Contract are hereby expressly excluded.
• All claims under or in connection with this Contract must in order to be considered as valid be notified to us in writing within 28 days of the appearance of any alleged defect or of the occurrence (or non-occurrence as the case may be) of the event complained of, and shall in any event be deemed to be waived and absolutely barred unless so notified within one calendar year of the date of completion of the works”

During the court case, Backer argues that it is not liable for any of the damages caused by the settlement of the slab beneath the warehouse for two reasons:

• As stated in Backer’s original quotation of 21 March 2020, Backer’s standard terms and conditions will prevail over any other terms and conditions in any subsequent order. As such, because the settlement was not notified to Backer within the timeframe required by Clause 12(b) of their standard terms and conditions, any claim for damages is invalid and barred; and
• Backer’s standard terms and conditions apply and, in any case, Wholers’s special conditions cannot apply because no formal contract incorporating Backer’s special conditions was ever sent to Backer for execution as promised in the purchase

Advise whether Backer is likely to be liable for the damages caused by the settlement of the slab beneath the warehouse. Your answer should address the two arguments raised by Backer in (i) and (ii) above.

Note:

When answering Q2, it is recommended you research and refer to the following court decisions:

Butler Machine Tool v Ex-Cello Corp [1979] 1 WLR 401

Hyde v Wrench (1840) 49 ER 132

Immingham Storage Company Ltd v Clear plc [2011] EWCA Civ 89

Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209