Forte Sydney Construction Pty Ltd v N Moit & Sons (NSW) Pty Ltd [2021] NSWDC 673

Andrew Hales  |  Maciej Getta  |  Taris Watson

Key takeouts

Builders need to be careful when reaching an agreement of a contractual nature and proposing to re-state the terms in a form that is more full and precise.

If a builder proposes a subcontract that contains terms radically different and inconsistent to the basis on which a tender is submitted and accepted it cannot be unilaterally imposed on the subcontractor.

Facts

Forte Sydney Construction Pty Ltd (builder) engaged N Moit & Sons (NSW) Pty Ltd (subcontractor) to carry out excavation, piling works, shotcreting and related civil works on a site in Porter Street, Ryde.  When the subcontractor commenced work at the Porter Street site on 25 May 2018, the builder had accepted the submitted tender which clearly stated that while there were lump sums for site clearance, bulk excavation of virgin excavated natural material and excavation of rock, the disposal of contaminated material would be on rates per ton and that this was additional to the quoted lump sums.  However, the builder put forward a subcontract that contained significant inconsistencies to the tender.  One such anomaly was that the tender gave the subcontractor the right to an extension of time for delays caused by rain, but under the subcontract, the subcontractor had to accept the risk of climatic conditions.

The ‘big ticket’ item in the builder’s claim was liquidated damages and the ‘big ticket’ claim in the subcontractor’s cross-claim was a variation for disposal of rock and other solid waste.  The resolution of these items depended entirely upon whether the builder’s version of the subcontract (which contained specific provisions for liquidated damages) or the subcontractor’s version of the subcontract (which contained specific provisions for disposal of rock and other solid waste) was accepted.

Decision

The court found the builder was not entitled to any damages against the subcontractor, but the subcontractor was entitled to damages on its cross-claim against the builder.  The submitted tender makes it plain that the subcontractor was offering to do work requested for the prices and rates set out in the tender.  The builder wanted work to commence promptly.  By requesting and permitting the subcontractor to come onto the Porter Street site and commence works on 25 May 2018, the builder engaged the subcontractor on the terms of the tender.  The builder’s subcontract was at odds with the submitted and accepted tender.  

The court found that it defies commercial common sense to think the subcontractor put forward a tender on the basis of extra over rates for disposal of contaminated material, but somehow would accept that it could not charge at all for the disposal of this material.  It was clear on the evidence that neither party had much idea what was to be found below the surface once excavation commenced.

A reasonable person in the position of the builder would think that there was a concluded bargain when the builder engaged the subcontract to start work on the Porter Street site on the basis of the tender, including its pricing and conditions.  If the builder was unhappy upon the basis of the subcontractor offering to do work, then it could have rejected the tender or gone back to the subcontractor and said that it was not interested in extra over rates for disposal of material, but wanted a lump sum for the entire excavation project.  The builder could also have made it explicit that the subcontractor had to quote to remove a tank, do all dewatering of ground water encountered during excavation, and should exclude any extensions of time for inclement weather or tip closure.  If the builder had taken this position with the subcontractor, then the only possible commercial approach would be for the subcontractor to entirely reprice its tender.

The subcontract put forward by the builder was radically different in effect from the terms proposed in the tender by the subcontractor, which was accepted by both parties.  The builder had no right to insist upon the subcontractor executing the subcontract in the form put forward.  The builder attempted to unilaterally impose upon the subcontractor the obligation to provide all services which were part of the tender for the price on the first page of the tender, but ignore the subsequent extra over rates, exclusions and conditions of the tender.  

The court found that there was no doubt that the parties expected they would agree on the mechanics for carrying out the works, but the subcontract put forward by the builder was not a contract between the parties. This was principally because important provisions were completely inconsistent with the tender and the basis on which the builder engaged the subcontractor, being the terms and conditions in the tender.