NSWLR Perini Corporation V Commonwealth of Australia (1969) 2 NSWR 530

530 [1969] 2 N.S.W.R.
SUPREME COURT OF NEW SOUTH WALES
PERINI CORPORATION v. COMMONWEALTH OF

AUSTRALIA
MACFARLAN, J.
8-12,15-18 September, 22 October 1969
Contracts-Building contract-Certifier-Duty to act impartially-Whether implied
term in contract that Commonwealth would see to it that certifier acted impartially
-Requirements for implication of terms.
P contracted with the Commonwealth to build the Redfern Mail Exchange. The
building contract contained a term that a Commonwealth official called the Director
of Works could extend the time for completion of the work to such period as he
should think adequate upon sufficient cause being shown to him. On many occasions
P made applications to the Director of Works for extensions of time but many of these
requests were refused because of departmental policy and other requests were only
partially granted.
P contended that the Director of Works was under a duty to act impartially
and that it was an implied term of the contract that the Commonwealth should
direct its Director of Works to so act.
P also contended that for extra expense incurred because of two public holidays
proclaimed under the Banks and Bank Holiday Act 1912, as amended, and two picnic
days inserted in the relevant award, as such holidays increased the rates of wages
payable to employees pursuant to an award judgment determination order or rule
of Court, Industrial Board or other statutory tribunal or authority, in accordance
with the contract it was entitled to be compensated.
After formally accepting P's tender, the Commonwealth required an additional
bank guarantee of $200,000. There was no agreement as to who was to pay the
cost of obtaining this bank guarantee. P claimed that there was an implied term
that the Commonwealth would meet this cost.
Held, (1) The Director of Works was a celti6er under the contract and as such
had certain duties imposed on him by the contract.
(2) The Director of Works had a discretion as to whether or not he would grant
an extension of time.
(3) The Director of Works could rely on other persons to supply him with the
information on which he would exercise his discretion.
(4) The Director was bound to give his decision on any application for extension
of time within a reasonable time which in the circumstances plainly meant that he
should give a decision as soon as his investigation into the facts was completed
and was not entitled to defer his decision.
(5) In making his decision, the Director was entitled to consider departmental
policy but would be acting wrongfully if he were to consider himself as controlled
by departmental policy.
(6) There was an implied term in the contract that the Commonwealth would
not interfere with tile Director of Works' duties as certifier.
(7) There was also an implied term in the contract that the Commonwealth would
ensure that the Dirctor of Works did his duty as certifier.
Minster Twst Ltd. v. Traps Tractors us, [1954] 3 All E.R. 136; [1954] 1
W.L.R. 963; Panamena Europea Navigation Compania Limitada v. Frederick
Leyland & Co. Ltd., [1947] A.C. 428 (H.L.); The Moorcock (1889), 14 P.B.
64; [1886-90] All KR. Rep. 530; Scanlan's New Neon Ltd. v. Tooheys Ltd.
( 1943), 67 C.L.R. 169, applied.
Cloucestershire County Council v. Richardson, [1968] 2 All KR. 1181; [1969]
1 A.C. 480; Young & Marten Ltd. v. McManus Childs Ltd., [1968] 2 All
E.R. 1169; [1969] 1 A.C. 454; Pettitt v. Pettitt, [1969] 2 All E.R. 385;
[1969] 2 W.L.R. 966; Hatrick (A.C.) (N.Z) Ltd. v. Nelson Carlton Con-
struction Co. Ltd., [1964] N.Z.L.R. 72; [1965] N.Z.L.R. 144; Hickman &
Co. v. Roberts, [1913] A.C. 229; Dixon v. South Australian Railways Com-
missioner (1923), 34 C.L.R. 71, referred to.
( 8) Public holidays proclaimed pursuant to the Banks and Bank Holidays Act
1912, as amended, did not come within the clause dealing with variation of rates
and hours by a statutory tribunal or authority as referred to in the contract.
(9) Picnic days inserted in awards did not involve any change or variation in
the rate of wages payable or in the hours of labour within the meaning of the
contract.
PERINI CORPORATION v. COMMONWEALTH (MACFARLAN, J.) 531
( 10) In view of the fact that the parties were silent as to the cost of the
guarantee, there was no ground for recovering it from the Commonwealth.
Commercial Cause
5
The facts and the nature of the proceedings sufficiently appear from the
judgment of Macfarlan, J.
D. L. Mahoney, Q.C. and T. R. H. Cole, for the plaintiff.

10
R. M. Hope, Q.C. and L. J. Priestley, for the defendant.
Cur. adv, vult.
15
Macfarlan, J.:
This action came to trial in unusual, though commendable, circumstances.
It was the consequence of disputes which happened during and after the
building of the Redfern Mail Exchange. The plaintiff was the builder and the
defendant was the building owner. A large sum of money was involved in the
20 transactions between the parties but the disputes related to a lesser sum,
although that sum itself was quite large. The defendant had acquired land at
Redfern on which it intended to build the Mail Exchange for the Department
of the Postmaster-General. In accordance with the practice of the defendant
the work ordinarily undertaken by a building owner was assumed by the
25 Department of Works. This Department invited tenders for the work and the
plaintiff was the successful tenderer. Thereafter an agreement was made by
the defendant with the plaintiff. This agreement, which is dated 27 April 1962,
was wholly in writing and consisted of a number of foolscap sheets, charts
and plans which, when placed one on top of the other, were about one inch
thick. There were included in it a specification which, as expected, was drawn
30 especially for the work to be undertaken, and a printed document intituled
"General Conditions of Contract". The "General Conditions of Contract"
document was in a standard form that was apparently used in all contracts
made by the defendant for the erection of buildings, although there had been
made to it certain important modifications that were appropriate to the defen-
35 dant's requirements with respect to the Mail Exchange. Consideration will need
to be given later to particular parts of this whole agreement but it is desirable
to say now that by its provisions the work was to be completed in three
different stages, for each of which a time was stated. There was also in the
agreement provision for extending the times for completion and certain
extensions were granted. In the result the plaintiff completed all the work within
40 the extended times and for aught that appears in this case the work in its final
form was satisfactory. The biggest part of the plaintiff's claim arose from
disputes with respect to applications for extension of time and these disputes
and the relevant provisions of the agreement will need to be considered in
detail.
45 When the action was first mentioned to me I was told that it was agreed
that I would only be asked to decide points of law involving the construction
of the agreement and that when these points had been decided, all facts would,
by agreement of the parties be referred for decision by a lay tribunal. Both
learned counsel told me that the points of law would arise as a result of the
50 tender of evidence and objection taken by the opposite side. This is indeed
what happened and, if I may say so, I am of the opinion that this method of
resolving the disputes is eminently sensible in the interests of the parties.
The General Conditions of Contract included an arbitration clause which
provided, in broad terms, for the resolution of all disputes arising out of or
concerned with or incidental to this contract. For the purposes of this action
and in aid of the general intention which I have described in the previous
paragraph, the parties agreed that the arbitration clause would be waived so
far as related to the beginning and prosecution of this action. This waiver was
necessary because the arbitration clause was expressed in the well-known Scott
-- -- ----_--_---
532 SUPREME COURT OF NEW SOUTH WALES [1969] 2 N.S.W.R.
v. Avery form (1856), 25 L.J. Ex. 308; [1843-60] All E.R. Rep. 1. I have
already said that the disputes related to applications made by the plaintiff for
extensions of time. A number was granted, others were refused and there were
others which were granted but not to the full extent for which the plaintiff
had applied. The applications were made throughout practically the whole of
the time taken to complete the building. Although it has become fashionable
to criticize arbitration clauses in building and commercial agreements and to
deplore the costly and lengthy proceedings which are often involved in their
application, with most of which criticism I am in general agreement, I do,
however, venture to think that in the present case it was unfortunate that when
the first of these applications for extension was refused the dispute, which that
refusal created, was not then referred to the arbitrator who, either himself or
the Court, by means of a reference, could have expressed a definitive opinion
upon the soundness and validity of the reasons given by the competent
authority for refusing the application. This course, if it had been adopted in
respect of one particular dispute, would almost certainly have been of short
duration and the decision would then have operated as a clear guide to the
competent authority in the decisions which he would be required to make
thereafter with respect to later applications for extension of time. If this course
had been adopted I think it probable that the present long, detailed and costly
proceedings would not have been required. I have not, however, heard learned
counsel on this point and it does not arise for my decision in the present case.
I do not doubt it was considered and that there were good reasons why it
was not adopted at the time I have suggested it might have been.
When the action was called for trial learned counsel for the plaintiff sought
to lead oral evidence with respect to the interpretation of the agreement its
avowed purpose being to influence its meaning and operation. Learned counsel
for the defendant objected to this evidence and counsel, I thought, if I may say
so with respect, very sensibly agreed that the admissibility of the evidence
should be argued and decided upon a basis of the broadest application that it
could have. Learned counsel for the plaintiff agreed that in aid of defining the
ambit of the argument he could state what the evidence, if admitted, would
prove, and he did so in the following words: "The evidence would show, I
believe, that in carrying out a job such as the present the only practical way,
the only businesslike way of carrying out the job involves the organisation of
men and plant to carry it out in an efficient manner. This is planned before
the job begins and it is planned by reference to the time available to do the
job; that if time were lost in carrying out the work and the contractor is
required to speed up the job appreciably this will result in additional cost and
for this reason in a practical or business sense it is essential for the contractor,
if an application for extension of time is made, to know within a reasonable
time whether it is to be granted so that he can plan his work accordingly. This
is because of the nature of building operations in such a job as that here in
question."
The admissibility of this evidence was fully argued and I decided that in
accordance with the settled principles of law it was not admissible. I delivered
separate reasons for my decision and I will not repeat them in this judgment.
Although I rejected this evidence I wish to emphasize that it does not follow
that considerations of the kind that learned counsel for the plaintiff sought to
prove by oral evidence might not be considered. My ruling was that I was
bound by the words of the written agreement that the parties had made as
amplified by a much more restricted area of oral evidence than learned counsel
for the plaintiff desired. Nevertheless, it became apparent as the trial proceeded
that many of the matters which the plaintiff wanted to prove by oral evidence
should be inferred from the words of the agreement and I will later state the
important bearing which some of those considerations have had upon my
decision.
Learned counsel for the plaintiff next tendered certain documents. Although
learned counsel for the defendant did not object to certain of these documents
being admitted in evidence he did object to others. It was then agreed by
learned counsel that that point of time had been reached when it was con-
venient to argue the principal points of construction of the agreement. It was
also agreed that for the purpose only of defining the ambit of the argument,
although I should not rule upon the admissibility of the documents tendered
I should, nevertheless, have them before me and that their contents should be
used to define and describe the application of the agreement, so far as it was
necessary to do so, to resolve the points of construction. It was also agreed by
5 learned counsel that for the purposes of the argument, the allegations in the
statement of claim, other than the allegations of breach and damage, should
be presumed to be true.
By far the greater part of the argument concerned the circumstances in
which applications for extension of time were made and the reasons given for
refusal of those applications in the cases where they were refused or not wholly
10 granted. I will deal with this aspect first and will immediately state the pro-
visions of the agreement relating to extensions of time. They are in cl. 35 of
the General Conditions of Contract, which is as follows:-
"35. DELAY-EXTENSION OF TIME.
15 "(1) Should the Contractor be delayed or impeded in the execution of the
works by reason of -
(a) not being able to obtain possession of any portion of the ground
required for the execution of the works; or
(b) the non-delivery, or delay in the delivery to the Contractor, of any
20 materials which under the Contract the Commonwealth is to supply; or
(c) any cause whatever arising out of the acts or defaults of the
Commonwealth, or of any officers or servants of the Commonwealth; or
(d) any accident happening to the works during their progress not arising
from the neglect or default of the Contractor or his servants or workmen,
or Sub-Contractors; or
25 (e) extras or variations being ordered by the Director of Works,
(0 any other cause, which. in the opinion of the Director of Works, has
caused delay,
the Contractor may, from time to time within fourteen days of the happening
or occurring of the inability, non-delivery, delay, act, default, accident, or
30 cause, apply in writing to the Director of Works for an extension of time on
account thereof, setting forth the cause of such application.
"(2) The Director of Works shall, if he thinks the cause sufficient, but not
otherwise, by writing extend the time for completion of the works for such
period as he shall think adequate, and the time for completion of the works,
35 as so extended, shall for all purposes of the Contract be deemed the time
specified for completion of the works.
"( 3) Unless the Contractor shall apply for an extension of time within the
period and in the manner aforesaid, and unless and until the Director of Works
shall extend the time as aforesaid, the Contractor shall not by reason of any
40 delay arising from causes aforesaid, or any of them, be relieved in any way
or to any extent from his obligations to proceed with, execute, and complete
the works within the time specified in the Contract for the completion of the
works.
"(4) Provided always that the Director of Works may, if he thinks the cause
sufficient, by writing extend the time for completion of the works for such
45 period as he shall think adequate, notwithstanding that an extension of time
has not been requested by the said Contractor."
Applications for extensions of time were made for delays to and disruption
of the work caused by rain, industrial disputes and late delivery of possession
of the site by the defendant. In cases where these applications were not wholly
50 allowed various reasons were given for refusing them. These reasons appear
in different parts of the documents which were considered in the course of
argument. However, I emphasize that I am not presently concerned to decide
whether or not any of these particular refusals were right or wrong; it would
certainly not be possible to do so on the evidence before me and it was agreed
that these facts would be afterwards determined in the sense of my opinion.
Some of the reasons given for refusing applications based upon the occurrence
of rain were that the rain was normal rain and should have been allowed for
by the plaintiff when it submitted its tender; that the policy of the Department
of Works was not to grant extensions for normal rain but only for abnormal
rain; and that the rain in fact did not delay the completion of the work.
Reasons of a similar character were given with respect to delays caused by
industrial disputes.
As a preliminary to my consideration of cl. 35 it is, I think, desirable to
make certain comments upon two matters. The first is the position of the
plaintiff as it appears from the documents and the second is the position of
the Director of Works, who was the person designated by cl. 35 as having
authority to grant or refuse an application for an extension of time. I will now
consider the position of the plaintiff.
The works which were the subject of the contract were, by any standard,
large. The contract price, which was for a lump sum, was $6,365,996. An
inspection of the lengthy contract readily shows that there was a great deal of
detail involved in the work. The presence of this detail, I do not doubt,
required careful and deliberate planning by the plaintiff, both from its own
interest in doing the work in the most efficient and profitable manner, and
also having regard to its obligations and the benefit to the defendant in having
the work completed by the time fixed in the contract. The presence in the
contract of three completion dates, and by that I mean the nomination of three
dates by which certain stages of the work had to be completed, would have
increased the necessity for careful planning. I can well appreciate that if there
were at a particular point disruption to the orderly and planned progress of
the work, reorganization of the whole plan could be required in important
respects. The importance of planning the progress of the work was well
illustrated by the provisions of the contract relating to the time and progress
chart. The obligation of the plaintiff when it was in the position of a tenderer
only was, if required by the Director of Works, to prepare and submit a time
and progress chart. The Director of Works did require the preparation and
submission of such a chart, and not only was it approved by him but it was
incorporated as part of the contract. By the contract the parties agreed that
"The Chart shall indicate the dates on which detailed drawings and particulars
of various items of work will be required, the anticipated dates of commence-
ment and completion of the various trades and the cumulative monthly per-
centages completion for each as valued in conformity with the contract priced
Bill of Quantities. Works to be executed by Sub-Contractors (nominated and
approved) shall be included in the Chart."
The chart is elaborate and is divided into vertical columns, the first of which
describes on succeeding horizontal lines the names of the various trades or
sub-contracting works, and in succeeding vertical columns there are indicated
month by month for the total number of months comprised within the con-
tract period the times when members of each trade would be engaged on each
work and the number of hours of work involved. The agreement also provided
that time should be of the essence. It was also agreed as follows:-
"Should the Contractor or any Sub-Contractor fail to proceed with or com-
plete the works or any part thereof at the rate or within the time specified in
the Time and Progress Chart, conditions 21 and 31 of the General Conditions
of Contract shall be applicable in relation to the works and action under these
conditions or either of them may be taken."
Clause 21 empowered the Director of Works to require the contractor to
engage additional employees if, in his opinion, that action was necessary to
ensure completion by the specified date or any extended date, and cl. 31 con-
tained elaborate provisions empowering the defendant if there had been a
breach of any of the kinds described in the condition or in the non-observance
of the provisions of the time and progress chart, either to take the works
wholly or partly out of the control of the plaintiff or to cancel the agreement.
It is obvious to me that the time and progress chart could not have been pre-
pared unless there had been considerable planning in relation to all aspects of
the work and the order in which that work would take place. A substantial
complaint of the plaintiff, as appears from the evidence, was that when delays
beyond its control occurred at any particular time there could not be strict
observance of the time and progress chart in the month in which those delays
occurred, unless extra men or equipment or modifications to the planning were
introduced. It was also a complaint of the plaintiff that if delays occurred in
anyone month and the time for completion were not extended, an extensive
reorganization of the plan for the sequence of the work could be necessary if
the time and progress chart, so far as it concerned later months, were to be
observed and if the total works were to be completed on the agreed date.
All these deductions and inferences in my opinion followed from the agree-
5 ment of the parties with respect to the time and progress chart. I am also of
the opinion that a proper inference to be drawn from the provisions of the
agreement, and particularly from those to which I have referred, is that
accomplishment of the works in accordance with the contractual obligation
required that if there should be unavoidable delays and in order that extensive
re-planning of the works should be avoided, any decision of the Director of
10 Works to extend or refuse to extend the completion date should be communi-
cated to the plaintiff as early as possible. I am of the opinion that all these
consequences flow from the agreement which the parties made.
The second matter on which I will speak generally concerns the position of
the Director of Works. This gentleman is undoudtedly an important officer in
15 the Commonwealth Public Service. Unlike other senior Commonwealth public
servants, there is not any provision made by statute for his appointment or
duties. However, his position appears to be fairly clear. At the head of the
permanent administrative staff of the Department of Works is the Director-
General of Works who is charged with the general supervision of the Depart-
ment and its activities throughout the Commonwealth. In each State there is
20 a Director of Works who, in relation to the State for which he is appointed,
discharges the same general duties as the Director-General does for the
Commonwealth. There is of course a considerable staff having duties to per-
form in aid both of the Director-General and the Director of Works. Both
the Director-General and the Director of Works are appointed in general terms
25 pursuant to the provisions of the Commonwealth Public Service Act 1922-1950,
and in particular I was told by both sides that ss. 55 and 56 of that Act are
applicable to them.
The fundamental basis upon which the plaintiff sought to litigate its case
against the defendant was that the defendant was in breach of certain terms
30 implied in the agreement. I will return at a later place in this judgment to the
nature of those terms and decide if the plaintiff be correct in the argument it
submitted. However, on the assumption that such terms were implied in the
agreement, the plaintiff's argument was that in the discharge of the duties
imposed upon him by cl. 35, the Director of Works, with the encouragement
and support of the defendant, acted in a manner that was outside his mandate.
35 The plaintiff then argued that the defendant was liable for damage suffered by
it in consequence of the errors of the director of Works. This liability, so it
was submitted, existed for three different reasons. In the first place, if the
Director of Works, when discharging his duties under cl. 35, were the servant
of the defendant, the defendant would be vicariously liable for anything that
40 the Director did wrongly. This conclusion would follow, so it was submitted,
from the relationship of master and servant and would not depend for its
soundness upon the implication of any term. As I followed the argument of
learned counsel for the plaintiff, this was his preferred argument. The second
reason was that the Director of Works in relation to his functions under cl. 35
was a certifier and the use which learned counsel made of the implied terms
45 was that the defendant either was obliged to insure that the Director as such
certifier performed his duties properly, or alternatively was required to refrain
from undertaking any action or course of conduct which would oblige or in-
fluence the Director to act otherwise than in accordance with his duties as
certifier. The third reason was that the Director of Works was an arbitrator
50 and that he was, as such arbitrator, obliged to act judicially, paying proper
and fair respect to the position and interests of both the plaintiff and the defen-
dant. On this aspect of the argument it was submitted that there were implied
terms of the kinds I have described, by which the defendant was bound, in
relation to the Director of Works, in a similar manner to that in which it was
bound with respect to the exercise of his functions if he were a certifier.
The only parties to this agreement were the plaintiff and the defendant. The
Director of Works was not a party but the plaintiff and the defendant had
agreed that certain functions should be performed by him. In my opinion it
is logically desirable to examine those functions first, and then to consider
whether or not in accordance with principles of law terms should be implied

in this agreement as was contended by the plaintiff. I am satisfied that the
Director of Works was not an arbitrator and, indeed, unless I am mistaken,
this argument was not strongly pressed by learned counsel for the plaintiff.
However, the argument that he was a servant and in the alternative that he
was a certifier was developed in detail. The decisions of the courts extending
back over many years show that in many agreements there are included pro-
visions of the same general character as is cl. 35. These characteristics appear
most noticeably and perhaps most frequently in agreements which have been
made for the construction of public works or where one party is a local
governing body. The characteristic of them is that there is a person appointed
on behalf of the government or semi-government body to supervise the execution
of the contract on behalf of his employer. He is generally a senior engineer
or a Director of Works or a principal architect or some other officer who,
because of his technical qualifications and experience, is competent to under-
take that work. He is, as I have said, an employee of the body on whose behalf
he undertakes this work, but, in addition, the same cases show that he is
commonly charged with a duty either of resolving disputes between the con-
tractor and the body which employs him or in certifying as to the quality of
the work done or the whole or part of the cost of doing that work. In my
opinion the cases make plain that throughout the period of performance of
all these duties, the senior officer remains an employee of the government or
semi-government body, but that in addition and while he continues as such
an employee he becomes vested with duties which oblige him to act fairly and
justly and with skill to both parties to the contract. The essence of such a
relationship in my opinion is that the parties by the contract have agreed that
this officer shall hold these dual functions and they have agreed to accept his
opinion or certificate on the matters which he is required to decide. It has
also been said, and in my opinion correctly said, that the agreement of the
parties is that they have referred the decision of these matters to a person who
by reason of his employment and who by reason of his other duties in super-
viSing the execution of the contract is a person who has both bias and
partiality. It is now in my opinion too late to hold that an appointment of
this kind is not one for which the parties to a contract cannot provide. I have
reached the conclusion that although the Director of Works as an officer of
the Commonwealth may well have been the servant of the Commonwealth,
the general nature of the duties imposed upon him by cl. 35 was such that at
the same time he fulfilled this biased and partial role of a certifier when he
was required to consider an application by the plaintiff for an extension of the
completion date. This conclusion is quite unaffected by the consideration that
in relation to other provisions of this agreement, (cf. cl. 21) the Director of
Works was acting in a purely administrative role and only as an officer and
servant of the Commonwealth.
It is now necessary to consider the duties of the Director of Works. He, of
course, has not bound himself by contract with either the plaintiff or the defen-
dant. The plaintiff and the defendant are the only parties to the agreement
but in it they have agreed that the Director of Works shall have the powers
and duties stated in it. Many of these powers and duties are administrative
and supervisory in their character and are performed by the Director of Works
as the servant and agent of the Commonwealth. I have already expressed the
opinion that in respect of the duties imposed upon him by cl. 35 of the general
conditions that he is a certifier. The word "certifier" does not have an exact
meaning but is used to describe a function which is somewhere between those
of a servant and those of an arbitrator. Nevertheless, the function is not the
same in every agreement, as is clearly seen in A. C. Hatrick (N.Z.) Ltd. v.
Nelson Carlton Construction Co. Ltd. (in liq.), [1964] N.Z.L.R. 72, and the
particular duties of the certifier are to be found in the instrument which gives
him his authority. In the present case this instrument is the agreement and the
authority is that which these parties have agreed to give him. In considering
the scope of the authority it is essential to pay regard to the position of the
Director of Works as it is seen apart from any special authority conferred
upon him by the agreement. As I have already described he is a senior
Commonwealth servant and is the Chief Executive Officer of the Department
of Works for the State of New South Wales. His duties lie within the Depart-
ment of Works and his subordinates are also within that Department. In
exercising his administrative functions under the agreement he undoubtedly,
as a servant of the Commonwealth, would need to have the interests of the
5 Commonwealth to the fore and his actions as such servant would be to pre-
serve or further those interests. He is also, of course, a public servant and as
such subject to the duties and obligations of the provisions of the Common-
wealth Public Service Act. If a Commonwealth public servant or a Minister of
State having authority to do so were to give him an order with respect to his
duties, or the manner of performing them, he would be obliged by law to
10 obey that order and would be liable to punishment if he did not do so. The
important relation of the Director of Works to the Department of Works is
emphasized by the contract which defines this title as meaning, "the officer
howsoever styled who is in charge for the time being of the branch of the
Department of Works in the State or Territory in which the works are to be
15 executed". (See cl. 1, General Conditions of Contract.) Clause 1 also empha-
sizes that the expression "Director of Works" is to have this meaning wherever
it appears in the contract and it is, I think, of significance that this meaning
is to be given without the common modification that often appears in Statutes
in the following words: "unless the context shall otherwise require".
It is, in my opinion, against the background of these considerations that
20 the parties must be deemed to have contracted. I hold this opinion because
the matters to which I have referred either appear in provisions of the agree-
ment or are declared as matters of public law.
I now turn to cl. 35. Two sharply contrasting interpretations of this condi-
tion were submitted in argument. They mainly turned upon the words used in
25 subclauses (1), (2) and (3). I have already quoted the clause and will not
repeat it. Subclause (1) refers to a number of events by description; paragraph
(f) refers to "any other cause which in the opinion of the Director of Works
has caused delay". Both sides agreed that the kinds of events which actuated
applications for extension of time were events which fell within paragraph (f).
30 The argument submitted for the plaintiff was that if in fact there was a
happening which caused delay to the erection of the building the Director of
Works was by his mandate required to grant an extension of time equal in
length to the delay which had occurred. It was also submitted that when an
application was made the Director of Works was obliged to give his decision
promptly. It was argued that he did not have any discretion as to whether he
35 should grant or refuse an application; he should it was said, once he found
the facts of cause and delay in the erection of the buildings, automatically
grant an extension. The argument continued that it was quite irrelevant, and
indeed wrong, for the Director to distinguish between rain which was normal
and therefore, as he said, to be expected and rain which was abnormal; to
40 refuse an extension because he was of the opinion that the contractor could
make up the lost time during the period that remained for completion of the
contract. It was also, so it was argued, quite wrong for him to defer his
decision of an application and to inform the contractor that he had done so
and that the facts upon which the deferred application had been based had
been noted and would be considered with other facts which might thereafter
45 occur to determine then whether or not an extension was justified at a later
time. At other times the Director gave as his reason for refusing an application
that the policy of the Department was that applications, made in circumstances
such as were being considered, should be refused. It was argued on behalf of
the plaintiff that this attitude to his duty was unauthorized. All these arguments
50 submitted on behalf of the plaintiff stemmed in a fundamental sense from the
consideration that with an agreement as large and complex as this one was,
it was of the utmost importance that the progress of the work should be
planned and that if by reason of a refusal of an application there had to be
a change in the plan it was important for the purposes of the contract that
that change should be made as early as possible. It was also important, so it
was argued, that the change should be made early because of the loss to the
plaintiff if it were not then done. It is important to mention another point in
which it was submitted on behalf of the plaintiff that the Director erred. The
duty which cl. 35 imposed upon him was, so it was argued on behalf of both
the plaintiff and the defendant, one which was required to be discharged by
him personally. On behalf of the plaintiff it was said that if a decision with
respect to a particular application were decided by reference to "Departmental
policy" that indicated that the Director was not making a personal decision
but was bowing to the established policy of the Department. A similar
criticism to the one that I have just mentioned was that the Director was not
entitled, if he were to make a proper decision, simply to "rubber stamp" the
opinion of another officer, or even to adopt the recommendations of a sub-
ordinate. This, it was argued, was to surrender his duty to somebody else and
he was not permitted to do it.
The major point of divergence between the arguments submitted for the
plaintiff and the defendant was that in the defendant's submission if in a
particular case the Director were satisfied that an event had caused delay in
the execution of the works subclause (2) conferred a discretion upon him as
to whether he would grant an extension or not. It was argued that the words
in subclause (2) "if he thinks the cause sufficient" indicated the existence of a
discretion and this indication was emphasized by the immediately following
words: "but not otherwise". I have formed the opinion that subclause (2)
does confer a discretion upon the Director. The operation of subclauses (1)
and (2) in my opinion is that if there shall be a delay "in the execution of
the works" and that delay has been caused by some relevant factor, then sub-
clause (2) confers a discretion upon the Director to say whether the cause is
sufficient or not to justify an extension of time. Considerable discussion
occurred during argument about the true limits of this discretion, and learned
counsel for the defendant submitted that the limits were confined within a
range of matters that were relevant to the interests of both parties under the
contract. In a sense I am of the opinion that this is correct but that the interest
to which the Director must pay attention is not simply a desire by the plaintiff,
for financial convenience or reasons of its own, to have an extension or, on
the other hand, desire by the defendant to have the building completed within
the time originally specified in the contract, or in an ulterior sense, the desire
of those representing the Postmaster-General to be given occupation at the
earliest possible date. The kind of interest which must govern the exercise of
the Director's discretion is the interest of each party as it appears from all the
provisions of the agreement. The interest in this sense, in my opinion, is
measured both by the rights and obligations of each as they appear from the
various provisions of the contract. Indeed, in my opinion, the discretion is of
a narrow scope and its ambit may well be illustrated, though not precisely
defined, by two examples that were given by learned counsel for the defendant.
The first example was a suppositious case where the contractor had been per-
suaded by his wife to take her away for a holiday; in this example it was
supposed that the works were delayed because the contractor, not being there,
could not give the degree of supervision or make the decisions which were
necessary to enable the progress of the works to continue. Undoubtedly, so
counsel submitted, there was delay and there was a cause of that delay within
the meaning of para. (f) of subclause (1), but he submitted it would be quite
unjust if an extension were to be granted in those circumstances. The second
example was to suppose a case where an accident had happened on the site
of the works in consequence of the default of the contractor and delay was
thereby caused in the erection of the works. It was submitted that this was
also an illustration of a kind where the Director, minded to exercise his discre-
tion on proper principles, would hold that even though he found there was a
cause and that three had been a delay it was not one in which there should
be an extension given for the benefit of the contractor. These illustrations given
by learned counsel for the defendant in my opinion aptly define the somewhat
narrow limits within which the discretion may be exercised to refuse an
application for an extension. It is a more difficult task to define in affirmative
terms what are the limits of the extension. In my opinion, though without
attempting to embrace every case that could arise or perhaps has arisen in the
course of the current disputes, the Director would be obliged to consider the
contractual rights and duties of the plaintiff. I have already said that the
agreement fixed three different terminal dates for the completion of the works;
but that was not the only provision with respect to time which was of the
essence of the contract. There were also provisions with respect to time in the
time and progress chart, and the agreement, as I have said, imposed serious
penalties upon the plaintiff if it did not observe the detailed periodic provisions
of this chart. It is, I think, a correct understanding of the time and progress
5 chart that it defined a specified rate of work throughout consecutive months
of the period of the agreement and it is of less importance that the work was
specified by reference to named months of the calendar year. It is, in my
opinion, more important to regard the time and progress chart as defining a
sequence of work measured by work which was required to be accomplished
month by month, and month by month in accordance with the obligations of
10 the contract it would be seen if the plaintiff had maintained that progress which
it had promised to do and if it had not the defendant could consider whether
it would invoke the provisions of the penalty clause. On this understanding of
the agreement 1 have formed the opinion that the Director, if he paid atten-
tion to the "interests" of the parties when deciding whether or not to exercise
lS his discretion, would be obliged to consider whether or not the plaintiff had
made or had been unable to make the monthly progress which contractually
he was obliged to make and treating the monthly progress as stated in the
time and progress chart as a chart for measuring the periodical sequence of
the work and not as work to be done in a particular named month, the
Director would be obliged, in a proper exercise of his discretion, to extend
20 time if there had been a delay and he was satisfied of a cause for it. In this
understanding of the Director's discretion, if there were a delay caused by
rain or by industrial disputes it would be, in my opinion, irrelevant for him
to consider whether or not the contractor could make up the time at a later
date. The short result would be that the contractor was behind time in the
25 monthly sequence of work and he was contractually obliged to observe this
time. In essence the Director should, in accordance with the contractual inten-
tion of the parties, treat time lost as time not to be counted. It follows in my
opinion also that, for the reasons 1 have given, decisions based upon whether
rain is normal rain or abnormal rain are irrelevant; the important feature in
my opinion is whether or not that rain has caused delay in the progress which
30 the contract requires the contractor to make. It is in this sense which 1 have
tried to express in words that the "interests of the parties" is to be understood
when 1 have said that the duty of the Director is to exercise his discretion in
those interests.
Two other points remain for consideration. The first is one to which 1 have
35 already referred and is whether or not the Director must, as was alleged on
behalf of the plaintiff, make his decision on an application promptly. Clause 35
is silent on this point. It provides that the application of the contractor shall be
within 14 days of the happening etc., but does not provide any time within
which the Director must give his decision. 'I have already described the general
40 character of this agreement and 1 will not repeat the description, but in my
opinion it is clear that the exigencies of this particular agreement, as exempli-
fied by all its provisions, require that a decision shall not be deferred or
delayed. 1 do not quite appreciate how condition 35 can be construed as an
obligation to decide promptly, but 1 am clear that both the exigencies of this
agreement as well as the words of cl. 35 require that the decision must be
45 given within a reasonable time. The measurement of a reasonable time in any
particular case is always a matter of fact. Plainly the director must not delay,
nor may he procrastinate, and in my opinion he is not entitled simply to defer
a decision. On the other hand he is, in my opinion, and this follows from the
nature of his obligation to give his own personal decision on the point,
50 necessarily obliged to have available for that consideration such time as is
necessary to enable him to investigate the facts which are relevant to making
it. When that investigation is complete I am of the opinion that his decision
should then be made. 1 cannot accept all the arguments submitted by learned
counsel for the plaintiff that the Director is bound to investigate every depen-
dent fact himself; this conclusion would, I think, be to ignore the realities of
the situation. I am of opinion, though, that by this agreement and by his man-
date he may act upon the findings and opinions of other persons, be they sub-
ordinates or independent persons such as architects or meteorological obser-
vers; he may also consider and pay attention to the recommendations of sub-
540 SUPREME COURT OF NEW SOUTH WALES (1969] 2 N.S.W.R.
ordinates with respect to the very application he is considering. I do agree

though that the actual decision must be one which flows from the volition of
his own mind and I am of opinion that it is quite irrelevant that that decision
is expressed by the placing of his initials upon the recommendation of a sub-
ordinate officer.
The second matter which I must mention is the entitlement of the Director
to consider Departmental policy. This point must be judged against a back-
ground that the Director is the senior officer of the Department in New South
Wales, that he is obliged to carry out the orders of his superiors and that he
has many duties under this very agreement which he performs as the servant
of the Commonwealth, and in the performance of which he is obliged to
execute and give effect to Departmental policy. I am of the opinion that in
discharging the duties imposed upon him by cl. 35 he is entitled to consider
Departmental policy but I am also of the opinion that he would be acting
wrongly if he were to consider himself as controlled by it. His overriding duty
in performing the function imposed by cl. 35 is to give his own decision having
regard to the rights and interests of the parties as I have described them. He
is thus obliged to consider each application having regard to those rights and
interests; he may also consider it from the point of view of departmental policy
but the rights and interests must be the only matters involved in the decision.
It is irrelevant if departmental policy coincides with the rights and interests of
the parties under the agreement, but it would be quite wrong, in my opinion,
for departmental policy to govern a particular decision, unless the personal
decision of the Director having regard to the rights and interests of the parties
under the agreement was that those rights and interests required it to be applied.
The cases cited by learned counsel for the defendant in my opinion are apposite
on this point and support my conclusion that departmental policy may be
considered but must not govern a decision unless the contractual rights and
interests of the parties so require.
I will now consider important arguments that were submitted with respect
to the existence and content of implied terms in the agreement. The plaintiff
Beeks to make the defendant liable on its agreement. The liability of the defen-
dant is alleged to arise from the honest though wrongful and misguided acts
of the Director. It is therefore necessary that the plaintiff should allege and
prove a responsibility on the part of the defendant for those acts which the
director has done wrongly. The problem would be simple if there were in the
agreement an express term which measured the extent of the defendant's
liability. There is not however any such term and the plaintiff rests its case
upon the argument that such a term must be implied. If any term is to be
implied it was acknowledged by learned counsel for the plaintiff that the nature
of the term would be measured by the mandate conferred upon the Director
by the agreement of the plaintiff and the defendant and also by such other
relevant provisions of the agreement as compelled the implication of the term.
The terms alleged to be implied are of two characters and they may be
described as being negative and positive. In the negative sense the plaintiff
alleged that the defendant was contractually bound not to "interfere" with the
proper performance of the Director's duties and in the positive sense the plain-
tiff alleged that the defendant was contractually bound to insure that the
Director did his duty. It is desirable to state the exact form of the allegations
made by the plaintiff on these points and it is to be found in paras. 6 and 7
of the Statement of Claim which are as follow:-
"6. It was a term and condition of the Agreement that the Defendant, in
relation to the exercise by the Director of Works of the Defendant of the
powers, duties, obligations and discretions cast upon the said Director of Works
of the Defendant by the provisions of clause 35 of the General Conditions of
Contract, would not:
(a) restrict, inhibit or fetter him in;
(b) seek to influence him in; or
(c) interfere with
his decisions in relation to the exercise by the Director of Works of the
Defendant of the powers, duties, obligations and discretions aforesaid.
"7. It was a term and condition of the Agreement that the Defendant would,
in its capacity as the employer of the Director of Works, do all things neces-
sary to ensure that:-
(a) the said Director of Works would exercise the powers, duties, obliga-
tions and discretions cast upon by clause 35 of the General Conditions of
Contract of the Agreement; and
(b) the said Director of Works would exercise the powers, duties, obliga-
5 tions and discretions cast upon him by clause 35 of the General Conditions
of Contract of the Agreement independently and free from interference
or restrictions; and
(c) the said Director would consider and deal with each application for
an extension of time made by the plaintiff pursuant to clause 35 as afore-
said promptly after the making of such application and thereafter promptly
10 notify the Plaintiff of his decision."
Learned counsel for the defendant submitted that in accordance with the
settled principles of law applicable to the implication of terms in a contract
a term could not be implied in this case, His argument to which I will refer
in more detail later was put on several bases. It was first submitted that the
15 terms alleged to be implied in the present agreement were so imprecise and
loose in the words used to describe them that for that reason only it would
be contrary to any principle of law to imply them. It was next argued that the
general principles of law themselves applicable to the implication of terms
required the rejection of the plaintiff's argument. It was finally argued that
judicial authorities did not show that in agreements of the type that the instant
20 agreement was, terms of the kind alleged were ever implied and that, on the
contrary, the authorities had decided that the terms were not implied. It was
acknowledged as part of his argument that there had been some expressions
of judicial opinion supporting the argument for the plaintiff but it was sub-
mitted that these judicial opinions were either obiter or had not received the
25 approval of higher Courts of Appeal. Affirmatively it was argued for the
defendant that in the case of agreements of this type where the complaint of
a contractor was that a certifier had not extended time when he should have
done and such failure to extend was wrongful and encouraged by the
employer, being the other contracting party, the only right in law of the con-
tractor was to disregard the provisions with respect to time in the agreement.
30 He would thereby be able to sue for his price even though he had not com-
pleted the works within the time named in the contract and could not produce
a certifier's certificate or, if he had been paid the price and was sued by the
building owner for ilquidated damages by way of penalty, he could resist such
a claim on the ground that the building owner was not entitled to rely upon
35 the provisions in the agreement with respect to the time for completion (see
Roberts v. Bury Improvement Commissioner (1870), L.R. 6 C.P. 310).
The argument submitted on behalf of the plaintiff is usefully but shortly
stated in the judgment of Devlin, I. (as Lord Devlin then was), in Minster
Trust Ltd. v. Traps Tractors Ltd., [1954] 3 All E.R. 136; [1954] 1 W.L.R.
40 963). At [1954] 3 All E.R., at p. 144; [1954] 1 W.L.R., at p. 973, Devlin, I.,
said: "It is convenient to consider first the issue raised by the last contention,
for I think that that consideration opens the way to the true interpretation of
the certificate clause. There is no general rule of law prohibiting the influencing
of certifiers. Apart from fraud, a duty not to influence can only be imposed
by an implication arising from the contract. Such an implication must, in
45 accordance with settled principles, be both reasonable and necessary, and the
contract must be examined to see what it yields in this respect."
At [1954] 3 All E.R., at p. 145; [1954] 1 W.L.R., at p. 974, the learned
judge said: "If two parties agree to appoint an arbitrator between them, it
would be, I think, implied in the contract in order to give it business efficacy
50 (it is not now in practice necessary to consider the point because of the con-
trol over the arbitrator which the Arbitration Acts give to the Court) that
neither side would seek to interfere with his independence. If a party to a
contract is permitted to appoint his agent to act as arbitrator in respect of
certain matters under the contract, a similar term must be implied; , , ,",
At [1954] 3 All E.R., at p. 146; [1954] 1 W.L.R., at p. 975, Devlin, J.,
said: "Finally, there is a distinction between a certifier whose function has
been completed before the contract is entered into and one who has a function
to perform under the contract. In the latter case there is room for an implied
undertaking that he will not be improperly influenced."
Later on the same page the learned judge said: "If a building owner makes
the obligation of payment conditional on his architect's certificate of quality,
he must not, for example, instruct his architect not to be content with less
than 3 coats of paint, if he has impliedly undertaken that he will leave his
architect free to judge independently, ... ".
Any consideration of this point must begin with the judgment of Bowen, L.J.,
in The Moorcock (1889), 14 P.D. 64; [1886-90] All E.R. Rep. 530. At 14 P.D.,
at p. 68; [1886-90] All E.R. Rep., at p. 534, Bowen, L.J., said: "and I believe
if one were to take all the cases, and they are many, of implied warranties or
covenants in law, it will be found that in all of them the law is raising an
implication from the presumed intention of the parties with the object of giving
to the transaction such efficacy as both parties must have intended that at all
events it should have."
At 14 P.D., at p. 70; [1886-90] All E.R. Rep., at p. 536, the learned judge
also said: "The question is what inference is to be drawn where the parties
are dealing with each other on the assumption that the negotiations are to
have some fruit, and where they say nothing about the burden of this kind of
unseen peril, leaving the law to raise such inferences as are reasonable from
the very nature of the transaction."
In Scanlan's New Neon Ltd. v. Tooheys Ltd. (1943), 67 C.L.R. 169, at
pp. 194 and 195, Latham, Cil., said: "The rule as to the implication of terms
in contracts which was stated by Bowen, L.J., in The Moorcock has not caused
any serious difficulty in the law. It is clear and intelligible. As put by Jordan,
C.J., in Heimann v. Commonwealth of Australia (1938), 38 S.R. (N.S.W.)
691, at p. 695, terms are to be implied only when the matter to which they
relate is not covered by the express terms of the contract, and if not annexed
by usage, statute or otherwise, is such that it is clearly necessary to imply the
term, in order to make the contract operative according to the intention of the
parties as indicated by the express terms. Jordan, C.J., said in that case: 'It is
not sufficient that it would be reasonable to imply the term. It must be clearly
necessary. And the test of whether it is clearly necessary is whether the express
terms of the contract are such that both parties, treating them as reasonable
men-and they cannot be heard to say that they are not-must clearly have
intended the term, or, if they have not adverted to it, would certainly have
included it, if the contingency involving the terms had suggested itself to their
minds.''' (Cf. Gloucestershire County Council v. Richardson, [1968] 2 All
E.R. 1181; [1969] 1 A.C. 480, per Lord Upjohn, at p. 503; Young & Marten
Ltd. v. McManus Childs Ltd., [1968] 2 All E.R. 1169; [1969] 1 A.C. 454;
Pettitt v. Pettitt, [1969] 2 All E.R. 385; [1969] 2 W.L.R. 966, per Lord Diplock,
at [1969] 2 All E.R. at p. 415; [1969] 2 W.L.R., at p. 1000. Cf. Howden v.
Cock (1915),20 C.L.R. 201, per Isaacs, J., at pp. 213, 214.)
The solution of this point in my opinion must be upon the basis of the
reasonable man and must not be determined by reference to the idiosyncracies
of one or other of the parties. In my opinion this follows from the judgments
of Bowen, LJ., and Latham, C.J., in the passages I have cited. It must in my
opinion be assumed that the parties entered into this agreement and it must be
assumed that when they did so they intended to achieve something. The
definition of what they intended to achieve is to be found in the agreement
itself. The main purpose no doubt was the erection of the building and the
payment of the lump sum price to the plaintiff. But there were also other pur-
poses. One purpose in my opinion must be that if cause arose for the applica-
tion of cl. 35 of the General Conditions of Contract, that condition would
receive effect according to its terms. I have already held that the duty of the
Director when acting as Certifier was to act independently and in the exercise
of his own volition according to the exigencies of a particular application. In
my opinion it is not possible to assume that the parties to this agreement could
have contemplated that he would act in manners other than those upon which
they have agreed and expressed in cl. 35 and that it is a consequence of this
assumption that they shall have impliedly bound themeslves one to the other
that they would not do anything that would prevent him from a proper dis-
charge of the mandate which contractually they had granted to him. It is not
necessary for any purpose of this case to decide whether the plaintiff is so
bound but I am of the opinion that the defendant is, and that the obligation
of the defendant in this respect is more clearly seen because it was the
employer of the Director who in his turn was bound to act as the defendant
should direct. The passages which I have read from the judgment of Devlin, J.,
refer to the situation I have been discussing and indeed they express the opinion
of the learned judge upon those points. It is true as was said by learned counsel
5 for the defendant that the opinion of Devlin, J., on this point is an obiter
dictum but it is a weighty obiter dictum and one which satisfies me of its
correctness. I am of opinion that there must be implied in this contract in
order to give it business efficacy an implied term of the negative character to
which I have already referred. (Compare A. C. Hatrick (N.Z.) Ltd. v. Nelson
10 Carlton Construction Co. Ltd., [1964] N.Z.L.R. 72; [1965] N.Z.L.R. 144.)
At this point I must, I think, express my opinion upon an important argu-
ment submitted by learned counsel for the defendant. This argument was that,
with the exception of the opinion of Devlin, J., not only was there not any
authority justifying the implication of a term in an agreement of this type
but that in fact the authorities were to the contrary. The argument was
15 principally founded upon Hickman & Co. v. Roberts, [1913] A.C. 229 and
Panamena Europea Navigation Compania Limitada v. Frederick Leyland & Co.
Ltd., [1947] A.C. 428. It was argued that these authorities decided that if there
had been a wrongful, in the sense of unauthorized, exercise of powers by a
certifier with the knowledge of the employer of the certifier, the employer
20 being the other party to the contract pursuant to which the certifier was
appointed, the only right of the contractor was that he was entitled to dis-
regard the provisions of the agreement with respect to time and either to sue
for the price or resist a claim for liquidated damages by way of penalty: Dixon
v. South Australian Railways Commissioner (1923), 34 C.L.R. 71. While it
is, in my opinion, the law that a contractor is entitled to disregard the pro-
25 visions of the agreement with respect to time in the manner that learned counsel
for the defendant submitted it does not follow, nor in my opinion has it been
decided that if the contractor has otherwise suffered damage he is not entitled
to sue upon an implied term. I cannot accept the argument which learned
counsel for the defendant submitted with respect to the decisions he cited. I
30 was referred to the decision of the Court of Appeal in Panamena, supra, and
to the judgments delivered by the members of that Court. In that case the
certifier adopted a wrong understanding of his functions and his employer,
which was the other contracting party, adopted and encouraged the under-
standing of the certifier. In the result the certifier did not issue his certificate
and the claim of the plaintiff was for the contracted price, or in the alternative,
35 for damages in the same amount. The claim of the plaintiff was based in the
alternative upon the implication of a term in the agreement that the defen-
dant, building owner, would not encourage or influence the certifier wrongly
to withhold the issue of his certificate. The defence was that a certificate had
not issued and that in its absence and in accordance with the provisions of
40 the agreement the plaintiff was not entitled to recover. The decision of the
Court of Appeal is reported in (1943), 76 Ll. L.R. 114. At p. 122, Scott, L.J.,
said that the problem for decision called for answers to two questions which
he stated as follows:-
(1) What is the scope of the function assigned to the certifying third party
by the agreement of both the contracting parties?
45 (2) What, if any, is the contractual undertaking, express or implied, of the
party whose servant, or agent, or nominee such third party expert is?
At p. 124 the learned Lord Justice also said: "Let us consider the position.
The repairers were entitled to rely on the surveyor doing what the contract
said he was to do, that is, keeping to matters of quality only. It seems to me
50 plain if the shipowners had known that he was departing from his proper
function under the contract, it would have been their duty to stop him and
tell him what the function was for which the contract provided, . . . . It
obviously was not the contractual duty of the repairers to bring him to book.
It is equally obvious that they would count on his carrying out his proper
function. In those circumstances I think the Court ought to imply an under-
taking by the owners that in the event of its becoming known to them that
their surveyor was departing from the function which both parties had agreed
he was to perform, they would call him to book, and tell him what his real
function was. This seems to me an implication exactly on the lines of all the
authorities on implied terms from The Moorcock down to Luxor (Eastbourne)

Ltd. v. Cooper, [1941] 1 All E.R. 33; [1941] AC. 108."
At the same page, Scott, L.J., said: "In the result, I am of opinion that
they were under a contractual duty to keep their surveyor straight on the scope
of what I metaphorically called his 'jurisdiction', by which I do not mean that
he was in any sense an arbitrator, but only that as an expert entrusted with
the duty of impartiality within a certain sphere he had to form his opinion
with judicial independence within that sphere. It follows from my premises
that in failing to inform Dr. Telfer that he was going outside and away from
the limits of his function, they broke their implied undertaking."
Luxmoore, LJ., agreed with the judgment of Scott, LJ., and also with that
of Goddard, LJ. Goddard, L.J., as I read his judgment which began at p. 126
agreed with the construction of the contract stated by Scott, L.J., and did not
propose to add to it. Accordingly it is apparent that all members of the Court
held the same opinion on the construction of the contract. However,
Goddard, L.J., then dealt with another question, namely, whether the defen-
dant was entitled to rely on the absence of a certificate and he held, applying
the principles of Hickman & Co. v. Roberts that the defendant was not so
entitled. Both these grounds were stated as grounds for dismissing the appeal
in the Court of Appeal. It is significant, I think, that although the claim of
the plaintiff was stated in the alternative to be for damages for breach of the
implied term the damages claimed were the same amount as was claimed
firstly for the contract price. It was accordingly sufficient in order that the
case might be decided in favour of the plaintiff that it should be upon either
of the two grounds asserted by the plaintiff. In that sense Panamena Europea
Navigation Compania Limitada v. Frederick Leyland & Co. Ltd., [1947] AC.
428, is different from the present case where the plaintiff, having been paid its
contract price claims other damages for breach of the implied term which all
members of the Court of Appeal in Panamena held to have existed.
When the case came to the House of Lords the only judgment was that
delivered by Lord Thankerton. The appeal was dismissed and it is true, as
learned counsel for the defendant argued, that the House of Lords did not
deal in any way with the plaintiff's claim based upon the existence of an
implied term. Learned counsel for the defendant submitted that this was
because the House of Lords was of the opinion that there was not any implied
term in the contract and he relied upon the approval given by Lord Thankerton,
with whose speech the other noble and learned Lords concurred, to the judg-
ment of Goddard, L.J., in the Court of Appeal. However, in my opinion the
argument of learned counsel for the plaintiff is correct about the true extent
of the decision of the House of Lords in Panamena. At pp. 434 and 435 of
the report it appears that specific questions were submitted to their Lordships
in the course of argument and that the argument of counsel and the subse-
quent decision of the House was confined to those points. The fourth point
is the only one which is material and that is stated at p. 435 in the following
words: "Are the respondents entitled to recover the amount claimed in the
action-and not merely such amount as may be held to be a reasonable price-
without producing a certificate of the appellant's surveyor in pursuance of
clause 7 of the contract?"
The House of Lords answered this question in the affirmative and dismissed
the appeal. In my opinion in so treating the appeal the House of Lords directed
its attention to the alternative, albeit the first alternative ground, upon which
the plaintiffs in the action rested their claim. The noble and learned Lords
expressed their opinions on that point and in my opinion it is correct to say
they approved the judgment of Goddard, LJ., because of the judges in the
Court of Appeal he was the only judge who dealt extensively with the point.
I find some comfort in the conclusion I have reached about Panamena from
the circumstance that Lord Devlin was counsel in Panamena, both at the trial
and in the two appeals. That learned judge referred to Panamena in his judg-
ment in Minster Trust Ltd. v. Traps Tractors Ltd., [1954] 3 All E.R. 136;
[1954] 1 W.L.R. 963, and it would be surprising In the circumstance if, having
referred to Panamena, without making any such criticism as a judge of first
instance may be entitled to make of a decision of the House of Lords, he
should then have added in the course of his judgment the passages which I
have cited about the implication of a term in such a contract. In my opinion

Lord Devlin must have held the same opinion of the effect of the Panamena
judgments as I have expressed.
I will now consider the affirmative aspect of the term which learned counsel
5 for the plaintiff argued must be implied in this agreement. Fundamentally he
argued it is essential to consider this aspect against the background that the
Director of Works was at all times a servant of the Commonwealth; that the
position he occupied as Certifier was part of the machinery set up by the
agreement of the Commonwealth and the plaintiff for certifying applications
for extension of time. As such a servant of the Commonwealth the Director
10 of Works was obliged by law to obey all lawful orders of the Commonwealth:
see Commonwealth Public Service Act 1922, s. 55 (1) (a). If, for example,
the Commonwealth were to say to the Director: "You are ordered to act in
a particular manner", and if that order constituted a breach of the Contractual
mandate conferred on him by cl. 35, the Director would none the less be still
obliged to act in compliance with the Commonwealth order. Against this back-
15 ground I will assume that the certifier, with the knowledge of both parties to
the agreement, acted in breach of his obligation. Could the Commonwealth
in those circumstances say: "I will not do anything to insure that he carries
out these duties"? In my opinion an application of the test stated in The Moor-
cock (1889), 14 P.B. 64; [1886-90] All E.R. Rep. 530, would require the
20 answer that the Commonwealth was contractually bound to order him to carry
out his duties. In my opinion the plaintiff and the defendant, being the parties
bound by this agreement, are bound to do all co-operative acts necessary to
bring about the contractual result. In the case of the defendant this is an
obligation to require the Director to act in accordance with his mandate if the
defendant
25 [1881] 6 App. is aware that he is proposing to act beyond it. In Mackay v. Dick,
Cas. 251, at p. 263, Lord Blackburn said: "I think I may
safely say as a general rule that where in a written contract it appears that
both parties have agreed that something shall be done which cannot effectually
be done unless both concur in doing it, the construction of the contract is
that each agrees to do all that is necessary to be done on his part for the
30 carrying out of that thing, though there may be no express words to that
effect." (Cf. Electronic Industries Ltd. v. David Jones Ltd. (1954),91 C.L.R.
288, at pp. 297, 298.)
I am accordingly of the opinion that a term must be implied in the present
agreement binding the defendant to insure that the Director of Works, its ser-
35 vant, performs his duties under cl. 35 in accordance with this mandate.
Paragraph 7 of the Statement of Claim alleges that the term to be implied
obliges the defendant to ensure that the Director of Works decides an applica-
tion for extension promptly. I have already expressed the opinion that the
proper implied term in the circumstances is to make a decision within a reason-
able time. I am also of the opinion that the obligation created by an implied
40 term of the defendant is to insure that the Director of Works gives his
decision within a reasonable time in the manner in which I have already
explained.
So far in this judgment I have been only considering the plaintiff's claim
with respect to its applications for extension of time. There were, however,
45 five other matters which I was originally asked to decide although when the
trial began I was informed that because three of these matters would involve
consideration of evidence it had been agreed that they should be decided by
the tribunal of fact. However, two remain for my decision.
The first concerned a claim for payment of money to compensate the plain-
50 tiff for moneys which it became obliged to pay the members of its work force
by reason of alterations of the law made after the date on which the agree-
ment was executed. These claims can be conveniently classified into two
groups. The first consisted of two public holidays on 31 December 1962 and
4 March 1963, respectively. Both these public holidays were proclaimed by
His Excellency the Governor pursuant to the provisions of the Banks and Bank
Holidays Act 1912, as amended. The second group consisted of two picnic
days allowed to members of the building trades. These two dates were
respectively 2 December 1963 and 7 December 1964. The members of the
building trades became entitled to them in consequence of variations to the
relevant awards made after the date when the agreement was executed.
The plaintiff maintained the validity of both claims in reliance upon certain
provisions of the Specification and Special Conditions of Contract. Each of
these documents was incorporated in and became part of the agreement. The
relevant part of the Specification was as follows: "The contract price shall be
subject to rise and fall adjustments in labour and materials in accordance with
condition No. 1 of the Special Conditions of Contract annexed to the General
Conditions of Contract and conditions Nos. 2 and 3 of the Special Conditions
of Contract forming part of this specification."
The relevant part of the Special Conditions of Contract was in the following
words:-
"( 1) The price mentioned in the tender and in the agreement for the
execution of the works shall be deemed to have been calculated on the mini-
mum rates of wages payable and on the hours of labour in force at the date
of the tender.
"(2) If by reason of any award, judgment, determination, order or rule of
a Court, industrial board or other statutory tribunal or authority, there shall
be any variation in -
(a) the rates of wages payable to persons employed by the contractor on
the site of the works (including any variation in the base rates of wages);
and/or
(b) the hours of labour to be worked by persons employed by the con-
tractor on the site of the works,
the price mentioned in the tender and in the agreement for the execution of
the works shall be varied in the same manner and to the same extent as the
cost to the contractor of executing the works would be varied by reason of
such variation in rates of wages and/ or hours of labour if each person
employed by the contractor on the site of the works were paid minimum
wages."
The argument submitted on behalf of the plaintiff was that the consequence
of these additional holidays was that in respect of each week in which a holi-
day occurred 32 hours of work were obtained for a rate of pay based upon
a 40 hour week. It was submitted that this resulted in a variation in the rates
of wages payable during that week. It was alternatively submitted that if the
employee worked on the holiday because he was entitled to double time, there-
fore, the contractor was obliged to pay for 40 hours' work the wages normally
earned in 48 hours' work.
In my opinion it is not correct to hold that the proclamation issued under
the Banks and Bank Holidays Act 1912, as amended, is an award, judgment,
determination, order or rule of a Court, industrial board or other statutory
tribunal or authority. The proclamation in each case was issued by the
Governor no doubt on the advice of the Executive Council. I also do not
doubt that the proclamation was in every respect lawfully issued. In my
opinion, however, such a proclamation cannot fall within the description of
the authorities which I have just quoted from the Special Conditions of Con-
tract. In my opinion the words of subclause (2) of cl. 1 plainly refer to the
kind of order, award or determination which is made by an industrial
authority such as the Industrial Commission or a Conciliation Commissioner
and that they do not extend to a proclamation however lawfully made by
His Excellency the Governor. For these reasons in my opinion the claim of
the plaintiff for the holidays on 31 December 1962 and 4 March 1963, fails.
So far as concerns the claims for the picnic holidays, I am of the opinion
that the variation of the awards conferring the right to these holidays did not
involve any change or variation in the rate of wages payable, or in the hours
of labour within the meaning of subcause (2) of d. l. These phrases have a
well-known meaning, at any rate in this State, and refer to the rates of wages
and the hours of labour specified for work in awards made by award-making
authorities. In my opinion the picnic holidays do not fall within the words.
They were additional holidays granted and the variations of the awards which
granted them did not constitute any variation of either the rates of wages or
the hours of labour. In my opinion the plaintiff's claim on this ground also
fails.
The next matter which I was asked to decide concerned the cost to the
plaintiff of obtaining a bank guarantee required by the defendant. The
conditions for tendering provided for a tender deposit of £100 which in the
case of the successful tenderer would be applied towards the security deposit
of £500. Clause 9 of the General Conditions of Contract provided that this
amount would be held by the Commonwealth as security for the due and
proper performance and completion of the contract to be accounted for when
5 the Director of Works' certificate that the whole of the project had been com-
pleted in accordance with the contract and the maintenance period had
expired. Notwithstanding this express provision, and another one in the agree-
ment, the defendant apparently thought that before awarding the contract
security of the amount already required was not an adequate safeguard for a
10 contract of over $6 million. The defendant, therefore, informed the plaintiff
of its view on this point and requested it to obtain a bank guarantee for
$200,000 to secure the due and proper performance of its obligations. This
guarantee was to be handed over before the agreement was signed but did not
form part of the tender conditions and the plaintiff, I accept, did not allow
for it in its tender price.
15 There is not any oral evidence on this point, but the argument submitted
on behalf of the plaintiff turned solely upon the construction of a letter dated
6 April 1962, written on behalf of the defendant to the plaintiff. This was
the letter by which the defendant formally accepted the plaintiff's tender. In
material respects the letter said: "The matters upon which verbal agreement
20 has been reached are as follows: ... "
then followed a reference to a matter that is not relevant to state and in para-
graph (b) it was said: "The company agrees to supply at no additional cost
B.G.E. No. FM2602 40-watt recessed flourescent light fittings in respect of
item 11 in the Schedule of specified items."
This was followed by a reference to the obligation of the plaintiff to procure
25 the execution of the additional guarantee.
The argument submitted on behalf of the plaintiff was that because what
the plaintiff agreed to do in para. (b) (which I have quoted) was to be done
at the cost of the plaintiff and because in para. (c) which referred to the
obligation of the plaintiff to procure the additional guarantee there was not
30 any reference to the cost being borne by the plaintiff, therefore it should be
inferred that the cost was to be borne by the defendant. This argument
involved reading a term into the letter dated 6 April 1962 which is not written
there. I do not doubt that in appropriate circumstances such a term could be
implied, but in my opinion before that could be done it would be necessary
35 for me to hold that the implication should necessarily be made in order to
give the agreement stated in this letter efficacy. I am of the opinion that it is
not correct to make this implication. The reality of the situation in my
opinion is that the plaintiff and the defendant agreed to the provision by the
plaintiff of an additional guarantee but that they did not make any agreement
at all with respect to the liability of one side or the other side for the cost
40 of doing so. It is in my opinion simply a matter upon which the parties have
not expressed any agreement and for that reason the claim of the plaintiff on
this point must fail.
My judgment has dealt with all matters which have been argued before me
but, of course, it does not decide all the matters which are in dispute between
45 the parties in the action. These matters remain to be decided in accordance
with the agreement of the parties which I have already stated and which I
have approved. I propose, therefore, in accordance with the further agreement
of the parties, merely to order that the further trial of the action shall stand
over to a date to be fixed and reserve leave to either party to restore the action
to the list for the purpose of making such further orders as may be necessary
50 for the purpose of disposing of all matters in dispute. I reserve all matters of
costs to date.
Rulings and order accordingly.
Solicitors for the plaintiff: Allen, Allen and Hemsley.
Solicitor for the defendant: H. E. Reniree, Commonwealth Crown Solicitor.
P. W. YOUNG
BARRISTER-AT-LAW

NSWLR Perini Corporation V Commonwealth of Australia (1969) 2 NSWR 530

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530 [1969] 2 N.S.W.R.

SUPREME COURT OF NEW SOUTH WALES

PERINI CORPORATION v. COMMONWEALTH OF

D. L. Mahoney, Q.C. and T. R. H. Cole, for the plaintiff.

Cur. adv, vult.

532 SUPREME COURT OF NEW SOUTH WALES [1969] 2 N.S.W.R.

whether or not in accordance with principles of law terms should be implied

ordinates with respect to the very application he is considering. I do agree

authorities on implied terms from The Moorcock down to Luxor (Eastbourne)

have cited about the implication of a term in such a contract. In my opinion

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