Lodder v Slowey

The judgment of their Lordships was delivered by

Lorp Davey. In the month of December, 1897, a contract
was made between the corporation of Karori in the Colony of |
New Zealand, acting by its borough council, with one John
McWilliams for the construction by him of certain road works
including a tunnel. The contract was subject to certain con-
ditions by which it was provided (clause 1) that the contractor
should execute the works according to the specification and
to the entire satisfaction of Thomas Ward, civil engineer;
(clause 4) that the engineer of the borough council should be
the sole judge in all matters or questions arising out of the
contract and of quality of materials or workmanship, meaning
of specification, rate of progress, and general management,
and that his decision should be final and conclusive in all
cases ; and (clause 8) that, should the contractor not proceed
with sufficient expedition in the performance of the work or
not execute the same in compliance with the specification or
drawings, it should be in the power of the engineer on behalf

(DHCCa RD rol': (2) 3 Times L. R. 272.

A.C. AND PRIVY COUNCIL.

of the borough council to enter on and take possession of the
works and materials and complete the same at the expense of
the contractor, or relet such works to another contractor, and
any loss should be recoverable from the contractor or, in the
alternative, to determine the contract, and on such determina-
tion the money paid under the contract should be accepted by
the contractor in satisfaction of all claims under the contract.

The appellants entered into a bond with the borough council
in the sum of 500. for the due carrying out by McWilliams of
his contract. The bond itself is not printed in the record, and
their Lordships do not know the exact terms of it.

In September, 1898, McWilliams made default and, in fact,
abandoned the works. The borough council thereupon called
upon the appellants under their guarantee, and in the result
a contract, dated November 15, 1898, was made between the
appellants and the respondent for the execution by the latter
on or before March 2, 1899, of the works undertaken by
McWilliams and left incomplete by him. This contract con-
tained a provision that the respondent should be deemed to
have full notice of the contents and effect of all the various
documents constituting McWilliams' contract, and to be bound
by all the terms and conditions of such contract so far as the
same were then applicable to the present contract and capable
of being carried into effect.

It may be useful at this point to consider the relation which
was thus constituted between these three parties, the borough
council for whom the works were to be executed, the appel-
lants, and the respondent. The borough council and the
appellants seemed to have assumed that on McWilliams'
default the borough council had the right to call upon the
appellants to complete the works, or that the appellants had
an option whether they would do so or pay the penalty on the
bond. At any rate they elected to take that course with the
acquiescence of the borough council, without, however, binding
the corporation by any contract with them. Probably all
parties considered that they were subrogated to McWilliams'
rights and subject to his liabilities. Instead of executing the
works themselves, the appellants engaged the respondent to do

447

J.C,
1904

_—m~
Lopprr
v.
SLOWEY.

448

J.C.
1904

—~y
LopDER
Us
SLOWEY.

HOUSE OF LORDS {1904]

so. Quoad the borough council the respondent was therefore
in the position of a sub-contractor only, and there was no
privity of contract as between them. But as between the
appellants and the respondent each party was liable to the
other one for any breach of the contract. The learned counsel
for the respondent referred their Lordships to some letters
which passed between the solicitors of the appellants and the
borough council respectively, in the month of February, 1899.
It was then arranged, at the suggestion of the appellants
themselves, that the respondent and the borough council
should deal directly with each other, but without interfering
with the position of the appellants towards the council, and,
in answer to an inquiry from the solicitors of the borough
council, it was explained that the meaning was that the
respondent should be the agent of the appellants in making
all arrangements about the tunnel, &c. These letters appear
to explain the relative positions of the parties to each other
with sufficient clearness.

Perhaps the expression that the respondent was to be deemed
the agent of the appellants was not a very happy one, but it
clearly meant that the appellants were, in a question between
them and the borough council, to be bound by arrangements
made with, and instructions given to, the respondent in the
course of the execution of the works. On the other hand, by
allowing the borough council to deal with the respondent
directly, the appellants, in any question on the contract
between them and the respondent, made the borough council,
acting through their proper officer, the agents of the appellants
as regards all matters relating to the execution of the contract,
and quoad the respondent assumed the responsibility for any
directions or instructions given by the council. In fact, the
execution of the works was proceeded with on this footing.
The respondent dealt directly with Mr. Ward, the engineer of
the borough council, and received his orders and instructions

' from him. And the appellants left the entire supervision and

superintendence of the respondent's execution of the works to
Ward.
The contractor failed to complete the works within the time

A.C. AND PRIVY COUNCIL.

specified in the contract, and in the month of July, 1899,
letters were written by Mr. Ward to the appellants complain-
ing of the.condition of the works, and threatening to take the
works out of their hands and complete them at their expense.
Copies of these letters were forwarded by the appellants to the
respondent with an intimation that unless something was done
to satisfy Mr. Ward it would be necessary for the appellants
to take the work out of the respondent's hands and complete
it at his expense. On August 8, 1899, the officers of the
borough council, purporting to act under the power contained
in the eighth condition of McWilliams' contract, entered upon
and took possession of the works.

The respondent shortly afterwards commenced the present
action against the appellants, and by his statement of claim
dated November 6, 1899, after alleging that the appellants had
wrongfully entered and taken possession of the works and
wrongfully determined, repudiated, and declined on their part
to perform their contract, the respondent claimed for work
and labour done and materials supplied by him at the request
ot the appellants, and, alternatively, damages for breach of
contract.

The corporation of Karori was afterwards added as a
defendant.

The action was tried before Edwards J. and a jury in July,
1900. The jury returned a special verdict in answers to twenty-
seven questions left to them. For the purpose of this appeal
the most material findings are those numbered 7, 10, 14, 17,
and 24.

'7, Did the defendant corporation prior to the seizure of the
works improperly prevent the plaintiff from proceeding with
the works in the manner authorized by his contract ? Answer:
Wes.

'©10. Was such seizure wrongful? Answer: Yes.

"14, Did the plaintiff proceed with the works with the rate
of progress required by the defendant corporation's engineer ?
Answer: Yes, except that he did not comply with the letters of
July 21st and 25th.

"17, Did the defendant corporation prevent the plaintiff

449

J.C.
1904

—~
LoppDER
UV
SLOWEY.

450 HOUSE OF LORDS [1904]

J.c. from proceeding with the said works with sufficient expedition ?
1904 Answer: Yes.

—~

Lanner "94, What would have been the sted which the plaintiff

aint would have obtained if he had been allowed to finish his con-

as tract ? Answer: No evidence that any profit would have been
made."

The learned judge, on cross-motions for judgment and non-
suit by the plaintiff and both defendants respectively, held that
the corporation were under no contractual liability towards the
respondent, and were liable only for the agreed value of certain
plant which they had taken. There is no appeal from this part
of the judgment. As against the appellants he held that there
was an implied warranty by the appellants that the respondent
should have undisturbed possession of the land for the purposes
of the contract, and the appellants were liable to the respondent
for breach of this implied warranty. But he held that the
measure of damages was the amount (if any) which the
respondent had lost by exclusion from the works before com-
pletion, and, as there was no evidence before the jury that the
respondent had suffered any loss, he gave them the option of
a new trial. And the learned judge entered judgment, dated
August 25, 1900, accordingly.

This judgment was reversed by the Court of Appeal, and by
their judgment of February 1, 1901, judgment was ordered to
be entered for the respondent for 1015/. 5s. with costs. The
present appeal is from this judgment.

The learned judges in the Court of Appeal agreed with
Edwards J. that the appellants were liable to the respondent
for the wrongful re-entry and seizure by the borough council,
but on rather different grounds. Connolly J. held that Ward
must be treated'as agent for the present appellants, with an
almost unlimited authority to act for them and bind them in
responsibility for his acts. Williams J., while agreeing with
the views expressed by Edwards J., thought further that, even
if that conclusion were incorrect, there was an implied warranty
or an implied condition of the contract that the respondent
should not be wrongly interfered with by the person to whom
by the contract the appellants had entrusted the superintendence

A.C. AND PRIVY COUNCIL.

of the respondent's work, namely, the engineer to the borough
council. On the measure of damages the learned judges dif-
fered from Edwards J. They adopted the statement of the law
in the notes to Cutter v. Powell in Smith's Leading Cases, and
they thought that Lord Cranworth's judgment in Ranger v.
Great Western Ry. Co. (1), which had been relied on by the
learned judge in the Court below, had been misapplied. All
that that case decided, in their opinion, was that the appellants
had no claim to equitable relief. Accordingly they held that
the respondent was in the circumstances entitled to treat the
contract as at an end and to sue on a quantum meruit for work
and labour done and materials supplied, the net amount of
which the jury had found to be 10151. 5s.

Their Lordships agree with the conclusion of the Court of
Appeal. They do not dissent from the contention of Mr.
Skerrett, in his very able argument for the respondent, that in
the circumstances of this case it was an implied term of the
appellants' contract with the respondent that the borough
council would permit the respondent, who was in the position
of a sub-contractor, to perform his contract. But they think
that the simplest and safest ground on which to rest the
liability of the appellants is that they made the borough
council, acting through their engineer, their agents for super-
intending the respondent's execution of his contract with full
power to act for them in respect thereto. Not only is this
proved by the arrangement made by the appellants with the
borough council that the respondent should deal directly with
the council and by the actual course of dealing by all parties,
but their Lordships think that it was also in accordance with
the contract which by clause 8 incorporated the conditions of
McWilliams' contract so far as then applicable.

Tt was, however, contended for the appellants at their Lord-
ships' bar that, according to the true construction and effect of
clause 8 of the respondent's contract, the borough council had
the right to re-enter upon the works if, in the opinion of the
engineer, the respondent was not proceeding with sufficient
expedition in the performance of the work. For this purpose

(1) (1854) 5 H. L. ©. 72.

451

J.C.
1904

—~
LoppER
v,
SLOWEY.

452

J.C.
1904

ead
LODDER
%.

SLOWEY.

HOUSE OF LORDS [1904]

it was said the engineer was not acting as the officer of the
borough council, but was placed by the contract in the position
of an arbitrator or referee, and his decision was made conclu-
sive on the rate of progress. No imputation, it was rightly
said, had been made upon Mr. Ward's good faith, and, there-
fore, the re-entry must be held to have been rightfully made,
and no cause of action arose from it.

Admitting this to be so, and assuming that the true effect of
the incorporation of the conditions of McWilliams' contract,
so far as the same were then applicable, was to give the right
of re-entry, under clause 8 of McWilliams' contract, not to
the appellants, but to the borough council, the answer to the
argument appears to their Lordships to be that the jury have
found (7.) that the corporation prior to the seizure of the works
improperly prevented the respondent from proceeding with the
works in the manner authorized by his contract, and (17.) that
the corporation prevented the respondent from proceeding with
the works with sufficient expedition.

It was not suggested before their Lordships that these
matters were not properly before the jury, or that the questions
were not properly left to them, or that there was not evidence
before them on which they could properly find as they did.
Their Lordships do not think that the appellants are precluded
by the express finding that the seizure was wrongful from
raising any questions of law, but they think that the 7th and
17th findings are fatal to the appellants' argument. The cor-
poration, of course, means the borough council, acting by their
engineer, Mr. Ward. Their Lordships have already expressed
their opinion that the borough council and Ward were made
the appellants' agents for the purpose of superintending the
execution of the contract by the respondent, and the acts done
and orders given by the borough council or Ward, which the
jury have found prevented the respondent from proceeding with
the works with sufficient expedition, were therefore within the
scope of the authority conferred by the appellants. Their
Lordships hold that a party to a contract for execution of works

cannot justify the exercise of a power of re-entry and seizure |

of the works in progress when the alleged default or delay of

a arg

A.C. AND PRIVY COUNCIL. 453

the contractor has been brought about by the acts or default of J. 6.
the party himself or his agent: Roberts v. Bury Improvement 1904
Commissioners. (1) 7

LopDER
Their Lordships also agree with the learned judges as to the aes
proper measure of damages, or (more accurately) as to the right © ——
of the respondent to treat the contract as at an end and sue for
_ work and labour done instead of suing for damages for breach
oi the contract.
Their Lordships will, therefore, humbly advise His Majesty
that the judgment appealed from should be affirmed and the
appeal dismissed. The appellants will pay the costs of the
appeal.