Questions of construction of contracts, assignment of building warranties and the limits of the principle - Walker Group Constructions Pty Ltd v Tzaneros Pty Ltd [2017] NSWCA 27

The Contract provided for the construction of five warehouses and the laying of various types of pavement. Following the laying of the pavement, cracks and spalling began to develop in some pavement types. Tzaneros claimed from WGC and AMT the cost of replacing the defective pavement.

The Issues

The issues raised by the notice of appeal included:

(1) Whether on a proper construction of the terms of the Deed and the letter of consent from WGC, there was an assignment by P& O to Tzaneros of any accrued cause(s) of action for breach of the building warranties.

(2) Whether construction of the relevant documents by reference to the surrounding circumstances was permissible.

(3) Whether Tzaneros acquired the terminal with knowledge of the defects and therefore suffered no loss as a consequence of those defects.

(4) Whether Tzaneros was entitled to recover damages for the cost of full replacement of the pavement.

(5) Whether a reduction in the sum of damages awarded to Tzaneros for betterment should have been made.

The Findings

The Court held (Bathurst CJ, Beazley P and Gleeson JA agreeing), dismissing the appeal:

Construction

• Recourse may be had to deleted words or clauses in a contract for the purpose of construing ambiguous language. The fact of the deletion of words can only be used to negative an inference sought to be drawn from the surrounding circumstances, where the evidence shows the parties mutually concurred in rejecting that meaning: [117]-[118] (Bathurst CJ); [241] (Beazley P); [242] (Gleeson JA) (Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24; Gee Dee Nominees Pty Ltd v Ecosse Property Holdings Pty Ltd [2016] VSCA 23; 260 Oxford Street Pty Ltd v Premetis [2006] NSWCA 96; Burger King Corporation v Hungry Jack