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South Australian Railways Commissioner v Egan [1973] HCA 5; (1973) 130 CLR 506 (20 March 1973)

CATCHWORDS

HEARING

DECISION

MENZIES J. This appeal is concerned with perhaps the most wordy, obscure and oppressive contract that I have come across. It is the standard form of contract which the South Australian Railways Commissioner requires those executing railway works for him to sign. It was probably compiled a long time ago mainly by putting together, with some incongruity, provisions from other contracts. In the compilation, I am sure that not one oppressive provision which could be found was omitted. The contract is so outrageous that it is surprising that any contractor would undertake work for the Railways Commissioner upon its terms. It is, of course, a contract to which the doctrine of contra proferentem applies. The employment of such a contract tempts judges to go outside their function and attempt to relieve against the harshness of, rather than give effect to, what has been agreed by the parties. Courts search for justice but it is justice according to law ; it is still true that hard cases tend to make bad law. (at p512)

2. If one had to choose the worst of a number of oppressive provisions it would, I think, be hard to go past cl. 32 entitled "Settlements of Disputes". This clause takes some 700 words to achieve the result which requires any dispute to be referred to and decided finally and conclusively by the Chief Engineer for Railways. It is true that there is a minor relaxation of this in a proviso relating to the measurement of works and the prices to be paid. In such cases an appeal does lie from the Chief Engineer for Railways to the Engineer in Chief for the State, or the Chief Engineer of the Harbours Board. The proviso is in keeping with the main provision and illuminates how strict is the adherence to control by bureaucracy rather than the law. Clause 32 is certainly invalid. It is a barefaced attempt to oust the jurisdiction of the courts. One problem here as I see it is to determine whether cl. 35 of the contract is so linked to cl. 32 that it, too, is invalid. This is of critical importance because, although he might have relied upon cl. 32, the Commissioner has only relied upon cl. 35. In the Supreme Court, cl. 35 was regarded as sharing the fate of cl. 32. (at p513)

3. What happened is that one Egan brought an action in respect of a contract between himself and the Railways Commissioner for the construction of certain bridges and culverts on the Mannahill-Methuen Railway line. Egan claimed for moneys due to him on a quantum meruit in respect of work done and materials supplied ; for damage for breach of contract caused by the Commissioner's allegedly wrongful repudiation of the contract ; and, for the release of a guarantee. He also claimed the return of his plant and goods and as an alternative to this claimed damages for the conversion of this plant and goods. To the foregoing claims the Commissioner by par. 9 of his defence objected in point of law that cl. 35 prevented any action for money being brought without first obtaining a certificate, order or award from the Chief Engineer for Railways for the amount ordered. (at p513)

4. The plaintiff replied, asserting in par. 5 thereof the invalidity of cl. 35 and alternatively saying that the Railways Commissioner was precluded from relying upon it by reason of :

"(a) the Defendant having waived any reference to the Chief
Engineer for Railways of the subject matter of these
proceedings : such waiver is implied from
(i) the receipt by the Defendant on or about the 24th
day of May, 1966 of a written notice of that date
from the Plaintiff that the Plaintiff objected to the
purported determination by the Defendant of the
Contract, and
(ii) the failure of the Defendant to take any step in or
towards reference of the dispute to the Chief
Engineer for Railways
(b) the Chief Engineer for Railways having acted in relation
to the said works not as independent arbitrator or
umpire but as servant or agent of and subject to the
directions of the Defendant and the Defendant having
exercised control and influence over the Chief Engineer
for Railways so as to preclude any independent or proper
decision by him." (at p514)

5. When the matter came on for hearing before Mitchell J., her Honour by consent ordered that the matters contained in par. 9 of the defence and par. 5 of the reply should be decided before evidence was given. Her Honour rejected the defendant's objection based upon cl. 35. It is from that decision that the Railways Commissioner now appeals by leave to this Court. (at p514)

6. In this case there was no statement of agreed facts. The only matters of evidence before her Honour were wholly documentary : three letters and a form of guarantee. There was no formal statement of questions arising from the pleadings nor any case stated. If the pleading point were to be answered strictly, it could be done without the resolution of several of the preliminary matters in dispute between the parties. On a strict view of the pleading point, there are no clauses of the contract in question other than cl. 35. However, the parties and her Honour appear to have considered issues which may be formulated as follows :
1. Upon the proper construction of the terms of the contract, could the whole action, or any and which of the claims in it, be brought in the absence of a certificate, order or award of the Chief Engineer for Railways.
2. If no action could be brought in the absence of such a certificate, order or award, was the respondent relieved of this obligation in the particular circumstances of this case as set out in the reply, namely : (i) a waiver (ii) the disqualification of the Chief Engineer. (at p514)

7. The part of cl. 35 of the General Conditions of Contract to which that objection in law relates is as follows :

"No suit or action shall be brought or maintained by the
Contractor or Commissioner against the other of them to recover
any money for, or in respect of, or arising out of any breach
of their contract by the Contractor or the Commissioner, or
for or in respect of any matter or thing arising out of this
contract, unless and until the Contractor or the Commissioner
shall have obtained a certificate, order, or award from the Chief
Engineer for Railways for the amount sued for." (at p514)

8. As is so often the case, the well-intentioned attempt to take a short cut by way of interlocutory proceedings has produced its own difficulties. Of these, perhaps the most considerable is that the matters alleged in par. 5(a) and (b) of the reply are matters of fact which cannot be determined before evidence is heard. However, I feel constrained to deal with the defence taken by the Commissioner by reliance on cl. 35 and to refrain from dealing with the other possibilities such as that the Railways Commissioner might have relied upon cl. 32. Accordingly, the issues for me are whether the Commissioner's reliance upon cl. 35 is ineffective either because cl. 35 is invalid as an unlawful attempt to oust the jurisdiction of the court, or, if not, whether if what is alleged in the reply were to be made out, the Railways Commissioner would be precluded from relying upon cl. 35. (at p515)

9. I have already referred to the argument that cl. 35 is inseparably linked with cl. 32. There is, of course, a link between the two clauses for, as I read cl. 32, it does provide that if the Chief Engineer for Railways did give a certificate, order or award under cl. 35 and a doubt, dispute, or difference arose with respect thereto, that doubt, dispute or difference would have to be referred to the Chief Engineer himself for final determination. This link, however,is not sufficient to involve cl. 35 in the downfall of cl. 32 ; nor does the fact that the two clauses may cover some of the same ground, mean that they stand or fall together. It seems to me that if cl. 35 is invalid it must be because of its own terms . As I understand its language, what it does is provide that no action can be brought for money in respect of anything arising out of the contract unless and until a certificate, order or award is obtained from the Chief Engineer for the amount sued for. Such a description falls within what is now described as a Scott v. Avery clause. It makes the obtaining of a certificate a condition precedent to an action, but it is established by Scott v. Avery [1856] EngR 810; (1855) 5 HLC 811 (10 ER 1121) that such a provision does not unlawfully oust the jurisdiction of the court. The explanation is that neither party undertakes liability unless the certificate, order or award is obtained. Unless the condition is complied with, there is no cause of action. (See Swanson v. Board of Land and Works [1928] VicLawRp 43; (1928) VLR 283 ; Dobbs v. National Bank of Australasia [1935] HCA 49; (1935) 53 CLR 643 .) In my opinion, cl. 35 is not itself invalid and is not inseparably linked with an invalid clause. The attack upon its validity therefore fails. It is worth noticing that in Dixon v. South Australian Railways Commissioner [1923] HCA 45; (1923) 34 CLR 71 , the clause now in question was considered and was treated as valid although that matter was not argued. (at p516)

10. It is at this point that I come to the matters raised by par. 5 (a) and (b) of the reply. As to these I cannot, I think, go beyond a tentatively expressed opinion. It is that if what is alleged in par. 5 (a) were to be proved, that would not amount to a waiver and that as cl. 35 clearly stipulates for a certificate, order or award of the Chief Engineer as a condition precedent to any liability, it simply cannot be held that that officer is, by reason of his position and by the performance of his duties, precluded from giving a certificate or making an award or order as contemplated by cl. 35. The parties have chosen one who must, because of his very position, have some interest in and personal knowledge of matters in dispute to give the certificate, order or award that must be obtained. This case is stronger than is Swanson v. Board of Land and Works [1928] VicLawRp 43; (1928) VLR 283 where a contention similar to that now made was made and rejected. In Dixon v. South Australian Railways Commissioner [1923] HCA 45; (1923) 34 CLR 71 reference was made to a like contention to that now under consideration. There the decision of the court was to the effect that it would only be actual improper conduct on the part of the Chief Engineer that would disqualify him from giving a certificate, order or award and would prevent the Railways Commissioner from relying upon the absence of the certificate, order, or any award given by the Chief Engineer. Paragraph 5 (b) of the reply is not, I think, in keeping with the decision of Dixon v. South Australian Railways Commissioner [1923] HCA 45; (1923) 34 CLR 71 . There, Isaacs J., who dissented and who took the most favourable view of the contractor's contention that the Chief Engineer was disqualified, used language which indicates how much further the plaintiff here seeks to go in his reply. Isaacs J. said (1923) 34 CLR, at pp 94, 95 :

"As a matter of construction and legal effect, I entertain
no personal doubt that the bargain between the parties
impliedly connoted a condition upon which the contractor
consented that the Commissioner's own servant, the Chief
Engineer, should be empowered as arbitrator to finally
determine the remuneration of the contractor for the work he
performed. That condition was that the Chief Engineer
should preserve his independence and impartiality towards
both parties, subject only to whatever might be the necessary
effect of honest and faithful performance of his proper duties
as owner's agent within the true meaning of the contract, and
that, when once a dispute arose, such independence and
impartiality were to be preserved even though that involved
depriving the owner of the Chief Engineer's assistance as his
exclusive agent in connection with the matters in dispute."

11. The majority contented themselves with deciding that there had been no improper conduct on the part of the Chief Engineer that would disqualify him and that therefore the Railways Commissioner was not prevented from relying upon the absence of a certificate, order or award. As I read the allegations in par. 5 (b) of the reply, they do not amount to allegations of improper conduct at all. Accordingly, I think that the plaintiff's attack upon the defendant's reliance upon cl. 35 of the conditions fails. (at p517)

12. There is, however, one point which ought to be made in safeguarding the plaintiff from a too wide application of cl. 35. That clause relates only to certain actions for money and does not, in my opinion, apply to an action in detinue for the return of chattels or to money claims not dependent upon the contract. (at p517)

13. I would allow the appeal. (at p517)

WALSH J. I agree with the reasons for judgment of Gibbs J. In my opinion the appeal should be allowed to the extent indicated by those reasons. (at p517)

GIBBS J. This is an appeal from a judgment of the Supreme Court of South Australia determining adversely to the appellant, the South Australian Railways Commissioner, an objection in point of law raised by the defence of the appellant, who is the defendant in an action brought in that Court by the respondent. By the statement of claim delivered in that action the respondent claims the following relief : (a) payment for work done and materials supplied ; (b) damages for breach of contract ; (c) a release of a guarantee ; (d) the return of certain plant and material of the respondent detained by the appellant or their value and damages for their detention ; and (e) alternatively to (d), damages for conversion. It is alleged in the statement of claim that by a contract made between the parties the respondent agreed to complete for the appellant, and the appellant to pay for, certain bridges and culverts on a railway line. The respondent alleges that the appellant wrongfully repudiated the contract. The first of the respondent's claims is to be paid quantum meruit for the work done and materials supplied in commencing to perform the work required by the contract and the second claim is for damages for breach of the contract. The guarantee to which the third claim refers was given to the appellant by the Bank of Adelaide, but it was procured by the respondent pursuant to his obligation under the contract to give security for the due completion and delivery of the work ; the respondent alleges that if the appellant obtained (albeit wrongly) payment from the bank under the guarantee the respondent would thereupon become indebted to the bank. The plant and material to which the claims for detinue and conversion refer were allegedly purchased by the respondent for use in respect of the contract. It is necessary to notice only two of the matters raised in the appellant's defence. It was alleged (and this was denied in the respondent's reply) that the contract was validly determined pursuant to cl. 30 of the general conditions of the contract. I shall later set out the provisions of that clause. Further the appellant by par. 9 of his defence objected in point of law that the respondent "cannot bring or maintain this action to recover any money for or in respect of or arising out of an alleged breach of contract or for or in respect of any matter or thing arising out of this contract" as he had failed to obtain a certificate, order or award from the Chief Engineer for Railways for any amount sued for as required by cl. 35 of the general conditions. The material parts of that clause read as follows :

"No suit or action shall be brought or maintained by the
Contractor or Commissioner against the other of them to
recover any money for, or in respect of, or arising out of, any
breach of their contract by the Contractor or the Commissioner,
or for or in respect of any matter or thing arising out of this
contract, unless and until the Contractor or the
Commissioner shall have obtained a certificate, order, or award from
the Chief Engineer for Railways for the amount sued for."

2. When the trial commenced the parties after some discussion agreed that the Court should make an order that the matters contained in par. 9 of the defence and par. 5 of the reply should be decided before evidence was given. Thereupon it appears that the learned trial judge ordered that the point of law raised in par. 9 of the defence and par. 5 of the reply be determined before any evidence in the case was given. It may, however, be observed that not all the questions involved were questions of law and that the parties tendered certain documents to enable their submissions to be considered. (at p519)

3. The parties to a contract may by their agreement validly provide that the giving of a certificate, or the making of an award, by a third party shall be a condition precedent to the right to bring or maintain an action. Such a provision is construed, not as ousting the jurisdiction of the courts in respect of a cause of action already accrued, but as having the effect that no cause of action arises until the certificate or award is given or made : see Anderson v. G.H. Michell & Sons Ltd. [1941] HCA 30; (1941) 65 CLR 543, at pp 549-550 . A provision indistinguishable from the material words of cl. 35 was held in Swanson v. Board of Land and Works [1928] VicLawRp 43; (1928) VLR 283 to make arbitration a condition precedent to action or in other words to say that no cause of action should arise until after a determination by the arbitrator. However cl. 35 does not itself provide for the reference of any disputes to the Chief Engineer for Railways, and it was submitted on behalf of the respondent that there is no provision of the contract pursuant to which the Chief Engineer for Railways could give a certificate, order or award in a case such as the present, and that the provisions of cl. 35 could therefore have no application. By cll. 17 and 27 of the general conditions of contract the Chief Engineer for Railways is given power to certify as to the condition or completion of the works, but those clauses are not applicable to the present case. No other provision expressly enables the Chief Engineer for Railways to give a "certificate, order or award". However under cl. 32 certain disputes are left to the decision of the Chief Engineer for Railways. It is unnecessary to set out in full the provisions of that long and rambling clause but so far as it is material it reads as follows :

"In the event of any doubt, dispute, or difference arising
or happening, relating to, touching, or concerning the works,
or any portion thereof, or the value, quantities, qualities,
description, or manner of work done and executed . . . by the
Contractor . . . or relating to, touching, or concerning the
exercise of any of the powers of the Commissioner, the Chief
Engineer for Railways, the Superintending Officer, or any
other person employed by the Commissioner under this
contract, or any claim made by the Contractor in consequence
thereof, or in any way arising therefrom . . . or relating to,
touching or concerning any inconsistency, ambiguity, or
variance in, or the meaning or intention of the contract . . .
or relating to, touching, or concerning any certificate, order
or award which may be made by the Chief Engineer for
Railways, or in anywise whatsoever relating to the interests
of the Commissioner or of the Contractor in the premises, or
to any alleged breach of contract, or touching or concerning
any other matter or thing in any way connected with or
relating to this contract or anything therein contained or
provided, every such doubt, dispute, or difference, shall from
time to time, and so far as the same has not herein before
been left to the decision or determination of the Chief
Engineer for Railways, be referred to and settled and decided
by the Chief Engineer for Railways, whose decision thereon
shall be final and conclusive."

4. Although cl. 32 does not speak of the Chief Engineer for Railways as an arbitrator, and does on the other hand refer to the person to whom a limited class of disputes may be referred by way of appeal as an arbitrator, it is apparent that certain disputes are referred to the decision of the Chief Engineer for Railways, and that he is placed by the contract in the position of an arbitrator. It would therefore be right, when he determines a dispute and gives his decision in writing, to call his decision an award. I cannot agree that cl. 35 should be held to be inapplicable simply because the contract does not expressly confer on the Chief Engineer for Railways power to make a certificate, order or award in the circumstances of the present case. (at p521)

5. It was then submitted on behalf of the respondent that the provisions of cl. 35 cannot apply in any case in which the Commissioner has exercised the power given by cl. 30 to determine the contract. It is convenient to set out in full the provisions of cl. 30, which read as follows :

"30. The Commissioner shall have the option, and full
power and authority, in lieu of proceeding under the last
preceding clause of these conditions, if the Contractor fails to
proceed in the execution of, and to carry on, the works in the
manner and at the rate of progress required by the Chief
Engineer for Railways, or if the Contractor fails to carry out,
perform, and observe the terms, conditions, and agreements
contained in this contract, of determining this contract so far
as relates to the works remaining to be done ; and in such
case the moneys which shall have been previously paid to the
Contractor on account of the work executed shall be taken
by him as full payment for all works done under the contract,
and upon notice in writing, under the seal of the
Commissioner, that he, under the authority of this condition,
determines the contract, being served upon the Contractor, or left
at his last known place of abode, the contract shall be
determined, and thereupon all sums of money that may be due to
or unpaid to the Contractor, together with all implements the
property of the Contractor used for the carrying out of the
contract, and all materials provided by him, upon the ground
upon which the work is being carried on or adjacent thereto,
and all sums of money named as penalties for the
non-fulfilment of the contract within the time specified, shall also

forfeited and become payable to the Commissioner, and the
said implements and materials shall become and be the sole
and absolute property of the Commissioner, and with the
moneys so forfeited and payable as aforesaid shall be
considered as ascertained damages for breach of contract."

6. It was further submitted by the respondent that the contract contemplates that disputes between a contractor and the Commissioner shall be decided by a third person, the Chief Engineer for Railways, but that in the present case, on some material dates, the Chief Engineer for Railways, Mr. Reginald James Bridgland, was the Deputy South Australian Railways Commissioner during the absence overseas of the Commissioner and that the provisions of cl. 35 cannot apply when the Commissioner and the Chief Engineer for Railways are the same person. However, although under the South Australian Railways Commissioner's Act, 1936 (S.A.) the office of Commissioner is filled by a natural person, it is provided, by s. 6 (2), that "The Commissioner shall be a body corporate and shall have perpetual succession and a common seal, and shall be capable in law of suing and being sued". The body corporate which was a party to the contract was not the same person as Mr. Bridgland, who on some occasions was appointed to act as Deputy for the Commissioner. This argument also fails. (at p522)

7. I therefore hold that, unless the appellant is precluded from relying on the provisions of cl. 35, the respondent is prevented by those provisions from bringing or maintaining against the appellant any action of the kind to which the clause refers. However, the clause upon its proper construction refers only to actions brought "to recover any money". The words "or for or in respect of any matter or thing arising out of this contract" govern "money" and not "suit or action". This is made even plainer by the fact that the certificate, order or award to which the clause refers is "for the amount sued for". In considering the application of cl. 35, two questions arise : (1) is the claim one to recover money ? (2) if so, is it a claim to recover money for, or in respect of, or arising out of, any breach of the contract or for, or in respect of, any matter or thing arising out of the contract? On behalf of the appellant it was submitted that cl. 35 has the effect of barring the whole action if one of the claims made therein is a claim of the kind described in cl. 35 and if no certificate, order or award has been obtained.If this statement were correct, it would mean that a contractor who had not obtained a certificate, order or award might bring an action to enforce a claim which was not a claim to recover money, but that if he joined a money claim of the kind mentioned in cl. 35 the whole action would be barred. However, the validity of cl.35 depends, as I have indicated, on the theory that the obtaining of the certificate, order or award is a condition precedent to the existence of the cause of action. If it appeared that a cause of action existed independently of the obtaining of the certificate, order or award, an attempt to exclude the jurisdiction of the Court to enforce it would be contrary to public policy. Obviously cl.35 makes the existence of a certificate, order or award a condition precedent only in the cases to which the clause expressly refers. Other rights and liabilities are left untouched by the clause, which must be strictly construed. The effect of the clause is, therefore, to prevent the continuance of an action only in so far as it involves claims to recover money that fall within the clause. The action may proceed with respect to the claims that do not fall within the clause. (at p523)

8. It follows from what I have said that the claim that the guarantee be released is not within cl. 35, because it is not a claim to recover money. The learned trial judge held that the respondent's claim for a release of the guarantee must fail, because the matter could not be determined in an action to which the Bank of Adelaide was not a party. The claim of the respondent in this regard was inartificially expressed and it is not clear whether what is sought is a declaration that the respondent is entitled to the release of the guarantee or some sort of mandatory order. If the action is defective because the bank was not joined as a party or because the statement of claim does not show precisely what relief is sought, those defects would not necessarily have been fatal to the respondent's case, but might have been cured if the Court had seen fit to grant leave, if necessary on appropriate terms, to join the bank or to amend the pleading. However, it seems to me, with great respect, that these considerations were extrinsic to the questions which fell for determination under par. 9 of the defence and par. 5 of the reply. Whatever else may be said about the claim in respect of the guarantee, cl.35 did not preclude the respondent from maintaining the action with respect to that claim. (at p524)

9. It then becomes necessary to decide whether the other claims fall within the clause. The claim for damages for breach of contract, in my opinion, clearly comes within the clause ; damages are payable in money and the claim to recover money for a breach of the contract is within the express words of cl.35. The claim to payment for work done and materials supplied is also, in my opinion, within the clause ; it is a claim to recover money for something arising out of the contract, i.e. for work done and materials supplied under the contract : cf. Government of Gibraltar v. Kenney (1956) 2 QB 410, at pp 421-422 . The remaining claims are for detinue and conversion ; the latter claim is to recover money and the former claim involves the recovery of money, although it is primarily to recover the goods. However, assuming that the claims both in detinue and in conversion may be described as claims to recover money, are they claims of the kind to which the following words of cl. 35 refer? Clearly they are not claims for, or in respect of, or arising out of, any breach of the contract. The respondent alleges not that the appellant detained or converted the goods in breach of the contract, but simply that the goods are the respondent's goods and that the appellant detains them or has wrongly taken possession of them and used them. Further, in my opinion, these claims are not claims to recover money for or in respect of any matter or thing arising out of the contract. To come within these words the matter or thing for or in respect of which the claim to recover money is made must have arisen out of the contract. The matters or things for or in respect of which the claims to detinue and conversion are made were the taking, keeping and use by the appellant of the respondent's goods. They are claims in tort, and it is no part of the claim of the respondent that the taking, keeping or use was done either in breach of or in pursuance of the contract. So far as these claims are concerned the contract is irrelevant ; it is enough for the respondent to say that the goods were his and that the appellant wrongly took, kept or used them. Of course the appellant by way of defence sets up the contract and asserts that he was justified by cl. 30 in treating the goods as his own. However, cl. 35 does not extend to bar actions in which a defence pleaded by the defendant arises under the contract. It does not extend to actions involving any dispute arising out of the contract, and for that reason cases such as Heyman v. Darwins, Ltd. (1942) AC 356 , concerning as they do clauses referring particular kinds of "disputes" to arbitration, as distinguishable. It may well be said that the present dispute can only be solved by reference to the contract and that the dispute therefore arises out of the contract. However, the precise words of cl. 35 must be given effect and they render it necessary not to consider whether the dispute or the defence arises under the contract but whether the claim is one to recover money for, or in respect of, or arising out of, a breach of the contract or for or in respect of any matter or thing arising under the contract. The claims in detinue and conversion are not claims of that description. If the appellant succeeds in showing that cl. 30 is effective and applicable, the result will be, not that cl. 35 ought to have been applied, but simply that the respondent will have established no cause of action. For these reasons in my opinion cl. 35 does not debar the respondent from maintaining the claims in detinue and conversion. (at p525)

10. It follows that, in my opinion, cl. 35 does prevent the respondent from maintaining the action, so far as the claims to be paid for the work and materials and the claim for damages for breach of contract are concerned, unless the appellant is precluded from relying on the clause. The first ground on which it is alleged, by par. 5 of the reply, that the defendant is precluded from relying on cl. 35, is that the defendant has waived any reference to the Chief Engineer for Railways of the subject matter of the proceedings. The particulars given in the paragraph show that what is complained of is the failure of the appellant, having been given notice that the appellant objected to the purported determination of the contract, to take any step for or towards reference of the dispute to the Chief Engineer for Railways. As I have already mentioned the parties did not go into oral evidence at the hearing before the learned trial judge. However, the documents tendered show that, by a letter dated 9th May 1966 and signed by R.J. Bridgland as the Deputy South Australian Railways Commissioner, the respondent was informed that he had "failed to complete the work within the specified time or within the extended time as allowed by the Chief Engineer for Railways" and that the Chief Engineer for Railways had provided a certificate meeting the requirements of cl. 30 of the general conditions in respect of the respondent's failure to carry on the works at the rate of progress required by him. The letter continued :

"You are hereby notified, in accordance with the above
clause of the contract, that the contract is determined in
accordance with that clause.
Your attention is drawn to the provisions of Clause 30 in
respect to materials, implements, and penalties."

"We will within the appropriate time object to this decision
of the General Engineer for Railways, and give you notice
thereof in writing setting forth the grounds of our client's
objection and require that the matter be referred by way of
appeal within the provisions of clause 32 of the General
Conditions of Contract relevant hereto."

"Take notice that I . . . object to and are dissatisfied with
the certificate or decision made by the Chief Engineer for
Railways and dated the 9th day of May, 1966 hereby require
that the matter be referred to Arbitration.
The grounds of such appeal are that the South Australian
Railways Commissioner wrongfully perpetrated (sic) to
determine the contract."

"The matters which the contractor is entitled to require to
be referred to arbitration are limited to those specified in the
proviso to the first paragraph of clause 32 of the contract and
your client has no right under the contract to require the
matter of the determination of the contract to be referred to
arbitration."

11. The second ground on which it is alleged in par. 5 of the reply that the appellant is precluded from relying on the want of a certificate, order or award is stated as follows :

"(b) the Chief Engineer for Railways having acted in
relation to the said works not as independent arbitrator or
umpire but as servant or agent of and subject to the directions
of the Defendant and the Defendant having exercised control
and influence over the Chief Engineer for Railways so as to
preclude any independent or proper decision by him."

12. However, the learned trial judge came to the conclusion that the Chief Engineer for Railways, Mr. Bridgland, was disqualified from giving any certificate as to the money claims of the respondent. For the reasons I have given I should not have thought, with all respect, that this question was raised by par. 5 as it should be understood in the light of the particulars. The learned trial judge referred to the fact that the Chief Engineer had apparently certified that the works had not been carried out at the rate of progress required by him and further that some of the remarks in the letters of 9th May 1966 and 10th June 1966 indicated that Mr. Bridgland had reached the view that the plant and materials of the respondent had become the property of the appellant. For these reasons the learned trial judge concluded that the Chief Engineer had already made a determination upon the claims of the respondent which would have prevented him from applying an open mind to any application for a certificate that money was payable by the appellant to the respondent. However, the authorities show that the fact that an engineer who under the contract is called upon to decide disputes between the parties has already expressed an opinion, or even formed strong views, as to the matters in dispute is no disqualification, for the parties must have contemplated that this would be the case and that, to use the words of Bowen L.J. in Jackson v. Barry Railway Co. (1893) 1 Ch 238, at p 247 , "virtually, the engineer, on such an occasion, must be the judge, so to speak, in his own quarrel". In that case the learned Lord Justice said (1893) 1 Ch, at p 247 :

"The perfectly open judgment, the absence of all previously
formed or pronounced views, which in an ordinary arbitrator
are natural and to be looked for, neither party to the contract
proposed to exact from the arbitrator of their choice. They
knew well that he possibly or probably must be committed
to a prior view of his own, and that he might not be impartial
in the ordinary sense of the word. What they relied on was
his professional honour, his position, his intelligence ; and the
contractor certainly had a right to demand that whatever views
the engineer might have formed, he would be ready to listen
to argument, and, at the last moment, to determine as fairly
as he could, after all had been said and heard."

"But he had two duties to perform - to superintend and
control the work, and also to act as arbiter. It is the
combination of these duties which makes a reference of this kind
so peculiar. But it is impossible to say that because a man
faithfully and zealously executes the one function that he
thereby debars himself from acting in the other."

"If the employers proceed to arbitration, then the engineer,
as arbiter, must receive all competent evidence which the
contractor thinks proper to bring before him and give an
honest opinion upon it. The fact that he has expressed an
opinion as an engineer before receiving the evidence does not
prevent him from afterwards applying his mind judicially to
the questions at issue in the light of the evidence adduced."

13. It is not necessary to consider in the present case the question, discussed in Dixon v. South Australian Railways Commissioner [1923] HCA 45; (1923) 34 CLR 71 , what sort of misconduct would have disqualified the Chief Engineer for Railways from acting as certifier or arbitrator. In the present case there was, in my opinion, nothing to support the view that the Chief Engineer for Railways had done anything more than discharge his duties in a proper manner. There was nothing to show that, if called upon to decide a dispute, he would fail to open his mind to the facts and arguments put before him, and to give an honest decision, departing, if convinced that he should do so, from his previous views. He was therefore not disqualified from giving a certificate, order or award for the purposes of cl. 35. Provisions such as those contained in the contract under consideration find little favour in modern eyes, but we are required to give them their legal effect and are not to be deflected from that course because they appear unfair and one-sided. (at p530)

14. For these reasons, I am, with respect, unable to agree with the conclusion reached by the learned trial judge. In my opinion, the respondent is not entitled to maintain this action so far as the claim to be paid quantum meruit and the claim for damages for breach of contract are concerned. The respondent may, however, maintain the action is so far as it relates to the other claims. (at p530)

15. I would allow the appeal. (at p530)

STEPHEN J. I have had the advantage of reading the reasons for judgment of my brother Gibbs and, for the reasons stated by him, agree with his conclusion that the respondent is not entitled to proceed with his action as far as it involves claims on a quantum meruit and for damages but may otherwise maintain his action despite the absence of a certificate under cl. 35 of the General Conditions. (at p530)

2. I regard cl. 35 as applicable to the quantum meruit and damages claims and as effective in requiring the respondent to obtain a certificate, order or award of the Chief Engineer for Railways as a condition precedent to the institution of any action to which the clause applies. (at p530)

3. The latter portion of the clause, that relevant in this case, is in substantially the same terms as was the clause upon which the decision of the Victorian Full Court turned in Swanson v. Board of Land and Works [1928] VicLawRp 43; (1928) VLR 283 , which was referred to with approval in Anderson v. G.H. Michell & Sons Ltd. (1941) 65 CLR, at p 550 . In Swanson's Case [1928] VicLawRp 43; (1928) VLR 283 it was held that such a clause did not oust the jurisdiction of the courts but merely made arbitration a condition precedent to action brought. The only distinction that can be drawn between Swanson's Case [1928] VicLawRp 43; (1928) VLR 283 and the present is that in the former case the condition precedent to action seems clearly to have been the obtaining of an arbitral decision by the architect whereas in the present case the condition precedent may be no more than the obtaining of a certificate of the Chief Engineer. (at p531)

4. In Dixon v. South Australian Railways Commissioner [1923] HCA 45; (1923) 34 CLR 71 , these same General Conditions were before the Court and not only did all members of the Court, like the primary judge and the South Australian Full Court before them, treat condition 35 as creating a condition precedent involving no attempted ouster of jurisdiction but no distinction was drawn between an arbitration award as the conditioning event and a mere certificate of the Chief Engineer. (at p531)

5. In Dobbs v. National Bank of Australasia Ltd. (1935) 53 CLR, at p 652 , it was said that the conditioning event may be "the arbitrament or discretionary judgment of an ascertained or ascertainable person". Dobbs' Case [1935] HCA 49; (1935) 53 CLR 643 was itself one not involving any arbitration clause but, rather, a term which made the certificate of a bank officer as to the amount of indebtedness of the principal debtor, a customer of the bank, conclusive both of the existence and the amount of indebtedness. That provision was held to be valid and effective, being in no way void as an attempted ouster of the Court's jurisdiction. In their joint judgment four members of the Court said (1935) 53 CLR, at p 654 that,

"It is therefore a mistake to suppose that the policy of the
law exemplified in the rule against ousting the jurisdiction of
the Court prevents parties giving a contractual conclusiveness
to a third person's certificate of some matter upon which their
rights and obligations may depend. In Ex parte Young ;
In re Kitchin (1881) 17 Ch D 668, at p 672 , James L.J. says :-
'If a surety chooses
to make himself liable to pay what any person may say is the
loss which the creditor has sustained, of course he can do so,
and if he has entered into such a contract he must abide by
it'.

There are many familiar kinds of contracts containing
provisions which make the certificate of some person, or the
issue of some document, conclusive of some possible question.
The most conspicuous example, perhaps, is the certificate of
the engineer or architect under contracts for the execution of
works or the construction of buildings.
For these reasons we think the certificate of the officer of
the bank is conclusive upon the parties of the amount and
existence of the customer's indebtedness."

6. Thus the validity of condition 35 is, I think, unaffected by the fact, if fact it be, that the conditioning event which it contemplates may be a mere certificate expressing the opinion of the Chief Engineer rather than his award following an arbitration hearing conducted by him. (at p532)

7. I agree with my brother Gibbs, and for the reasons stated by him, that the applicability of cl. 35 is not affected either by the Commissioner's determination of the contract under cl. 30 or by the fact that at the relevant time the one officer was both Chief Engineer for Railways and also the Deputy South Australian Railways Commissioner. I also agree that neither of the matters pleaded in par. 5 of the reply, either as pleaded or in the rather different form which they assumed in argument before the learned trial judge, prevents the Commissioner from relying upon the absence of a certificate in answer to the contractor's claims for damages and on a quantum meruit. (at p532)

8. I would allow the appeal accordingly. (at p532)

ORDER