The District Court of South Australia’s decision in Contek Pty Ltd v Mossop Group Pty Ltd¹ considers the equitable remedy of rectification.
A bespoke subcontract was intended to reflect documents that had previously been tendered on and agreed, but the executed subcontract instead referenced further revised documents.
The decision is an example of how, in some circumstances, courts may be prepared to rectify or ‘correct’ a common or unilateral mistake in a construction contract to reflect the ‘true agreement’ of the parties.
Background
Contek Pty Ltd (Contek) is a subcontractor that performs civil and concreting works for commercial projects.
Contek performed concreting works for a head contractor, Mossop Group Pty Ltd (Mossop), in respect of a large, two-storey aged care facility (the Lifecare Project).
Tender and negotiations based on the Revision 00 Drawings
For the purpose of tendering work on the Lifecare Project, Mossop had made certain tender drawings (Revision 00 Drawings) available on an online platform, BidContender, for Mossop’s invited tenderers to download and consider.
Contek submitted a tender for the Lifecare Project based on the Revision 00 Drawings.
Contek and Mossop held a tender evaluation meeting on 28 September 2016 where the Revision 00 Drawings were the subject of discussion.
On 29 September 2016 the parties, by an email exchange, agreed a revised subcontract price. The emails confirmed that the revised scope of works to which that price related was based on the Revision 00 Drawings, as well as certain minor additional works as discussed at the meeting.
The Revision 01 Drawings
On 6 September 2016, before the subcontract was agreed, Mossop was issued ‘for construction’ drawings (Revision 01 Drawings) by PT Design.
However, the Revision 01 drawings were never provided by Mossop to Contek prior to execution of the subcontract between Mossop and Contek.
The Subcontract as executed
In October 2016, Mossop and Contek executed a subcontract for the Lifecare Project (the Subcontract).
The Subcontract expressly provided that the parties’ agreement for Contek to supply and perform concrete works was in accordance with the terms of the subcontract including Appendix D – Contract Documentation (Appendix D), and that Mossop agreed to pay a fixed lump sum price for that scope of work. The price was the same as the revised tender price previously agreed in the 29 September 2016 email correspondence.
Appendix D expressly referred to the Revision 01 structural drawings issued on 6 September 2016 (and not the Revision 00 drawings).
On 25 October 2016 – after Contek had executed the Subcontract – Mossop emailed the Revision 01 Drawings to Contek and advised Contek that they were ‘updated drawings’ and had been forwarded to ‘ensure that [Contek] had the latest drawings’.
Contek’s payment claim
In a payment claim issued by Contek in May 2017, Contek claimed three variations.
Two of the variations related to changes between the Revision 00 Drawings and the subsequent Revision 01 Drawings.
These claims were disputed by Mossop on the basis that, upon reviewing the Subcontract, the scope of works at Appendix D had referenced the Revision 01 Drawings (not Revision 00).² As such, according to Mossop, there was no change to the scope of works under the contract, and no variation.
Contek claimed that any drawing revision made after the tender drawings were issued constituted a variation, because the tender drawings were the basis of its tender price, and Contek was not advised of any changes to the drawings nor given an opportunity to adjust its tender price before contract.
Decision
On whether the Subcontract for the Lifecare Project should be rectified to list the Revision 00 Drawings in Appendix D, the Court found that Contek and Mossop had shared a common mistake as to the specification in Appendix D.
Specifically, the Court found that the email exchange on 29 September 2016 was evidence that Mossop expressed an intention to contract on the scope of works specified in the Tender Drawings for the ‘Tender Amount’.
The Court inferred that all parties to the email exchange, including Mossop’s Contract Administrator and Project Manager, shared a common intention that the contract documents (which included Appendix D) reflected the scope of works which formed the basis of the revised tender price (the scope included in the Tender Drawings and minor additional works).³ That is, the parties intended that the Subcontract should specify Revision 00, not Revision 01.
Judge Thomas found that Contek was truly mistaken and not careless in reading Appendix D, because the references to the Contract Drawings were not obvious from the almost 100 pages of annexures. Her Honour also found that the evidence suggested that Mossop did not appreciate that Appendix D specified a different scope of works than the Revision 01 drawings.
The Court (at [662]) summarised the relevant legal principles:
The purpose of the equitable remedy of rectification is to make a written instrument conform to the ‘true agreement’ of the parties where the writing by common mistake fails to express their agreement accurately. The ‘true agreement’ may be manifested in a concluded antecedent agreement or the continuing concurrent intention of the parties up to the time the instrument was executed. Any common intention must be shown by admissible evidence and proved to a high standard. Otherwise the “hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties” cannot be displaced.
Notably, the Court also held that, even if it were only Contek that was mistaken, the Court would have granted a remedy for unilateral mistake. The Court said that [i]t would be unconscionable’ for the contractor to deny that the Subcontract scope of works was that reflected in the original tender drawings (as revised by the minor additional works) and not rectify Appendix D.
This article was written by John Vozzo, Partner, Jonathan Davies, Special Counsel and Lara Centofanti, Law Clerk.
¹ [2024] SADC 1.
² Ibid at [347].
³ Ibid at [390].
