Public Works Commissioner v Hills
| Jurisdiction | UK Non-devolved |
| Judgment Date | 1906 |
| Date | 1906 |
| Year | 1906 |
| Court | Privy Council |
Railway Contract - Construction - Penalty for Non-completion of Line - Liquidated Damages - “Actual Cost” does not include Interest on Moneys expended.
It was provided in a railway construction contract that in the event which happened of non-completion of the line within a specified period the plaintiff contractor should forfeit to the defendant Government certain percentages which the Government retained out of moneys payable under this and two other railway contracts as a guarantee fund to answer for defective work and also certain security money lodged with its Agent-General “as and for liquidated damages sustained by the said Government for the non-completion of the said line”; and that it should be lawful for the Government to take possession of the incomplete line and pay the balance due in respect of its “actual cost”:—
Held that, on its true construction, the term “actual cost” was limited to the amount of moneys expended on the work, and that interest thereon could not be added.
Held, further, that the Government was not entitled to the retention and security moneys as liquidated damages; for the total amount thereof was indefinite, and in the case of the retention moneys depended on the progress of construction, the amount of the percentages, and the quantity of defective work. It could not, therefore, be treated as a genuine pre-estimate of loss, but the Government was entitled to obtain judgment in reconvention for such damages as it may have actually suffered through the plaintiff's breach of contract and deduct the same from the funds in question.
CROSS appeals from a decree of the Supreme Court of the Cape of Good Hope (February 29, 1904).
The questions determined arose in the circumstances detailed in the judgment of their Lordships under an agreement dated July 4, 1900, for the construction of a railway from Mossel Bay to Oudtshoorn, and were shortly — (1) upon what basis the actual construction of the railway is to be computed; (2) whether the respondent Hills is entitled to recover from the Colonial Government certain moneys deposited with and certain moneys retained by them as security for the completion of the said agreement; and (3) whether the Colonial Government is entitled to recover from Hills under the provisions of clause 16 of the said agreement the sum of 10,000l. by way of forfeit.
By clause 16 provision was made for the completion of the sections of the line within the periods of time therein mentioned, and the clause further provided: “If the concessionary shall not complete the sections of the line and works described in this clause within the periods aforesaid the concessionary shall forfeit to the Government the sum of 10,000l. (ten thousand pounds sterling) unless the delay is proved to the satisfaction of the Commissioner to have been caused by the act of God, war, insurrection, rebellion, strikes, lock-outs or combinations of workmen or other extraordinary or unforeseen circumstances beyond the control of the concessionary or from or on the part of the Railway Department.”
Judgment was entered in the Supreme Court for the respondent Hills for — (1.) 73,500l. 12s. 7d.; (2.) the return of the 50,000l. lodged with the Agent-General; and (3.) the payment of the retention moneys, viz., 66,146l. 18s. 7d., with interest from the date of summons.
The balance of the actual cost of construction not paid by the Government as found by the referees amounted, in fact, to 78,413l. 15s., and the amount of 73,500l. 12s. 7d. mentioned in the judgment was arrived at by deducting from the sum of 78,413l. 15s. the sum of 4913l. 2s. 5d. retention money under clause 6 of the contract, which was then added to the sum of 61,233l. 16s. 2d. (due to Hills in respect of the construction of the other lines, and retained under the provisions of clause 15 of the contract), so making up the sum of 66,146l. 18s. 7d. retention moneys ordered to be returned to the respondent Hills.
The Chief Justice, in his reasons, held that according to the true construction of the agreement the term “actual cost” was meant to include no more than payments actually made for materials used and work done by Hills, and therefore did not include interest as claimed by him; that the sum of 50,000l. and the retention moneys were, under the terms of the said agreement, held as security only for the completion of the line; that the Government having determined the agreement was not entitled to retain such security without proof of damage, and that there was no proof of any damage having been sustained by the Government. The Chief Justice further held, as to the sum of 10,000l. claimed by the Government to be forfeited under clause 16 of the said agreement, that the forfeiture was a penalty for non-completion of certain sections of the said line; that, unless damage by such non-completion was proved, the Government was not...
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