Termination for works undertaken outside of contractual scope found to be unlawful
October 18, 2023
In the Victorian Court of Appeal decision of RW & ME Smith Pty Ltd v Boral Resources (Vic) Pty Ltd [2023] VSCA 182, the Court considered whether Boral had unlawfully terminated a cartage agreement.
RW & ME Smith Pty Ltd (RW & ME Smith), a company operated by Mr Robert Smith, delivered concrete for Boral Resources (Vic) Pty Ltd (Boral) under a cartage agreement. Mr Smith, at Boral’s request, assisted Boral replace broken equipment which had prevented Boral from loading concrete onto trucks (the repair work). Once the repair work was complete, Boral terminated the cartage agreement because it considered Mr Smith undertook the repair work in an unsafe manner that amounted to serious misconduct.
Mr Smith commenced proceedings in the Victorian Country Court alleging that Boral had unlawfully terminated the cartage agreement as (amongst other things) the repair work was outside the scope of the cartage agreement. The County Court dismissed Mr Smith’s claim as it considered that the repair work was captured by the definition of ‘Cartage Works’ which included “associated tasks performed by the Contractor for Boral in accordance with [the] Agreement”.
Mr Smith appealed to the Victorian Court of Appeal which overturned the County Court’s decision, finding that Boral had unlawfully terminated the cartage agreement. Applying well-established common law principles of contract interpretation, the Court held that the scope of works under the cartage agreement did not extend to any task associated with delivering concrete, but rather only tasks associated with delivering concrete “in accordance with the cartage agreement”.
In this regard the Court observed that nothing in the cartage agreement gave Boral a contractual entitlement to insist that Mr Smith repair Boral’s own broken plant. Although Mr Smith’s choice to assist Boral to repair the broken plant may, in general terms, be associated with a particular delivery task, Mr Smith’s voluntary action did not convert a non-contractual task into a contractual task merely by reason of a temporal or functional connection. Accordingly, the Court held that it was not open to Boral to terminate the cartage agreement on the basis of works that were performed outside the scope of that agreement.
The full decision can be found here.
