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  • Unreported Judgment

Iezzi Constructions Pty Ltd v Terry Seirlis Constructions Pty Ltd

 

[2003] QSC 214

SUPREME COURT OF QUEENSLAND

CIVIL JURISDICTION

WHITE J

No 8485 of 2002

IEZZI CONSTRUCTIONS PTY LTD (ACN 009 699 003)

Plaintiff

and

 

TERRY SEIRLIS CONSTRUCTIONS PTY LTD (ACN 086 482 840)

Defendant

BRISBANE

DATE 20/06/2003

JUDGMENT

HER HONOUR: The plaintiff seeks summary judgment pursuant to rule 292 of the Uniform Civil Procedure Rules against the defendant for sums pursuant to a building contract. The notice of intention to defend was filed on the 11th of October 2002. The plaintiff filed an amended statement of claim on the 17th of June this year. It is not submitted for the defendant that the amendments, although extensive, would call for a materially different defence or at least one which would alter the relevant matters in question between the parties on this summary judgment application.

Rule 292(2) provides that a Court may give judgment against the defendant if the Court is satisfied that the defendant has no real prospect of defending all or part of the plaintiff's claim and there is no need for a trial of the claim or part of the claim. What is in issue principally is whether the parties entered into a building contract on 19 July 2002 with subsequent variations such as to entitle the plaintiff to the sums claimed.

The defendant owned land at Mount Gravatt on which it wished to have constructed some 65 residential units. The plaintiff was the preferred builder. It wanted the security of a financier standing behind the defendant before embarking on the work. The defendant relies on a letter of 24 May 2002 to it from the plaintiff. The plaintiff wrote that it:

(1)required the contract sum to be secured by the defendant's financier via a suitable tripartite agreement.

(2)It would assist the defendant to achieve a February 2003 completion date even though finance had not then been approved by commencing “early” but required a secure position financially.

(3)A sum of $270,000 which the defendant could make available almost immediately would be sufficient for demolition, site establishment, earthworks, sewer diversion, footings to two main buildings, under-slab drainage to two main buildings.

(4)Once this work had been done work on the site would cease and payment was to be made in terms of an early works contract if full project funding were not in place.

(5)“A brief contract is to be prepared at your expense to cover these works.” On signing, $70,000 was to be paid to the plaintiff and the balance $200,000 was to be payable immediately the work abovementioned was completed and provided the head contract for the whole of the works had not come into place.

(6)If the head contract “comes into existence” all moneys paid under the early works contract was to be deducted from the first progress payment due and payable under the head contract.

On 30 May 2002 the parties signed a minor works contract AS4305-1996. The scope of works was as set out in the letter of the 24th of May. The value of the works was $270,000, the $70,000 to be paid on execution and the balance on the date of practical completion. The $70,000 was paid. The work commenced.

On the 31st of May the defendant sent a copy of a pro forma “multipartite” deed from its bankers to the plaintiff for consideration. On 27 June the defendant forwarded a facsimile received from its bankers that the bank had “approved finance to assist with your development” to the plaintiff.

On 19 July the parties executed a building contract for the construction of 65 apartments on the Mount Gravatt land for the sum of $9.35 million. At clause 4, the documents forming the contract, were stated as:

“(a)this formal instrument of agreement;

(b)general conditions of contract AS2124-1992;

(c)part A annexure to the general conditions;

(d)the attached special conditions;

(e)the multipartite agreement not yet completed;

(f)the plans, specifications and other documents referred to in the attached schedule A.”

By clause 5 the contract represented the entire agreement between the parties and “supersedes all other agreements concerning the subject matter hereof”.

By clause 8 “The terms of the contract apply to all of the works even if they were performed prior to the date of the execution of the contract or pursuant to a contract or agreement between the parties that was entered into prior to the date of execution of the contract.” The parties, but not the bank, signed the multipartite agreement, now described as a tripartite agreement, on the same day, that is, the 19th of July.

The defendant contends that no contract was concluded on the 19th of July because the tripartite agreement was not executed by the bank and delivered to the plaintiff. The bank did sign the tripartite agreement on or about the 5th of September but the defendant is in dispute with the bank over its effect. For these proceedings, neither party contends that any effective execution occurred by the bank. The plaintiff contends that this execution was irrelevant to the plaintiff's claim for payment under the contract.

The parties executed a variation to the contract on 27 July. It recorded that the parties executed a written contract for the construction of apartments on the land at Mount Gravatt on 19 July 2002 and that the defendant, as principal, wished to vary the work to provide for additional work not allowed for in the contract. Those additional works are set out with the cost amounting to about $3 00,000.

By clause 4.2 the defendant agreed to pay the plaintiff a fee of $275,000 for extra work required by the defendant concerning an alternate wall system. Provision was made for the payment of that sum by instalments.

Clause 5 allowed for the $70,000 already paid for work done to be allowed in the first payment claim under the contract.

Clause 5.1.2 provides:

“All work performed by the contractor in anticipation of the contract shall be treated in all respects as work under the contract and the contractor is entitled to claim for the value of such work in accordance with the contract.”

By clause 5.1.3 the sum of $200,000 held as security for payment to the contractor for work done in anticipation of the contract was to be released to the defendant.

This variation, the plaintiff submits, demonstrates, as did the contract of 19 July, that the minor works contract was subsumed into the contract of 19 July as varied.

On 6 August the defendant notified the plaintiff that the bank had refused funding for the project and directed the plaintiff to cease work, so no further work was carried out after 7 August.

On 15 August in accordance with clause 42.1 of the General Conditions concerning payment claims, the plaintiff delivered to the defendant and the superintendent nominated in the contract, Osman Designpac Pty Ltd claim number 2 in the amount of $657,243.40.

Osman had stated on 12 August that it was not to be regarded as having any formal agreement for the role of superintendent, which it restated on 15 August. On 21 August Osman accepted the role of superintendent in writing. On 4 September 2002 the parties executed a further deed of variation acknowledging the contract of 19 July and the variation on 27 July. A new clause 3.3 was included into the contract whereby the defendant agreed to pay the plaintiff $55,000 on account of delay and disruption costs incurred by the plaintiff during the suspension of the works “under the contract” from 6 August to 4 September 2002. This sum was to be paid within 14 days of issuing the September claim. The date for practical completion was extended by 45 days. No payment certificate issued in respect of progress claim number 2 (claim number 1 is not relevant to these proceedings.)

On 13 September payment claim number 3 was delivered in the amount of $712,243.40 for work done and payments agreed. An amount of $25,000 was sought on 15 September being the instalment agreed for the variation of the wall. By letter dated 16 September the superintendent notified the plaintiff that the role of superintendent was beyond his licence. The bank finally declined to provide finance to the defendant. An amount of $150,000 was paid by the defendant to the plaintiff as part of settlement terms arising out of the removal of a caveat hearing.

Mr O'Donnell QC for the plaintiff submits that the tripartite agreement as described “fits” into the contractual scheme between the parties. It imposes no obligations on the bank but does on the parties inter se. There is no provision for completion of the tripartite agreement within the contract nor for what is to happen if it was not completed by the bank. The description of the tripartite agreement as uncomplete is, it seems to me, just that, and without condition as to the conclusion of the agreement.

The provision that the work was to commence “under the contract” virtually immediately and the subsequent variations do not sit well with the defendant's assertion of no concluded agreement and against the background of the minor works contract.

Mr Cooper SC, who with Mr Ryan appeared for the defendant, submitted that there are provisions in the tripartite agreement which could not or did not come into effect which would suggest that the execution of the agreement by the bank was essential to the validity of the building contract. I cannot agree. Where the bank has a role it operates to allow the bank to control such things as the value of variations beyond a certain nominated amount. Other points are taken on behalf of the defendant, but to my mind they are minor matters and clearly waived by the parties.

As mentioned, the defendant relied on the letter of 24 May, in which the plaintiff emphasises its need for financial security. This was protected by the $270,000. Prior to executing the building contract on 19 July, the plaintiff was in receipt of the assurance in writing from the bank that the defendant's finance had been approved by the bank.

It is difficult to explain the expressions used in the 19 July agreement if the minor works contract continued to govern the relations between the parties. Even more difficult is to explain away the variations to the contract. To characterise them as “misconceived” suggests mistake and nothing in the pleadings or affidavits supports this.

Mr Cooper points to correspondence from Mr Edwards of the plaintiff's solicitors, seeking release of the $200,000 from the defendant's solicitors' trust account on 8 August, “due under the minor works contract”, as acknowledgment by the plaintiff that the building contract of 19 July had not come into effect. That is rather too optimistic an analysis of this letter. It must be seen in terms of the authority executed by the defendant on 6 August, the day the works were suspended, to pay the $200,000 to the plaintiff. The defendant's solicitor did not do so, hence the letter. The use of some expressions by the solicitor for the plaintiff was not helpful.

There is complaint made about the quantum. The defendant has a report from a quantity surveyor who values the works done at $228,000. The defendant has paid $70,000 plus $150,000. That is not how the contract works. By the terms of the contract, the notice of claim must be made to the superintendent. No certificate issued. According to clause 42.1, the defendant was then liable to pay the amount of the claim. Payment is not an admission of money due and payable under the contract, there is no right of set-off. The defendant contends that there is doubt about the appointment of the superintendent. The contract and subsequent reinstating documents nominate a superintendent. A principal cannot avoid the consequences of clause 42 by blowing hot and cold on the nominated superintendent. Daysea Pty Ltd v. Watpac Australia Pty Ltd (2001) QCA 49 makes clear that such clauses and in particular clause 42 of the standard contract are to be strictly construed (see paragraph 25 of the reasons for judgment of Williams JA.)

None of the matters raised by the defendant as needing a trial for resolution has any real substance. The quantum issues are for separate dispute resolution on the view which I have taken, that the contract of 19 July and variations is a subsisting agreement and not conditional on the execution by the bank of the tripartite agreement.

I am satisfied that the defendant has no real prospects of successfully defending the plaintiff's claim and there is no need for a trial.

Do you have a draft order, Mr O'Donnell?

HER HONOUR: Do you want a stay?

HER HONOUR: I will accede to the request for a stay of the judgment. The stay will be in place pending the filing of an appeal.

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Editorial Notes

  • Published Case Name:

    Iezzi Constructions Pty Ltd v Terry Seirlis Constructions Pty Ltd

  • Shortened Case Name:

    Iezzi Constructions Pty Ltd v Terry Seirlis Constructions Pty Ltd

  • MNC:

    [2003] QSC 214

  • Court:

    QSC

  • Judge(s):

    White J

  • Date:

    20 Jun 2003

Litigation History

No Litigation History

Appeal Status

No Status