Loading...
Queensland Judgments

beta

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  • Unreported Judgment

Iezzi Constructions Pty Ltd v Terry Seirlis Constructions Pty Ltd

 

[2003] QSC 202

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Iezzi Constructions P/L v Terry Seirlis Constructions P/L [2003] QSC 202

PARTIES:

IEZZI CONSTRUCTIONS PTY LTD
ACN 009 699 003
(applicant)
v
TERRY SEIRLIS CONSTRUCTIONS PTY LTD
ACN 086 482 840
(respondent)

FILE NO:

SC No 8485 of 2002

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

10 July 2003

DELIVERED AT:

Brisbane

HEARING DATE:

26 June 2003

JUDGE:

White J

ORDER:

Dismiss the application for summary judgment

CATCHWORDS:

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – SUMMARY JUDGMENT – where summary judgment sought by plaintiff in respect of building contract – where order granting summary judgment pronounced orally but not drawn up – where matter reopened on the basis of additional evidence – whether matter should proceed to trial

Uniform Civil Procedure Rules 1999 (Qld), r 378

Bailey v Marinoff (1971) 125 CLR 529, referred to

Pittalis & Ors v Sherefettin [1986] 2 All ER 227, referred to

The Texas Company (Australasia) Ltd v Federal Commissioner of Taxation (1940) 63 CLR 382, referred to

COUNSEL:

B O’Donnell QC for the applicant

D Cooper SC with D Ryan for the respondent

SOLICITORS:

Dibbs Barker Gosling for the applicant

Lees Marshall Warnick for the respondent

  1. The plaintiff sought summary judgment against the defendant in respect of a certain building contract. The application was heard on 19 June 2003. On 20 June I gave oral judgment in favour of the plaintiff and granted a stay pending the lodging of an appeal by the defendant. The terms of the order were to be settled by counsel. The managing director of the defendant was present in court and instructed his lawyers that it was not until he heard me say as part of the reasons that progress claim no. 1 was irrelevant to the plaintiff’s claim for judgment that he appreciated the significance of progress claim no. 1. He deposes that he then provided his solicitors with a copy of that claim which had been delivered by the plaintiff to Gray Robinson Cottrell, quantity surveyors appointed by the defendant’s proposed financier, BankWest, together with other documents not previously made available to them.  This information and the implication which it might have for the central issue on the summary judgment application was such that the defendant sought successfully to have the matter reopened for further hearing which occurred on 27 June 2003.  There was no challenge to the court’s power to do so particularly where the order had been pronounced orally in general terms but not drawn up or perfected, see The Texas Company (Australasia) Limited v The Federal Commissioner of Taxation (1940) 63 CLR 382 per Starke J at 457;  Bailey v Marinoff (1971) 125 CLR 529;  and Pittalis & Ors v Sherefettin [1986] 2 All ER 227.  Order 45 of the former Rules of the Supreme Court, a remedy peculiar to Queensland, which permitted a judgment or order to be reopened does not appear to have been included in the Uniform Civil Procedure Rules.
  1. The plaintiff filed and served a claim and statement of claim against the defendant on 13 September 2002 claiming the payment of moneys due under a building contract or alternatively damages for breach of that contract and interest. The defendant filed its notice of intention to defend on 11 October 2002 in which it denied that the parties had entered into a binding building contract but without the particulars developed on this application. On 17 June this year the plaintiff filed an amended statement of claim to which there has been no response. The issues are whether the parties entered into a building contract on 19 July 2002 with variations on 27 July and 4 September 2002 or whether, as the defendant contends, the completed tripartite agreement with BankWest as financier was an essential component of the agreement. If there was a concluded agreement, the defendant contends that there is no money due and owing under it.
  1. It is convenient to mention other relevant proceedings involving the parties. On 23 September 2002 the defendant commenced proceedings against BankWest for declarations in respect of a loan facility associated with the subject building agreement and the plaintiff as second respondent (S 8754 of 2002).  On 7 April 2003 the defendant filed an originating application against the plaintiff as respondent seeking the removal of a caveat lodged by the plaintiff over another development being undertaken by the defendant in which the plaintiff was not involved as builder but which was included as security in the subject building agreement (S 3114 of 2003).
  1. On this reopening the parties have taken the opportunity to develop further their submissions in general and provided further written submissions on 7 and 9 July.
  1. The defendant owned land at Tyron Street, Mt Gravatt on which it wished to have constructed some 65 residential units. The plaintiff’s managing director, Mr Iezzi, described the plaintiff as the ‘preferred builder’ and submissions made on its behalf assumed that there was no tender process. That is contradicted by the managing director of the defendant, Mr Seirlis. It is uncontentious that the defendant had not then secured finance from its bank, BankWest, but was in the process of doing so and was confident of success. Neither does it appear controversial that Mr Seirlis told Mr Iezzi there was pressure to start the project. The plaintiff was concerned to have security before it embarked on the work. This is reflected in a letter of 24 May 2002.  The defendant relied heavily on this letter as an indication that the plaintiff would not have entered into the building contract without the certain involvement of a financier.  The plaintiff set out its position that it
  • required the contract sum to be secured by the defendant’s financier via a suitable tripartite agreement;

 

  • the defendant was prepared to commence building prior to the finance being in place but required security;

 

  • 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 and underslab drainage;

 

  • on the completion of that work, 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 then in place;

 

  • the early-works contract was to provide that on signing $70,000 was to be paid to the plaintiff and the balance $200,000 was to be payable immediately the work was completed provided the principal contract for the whole of the works had not come into place;

 

  • if the principal contract ‘comes into existence’ all moneys paid under the early-works contract were to be deducted from the first progress payment due and payable under the principal contract.
  1. As at 30 May 2002 construction finance had not been provided to the defendant and the parties signed a minor works contract, AS 4305-1996. The scope of the works was to carry out demolition, site establishment, earthworks, sewer diversion, footings and underslab drainage to two main buildings. The value of the minor works was $270,000 with $70,000 to be paid on execution and the balance on the date of practical completion. The defendant paid the $70,000 and work commenced immediately.
  1. On 31 May the defendant sent a copy of a pro forma multipartite deed from its bankers to the plaintiff for consideration.  The work continued on the site.  On
    27 June the defendant forwarded a facsimile transmission received from BankWest that it had approved finance to assist with the development of the site.  The bank wrote

‘We are currently arranging for our solicitors to prepare the formal Letter of Offer document which will include the terms and condition of the approval.

 

We wish to apologise for the delay in being able to provide you with this approval, but as advised, due to internal issues within the Bank the approval process has taken considerably longer than originally anticipated.’

  1. The parties’ solicitors negotiated the terms of the building agreement and the multipartite agreement. On 19 July the parties executed a building contract for the construction of 65 apartments on the Mt Gravatt land for the sum of $9,350,000. Clause 4 of the contract provided

 

‘The documents forming the Contract are:

 

(a)This formal instrument of agreement;

(b)General conditions of contract AS 2124-1992;

(c)The attached 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”.’

 

  1. By cl 5 the contract was said to represent the entire agreement between the parties and superseded ‘all other agreements concerning the subject matter hereof’. By cl 8 the terms of the contract were to apply to all of the works ‘even if they were performed prior to the date of 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’.
  1. The Part A annexure to the general conditions of contract nominated as superintendent Osman Designpac Pty Ltd which from the contract documents seems to have been the designer of the development.
  1. The parties executed a tripartite agreement apparently prepared by BankWest’s solicitors. Mr Iezzi deposed this occurred on 19 July. Mr Seirlis in an affidavit in the caveat proceedings deposed to 26 July. The document is dated 26 July 2002. At this stage nothing seems to turn on it. BankWest did sign the tripartite agreement on or about 5 September 2002 but the defendant is in dispute with the bank over its refusal to advance loan moneys. For this proceeding neither party contends that any effective execution by the bank occurred. The defendant contends that no contract was concluded on 19 July because the tripartite agreement was not executed by BankWest as was contemplated by the parties, that is, finance was not in place. The plaintiff contends that execution by the bank was irrelevant to the building contract between the plaintiff and the defendant and relevant terms of the tripartite agreement were incorporated into the agreement between them by their execution of that agreement.
  1. The parties executed a variation to the contract on 27 July 2002. It recorded that the parties executed a written contract for the construction of apartments on the land at Mt 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 being in the vicinity of $300,000.
  1. By cl 4.2 of the deed of variation the defendant agreed to pay the plaintiff a fee of $275,000 for extra work required by the defendant concerning an alternate wall system. This payment was to be made by monthly instalments. By cl 5.1.1

 

‘The parties acknowledge and agree that the sum of $70,000 (including GST) already paid by the Principal to the Contractor for the Contract for work done in anticipation of the Contract shall be paid or allowed by the Contractor to the Principal within 7 days of the Contractor receiving payment under it’s [sic] first payment claim under the Contract.’

By cl 5.1.2

 

‘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.’

Clause 5.1.3 provided that the sum of $200,000 presently held by the defendant’s solicitors as security for payment to the contractor of work done in anticipation of the contract would be released to the defendant within three days of the execution of the deed of variation.  The deed of variation contains other important provisions but not relevant to the issue to be decided here.

  1. The plaintiff contends that this variation affirmed the existence of the contract of
    19 July even though BankWest had not then signed the tripartite agreement and that the minor works contract was subsumed into the contract of 19 July as varied. 
  1. BankWest had appointed Gray Robinson Cottrell Pty Ltd as quantity surveyor in the tripartite agreement. On 5 July it informed the plaintiff that it had been appointed to act as ‘audit Quantity Surveyors for BankWest’ and required certain information. The writer indicated what was required for ‘the first progress payment’. By letter dated 26 July 2002 the plaintiff sent progress claim no. 1 to Gray Robinson Cottrell with copies to the defendant and Osman Designpac Pty Ltd. The claim was in the sum of $413,254. It contained no allowances for the $70,000 paid by the defendant.
  1. On 6 August the defendant directed the plaintiff to cease work on the site. No further work was carried out after 7 August 2002. Mr Seirlis deposes that the conditions imposed by BankWest before finance would be approved took a long time to fulfil involving investigation by the bank’s solicitors, among other things, of the contracts for the sale of some 30 or so units which had been sold off the plan. It appears not to be the case that BankWest had declined finance and Mr Seirlis seemed to have expected that it would eventually be forthcoming. A meeting was held between Mr Iezzi and Mr Seirlis at the plaintiff’s office during which Mr Iezzi noted that he requested the release of the $200,000 as payment for the early works, to which Mr Seirlis agreed. On 8 August the plaintiff wrote to the defendant asserting the binding nature of the building contract. By letter dated 22 August in response to a show cause notice pursuant to cl 44 of the general conditions of the contract the defendant’s solicitors rejected the notion that the building contract was operative without the tripartite deed.
  1. On 12 August 2002 the nominated superintendent to the contract,
    Osman Designpac Pty Ltd, wrote to the parties advising that it was not to be regarded as having any formal agreement for the role of superintendent under the contract.  On 15 August in accordance with cl 42.1 of the general conditions concerning the payment of claims the plaintiff delivered to the defendant and Osman Designpac Pty Ltd as the superintendent nominated in the contract claim no. 2 in the amount of $657,243.40.
  1. On 21 August Osman Designpac Pty Ltd 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 of 27 July. A new cl 3.3 was included into the contract whereby the defendant agreed to pay to 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. By way of background,
    Mr Seirlis deposed to progress with BankWest and an expectation that finance would finally be approved.
  1. No payment certificate issued in respect of progress claim no. 2. On 13 September progress payment claim no. 3 was delivered in the amount of $712,243.40 for work done and payments agreed. That claim was copied to the defendant and to
    Gray Robinson Cottrell Pty Ltd.  By invoice dated 15 September 2002 in accordance with cl 4 of the deed of variation of 27 July 2002 the plaintiff sought payment of the first instalment of $25,000 of the sum agreed.
  1. By letter dated 16 September Osman Designpac Pty Ltd notified the plaintiff that the role of superintendent was beyond its licence. The letter was copied to the defendant.
  1. BankWest’s execution and implementation of the tripartite agreement is submitted by the defendant to be essential to the validity of the building agreement. Recital D provides that

‘The Bank requires the parties to enter into this deed as a pre-condition of providing the Finance Facility’

By cl 2.1 each of the plaintiff and defendant acknowledged and ‘agrees for the benefit of the Bank’ that they would duly and punctually perform their respective obligations under the building contract.  That clause goes on to provide generally that the builder would complete the construction of the works in accordance with the building contract and that the parties would reach agreement with respect to variations in the scope or nature of the works but needed the approval of the bank if the variations exceeded $380,000 excluding GST.  By cl 2.1(g) the bank was noted to owe no obligation to the builder unless otherwise agreed.  Clause 3 imposed an obligation on the builder to take out and keep in effect all necessary insurances as required under the building contract and to ensure that the bank’s interests were noted in the relevant policy.  Other provisions in the tripartite agreement dealt with the enforcement of the building contract by the bank against the builder by notices to complete and assignment of builder’s rights under the sub-contract and so on. 

  1. Mr D Cooper SC, who with Mr D Ryan, appeared for the defendant, submitted that there are a number of issues which would dictate that there ought to be a trial about whether the parties entered into a binding agreement on 19 July 2002 and the subsequent deeds of variation:
  • The identification and role of the superintendent;  and
  • The failure by the plaintiff (and the defendant) to provide security for the due performance of the contract.

 

If there is found to be a contract

 

  • The construction of the building contract which would suggest that no money is owing.
  1. By cl 2 of the general conditions of contract ‘Superintendent’ means the ‘person stated in the Annexure as the Superintendent or other person from time to time appointed in writing by the Principal to be the superintendent and notified as such in writing to the Contractor by the Principal and, so far as concerns the functions exercisable by a Superintendent’s Representative, includes a Superintendent’s Representative’. The annexure to the general conditions names the superintendent as ‘Osman Designpac Pty Ltd ACN 070 174 819’. By cl 23 of the general conditions the principal is required to ensure that there is a superintendent at all times. Osman Designpac Pty Ltd was the named superintendent under the contract when the plaintiff delivered progress claim no. 3 on 13 September 2002. Thereafter Osman Designpac Pty Ltd wrote that it was unable to perform the duties of superintendent and unable to process the progress claim. Mr O’Donnell QC for the plaintiff submitted that the renunciation of the superintendent’s role did not have the consequence that Osman Designpac Pty Ltd ceased to be the superintendent for the purposes of the building contract. It remained ‘the person stated in the Annexure as Superintendent’. The defendant was obliged under the contract to appoint another superintendent. Mr O’Donnell submitted that it cannot be the case that a principal can avoid the obligation to pay a progress claim by having a vacuum in the nomination of superintendent. Since no certificate issued by virtue of cl 42.1 of the general conditions the defendant as principal was obliged to pay the amount of the claim. In a sense that submission begs the question because it supposes a concluded agreement. That there was no superintendent performing the role might well suggest that that was because the quantity surveyor nominated by BankWest would do so as seems to have been accepted by the plaintiff by delivering progress claim no. 1 to Gray Robinson Cottrell Pty Ltd.
  1. The annexure to the general conditions required the plaintiff to provide security in the amount of five per cent of the contract sum in the manner provided for in special condition 4 which replaced cl 5.2 of the contract. The effect is to provide security as to 2.5 per cent of the contract sum by way of a bond, cash or a valuable instrument from a financial institution ‘prior to payment of the first progress payment’. The general conditions required payment within 28 days of the date of acceptance of the tender. The plaintiff submitted there was no tender. That seems unlikely but cannot be decided now. The defendant submitted that the special condition relates to mode of payment and to the situation where the first progress claim might be made prior to the expiration of the 28 days. There is some tension here but the security was never provided. If the contract was in force this constituted a fundamental breach of its terms. By special condition 4(a) the balance 2.5 per cent was to be retained out of progress claims certified “by the Principal’s financier until such time as the retention moneys are due to be released to the Contractor in accordance with the Contract”. The general conditions, annexure and special conditions contemplated that there would be retention moneys, but there was nothing in place for dealing with them.
  1. The defendant as principal was to provide security under the contract. In the annexure the amount is described as “refer tripartite deed with BankWest”. No other provision for security was made. The reliance by the defendant on the letter of 24 May and the express wish of the plaintiff to have security before it undertook work on the site is not determinative of the question whether a contract was formed between the parties. But Mr Iezzi was aware from the beginning of his discussion with Mr Seirlis that $270,000 was the limit of the funds at the disposal of the defendant for this development and that a financier was essential if the project was, literally, to get off the ground. The contract itself was not subject to finance. In the defendant’s financial circumstances that may be seen as an indication that the tripartite agreement was essential. It would, it might be thought, be commercially surprising to enter into such a large project without any assurance of being paid. At each step along the way the defendant gave the plaintiff the impression that finance was about to be put in place. The conduct of the parties was consistent with that anticipation. That the plaintiff sent progress claim no. 1 to Gray Robinson Cottrell, is consistent with this expectation as is the noting of the bank’s interests in the insurance certificate and the letters of 9 August 2002 from the plaintiff to the defendant asking for written evidence that it had notified all relevant parties with an interest in the contract “(in particular BankWest)” of the existence and terms of the deed of variation of 27 July 2002. The conduct is consistent with the need for the bank to be involved in the tripartite agreement before the building contract came into force.
  1. Of some real difficulty for the defendant are the expressions used in the deeds of variation of 27 July and 4 September 2002 where the defendant has affirmed the existence of the principal contract and the expiration of the minor works agreement. It is not, however, beyond argument that the parties continued to work out the details of the development project as the defendant waited for the expected finance to materialise. The defendant’s expectations were not speculative as the affidavits of Mr Seirlis in the other proceedings exhibited to an affidavit of Mr D Edwards, the plaintiff’s solicitor, demonstrate.
  1. As mentioned in the reasons on 20 June, Mr Cooper had submitted that the correspondence from Mr Edwards seeking release of the $200,000 from the defendant’s solicitors’ trust account on 8 August ‘due under the minor works contract’ was acknowledgment by the plaintiff that the building contract had not come into effect. That letter 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. However it does lend colour to the argument that only the minor works had been carried out and if the general contract had not come into force the minor works agreement governed the balance of the payment for the work, namely, the payment of the $200,000.
  1. It will be clear that I am not now persuaded that there is no need for a trial of the claim. I should, however, say something briefly about the defendant’s submission that on the proper construction of cl 42.1 of the general conditions as amended by special condition 19 there is no money owing. Special condition 19(a) amends
    cl 42.1 by inserting before the first paragraph sub-sections (3), (4), (5), (6) and (8) of s 67W of the Queensland Building Services Authority Act 1991.  Mr Cooper contends that by virtue of special condition 19(a)(iv) there is no money payable.  It provides

‘The amount of a progress payment (the ‘current progress payment’) other than the first progress payment must be worked out having regard to the amount of work carried out from when the Contractor first submitted a claim under the contract for the progress payment most recently payable until the Contractor submitted a claim under the contract for the current progress payment.’

  1. I doubt that can mean, as the defendant contends, that each progress claim payment can only be made in respect of work carried out in the period from the date of the previous progress claim. Clause 42.1 provides, so far as it relates to payment claims, within 14 days of receipt of a claim for payment the superintendent is required to issue to the principal and to the contractor a payment certificate stating the amount of the payment which ‘in the opinion of the Superintendent, is to be made by the Principal to the Contractor or by the Contractor to the Principal’. Special condition 19(a)(iv) seems to be a direction to the superintendent that when working out the amount to be certified as payable he should have regard to the amount of work carried out from the time of the contractor’s last progress claim to the time of the current payment. The argument that ‘having regard to’ does not require the superintendent to certify only with respect to the work carried out since the previous progress claim was made seems correct. The subclause does not confine the progress claim to the work carried out subsequent to the preceding progress claim. It relates to the payment. This is supported by special condition 19(b) which amends the first paragraph in the second sentence of cl 42.1 of the general conditions, namely

‘Claims for payment shall include the value of work carried out by the Contractor in the performance of the Contract to that time, including variations valued under Clause 40.5 and other adjustments to the Contract Sum under the Contract, together with all amounts then due to the Contractor arising out of or in connection with the Contract or any alleged breach thereof. …’

This tends to run counter to the defendant’s submission that the special conditions do not permit a cumulative progress claim procedure.  Each of the plaintiff’s progress claims included the value of work carried out by the plaintiff in the performance of the contract to the time of that progress claim including variations together with all amounts then said to be due to the plaintiff arising out of or in connection with the contract.

  1. In view of the conclusion I have come to about the need for a trial it is inappropriate to consider the construction of the contract further.
  1. The plaintiff sought to tender a further amended statement of claim to include a claim for interest at 15 per cent per annum pursuant to the terms of the contract. Whether leave was required under the rules remained an open question. By r 378 a party may as often as necessary make an amendment for which leave is not required before the filing of a request for trial date. No request for trial date has been filed in this matter. Mr Cooper did not submit that the amendment ought not be made. The plaintiff falls within the parameters of r 378 and accordingly since there is no application to disallow the amendment and there is no prejudice in doing so the plaintiff may file an amended statement of claim amended in the way indicated without leave.
  1. The formal order is to dismiss the application for summary judgment. To remove any doubt I vacate orders made orally on 20 June 2003. I will hear, or receive in writing if appropriate, submissions as to costs and directions as to the further conduct of the proceeding since the parties are in receipt of a notice from the Registrar to show cause why the proceeding should not be deemed resolved.
Close

Editorial Notes

  • Published Case Name:

    Iezzi Constructions P/L v Terry Seirlis Constructions P/L

  • Shortened Case Name:

    Iezzi Constructions Pty Ltd v Terry Seirlis Constructions Pty Ltd

  • MNC:

    [2003] QSC 202

  • Court:

    QSC

  • Judge(s):

    White J

  • Date:

    10 Jul 2003

Litigation History

No Litigation History

Appeal Status

No Status