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Multiplex Constructions Pty Ltd v Abigroup Contractors Pty Ltd

 

[2005] QCA 61

Reported at [2005] 1 Qd R 610

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO/S:

SC No 2909 of 2004

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

DELIVERED ON:

11 March 2005

DELIVERED AT:

Brisbane

HEARING DATE:

2 November 2004

JUDGES:

McMurdo P, Jerrard JA and Mullins J

Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDER:

1.Appeal dismissed

2.Cross-appeal dismissed

3.Appellant to pay the respondents' costs of and incidental to the appeal to be assessed on the standard basis

4.Respondents to pay the appellant’s costs of and incidental to the cross-appeal to be assessed on the standard basis

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – RECOVERY – appellant subcontractor and respondent joint venturers agreed to extension of completion date of works to 20 May 2003 – appellant achieved substantial completion of the subcontracted works on 29 May 2003 – appellant gave fourth notice of claim of charge on 14 November 2003 – claim included an amount for acceleration costs – appellant argued respondents had given an implied direction to accelerate works –  appellant gave notification of additional costs to be incurred in acceleration – subcontract required the respondents to affirm or withdraw an acceleration direction upon receipt of the notification – respondents advised they had not instructed any acceleration – appellant argued that if a contracting party prevents the fulfilment by the opposite contracting party of a condition precedent, it amounts to performance of the condition – whether this principle can be applied to assume performance of an opposite contractual obligation

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – SUBCONTRACTORS’ CHARGES ACT (Q) – s 10(2) of the Subcontractors Charges Act 1974 (Qld) provides that a notice of claim of charge may be given although the work is not completed, but if the work is completed it must be given within three months after such completion – s 3B of the Act provides a definition of when work specified in the subcontract is deemed to be complete – contract between appellant and respondents defined date of ‘substantial completion’ – whether “the work” under s 10(2) should be read as meaning either the work the subject of the notice of claim of charge or the entirety of work to be performed under the subcontract – whether the contractual date of substantial completion could be deemed to be the commencement of the three month time limit for submission of a notice of claim of charge

Contractors and Workmans Lien Act 1906 (Qld), s 6, s 10, s 11, s 12

Subcontractors Charges Act 1974 (Qld), s 3B, s 5, s 10, s 21

Wages Protection and Contractors Liens Act 1908 (NZ), s 51, s 56, s 66

Wages Protection and Contractors Liens Act 1939 (NZ), s 21, s 26, s 29, s 30

Bartier v Kounza Investments Pty Ltd & Ors [2003] QSC 390; SC No 11457 of 2002, 19 November 2003, considered

Foran v Wight (1989) 168 CLR 385, cited

Jones v Barkley (1781) 2 Dougl. 684; (1781) 99 ER 434, cited

Multiplex Constructions Pty Ltd v Rapid Contracting Pty Ltd (in liq) [1999] QCA 306; Appeal No 10856 of 1998, 6 August 1999, applied

Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235, distinguished

Qline Interiors Pty Ltd v Jezer Construction Group Pty Ltd [2002] QSC 88; SC No S8251 of 2001, 26 March 2002, considered

Rapid Contracting Pty Ltd (in liq) v Multiplex Constructions Pty Ltd [1998] QSC 227, SC No 10146 of 1997, 27 October 1998, applied

COUNSEL:

J Bond SC, with R Schulte, for the appellant

P H Morrison QC, with P A Hastie, for the respondents

SOLICITORS:

Allens Arthur Robinson for the appellant

Minter Ellison for the respondents

[1] McMURDO P:  I agree that the appeal should be dismissed with costs and that the cross-appeal should be dismissed with costs for the reasons given by Jerrard JA.

[2] JERRARD JA:  These appeals involve the proper construction of s 10(2) of the Subcontractors Charges Act 1974 (Qld), (“the Act”) and the application of some well settled principles of contract law to the contract executed on 24 April 2002 between the appellant Abigroup Contractors Pty Ltd (“Abigroup”) and the respondents, Multiplex Constructions Pty Ltd and Watpac Australia Pty Ltd trading as “The Lang Park Redevelopment Joint Venture” (“the joint venturers”).  Abigroup’s contract with the joint venturers was a subcontract, the joint venturers having contracted in May 2001 with the Department of Public Works (“the Department”) for the construction of a football stadium in Brisbane on the site previously known as Lang Park.  Abigroup’s subcontract with the joint venturers involved the construction of bridges, plazas, road-works, walkways and associated services, those being part of the construction work on the project described as the Community Infrastructure West works.

[3] Abigroup’s subcontract was for a fixed lump sum, exclusive of GST, of $17,280,920.  Abigroup’s subcontracted work began on 24 April 2002, and the date of substantial completion of those subcontracted works was certified in writing by the main contractor’s representative as achieved on 29 May 2003.  The originally agreed date for completion was 24 April 2003, extended pursuant to the contract to 20 May 2003.  On 14 November 2003 Abigroup lodged the fourth in a series of notices of claims of subcontractor’s charges which it gave.  That particular notice of claim of a charge was for an amount of $10,440,091, in respect of work performed between 24 April 2002 and 14 November 2003.  Proceedings in the judgment under appeal, and in this Court, were conducted on the basis that the $10,440,091 included an amount of $6,168,632.80 claimed to be due under the subcontract for acceleration costs. 

[4] The joint venturers successfully applied to the learned trial judge pursuant to s 21 of the Act for an order modifying the effect of Abigroup’s claim by reducing it by that amount of $6,168,632.80.  The learned trial judge held that that sum could not be characterised as an amount payable to Abigroup for work done by it under the subcontract, but was properly characterised as a claim for damages for breach of the subcontract, and thus not money the payment of which could be secured by a charge, by reason of s 5(6)(b)(i) of the Act.  The learned judge rejected the joint venturers’ second contention, namely that s 10(2) meant Abigroup had to give notice of claim of charges no later than within three months after 29 May 2003, the date of practical completion; or no later than 4 November 2003, that being the date three months after Abigroup should have been found to have completed all work under the subcontract.  The joint venturers argued that whichever date was correct, the notice given on 14 November 2003 was given too late and by virtue of s 10(4) did not attach to the moneys payable by the Department to the joint venturers.  On this appeal Abigroup challenges the order modifying its fourth notice of claim of charge, and the joint venturers challenge the learned judge’s construction of s 10(2) and related rulings. 

Findings by the judge

[5] The learned trial judge found that some of the work which Abigroup was obliged to perform by the terms of the subcontract was not completed until after 14 August 2003, and the value of that work was $327,095.53.  Further, some defects in works done by Abigroup had been discovered prior to 29 May 2003 but were not remedied before that day.  The joint venturers argued before the learned judge that the evidence established convincingly that all work had been performed under the subcontract by either 29 or 30 May 2003, and pointed to statements by Abigroup to that effect in a number of letters written on its behalf.  The learned judge took into account, however, other evidence showing that work under the subcontract continued after 14 August and up to 14 November 2003, and the judge remarked that the admissions or assertions made by Abigroup, that work had finished earlier, was only some of the relevant evidence on the question of when work under the subcontract had been completed.  The joint venturers challenged those findings on the appeal, while conceding, as the learned judge had held, there was other evidence contradicting Abigroup’s statements on which the joint venturers relied, namely that all works on the site were complete by 4 August 2003 and that there were only minor outstanding works to be completed after 29 May 2003. 

[6] The joint venturers’ concession that there was other evidence apart from those statements by Abigroup means that its appeal on that finding must fail, since it was one open to the learned judge to make.  Further, the application by the joint venturers under s 21 for an order modifying Abigroup’s notice of claim of a charge was an application in which the joint venturers had the onus of satisfying the judge that Abigroup had no arguable, or fairly arguable case in support of its claimed charges; the joint venturers were obliged to show that the basis of the charge claimed was untenable.  It follows that such an application could not be determined against a subcontractor where there is evidence, capable of acceptance although disputed, of facts giving rise to an entitlement to claim a charge.  The learned trial judge held as to the relevant onus and appropriate approach by a judge on a s 21 application in the terms which I have quoted in this paragraph, relying in turn on remarks by Shepherdson J in Rapid Contracting Pty Ltd (in liq) v Multiplex Constructions Pty Ltd [1998] QSC 227 (27 October 1998), and by Thomas JA in that same case in appeal on 6 August 1999.[1]  On this appeal the joint venturers did not challenge the test settled upon by the learned trial judge, and the appellant likewise accepted that formulation.  I respectfully consider it was correctly put by the learned judge, and that that is a further reason for rejecting the joint venturers’ challenge to the learned judge proceeding on the footing that work Abigroup was obliged to perform had not been completed until after 14 August 2003.

Provisions in the Act

[7] Abigroup’s charge over moneys payable by the Department to the joint venturers derives from s 5 of the Act.  It relevantly provided:

 

(1)If an employer contracts with a contractor for the performance of work upon or in respect of land or a building, or other structure or permanent improvement upon land or a chattel, every subcontractor of the contractor is entitled to –

(a)a charge on the money payable to the contractor … under the contractor’s … contract …;

(2)The charge of a subcontractor secures payment in accordance with the subcontract of all money that is payable or is to become payable to the subcontractor for work done by the subcontractor under the subcontract.

(3)The total amount recoverable under the charges of subcontractors does not exceed the amount payable to the contractor or subcontractor under the contract or subcontract, as the case may be.”

[8] Relevant to both grounds of appeal, s 5(6) provides:

 

“Money that is or is to become payable to a subcontractor for work done by the subcontractor under a subcontract, and the payment of which is secured under subsection (2) –

(a)includes money the payment of which is governed by a provision of the subcontract still to be complied with, including for example the following –

(i)a provision establishing a procedure for the certification of the amount, quality or value of work that has been performed; …

(b)does not include the following –

(i)damages for breach of contract or in tort; …”

[9] Section 10, central to the joint venturers’ appeal, relevantly provides:

 

10 Notice of claim of charge

(1)A subcontractor who intends to claim a charge on money payable under the contract to the subcontractor’s contractor or to a superior contractor –

(a)must give notice to the employer or superior contractor by whom the money is payable, specifying the amount and particulars of the claim certified as prescribed by a qualified person and stating that the subcontractor requires the employer or superior contractor, as the case may be, to take the necessary steps to see that it is paid or secured to the subcontractor; …

(1A)The claim is in respect of –

(a)money payable to the subcontractor at the date of the notice; and

(b)money to become payable to the subcontractor after the date of the notice for work done by the subcontractor prior to that date …

(1D)To remove any doubt, it is declared that when a charge on money payable under a contract is claimed, the claim includes a charge on retention money.

(2)A notice of claim of charge may be given although the work is not completed or the time for payment of the money in respect of which the charge is claimed has not arrived, but if the work is completed must be given within 3 months after such completion.

(3)A notice of claim of charge in respect of retention money only may be given at any time while work under the contract mentioned in subsection (1) is being performed but must be given within 3 months after the expiration of the period of maintenance provided for by the contract and no later.

(4)If notice is not given pursuant to this section, the charge does not attach ...

(7)To remove any doubt, it is declared that a subcontractor may make 2 or more claims in relation to money payable or to become payable to the subcontractor for work done by the subcontractor under a subcontract.

(8)However –

(a)each claim must be about a separate and distinguishable item of the work done by the subcontractor under the subcontract; and

(b)there must not be more than 1 claim about any 1 item.”

[10] Both parties argued that s 3B was relevant to their contended for construction of s 10(2).  Section 3B provides:

 

3B When work specified in contract or subcontract completed
For the purposes of this Act the work specified in a contract or subcontract is deemed to be completed when, with such variations, omissions or deductions as have been duly authorised or agreed upon, it has been performed in accordance with the contract or subcontract, notwithstanding that the contractor or subcontractor –

(a)may then or subsequently be employed in doing additional or extra work that is connected with or related to the work but is not specified in the contract or subcontract; or

(b)may be liable to rectify defects in the work discovered since the performance thereof and during a period of maintenance provided for by the contract or subcontract.”

[11] Section 11 of the Act has the effect that if a notice of claim of charge is given pursuant to s 10, the person to whom it is given must retain a sufficient part of the money that is or is to become payable by the person under the contract to satisfy the claim, and in the event of the person to whom it is given failing to retain that amount, that person is personally liable to pay to the subcontractor the amount of the claim, not exceeding the amount that the person is required to retain.  Section 21 allows a person who alleges being prejudicially affected by a claim of charge to make an application for an order that the claim be cancelled or modified.  The court is to hear and determine summarily any such application, and make such order as it thinks fit.

The joint venturers cross-appeal

[12] Apart from its unsuccessful argument that the evidence showed all work under the subcontract had been completed by 4 August 2003, the joint venturers’ principal contention was that the reference to “the work” in s 10(2) should be understood as meaning “the work the subject of the notice of claim of charge”.  If so, the time bar provided by s 10(2) and s 10(4) had the effect that the claimed charge could not attach in respect of claims for work completed before 14 August 2003.  That construction, which prima facie appears reasonable, would reduce the amount secured by the charge to below half a million dollars. 

[13] Mr Morrison QC, senior counsel for the joint venturers, pointed to the absence in s 10(2) of the expression “the work specified in a …subcontract”, the term appearing in s 3B; and likewise the absence of the expression “the work the subject of a …subcontract”, the phrase appearing in s 3 in the definition of “retention money”.  Mr Morrison then pointed to the provision in s 10(7) expressly declaring that a subcontractor might make two or more claims in relation to money payable for work done under a subcontract.  Mr Morrison submitted that supported the joint venturers’ construction of “the work” in s 10(2). 

[14] Mr Morrison submitted that the legislative history leading to the enactment of the Act, and in particular those parts of earlier statutes which led to the current form of s 10(2) and s 3B, showed that the legislative precursors to s 10(2) made clear that the term “the work” therein referred to the work the subject of the charge, and not to the entirety of work to be performed under the subcontract.  Abigroup contended for that latter construction, and the learned judge agreed with it.  Mr Morrison in particular referred both this court, and the learned trial judge, to the Wages Protection and Contractors Liens Act 1908 (NZ) (s 51, s 56, s 56(3), and s 66(2)); the Wages Protection and Contractors Liens Act 1939 (NZ) (s 21(1), s 21(2),  s 29(1), s 26(2) and s 30(2)); and the Contractors and Workmens Lien Act 1906 (Qld) (s 6, s 10, s 11, and s 12).

[15] I respectfully agree with the learned trial judge that the joint venturers’ invocation of legislative precursors in support of their construction was interesting, but unpersuasive.  For example, in the 1908 New Zealand Act, s 56 thereof – to which s 10 can be traced – required in s 56(1) that a subcontractor or worker intending to claim a charge give notice of it “before the completion of the work in respect of which it is claimed, or within thirty days after the completion”; and in s 56(3) permitted a notice of claim of charge to be given although “the work” was not completed.  Clearly enough, the reference to “the work” not completed in s 56(3) picked up the fuller expression used in s 56(1).  Section 10(1A) of the Act does not contain that earlier expression “the work in respect of which it is claimed”, leaving nothing to which the words “the work” in s 10(2) of the Act would naturally refer.

[16] The 1906 Queensland Act likewise expressly provided in s 10 thereof that a workman or subcontractor intending to claim a charge was required to give notice of it “before the completion of the work in respect of which it is claimed, or within seven days after completion”; and likewise then continued on to provide that a notice of claim of charge might be given although the work was not completed.  Once again the expression “the work” in the latter part of s 10 in that 1906 Queensland Act sensibly could be understood as referring back to the earlier expression.  The 1939 New Zealand Act, as Mr Morrison conceded, was less clear in providing support for his construction, but did refer in s 26(2) thereof to a notice of charge being given “before the completion of the work in respect of which it is claimed or within thirty days after the completion”, and s 30(2) thereof then provided that a notice of charge might be given although “the work” was not completed. 

[17] In all three of those precursor Acts there is therefore an express provision referring to giving notice before the completion of the work in respect of which the charge is claimed, which express provision preceded a provision now reflected in s 10(2) of the Act, permitting a notice of claim to be given although “the work” is not completed.  In those three precursor Acts the reference to “the work” both took its meaning from a preceding phrase in that legislation, and was consistent with the provision in that earlier section or subsection that a notice could be given before the completion of the work in respect of which the charge was claimed.  The Act both does not have any section proceeding s 10(2) to which the expression in s 10(2) “the work” would naturally refer; and does not have any preceding section authorising giving of a notice before the completion of the work in respect of which the charge is claimed.

Abigroups argument on the joint venturers cross-appeal

[18] Indeed, the Act contains a very different preceding section in s 5(2), it being common ground on the appeal that its effect is to provide a charge securing payment of moneys owing only for work actually done.  Mr Bond SC, senior counsel for Abigroup, made that point central to his submission on the proper construction of s 10(2).  That is, because s 5(2) limits a subcontractor’s charge to securing payment in accordance with the subcontract of money payable for work (actually) done by the subcontractor under the contract, the reference in s 10(2) to “the work” which was not completed when a notice of claim of charge might be given, could not be a reference to, or description of, “work done”.  Section 5(2), s 10(7) and s 10(8) all refer to “work done” or “the work done”; in contrast s 10(2) refers to a situation where “the work is not completed”.  That differs from “work done”, the latter being the only work which can be the subject of a charge on a notice of claim of charge.  I respectfully observe that while the submissions of Mr Morrison had merit, I consider that central submission of Mr Bond’s had far more substance, and that the joint venturers’ arguments never really met the submission that construing s 10(2) as Mr Morrison suggested was inconsistent with the provision in s 5(2) that a charge only secures money payable for work done, and those in s 10(1A) with respect to the subject of a claim.

[19] The learned trial judge considered that the joint venturers’ submission would result in there being an inconsistency between s 10(1A) and s 10(2), in that s 10(1A) provides that a claim “is” in respect of money payable to the subcontractor for work done prior to the notice, and s 10(2) permits a notice of claim of charge to be given although the work is not completed.  Those two provisions could be reconciled, however, if Abigroup’s submission that “the work” referred to in s 10(2) was the whole of the subcontract work.

[20] The learned judge considered that that construction gave a certain symmetry to s 10, since s 10(3) dealt with claims of charge in respect of retention money only, and allowed notice in respect of such claims to be given within three months of the expiration of the period of maintenance provided for by the (head) contract and no later; if s 10(2) was read as Abigroup submitted, it allowed notice to be given up to three months from completion of the subcontract.  On the other hand, if the joint venturers’ submission was accepted, then for the purposes of s 10(2) there would be different time limits in respect of each different item of work for which a notice of claim of a charge was given.  The judge observed that while it would be relatively easy to determine in any particular case when all of the subcontracted works were completed, it would probably be less easy to determine when particular items were done.  The judge also observed that s 3B was likely intended to assist in determining the commencement of the three months allowed by s 10(2), and that while s 10(2) did not refer in terms to “work specified in a ... subcontract” (the expression used in s 3B), if “the work” referred to in s 10(2) was construed to mean the work to be done under a subcontract, or work specified in a subcontract, that construction of     s 10(2) did give s 3B a purpose to perform.  It otherwise appeared to the learned judge to serve no purpose.

[21] I respectfully observe that those are all persuasive arguments in support of Abigroup’s construction of s 10(2).  I consider the strongest point is the inconsistency between the provision in s 5(2) that a charge secures payment for work done, and in s 10(1A) that a claim is in respect of money payable at the date of the notice or to become payable for work done prior to that date, on the one hand, and on the other the submission by Mr Morrison that s 10(2) permits a notice of claim to be given although that work (already) done (the subject of the charge and notice of claim) is not completed. 

[22] Mr Morrison submitted that consistent with his argument on s 10(2), s 3B served the function of establishing when completion of the head contract work occurred. That would always be relevant to determining what was “retention money”.  That submission had reference to the definition of “retention money” in s 3 of the Act.  It reads:

 

Retention money means any part of the contract price retained during the progress or after the completion of the work the subject of a contract or subcontract as security for rectification of defects in the work during the period of maintenance provided for by the contract or subcontract or to be payable after such rectification or on the expiration of such period of maintenance.”

I agree with the submission of Mr Bond that determining whether any part of the contract price can be characterised as retention money does not require identification of the date of the completion of the work the subject of the contract.  The definition provides a characterisation of that which is retention money, which is applicable both during the progress and after completion of the work, and which characterisation depends on the purpose for which the money was retained.  As Mr Bond put it, “you don’t need to know when the work is completed to operate the definition”. Section 10(3) permits giving of a notice within three months after the expiration of the period of maintenance provided for by the contract; to determine when that period had begun and ended one would go to the contract.  In that regard Mr Bond submitted that while s 10(2) used terms (“if the work is completed”) apposite to pick up s 3B, s 10(3) did not.  I am satisfied the construction of s 10(2) that the learned trial judge accepted is the correct one, imposing one cut off date in respect of all notices of claims of subcontractor’s charges. That date is ascertained by the application of s 3B to the subcontract. 

[23] Mr Morrison had a further argument, namely that s 3B imported – for all contracts in which the date of practical or substantial completion was defined – those contractual terms into the consideration required by s 3B of when it was that the works specified in the contract had been performed in accordance with it.  Mr Morrison submitted that the expression “performed in accordance with the contract or subcontract” in s 3B did not simply mean “done” or “finished”, but rather that where the contract or subcontract provided, as between the parties, that the works would be practically or substantially completed at a particular point, that term was part of the consideration governing when, for the purposes of s 3B, the work was deemed to be completed.  If the contract contained terms defining those dates or events, that was when that deemed completion occurred.  In the instant matter, that was on 29 May 2003. 

[24] The learned trial judge, in rejecting that submission, observed that by definition the state of affairs described as practical or substantial completion in a building contract was not completion of the whole of the contract works.  The judge noted that since most, if not all, building contracts for substantial sums contain a definition of either or both “practical” or “substantial” completion, it would have been easy enough for the legislature to declare in s 3B that a building subcontract was completed when, by its terms, the subcontractor had achieved practical or substantial completion, had that been the purpose of s 3B. 

[25] The subcontract under consideration relevantly described “substantial completion” as meaning “completion of the subcontractor’s work”, and the latter phrase as being that stage in the execution of the work under the subcontract when those works were complete except for a limited number of minor omissions and minor defects which the managing contractor’s representative, in its absolute discretion, determined did not prevent the work from being reasonably capable of being used for their intended purpose, and which that representative determined the subcontractor had reasonable grounds for not promptly rectifying, and rectification of which would not prejudice the convenient use of the works.  That definition, describing substantial completion as occurring when there were only those limited minor omissions and defects, envisaged their rectification, which was specifically provided for in the contractual terms providing for defects liability and a defects liability period.  As I understand the matter, there remained after 29 May 2003 minor omissions and minor defects which Abigroup was still required by its contract to rectify, and it was that work which had a value of $327,095.53.  Mr Bond informed the court that according to Abigroup’s evidence that work was done after 14 August 2003. 

[26] On those facts, irrespective of whether the managing contractor’s representative had certified that there had been substantial or practical completion of the subcontract work by 29 May 2003, as at 14 August 2003 Abigroup had not yet performed the work specified in the subcontract in accordance with it.  That is, irrespective of whether it satisfied the contractual definition of completion of the subcontract works, it did not satisfy the statutory one.  It achieved that status, it would appear, on or about 14 November 2003.  I agree with the learned trial judge that it was when the statutory definition in s 3B was satisfied that the time bar provided in s 10(2) started to run.  I observe that contracting parties would usually find it relatively easy to identify when in fact the s 3B definition of deemed completion applied.   Accordingly I would dismiss the joint venturers’ cross-appeal against that part of the judgment.

Abigroups appeal

[27] Turning to the appeal by Abigroup, it accepted that if the claims on which the relevant component of the fourth notice of claim of a charge was based were incapable of being described as a claim under the subcontract, they could not form part of a charge under the Act.  Mr Bond’s argument was that while the evidence justified Abigroup in making claims for damages for breach of that (sub)contract, that evidence also permitted Abigroup to claim those same sums for acceleration costs under the contract, pursuant to clause 33.5 thereof.

[28] That clause reads as follows:

 

“33.5 Acceleration

 

The Managing Contractor may direct the Subcontractor to accelerate the execution of any part of the Subcontract Works.

 

The Subcontractor may notify the Managing Contractor in writing of any reasonable objection it has to a direction to accelerate given under this clause.  Upon receipt of such objection the Managing Contractor may withdraw the direction.

 

If the Subcontractor does not object to the direction to accelerate the Subcontractor shall promptly, and in any case before the Subcontractor takes steps to comply with the direction to accelerate, notify the Managing Contractor in writing of the additional direct costs it will incur in complying with the direction.

 

The Managing Contractor may after receiving the Subcontractor’s notice of costs to comply with the direction to accelerate do one of the following:

 

(a)Withdraw the direction, or

 

(b)Affirm the direction in writing along with a statement of each of the following:

 

(i)That the Managing Contractor accepts the amount of additional costs notified by the Subcontractor under the third paragraph of this clause.

 

(ii)The details of the required acceleration.

 

(iii)The adjusted date for Completion of the Subcontract Works.

The Subcontractor’s entitlement to be paid the costs of any acceleration shall be subject to each of the following:

 

(a)A condition that the Subcontractor completes the Subcontract Works by the adjusted date for completion stated by the Managing Contractor in the acceleration direction, and

 

(b)the amount of acceleration costs payable to the Subcontractor (if any) shall be limited to the additional direct costs notified by the Subcontractor under paragraph 3 of this sub-clause, and

 

(c) the Subcontractor shall be entitled to only the acceleration costs actually expended by the Subcontractor that the Subcontractor can verify to the Managing Contractor’s satisfaction.”

[29] Mr Bond also relied on the contract requirements of good faith in clause 57, which provided that:

 

“The parties warrant that they shall perform all duties and act in good faith.

 

Acting in good faith includes:

 

(a)being fair, reasonable and honest;

(b)doing all things reasonably expected by the other party and

by the Subcontract; and

(c)not impeding or restricting the other party’s performance.”

 

[30] The learned trial judge helpfully summarised the facts on which Abigroup based its claim to acceleration costs under the contract in these terms, at [37] of the reasons for judgment.

 

“The amount in dispute, about $6,000,000, is claimed by the respondent as moneys due under the subcontract for acceleration, compression, delay and disruption.  The background of the claim is that there was limited time available to build the stadium.  It was important to the Department to have it ready for an important football game on 1 June 2003.  The respondent claims that there were delays and disruptions to its program of work caused by the applicants’ failure to provide adequate drawings and information.  Because of the delays in giving drawings, errors in drawings and conflicts between drawings, the respondent could not plan and execute its subcontract works efficiently or expeditiously.  It is also said that the applicants had grossly underestimated the extent of the subcontract work.  Variations to the subcontract extended its scope and value by more than 64 per cent.  The respondent claims that it was entitled to an extension of the time to complete its works but its claim for extra time was only partly recognised.  The result was that the respondent, in order to complete in the time allowed by the applicants, had to perform its work within a compressed time frame.  It did so by accelerating its works and devoting more men and material to the task.  This caused it to incur additional expense which is the subject of this part of the claim.”

The respondent referred to is Abigroup, and the applicants are the joint venturers.

The relevant history

[31] Abigroup had complained to the joint venturers by letter dated 24 October 2002 of delays due to various matters, none of them its fault, and advised that it was preparing an up to date extension of time (EOT) program, and an accelerated program and costing to complete the subcontract works no later than 14 May 2003.  The joint venturers replied on 28 October 2002 advising that extensions of time would be dealt with in accordance with the relevant contract provisions, noting that to date Abigroup had not been granted any extensions to the date for completion of its work, and advising, “for the avoidance of any doubt, that we have not requested you to formulate a plan to accelerate the works to meet the original completion date”.  The contract provisions dealing with claims for an extension of time were in clause 35.5.2, entitling Abigroup to such extensions of time to the Date for Completion as the joint venturers’ representative assessed, provided inter alia the delays were caused by specified parties (not including Abigroup itself), or causes.

[32] On 5 November 2002 Abigroup sought an additional 55 working days to complete its subcontract, which would have made the date for completion 19 June 2003.  That claim was based upon delays caused to it principally by the joint venturers changing the design of the subcontract works, and requiring additional works.  On 8 November 2002 Abigroup presented “an offer of acceleration, including for specific disruption costs, in accordance with clause 33.5 of the General Conditions of Contract”.  Those asserted specific disruption costs described by Abigroup did not satisfy the requirement in clause 33.5 of the contract that Abigroup notify the managing contractor of the additional direct costs it would have incurred in complying with a direction to accelerate the execution of any part of the subcontracted work.  Instead, the “offer” made by Abigroup referred to a schedule of rates “to be agreed”, lump sum items “to be agreed”, and provisional sums, in an amount totalling $1,235,205.  The joint venturers’ contention on this appeal was that Abigroup was effectively attempting to renegotiate its contract at that point.  No express direction had been given to Abigroup to accelerate by the managing contractor, as provided in the first sentence of clause 33.5.

[33] The joint venturers responded on 11 November 2002 to Abigroup’s correspondence of 8 November 2002 and its offer of acceleration, advising that for the time being they did not require Abigroup to accelerate the work, nor had they instructed Abigroup to do so.  They informed Abigroup that they would complete their adjudication of its application for extension of time and grant any extension to which Abigroup was entitled.  Further correspondence followed to the same effect, on 23 November 2002 from Abigroup, on 25 November 2002 from the joint venturers; on 4 December 2002 and 20 December 2002 from Abigroup; on 21 December 2002 from the joint venturers, and Abigroup that same day; and from the joint venturers dated 9 January 2003.

[34] The party’s respective positions were clear enough. For its part, Abigroup contended it had been denied a significant number of days of extensions of time for completion, properly claimed by it under the contract, the denial of which had forced it to accelerate its work, and that the joint venturers were only too well aware of that; and they were also aware that it was their own unjustified denial of those extensions of time – which would have taken the date for completion to one past the date fixed for the football game on 1 June 2003 – which necessitated that acceleration.  For their part, the joint venturers' position was that if Abigroup was entitled to further extensions of time, it would undoubtedly get those; and that its problems were of its own making, and not caused by the joint venturers.  Abigroup’s position was restated by it in a letter dated 10 March 2003, in which it provided what it described as confirmation of its acceleration costs to date, and forecast its acceleration costs to come; and described the joint venturers as denying the reality that “EOT’s” were overdue; while Abigroup said it was accelerating and compressing the works to meet the State Government’s requirement.  The response from the joint venturers dated 17 March 2003 reiterated that they had not instructed Abigroup to accelerate, and that “if you have done so then you have done so of your own accord and presumably have done so in order to mitigate delays of your own making”.  This correspondence further asserted that “We emphasise however for the avoidance of any doubt that we do not require you to accelerate in lieu of any entitlement that you may have for any extension of time which is properly due to you under the subcontract.”

[35] On that evidence, Mr Bond argued as follows.  Firstly, that the elements of a right in accordance with the subcontract to recover acceleration costs were:

 

(a) the joint venturers directed Abigroup to accelerate;

(b) Abigroup gave the notice contemplated by the third paragraph of clause 33.5;

(c) Abigroup obtained from the joint venturers the affirmation and statement contemplated by the fourth paragraph of 33.5; and

(d) Abigroup actually incurred acceleration costs.

I observe that an extra element required by the contract is that Abigroup can claim those acceleration costs, limited in amounts to the direct costs notified pursuant to the third clause of 33.5; and that the terms in which Mr Bond put those elements converted the agreement in the subcontract that the joint venturers would take positive action into a more passive obligation placed on Abigroup.  The contractually agreed term was that after the joint venturers had directed Abigroup to accelerate, and after receiving Abigroup’s notification in writing of the additional direct costs it would incur in complying with that direction (the giving of which notification was an obligation on Abigroup) the joint venturers would either withdraw the direction or affirm it in writing, accompanied by a statement accepting the amount of additional costs, and providing details of the required acceleration and the adjusted date for completion.  Mr Bond’s argument converted the joint venturers’ agreed obligation into Abigroup’s obligation to obtain that affirmation and statement from the joint venturers.  While receipt of such an affirmation and accompanying statement would be an essential part of a claim for acceleration costs under the subcontract, the contract required the joint venturers to give it, rather than obliged Abigroup to receive it.

[36] Mr Bond described the position as he did because, in his further submission, Abigroup had a fairly arguable case that the joint venturers had given it a direction no later than 25 November 2002, constituted by their conduct in failing to give justified extensions in conjunction with the enormous pressure placed on Abigroup by the joint venturers to finish the project in time for that football game.  The argument pointed to the definition of “direction” in clause 23 of the general conditions of the contract, which provided that a “direction” included an “agreement, approval, authorisation, certificate, ….rejection, request or requirement”. 

[37] The next step in the argument was that, having thus given a direction to accelerate, the joint venturers – by their conduct in breach of contract in knowingly failing or refusing in good faith to give that direction in writing – had made clear to Abigroup that it was pointless and irrelevant for it to comply with the contractual requirements that it notify the joint venturers in writing of the additional direct costs it would incur in complying with the direction it had, in reality, received.  Abigroup was therefore relieved of the obligation to comply with that requirement because the joint venturers had made clear they would not consider and would ignore a claim for acceleration costs. 

[38] Further, so the argument then ran, that same conduct by the joint venturers operated to dispense Abigroup from compliance with its obligation to obtain the affirmation and statements which the contract obliged the joint venturers to give when affirming the direction to accelerate in writing.  Accordingly, Abigroup had an arguable claim under the contract for the amount it asserted were the additional direct costs it had incurred in complying with that direction.

[39] Abigroup did not argue that the figures it had supplied to the joint venturers in its correspondence referred to could be regarded as notification of the additional direct cost it then contended it would incur.  It accepted before the learned judge, and on appeal, that it had not complied with that clause, although it had supplied some figures, differing on different occasions.  Mr Bond did not submit that Abigroup could argue that the joint venturers had accepted a calculation of additional direct costs Abigroup had not given to the joint venturers.  Instead, he contended Abigroup was relieved of the need to get a notice accepting its calculation.

[40] Abigroup’s argument relied on the principles described in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 246-8 (per Dixon CJ) and 250-52 (per Kitto J), and repeated in Foran v Wight (1989) 168 CLR 385 at 417-9, in the judgment of Brennan J.  Those were expressed in Peter Turnbull v Mundus Trading by Dixon CJ as being that it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied, it was equal to performance thereof; and that a plaintiff might be dispensed from performing a condition by the defendant expressly or impliedly intimating that it was useless for the plaintiff to perform it and requesting the plaintiff not to do so.  If the plaintiff then acted upon that intimation it was just as effectual as actual prevention.  As expressed by Lord Mansfield in Jones v Barkley[2] “The party must show he was ready; but, if the other stops him on the ground of an intention not to perform his part, it is not necessary for the first to go farther, and do a nugatory act”.

[41] Mr Bond argued that application of that principle in the manner in which it was applied by McMurdo J in Bartier v Kounza Investments Pty Ltd[3], and in accordance with observations of Muir J in Qline Interiors Pty Ltd v Jezer Construction Group Pty Ltd[4], would mean the parties had dispensed with the need for Abigroup to give the notice of its additional direct costs in writing, and with a need for Abigroup to obtain either the affirmation or the statement.  Mr Bond contended that any other conclusion would allow the joint venturers to take advantage of their own breach of contract in not affirming in writing the constructive direction to accelerate they were giving.

[42] I respectfully disagree with the proposition that the principles in Peter Turnbull v Mundus Trading can have the effect Abigroup submits. I readily accept that on the assumption Abigroup has an arguable case that a constructive notice to accelerate was given – and the contract did not require it to be given in writing – then, in the circumstances then prevailing, the joint venturers’ conduct also arguably relieved Abigroup of its obligation to provide a written notification of the additional direct costs it would incur on that acceleration. But I do not agree that application of those principles can result in the joint venturers being treated as if they had thereafter acted as required by the contract on receipt of Abigroup’s written notification and either withdrawn the direction, (which Abigroup contends they did not do), or affirmed the direction in writing accompanied by the described statements.  The Peter Turnbull principle entitles Abigroup to be treated as if it had performed its contracted obligations, but does not entitle Abigroup to be treated as if the joint venturers had responded in a particular way in the performance of their contracted obligations.  As Mr Morrison put it, Abigroup’s argument was the claim that the Turnbull principle elevates the absolving of a condition precedent into performance of the opposite contractual obligation.  I respectfully agree with that description, and that Mr Bond’s proposition goes too far. 

[43] I also observe that Mr Bond’s position is not actually supported by the decision in Bartier v Kounza Investments, or that in Qline Interiors.  In Bartier McMurdo J applied the Peter Turnbull principle in support of a plaintiff to whom the defendant had intimated that it would be useless for the plaintiff to make a final claim, because the defendant would not consider it.  The making of that final claim was a condition precedent to an entitlement to a final payment.  The learned judge treated the plaintiff as having been dispensed from performance of that condition, and as entitled to be treated as though he had performed it.  In the instant matter, treating Abigroup as if it had performed its contractual obligation to give the relevant notice in writing of additional direct costs does not entitle it to any payment.  Had Abigroup given that notice, that would have entitled the joint venturers to either withdraw the direction, or affirm it in writing.  An affirmation in writing accompanied by the relevant statements would have then entitled Abigroup to be paid the cost of acceleration, limited to those it actually incurred and to the extent of the additional costs notified.

[44] I also observe that the decision by Muir J in Qline Interiors concerned the position of a plaintiff who had delivered progress claims under a subcontract, which the recipient defendant was required by the contract to assess.  The learned judge expressed the view that where such a claim had been delivered prior to the termination of the contract, but not assessed by the defendant in breach of its obligation to do so, then the court might proceed to decide, as a question of fact, the amount of the payment to which the plaintiff was entitled.  The learned judge cited the principle which prevents a person from taking an advantage of the non-fulfilment of a condition the performance of which has been hindered by himself, and the related principle which “exonerates one of two contracting parties from the performance of the contract when the performance of it is prevented and rendered impossible by the wrongful act of the other contracting party”.[5]  His Honour referred to the decision of the New Zealand Court of Appeal in Butcher v Port[6] in which Cooke J expressed the principle as being that:

 

“For present purposes a clause such as this is not materially distinguishable from one making the certificate of a party’s engineer or other appointee a condition precedent to action.  The principle that a party cannot insist on a condition if non-fulfilment is his own fault is basic in contract law.”

[45] Muir J then remarked that in relation to certificate clauses and the like, the principle has the effect of, first, disabling the party from setting up the absence of the stipulated approval, and, secondly, leaving the issue to the determination of the court.  He thus concluded that there was then, prior to the termination of the subcontract by it, vested in the plaintiff in the case before him a right to have the amount payable determined by the court.  I respectfully observe that while the facts of that case made those observations obiter, I agree with them; and with His Honour’s further observation that on that analysis, at the date the subcontract in that case was terminated, a right had accrued to the plaintiff under that subcontract the exercise of which required no further performance of any obligations of the first defendant under that subcontract, but merely a determination by the court.

[46] That further observation by Muir J clearly distinguishes the position in that case, much relied on in argument by Mr Bond, from the position here where the rights which had accrued to Abigroup under the contract (on the assumption in its favour that a constructive direction had been given) did require the further performance of obligations by the joint venturers.  Like the learned trial judge in this case, I consider that the principle described in Peter Turnbull v Mundus Trading does not apply to assist Abigroup.

[47] I also agree with the learned trial judge that the difficulties Abigroup faces on its claim for acceleration costs under the contract are insuperable.  Its claim that a direction could be inferred in the circumstances raised the problems that that direction was not in writing, when, as the trial judge observed, occasions will be rare when a direction by a head-contractor to a subcontractor to accelerate work in a multimillion dollar project are not express; and an implication or inference that it had happened would require the clearest evidence.  Drawing that implication in this case would occur in the face of the express and repeated communications from the joint venturers that they were not directing that acceleration.  Further, there is the point which also appealed to the learned trial judge, that if a direction was to be inferred, then there were a number of subsequent written communications explicitly withdrawing any implied direction.

[48] Independent of those matters is the point that the joint venturers’ conduct did not do anything to prevent Abigroup from notifying the joint venturers in writing of the additional direct costs Abigroup would incur from accelerating the performance of its work.  Abigroup submitted various estimates and calculations in various items of correspondence, but not the contractually agreed upon one. Assuming a breach by the joint venturers which arguably constituted an effective direction, that breach did not prevent Abigroup from making the required calculations, and it was clearly not dissuaded from presenting calculations to the joint venturers.  It simply did not take a step that is critical to a claim for acceleration under clause 33.5, which step was necessary for quantifying the claim for acceleration costs.  Even if every other argument advanced for Abigroup was fairly arguable, its entitlement under clause 33.5 was specifically limited to the additional direct costs notified by it under that subclause.  Mr Bond did not suggest there was any figure it could be deemed or taken to have notified.  I consider that Abigroup’s appeal must fail.

[49] I would therefore dismiss both appeal and cross-appeal, and order that the appellant pay the respondents’ costs of and incidental to the appeal to be assessed on the standard basis; and order the respondents pay the appellant’s costs of and incidental to the cross-appeal to be assessed on the standard basis.

[50] MULLINS J:  I have had the advantage of reading the reasons for judgment of Jerrard JA and respectfully agree with those reasons and the orders proposed.  

Footnotes

[1] [1999] QCA 306

[2] (1781) 2 Dougl. 684 [99 ER 434]

[3] [2003] QSC 390

[4] [2002] QSC 88

[5] Citing from Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd [1947] AC 428 at 436, per Lord Thankerton; and referring also to Hickman & Co v Roberts [1913] AC 229

[6] (1985) 3 ANZ Insurance Cases 60-638

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Editorial Notes

  • Published Case Name:

    Multiplex Constructions P/L & Anor v Abigroup Contractors P/L

  • Shortened Case Name:

    Multiplex Constructions Pty Ltd v Abigroup Contractors Pty Ltd

  • Reported Citation:

    [2005] 1 Qd R 610

  • MNC:

    [2005] QCA 61

  • Court:

    QCA

  • Judge(s):

    McMurdo P, Jerrard JA, Mullins J

  • Date:

    11 Mar 2005

Litigation History

Event Citation or File Date Notes
Primary Judgment [2004] QSC 61 - -
Appeal Determined [2005] 1 Qd R 610 11 Mar 2005 -

Appeal Status

{solid} Appeal Determined (QCA)