Maxicorp Pty Ltd -v- Smith & Smith
[2007] QDC 114
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- Unreported Judgment
- Maxicorp Pty Ltd -v- Smith & Smith[2007] QDC 114
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Maxicorp Pty Ltd -v- Smith & Smith[2007] QDC 114
Maxicorp Pty Ltd -v- Smith & Smith[2007] QDC 114
DISTRICT COURT OF QUEENSLAND
CITATION: | Maxicorp Pty Ltd -v- Smith & Smith [2007] QDC 114 |
PARTIES: | MAXICORP PTY LTD (ACN 108 354 383) Plaintiff V GREGORY DAVID SMITH First Defendant AND MARIA SMITH Second Defendant |
FILE NO/S: | 1317/07 |
DIVISION: | Civil |
PROCEEDING: | Application for summary judgment and declaration |
ORIGINATING COURT: | District Court, Brisbane |
DELIVERED ON: | 22 June 2007 |
DELIVERED AT: | District Court, Brisbane |
HEARING DATE: | 4 June 2007 |
JUDGE: | Kingham DCJ |
ORDER: |
|
CATCHWORDS: | SUMMARY JUDMENT – Whether no real prospects of succeeding in claim – Whether no need for a trial of the claim – Application refused CONTRACT – REPUDIATION – Alleged breaches – Referral to Commercial and Consumer Tribunal – Whether order sought from tribunal evinces an attention to be no longer bound by the contract EQUITABLE MORTGAGE – Created by contract – Whether survived termination of contract – Whether secures payment of damages claimed COSTS – Indemnity costs – Whether grounds for orders sought – costs awarded on a standard basis Uniform Civil Procedure Rules 1999 (Qld), r293 CSR Limited v Casaron Pty Ltd & Ors [2002] QSC 21 – cited Gray v Morris [2004] QCA 5 – applied Groutco (Aust) Pty Ltd v Thiess Contractors Pty Ltd [1985] 1 Qd R 238 – considered Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 – applied McDonald and Anor v Dennys Lascelles Ltd (1933) 48 CLR 457 – applied McPhee v Zarb & Ors [2002] QSC 4 – cited |
COUNSEL: | R. Cameron for the plaintiff M.F. Wilson for the defendants |
SOLICITORS: | Q5 Law for the plaintiff Quinn & Scattini Lawyers for the defendants |
- [1]The Smiths, as trustees of a trust, are the registered proprietors of land in Scarborough. They contracted with Maxicorp for it to construct seven townhouses on the land. Before construction was completed, disputes arose between the Smiths and Maxicorp regarding compliance with the contract. The Smiths sent Maxicorp a letter asserting breaches of contract and requiring Maxicorp to show cause under the agreement. The Smiths did not exercise any further rights which flowed from that notice as, on the same day, Maxicorp referred the dispute to the Commercial and Consumer Tribunal (CCT) for resolution.
- [2]After an unsuccessful attempt at mediation, Maxicorp gave notice that it intended to commence proceedings claiming more than $50,000 and no longer consented to the CCT having jurisdiction in relation to the dispute. Maxicorp commenced these proceedings claiming damages and a declaration.
- [3]Maxicorp’s damages claim is particularised at para[18] of the Statement of Claim as $139,479.10 for loss of profits and a further unquantified amount for the cost and expenses of materials and labour it incurred in performing its obligations under the contract. The Smiths seek summary judgment in relation to the claim for loss of profits of $139,479.10, not the costs and expenses claim. They argue Maxicorp cannot maintain a claim for damages for the loss of the bargain or future profits because it repudiated the contract.
- [4]The Smiths contend that, by seeking an order from the CCT that the contract “is terminated or alternatively, rescinded”, Maxicorp unequivocally indicated its intention to be no longer bound by the contract. The Smiths say they accepted that repudiation of the contract and it was thereby terminated.
- [5]The Smiths argue this issue can be determined in a summary way without the need for a trial because the act of repudiation is recorded in documentary form. Maxicorp submits that seeking the order was not an act of repudiation and that it is not appropriate to determine how the contract was terminated and the consequences for their damages claims in a summary way.
- [6]Maxicorp’s claim also seeks a declaration that it is entitled to a charge over the land as equitable mortgagee. It has lodged a caveat over the land asserting its right to the charge and these proceedings have been brought to establish that right. Initially the Smiths sought an order to remove the caveat but at the hearing requested leave to amend the application to instead seek a declaration that the equitable mortgage claimed by Maxicorp did not survive the termination of the contract. The application to amend was not opposed although, because of the late notice, counsel for Maxicorp requested, and was granted, leave to provide further written submissions (received on 8 June 2007).
- [7]The Smiths argue the equitable mortgage, provided for by a clause in the contract, did not survive the contract’s termination and Maxicorp’s damages claims are not encompassed by it. Maxicorp argues the termination of the contract did not defeat the charge, which protects the damages claimed and, in any case, the issue should not be determined summarily.
- [8]If the court makes the order the Smiths seek, the basis for the caveat will be negated and counsel for the Smiths advised the court they will request the Registrar of Titles to remove it. In effect, then, whilst it is not expressed as such, the Smith’s application for a declaration is an application for summary judgment on Maxicorp’s claim for declaratory relief. As such, I consider the same principles should be applied to both of the orders sought.
- [9]The court may give summary judgment for the defendant if satisfied that the plaintiff has no real prospect of succeeding in its claim (or part of it) and there is no need for a trial of the claim (or the part of it) (UCPR r293).
- [10]The parties agree that the application should only succeed if I am persuaded that there is no need for a trial because the prospects of defending the claim are “so slim as to be fanciful” (McPhee v Zard & Ors) and there are no issues which should be investigated at a trial (CSR Limited v Casaron Pty Ltd & Ors). If there are disputes of fact and the plaintiff’s case is not bound to fail, the application should be dismissed (Gray v Morris).
- [11]The question then is whether I should determine, summarily:
- Whether Maxicorp repudiated the contract by applying to the CCT for an order that the contract “is terminated or alternatively, rescinded”. And
- Whether the equitable mortgage survive the termination of the contract and covers the damages claimed by Maxicorp.
- 1.Should I determine, summarily, whether Maxicorp repudiated the contract by applying to the CCT for an order that the contract “is terminated or alternatively, rescinded”?
- [12]The order sought by Maxicorp in its referral to the CCT was:
“A declaration that the contract made between the respondents (“the Respondents”) as owner and the applicant as builder for the construction of a building on land situate at Warde St, Scarborough in the state of Queensland dated 26 April 2006 is terminated or alternatively rescinded.”
- [13]The Smiths assert Maxicorp’s action in seeking an order in those terms evinces a clear intention to be no longer bound by the contract, a repudiation of it which was accepted by the Smiths by letter on 24 November 2006. They argue it manifested Maxicorp’s intention not to perform its obligations under the contract.
- [14]Had Maxicorp expressly stated that it would not perform its obligations under the contract, it would not be necessary to look behind the statement as the renunciation of the contract would be clear on its face. Maxicorp’s reference to the CCT was not an express statement of its intention not to perform the contract. Rather, I am being asked to infer from the terms of the relief sought an intention to renounce the contract. In order to do so, the manifestation of the requisite intention must be unequivocal. Repudiation of a contract has serious consequences for a party’s rights and is not to be lightly found or inferred (Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd).
- [15]Mr Marshall, a director of Maxicorp, has attested that the company remained at all times ready, willing and able to perform the contract. The test of repudiation is an objective one. I do not take the view that the necessary intention is so evident on the fact of the CCT referral that Maxicorp could adduce no evidence which placed a different complexion upon it. Maxicorp asserted contractual rights by suspending the works and referring the dispute to the CCT. Prior to the referral there was a history of disputes between the parties. The affidavit material discloses that each accused the other of breaching the contract and asserted rights flowing from the alleged breach.
- [16]The CCT referral was made and should be assessed in that context. It may well be that the Smiths will be able to establish at trial that, viewed in that context, Maxicorp’s conduct did evince an intention not to fulfil its contractual obligations. However, I do not consider it appropriate to draw the inference urged by the Smiths in the absence of a proper exploration of all admissible evidence as to the course of dealings between the parties.
- [17]Counsel for the Smiths conceded if I was not persuaded by the terms of the CCT referral alone that Maxicorp had repudiated the contract, the application for summary judgment should fail. I am not satisfied that Maxicorp has no real prospect of succeeding in its claim for damages for loss of bargain or that there is no need for a trial of that part of the claim and, accordingly, the application for summary judgment on that claim must fail.
- 2.Should I determine, summarily, whether the equitable mortgage survived the termination of the contract and covers the damages claimed by Maxicorp?
- [18]Maxicorp relied on an equitable charge created by clause 35.2 of the contract in lodging a caveat over the land.
- [19]Clause 35.2 provides:
“Except where the owner is a resident owner, the owner charges the land with, and grants an equitable mortgage in favour of the builder for, the due payment to the builder of all moneys that are or may become payable to the builder arising out of the subject matter of this contract.”
- [20]The Smiths seek a declaration that the charge did not survive the termination of the contract because, they contend, no subject matter survived the contract. They argue the subject matter of the contract is the plans, specifications, schedules, and payment details for the works under the contract and that, upon termination, there was no subject matter which survived. Maxicorp contends the subject matter of the contract was the agreement to construct units on the land in accordance with the terms of the contract.
- [21]Whichever is the better interpretation of that phrase, it seems to me that the Smiths’ submission addresses the wrong question. Termination of an executory contract does not have the effect of rescinding the contract as from its inception. Any rights unconditionally acquired and any causes of action which have accrued from the breach continue unaffected (McDonald and Anor v Dennys Lascelles Ltd). The contract is only determined in so far as it is still to be executed and the party in default is liable for damages for its breach.
- [22]The question then is not whether any subject matter survived termination of the contract, but rather whether any of Maxicorp’s claims accrued upon alleged breaches of the contract by Smith and whether clause 35.2, properly interpreted, secures payment of those claims, should they be made out.
- [23]Maxicorp claims damages for loss of profit and for costs and expenses incurred for materials and labour supplied in performing its obligations under the contract. The former are damages for the loss of the bargain. The latter was described by counsel for the Smiths as a quantum meruit claim. I am not sure that is an accurate description of the claim but, for the purposes of this application, I do not see any consequence arising from the distinction.
- [24]The Smiths argue the damages claims are not “moneys that are or may become payable to the builder arising out of the subject matter of this contract”. They propose a narrow construction of clause 35.2 to support only claims for payments due under the contract or damages claimed pursuant to a particular clause of it. It is not contentious that each claim for damages derives from the law of contract not from a particular clause in the contract.
- [25]That foundation proposed for that interpretation is a decision of the Queensland Court of Appeal in Groutco (Aust) Pty Ltd v Thiess Contractors Pty Ltd which decided s 5(2) of the Subcontractor’s Charges Act 1974 did not provide a charge in relation to claims for damages.
- [26]Counsel for the Smiths submitted s 5(2) is in almost identical terms to clause 35.2. I do not accept that. There are a number of distinguishing features. Section 5(2) relevantly provides:
“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.”
- [27]On its face, it is much more restrictive operating only to secure payment “in accordance with the subcontract” and “for work done by the subcontractor”. The former phrase was considered of some significance by the court in interpreting the provision. McPherson J considered that clause was capable of being construed to include damages for breach of that contract but, when viewed in the context of its legislative history, he considered that interpretation was not the correct one (at pp250-251). The Chief Justice likewise construed the Act in accordance with its legislative history and with reference to the interpretation of equivalent provisions in similar legislation in other jurisdictions. Another matter which influenced his decision was that the charge interfered with the relationship between the head contractor and its employer who was not a party to the subcontract and intercepted moneys otherwise payable in accordance with the contract between the employer and the head contractor. The Chief Justice considered this factor supported a narrow construction of the provision (at p244).
- [28]Clause 35.2 is more broadly expressed than s 5(2). It is not limited by its terms to payments in accordance with the contract or for work done under the contract but, rather, refers to moneys that are or may become payable to the builder arising out of the subject matter of this contract. It is arguable that Maxicorp’s damages claims fall within that description. I am not satisfied that the interpretation contended for by Maxicorp is so untenable that it has no real prospect of succeeding.
- [29]I also consider it is not appropriate to determine the matter in a summary way. In my view, the question is not whether the charge survived the termination of the contract but whether any of Maxicorp’s claims for damages are secured by it. That involves not only the interpretation of clause 35.2 but also determinations about alleged breaches of contract, its termination and the rights of the parties which flow from that. The application of the asserted charge is best dealt with after those determinations have been made.
- [30]There is some urgency for the Smiths in resolving this dispute, as the units are now complete and contracts for sale of at least some of them may be affected if there is not a timely determination. This is best dealt with by directions. The parties are directed to confer with a view to reaching agreement upon appropriate directions. Failing agreement, the parties have liberty to bring the matter on before me on two days’ notice for directions to be made.
- [31]For the sake of completeness, I should note that there were a number of procedural requirements which neither party fulfilled in relation to this application. No particular complaint was made of them by either and, had I formed a different view on the application, I would have been minded to excuse any deficiencies. Given my decision on the application, it is not necessary to address these matters further.
- [32]Maxicorp sought indemnity costs because of the late change to the application and because one of the orders originally sought (to remove the caveat) should never have been brought. I do not consider this is an appropriate case for an award of indemnity costs. Whilst the application for an order to remove the caveat was not pursued, there are conflicting precedents in this court as to its jurisdiction to award such relief and it is not so clear that this is a claim that should not have been made. Further, whilst the Smiths were unsuccessful, I do not consider the application was entirely unmeritorious or that there has been any improper conduct by the Smiths or their representatives in the bringing this matter before the court. However, there is no reason why Maxicorp should not have its costs of and incidental to the application on a standard basis.
- [33]My orders are:
- The defendants’ application of 23 May 2007, as amended by leave on 4 June 2007, is dismissed.
- The parties are directed to confer about directions for the conduct of the claim and, failing agreement, either may list the matter before me on two days notice for directions to be made.
- The defendants must pay the plaintiff’s costs of and incidental to the amended application as assessed if not agreed.