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Spunwill v BAB Australia Contracts Reports

SPUNWILL PTY LTD V BAB PTY LTD (1994) AUST CONTRACTS REPORTS 90-053

Supreme Court of New South Wales – 29 November 1994

FACTS

This case concerned a dispute over the meaning and interpretation of a restraint of trade clause contained in a deed to purchase a hardware store.

Spunwill had owned the three stores and sold one to BAB which was formed by two former directors of Spunwill. BAB began to sell gas appliances which Spunwill claimed was a breach of the restraint of trade clause.

ISSUES

The court had to decide whether surrounding circumstances could be used to interpret any ambiguity in the restraint of trade clause and whether the post-contractual conduct of the parties could considered as part of the surrounding circumstances.

FINDING

Australian law supports the proposition that extrinsic evidence of post-contractual conduct is excluded only by the parol evidence rule. Thus evidence of post-contractual conduct may in some circumstances be considered under the recognised exception to the parol evidence rule, and in particular the surrounding circumstances exception.

Though the relevance of subsequent conduct as an aid to construction is evidence of a party’s subjective belief as to what the contract meant when it was made, use of such conduct will be legitimate under the objective theory of the contract in the limited circumstances where conduct evidences a clear and mutual subjective intention as to what the contract originally meant.

There appears to be no justification in principle for excluding such evidence of a mutual subjective intention at the time of contracting merely because the evidence itself arises subsequently to the making of the contract.

QUOTE

Santow J said

“Thus, evidence of post-contractual conduct may in some circumstances be considered under the recognised exceptions to that general rule, and in particular the surrounding circumstances exception.

Though the relevance of subsequent conduct as an aid to construction is a evidence of a party’s subjective belief a to what the contract meant when it was made, use of such conduct will be legitimate under the objective theory of the contract in the limited circumstances where conduct evidences a clear and mutual subjective intention as to what the contract originally  meant.

There appears to be no justification in principle for excluding such evidence of a mutual subjective intention at the time of contracting merely because the evidence itself arises subsequently to the making of the contract.” – page 90,264 of (1995) Aust Contract Reports 90-053

IMPACT

Parties to contracts should be aware that courts may consider post-contractual conduct where that conduct evidences a clear and mutual subjective intention as to what a clause of the contract originally meant.

However it is preferable for the parties to prepare a clear contract so as to avoid the situation were a Court has to interpret a contract clause for the parties.

Shellbridge v Rider Hunt Sydney

SHELLBRIDGE PTY LTD V RIDER HUNT SYDNEY PTY LTD [2005] NSWSC 1152

Supreme Court of New South Wales – 14 November 2005

FACTS

Shellbridge Pty Ltd (“Shellbridge”) and Rider Hunt Sydney Pty Ltd (“Rider Hunt”) entered into a construction contract whereby Rider Hunt was to provide quantity surveying services.

Rider Hunt submitted three Payment Claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”) in the sum of $11,220, in the sum of $2,805 and an aggregate claim in the sum of $14,025.

Shellbridge responded with Payment Schedules indicating its intention to make no payment. The third Payment Claim was referred to Adjudication and determined in favour of Rider Hunt. During the course of the Adjudication, the Adjudicator requested submissions on the “arrangement” between the parties.

Shellbridge then appealed to the Supreme Court, contending that the Adjudication was void on the basis that the Adjudicator failure to consider its submissions which resulted in a substantial denial of natural justice required by the Act.

ISSUES

Whether there was a substantial denial of natural justice.

FINDING

The Court found that the Adjudicator did not fail to consider the content of the submissions as he summarised the most pertinent aspects and included passages in the determination which demonstrated that he gave active consideration to the Shellbridge’s submissions.

QUOTE

Barrett J at paragraphs 13, 14 and 15 commented, after considering section 22(2) of the Act:

[13] “Among the matters to be considered are “all submissions (including relevant documentation)” made by the claimant in support of the payment claim and the respondent in support of the payment schedule. If, as happened in this case (with respect to the matter that became the subject of the no-contract submissions), the adjudicator acts under s.21(4)(a) to request further written submissions from a party, it must follow that any such further submissions and any comments thereon by the other party (as allowed by s.21(4)(a)) are among the matters to be considered in conformity with s.22(2). These statutory provisions delineate the “measure of natural justice that the Act requires to be given.

[14] … so far as natural justice is concerned, the relevant question is whether there has been a failure to receive and consider submissions in a way that entails inconsistency with the statutory provisions.

[15] Another important indicator of the extent of “the measure of natural justice that the Act requires to be given” comes from s.21(3). That section requires an adjudicator to determine an adjudication application “as expeditiously as possible” and, in any event, within 10 business days after his or her notification of acceptance of the application(or any longer period the parties agree). There is thus a statutory intention that an adjudicator should work quickly. That may militate against the standards of thoroughness and detail that are to be expected where no externally imposed time pressure applies. It cannot be intended that an adjudicator working to the tight statutory timetable will be as painstaking as a judge who has reserved judgment in a case involving the same claims under the same construction contract.”

IMPACT

In order to discharge his or her functions under the Act, an Adjudicator should ensure that he considers further submissions in an active manner, that is, by summarising the pertinent aspects and including where appropriate passages of the submissions, but an adjudicator will not be held to the usual high standards of judicial analysis.

Rickard Constructions & ANOR v Rickard Hails & Moretti & ORS

RICKARD CONSTRUCTIONS & ANOR V RICKARD HAILS & MORETTI & ORS [2004] NSWSC 1041

Supreme Court of New South Wales – 17 December 2004

FACTS

Rickard Constructions constructed a pavement for a container depot at Port Botany. The pavement was designed by Rickard Hails and Moretti (‘Rickard Partners’) and eventually leased out to Mayne Nickless (‘Mayne’). The container depot was to be used for the storage of shipping containers and involved the use of heavy forklift trucks, to shift and place the containers.

The pavement failed within three days of being put into service, when substantial portions of it collapsed.

Mayne and Rickard Constructions agreed that the rectification works would constitute a variation under the building contract.

However, Mayne were not to pay Rickard Constructions in cash for the variation. Instead they agreed to assign to Rickard Constructions any right that they might have against the designer of the pavement to recover the amount payable in connection with the variation.

Rickard Constructions submitted that they were entitled to damages for breach of contract, breach of duty of care and misleading and deceptive conduct from Rickard Partners. Rickard Partners submitted that the cause of action was not assignable at law and, therefore, were not liable to pay damages to Rickard Constructions.

ISSUE

Was the cause of action assignable at law?

FINDING

The Supreme Court considered the two conflicting judgments of Poulton v The Commonwealth (1952-1953) 89 CLR 540, in which the High Court held that causes of action in tort or contract are not assignable at law or in equity, and the decision in Trendex Trading Corporation v Credit Suisse [1982] AC 679 in which the English House of Lords concluded that a cause of action in tort or contract could be assigned where the assignee has a genuine and substantial, or genuine commercial, interest in the enforcement of that cause of action.

The Supreme Court held that the relevant remarks by the High Court in Poulton were obiter and a valid assignment of a cause of action for tort or breach of contract could be made where the assignee had a sufficient interest prior to the assignment. Accordingly, the decision of Trendex should be followed in principle.

In determining whether the interest was sufficient the Supreme Court considered a number of decisions and appeared to conclude that the existence of a legitimate interest in the party supporting the action is distinct from the benefit which he or she seeks to derive from it and that the interest relied upon must exist prior to the assignment. On the facts that Court found that Rickard Constructions did not have a sufficient interest prior to the agreement to assign causes of action and the assignment must, therefore, fail.

QUOTE

McDougall J at paragraph 59 stated:

…what was required was something beyond a mere personal interest in profiting from the outcome of the proceedings; an interest by the assignee in the assignor or its business affairs or activities which might be protected by the assignment…

IMPACT

This case stands for the proposition that a cause of action in tort or contract can be assigned where there is a genuine and substantial, or genuine commercial, interest in the enforcement of the cause of action.

Reiby Street v Winterton

REIBY STREET V WINTERTON [2005] NSWSC 545

Supreme Court of New South Wales – 16 June 2005

FACTS

Reiby Street Apartments Pty Ltd (‘Reiby’) entered into a Contract with Winterton Constructions Pty Ltd (‘Winterton’) for the construction of a two-level basement car park, 23 residential apartments and four shops in Newtown, Sydney. Winteron served a Payment Claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (‘the Act’) on Reiby and the matter proceeded to Adjudication. The Adjudicator then determined the matter, however, it was not issued within the time required by the Act (10 days). Shortly thereafter the fees were paid and the Adjudicator gave his determination. Reiby then requested reimbursement of the fees paid on the basis of section 29(4) of the Act, namely, that the Adjudicator is not entitled to be paid his fees if he fails to make a decision within 10 days.

Winterton served a second Payment Claim for $242,195, which again proceeded to Adjudication. The same Adjudicator was nominated for the second Payment Claim. Reiby requested that the nomination be reviewed because of a dispute about the fees of the earlier determination. The Adjudicator responded advising that no bias existed on his part and determined the Adjudication. After the second determination had issued, Reiby sought judicial review of the Adjudication Determination on the grounds of apprehended bias. Winterton submitted that there was no reason as to why the Adjudicator would not approach the task in an impartial manner as he had no interest in the result.

ISSUE

Whether there was a reasonable apprehension of bias.

FINDING

The Court found that Reiby’s request was a courteous demand for payment for a refund of fees and that the Adjudicator did have an interest in the result because he was facing a demand to return his fees. Accordingly, the Court held that there was a reasonable apprehension of bias. On this basis, the Court found that Adjudication Determination was void and should be set aside.

QUOTE

Master Macready at paragraphs 28 and 29 stated:

“[28] The plaintiff’s submission was that the principle relating to apprehended bias was to be applied with greater rigor in the context of adjudications under the act compared to judicial proceedings. The first reason was said to be the fact that judges by their training are conscious of these matters and have taken a judicial oath and secondly that appeals do not lie from decisions of adjudicators under the act. Reference was made to Commonwealth Coatings Corp. v Continental Casualty Co. 393 US 145 at 149 (1968) (21 L. Ed. 2d 301 at 305), where the court said: “[W]e should, if anything, be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review”.

[29] The force of the last proposition is negated by the provisions of section 32 of the Act which will allow the dispute resolution procedures in an ordinary building contract to be used as a medium for adjusting the parties’ rights following upon the interim determinations of the adjudicator during the course of the contract. The first proposition is certainly true and I feel that it is appropriate to be somewhat more particular in the case of an adjudicator rather than a judicial officer although this must depend upon the community’s continued general acceptance of the role of judicial decisions in our society.”

IMPACT

This case stands for the proposition that an Adjudication Determination is void if there is an apprehended bias on the part of the Adjudicator and very high standards are expected by the Court.

The more concerning aspect of this case is that a disgruntled party to a determination under the Act may have an escape mechanism and avoid the effect of a determination in the event that the determination is unfavourable by making a request for a different Adjudicator on the grounds of bias.

Perini Corporation v Commonwealth of Australia

PERINI CORPORATION V COMMONWEALTH OF AUSTRALIA [1969] 2 NSWLR 530

Supreme Court of New South Wales – 22 October 1969

FACTS

Perini Corporation (“Perini”) entered into a building contract with the Commonwealth of Australia (“Cth”) to build the Redfern Mail Exchange which appointed the Director of Works as the certifier. The building contract contained a term that a Commonwealth official called the ‘Director of Works’ who could extend the time for completion of the work to such period as he should think adequate upon sufficient cause being shown to him. On many occasions Perini made applications to the Director of Works for extensions of time but many of these requests were refused because of departmental policy and other requests were only partially granted. Perini contended that the Director of Works was under a duty to act impartially and that itwas an implied term of the contract that the Commonwealth was obliged to ensure that the Director of Works so act.

ISSUE

Whether there was an implied term in the contract that the certifier should act impartially.

FINDING

The Court held that the Director of Works was a certifier under the contract and as such had certain duties imposed on him by the contract, including the obligation to act fairly, justly and with skill. Although the Director was entitled to consider departmental policy, he was not entitled to be controlled by it; on the contrary, he was subject to the implied term to exercise his discretion according to the rights and obligations of each party to the contract and the contract itself. Consequently, the discretion was a narrow one. The Court also held that there was an implied term in the contract that the Commonwealth would ensure that the Director of Works did his duty as certifier.

QUOTE

MacFarlan J, at 536, commented on the role of the Superintendent:

The characteristic of them is that there is a person appointed on behalf of the government or semi-government body to supervise the execution of the contract on behalf of his employer. He is generally a senior engineer or a director of works or a principal architect or some other officer who, because of his technical qualifications and experience, is competent to undertake that work. He is, as I have said, an employee of the body on whose behalf he undertakes this work, but, in addition, the same cases show that he is commonly charged with a duty either of resolving disputes between the contractor and the body which employs him or in certifying as to the quality of the work done or the whole or part of the cost of doing that work. In my opinion, the cases make plain that throughout the period of performance of all these duties, the senior officer remains an employee of the government or semi-government body, but that in addition and while he continues as such an employee he becomes vested with duties which oblige him to act fairly and justly and with skill to both parties to the contract. The essence of such a relationship in my opinion is that the parties by the contract have agreed that this officer shall hold these dual functions and they have agreed to accept his opinion or certificate on the matters which he is required to decide. It has also been said, and in my opinion correctly said, that the agreement of the parties is that they have referred the decision of these matters to a person who by reason of his employment and who by reason of his other duties in supervising the execution of the contract is a person who has both bias and partiality. It is now in my opinion too late to hold that an appointment of this kind is not one for which the parties to a contract cannot provide. I have already expressed the opinion that in respect of the duties imposed on him by cl 35 of the general conditions that he is a certifier. The word “certifier” does not have an exact meaning but is used to describe a function which is somewhere between those of a servant and those of an arbitrator.

MacFarlan J, more specifically, said at 538:

The kind of interest which must govern the exercise of the director’s discretion is the interest of each party as it appears from all the provisions of the agreement. The interest in this sense, in my opinion, is measured both by the rights and obligations of each as they appear from the various provisions of the contract. Indeed, in my opinion the discretion is of a narrow scope… In my opinion, though without attempting to embrace every case that could arise or perhaps has arisen in the course of the current disputes, the director would be obliged to consider the contractual rights and duties of the plaintiff.

MacFarlan J also held at 542 that:

…the duty of the Director when acting as Certifier was to act independently and in the exercise of his own volition according to the exigencies of a particular application.

Further, MacFarlan J commented that:

In my opinion [Perini] and [Commonwealth], being the parties bound by this agreement, are bound to do all co-operative acts necessary to bring about the contractual result.

IMPACT

This case stands for the proposition that the Courts usually imply a term into the contract that the Superintendent will act, and the Principal shall ensure that the Superintendent will act, in a fair, unbiased and competent manner.

Pacific General Securities & ANOR v Soliman & Sons

PACIFIC GENERAL SECURITIES LTD & ANOR V SOLIMAN & SONS [2006] NSWSC

Supreme Court of New South Wales – 31 January 2006

FACTS

Pacific General Securities (“Pacific”) and Finmore Holdings, as owners, entered into a construction contract with Soliman & Sons Pty Ltd (“Soliman”) to carry out demolition and construction works at 3-11 Hawkesbury Avenue, Dee Why. Soliman delivered a Payment Claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”) to Pacific in the amount of $440,189.98 and proceeded to Adjudication.

The Adjudicator determined that as the submissions in the Adjudication Response could not be considered or, alternatively, do not relate to the contents of the Payment Schedule, Soliman was entitled to payment of the full amount claimed.

Pacific appealed the Adjudicator’s determination on several grounds, in particular, on the ground that the Adjudication Determination was not a valid and effective discharge of the Adjudicator’s function, because the Adjudicator did not apply his mind to a consideration of the claim within the parameters of the Act, but having rejected the matters raised by Pacific simply accepted, without examination, Soliman’s claim.

ISSUES

The nature of the Adjudicator’s duties and functions and whether these had been properly discharged by the Adjudicator.

FINDING

The Court held that the absence of relevant material from Pacific does not entitle the Adjudicator to simply award the amount of the claim without addressing its merits, which as a minimum involve determining whether the construction work identified in the Payment Claim has been carried out, and what is its value. To do so would result in a breach of one of the basic and essential requirements for there to be a valid Adjudication Determination. As the Adjudicator failed to come to a view as to what was properly payable on its merits, the Court concluded that the Adjudication was void.

QUOTE

Brereton J held at paragraph 82:

…the adjudicator’s duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim, and while the adjudicator may very readily find in favour of the claimant on the merits of the claim in the absence of a payment schedule or adjudication response, or if no relevant material is advanced by the respondent, the absence of such material does not entitle the adjudicator simply to award the amount of the claim without addressing its merits, which as a minimum will involve determining  whether the construction work identified in the payment claim has been carried out, and what is its value.

Brereton J, at paragraph 86, considered that:

…by allowing a claim in full just because a respondent’s submissions are rejected, without determining whether the construction work the subject of the claim has been performed and without valuing it – would bespeak a misconception of what is required of an adjudicator. … In short, there would not have been an adjudication, within the meaning of the Act, of the payment claim, but only a rejection of the respondent’s contentions.”

IMPACT

An Adjudicator should be careful to consider the merits of the Claimant’s Payment Claim where there is no Payment Schedule and/or Adjudication Response, as to simply rubber stamp the Claimant’s Payment Claim may result in the Adjudication Determination being held void.

Overlook v Foxtel

OVERLOOK V FOXTEL [2002] NSWSC 17

Supreme Court of New South Wales – 31 January 2002

Overlook Management BV (“Overlook”) entered into a contract with Foxtel Management Pty Limited (“Foxtel”) wherebyFoxtel would purchase non-English television program content from Overlook for its pay television system. Foxtel agreed initially that  the price to be charged for Overlooks channels would be $19.95 per month. This price was subsequently reduced to $9.95 which severely impacted on Overlook’s financial return from the contract, unless and until offset by a significant increase in subscriber numbers.

Overlook claimed that Foxtel had breached an implied term that Foxtel would act in good faith that the price would not be varied except by agreement to preserve Overlook’s revenue base. Whether Foxtel had acted in good faith.

The Court proceeded on the basis that an obligation of good faith is implied into all commercial contracts and found that Foxtel did not breach its obligation of good faith. Its action was not capricious because it acted on the basis to seek to enhance penetration of the product. Foxtel’s action did not cause Overlook’s rights to become “nugatory, worthless or undermined”.

Barrett J stated at paragraph 62:

“An additional term implied by law into commercial contracts is a term requiring the exercise of good faith in the performance of the contract. This is now in this State a legal incident of every such contract…”

“[67] … the implied obligation of good faith underwrites the spirit of the contract and supports the integrity of its character. A party is precluded from cynical resort to the black letter. But no party is fixed with the duty to subordinate self-interest entirely… The duty is not a duty to prefer the interests of the other contracting party. It is, rather, a duty to recognise and to have due regard to the legitimate interests of both the parties in the enjoyment of the fruits of the contract as delineated by its terms.

[68] In many ways, the implied obligation of good faith is best regarded as an obligation to eschew bad faith. This is borne out by the following succinct statement by Lord Scott of Foscote in Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] 2 WLR 170, a case concerning the duty of good faith in the insurance context: “Unless the assured has acted in bad faith, he cannot, in my opinion, be in breach of a duty of good faith, utmost or otherwise.”

[73] A prohibitory or negative spirit precluding capriciousness will readily be accepted as attending the parties’ contracts. The exclusion of capriciousness as an acceptable form of behaviour in the performance of the contract will prohibit conduct which has no rational basis or objective explanation.

[74] A point to be noted is that, in Burger King and in most, if not all, of the earlier Australian cases in which an obligation of good faith or reasonable conduct in contract performance has been found to be implied by law, the question in issue has involved exercise of a right or power arising from the terms of the contract.

[75] In the present case, … Foxtel was not exercising a contractual power or performing a contractual obligation when it reduced the subscriber price of the RAI and Antenna channels. There is nevertheless scope for the operation of an implied obligation of  good faith. In Burger King, … the defendant deliberately pursued a course to “thwart”the plaintiff’s rights under the contract in that the actions it took were not justified by any of the factual matters upon which it sought to justify them.”

This case stands for the proposition that the duty of good faith is best regarded as an obligation not to act in bad faith.

Oracal International v International Professional Traders

ORACAL INT. V. INTERNATIONAL PROFESSIONAL TRADERS [1999] NSWSC 753

Supreme Court of New South Wales – 28 July 1999

FACTS

Oracal supplied cordless telephones to Tandy and began negotiations to also supply computers to Tandy. As Oracal did not at the time deal in computers it purchased computers from International Professional Traders (trading as Datcom). Datcom was involved in discussions with both Oracal and Tandy but was not in a contractual relationship with Tandy.

However Datcom and Oracal were at the time negotiating a contract to supply computers to Tandy as a joint venture with profits to be split evenly.

Oracal was very slow at paying Datcom for the supply for computers. Eventually Datcom stopped negotiating with Oracal and began to supply computers directly to Tandy. Oracal issued proceedings against Datcom and sought an injunction to prevent Datcom selling computers to Tandy.

ISSUES

Was Oracal entitled to an injunction to – prevent Datcom breaching fiduciary obligations to Oracal by dealing directly with Tandy; and/or prevent Datcom breaching a duty of confidence owing to Oracal?

FINDING

The balance of convenience was against awarding an injunction because – Oracal would have difficulty proving that there had been a breach of fiduciary duty by Datcom as there was no final contract between the parties and either party could discontinue the relationship at will.

The nature of the information that Datcom allegedly received from Oracal was not confidential information and there was no express agreement that the information was to be treated as confidential.

QUOTE

Justice Bryson

“It is important when the Court is asked to enforce some contractual or analogous obligation … to consider whether the whole skein of contractual obligations on both sides has been complied with or can be enforced.” paragraph 14 of [1999] NSWSC 753

IMPACT

The Courts will not impose fiduciary duties or duties of confidence on parties negotiating a possible contract unless the parties expressly agree to the existence of these duties. The contractual relationship between the parties in this case was simply that of seller and purchaser.

If a party negotiating a possible contract wants to stop the other party from behaving in a manner inconsistent with that possible contract then serious consideration should be given to executing confidentiality agreements and/or restraint of trade clauses before negotiations commence.

McGettigan v Eliran

MCGETTIGAN V. ELIRAN PTY LTD [1999] NSWSC 769

Supreme Court of New South Wales – 22 July 1999

FACTS

Eliran was the trustee of a hotel business. McGettigan was one of three beneficiaries. The beneficiaries fell into dispute and the hotel business was to be sold to redeem the McGettigan interest. An auction of the hotel was unsuccessful and McGettigan sought to appoint a receiver. The parties agreed to terms which provided that:

Eliran had until 30 June 1999 to find an investor willing and able to invest sufficient funds to allow Eliran to pay McGettigan for its interest in the trust business.

If there was no investor found, the hotel was to be submitted to public auction by 31 July 1999.

Eliran negotiated with an investor before 30 June 1999 but they were unable to confirm that they would invest the sufficient funds by that date. However the investor later offered to pay the funds by 23 July 1999. McGettigan sought a declaration that the find an investor clause had not been complied with and the hotel had to be sold at a public auction.

ISSUES

What was the meaning of the ‘find an investor” clause and had that clause been complied with?

Was time of the essence for the “find an investor” clause?

FINDING

The clause simply provided that an investor had to be found by 30 June 1999, and there was no requirements for money to be paid before that date. However, finding an investor required Eliran to decide that the investor was willing to invest by 30 June 1999. This had not been proven.

A contract date will not be essential unless the parties intended it to be essential. The inclusion of the word “forthwith” and the drafting of settlement terms showed that the parties had agreed that it was essential that the investor be willing to invest by 30 June 1999.

QUOTE

Young J said:

“The next question is whether as a matter of fact did the defendant not find such a person. The word “find” ordinarily means “meet with” or “come across”. It does not mean “discover for the first time”; see for instance Re R (1966) 3 All ER 613, 616. In the present context it means more than merely “come across” an investor. It means deal with the investor to such an extent that it is established that he or she is willing an able to invest the funds when required, the requirement being to provide them within a reasonable time after the investor is found.” – paragraphs 20 of [1999] NSWCA 769

“There is no evidence from the investor. There is no strong evidence from those with whom the negotiations took place. All we have is the paragraph of the defendant’s solicitors’ letter of 29 June 1999, to which I have already referred, and a statement in Mr Graham McGuiness’ affidavit of 20 July, that the trustee had been negotiating with Messrs Dickenson, that as at 29 June they were able to confirm their investment in the trust. It was the next day that the defendant’s solicitors communicated that fact to the plaintiffs.” – paragraph 21 of [1999] NSWCA 769

“It seems to me on the proper construction of the present document time is essential. One finds that although the referee’s decision is not caught up in time provision almost every other provision is and the word “forthwith” appears in clause 4.” – paragraph 27 of [1999] NSWCA 769.

IMPACT

When making agreements which include time limits, it is important to consider whether the time limits follow on from each other. If the time limits are contingent on each other then the time limits may be essential to the contract and a failure to comply with the time limit may allow the innocent party to end the contract and recover damages.

If a time limit is an essential accurately defined.

Lucas Stuart v Council of The City of Sydney

LUCAS STUART PTY LIMITED V COUNCIL OF THE CITY OF SYDNEY [2005]NSWSC 925

Supreme Court of New South Wales – 13 September 2005

FACTS

Lucas Street Pty Ltd (“Lucas”) entered into a construction contract with the Council of the City of Sydney (“the Council”) for the reconstruction of the Customs House. Lucas served a Payment Claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”) in the sum of $3,952,474 for variations and alleged unpaid contract sum amounts. The Council failed to issue a Payment Schedule under section 14 of the Act within the 10 business days after service of the Payment Claim. Following the service of the Payment Claim, the due date for payment passed and Lucas did not receive any payment from the Council.

Lucas then sought summary judgment for the Payment Claim in the Supreme Court on the basis of section 15(2)(a) of the Act, which provides that “a claimant…may recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction…”

The Council, by way of defence, sought to contend that Lucas engaged in conduct that was misleading and deceptive concerning the service of the Payment Claim and, further, that Lucas should be estopped so as to prevent Lucas from relying on the documents provided forming the Payment Claim as Lucas had allegedly foreshadowed the provision of a number of contractual claims that awaited resolution, rather than a Payment Claim.

The Court found that notwithstanding the claims for estoppel and misleading and deceptive conduct, the proper analysis was that Lucas was entitled to summary judgment for the total amount claimed. The Council then sought to appeal that decision.

ISSUE

Whether the Council is able to appeal the matter.

FINDING

The Court refused to grant relief to the Council.

QUOTE

Palmer J held at paragraphs 5 to 7: [5] “Mr Feller says the Plaintiff’s ability to repay the Defendant at the end of the day is in question because the Plaintiff is subject to a charge over all of its assets securing a very substantial debt and, by virtue of the terms of the guarantee required by Bryson JA, that guarantee will no longer be in force when proceedings are resolved on a final basis. Mr Feller therefore says that the terms of the guarantee, as presently framed, expose the Defendant to a substantial risk of injustice if its case is ultimately upheld in the final proceedings. It is for this reason that Mr Feller now seeks from this Court a stay of the judgment of Einstein J.” [6] “Bryson JA was concerned with setting the terms upon which the Court of Appeal would either grant or refuse the stay. It is now said that the terms as fixed by his Honour operate in a certain circumstance to produce injustice.

In my opinion, that is a matter which should be taken up again with Bryson JA so that his Honour can have the benefit of further argument and may, if he considers it appropriate, reframe the terms upon which he made the order dissolving the stay. It is not for a judge at first instance to interfere with the terms of a stay which has been granted or refused by the Court of Appeal. So to do would be, in effect, for a judge at first instance to sit in review of the Court of Appeal – that would be completely inappropriate, to say the least.” [7] “In those circumstances, I decline to grant the relief sought…”

IMPACT

If a Respondent believes that it may be exposed to a substantial risk of injustice in respect of a guarantee which secures an Adjudicated Amount pending final dispute, a Respondent should make its submissions at first instance.