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[2025] NSWSC 593
General information, not legal advice.
Supreme Court of NSW
2025-06-11
Stevenson J
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Medium Neutral Citation: Calibre Construction Group Pty Ltd v Kaloriziko Pty Ltd atf Ryde Combined Unit Trust; Kaloriziko Pty Ltd atf Ryde Combined Unit Trust v Calibre Construction Group Pty Ltd (No 2) [2025] NSWSC 593
Hearing dates: 19 – 21 May 2025; further written submissions on 26 and 27 May 2025; Redfern Schedule provided 2 June 2025
Decision date: 11 June 2025
Jurisdiction: Equity - Technology and Construction List
Before: Stevenson J
Decision: Plaintiff entitled to recover retention from first defendant; no trust constituted in relation to retention; plaintiff’s claim against second defendant not made out; plaintiff entitled to recover for variations as set out in Redfern Schedule; plaintiff entitled to recover balance of contract sum; first defendant’s claim for liquidated damages is dismissed; first defendant may claim for agreed defects; remaining defects not pressed
Catchwords: EQUITY – trusts and trustees – where building contract provided that retention shall be held in trust by defendant developer for plaintiff builder until such time as either became entitled to retained funds – where plaintiff builder alleges breach of trust against defendant developer – where plaintiff builder alleges defendant director knowingly involved in the defendant developer’s breach of trust – whether any trust constituted – no trust constituted
EQUITY – contribution – coordinate liability – where plaintiff builder settled claims against some defendants prior to hearing by transfer of residential lots – whether settling parties had coordinate liability to the plaintiff builder for the defendant developer’s contractual debts – whether coordinate liability arose by reason of knowing involvement in breach of trust or by reason of mortgages entered over properties – whether effect of settlement was to discharge that liability – whether transfer of residential lots was at an undervalue such that the plaintiff builder achieved a benefit – no discharge of coordinate liability
BUILDING AND CONSTRUCTION – contract – variation – where defendant developer’s representative priced and approved variations – where plaintiff builder obliged to do work when directed by defendant developer under contract – whether defendant developer now entitled to contest variations – construction of “variation” and “direction”
BUILDING AND CONSTRUCTION – contract – damages – delay – where defendant developer claims liquidated damages against plaintiff builder for delay – factual dispute over the original contracted date for practical completion
Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW)
Conveyancing Act 1919 (NSW)
Corporations Act 2001 (Cth)
Cases Cited: Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17
Calibre Construction Group Pty Ltd v Kaloriziko Pty Ltd atf Ryde Combined Unit Trust [2023] NSWSC 279
Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) [1992] BCLC 350
Mahoney v McManus (1981) 180 CLR 370; [1981] HCA 54
Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWCA 422
Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWSC 79
Rayack Construction Ltd v Lampeter Meat Co Ltd (1980) 12 BLR 30
Category: Principal judgment
Parties: Calibre Construction Group Pty Ltd (Plaintiff/Cross-Defendant)
Kaloriziko Pty Ltd as trustee for Ryde Combined Unit Trust (First Defendant/Cross-Claimant)
Camile Chanine (Second Defendant)
Eddie Tran (Third Defendant)
Ninth Campsie Pty Ltd (Fourth Defendant)
Representation: Counsel:
M Sheldon / Y Truong (Plaintiff/Cross-Defendant)
M Ashhurst SC / S Scott (First and Second Defendants/Cross-Claimant)
Solicitors:
One Group Legal (Plaintiff/Cross-Defendant)
Fortis Law (First and Second Defendants/Cross-Claimant)
Sage Legal (Third and Fourth Defendants)
File Number(s): 2022/195843
On 30 November 2017, the plaintiff, Calibre Construction Group Pty Ltd (the “Builder”) entered a Design and Construct Contract (the “Contract”) with the first defendant, Kaloriziko Pty Ltd (the “Developer”). The Contract was constituted by a Formal Instrument of Agreement, General Conditions in the AS 4902-2000 format and ancillary documents.
By the Contract, the Builder agreed to design and construct, on land owned by the Developer in Ryde, a multi-storey, mixed use residential and commercial development comprising 4 towers and some 100 units (the “Development”). The Development was called “Sky Gardens”. The contract sum was $31 million plus the cost of “Excluded Items”. [1]
The Contract provided for the Developer to retain 5% of the contract sum (the “Retention”) as security, [2] and for the Retention to be paid to the Builder over a period of 12 months after the issue of a certificate of practical completion. [3] That certificate was issued on 15 September 2020. The Contract provided that the Retention was to be “held in trust” by the Developer for the Builder until such time as either became entitled to the retained funds. [4]
The Builder claims some $1.6 million plus interest from the Developer in relation to the Retention.
The Builder also claims from the Developer some $270,000 for unpaid variations and some $250,000 for the balance of the contract sum. A question of construction of the Contract arises in relation to the Builder’s claim for variations.
The Developer disputes the Builder’s entitlement to variations and, by its Cross Claim List Statement, seeks to recover amounts paid for variations and claims damages for delay and defective work.
The Builder also sought to recover the Retention from the second defendant, Mr Camile Chanine, and the third defendant, Mr Eddie Tran; the directors and shareholders of the Developer. That claim is based on Mr Chanine’s and Mr Tran’s alleged knowing involvement in the Developer’s breach of the trust said to have arisen in relation to the Retention.
The Builder maintains that claim against Mr Chanine, but has settled its claim against Mr Tran.
The Builder has also settled its claim against the fourth defendant, Ninth Campsie Pty Ltd; a company controlled by Mr Tran’s daughter, Ms Hillary Tran. That claim was made under s 37A of the Conveyancing Act 1919 (NSW) alleging that the transfer to it by the Developer of a unit in the Development was made with intent to defraud creditors and voidable at the Builder’s instance.
That settlement was achieved by a Deed of Agreement and Set Off dated 8 February 2024 (the “Deed”). Pursuant to the Deed, a company associated with Ms Tran, Apolo Apartments Pty Ltd, agreed to transfer three adjoining residential lots in Arncliffe (the “Arncliffe Properties”) owned by Apolo to Aerial Holdings Pty Ltd, a company associated with the wife of the director of the Builder, Mr Ali Mohanna, for $5 million. The Developer contends that sale was at an undervalue in the order of $2.9 million and the effect of the Deed was to discharge any liability owed by it, and by Mr Chanine, to the Builder.
As this is the principal claim made by the Builder, I turn to it first.
The relevant provisions of the Contract are summarised at [3] above.
The critical provision is cl 5.5 which provided, relevantly:
“[A]ny portion of security … which is … retention monies … shall be held in trust for the party providing them until the [Developer] or the [Builder] is entitled to receive them”. (Emphasis in original.)
It is well established that provisions such as this impose on parties in the Developer’s position a contractual obligation to “appropriate and set aside as a separate trust fund a sum equal to that part of the sum certified in any interim certificate as due in respect of work completed which the [party in the Developer’s position] is entitled to retain”. [5]
But until any such sum has been so “appropriate[d] and set aside” no trust is constituted. [6]
Mr Sheldon, who appeared with Ms Truong for the Builder, [7] pointed to payment schedules served by the Developer on the Builder under the Building and Construction Industry Security of Payment Act 1999 (NSW) that identified amounts withheld for retention.
Mr Sheldon also pointed to an affidavit made by Mr Tran on 22 October 2021 in support of an application under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand in which he deposed that the Developer “is entitled to, and has, withheld the retention monies which [the Builder] claims is due to be released”.
But the Builder’s pleaded case is not that the Developer had “retained” the Retention, but rather that, consistently with the above authority, the Developer “was obliged to hold on trust” for the Builder the Retention. [8]
The Builder’s case is that the Developer had “failed to hold the retention monies” [9] and “failed to hold any cash retention on trust for [the Builder]”. [10] The Builder’s solicitor has deposed that none of the financial statements produced by the Developer indicated any cash as being held on trust for the Builder.
The evidence showed that these contentions were correct.
That is, although, as I have said, cl 5.5 provided that any cash retention “shall be held on trust” by the Developer in the first instance for the Builder, the Developer did not ever receive any cash retention and did not ever set aside a cash retention fund.
The Developer funded the development using the proceeds of a Facility Agreement made between a related company, Kaloriziko Finco Pty Ltd (“Finco”), as borrower and Capital Bridge Global Ltd as financier. It was a term of that facility that Capital Bridge would “only fund the proportion of the relevant Draw in an amount not exceeding 90% of the relevant Current Progress Claim”. [11] That is, Finco was not entitled to, and did not, draw down any part of the facility referable to the amount the Developer retained from the monies otherwise payable to the Builder; and therefore did not make such amount available to the Developer. Thus, while the Developer only paid the Builder 95% of its progress claims, and in that sense “retained” the balance of 5%, it did not actually retain any cash and did not set any such amount aside.
“But the short point [is] that there never was compliance with the contractual obligation to create a trust. And no trust was ever created”.
After the conclusion of closing submissions, Mr Sheldon sought to withdraw the concession I have set out at [25] on the basis that “that concession was not correct” and that it was not open to the Developer to contend that no trust had been created. That was said to be because the Developer had “expressly plead[ed] that they held $1,621,418.27 in retention” and that “the same representation was made to this Court on oath” by Mr Tran in the affidavit I have referred to at [18] above.
The pleading referred to was the Developer’s denial of the allegation set out at [19] above coupled with an assertion that “the total retention which was held by the [Developer]” was a slightly different figure than the one the Builder had alleged that the Developer “was obliged to hold on trust” for the Builder.
But neither of those matters amounted to an assertion, let alone an admission, that the Developer was in possession of funds upon which a trust could attach. The evidence, and indeed the Builder’s case, was to the contrary.
Thus, Mr Sheldon’s concession was well made. There was no trust constituted.
Mr Ashhurst accepted that it followed from these matters that, leaving aside the effect of the Deed, and subject to such set offs as might arise from the Developer’s claims for defects, delay and in respect of variations, the Developer was liable in contract to repay the Retention to the Builder.
It must also follow that the Builder’s contention, emphasised in written submissions, that the transfer by the Developer of a number of properties for no consideration to allegedly related entities shortly after commencement of these proceedings was somehow a breach of the Developer’s obligations “as trustee” was not correct.
The Builder relied on these transfers to obtain a freezing order against the Developer on 21 February 2023 (the “Freezing Order”). I return to the Freezing Order below when considering the Developer’s claim concerning the effect of the Deed.
The Builder sought no relief in the proceedings arising from these transfers. Such remedy as may have been available to it did not arise by virtue of any trust.
On 21 February 2023, the Builder obtained the Freezing Order against the Developer. The Freezing Order was subsequently extended to include Mr Chanine and Mr Tran on 22 March 2023. [17]
On 22 March 2023, the Builder also obtained an order restraining Ninth Campsie from dealing, whether by sale, transfer, charge or encumbrance, with the unit in the Development the subject of its s 37A claim against Ninth Campsie (the “Asset Preservation Order”).
On 26 May 2023, the Court made orders which provided for the Freezing Order and Asset Preservation Order to be discharged and substituted with mortgages (the “Mortgages”) in favour of the Builder over five properties owned by entities associated with Mr Chanine and Mr Tran, including one owned by Ninth Campsie and one owned by Ms Tran.
The “Secured Money” referred to in each of the Mortgages was:
“AUD 2,963,529.21, or upon judgment in respect of each of the Defendant Parties (other than for costs) the Relevant Judgment Debt”.
The figure $2,963,529.21 was the total of the amounts specified in the Freezing Order and the Asset Preservation Order.
“Relevant Judgment Debt” was defined to mean any judgment in these proceedings in favour of the Builder.
The Defendant Parties were defined to mean the Developer, Mr Chanine, Mr Tran and Ninth Campsie.
I have set out the effect of the Deed at [10] above.
The Deed recited that:
“The parties have agreed to an arrangement whereby:
(a) [Apolo Apartments] [18] will sell the [Arncliffe Properties] to [Aerial Holdings] [19] pursuant to the terms of the Contract for a purchase price of $5,000,000 plus the value of the Litigation Liability (if any); and
(b) In consideration of [Apolo Apartments] and [Aerial Holdings] entering into the Contract, [the Builder] will release the Tran Parties [20] from the Litigation Liability and will offset any amount the Tran Parties will be required to contribute to [the Developer] to pay [the Builder] in respect of the Litigation Liability”.
The Deed recited that Apolo Apartments was a “Related Party to the Tran Parties” and that Aerial Holdings was a “Related Party to [the Builder]”.
The Deed defined Litigation Liability to mean:
“… any amount payable to Calibre by the Tran Parties in [these proceedings] … provided however, the amount payable by the Tran Parties to [the Builder] does not exceed 50% of any award, judgment, compromise or settlement entered into against [the Developer] in [these proceedings]”.
“The parties agree that the Litigation Liability payable by the Tran Parties … to [the Builder] is set off against the Litigation Liability payable by [Aerial Holdings] to [Apolo Apartments] under the Contract”.
The Deed provided that “on and from the date of this Deed” the Builder released the Tran Parties from all claims it had or may have “for the Litigation Liability”. [22]
The Deed contained an acknowledgement by the Tran Parties that the Deed did not constitute any compromise by the Builder in these proceedings against the Developer or against Mr Chanine. [23]
Finally, by the Deed, the Builder agreed to discharge the Mortgages granted in favour of the Builder by Ninth Campsie and Ms Tran referred to at [38] above. [24]
Mr Ashhurst submitted that the Developer, Mr Chanine and Mr Tran had a “coordinate liability to [the Builder] for the contract debts of [the Developer]” and that “these debts are alleged to be $256,409.41 (in unpaid variation claims) and $1,619,220.18 for [the Developer’s] breach of trust by … failing to withhold retention monies owed under the Contract”. [25]
The only basis on which the Builder contended that Mr Chanine and Mr Tran were liable to it was on the basis of their alleged knowing assistance in the Developer’s breach of trust and fiduciary duty concerning the Retention.
I have found that no trust was constituted. Mr Sheldon did not press the claim of breach of fiduciary duty.
There was thus no coordinate liability between the Developer, Mr Chanine and Mr Tran.
Mr Ashhurst submitted that, nonetheless, a coordinate liability arose by reason of the Mortgages.
Mr Ashhurst submitted that:
“The Mortgages resulted in the defendants sharing a common burden in respect of the obligations owned to [the Builder] such as to result in mutual rights and obligations. This resulted in the requisite mutuality … for the purposes of a set-off”. [26]
But “the defendants” are not parties to the Mortgages. Any coordinate liability could only arise between the mortgagors of the Mortgages: Ninth Campsie, Ms Tran, and two other companies: Marwan Layla Pty Ltd and The Wave Rockdale Pty Ltd; and the Developer.
Those mortgagors, by the Mortgages, each provided security for the amount of the Freezing Order and the Asset Preservation Order, $2,963,529.21, and also for the amount of any judgment obtained by the Builder in these proceedings. They and the Developer each had a coordinate liability for any such judgment.
The effect of the Deed was that Ninth Campsie and Ms Tran were released from their liabilities under their Mortgages in exchange for the transfer by Apolo Apartments, a “related party” to the “Tran Parties”, to Aerial Holdings, a “related party” to the Builder of the Arncliffe Properties.
The consideration for the transfer of the Arncliffe Properties was $5 million “plus the value of the Litigation Liability” of the “Tran Parties”, that is Mr Tran and Ninth Campsie. That liability was 50% of any, relevantly, any judgment obtained by the Builder against Mr Tran or Ninth Campsie.
The Developer’s case is that the transfer by Apolo Apartments to Aerial Holdings of the Arncliffe Properties:
was at an undervalue;
was made at the direction of the Builder;
had the effect of conferring on the Builder a benefit equal to that undervalue; and
thereby had the effect of discharging the coordinate liability of the Developer and the Mortgagors to the Builder.
Debate before me focussed on whether $5 million represented the true value of the Arncliffe Properties at the date of the Deed. The Developer led evidence from a valuer, Mr Nicholas Garnsey, that the properties were then valued at some $7.9 million, $2.9 million more than the $5 million referred to in the Deed. The Developer thus contended that the Builder had received a benefit of $2.9 million, which exceeded the value of the Builder’s claim against it.
On the other hand, the Builder adduced evidence from another valuer, Mr Andrew McDonnell, who opined that the Arncliffe Properties were valued at some $5.5 million at the date of the Deed.
There is, however, another factor to be taken into account to determine what benefit the Builder obtained by reason of the Deed. That other factor is the value to the Builder of Mr Tran’s and Ninth Campsie’s “Litigation Liability” that, by reason of the Deed, the Builder surrendered. In addition to paying $5 million for the Arncliffe Properties, the Builder forewent whatever entitlement it had to pursue Mr Tran and Ninth Campsie to judgment in these proceedings. The Builder thus obtained title to the Arncliffe Properties by paying the $5 million. But it also “paid” whatever the value might then have been of its claims against those parties.
There is no evidence before me as to what the value to the Builder of that claim was as at the date of the Deed. The Builder’s claim against Mr Tran was for the full value of the Retention, based on his alleged knowing involvement in the Developer’s alleged breach of trust. Based on my findings, that claim is of no value, as there was no trust. But that was not a matter known to the parties to the Deed at the time of its execution.
Turning to the competing evidence of the valuers, I heard the evidence of Mr Garnsey and Mr McDonnell concurrently.
Both witnesses impressed me as competent and well qualified valuers who had given careful consideration to the question of the value of the Arncliffe Properties as at the date of the Deed.
As I have said, the Developer’s valuer, Mr Garnsey, opined that the Arncliffe Properties were then worth some $7.9 million whereas the Builder’s valuer, Mr McDonnell, expressed the opinion that the Arncliffe Properties were then worth some $5.5 million.
Apolo Apartments purchased the three Arncliffe Properties in 2020. They were then three separately owned houseblocks. Apolo Apartments purchased all three properties for a total price of $6.92 million: two for some $2.084 million and the other for $2.75 million.
There is no evidence before me of the circumstances in which Apolo Apartments made those purchases. Neither valuer could find any evidence of any marketing of the properties. Presumably, Mr Tran approached each of the homeowners and negotiated the best price he could with a view to creating a development site from the three properties. What factors motivated each vendor at that time to sell is not known. There is no evidence that the sale price of $6.92 million represented the then market value of the three sites, whether separately or as a development site.
The Valuer General’s valuation for the land value of the three Arncliffe Properties has doubled between FY20 and FY24.
Further there is evidence that the land values in Arncliffe generally have increased by 44% over that period.
Those matters, and the comparison of the competing valuations, is illustrated by the attached document. MFI 2 - Valuer General Valuations for subject sales (619 KB, pdf)
These matters suggest that careful attention needs to be given to Mr McDonnell’s opinion that the value of the three sites, as a development site, as at the date of the Deed, was some $1.4 million less than the sale price of the three sites four years earlier.
Both experts agreed that the appropriate valuation method was by reference to comparable sales. Both agreed that the most comparable site was the site known as “Site 3” which is in the same street as the Arncliffe Properties.
Mr Garnsey agreed in cross-examination that applying his rate of $4,173 per square metre in relation to “Site 3” to the Arncliffe Properties would result in a value in the order of $6.8 million.
There was also debate between the experts about what adjustments would be needed to make “Site 3” truly comparable to the Arncliffe Properties. Mr McDonnell suggested that a 5% to 10% deduction was required whereas Mr Garnsey opined that a 10% increase was required. There was also debate about the extent to which Council contributions of some $9,000 per lot in relation to the Arncliffe Properties should be brought to account.
Between November 2017 and September 2020, the Builder sought and received payment for what it contended to be variations. The total amount of the variations claimed and paid for was $1,380,663.91.
The Developer disputes its obligation to pay nine of those purported variations in respect of which it has paid the Builder $689,922. The Developer seeks to recover that sum from the Builder in its cross-claim in these proceedings.
The Builder also claims $270,434 for variations that have not been paid by the Developer. The Developer disputes its obligation to pay 15 of those claimed variations: the disputed amount is $256,409.41.
The Developer approved and paid for the variations referred to at [83] and [84] and approved but did not pay the variations referred to at [85].
That manner in which the Developer approved the unpaid variations may be illustrated by reference to Variation Claim 19. The Builder submitted a document called “Variation Cost” to the Developer’s Representative [28] setting out a “Detailed Description of the Variation”. The Developer’s Representative stamped the document “Approved” and a representative of the Developer’s Representative initialled and dated the document adjacent to the “Approved” stamp. A copy of the “Variation Cost” document in relation to Variation 19 is attached to these reasons. Variation Cost - Court Book p 4354 (711 KB, pdf)
The Developer’s position is that the payment or approval was “on account” and that, on the proper construction of the Contract, the payment or approval did not bespeak the Developer’s agreement that there was in fact a variation for which the Builder was entitled to payment beyond the contract sum of $31 million.
The Contract defined “variation” as having “the meaning in clause 36”.
However, cl 36 did not, in terms, define “variation”.
Instead, it provided:
“36 Variations
36.1 Directing variations
The [Builder] shall not vary [Work Under Contract] except as directed in writing.
The [Developer’s Representative], before the date of practical completion, may direct the [Builder] to vary [Work Under Contract] by any one or more of the following …
(a) increase, decrease or omit any part;
(b) change the character or quality of any material or work;
(c) change the levels, lines, positions or dimensions of any part of the [Work Under Contract];
(d) carry out additional work; and
(e) demolish or removal material or work no longer required by the [Developer].
If the [Builder] is directed to carry out a variation pursuant to subclause 36.1(b):
(i) the [Builder] shall immediately and prior to the variation being priced, carry out the work the subject of the variation; and
(ii) the variation will be valued under subclause 36.4 (including any delay costs if applicable) during the carrying out of the work, the subject of the variation.
36.2 Proposed variations
The [Developer’s Representative] may give the [Builder] written notice of a proposed variation.
The [Builder] shall as soon as practicable after receiving such direction, notify the [Developer’s Representative] in writing whether the proposed variation can be effected …
…
36.3 Variations for convenience of [Builder]
If the [Builder] requests the [Developer’s Representative] to direct a variation for the convenience of the [Builder], the [Developer’s Representative] may do so ...”. (Empasis in original.)
As can be seen, cl 36.1 provided that the Builder was not able to vary the Work Under Contract except “as directed in writing” and that the Developer’s Representative “may direct” the Builder to “vary” the Work Under Contract by one of the ways specified in cll 36.1(a)-(e).
That suggests that a “variation” is work done by the Builder as a consequence of a direction from the Developer’s Representative to vary the work in one or more of the ways specified in sub-paragraphs (a) to (e).
Thus, the question of whether work does constitute a “variation” would depend upon the nature of the direction given to the Builder by the Developer’s Representative.
“Direction” was defined very widely in the Contract, and included an “agreement” and an “approval”.
The word “variation” first appeared in cl 36.1 in the chaussure, which dealt with the circumstances where the Builder was directed to carry out a “variation” having the effect of changing “the character or quality of any material or work”. [29] In that event, the Builder was obliged immediately to carry out the work prior to the variation being “priced” and the variation was to be “valued” under cl 36.4 “during the carrying out of the work, the subject of the variation”. [30]
The reference in the chaussure to cl 36.1 to work being “priced” and “valued” directs attention to cl 36.4 of the Contract that provided:
“The [Developer’s Representative] shall, as soon as possible, price each variation using the following order of precedence:
(a) using prior agreement, provided only that the agreed value is approved by the … agreement between the parties;
…
Subject to clause 36.3, that price shall be added or deducted from the contract sum.” (Emphasis in original.)
The Developer’s written submissions implicitly accepted that the Developer’s Representative’s approval of a variation necessarily involved it pricing the variation for the purposes of cl 36.4. Obviously, actual payment by the Developer of the variations referred to at [83] and [84] above necessarily bespoke the Developer’s Representative’s earlier pricing of the variation.
Under cl 36.4 the only thing that the Developer’s Representative could “price” was a “variation”. That is work done following a direction by the Developer’s Representative made pursuant to cl 36.1.
The effect of the chaussure to cl 36.1 was that, on receiving a direction from the Developer’s Representative to do work of the kind specified in subcl (b), the Builder was obliged to do that work before it was “priced” under cl 36.4; doubtless because of the potential significance of a direction to vary work in that way. Otherwise, the directed work was to be “priced” before the work was performed.
Either way, there is no suggestion in any of these provisions that such “pricing” was to be in any sense provisional. On the contrary, it was to be done “as soon as possible”; and in the case of cl 36.1(b) directed work, after the work was done.
What cl 36.4 required the Developer’s Representative to do was to price “each variation”; not something which may or may not constitute a variation.
The chaussure to cl 36.4 provided that, once such pricing had occurred, the price was to be added to or deducted from the contract sum. That is, the question of what extra amount the Builder was to be paid for the directed work was not to be revisited.
The Developer relied upon a sentence in cl 37.2 of the Contract to contend that any “pricing” by the Developer’s Representative under cl 36.4 was provisional and “on account” only.
Clause 37.2 dealt with the provision by the Developer’s Representative of a “progress certificate” to the Developer and the Builder following receipt by the Developer’s Representative of a progress claim by the Builder.
Clause 37.2 provided relevantly:
“Subject to subclause 37.6, the [Developer’s Representative] shall within 15 Business Days after receiving the progress claim pay to the [Builder] the balance of the progress certificate.
If any set-off under clause 37.6 produces a negative balance, the [Builder] shall pay that balance to the [Developer] within 7 days of receiving written notice thereof. Neither a progress certificate nor a payment of moneys shall be evidence that the subject [Work Under Contract] has been carried out satisfactorily. Payment other than final payment shall be payment on account only.” (Emphasis in original.)
I do not see that this provision has any role to play in the proper construction of cl 36.4.
The provision in cl 37.2 is dealing with payment of progress claims and it is in that context that the final words of cl 37.2 provide that “payment other than final payment shall be payment on account only”.
Reasonable persons in the position of the parties would not understand that the effect of the words used in these provisions to be that the Developer’s Representative could, first, give a direction to the Builder under cl 36.1 to vary the Work Under Contract and then price the variation on the basis set forth in cl 36.4(a), but leave it open to the Developer later to contend that there has been no “variation”.
Having given the direction under cl 36.1 to the Builder to vary the Work Under Contract in any one of the ways specified in the sub-cll (a) to (e) of cl 36.1, and then having “priced” that work under 36.4, it was not open to the Developer then to argue that the work in question did not constitute a “variation”.
All of the disputed variations were approved by the Developer. As I have said, many were not only approved, but paid.
It is not now open to the Developer to challenge these matters by contending that its approval was “on account” only.
The parties agreed to set out their competing contentions in relation to the variations claimed by the Builder in a Redfern Schedule. It was agreed that I would populate the Redfern Schedule with my decisions in relation to each variation.
In relation to all the variations, it follows from my conclusion at [112] that the Builder is entitled to payment for each of the variations and that the Developer is not entitled to recover any amount from the Builder on that account. I have signified this in the Redfern Schedule by the words “Allowed”, “Approved” and “Claim Rejected” as appropriate. The Redfern Schedule is attached to these reasons. Redfern Schedule completed with his Honour's decisions (1.14 MB, pdf)
Two further questions as to the proper construction of the Contract arise.
The first is in relation to “Excluded Items”.
Clause 2 of the Formal Instrument of Agreement provided:
“2. Contract sum
(a) The Contract Sum is $31,000,000.00 plus GST.
(b) Notwithstanding any other condition in this Contract, the Parties expressly agree that the Excluded Items and any associated fees to authorise and/or service providers in relation to the Excluded Items do not form part of the Contract Sum and should any work be required to perform the Excluded Items, that work, including any work incidental to performing that work will be in addition to the Contract Sum and will constitute a Variation to the Contract.” (Emphasis in original.)
Clause 4 of the Formal Instrument of Agreement provided that the Contract was constituted by the Formal Instrument of Agreement, the General Conditions, and a number of ancillary documents including “all the documents contained on CD signed by the parties and in [an identified] Dropbox file”.
Clause 4(b) of the Formal Instrument of Agreement provided that:
“Where there is any inconsistency, ambiguity or discrepancy between the documents set out above, they will prevail in their stated order of precedence so that this document is the primary contract document”.
“… any work or costs, fees or charges in relation to the following:
…
(v) services or infrastructure upgrades;
(vi) any fees payable to any authorities and/or service providers and/or infrastructure stakeholders …”.
The effect of cl 2 of the Formal Instrument of Agreement was to excise from the work the Builder was required to perform in order to earn the contract sum, the value of “any work … required to perform the Excluded Items”.
Such work, and any “work incidental to performing that work” constituted a variation to the Contract.
The debate between the parties concerning this issue arises in relation to “infrastructure upgrades”.
Insofar as the Contract required the Builder to build an item of infrastructure, for example an electricity substation, that work was within the scope of the Contract and part of the work for which the Contract Price of $31 million was payable.
The effect of the provisions I have set out is that if the work that the Builder was required by the Contract to perform was an “upgrade” of such infrastructure, it was an “Excluded Item” for which the Builder was to be paid extra.
In the Redfern Schedule, I have indicated where I have come to this conclusion as an additional reason to allow the Builder’s claim for variation or reject the Developer’s claim for repayment by the words “Excluded Item: Infrastructure Upgrade”.
The second question of construction arises from cl 11 of the General Conditions that dealt with “Legislative Requirements”.
Clause 11 provided:
“11 Legislative requirements
11.1 Compliance
The [Builder] shall satisfy all legislative requirements except those in Item 22A or directed by the [Developer’s Representative] to be satisfied by or on behalf of the [Developer].
The [Builder], upon finding that a legislative requirement is at variance with the Contract or the [Developer’s] project requirements, shall promptly give the [Developer’s Representative] written notice thereof.
11.2 Changes
If a legislative requirement:
(a) necessitates a change:
(i) to the [Developer]’s project requirements;
(ii) to the Works;
(iii) being the provision of services by a municipal, public or other statutory authority in connection with [Work Under Contract]; or
(iv) in a fee or charge or payment of a new fee or charge;
(b) comes into effect after execution of the Contract but could not reasonably then have been anticipated by a competent contractor; and
(c) causes the [Builder] to incur more or less cost than otherwise would have been incurred,
the difference shall be assessed by the [Developer’s Representative] and added to or deducted from the contract sum.” (Emphasis in original.)
“(a) Acts, Ordinances, regulations, by-laws, orders, awards and proclamations of the Commonwealth of Australia and the jurisdiction where [Work Under Contract] or the particular part thereof is being carried out”.
It is common ground that the reference to “orders” in that definition included any order or direction by the local Council.
Clause 11.1 refers to “all legislative requirements except those in Item 22A”.
Item 22A provided:
| “Approvals which the [Developer] must obtain at its own expense (subclause 11.3) | S96 Application and access to neighbouring properties including but not limited to access to airspace, permission to install anchors into neighbouring properties and substation approvals.” |
As can be seen, that item does not refer to legislative requirements but rather to approvals of the kind referred to in cl 11.3 of the Contract. [31]
On the other hand, Item 22 provided:
| “Legislative requirements (a) Those excepted (subclause 11.1) | Fees payable to an Authority in connection with the [Work Under Contract] and any licence fees.” (Emphasis in original.) |
There is obviously an error in cl 11.1. The reference to Item 22A should be a reference to Item 22.
Thus, the effect of cl 11.1 was to require that the Builder ensure that its work complied with all legislative requirements. It also required the Builder to do so at its own expense save for the exception in Item 22: “fees payable to any Authority in connection with the [Work under Contract] and any licence fees”.
Clause 11.2 is directed to circumstances where a legislative requirement necessitating a change to the works “comes into effect after execution of the Contract” and could not then have been reasonably anticipated by the Builder.
There was debate before me as to when a legislative requirement would “come into effect” for the purpose of cl 11.2.
The better view is that this would occur when the legislative requirement became operative, in the sense of effective to impose an obligation on the Builder; whether or not the Builder was required immediately to comply with that obligation.
It is common ground that the relevant Development Consent issued by the Council was a legislative requirement.
The Development Consent was operative, in accordance with its terms, from the time when it was given; that is, before the Contract.
It may be that some aspects of the Development Consent were not engaged, in the sense of requiring particular action at a particular time by the Builder until after the date of the Contract.
But the Development Consent would nonetheless remain a legislative requirement that came into effect before the Contract.
However, there were variations in respect of which a legislative requirement arising otherwise than by reason of the Development Consent came into effect after the date of the Contract.
In the Redfern Schedule, I have indicated where I have come to the conclusion set out at [139] as an additional reason to allow the Builder’s claim for variation or reject the Developer’s claim for repayment by the words “Legislative Requirement after date of Contract”.
Clause 34.7 of the Contract provided that if the Work under Contract did not reach practical completion by the date for practical completion, the Builder was liable to pay liquidated damages to the Developer of $7,500 per day.
It is common ground that practical completion was in fact achieved on 15 September 2020; that was the date of practical completion.
What divides the parties is whether the date for practical completion was 20 April 2020 or 23 May 2020.
The Contract provided that the date for practical completion was 20 months from the date that a Construction Certificate was issued. [32] The Construction Certificate was issued on 20 August 2018; 20 months from that date is 20 April 2020.
However, the definition of date for practical completion provided:
“… but if any [extension of time] for practical completion is directed by the [Developer’s Representative] … it means the date resulting therefrom”.
The Contract contained a wide definition of “direction” to include “agreement”.
The Builder pointed to entries in a number of Project Control Group reports stating that the “Original Construction Start Date” was 23 July 2018 and that the “Original Construction Completion Date” was 23 May 2020.
Indeed, the Project Control Group Report for 2 May 2019, containing these entries, was circulated to the Developer’s Representative prior to the meeting, and described by Ms Nicole Rizk, the Project Assistant employed by the Developer’s Representative, as being “acceptable”.
Further claims for an extension of time were made by the Builder on 13 September 2018, 2, 5, and 20 October 2018, 10 November 2018 and 1, 5, and 20 December 2018. The “Original Contracted Completion Date” was described in each of these documents as being 23 May 2020.
There is no evidence that the Developer’s Representative took issue with 23 May 2020 being described in any of these documents as the Original Contracted Completion Date.
The evidence of Mr Marwan Chanine, who is Mr Chanine’s son and the sole director of the Developer’s Representative, was that he did not notice these entries. However, as I have set out, it is clear that Ms Rizk did notice the entry in the 2 May 2019 Project Control Group Report.
I infer from these documents that the Developer’s Representative did agree that the Original Contracted Completion Date, and thus the date for practical completion, was 23 May 2020.
Mr Ashhurst pointed to a provision in the Contract providing that a variation to the Contract must be in writing and signed by each party.
But the question here is whether the Developer’s Representative “directed” an “extension of time”. Such a direction could take the form of an agreement and I see no reason why that agreement needed to be in writing and signed by both parties.
I am satisfied, in these circumstances, that the original extended date for practical completion was 23 May 2020 and with the agreed extensions of time of 102 days, the extended date for practical completion was 19 September 2020.
Accordingly, the Developer’s claim for liquidated damages is dismissed.
The Developer claims an amount of $21,998 for alleged defects which it contends it paid for directly and a further sum of $17,592.29 for rectification work for which it provided reimbursement on settlement of the relevant properties.
The Builder accepts that the Developer is entitled to $6,513.64 for defects.
Otherwise, Mr Sheldon provided a detailed schedule dealing with the alleged defects and, in closing oral submissions said that, other than the defects referred to at [163], “the rest just simply, on the primary documents, are not defects”.
Mr Ashhurst responded:
“Can I just interrupt and say there is some force in what my learned friend just said. I don’t yet have instructions. But I will ensure, very shortly, to get instructions so that your Honour doesn’t waste time on matters that are not properly in dispute”.
The parties should confer and agree on the orders needed to give effect to these reasons.
If there is any disagreement about those orders, the parties should confer and agree on a timetable for short competing submissions. I will deal with that question on the papers.
**********
See below from [116].
General Conditions, cl 5.1.
General Conditions, cl 5.5; item 14(f).
General Conditions, cl 5.5.
Rayack Construction Ltd v Lampeter Meat Co Ltd (1980) 12 BLR 30 at 37 (Vinelott J); cited with approval by the UK Court of Appeal in Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) [1992] BCLC 350 at 353 (Scott LJ, Farquharson and Parker LJJ agreeing); see my summary in Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWSC 79 at [27] to [34]; see also Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWCA 422 at [52] (Ward JA, as the President then was, Meagher JA agreeing) and [118] (Leeming JA).
Parkview Qld Pty Ltd v Commonwealth Bank of Australia (supra) at [54] (Ward JA, Meagher JA agreeing) and [122] and [125] (Leeming JA).
For convenience, and without intending any disrespect to Ms Truong, I will henceforth refer only to Mr Sheldon.
Further Amended Technology and Construction List Statement filed 29 June 2023 at [C6].
Ibid at [C19C].
Ibid at [C117.3], [C207.1], [C208.1], [C244.1], and [C243.1].
Clause 3.2.
Again, for convenience, and without intending any disrespect to Ms Scott, I will henceforth refer only to Mr Ashhurst.
Such obligation being recognised as an implied term of a building contract such as thus: Parkview Qld Pty Ltd v Commonwealth Bank of Australia (supra) at [52] (Ward JA, Meagher JA agreeing).
At T140.8 to T140.14.
Parkview Qld Pty Ltd v Commonwealth Bank of Australia (supra) at [52] (Ward JA, Meagher JA agreeing) and [118] (Leeming JA).
Rayack Construction Ltd v Lampeter Meat Co Ltd (supra) at 37 (Vinelott J); Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) (supra) at 353 (Scott LJ, Farquharson and Parker LJJ agreeing).
Calibre Construction Group Pty Ltd v Kaloriziko Pty Ltd atf Ryde Combined Unit Trust [2023] NSWSC 279.
The company associated with Ms Tran.
The company associated with the wife of the director of the Builder, Mr Mohanna.
That is, Mr Tran and Ninth Campsie.
Clause 3(a).
Clause 4(a).
Clause 6(a).
Clause 5(d).
Referring to the familiar observations of Gibbs CJ in Mahoney v McManus (1981) 180 CLR 370 at 378; [1981] HCA 54 at [14].
Referring to Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 at [61] (McHugh J), [85] (Kirby J).
See [9] above.
C9 Developments Pty Ltd, a company associated with Mr Chanine’s son, Mr Marwan Chanine.
In accordance with General Conditions, cl 36.1(b).
General Conditions, cl 36.1(i)-(ii).
That clause provided that the Builder was obliged at its expense to procure all necessary approvals “except for … those matters specified in Item 22A”.
Item 7(b).
Coversheet - catchwords amended
Decision on coversheet, [57], [58], [160] and [161] amended.
Attachments
(2002) 209 CLR 282
(1981) 180 CLR 370
That is, the Developer contends that the Deed is a complete answer to the Builder’s claim.
Mr Ashhurst SC, who appeared with Ms Scott for the Developer, [12] accepted that this constituted “a breach of [the Developer’s] obligation to set aside a retention fund”. [13]
But it also follows that, as Mr Sheldon ultimately accepted, [14] as there was “no identifiable asset … referable to or impressed by” the trust which the Contract sought to establish, “no trust came into existence” [15] and thus that cl 5.5 had “no practical operation”. [16]
As Mr Ashhurst succinctly put it:
Assessment of the cost to the Builder of its surrender of its s 37A claim against Ninth Campsie [27] would involve factors including the value of the unit transferred to it by the Developer and an assessment of the Builders prospects of making out its s 37A claim. None of this was explored before me.
For these reasons alone, I cannot assess to what, if any, extent the effect of the Deed was to cause a discharge of any coordinate liability to the Builder.
It was for the Developer to prove that Apolo Apartments sold the Arncliffe Properties to Aerial Holdings at an undervalue, and what that undervalue was.
The evidence of the experts persuades me that the likely true value of the Arncliffe Properties as at the date of the Deed was more than $5 million. But otherwise, I not persuaded that I can come to any conclusion as to their value at that time.