Floruit Holdings Pty Ltd & Anor v Sebastian - Builders & Developers Pty Ltd - [2009] NSWCA 303 - NSWCA 2009 case summary

Floruit Holdings Pty Ltd & Anor v Sebastian - Builders & Developers Pty Ltd - [2009] NSWCA 303 - NSWCA 2009 case summary — Zoe

[31]

Responsibility of Builder and Results of Construction (a) The Builder will, subject to these Conditions and the work particulars set out in Schedule 3 , execute and complete the works required by the Contract. 26 Clause 1 (b) of the Contract contained the Builder's warranties pursuant to s 18B of the Home Building Act in respect of the standard of the performance and quality of "the work" done under the contract and the suitability and standard of the materials provided by the Builder. Clause 1 (c), headed "Quality of Construction", provided that the "work done" under the Contract would comply with relevant codes, statutory provisions standards specifications and the conditions of the relevant development consent. 27 The Owner was required: to produce to the Builder "prior to the commencement of the works"; documentary proof of certain matters; if requested during the contract period, to produce proof of its capacity to pay for "the works"; to act so to "avoid delay to the works"; to take steps to confirm that "the work under the contract" was acceptable to the relevant authority; and to ensure that the Builder received copies of any approval which affected or were relevant "to the works": cl 2. 28 The Contract provided for the resolution of any alleged discrepancy or ambiguity in the Contract, failing compliance with which the Builder was entitled to "proceed with the work": cl 4. If "approval of works" by any relevant authority was delayed by more than 50 days from the execution of the Contract, either party could terminate the Contract and the Builder was entitled to "a reasonable sum for services performed and reimbursement of all expenses incurred and payable" at the date of termination: cl 5(a). "The works" were deemed to comply with the requirements of any Authority by the issuing of a certificate of compliance or similar document by the relevant authority: cl 5(c). 29 The Owner acknowledged that where a termite treatment system was installed or "forms part of the work", it was a management scheme and that termites could not necessarily be controlled or eliminated: cl 6(a)(i). Where "work involving a renovation or addition to an existing residence or structure" included the installation of a termite treatment system the Builder did not warrant protection from termites, nor: 6(a)(ii) that the termite treatment system installed will prevent the "works" from being affected by an infestation sourced from an existing structure or the environment and through the existing structure. 30 The Owner was solely responsible for having "the works and the property inspected" in relation to termite activity at least once every 12 months: cl 6(b). 31 Clause 8 provided:

[32]

Possession of the Site, Access, and Site Meetings (a) (i) The Builder is to have exclusive and uninterrupted possession of the site for the performance of work. The possession to be given to the Builder includes access to other parts of the property necessary to enable the Builder to carry out work. (ii) If access is required to any other property in order for the works to be carried out it will be the responsibility of the Owner to do or authorise any actions necessary to gain such access (b) The Owner acknowledges that the site is a work site which, by reason of the work to be undertaken, can be a dangerous place. As such the Owner will comply with any direction of the Builder concerning site access and movement around the site. 32 The Builder was entitled to extensions of time if the "progress of the works" was delayed by matters, conditions or consequences resulting from various circumstances including "suspension of the works"; the ability to "carry out work or requiring work"; weather affecting the "ability to do the work"; and any other matter beyond a reasonable control of the Builder which affected its ability "to do the work": cl 11. The parties agreed that the Builder would comply with all notices required by any statute or regulation of any authority which had "jurisdiction over the works" and that the Builder would pay and indemnify the Owner against any fees under any Act in respect of the "works": cl 12. 33 The Owner warranted that the "site" would allow "the works to be carried out" and the Builder agreed to give prompt written notice if it appeared to it that "the site" would not "support the works": cl 13. The parties agreed that the "works may be varied" by "execution of additional work" or "decreases in or omissions from the works" or changes in the dimensions "of any part of the works": cl 14. 34 The Builder was entitled to "subcontract any portion of the works" but was not relieved from any liabilities or obligations under the Contract in respect of that portion of the works: cl 16(b). The Builder was obliged to provide the Owner with a copy of the Home Warranty Insurance Certificate "for the works where the value of the works" was $12,000 or more: cl 17(a). The Builder was also obliged to insure and indemnify the Owner in respect of injury to persons "arising out of or in the course of the works" and to obtain and effect "Contracts Works Insurance": cl 17(d) and (e). On settlement of any claim under the various insurance policies, the Builder agreed to proceed to "rebuild or repair the works and replace or repair the materials" the subject of any claim: cl 17(f)(i). The parties agreed that the money paid under the policy was to be used to allow the Builder to "rebuild or repair the works", but the owner was to pay the Builder the proper value "of the work done prior to the insured event occurring": cl 17(f)(iii). Clause 17 included the following:

[56]

48 The terms "work", "works" and "work under the contract" are used in different contexts throughout the Contract. For instance in sub-clauses 1(b) and (c) the term "work done under this contract" refers to the Builder's obligations to perform the building work to complete the development in accordance with requisite standards. In some clauses of the Contract the term "works" is used to mean the performance of the building works to complete the works, being the constructed buildings, for instance clauses 8(a)(1); 10(a); and 13(a). However in other parts of the Contract it is used to refer to the completed development or buildings. Clause 6(a) in relation to termite treatment is a good example of this. The use of the term "contract work" in clause 6(a)(ii)(a) is a reference to the work done by the Builder, being the installation of a termite treatment system, in respect of which the Builder was not giving a warranty. However in sub-paragraph (b) the use of the expression "works", as parenthesised, is a reference to the completed product - being the renovated residence or the addition to the existing residence. It was that completed product that the Builder would not warrant was protected from infestation by the installed termite treatment system. Other examples of the use of the expression as meaning the product, the townhouses, are: clause 13 dealing with whether "the site" would "support the works", the physical load of the townhouses; clause 17, dealing with rebuilding "the works", that is the finished townhouses; and clause 31, dealing with the charge on the land "on which the works are to be or were erected", clearly referring to the buildings as constructed or erected. 49 Clause 23(d) was in the context of the regime for payment of the Builder when Practical Completion was achieved. The Builder was entitled to payment of the unpaid balance of the Contract price and any other monies which were payable in connection with the Contract within two days of a written request for payment. If the Owner did not make payment within two days, then the Builder was entitled to charge interest on the outstanding amount at 10% per annum. The Builder's entitlement to payment was secured by a prohibition on the Owner from taking possession or receiving the keys to the "works" until the Builder was paid. That position was enhanced by the Builder's further entitlement to "secure the property so as to prevent entry" until final payment was made.

[57]

50 Clause 8 of the Contract provided exclusive possession of "the site" to the Builder for the performance of work. The "site address" was the same address as "the property", but it is clear that "the site" was not intended to be the whole of "the property" by reason of the provision that possession of the site included "access to other parts of the property" necessary to enable the builder to carry out work: clause 8(a)(i). But when it came to payment of the Builder, the Owner could be prevented from "entry" to the "property", not merely the "site", until the Builder was paid. The costs incurred by the Builder to secure "the property" to prevent entry were to be paid by the Owner. The Builder's contractual right for non-payment was to exclude the Owner from the "property", thereby preventing the Owner from taking possession of or receiving the keys to "the works" until he was paid: cl 23(e). This sub-clause, together with the reference to the provision of a key in clause 23(d), provides support for the conclusion that the expression, "the works", in clause 23(d) referred to the buildings, as constructed or partially constructed, rather than the work, or building services, including the provision of the Certificate, provided by the Builder. 51 Although the expressions "work" and "works" are used in different contexts throughout the Contract, the only sensible and businesslike interpretation of the word "works" in clause 23 (d) is that it means the completed buildings, the townhouses, and does not include pieces of paper, including certificates and insurance policies that may be held by the Builder either at the site or off-site. The inducement for prompt payment of the Builder was the contractual right of the Builder to lock the Owner out of the "property" on which the "works" were erected or constructed. 52 The Builder's submission that the provision of the Certificate to the Owner was equivalent to the Owner taking possession of the "works" because it enabled the Owner to submit the Certificate to the Council to obtain the registration of the sub-division and complete the sale of one of the townhouses does not accommodate any discretion in the Council to refuse to register the sub-division plan for reasons that may not have anything to do with the Certificate. In any event that submission is inconsistent with the plain words of the Contract. The provision of the Certificate to the Owner may have fallen within what was described as the "work" the builder was required to do, however it is not part of "the works" as that expression is used in clause 23 (d). 53 The trial judge fell into error in finding that the "certificate being part of, as well as being the embodiment of part of, the works, its use would constitute taking of possession within the meaning" of clause 23(d) of the Contract with the consequential affirmative answer to the separate question. Proposed Orders 54 The orders I propose are as follows:

Floruit Holdings Pty Ltd & Anor v Sebastian - Builders & Developers Pty Ltd

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