Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190

Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190 - VSCA 2015 case summary — Zoe

[47]

[A]t the times for payment claims or upon completion of the stages of the work under the [D&C] Contract stated in Annexure Part A and upon the issue of a Certificate of Practical Completion ... [Grocon] shall deliver to the Superintendent (with a copy provided to [APN and Scots Church]) claims for payment supported by:

(a) evidence of the amount due by [APN and Scots Church] to [Grocon];

...

(e) such information as the Superintendent may reasonably require.

Claims for payment shall include the value of work carried out by [Grocon] in the performance of the [D&C] Contract (and details of additions or omissions to the work, and the respective adjustment to the Fixed Contract Sum) to that time together with all amounts then otherwise due to [Grocon] arising out of the [D&C] Contract.

...

Within 10 Business Days of receipt of a claim for payment, the Superintendent shall assess the claim and shall issue to [APN and Scots Church] and to [Grocon] a payment certificate stating the amount of the payment which, in the Superintendent's opinion, is to be made by [APN and Scots Church] to [Grocon] and in such instance the amount [APN and Scots Church propose] to pay to [Grocon] or by [Grocon] to [APN and Scots Church]. For the purpose of the Superintendent assessing the claim, the Superintendent may have reference to the trade breakdown schedule of the Fixed Contract Sum as set out in Annexure Part M

...

[W]ithin 14 days of issue by the Superintendent of the Superintendent's payment certificate and within 14 days of the issue of a Final Certificate, [APN and Scots Church] shall pay to [Grocon] or [Grocon] shall pay to [APN and Scots Church], as the case may be, an amount not less than the amount shown in such certificate as due to [Grocon] or to [APN and Scots Church], as the case may be. A payment made pursuant to this Clause 42.1 shall not prejudice the right of either party to dispute under Clause 47 whether the amount so paid is the amount properly due and payable and on determination (whether under Clause 47 or as otherwise agreed) of the amount so properly due and payable, [APN and Scots Church] or [Grocon], as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable.

Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be a payment on account only, except as provided under Clause 42.6. ...

[68]

(a) [Grocon] agrees to pay to [APN and Scots Church], to the extent that this is a positive figure:

(i) the amount payable by [APN and Scots Church] to [Grocon] under and in accordance with the [D&C] Contract, including for variations; less

(ii) the amount calculated as follows:

(A) the total of the Actual Trade Cost and the Preliminaries Amount ... at the times as stipulated for payment of progress claims in the [D&C] Contract ...; and

(B) any margin for profit payable by [APN and Scots Church] to [Grocon] will be calculated at the rate of 0%.

(b) The parties irrevocably agree that the amount payable by [Grocon] under clause 2(a) ('Set Off Amount') will be set off progressively against each progress claim under the [D&C] Contract and is not required to be paid by [Grocon] until [APN and Scots Church make] a payment on account of the relevant progress claim at least equal to the Set Off Amount. The Set Off Amount will be dealt with by [Scots Church] and APN in accordance with clause 2(e).

(c) [APN and Scots Church agree] to pay to [Grocon], to the extent that this is a positive figure:

(i) the amount calculated as follows:

(A) the total of the Actual Trade Cost and the Preliminaries Amount ... at the times as stipulated for payment of progress claims in the [D&C] Contract; and

(B) any margin for profit payable by [APN and Scots Church] to [Grocon] will be calculated at the rate of 0%; less

(ii) the amount payable by [APN and Scots Church] to [Grocon] under and in accordance with the [D&C] Contract, including for variations; and

(d) [APN and Scots Church] must pay any amount payable under clause 2(c) as and when progress claims are due under the [D&C] Contract.

(e) APN and [Scots Church] agree that to the extent there are any net positive differences as calculated under clause 2(a) ... that the net positive difference will be maintained by [APN and Scots Church] in its project budget cash flow and bank account as 'Contractor's Contingency' to be available for payment of any subsequent net negative difference (eg cost over run) claimed by [Grocon] at a later date until at least the Assessment Date (unless APN and [Scots Church] otherwise agree in writing).

...

(g) To the extent that either [Grocon's] rights against [APN] or [Scots Church] under the [D&C] Contract or APN and [Scots Church's] rights as Developer against [Grocon] under the [D&C] Contract are inconsistent with this clause 2 then, to the extent of that inconsistency, each of APN, [Scots Church] and [Grocon] irrevocably waives those rights as against each other, as applicable.

(h) In consideration of [Grocon], APN and [Scots Church] agreeing to fix the Preliminaries Amount in accordance with this Deed, [Scots Church] and APN agree that the [JVA] (including clauses 2.3, 16.2 and 23 of it) is varied as follows:

(i) if the Actual Trade Cost at the Assessment Date is below $96.3m (being the Fixed Contract Sum less the Preliminaries Amount) the first $3,000,000.00 of that saving up to $93.3m is to be shared between APN and [Scots Church] as follows:

APN 100%, [Scots Church] 0%

(and any savings on the Actual Trade Costs beyond $93.3m are thereafter enjoyed as per Clause 2.3 of the [JVA].)[15]

(ii) subject to (iii) below, if the Actual Trade Cost as at the Assessment Date is above $96.3m that cost overrun will be shared between APN and [Scots Church] as follows:

APN 50%, [Scots Church] 50%

(iii) if the Actual Trade Cost as at the Assessment Date is above $99.3m that cost overrun will be shared between APN and [Scots Church] as follows:

APN 0%, [Scots Church] 100%

...

(j) As long as [Grocon] has used all reasonable endeavours to recover any additional Actual Trade Costs from its subcontractors, consultants and insurance after the issue of the Final Certificate under the [D&C] Contract, if the Actual Trade Cost increases after the Assessment Date:

(i) [APN and Scots Church] shall be obliged to make a further payment of such additional costs to [Grocon] in accordance with this Deed upon 30 days' written notice; and

(ii) either APN or [Scots Church] (as the case may be) will make any adjustment payment as between themselves for contribution at that time in accordance with the [JVA] (as varied above).

[164]

First, the word 'actual' in the definition qualifies the word 'cost'. The concept of an 'actual cost' connotes a cost that has not only been incurred, but a liability which has actually been discharged upon payment. Upon payment, it becomes an 'actual cost' and aptly falls within the definition.

In the second place, if upon payment, the cost becomes an 'actual cost' and is captured by the definition, a temporal element is clearly fixed by the event of payment. This assists to make the important contractual obligations to make progress payments between [APN and Scots Church] and [Grocon] work in a certain and well defined manner.

On the other hand, if liability to make a progress payment is to be governed merely by a liability incurred to make payment for 'work undertaken, materials supplied, defects rectified or services provided', real questions are likely to arise as to precisely when such a liability arose or arises. Such liabilities could, for example, be controlled by a wide variety of circumstances unique to each individual sub-contract transaction. Uncertainty in relation to the timing of the obligation to make progress payments between [APN and Scots Church] and [Grocon] in a D&C Contract of this type and scale, particularly given the large sums of money that are likely to become payable, is not consistent with the avoidance of commercial inconvenience and the production of a businesslike result.

Third, an amount which may initially be payable by Grocon to a sub-contractor for work undertaken, materials supplied, defects rectified or services provided, may not be the sum that is actually paid by it for such goods and services. A variety of commercial events, which are sometimes unforseen and cannot be predicted, may arise and operate to discharge or alter a liability to make payment to a sub-contractor in the course of a large scale construction project. In these circumstances, it makes no commercial sense for Grocon to be put in funds by payments from APN in respect of liabilities which may never in fact be matched with actual payment.

Fourth, the meaning of the expression 'Actual Trade Cost' as defined in clause 1.1 of the Side Deed, is informed by its context and the object of clause 2 of the Side Deed which is to effectuate the delivery of the performance of the Works by [Grocon] under the Transaction Documents at cost.[47]

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