On 20 October 2015 the plaintiff, H & M Constructions (NSW) Pty Ltd ("the Builder"), entered into a design and construct contract ("the Contract") with the defendant, Golden Rain Development Pty Ltd ("the Developer") to design and construct 109 high rise apartments known as the Sugarcube Apartments ("the Apartments"), eight terraces known as the Honeycomb Terraces ("the Terraces") and various public domain roads ("the Dedicated Public Roads") on a former industrial site in Erskineville. [1]
The contract price was approximately $44 million (exclusive of GST).
As was known to both the Builder and the Developer, the site was contaminated in the soil and groundwater. This was because, for most of the last century, the site had been occupied by pipe, oven, and boiler manufacturers; including Metters Limited, which occupied the site from 1936 to 1973.
On 24 September 2015, City of Sydney Council ("the Council") granted development approval for the project subject, relevantly, to conditions 98, 99 and 100. Those conditions, which I will call "the Remediation Conditions", were summarised in the Builder's opening submissions as follows:
"(a) Condition 98 required the site to be remediated in accordance with a 'Remediation Action Plan' … approved by the Site Auditor and the Council. Any variations to the [Remediation Action Plan] were required to be approved in writing by the Site Auditor and the Council's Area Planning Manager prior to the commencement of such work.
(b) Condition 99 required that, prior to the commencement of works associated with the built form of the development (excluding building work directly related to remediation) a Section A Site Audit Statement … obtained from a NSW EPA Accredited Site Auditor was required to be submitted to the Area Planning Manager. The [Site Audit Statement] was required to confirm that the site had been remediated in accordance with the [Remediation Action Plan]. Where [a Site Audit Statement] was subject to conditions that required ongoing review by the Site Auditor or the Council, these were required to be reviewed and approved by the Council before the [Site Audit Statement] could be issued.
(c) Condition 100 provided that, where the ongoing land use suitability and release of the [Site Audit Statement] was dependent upon the implementation of an Environmental Action Plan … in relation to any residual contamination remaining onsite, this was to be submitted to and approved by the Site Auditor and the City's Area Project Manager prior to the issue of the [Site Audit Statement]."
The Site Auditor was Dr Ian Swane.
The relevant Remediation Action Plan was made on 28 October 2015. The parties referred to this document as "RAP4".
The Builder's scope of work under the Contract included remediating the site contamination in accordance with the requirements of the Remediation Conditions. Under the Contract, all risks relating to remediating the contamination were allocated to the Builder.
The Contract required the Builder to give security ("the Security"). The Security was in the form of two guarantees issued by the Commonwealth Bank of Australia, each for some $1.1 million, representing 5% of the contract price.
The Builder performed remediation works from around late 2016 to mid-2017 and commenced construction of the Apartments and the Terraces in 2017. By July 2018, the Builder contended that it had completed the works.
The focus of the dispute in these proceedings is on a Conditional Certificate of Practical Completion ("the Conditional Certificate") issued on 24 September 2018 by the Superintendent under the Contract, Urban Pty Ltd. The Contract provided that the Superintendent was the agent and representative of the Developer. [2] The effect of the Conditional Certificate and the consequences which flow from it are at the heart of this litigation. The Conditional Certificate purported to specify 7 September 2018 as the date of practical completion under the Contract. However, as its title suggests, the Conditional Certificate was qualified by a number of conditions, including the issue of an occupation certificate. I return to this below.
An interim occupation certificate was issued on 16 November 2020 in respect of the Apartments. However, no occupation certificate, interim or otherwise, has yet been obtained in relation to the Terraces which remain unoccupied. Further, the Dedicated Public Roads have not been completed to the satisfaction of the Council.
[3]
Issues and disposition
The ultimate issues are whether the Developer is entitled to the benefit of the Security and also to liquidated damages of some $22 million.
Those alleged entitlements depend, in substance, on the status and effect of the Conditional Certificate and, in particular, whether the effect of that document was that practical completion of the works under the Contract was validly certified as having been achieved on 7 September 2018, and that 7 September 2018 was to be applied by the parties to determine their respective entitlements to liquidated damages and delay costs.
My conclusion is that the Conditional Certificate had no contractual effect and that, even if it had contractual effect, it was not conclusive as to when practical completion took place.
The Builder's case is that, if that be the correct conclusion, the Developer is not entitled to liquidated damages or access to the Security by reason of an estoppel, alleged unconscionable conduct and operation of the "prevention principle".
My conclusion is that the Builder has not established any of these matters.
The Builder accepts that, if that be the correct conclusion, there is no impediment to the Developer having access to the Security and recovering the liquidated damages it seeks.
[4]
The Conditional Certificate
The Superintendent issued the Conditional Certificate on 24 September 2018. A copy of the Conditional Certificate is attached to these reasons.
The Conditional Certificate purported to "certify", pursuant to cl 34.7 of the Contract, that the Builder had been awarded practical completion. The document stated that the "Date of Practical Completion" was 7 September 2018.
However, the document then contradicted, or at least qualified that purported certification by stating that it was "conditional upon the completion" of 10 identified "issues", seven of which were, in terms, requirements of "Practical Completion" as defined in the Contract.
Those seven requirements were those stated in italics in the Conditional Certificate, namely that:
1. "the Works are complete except for minor Defects";
2. "all documents and other information which the [Builder] is specifically required to provide under the Contract which, in the Superintendent's opinion, are essential for the use, operation and maintenance of the Works have been supplied";
3. "the [Developer] has been issued with an occupation certificate, as defined in s 109C(1)(c) of the Environmental Planning and Assessment Act 1979 (NSW), in respect of the Works on terms and conditions acceptable to the [Developer], acting reasonably, and there is no legal impediment to the use or occupation of the Works by the [Developer]";
4. "final confirmation of compliance with those authorisations, approvals and statements of compliance" have been provided to the Superintendent;
5. "Warranties for the Works listed in Annexure Part N [of the Contract]" have been provided to the Developer;
6. "all debris, rubbish, building materials, construction plant and equipment has been removed from the Site … and the Site has been professionally and thoroughly cleaned to the satisfaction of the Superintendent"; and
7. "the Works comply with all the requirements of (i) the Contract and (ii) all relevant Legislative Requirements …".
So qualified, the Conditional Certificate did not comply with the requirements of the Contract for a "Certificate of Practical Completion". Those requirements were contained in cl 34.7 of the Contract which provided:
"34.7 Practical completion
(a) The [Builder] must give the Superintendent at least 10 Business Days written notice of the date upon which the [Builder] anticipates that Practical Completion will be reached.
(b) When the [Builder] is of the opinion that Practical Completion has been reached, the Contractor must in writing request the Superintendent to issue a Certificate of Practical Completion. Within 10 Business Days after receiving the request, the Superintendent must give the [Builder] and the Principal either a Certificate of Practical Completion evidencing the Date of Practical Completion or written reasons as to why Practical Completion has not been achieved.
(c) If the Superintendent is of the opinion that Practical Completion has been reached, the Superintendent may issue a Certificate of Practical completion even though no request has been made.
(d) On issue of the Certificate of Practical Completion, the [Builder] must provide to the [Developer] an executed Deed of Release - Practical Completion."
By reason of cl 34.7(b), once the Builder gave the Superintendent a request to issue a Certificate of Practical Completion, the Superintendent had a choice. Either it could issue a "Certificate of Practical Completion evidencing the Date of Practical Completion" or it could give "written reasons as to why Practical Completion has not been achieved". [3] Clause 34.7(b) did not permit or authorise the Superintendent to take any other step.
I do not see how the Conditional Certificate could be construed as a document in which the Superintendent gave "reasons as to why practical completion has not been achieved". To the contrary, the document stated that "Practical Completion has been awarded" albeit conditionally upon "completion" of the 10 identified issues. The Builder did not submit otherwise.
Nor did the Conditional Certificate comprise a document "evidencing the Date of Practical Completion". In order to be such a document, the Conditional Certificate would have had to specify what, as at the date of its issue, was the actual date of practical completion; not what date would be the date of practical completion if all of the specified "issues" were completed.
The Conditional Certificate purports to specify a retrospective date, namely 7 September 2018, on which practical completion would be taken to have been achieved in the event of "completion" by the Builder of the identified issues. As I have set out, one of those "issues" was the issue of an occupation certificate, an event that has still not come to pass so as concerns the Terraces.
If such a document was taken to be a Certificate of Practical Completion, it would leave the parties in a state of uncertainty as to whether that date was 7 September 2018; as this would depend on if and when the specified "issues" were completed.
This was the conclusion to which Rees J came in Parkview Constructions Pty Ltd v Futuroscop Enterprises Pty Ltd [4] in relation to a contract with indistinguishable wording. I agree. The Builder pointed to the fact that, unlike the contract in Parkview, the Contract permitted the Superintendent to consult with the Developer before issuing the Conditional Certificate. [5] The Builder also pointed to the facts that in Parkview, two certificates were issued at different times, that the certificates specified dates by which the relevant conditions were to be completed and that the contract in Parkview did not provide for the possibility of the superintendent directing that there be separable portions. [6] However, the Builder did not develop any submission as to what significance lay in these differences. I see none.
The Conditional Certificate was thus a document for which there was no authority in the Contract and thus had no contractual effect.
In any event, even if the document did have contractual effect, it would not have been conclusive as to when practical completion in fact took place. That is because the "Date of Practical Completion" was defined in the Contract to mean:
"(a) the date evidenced in a certificate of Practical Completion as the date upon which Practical Completion was reached; or
(b) where another date is determined in any arbitration or litigation as the date upon which Practical Completion was reached …"
In this "litigation", and pursuant to the Contract, I am asked to determine "the date upon which practical completion was reached", that is, on which date practical completion, as defined in the Contract, was in fact reached. As no occupation certificate has yet been issued in relation to the Terraces, practical completion has not yet occurred.
[5]
The Builder's alternative arguments
The Builder's case is that if this be the correct conclusion as to the contractual status of the Conditional Certificate:
1. following the issue of the Conditional Certificate, the Developer induced the Builder to assume that the date to be applied by the parties in determining their respective entitlements to liquidated damages and/or delay costs under the Contract was 7 September 2018, and is now estopped from departing from that assumption;
2. the Developer engaged in unconscionable conduct for the purposes of s 21(1) of the Australian Consumer Law [7] ("ACL") in the circumstances I describe below; and
3. by operation of the "prevention principle", the Developer is not entitled to claim liquidated damages "because there is no date from which liquidated damages can be calculated under the Contract".
Consideration of these arguments directs attention to the events leading up to the issue by the Superintendent of the Conditional Certificate, and events thereafter.
[6]
The events leading to the issue of the Conditional Certificate
By June 2018, construction of the Apartments and Terraces was all but completed.
By June 2018, the date for practical completion of both the Apartments and the Terraces had passed. The original date for practical completion was 17 July 2017. The date for practical completion of the Apartments was later extended to 19 March 2018, and for the Terraces to 3 May 2018. Accordingly, as at June 2018, unless the Builder obtained extensions of time to achieve practical completion, it would be liable to pay liquidated damages to the Developer at an agreed daily rate of $13,628. [8]
On 5 July 2018, the Site Auditor, Dr Swane, issued a site audit report which reported that:
1. there was known or suspected contamination remaining at each of the Apartments, the Terraces and the Dedicated Public Roads;
2. the contamination risks that remained at the site made the three parts of the site unsuitable for the proposed land use without implementation of environmental management plans;
3. it was "technically feasible" for a site audit statement to be issued for each of the three areas once the Council had given written approval for an environmental management plan for each of the three areas;
4. the nature and extent of the contamination at some parts of the site have not been appropriately determined due to deficiencies in the remediation and validation work; and
5. the three environmental management plans that had been prepared for the long-term management of contamination remaining at the site were not appropriate because no approval had been received from the Council in relation to them.
On 13 July 2018, the Council wrote to the Developer, and sent a copy to the Superintendent stating:
"These [environmental management plans] are not supported by Council officers. This is due to non-compliances with [RAP4], lack of documentation and evidence to illustrate the level of remediation undertaken and the need for further remediation works to be undertaken on the site."
On 16 July 2018, the Superintendent issued a Superintendent's Instruction stating that the Builder had completed the Apartments except for matters identified in a letter from the Council of 29 June 2018 and that practical completion for the apartments "would have been issued on" 29 June 2018 if a number of items were completed, including the issue of an occupation certificate and compliance by the Builder with the Remediation Conditions.
On 23 July 2018, the Builder wrote to the Superintendent stating that the Superintendent's Instructions:
" … seem to indicate that [the Builder] has conditionally achieved a state of practical completion for [the Apartments]. However, for clarity, [the Builder] confirms that we have unconditionally completed all Works Under Contract for both [the Apartments and the Terraces]. Occupancy and Practical Completion is achievable on the project once the Environmental Delay is resolved."
On 25 July 2018, the Builder's Environmental Consultant, EI Australia Pty Ltd, wrote to the Developer and the Superintendent stating that, amongst other things, the soil underneath the Dedicated Public Roads still contained asbestos in quantities exceeding the applicable criteria, and that those matters were proposed to be managed under environmental management plans.
On 25 July 2018, the project manager of the Builder, Mr Jan-David Storm, wrote to the Superintendent:
"As I mentioned to you previously, we are in a difficult position whereby we have completed the works, provided you with all required levels of consultation, amended all claims in accordance with your requirements, provided you with all requested substantiation. Given the status of the project, I would have expected that it would now be relatively simple for the Superintendent to provide a letter confirming that the project is in delay for an [extension of time] cause which the Superintendent has accepted."
The Superintendent replied that day:
"As discussed this morning we have completed our assessment of [the Builder's latest extension of time application] …
As discussed we cannot make a final assessment of the duration with the current delay regarding the Council review of Environmental Items … Despite this the assessment will acknowledge that the Council Assessment warrants [the Builder] to an [extension of time]".
On 7 August 2018, the Builder wrote to the Superintendent:
"We have been trying to work with [the Superintendent] for 8 weeks to try and resolve the time extension on the project … to date we have not been issued anything. As you can appreciate we are trying to get the 3rd bonus payment of $500,000 from [the Developer], and they are not approving this based on the project not achieving practical completion]. Given that the delay is outside of our control we should not be further disadvantaged due to this."
The Builder's reference to the "3rd bonus payment" was a reference to the Builder's entitlements to "bonus payments" under a bonus payment deed made between the Builder and the Developer on 11 May 2016.
The Developer, by its director Ms Rosemary Ren, responded by saying:
"According to the deed, the final payment is after the issue of [practical completion] and release from the bank on [practical completion]. We also need to do the [quantity surveyor] after the [practical completion]."
Ms Ren was referring to a provision in the bonus payment deed that required a quantity surveyor to express an opinion as to the bonus payment that should be paid to the Builder.
On 8 August 2018 the Superintendent issued a further Superintendent's Instruction stating:
"The Superintendent acknowledges that the [Builder] is entitled to a[n] Extension of Time to the date of issue of this notice as a result of ongoing delay in Council approval of [the Remediation Conditions], Site Audit Statement and [Environmental Management Plan] Covenant. The Superintendent acknowledges that this [extension of time] will extend until such time that these conditions are satisfied and therefore cessation of the delay.'
The [Builder] is required to re-submit a[n] [extension of time] for the current delay once the full extent of the delay is known.
Current Practical Completion [the Apartments] - 19th March 2018
Current Practical Completion [the Terraces] - 3rd May 2018"
On 4 September 2018, in response to an enquiry from the Superintendent as to when sales agents might have access to the site, Mr Storm wrote to the Superintendent:
"If you wish to walk around the project unsupervised - issue [practical completion]."
So began the Builder's agitation for the issue of a certificate of practical completion.
The Superintendent replied that "access needs to be provided" and that "you know I cannot issue [practical completion]."
On 5 September 2018, the Builder made an application to the Superintendent for an extension of time until 7 September 2018 to achieve practical completion. The parties referred to this as "EOT9".
As I have set out above, the dates for practical completion at that stage were 19 March 2018 for the Apartments and 3 May 2018 for the Terraces.
The Builder claimed an entitlement to an extension of time on the basis of the "ongoing delay in Council approval" of the Remediation Conditions.
However, the Builder was only entitled to claim an extension of time for a "Qualifying Cause of Delay" and only if the Builder did not "contribute to the cause of the delay". [9] Any delay by the Council in certifying compliance with the Remediation Conditions was not a "Qualifying Cause of Delay".
In any event, the Council's "delay" in certifying compliance with the Remediation Conditions was because of its lack of satisfaction that those conditions had been satisfied, a matter for which the Builder was responsible under the Contract. The "delay" was thus one to which, at the very least, the Builder "contributed".
The Builder also claimed, for the same reason, "associated delay costs from completion of the Contract Works to the date of [practical completion] due to delays outside the control of [the Builder] being this ongoing delay in approval of DA conditions 99 and 100". [10]
By EOT9, the Builder claimed an extension of time to 7 September 2018 on the basis:
"In good faith that a letter of Practical Completion can be provided on the project by this date."
On 6 September 2018, the Council wrote to the Developer:
[RAP4] envisaged the management of contaminated material under less sensitive areas of the site i.e. roads. [RAP4] did not envisage [environmental management plans] would be required for the apartments and terraces areas. Onerous requirements for monitoring and managing the risk are now being proposed under [environmental management plans] for not just the road areas, but the apartments and individual terraces, for which no prior approval has been provided. This represents a clear breach of Condition 98.
Condition 99 of [the Development Approval], required that prior to the execution of works associated with the built form of the development (excluding building work directly related to remediation) a Section A Site Audit Statement (SAS) is to be obtained from the Site Auditor and submitted to the Area Planning Manager. The SAS must confirm that the site has been remediated in accordance with the Remediation Action Plan approved by the Site Auditor and the Council and clearly state that site is suitable for the proposed use. The residential development was essentially complete at the time the Section B SAS was provided to the Council by the Site Auditor, which is a clear breach of Condition 99.
The three [environmental management plans] listed above are not approved. You may seek legal advice to an alternative path to satisfy the conditions of [the Development Approval] or further remediate the land."
The Builder continued to seek establishment of a date of practical completion. Thus, also on 6 September 2018, Mr Storm for the Builder wrote to the Superintendent:
"Were you able to get any outcome with Norton Rose [the Developer's then solicitor] in relation to the ability to issue [practical completion] for Sugarcube."
On 7 September 2018, Mr Evan Torbica from the Superintendent replied:
"I'm drafting [practical completion] letter now … it is likely we will issue Monday [11 September 2018]".
Later on 7 September 2018, Mr Torbica wrote to the Developer (Ms Ren):
"After much consideration we have decided that conditional practical completion should be issued to [the Builder] today, this is on the basis that both the apartment building and the terraces have been completed, the EPA Auditor [Dr Swane] has issued his [Site Audit Statement] and endorsement of the [environmental management plans] along with interim advice stating that [RAP4] has been followed. The [occupation certificate] could be issued if council was not holding up their approval of these documents."
Thus, the Superintendent announced to the Developer its intention to certify "conditional practical completion". However, it was not correct for the Superintendent to say that Dr Swane had "endorsed" the proposed environmental management plans. On 5 July, Dr Swane had said that they were not appropriate because the Council had not approved them. [11] The day before, 6 September 2018, Council had stated, in terms, that they were not approved. [12]
Mr Torbica continued:
"I attached a draft version of the Practical Completion Certificate for your information, as you will see this has been heavily conditioned to ensure [the Builder] remain[s] responsible for obtaining the Final Occupation Certificate."
On 12 September 2018, Ms Ren wrote to Mr Torbica asking him to "please clarify the draft [practical completion]" and asking Mr Torbica to "please also send us the possible costs after the [practical completion]".
Later on 12 September 2018, Mr Torbica wrote to Ms Ren:
"Please find attached revised draft [practical completion] certificate taking into consideration your points raised yesterday, this includes the [defects liability period] commencing on the issuance of the [occupation certificate], and that the [Builder] is to maintain an element of site fencing, security, [bank guarantees] and insurances across the site until the [occupation certificate] is issued. Please advise if you are ok for us to issue this to the [Builder] or if you have any other questions."
A short time later on 12 September 2018, Ms Ren replied:
"Please advise whether or not all the conditions for practical completion have been achieved by [the Builder]? If not, please advise what are the outstanding items?"
Finally, also on 12 September 2018, Mr Torbica replied:
"This is a conditional [practical completion] only and is issued on the condition that the conditions of its issuance are followed. To provide [the Developer] with further comfort we have noted that the full amount of security in the form of the bank guarantee will be kept, under normal circumstances one of the two [bank guarantees] provided would be given back to the contractor at [practical completion]. We have also ensured that the [defects liability period] will not commence until the [occupation certificate] is issued, again this ensures that this is only applicable from when the building can be legally occupied.
We would like to issue this to ensure any delay costs can be reduced while still holding [the Builder] to their obligations under the contract."
The last paragraph of this email suggests that the Superintendent contemplated that the effect of the Conditional Certificate might be to reduce delay costs claimed by the Builder. As I set out below, Ms Ren agreed that the Superintendent had told her that this was the purpose of the document.
On 13 September 2018, Ms Ren sought advice from Mr Emanuel Confos at Norton Rose Fulbright:
"Please find attached the draft [practical completion] letter our superintendent would like to issue.
I believe you know our recent [environmental management plan] issue with council and according to the contract, the contamination is builder's risk.
I have concern if [the Builder] is still bound to contract after [practical completion] and if more remediation work to be done, it's still their liability?
[The Superintendent] mentioned the delay cost which I don't see the grounds as contamination is builder's risk and we can't get the [occupation certificate] now is being the remediation work not approved by the council.
Can I have your instructions [13] on this please?"
On 14 September 2018, Mr Confos replied to Ms Ren stating that "the [practical completion] certificate can be issued" and that "the Builder is still liable for defects after [practical completion]".
Ms Ren replied:
"I am not talking about defects and note they are liable in the 12 months period after final [occupation certificate].
I am saying the contamination and remediation liability. The remediation was not approved by the council last week which led to the failure of [environmental management plan] sign off and of course [occupation certificate] cannot be awarded.
I don't mind issuing the letter provided we are protected properly."
At around that time, also on 14 September 2018, Ms Ren wrote to the Superintendent:
"As Superintendent, it's your decision to approve the delay cost that we don't agree with."
On 17 September 2018, Mr Confos wrote to Ms Ren:
"The letter from Urban awarding [practical completion] will need to carve out the remediation of the contamination … It presently does not do that specifically."
Later on 17 September 2018, Mr Torbica from the Superintendent wrote to Mr Confos:
"Please find attached revised [practical completion] Certificate, I have added an extra condition that the [Builder's] obligations to site remediation and compliance with [Development Approval] conditions remains. I welcome any comments or suggested rewording to be in line with your advice below."
Later on 17 September 2018, Ms Ren wrote to Mr Torbica:
"I believe [Norton Rose Fulbright] should have given the draft [practical completion] a good consideration, we feel ok for you to issue the [Conditional Certificate]."
On 14 September 2018, the Council wrote to Norton Rose Fulbright expressing the Council's dissatisfaction with the proposed environmental management plan and stating:
"The City does not agree with your view that the Developer's Works are 'Complete' as contemplated by the Planning Agreement. Having regard to our comments above that to date the land comprising the Developer's Works has not been appropriately remediated, the City is of the view that this constitutes more than a 'minor defect' in the Developer's Works. Accordingly:
a. it is not correct to say that the Developer's Works are complete except for minor defects; and
b. at this time, the City will not be providing the Completion Certificate as requested."
Later on 17 September 2018, Ms Ren wrote to Mr Torbica:
"I just read the council reply which they don't think the project is complete and remediation required is not a minor defect.
I am not sure if it's proper to issue the [practical completion] on base of this?
Again, I need to remind you that the remediation is builder's risk and any delay cost claimed caused by this are not acceptable on our side."
On 18 September 2018, Mr Bart O'Callaghan from the Superintendent wrote to Mr Storm:
"Please find DRAFT [practical completion] with obvious carve outs for Occupancy Permit, Insurance, Security Presence onsite and Bank guarantee retentions and site remediation.
Subject to your accepting these provisions we can issue the signed form tomorrow."
On 19 September 2018, Mr Storm replied to Mr O'Callaghan with comments in relation to the particular condition specified in the "draft [practical completion]".
One matter that Mr Storm sought was that "the letter is to state confirmation that no Liquidated Damages are applicable to [the Builder]". As can be seen from the form of the Conditional Certificate, as issued, it contained no such confirmation.
On 21 September 2018, the Superintendent issued an extension of time purportedly extending the date of practical completion to 7 September 2018. The status of this document is problematic, as it attributed delay to alleged "delayed responses" from the Site Auditor. There was debate before me as to whether there was any such material delay by Dr Swane. However, I do not find it necessary to resolve that debate as none of the issues arising in the proceedings depends on its resolution. Nothing in these reasons should be construed as a finding that there was any such delay.
On 24 September 2018, the Superintendent issued the Conditional Certificate.
Within hours of the issue by the Superintendent of the Conditional Certificate, Mr Storm wrote to Ms Ren, asking her to "confirm when you will be making payment for the $500,000".
Ms Ren replied the following day:
"Thanks for your email. Note the [Conditional Certificate] has been issued from Urban. I believe this is the last lot of the bonus payment and we will need to get the [quantity surveyor] to assess the whole three lots and close the deed.
We will talk to [the quantity surveyor] and hope you will provide required docs at your convenience."
[7]
Ms Ren's state of mind concerning the Conditional Certificate
[8]
Delay costs
Ms Ren accepted in cross-examination that she understood from the Superintendent that the reason the Superintendent had issued the Conditional Certificate was to protect the Developer from possible applications by the Builder for delay costs.
Thus, Ms Ren gave this evidence:
"Q. You were told by Urban that the purpose of this certificate was to protect [the Developer] from further delay costs, correct?
A. That's what, that's what Urban said."
A short time later, Ms Ren said:
"Q. But you knew didn't you that Jan was relying on that document insofar as he was not claiming extensions of time didn't you?
A. Yeah."
[9]
The legal validity of the Conditional Certificate
Ms Ren was also asked questions about her state of mind concerning the legal validity of the Conditional Certificate.
She gave this evidence:
"Q. So was it your view that this document was completely invalid legally, is that your view?
A. Yes.
Q. That was your view?
A. I, I don't know why he issued that."
Ms Ren was then taken to her email that I have set out at [86] above and gave this evidence:
"Q. You said in your response, 'Thank you for your email. Note the conditional PC has been issued from Urban'?
A. Yes.
Q. You don't say in that email that their Certificate of Practical Completion is completely invalid do you?
A. I said it's conditional PC.
Q. Are you saying it has some effect or you're not saying it has some effect?
A. I don't think it has any effect.
Q. What are you saying there? You're saying--
A. This is Urban issued conditional PC.
Q. You are expressing your view in this email as to what the certificate is and you're saying 'Note the conditional PC certificate has ben issued from Urban'?
A. Yes.
Q. You're not saying 'There's a certificate that's been issued by Urban but I don't agree with it' are you?
A. Well I mean--
Q. Are you?
A. I didn't but--
Q. You didn't, did you?
A. I, I didn't.
Q. You didn't say 'Jan, why are you writing to me? That piece of paper has no meaning at all' did you?
A. No I didn't say it in this email.
Q. So you were operating on the basis the certificate was invalid but stating an email to H & M that the certificate had some form of legal validity. Is that the position?
A. Well the conditional PC was issued from Urban and I think it's not valid, but he issued it, I couldn't stop him from issuing the conditional PC."
Ms Ren, a short time later, gave this evidence, initially in response to questions from me, and then in response to a question from Ms Simpson who appeared with Mr Hanscomb for the Builder:
"Q. … In this case you know don't you that Golden Rain's position is that the conditional certificate of practical completion has no legal effect?
A. No.
Q. That's the argument in this case. Was that your state of mind back in September 2018? In other words, did you yourself think that the conditional certificate of practical completion had no effect, or did you not know either way?
A. I, I just don't think it's effect.
Q. But back in, let's say 29 September 2018, is that what you then thought, that it was of no effect legally or at all?
A. Back then I think it's the way that the Superintendent issued to stop the legal, to stop the delay cost, which I didn't agree with.
Q. To stop the delay costs and what you didn't agree with was whether the Builder was entitled to delay costs is it?
A. No.
Q. So you're agreeing with me?
A. Yeah.
SIMPSON
Q. So is this the case, you did not consider the Conditional Certificate of Practical Completion to have any legal validity, that's correct?
A. Correct.
Q. At no time did you state to H & M that you considered it had no legal validity?
A. I didn't tell H & M.
Q. And you didn't--
A. Directly tell H & M.
Q. You did not respond to any piece of correspondence saying that the Certificate of Completion had no legal validity, did you?
A. No."
The Builder relies on this evidence, particularly Ms Ren's answer to Ms Simpson's question following my questions, as showing that at all material times, Ms Ren's state of mind was that the Conditional Certificate had no legal effect. As I set out below, this proposition loomed large in Ms Simpson's closing submissions.
As Mr Kidd SC, who appeared with Mr Dooley for the Developer accepted, the evidence that Ms Ren gave in response to Ms Simpson's questions, immediately after my questions, taken alone provides some support for that submission.
However, I do not think that a fair reading of Ms Ren's evidence, taken as a whole, justifies that conclusion. Ms Ren, whose first language is not English, appeared to me to be saying that, although she understood that the Superintendent had caused the Conditional Certificate to be issued to protect the Developer from delay costs, she did not believe that the Builder had any entitlement to delay costs (a matter she consistently asserted in the contemporaneous correspondence to which I have referred) nor that the Conditional Certificate had "legal validity" in the sense of operating so as to give the Builder an entitlement to delay costs.
However that may be, the wider point is that it is no part of the Builder's case as articulated in its List Statement that Ms Ren had a belief, that she did not disclose to the Builder, that the Conditional Certificate had no legal effect. This point is particularly important in light of the manner in which Ms Simpson ultimately put the Builder's case in relation to unconscionable conduct. I will return to this below.
[10]
Events thereafter
On 26 September 2018, the Builder sent the Superintendent a "Variation Notice". The document was headed:
"Variation Notice - Ongoing Project Costs Post [Practical Completion]"
The document stated:
"As has been detailed in [the Conditional Certificate], [the Builder] has achieved the state of Practical Completion on the project.
However, in this same Superintendent Instruction, the Superintendent has requested [the Builder] to complete additional works. [The Builder] should now have no further requirements to perform any additional works given Practical Completion has been achieved …
… We will not commence these additional works until a written Variation Direction is provided for these works agreeing to the rates and costs provided."
Thus, within three days of the issue of the Conditional Certificate, the Builder's position was that it had no further obligations to perform any additional works, and that it sought release of the final payment under the bonus payment deed and return of 50% of the Security.
On 27 September 2018, and again on 5 October 2018, Mr Storm for the Builder wrote to Ms Ren requesting payment of the $500,000 bonus.
On 5 October 2018, Ms Ren replied:
"Sorry for the late reply.
According to the deed, prior to the final payment (a further amount not exceeding 1.5 mil less the payments made … 30 days after the [practical completion]), there should be a [quantity surveyor] assessment to determine how much it should be.
Your attached report is very initial at the first payment and cannot be used for the final payment. Please provide the written evidence of the trade package cost increase."
On 25 October 2018, the Builder served on the Developer a "Notice of Dispute" formally requesting payment "of the agreed $500,000 ex GST for the Bonus Payment in accordance with the Bonus Payment Deed". Payment was requested by the following day, 26 October 2018. The Builder stated that if payment was not received by that date it would "proceed with legal proceedings to obtain the payment of the agreed figure".
Ms Ren replied the same day:
"According to the bonus deed, the payment is to be arranged 30 days after the date of practical completion. The [practical completion] now is conditional which is not the final."
Ms Ren thus made clear to Mr Storm, and thus to the Builder, that the Developer's position was that there had not yet been "final" practical completion.
On 27 October 2018, Mr Storm sent Ms Ren an email stating that he would need to notify the Developer's bank, ANZ, of the dispute that was brewing. Mr Storm agreed that he took this step to apply pressure on the Developer to make the bonus payment.
On 27 November 2018, the Developer made the final bonus payment of $500,000 to the Builder.
As I set out below, Mr Storm understood at this time that the Developer's position was that the Conditional Certificate had certified practical completion conditionally, but not on a final basis. [14]
On 6 February 2019, the Builder sent the Superintendent a "Letter of Concern" in which the Builder expressed "concern in relation to inaction" by the Developer in dealing with the Council in relation to the Remediation Conditions. The letter included:
"[The Builder has] been made aware that to date the [Developer] has failed to reach an outcome with the [Council] in relation to the consent conditions required to be resolved to allow for occupation of the project. Our concern which has previously been raised formally, is the lack of action being taken by the [Developer] in relation to this matter.
…
Prior to issuance of Practical Completion, we believe that the [Developer] was advised by both [the Superintendent] and their legal representation to lodge an application to the Land and Environment Court. This would have facilitated for improved outcomes for all project stakeholders, and secure the ability of the [Developer] to hold the [Council] accountable for their delays. Our understanding is that to date the [Developer] has failed to lodge an application to the Court.
Whilst [the Builder has] not been involved in the discussions which the [Developer] has held with the [Council] over the past six months, we cannot understand why this matter has failed to progress or reach an outcome."
In February 2019, the Developer sought access to the site for the purpose of "service locating and concrete coring" and certain "drilling works".
The Builder required that the Developer execute a "general indemnity prior to any works being undertaken" and arranged for its lawyers to prepare a Deed of Indemnity and Release that Mr Storm sent Ms Ren on 18 February 2019, under cover of an email stating:
"Note that the deed is to be executed prior to any works commencing."
The proposed deed recited that "Practical Completion under the Contract was achieved on 7 September 2018" and contained a clause in the following form:
"The Principal agrees that the Contractor achieved Practical Completion on the Date of Practical Completion [defined to mean 7 September 2018] and that any conditions for Practical Completion are deemed to have been met by the Contractor as at the Date of Practical Completion."
On 26 February 2019, Norton Rose Fulbright for the Developer replied:
"Our client has not agreed to the proposed definition of Practical Completion and Date of Practical Completion and clause 3 in the deed.
Please find attached the conditional practical completion certificate issued by [the Superintendent] to [the Builder] under the Contract.
Could you please amend the deed, particularly clause 3 to reflect the conditional nature of the granting of practical completion by attaching the document as an annexure to the deed and referencing this document for the definitions of Practical Completion and Date of Practical Completion and amending clause 3 accordingly. Clearly the statement in clause 3 that 'any conditions for Practical Completion are deemed to have been met by the Contractor as at the Date of Practical Completion' is not correct."
Mr Storm was taken to this document in cross-examination and gave this evidence:
"Q. You knew as at 26 February 2019, if you didn't already know, that Golden Rain's position was that practical completion had not been achieved on 7 September 2018, correct?
A. From this email, correct."
And a short time later:
"Q. They were telling you what they understood the document to mean, correct?
A. Yes.
Q. They were telling you that they understood that the date of practical completion was not 7 September 2018, correct?
A. Correct.
Q. And they were telling you that the conditions for achieving practical completion had not been met, as you understood what they were saying, correct?
A. From this correspondence, correct."
This evidence is important in relation to the Builder's estoppel case as it confirms that the Builder knew that the Developer's position was that practical completion had not been achieved. However, as I discuss below, the Builder's case in relation to estoppel changed by the time of closing submissions, leaving this evidence of less significance.
On 27 February 2019, the Builder sent Norton Rose Fulbright a revised Deed of Indemnity and Release which "as a compromise" changed the provision set out at [110] above to the following:
"The Principal agrees that Practical Completion has been achieved in accordance with the Practical Completion Certificate",
a copy of which was to be annexed to the deed.
On 4 March 2019, Ms Ren wrote to Mr Storm saying that the proposed deed was "not acceptable" in its current form.
On 6 March 2019, the Developer served on the Builder a "Notice of Required Access under subclause 24.2" of the Contract.
On 8 March 2019, the Builder replied, referring to the Conditional Certificate, and concluding:
"Also you were aware that having achieved Practical Completion, we demobilised from the site although have agreed to provide security, maintenance and continuation of Contractor Works Insurance for an agreed daily rate.
We confirm our position stated in the meeting that having achieved Practical Completion, Golden Rain Developments is at liberty to access any part of the Site and that we are no longer in possession of the Site, other than as necessary to provide the agreed additional services."
On 12 March 2019, the Builder requested return of half of the Security and attached a purported "Deed of Release - Practical Completion". The document was in the form of a deed poll and executed on behalf of the Builder by its directors, Mr Matthew Green and Mr Shaun O'Connell. The purported release by the Builder was subject to a large number of exceptions which, as the Developer has submitted, were "so broad as to include almost any conceivable liability" that the Builder might have to the Developer.
This document loomed large in the Builder's estoppel case as articulated in its List Statement. It has less, if any, significance in light of Mr Storm's evidence of his understanding of the Developer's position concerning the Conditional Certificate as at 27 November 2018 [15] and as at 26 February 2019, [16] and the manner in which the Builder articulated its estoppel case in closing submissions. I return to this below.
On 18 April 2019, Allens Linklaters, who were now the solicitors for the Developer, wrote to the Builder:
"We are instructed to confirm our Client's view that the Conditional [Practical Completion] Certificate is invalid and that Practical Completion has not been reached in accordance with the D&C Contract as (without limitation):
• at the time the Conditional [Practical Completion] Certificate was issued, a number of the requirements of Practical Completion as set out in subparagraph (a) to (h) of the definition of Practical Completion had not been (and have still not been ) met, including compliance with the Remediation Obligations and obtaining an occupation certificate;
• there is no regime under the D&C Contract for the Superintendent to issue a 'conditional' Certificate of Practical Completion; and
• to the extent it was permissible for the Superintendent to issue a 'conditional' Certificate of Practical Completion (which is denied by our Client), the [Practical Completion] Certificate states that Practical Completion is 'conditional upon the completion' of the ten 'issues' listed in the [Practical Completion] Certificate. To date, the Contractor has failed to satisfy those ten 'issues', including compliance with the Remediation Obligations and obtaining an occupation certificate."
The letter concluded:
"As you are aware, the City of Sydney Council ('the Council') has refused to provide confirmation that the [Development Approval] conditions have been satisfied. The Council has cited significant non-compliance with certain remediation conditions of the [Development Approval] including condition 98 (Land Remediation), condition 99 (Section A Site Audit Statement) and condition 100 (Site Audit Statement - Environmental Management Plan) (together, 'the Remediation Obligations'). On this basis, the Private Certifying Authority has not issued an Occupation Certificate for the Project."
Allens set out the details of work that the Builder had not completed and concluded:
"We are instructed to request the Contractor to return to the Project site by 29 April 2019 and complete the outstanding Work identified above by no later than 1 June 2019 in accordance with its obligations under the D&C Contract.
Our Client has similarly requested a Direction be issued by the Superintendent to this effect."
On 23 April 2019 the Builder's solicitor responded by asserting that practical completion "was achieved by the [Builder] on 7 September 2018" and stating that as the Builder "has achieved Practical Completion [it] is under no obligation to effect any of the works suggested in your letter".
[11]
Estoppel
Until delivery of the Builder's closing written submissions, it contended for a conventional estoppel arising from the alleged fact that from the date of the Conditional Certificate of 24 September 2018 to the date of the Allens letter of 18 April 2019, the parties conducted themselves on the basis of a common assumption that:
1. practical completion was achieved on 7 September 2018; or
2. the Superintendent was permitted under the Contract to issue the Conditional Certificate; and
1. the legal effect of the Conditional Certificate was that the date of practical completion was 7 September 2018; or
2. the date to be applied by the parties to determine their respective entitlements to liquidated damages and/or delay costs under the Contract was 7 September 2018. [17]
This was described in the List Statement as "the Assumption" and was said to arise from nine identified events grouped under the heading "Project handover following Practical Completion".
Alternatively, the Builder contended that the Developer represented to the Builder that it was proceeding on the basis of that assumption. This was described in the List Statement as "the Representation". [18]
In closing written submissions, the Builder no longer pressed its case for a conventional estoppel and relied instead on an equitable estoppel of the kind described by Brennan J in Waltons Stores (Interstate) Limited v Maher. [19]
Thus, it was stated in closing submissions that "the primary way in which estoppel was pleaded in this case was an estoppel by convention" and that "it was pleaded in the alternative that the estoppel arose by reason of a Representation (being that [the Developer] was proceeding on the basis of the Assumption)".
The submission continued that "as it turns out, the estoppel arose by way of a Representation because Ms Ren (for [the Developer]) gave evidence that, at all relevant times, she considered the [Conditional] Certificate to be of no legal validity at all". This was a reference to the evidence of Ms Ren, to which I have referred at [88] to [94] above. As I have there set out, I do not accept that Ms Ren's evidence should be understood as meaning that, at the time of the issue of the Conditional Certificate, her state of mind was that it had no legal effect. In any event, as I have said, no such allegation is pleaded by the Builder. It is therefore not a matter on which the Builder can rely.
This was confirmed during oral submissions, when Ms Simpson confirmed that the Builder's case was now summarised in the following passage from the Builder's closing written submissions:
"In this case:
(a) [the Builder] assumed that:
(i) the Superintendent was permitted under the [Contract] and/or otherwise at law to issue the [Conditional Certificate]; and
(ii) the legal effect of [the Conditional Certificate] was that the date to be applied by the parties in determining their respective entitlements to liquidated damages and/or delay costs under the [Contract] was 7 September 2018;
(b) [the Developer] induced [the Builder] to adopt the assumption by:
(i) engaging in correspondence with [the Builder], in which [the Developer] asserted the validity of the [Conditional] Certificate …;
(ii) failing to issue a notice of dispute as regards the effect of the [Conditional] Certificate;
(c) [the Builder] refrained from seeking extensions of time and claiming delay costs in reliance on the assumption (or, in the event extensions of time were not granted as claimed, undertaking the work required to procure the occupation certificates);
(d) [the Developer] knew that [the Builder] was refraining from seeking extensions of time and claiming delay costs in reliance on the assumption;
(e) [the Builder's] inaction (failing to seek extensions of time and claiming delay costs, or in the event extensions of time were not granted, undertaking the work required to procure the occupation certificates) will occasion detriment if the assumption or expectation is not fulfilled (because [the Builder] will be exposed to liquidated damages); and
(f) [the Developer] failed to act to avoid that detriment by making it clear to [the Builder] that, as a matter of fact, it did not consider the [Conditional] Certificate to be of any legal effect."
This passage puts the Builder's estoppel by representation differently to its case as articulated in its List Statement. In its List Statement, the Builder alleged that the Developer represented that it was proceeding on the basis of the "Assumption" by issuing the Conditional Certificate and engaging in six identified acts (including sending emails) and remaining silent in the face of four identified communications from the Builder.
As can be seen from the passage that Ms Simpson stated summarised the Builder's final position, that final position was that the Developer induced the Builder to assume that the effect of the Conditional Certificate was to specify 7 September 2018 as the date by reference to which the Developer's entitlement to liquidated damages and the Builder's entitlement to delay costs be determined by:
1. "asserting", which I understand to mean representing, that the Conditional Certificate was valid, which I understand to mean validly issued under the Contract; and
2. failing to issue a notice of dispute concerning the Conditional Certificate: see subpar (b) of the submission.
Thus, the Builder no longer contended for the Representation alleged in its List Statement.
The "correspondence" referred to in [(b)(i)] of the Builder's submission set out at [131] above said to comprise assertions as to the "validity" of the Conditional Certificate, comprised, in addition to the Conditional Certificate itself: [20]
1. Ms Ren's failure to respond to the Superintendent's 18 September 2018 email, referred to at [78] above, in which he stated:
"Please find [attached] DRAFT [practical completion] with obvious carve outs for Occupancy Permit, Insurance, Security Presence onsite and Bank guarantee retentions and site remediation";
1. Ms Ren's failure to reveal her "position" on the "legal effect" of the Conditional Certificate on receipt of the Conditional Certificate from the Superintendent on 24 September 2018 "knowing that [the Builder] would cease issuing claims for extensions of time and delay costs on receipt of this document";
2. Ms Ren's email to Mr Storm of 25 September 2018 referred to at [84] above when she wrote:
"Thanks for your email. Note the conditional [practical completion] has been issued from Urban.
I believe this is the last lot of the bonus payment and we will need to get the [quantity surveyor] to assess the whole three lots and close the deed.
We will talk to [the quantity surveyor] and hope you will provide required docs at your convenience";
1. Ms Ren's reply to an email from Mr Storm on 27 September 2018 in which he sought the release of the Security and payment of the $500,000 bonus payment in which she said, allegedly suggesting the Conditional Certificate was of legal effect and knowing the Builder was relying on the Conditional Certificate in not issuing extension of time claims:
"2: As soon as the conditional [practical completion] issued, we talked to our [quantity surveyor] and the assessment is undergoing now. With the very limited docs on hand, we may need your assistance in providing the necessary info. I think the list will be provided within next week";
1. an email sent by Ms Ren to Mr Storm on 29 September 2018 in which she stated, again allegedly asserting the legal validity of the Conditional Certificate:
"Thank you for your email.
As per our meeting last week, we understand we both are under significant pain due to the extra long timeframe of the project. With the issuance of conditional [practical completion] on last Monday, I believe:
1: Urban will organise the release of the bank guarantee (half of the 5% according to what Urban informed us). We have no problem signing the docs when ready.
2: As soon as the conditional [practical completion] issued, we talked to our [quantity surveyor] and the assessment is undergoing now. With the very limited docs on hand, we may need your assistance in providing the necessary info. I think the list will be provided within next week.
3: Sorry to know your accounting is at a loss situation. I do hope you understand ours";
1. a text message Ms Ren sent to Mr Storm on 12 October 2018:
"Bart [O'Callaghan from the Superintendent] rang me about the release of the guarantee. I said ok as long as ANZ and his side agreed to it. I think he is working on it. Just to let you know";
1. an email Ms Ren sent to Mr Storm on 26 October 2018:
"We confirm receipt of your letter of notice dated the 25th Oct 2018. According to the bonus deed, the payment is to be arranged 30 days after the date of practical completion. The [practical completion] now is conditional which is not the final.
The report from Mitchell Brandtman is a budget and quotes not supported by written evidence as required in Bonus Deed.
I have forwarded your claim to [the quantity surveyor] for consideration and assessment especially on the base of piling and steel reinforcement supply as stated in your letter";
1. the fact that the Developer paid the Builder the $500,000 bonus on 27 November 2018; and
2. the absence of any claim by the Developer for liquidated damages from the time of the Builder's 6 February 2019 "letter of concern" up to and including Allens' letter of 18 April 2019.
Assuming that these matters do amount to an assertion by the Developer as to the "validity" of the Conditional Certificate, an assertion that the Conditional Certificate was valid, or issued validly under the Contract is different from an assertion that its effect was to fix 7 September 2018 as the date from which the parties' entitlements as to liquidated damages and delay costs were to be calculated.
The Builder does appear to have assumed that, as Mr Storm said in cross-examination, the effect of the Conditional Certificate was that time stopped running for the Builder to make a delay claim and the Developer to be entitled to liquidated damages. As Ms Simpson submitted, the Builder in fact ceased claiming extensions of time and delay costs once the Conditional Certificate was issued.
But, bearing in mind the terms of the Conditional Certificate, I cannot see how a representation by the Developer to the Builder that it was "valid", without more, could reasonably have induced the Builder to make that assumption.
I can see nothing in the Conditional Certificate itself, nor in the matters set out at [135], that could amount to a representation that the legal effect of the Conditional Certificate was as the Builder contends it understood.
None of the emails upon which the Builder now relies were capable of inducing such an understanding.
The Conditional Certificate contains no reference to delay costs or liquidated damages despite the fact that, as I have set out above, [21] Mr Storm sought to have included in the Conditional Certificate a "confirmation that no liquidated damages are applicable" to the Builder. The fact that, despite that request, no such "confirmation" was included in the Conditional Certificate shows that the Conditional Certificate itself was incapable of inducing the Builder to make the assumption it claims it made.
As I have said, it appears that the Builder assumed that the effect of the Conditional Certificate was that it was no longer necessary for it to seek extensions of time or delay damages.
In that regard, Mr Storm gave this evidence, including in answer to questions from me:
"Q. That was true, wasn't it, practical completion had been certified as conditional?
A. There were conditions on the practical completion, your Honour. The, the certificate, as we received it, at the top of the certificate called it a 'Certificate for Practical Completion'.
HIS HONOUR
Q. But it was subject to conditions?
A. There were conditions, your Honour, yes.
Q. So it was a conditional certificate, wasn't it?
A. Your Honour, if I may, we accepted the certificate as a certificate of practical completion with the intent of time stopping.
Q. But that's not what it says, is it?
A. It, it does, your Honour. It says the date certified for practical completion and the date is, is listed there.
Q. It says, 'Practical completion has been awarded and is conditional on a number of things'?
A. Yes, your Honour. Those conditions are stated. But at the top of the certificate, your Honour, it says the date certified for practical completion and, and the date listed." (Emphasis added.)
Thus, Mr Storm's position was that he understood that time had stopped running because the Conditional Certificate "says the date certified for practical completion and the date listed".
But this ignores the clear statement in the Conditional Certificate that those statements were qualified, if not contradicted, by the statement that the "award" of practical completion was conditional on completion by the Builder of the 10 items listed in the Conditional Certificate. My conclusion is that the position that the Builder now finds itself in is as a result of its unilateral misunderstanding of the effect of the Conditional Certificate, and not because of any inducement by the Developer.
As to the payment by the Developer to the Builder of the $500,000 bonus on 27 November 2018, the difficulty for the Builder is that Mr Storm agreed that, by this time, he understood that practical completion as defined in the Contract had not been achieved and that the Developer's position was that the Conditional Certificate had certified practical completion conditionally, but not on a final basis.
Thus, Mr Storm gave this evidence:
"Q. I'll ask it one more time. You knew, as at 27 November 2018 that practical completion, as defined in the building contract, had not been achieved, correct?
A. If you want to put it that way, yes.
Q. You also knew, as at 27 November 2017, that the certificate of practical completion itself stated that practical completion had been awarded conditionally, didn't you?
A. We understood it to have conditions, yes.
Q. I suggest you also knew, as at 27 November 2017, that Golden Rain's position, as articulated in the emails to which I've drawn your attention, was that the certificate of practical completion had certified practical completion conditionally, but not on a final basis. Do you agree?
A. Yes."
The fact that the Developer did not make a claim for liquidated damages until after Allens' letter of 18 April 2019 appears to me to be neutral on this question, as does the alleged fact that the Developer did not serve a notice of dispute "as regards the Effect of the Certificate".
[12]
No reliance or detriment
In its List Statement, the Builder asserts that it relied on the Representation "by taking no further steps in respect of the matters" specified as conditions in the Conditional Certificate, including obtaining a final occupation certificate and effecting site remediation compliance with the Remediation Conditions. [22]
However, as the Developer has pointed out, the Conditional Certificate made it clear that the Builder remained responsible for obtaining the occupation certificate and performing the remediation obligations.
I accept the Developer's submission that the fact that the Builder unreasonably ignored those conditions cannot amount to detrimental reliance.
[13]
The statements made by the Builder to its subcontractors
Following the issue of the Conditional Certificate, the Builder wrote to numerous of its subcontractors asserting, inconsistently with its case in these proceedings, that practical completion had not been achieved. This was in the context of those subcontractors seeking to have released to them amounts held by the Builder by way of retention.
The Developer did not invite me to find that it followed from these matters that I should not accept that the Builder genuinely believe that practical completion had been achieved or should be taken to have been achieved; and I do not find it necessary to make any finding to this effect. However, it does show that the Builder was prepared to make assertions to its subcontractors contradicting the case it seeks to maintain in these proceedings.
[14]
Conclusion as to the Builder's estoppel case
The Builder has not established its estoppel case.
[15]
Unconscionable conduct
The Builder alleges that the Developer has engaged in unconscionable conduct within the meaning of s 21 of the ACL.
Under s 21 of the ACL, the question of what conduct is unconscionable is not limited by the unwritten law relating to unconscionable conduct. [23]
What must be shown is conduct that:
1. "objectively answers the description of being against conscience", where the standard of conscience is informed by such matters as "certainty in commercial transactions, honesty, the absence of trickery or sharp practice, fairness when dealing with customers, the faithful performance of bargains and promises freely made"; [24]
2. "is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience", [25] the judgment being "a heavy one" and one "informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within contemporary Australian society"; [26]
3. although not limited to conduct held to be "unconscionable" under the general law, must nonetheless be capable of being described as unconscionable; [27] and
4. is capable of being established even where the innocent party is a willing participant, the question then being how that willingness was produced. [28]
Factors relevant to whether conduct is unconscionable in this sense include asymmetry of power or information, and the risk and worth of the bargain. [29]
It has also been held that:
"… it is not necessary to show that a person is under a disadvantage or that any particular person has been disadvantaged by conduct. [30] Statutory unconscionability does not require some form of pre-existing disability, vulnerability or disadvantage of which advantage was taken; there is no need to establish exploitation of disadvantage. In any event, a post is not treated as being in a position of substantial disadvantage merely because there is an inequality of bargaining power. And the mere existence of disparity in bargaining power does not establish that the party which enjoys the superior power acts unconscionably by exercising it". [31]
In every case, it is necessary to engage in a careful examination of the facts. [32]
As formulated in its List Statement, the Builder's case was that the Developer engaged in unconscionable conduct for the purposes of s 21 of the ACL by seeking, allegedly contrary to its entitlements under the Contract, to levy liquidated damages and call on the Security in circumstances where it:
1. did not challenge the Conditional Certificate;
2. acted "on the apparent basis" that practical completion had been achieved under the Contract, or alternatively that the date for determining the parties' respective entitlements to liquidated damages and delay costs have been certified as 7 September 2018;
3. independently of the Builder, sought modification to the Remediation Conditions. [33]
In opening written submissions, the Builder's case on unconscionability was put this way:
"If [the Developer], through Ms Ren, did not consider that the [Conditional Certificate] was of legal effect, such that liquidated damages were running on and from 25 September 2018 in circumstances where, to her knowledge, [the Builder] had not issued further extensions of time, then [the Developer's] conduct in:
(a) engaging in discussions with Mr Storm in relation to payment of the final bonus payment … And in relation to the return of the [Security];
(b) engaging others to undertake the work required to negotiate with the Council in relation to the … [environmental management plans] and Occupation Certificate for the Project …
while also taking benefit of the fact that [the Builder] had ceased to issue claims for extensions of time and delay costs, was a significant departure from the norms of acceptable commercial behaviour"
and constituted unfair tactics or a failure to act in good faith, and thus constituted unconscionable conduct.
In closing submissions, the Builder's case in relation to unconscionable conduct changed dramatically, evidently based on the evidence of Ms Ren to which I have referred concerning her state of mind as to the legal validity of the Conditional Certificate.
Thus, it was submitted:
"In circumstances in which [the Developer], through Ms Ren, did not consider that the Certificate was of legal effect, and where Ms Ren herself knew that [the Builder] laboured under the assumption that the Certificate curtailed its rights (in respect of extensions of time and delay costs) and protected it from liabilities (in respect of liquidated damages) under the Contract, it is unconscionable that [the Developer] would now seek to call on the Replacement Security and levy liquidated damages.
The question of unconscionability in these proceedings arises from the disparity between Ms Ren's evidence in cross examination that she:
(a) did not believe that the Certificate had had any legal effect; and that she
(b) knew that [the Builder was] labouring under the apprehension (to her, in light of (a) above, a misapprehension) that the Certificate had had a legal effect; but that
(c) upon its issue [the Builder] would cease claiming delay costs …
and the documentary evidence, which demonstrates a consistent representation from Ms Ren, on behalf of [the Developer], in the period following the issue of the Certificate that [the Developer] considered it the certificate was of legal effect (in the knowledge that [the Builder] had ceased making claims for extensions of time or delay costs on the basis of that document). In the terms of s 22(2) of the ACL, that conduct amounted to 'unfair tactics' (s 22(2)(d)) or a failure to act in good faith (s 22(2)(1)).
There is nothing fair about allowing a Principal its counterparty, the [Buiilder], to resile from its contractual entitlements (the claiming of extensions of time or delay costs, whether the Principal might agree with the entitlement or not) and to thereby expose itself to new liability (in the form of liquidated damages or a call on the security) on a basis which is known (or at least thought by the Principal) to be false.
To put it another way, in allowing [the Builder] to labour under this misapprehension as to the effectiveness of the Certificate, [the Developer] engaged in the unfair tactic of exploiting [the Builder]'s assumption to allow it to make an 'each-way' bet on the validity of the Certificate. If it be the case that the Certificate was effective, [the Developer] has avoided the liability to pay delay costs (and Ms Ren acknowledged in cross examination this would be an effect of the Conditional Certificate …); if it be the case that the Certificate was not effective, [the Developer] has created a situation in which there has been no extension of time and so liquidated damages may run.
The moral obloquy, to adopt the expression of waning favour in the cases, arises not because of some luck on the part of [the Developer] that might follow a determination of this Court that the Certificate was or was not effective, but rather more specifically from the actual knowledge of Ms Ren as far back as 26 September 2018 that [the Builder] was making decisions which affected its rights and liabilities on a basis which she herself thought to be false and which she herself could have corrected. While it may not have been unconscionable for Ms Ren to fail to correct Mr Storm, it is unconscionable that [the Developer] now call on the security and claim liquidated damages where that correction was not made." (Emphasis in original.)
This is a fundamentally different case to that articulated in the Builder's List Statement and, as Ms Simpson accepted in closing submissions, was now based on Ms Ren's alleged state of mind that the Conditional Certificate was of no legal effect.
As I have set out earlier, I do not accept Ms Ren had such a state of mind.
In any event, the unconscionability case sought to be made on behalf of the Builder in closing bears no resemblance to the case in its List Statement and, in my opinion, is not one that is available to the Builder.
[16]
Conclusion as to unconscionability
The Builder has not sought to make out the unconscionability case in its List Statement. It is not entitled to make out the unconscionability case articulated in its closing submissions.
[17]
Prevention
The "prevention principle" is that "a party cannot insist on the performance of a contractual obligation by the other party if it itself is the cause of the other party's non-performance". [34]
The Builder's case is that the operation of the prevention principle in this case has the effect that the Developer "cannot insist on the performance" by the Builder of what would otherwise be its contractual obligation to pay liquidated damages by reason of two matters.
The first is the contention that on and from 7 September 2018, the Developer by its conduct "took over" the Builder's obligations under the Contract to satisfy the Remediation Conditions and thereby "prevented" the Builder from performing its obligation to satisfy the Remediation Conditions. [35]
The second is the contention that on and from 7 September 2018, the Developer "took out of the Builder's hands" [36] the ability to prepare a delay claim under cl 34.2 of the Contract. This is alleged to have "prevented" the Builder from making an extension of time claim for practical completion because the Builder "did not, and could not provide the details required under clause 34.3" of the Contract "because it did not have detail of the matters required to be set out in such a claim". [37]
Clause 34.2 of the Contract obliged the Builder to notify the Superintendent of anything that would probably cause delay to the works and provide "details of the nature and where possible the extent of the possible delay and the probable cause of delay".
Clause 34.3 provided that the Builder was entitled to claim for an extension of time for practical completion if there was delay in reaching practical completion by a "Qualifying Cause of Delay", subject to various conditions including compliance with cl 34.2 and that the Builder "did not contribute to the cause of the delay".
Ms Simpson's submissions on this topic were directed primarily, if not exclusively, to the first of the two contentions that I have outlined.
However, the evidence shows that, following the issue of the Conditional Certificate, the Developer neither "took over" the Builder's obligations under the Contract nor "took out of the Builder's hands" its ability to exercise its rights under the Contract.
Rather, following the issue of the Conditional Certificate, the Builder announced, and repeatedly reiterated, that it had no further obligations under the Contract; seemingly based on its misunderstanding of the status and effect of the Conditional Certificate.
As I have set out above, [38] on 26 September 2018, immediately after the issue of the Conditional Certificate, the Builder wrote to the Superintendent:
"The [Builder] should now have no further requirements to perform any additional works given Practical Completion has been achieved …"
And on 23 April 2019, following Allens' letter of 18 April 2019 requesting the Builder to return to the site, the Builder's solicitors stated:
"The [Builder] repeats that it has achieved Practical Completion and is under no obligation to affect any of the work suggested in your letter". [39]
As to the Builder's contentions concerning the Remediation Conditions, although it is true that there is no evidence that the Developer invited the Builder to participate in negotiations with the Council concerning this matter, there is no evidence that the Developer prevented the Builder from performing its obligations under the Contract concerning the Remediation Conditions. As the Developer submitted, the Builder did not ever indicate that it was to be involved in the remaining tasks, stating consistently that its position was that it had no further obligations to perform. The Builder's "letter of concern" of 6 February 2019 [40] made clear that the Builder was aware of the Developer's negotiations with the Council but did not request that the Builder be involved in those negotiations.
As to the Builder's contentions concerning its inability to make an extension of time claim and of its ability to do so being taken out of its hands by the Developer, the evidence to which I have referred establishes that after the issue of the Conditional Certificate, the Builder never intended to seek an extension of time of the date for practical completion, again evidently because of its misunderstanding of the status and effect of the Conditional Certificate.
As the Developer pointed out in closing submissions, the point is clearly made in a paragraph of Mr Storm's affidavit in which he stated that until receipt by the Builder of Allens' letter of 18 April 2019:
" … it had never occurred to me to submit a claim for an extension of time at any stage post 24 September 2018, the date on which [the Superintendent] sent [the Builder] the [Conditional Certificate] because the purpose of an [extension of time] claim is to extend the Day for Practical Completion, which I believe had been achieved on 7 September 2018."
Further, my attention has not been drawn to any evidence that the Builder was in fact prevented from making an extension of time claim, nor to any evidence from an officer or employee of the Builder that they would have made an extension of time claim, but had been prevented from doing so by not knowing the details of the Developer's dealings with the Council.
In any event, the contents of the Builder's 6 February 2019 "letter of concern" [41] show that the Builder did have knowledge of the Developer's conduct which the Builder believed had delayed the obtaining of an occupation certificate and had sufficient details to be able to express the opinion that the Developer had failed to take sufficient action to obtain an occupation certificate, including by commencing proceedings in the Land and Environment Court.
I find these matters to be sufficient to conclude that the Builder has not established its case concerning the operation of the "prevention principle".
[18]
The Securities and liquidated damages
Ms Simpson accepted that if the Builder was unsuccessful in relation to its case concerning the status of the Conditional Certificate and in relation to its estoppel, unconscionability and prevention arguments, there was no impediment to the claim made by the Developer to recover the Security and to liquidated damages referred to in its cross-claim.
[19]
Conclusion
I will invite the parties to consider these reasons and make submissions as to what, if any, further matters require resolution, and as to the orders needed to give effect to these reasons and finalise the proceedings.
[20]
Endnotes
The Contract enabled the Superintendent, Urban Pty Ltd, to specify "separable portions" of the works. In June 2017, the Superintendent directed that the Apartments and all but one of the Dedicated Public Roads be "Separable Portion 1" and that the Terraces and the remaining Dedicated Public Roads be "Separable Portion 2". However, for simplicity, I will refer only to the defined terms in [1].
Clause 20(b)(i).
Abergeldie Contractors Pty Ltd v Fairfield City Council [2017] NSWCA 113 at [32] (Basten JA (as his Honour then was), considering an indistinguishable clause; Beazley ACJ (as her Excellency then was) and Meagher JA agreeing).
[2023] NSWSC 178.
Clause 20(c).
Cf fn 1 above.
Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law.
Clause 34.8 and Item 29 in Part A of the Contract.
Clauses 34.3(a)(i) and (iv) of the Contract.
Under cl 34.10, the Builder was entitled to delay costs to a maximum daily amount of $25,150 but again, only for a "Qualifying Cause of Delay"; which did not include any delay by the Council.
See [36] above.
See [58] above.
Ms Ren obviously meant "advice".
See [143] below.
See [106] above and [143] below.
See [112]-[113] above.
List Statement C58 and C59.
List Statement C60.
(1988) 164 CLR 387 at 428-429; [1988] HCA 7.
As set out in the Builder's closing submissions at par 54.
See [80] above.
List Statement C61 and C33.
Section 21(4)(a).
Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18 at [14] (Kiefel CJ and Bell J).
Ibid at [92] (Gageler J).
Ibid at [93].
Ibid at [119] (Keane J).
Ibid at [157] (Nettle and Gordon JJ).
Australian Securities and Investments Commission v Westpac Banking Corporation (Omnibus) [2022] FCA 515 at [26] (Beach J).
See Australian Securities and Investments Commission Act 2001 (Cth), s 12CB(4)(b) and ACL, s 21(4)(b).
Australian Securities and Investments Commission v Westpac Banking Corporation (Omnibus) (supra) at [31] (Beach J).
An obvious point and one emphasised, for example, in Good Living Company Pty Ltd as trustee for the Warren Duncan Trust No 3 v Kingsmede Pty Ltd (2021) 284 FCR 424; [2021] FCAFC 33 at [2] (Allsop CJ) and [26] (Jagot J).
List Statement C64.
Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) [2012] WASCA 53 at [47] (McLure P, Newnes JA agreeing), cited with approval in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 at [114] (McColl JA; Beazley ACJ (as her Excellency then was) and Macfarlan JA agreeing).
List Statement C66(aa), (ab) and (a).
Particulars to List Statement C66(b): "was taken out of the Contractor's hands".
List Statement C66(b).
See [97] above.
See [124] above.
See [107] above.
See [107] above.
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Decision last updated: 09 August 2023
Parties
Applicant/Plaintiff:
H & M Constructions (NSW) Pty Ltd
Respondent/Defendant:
Golden Rain Development Pty Ltd
Legislation Cited (5)
Australian Consumer Law Environmental Planning and Assessment Act 1979(NSW)
See Australian Securities and Investments Commission Act 2001(Cth)