Intercon Engineering Pty Ltd v Lend Lease Project Management & Construction

Factual background 4Each of the subcontracts is in substantially the same terms. Clause 10.8.1.1(1) of each subcontract entitles Lend Lease to retain from any amount payable under the subcontract an amount determined at the rate, and up to the limit, specified in the appendix to the subcontract. Clause 10.9 of each subcontract provides that, in lieu of the retention referred to in cl 10.8.1.1(1), the subcontractor may provide 2 unconditional banker's undertakings of equal value for a total amount that is equal to the limit of the amount Lend Lease is entitled to retain. Clause 10.10.1 of each subcontract provides: Upon the later of Substantial Completion and receipt by [Lend Lease] of a written request from the Subcontractor for release of either a banker's undertaking or money retained and subject to Clause 6.9.3, [Lend Lease] must release to the Subcontractor either one banker's undertaking or one half of the money retained under Clause 10.8.1.1(1) as applicable. Upon the later of the making good of defects and other matters not in accordance with the Subcontract, the expiration of the Defects Liability Periods (or Second Defects Liability Periods if applicable) and receipt by [Lend Lease] of a written request from the Subcontractor for release of either a banker's undertaking or money retained [Lend Lease] must release to the Subcontractor either the remaining banker's undertaking or the balance of the money retained. 5The terms "Defects Liability Periods" and "Second Defects Liability Periods" are defined in cls 9.7.1, 9.7.2 and 9.7.3 of the subcontracts in the following terms: 9.7.1 The Defects Liability Period for the Works and each Stage will commence on the Date of Substantial Completion. 9.7.2 Each of the Defect Liability Periods will expire at the end of the period stated in the Appendix. 9.7.3 A Second Defects Liability Period for the period stated in the Appendix will apply to a defect or other matter not in accordance with the Subcontract notified to the Subcontractor by [Lend Lease] during a Defects Liability Period. The Second Defects Liability Period will commence on the date [Lend Lease] notifies the Subcontractor that the defect or other matter has been made good to the satisfaction of [Lend Lease]. 6The "Works" were the works to be performed under each subcontract. The work under each subcontract was not divided into stages. 7In relation to cl 9.7.2, the relevant item in the Appendix to each subcontract provides: Defects Liability Periods will expire 24 months after the Date of Final Acceptance (as defined under the Head Contract). In relation to cl 9.7.3, the relevant item in the Appendix to each subcontract provides: Second Defects Liability Period is 36 months after the Date of Final Acceptance. 8Nothing in this case turns on the Second Defects Liability Period. Presumably, however, the reference in the Appendix to "the Date of Final Acceptance" in respect of that item is also meant to be a reference to that expression as defined in the Head Contract. There is no definition of "Date of Final Acceptance" in any of the subcontracts. 9"Head Contract" is defined in cl 1.1 of each subcontract to mean the Head Contract. The expression "Date of Final Acceptance" is defined under that contract to mean: The date of Final Acceptance of the Works or a Stage set out in a Certificate of Final Acceptance, being the date by which the Works or a Stage achieved Final Acceptance and all other preconditions to Final Acceptance are satisfied. It is agreed between the parties that Final Acceptance of the Works under the Head Contract has not yet been achieved. 10It appears that Mr and Mrs Wright provided Lend Lease with 6 bank guarantees in accordance with cl 10.9 of each of their subcontracts. Three of those have been released in accordance with the first limb of cl 10.10.1, following Substantial Completion of the work the subject of the subcontracts and receipt of a written request from Mr and Mrs Wright. Lend Lease continues to holds 3 bank guarantees provided by Mr and Mrs Wright for $46,205.65, $107,914.17 and $46,810.27. 11There was a dispute between Lend Lease and Intercon in relation to the work performed under Intercon's subcontract. On or about 2 September 2010, Intercon and Lend Lease entered into a Deed of Release to resolve that dispute. Clause 2 of that deed sets out certain payments to be made by Lend Lease to Intercon. Clause 2(ii) relevantly provides: ... For the avoidance of doubt the retention monies held by [Lend Lease] comprises two bank guarantees each valued at $172,833.50 as well as cash retention of $45,583. Further, for the avoidance of doubt, the monies paid by [Lend Lease] in accordance with clause 2(i) of this Release includes one half of the retention monies retained by [Lend Lease] under the Subcontract and the Agreement and the release of the remaining retention monies referred to in this clause 2(ii) (i.e. $391,250 exclusive of GST) will occur upon the latter [sic] of the making good of all defects and other matters not in accordance with the Subcontract and the Agreement, the expiration of the Defects Liability period (or Second Defects Liability Period if applicable) and receipt by [Lend Lease] of a written request from Intercon for release of the balance of the money retained; ... It was common ground between Lend Lease and Intercon that the effect of this clause was to preserve Lend Lease's right to retain half the retention amount in accordance with cl 10.10.1 of the subcontract and that that amount consists of 2 bank guarantees each of $172,833.50 and $45,583 in cash. 12Mr and Mrs Wright and Intercon have demanded return of the guarantees and cash still held by Lend Lease. It is agreed between the parties that those demands were made more than 2 years after Substantial Completion of the works (as defined in each subcontract). 13It is clear from the definition of "Date of Final Acceptance" in the Head Contract that that contract contemplates the possibility that work under it will be divided into stages and that it is possible for Final Acceptance to occur in respect of each stage. 14At the time the Head Contract was entered into, the works were divided into 2 stages. One was described in schedule 1 to the contract as "Stage 1 PSTC". The other was described as "Stage 2 rest of the works". It appears that since then the works under the Head Contract have been divided into additional stages. However, it is not clear what those stages are. The Head Contract has been varied by deed by the Commonwealth and Lend Lease on a number of occasions. It is apparent from Deed Number 4 dated 20 December 2013 that the works have been divided into additional stages described as "PPSF" and "CBF Building" and that the date for Final Acceptance of those stages is 15 February 2015. Apart from that, there was no evidence concerning the stages the work has been divided into, nor any evidence concerning which, if any, of those stages have been the subject of Final Acceptance. The absence of that evidence was raised by the court with the parties, but no party sought to lead additional evidence concerning that matter or sought an adjournment in order to do so. 15It is agreed between the parties that there is no outstanding notice served by Lend Lease in respect of any defects or other matters not in accordance with the respective subcontracts. 16It is also agreed that Mr and Mrs Wright and Intercon did not see the terms of the Head Contract at the time they entered into their respective subcontracts.

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