Metier3 Pty Ltd v Enwerd Pty Ltd & Anor [2014] VSC 80

PRACTICE AND PROCEDURE - Supreme Court (General Civil Procedure) Rules 2005 (Vic) - Rule 47.04 - Preliminary question for determination

1 The Plaintiff, by Originating Motion and summons on Originating Motion, seeks relief in the form of declarations, intended to substantiate its entitlement to relief, and final judgment against the Defendants in the amount of $300,000.00 plus GST.

2 At a directions hearing conducted on Friday 21 February 2014, I directed, pursuant to the case management provisions of the Civil Procedure Act 2010, that a preliminary trial of a contract construction issue be conducted on 26 February 2014 pursuant to rule 47.04 of the Supreme Court (General Civil Procedure) Rules 2005 (the 'Rules').

3 These reasons provide the answer to the question stated for determination and the reasons for that answer.

4 The Plaintiff is an architectural firm specialising in the design and redevelopment of commercial buildings, and was and remains the Architect for the redevelopment of the St James Building at 121 William Street, Melbourne ('the Project').

5 The Plaintiff undertook to perform architectural services in relation to the Project pursuant to an Architect Consultant Agreement entered into between the parties in or about January, 2010. The Plaintiff then made claims under the Agreement for payment of fees for those services in respect of the period between December 2008 and December 2011.

6 The calculation of fees over this period was disputed and following extensive negotiations the parties agreed on the final fees payable, by entering into a Deed of Settlement on 19 November, 2012 (the 'Deed of Settlement').

7 The Deed of Settlement provided, inter alia, for the total unpaid balance of the outstanding fees due to the Plaintiff to be settled at $1,314,584 (plus GST). This sum was agreed to be paid by instalments which were specified in a schedule to the Deed. The final instalment payable was the sum of $300,000 (plus GST). This was payable in accordance with Clause 2(e) of the Deed, which was in the following terms:

Payment by the Principal of the last instalment of the Final Payment shall be subject to Practical Completion of the Works (including provision of all construction drawings and any other documents required under the agreement to be provided by the Consultant in respect of the Project, upon, or immediately following, Practical Completion); and ...

8 The issue of construction for determination in this part of the proceeding concerns the construction of Clause 2(e) of the Deed.

9 Clause 1.1 of the Deed of Settlement defines 'Practical Completion' for the purposes of the Deed to mean:

'Practical Completion' means the issue of a Certificate of Practical Completion for the Works, or any relevant portion of the Works, in accordance with the contractual arrangements for performance of the Works.

10 It was common ground that the 'contractual arrangements for performance of the Works' as referred to in the Clause 1.1 Deed of Settlement definition for 'Practical Completion' was the 'St James Redevelopment Design and Construction Contract' dated 11 July 2011, which included amended general conditions of contract for a design and construction contract in accordance with the Australian Standard AS 4300 - 1995 (the 'D & C Contract').[1]

11 It was also common ground that on 1 March, 2013, Peter Steinschuilte, acting as the Superintendent's Representative, issued what purported to be a Certificate of Practical Completion ('the CPC') for the Works.

12 However, the Defendants have failed and refused to pay the final instalment of $300,000, plus GST, or any part of this sum, and have maintained this position in spite requests by the Plaintiff. The Plaintiff eventually wrote a letter of demand to the Defendants dated 13 September, 2013 requesting payment of the final instalment. However, neither this sum, nor any part of it, has been paid by the Defendants.

13 The Defendants in correspondence asserted that the CPC was issued prematurely by the Superintendent, and that the Superintendent, Case Meallin and Associates had been terminated and that the CPC 'is meaningless and ineffectual'.

14 It is further common ground that the Defendants have not taken any steps by way of arbitration or litigation to set aside the CPC.

15 The question stated for determination pursuant to r.47.04 of the Rules is: Subject to Clause 2(e) of the Deed of Settlement, whether the relevant provisions of the Deed give rise to an entitlement for the Plaintiff to be paid the final instalment of $300,000 plus GST upon the issue of a Certificate of Practical Completion by the Superintendent?

16 The Plaintiff submitted that the CPC certified that Practical Completion had been achieved for the remaining Works and that the Defects Liability Period had now commenced.

17 The Plaintiff contends that the Defendants are retaining the money to ensure that the Plaintiff is actively involved in the defects liability process, which is not in accordance with the Settlement Deed. The Settlement Deed contemplates that defects liability would take place after payment of the Final Payment.

18 The Plaintiff's essential submission is that on a proper construction of the Settlement Deed, Practical Completion of the Works occurred for the purpose of the Settlement Deed when the CPC was issued by the Superintendent on 1 March 2013, and that the Plaintiff has been put out of its money since that time.

19 The Plaintiff says further that the Defendants have put forward an untenable construction of the Settlement Deed in order to avoid payment to it.

20 The Plaintiff submits that definition of 'Practical Completion' of the Works for the purpose of payment of the last instalment is unambiguous. The term is qualified by the definition of 'Practical Completion' contained in Clause 1.1 of the Settlement Deed, which provides that 'Practical Completion' means the issue of a Certificate of Practical Completion for the Works, in accordance with the contractual arrangements for performance of the works.

21 The Plaintiff points to the following Clauses of the D & C Contract:

"Date of Practical Completion" means:

(a) the date certified by the Superintendent in a Certificate of Practical Completion to be 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, that other date.

When the Superintendent is of the opinion that Practical Completion has been reached the Superintendent may issue a Certificate of Practical Completion, whether or not the Contractor has made a request for its issue.

Effect of certificates

The issue of a payment certificate or a Certificate of Practical Completion shall not constitute approval of any work or other matter nor shall it prejudice any claim by the Principal or the Contractor.

22 The Plaintiff also emphasised the importance of the fact of the issue of the CPC, and in turn the date of Practical Completion which this signals, as a trigger for other elements of the D & C Contract, including, for example the commencement of the Defects Liability Period pursuant to Clause 37;[2] and the provision of a Final Payment Claim which follows upon the expiry of the Defects Liability Period pursuant to Clause 42.4.[3]

23 The Plaintiff submitted that the commercial object of the Deed of Settlement was to identify and specify objectively ascertainable events when each of the settlement instalments are required to be paid. The last instalment of $300,000 (plus GST) was required to be paid by the Defendants when the CPC was issued by the Superintendent, which it says occurred on 1 March, 2013 when the construction drawings and other documents required to be provided by the Plaintiff under the Architect Agreement were provided, which it says occurred by 20 March, 2013.

24 The Plaintiff says that the tying of the last instalment to the issue of the CPC by the Superintendent, who was appointed by the Defendants as the independent certifier under the D & C Contract, was intended to ensure that there was a definite and ascertainable objective event to determine when the final instalment would be paid. This was not dependent on the subjective opinion of the Defendants as to when they considered Practical Completion of the Works had occurred. It says that, as a matter of business common sense, the Plaintiff entered into the Deed of Settlement on the basis that it would be paid all of the instalments of its agreed unpaid fees promptly, based on the objectively ascertainable dates provided in Schedule 1. The last instalment is substantial and represented a settlement for unpaid Consultant's Fees between December, 2008 and December, 2011. The Plaintiff submitted that it is apparent that unless timely payment was made the Plaintiff will suffer significant uncertainty and financial detriment.

25 The Plaintiff says further that the alternative construction, which it says is pressed by the Defendants, to the effect that the term 'Practical Completion' is tied to the actual definition of 'Practical Completion' in the Construction Contract, and only occurs when every item of work that the Defendants consider is required to be rectified or completed to achieve Practical Completion is completed or rectified, is untenable and uncommercial.

26 It says that the construction advanced by the Defendants is uncertain, impractical and uncommercial because, if that construction were to be adopted:

(a) there would be great uncertainty when Practical Completion of the Works was reached;

(b) it would always be open for the Defendants to continually assert that various items of works remain uncompleted, almost indefinitely;

(c) the Defendants could disregard the opinion of the Superintendent, as the independent certifier, and require determination of a complex dispute as to whether the alleged uncompleted or defective item/items asserted by the Defendants is inconsistent with Practical Completion, or is at best, an item that is entitled to be addressed by the Contractor or its Subcontractors following Practical Completion of the Works as part of the Defects Liability Period;

(d) the parties would be involved in a dispute concerning whether the CPC was validly issued by the Superintendent, which is not something within the knowledge of the Plaintiff. In any event, even under the D & C Contract the date certified by the Superintendent in a CPC is deemed to be the date of Practical Completion, unless some other date is determined by arbitration or litigation (see: Clause 2 definition of 'Date of Practical Completion');

(e) the Defendants' construction has little to commend it on the grounds of commercial efficacy or business common sense and should be rejected by the Court.

27 The Plaintiff points to the fact that even some 12 months after the issue of the CPC, the Defendants have failed to pay the final instalment and are continuing to make allegations that there are items of uncompleted works which prevent practical completion.

28 It also points to the fact that the 12 month Defects Liability period has commenced (and in fact is now near completion). The Plaintiff submits that the Defects Liability Period is intended to enable the identification and rectification of defects and omissions in the works. This period obviously contemplates that there will still be defects and omissions in the works requiring rectification following Practical Completion. Importantly, the presence of defects which require rectification during the Defects Liability Period, does not work to inhibit the issue by the Superintendent of a CPC, provided that he or she is of the opinion that Practical Completion has been achieved pursuant to Clause 42.3.[4]

29 In addition, the Plaintiff submitted that the D & C Contract itself provides that the date certified by the Superintendent in a CPC is to be the date upon which Practical Completion was reached, unless some other date is determined by arbitration or litigation, which has not occurred here. It is in the discretion of the Superintendent to issue a CPC when the Superintendent is of the opinion that Practical Completion has been reached.

30 On any reasonable view, the Plaintiff submitted, Practical Completion of the Works for the purpose of Schedule 1 occurred when the CPC was issued under the D & C Contract.

31 The Plaintiff says further that the Defendants' construction does not accord with the terms of the Deed of Settlement, which provides that 'Practical Completion' means the issue of a Certificate of Practical Completion for the Works.

32 Under the D & C Contract, the following further term is defined under Clause 2:

"Practical Completion" is that stage in the· execution of the work under the Contract when:

(a) the Works are complete ·except for minor omissions and minor defects:

(i) which do not prevent the Works from being reasonably capable of being used for their stated purpose and, in respect of the Major Tenancy, do not prevent the occupancy and use of office premises of the Major Tenancy in accordance with the Major Tenant Requirements;

(ii) which the Superintendent determines the Contractor has reasonable grounds for not promptly rectifying; and

(iii) rectification of which will not prejudice the convenient use of the Works;

(b) those tests which are required by the Contract to be carried out and passed before the Works reach Practical Completion, have been carried out and passed;

(c) documents and other information required under the Contract which, in the opinion of the Superintendent, are essential for the use, operation and maintenance of the Works, have been supplied;

(d) all Planning Permit Requirements have been completed to the satisfaction of the Superintendent;

(e) Separate Contractors have been afforded access to each Tenancy for the performance of tenancy fitout work for not Jess than the applicable Tenancy Fitout period (unless the relevant tenancy fitout work is completed earlier);

(f) Contractor Approvals, including all necessary Occupancy Permits, required for the Works including Approvals and other documents provided by or received by the Contractor to or from the Building Surveyor, any Government Agency, the Major Tenant and any Utility, except to the extent unable to be obtained in respect of any retail tenancies only required under the Contract to be completed to a shell and core standard, for subsequent fitout by a tenant;

(g) the Contractor has obtained and provided to the Superintendent a certificate from a licensed surveyor which confirms that the whole of the Works have been constructed in accordance with locations marked on the approved Design Documents and which certifies the Lettable Area of the Major Tenancy;

(h) all services and installations incorporated in the Works, including mechanical, electrical, hydraulic, water and fire protection services are:

(i) physically completed and commissioned;

(ii) initially and finally tested as any Government Agency may require; and

(iii) in a continuously useable condition which is appropriate in a particular case and this has been demonstrated under normal and emergency operating conditions, to the. satisfaction of the Superintendent;

(i) all necessary infrastructure work! including Utilities services connections, have been completed to the satisfaction of the responsible authority and the relevant Utilities;

(j) the Contractor has provided to the Superintendent a final certificate from the principal architectural and engineering Consultants, addressed to the Principal and the Major Tenant, in or substantially in the form in Annexure Part L. which confirms that, for their respective disciplines, and based where necessary on periodic inspections of the Works, the design and construction of the Works are in accordance with the Design Documents prepared by it and all relevant Legislative Requirements;

(k) the Contractor, has provided to the Superintendent those warranties, guarantees and operation manuals required for the immediate use of the Works, including those required by the commencement of the lease under the Agreement for Lease;

(l) all rubbish, surplus materials, Temporary Works and Constructional Plant have been removed from the Site, except for those items, if any, which the Superintendent directs in writing may remain on the Site; and

(m) training in the use, operation and maintenance requirements for all building services and systems has been provided to the Principal and the Major Tenant, to the reasonable satisfaction of the Superintendent.

33 Further, the full terms of Clause 42.3 of the D & C Contract are:

42.3 Certificate of Practical Completion

The Contractor shall give the Superintendent, the Principal and each Tenant at least 14 days' notice of the date upon which the Contractor anticipates that Practical Completion will be reached. When the Contractor is reasonably of the opinion that Practical Completion has been reached, the Contractor shall:

(a) provide to the Superintendent, drafts of all documents required to be provided to the Superintendent at Practical Completion;

(b) in respect of the Major Tenancy, in writing request a joint inspection of the Works by the Superintendent, the Principal and the Major Tenant; and

(c) request the Superintendent to issue a Certificate of Practical Completion.

Within 14 days of the receipt of the request, subject to satisfaction by the Contractor of all requirements under the Agreement for Lease for the completion of all relevant elements of the Works to enable the commencement of the lease of the Major Tenancy, the Superintendent shall give to the Contractor and to the Principal a Certificate of Practical Completion certifying the Date of Practical Completion or give the Contractor in writing the reasons for not issuing the Certificate.

When the Superintendent is of the opinion that Practical Completion has been reached; the Superintendent may issue a Certificate of Practical Completion, whether or not the Contractor has made a request for its issue.

Within 30 days after the Date of Practical Completion, the Contractor must provide to the Superintendent, all warranties, .guarantees, operation manuals and other documents and information required under the Contract for the use, operation and maintenance of the Works, to the extent not provided prior to Practical Completion.

34 The Defendants submitted that the definition of 'Practical Completion' in the Deed of Settlement by its reference 'in accordance with the contractual arrangements for the performance of the Works' brings into play the requirements of the D & C Contract in respect of the state of the works required to achieve Practical Completion as defined, and then whether, pursuant to Clause 42.3 of the D & C Contract, the Superintendent was entitled to issue the Certificate of Practical Completion. It was not simply a matter whereby, upon the issue of a Certificate of Practical Completion, valid or otherwise, the Plaintiff was automatically entitled to payment.

35 The relevant legal principles to be applied in the interpretation of commercial contracts are relatively clear. They have recently been restated by the Court of Appeal in Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd.[5]

36 The provisions of commercial agreements are to be construed according to what a reasonable person would have understood them to mean, having regard to the surrounding circumstances known to the parties and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd.[6]

37 This principle is often stated in terms of a necessity to construe commercial agreements so as to accord with 'business commonsense' or 'commercial reality'.

38 In Antaios Compania Naviera SA v Salen Rederierna AB,[7] Lord Diplock said that:

... if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.

39 To like effect, Marks J said in Di Dio Nominees Pty Ltd v Brian Mark Real Estate Pty Ltd:[8]

In recent times, the courts have with increasing frequency and emphasis interpreted commercial contracts so that they accord with commercial reality and where necessary imply such words for that purpose as appear necessary. See Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VicRp 74; [1990] VR 834 per McGarvie J, pp 840, 845, and the authorities there mentioned. See also David Leahey, p 387, per Murphy J and Doyle v Mount Kidston Mining and Exploration Pty Ltd [1984] 2 Qd R 386 (MacPherson J), p 392.

40 As Gleeson CJ said in International Air Transport Association v Ansett Australia Holdings Limited:[9]

In giving a commercial contract a businesslike interpretation, it is necessary to consider the language used by the parties, the circumstances addressed by the contract, and the objects which it is intended to secure. An appreciation of the commercial purpose of a contract calls for an understanding of the genesis of the transaction, the background, and the market.

41 However, a statement of this principle of construction belies practical difficulty which may be incurred in its application. In Maggbury Pty Ltd v Hafele Australia Pty Ltd,[10] Gleeson CJ, Gummow and Hayne JJ identified the potential problem of identifying what, in respect of any particular contract, comprised 'business commonsense':[11]

Of course, what in respect of a particular contract comprises 'business commonsense', as an apparently objectively ascertained matter, may itself be a topic upon which minds may differ and in respect of which an imputed consensus is impossible. Here the difficulty arises not from the need for detailed semantic and syntactical analysis of the language used in the agreements, but from the use therein of simple terms such as 'at any time hereafter' and 'forever'. Is this a case where 'something must have gone wrong with the language'?

42 In the application of these principles, the Court will also consider the reasonableness of the result of the particular constructions that are advanced. The more unreasonable a result, the less likely it is that the parties intended it. The Court will also have regard to all of the words used in the agreement so as to, as far as possible, render them all harmonious:[12]

43 In Spunwill Pty Ltd v BAB Pty Ltd,[13] Santow J helpfully listed a number of settled approaches to the interpretation of written documents, which support the principles that I have described in relation to the construction of commercial agreements. Set out below are those of significance to the construction of the Deed of Settlement in this case:

1. In construing a written document, the object is to discover and give effect to the contractual obligations that reasonable persons in the position of the parties would objectively have intended the document's language to create. The emphasis is thus on giving effect to the apparent intention of the parties, and direct evidence of the parties' actual subjective intentions and expectations is inadmissible for purposes of construction: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales; Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd.
2. The language of a term is generally assigned its natural and ordinary meaning, read in the light of the contract as a whole but where it is ambiguous surrounding circumstances may be taken into account in assigning the presumed meaning. The surrounding circumstances include the matrix of mutually known facts, and the background, object, context and commercial purpose of the transaction, in the objective sense of what reasonable persons in the position of the parties would have had in mind: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales; Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd; Manufacturers' Mutual Insurance Ltd v Withers.
3. The consequences of alternative interpretations are not immaterial, and where the meaning of language in a contract is ambiguous, that interpretation will be preferred which avoids consequences which are in the circumstances capricious, unreasonable, unjust or not consonant with business efficacy: Australian Broadcasting Commission v Australasian Performing Right Association Ltd; Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland; Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd.
4. Every passage of a document must be read as part of the whole instrument. This may justify departing from what had seemed the plain meaning of a clause considered in isolation: The Metropolitan Gas Co v Federated Gas Employees' Industrial Union.
5. Where a court can discern the intent of the parties from an examination of the document as a whole, words may be supplied, omitted or corrected in the instrument, where it is clearly necessary in order to avoid absurdity or inconsistency: Fitzgerald v Masters. In such cases rectification of the document is not required: Re United Pacific Transport Pty Ltd; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales.
6. If, by any reasonable construction, the intention of the parties can clearly be arrived at from the document itself, then the court will give effect to that intention even though this involves departing from or qualifying particular words used. So the court will be prepared to restrict, transpose, modify, supply or reject words or terms in the documents, provided the intention of the parties is plain in spite of the words: Chitty on Contracts; Tropwind AG of Zug v Jade Enterprises Ltd (The Tropwind).[14]

44 The High Court has recently considered these principles of construction in Woodside Energy Ltd v Electricity Generation Corporation[15] and reaffirmed the approach to be taken in the construction of commercial contracts. The High Court highlighted that in establishing the content of the notion of 'business efficacy' as a tool of construction, economic considerations are not to be overlooked.

45 The terms of a commercial contract are to be determined by what a reasonable businessperson would have understood those terms to mean, and a Court may construe the obligations of a party under a contract in accordance with that party's reasonable business and economic and operational considerations.[16]

46 As reaffirmed, proper construction will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. [17] Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'.[18]

47 The majority of the High Court endorsed the statement of Arden LJ in Re Golden Key Ltd,[19] where unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'.[20] A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.[21]

48 The Deed of Settlement in this case is to be construed in accordance with these principles.

49 In my opinion, the construction of Clause 2(e) (entitlement of payment of the last instalment), when read alongside the definition of 'Practical Completion' in Clause 1.1 of the Deed of Settlement, means that the entitlement of the Plaintiff to payment of the last instalment under the Deed of Settlement arises when a Certificate of Practical Completion, duly issued in accordance with the terms of the Deed of Settlement, has been issued by the Superintendent.

50 Conversely, a Certificate of Practical Completion will be invalid for the purposes of triggering the entitlement of the Plaintiff to payment of the last instalment, if it has not been duly issued in accordance with the terms of the Deed of Settlement by the Superintendent.

51 This may arise if the Defendants, who bear the evidentiary onus on the issue, are able to establish the invalidity of the Certificate of Practical Completion because it has not been issued in accordance with the terms of the Deed of Settlement by the Superintendent in reliance on one or a number of general grounds, namely:

(a) If the technical requirements of Clause 2(e) and the Clause 1.1 definition have not been satisfied, for example, if the document relied upon as the Certificate of Practical Completion, is in fact not a document of that character; or if the person who purported to issue the Certificate of Practical Completion was not in fact the Superintendent at the relevant time;[22]

(b) If the Superintendent did not bona fide exercise his contractual power[23] - for example, if it is established that the Superintendent was not genuinely of the opinion that Practical Completion had been reached when he purported to issue the Certificate of Practical Completion;

(c) If the decision of the Superintendent to issue the Certificate of Practical Completion was so unreasonable that no reasonable Superintendent in his or her position would ever consider issuing it,[24] or if the decision lacks an evident and intelligible justification or is shown to be arbitrary or capricious or to abandon common sense;[25]

(d) Or, if the issue of the Certificate of Practical Completion is otherwise shown to be beyond the contractual power conferred on the Superintendent,[26] or if the exercise of the power is otherwise liable set aside,[27] for example through the application of the principles of unconscionable conduct pursuant to sections 20-22 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)).

52 There has been much said in case law about the general duty [obligation] of the Superintendent to act honestly, fairly and reasonably.[28] These general notions are given standard-form contractual expression by AS 2124. Obligations of this nature were described in John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd[29] as being met by a Superintendent making 'decisions which are professional, careful and even-handed, not in the interests of any one party'. While this may be more frequently discussed in the context of a superintendent's liability in negligence, these obligations may emanate from the contractual context of a construction or engineering project and the Superintendent's role therein.

53 A construction contract implies fundamental obligations of cooperation between the principal and contractor in the achievement of the contractual aim.[30]

54 An important facility designed to ensure the workability of a construction or engineering contract is the mechanism provided for the Superintendent to act as contract administrator. In issuing a Certificate of Practical Completion, and in otherwise carrying out his or her role as Superintendent, the duty of a Superintendent is, in a practical sense, the administration of the agreement in the direction of achieving its contractual objectives as agreed to between the Principal and the contractor (here the Architect).

55 The Superintendent, as contract administrator, thus has a duty to promote the contractual aim, set against the background of reciprocal rights and obligations provided by the terms of the contract. While this is not a positive duty of facilitation, a Superintendent must not do anything to interfere with the proper functioning of the agreement - that is, he or she must perform their role as a quasi-independent third party in such a way as to give full effect to the terms negotiated and agreed between the parties to the Contract.

56 The four general grounds, discussed above, on which the validity of the issue of a Certificate of Practical Completion may rest, are illustrative of ways in which the purpose of the contract may be undermined. An invalid Certificate issued under such circumstances is inimical to the carrying out and achievement of the contractual aim.

57 In my opinion, but subject to the Certificate of Practical Completion issued on 1 March 2013 being not demonstrated to be invalid on any one or more of the grounds described and subject to the other requirements of Clause 2(e) of the Deed of Settlement being satisfied, the issue of the Certificate of Practical Completion gave rise to an entitlement in the Plaintiff to be paid the agreed unpaid balance of fees totalling $1,314,584 (plus GST) pursuant to the Deed of Settlement.

58 Such a construction results from the Deed of Settlement being construed objectively, in a businesslike manner, paying heed to the language used by the parties, the commercial circumstances the document addresses and the objects it is intended to secure.

59 Subject to the qualifications expressed in these reasons, the answer to question stated for determination pursuant to r 47.04 of the Rules, being, subject to Clause 2(e) of the Deed of Settlement, whether the relevant provisions of the Deed give rise to an entitlement for the Plaintiff to be paid the final instalment of $300,000 plus GST upon the issue of a Certificate of Practical Completion by the Superintendent? is: Yes.

[1] Incorporating Amendment No. 1 (October 2000).

[5] [2013] VSCA 217; see too ICM Investments Pty Ltd v San Miguel Corporation and Anor (No. 2) [2013] VSC 528 (7 October 2013), [69]-[77].

[7] [1985] AC 191, 201.

[8] [1992] VicRp 99; (1992) 2 VR 732, 740 (Marks J, with Hedigan J.

[9] [2008] HCA 3; (2008) 234 CLR 151 [8] (citations omitted).

[10] [2001] HCA 70; (2001) 210 CLR 181

[11] [2001] HCA 70; (2001) 210 CLR 181, 198 [43] (citations omitted).

[12] International Fina Services AG v Katrina Shipping Limited [1995] 2 Lloyd's Rep 344, 350. ABC v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109.

[13] (1994) 36 NSWLR 290; cited with approval by the Court of Appeal in Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd [2013] VSCA 217 [43].

[14] Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290, 298-300 (citations omitted).

[15] Woodside Energy Ltd v Electricity Generation Corporation [2014] HCA 7.

[16] Woodside Energy Ltd v Electricity Generation Corporation [2014] HCA 7 [45]-[50] (French CJ, Hayne, Crennan, Kiefel JJ) ('Woodside').

[17] Woodside [2014] HCA 7 at [35]. Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, 461- 462

(Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151, 160 (Gleeson CJ), 174 (Gummow, Hayne, Heydon, Crennan and Kiefel JJ); Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 , 284 (Heydon and Crennan JJ).

[18] [2014] HCA 7 [35]. Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337, 350 (Mason J, citing Reardon Smith Line Ltd v Yngvar HansenTangen [1976] 1 WLR 989, 995-996). See also Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530, 559 [82] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ); International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151, 160 (Gleeson CJ).

[19] Re Golden Key Ltd [2009] EWCA Civ 636.

[20] Re Golden Key Ltd [2009] EWCA Civ 636 [28].

[21] Woodside [2014] HCA 7 [35]; Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530 559 (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ_)_

[22] See eg where an error going to the heart of the basis for a decision can render that decision open to challenge. Such an error can occur contrary to the obligation to act fairly, honestly and reasonably, as explained in the context of an erroneous valuation by an independent arbiter in Federal Cmr of Taxation v St Helens Farm (ACT) Pty Ltd [1981] HCA 4; (1981) 146 CLR 336, 381 (Mason J).

[23] Aleyn v Belchier [1758] EngR 208; (1758) 28 ER 634, 637 by Lord Northington: 'No point is better established than that, a person having a power, must execute it bona fide for the end designed otherwise it is corrupt and void'. Ngurli v McCann [1953] HCA 39; (1953) 90 CLR 425, 440 (Williams ACJ, Fullagar J and Kitto J).

[24] This may be compared to the standard of reasonableness applied to the construction of a 'best endeavours' clause, for example, as in Transfield Pty Ltd v Arlo International Ltd [1980] HCA 15; (1980) 144 CLR 83. A valid issue of a certificate may be measured objectively by what is reasonable in the circumstances having regard to the nature, capacity qualifications and responsibilities brought to bear by the Superintendent, viewed in light of the particular contract.

[25] That is, it does not fall within a range of reasonable decisions determined in accordance with the discretion afforded by the contract: Yarraman Pine Pty Ltd v Forestry Plantations Queensland [2009] QCA 102 [42]-[44].

[26] A superintendent must form opinions and exercise discretions according to the contractual context, having regard to the facts and circumstances of the project. See eg WMC Resources Ltd v Leighton Contractors Pty Ltd (2000) 16 BCL 53.

[27] For example in the case of fraud or obvious conflict.

[28] WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489 [46].

[30] Electronic Industries Ltd v David Jones [1954] HCA 69; (1954) 91 CLR 288, 297-298; Perini Corp v Commonwealth [1969] 2 NSWLR 530 (Macfarlan J).