[1905] HCA 45
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500
[1986] HCA 82
Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VR 358
[1982] HCA 29
Regional Power Corporation v Pacific Hydro Group Two Pty Ltd 46 WAR 281
Source
Original judgment source is linked above.
Catchwords
[1905] HCA 45
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500[1986] HCA 82
Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VR 358[1982] HCA 29
Regional Power Corporation v Pacific Hydro Group Two Pty Ltd 46 WAR 281
On 22 December 2017 the plaintiff ("the Principal") and the defendant ("the Contractor") entered a contract ("the Building Contract") to design and construct 40 townhouses on property owned by the Developer at Baulkham Hills. The contract sum was $20,774,069.44.
The Contractor did not proceed to construct the townhouses the subject of the Building Contract. On 1 May 2019 by a "Deed of Termination" the Principal and the Contractor agreed to "mutually terminate" the Building Contract.
The Deed of Termination provided that each party reserved their rights in relation to any breach arising before termination.
The Principal now seeks damages from the Contractor arising from what are described as the Contractor's "twin failures" to provide "contractor's security" by way of a bank guarantee and evidence of home warranty insurance.
The Principal also seeks damages or compensation from the sole director of the Contractor, Mr Meng Dai, arising from Mr Dai's allegedly misleading or deceptive conduct ("the ACL Claim").
[3]
Decision
My conclusion is that the Principal has failed to establish that it has suffered damage as a result of any breach of contract by the Contractor.
Further, the Principal has failed to establish it suffered any loss as a result of any misleading or deceptive conduct by Mr Dai.
Accordingly, the proceedings should be dismissed with costs.
[4]
The Building Contract
The Building Contract comprised a "Formal Instrument of Agreement" together with General Conditions amended from AS-4902-2000.
The critical provisions of the Building Contract are contained in cll 7 and 9 of the Formal Instrument of Agreement which were in these terms:
"7 (a) The Contractor must:
(i) not commence the [Work Under Contract] unless and until the Principal … issues a note to proceed;
(ii) commence the [Work Under Contract] within 1 month of the date of the Notice to Proceed and complete the [Work Under Contract] by the date for practical completion.
(b) If the Contractor performs any works prior to receiving a Notice to Proceed, the Contractor does so at its own risk and shall not be entitled to make any claim (for any costs or an [extension of time]) against the Principal in respect of, or in connection with such works.
…
9. (a) Both the Principal and Contractor acknowledge and agree that despite anything to the contrary in the Contract:
(i) the Contract is subject to, and conditional upon, the conditions precedent set out under clause 9(a)(ii) being satisfied; and
(ii) the Contractor is under no obligation to perform any of the [Work Under Contract], and the Principal shall have no liability under the Contract, until such time as:
(A) the Principal has secured financing for the cost of the [Work Under Contract] on terms and conditions acceptable to the Principal acting reasonably;
(B) all conditions precedent to the Principal making first draw on that financing have been satisfied;
(C) the Principal, the Contractor and the Principal's Financier have entered into any tripartite agreements required by the Principal's Financier on terms acceptable to all parties;
(D) the Principal has provided a Notice to Proceed to the Contractor in accordance with clause 7;
(b) The Contractor shall have no claim against the Principal in respect of, or in connection with, any costs, loss, damage or liability which arises prior to the events in clause 9(a)(ii)(A)-(D) occurring."
Clause 9(a)(ii)(D) referred to a "Notice to Proceed". The issue of a valid Notice to Proceed was a critical integer governing the relationship of the parties under the Building Contract because:
1. the Contractor was required to provide evidence of home warranty insurance within 20 business days of receiving the Notice to Proceed; [1]
2. the Contractor was required to commence the Work Under Contract within one month of receiving a Notice to Proceed; [2] and
3. the date for practical completion was 18 months from the date of the Notice to Proceed. [3]
It is common ground that the conditions precedent referred to in cl 9(a)(ii)(A) (that the Principal secure funding) and cl 9(a)(ii)(C) (that the Principal, its financier and the Contractor enter into a tripartite agreement) were satisfied.
What divides the parties is whether the condition precedent referred to in cl 9(a)(ii)(B) (that the financier's conditions precedent be satisfied) and cl 9(a)(ii)(D) (that the Principal issued a valid Notice to Proceed) were satisfied.
On 31 October 2018, the Principal served on the Contractor what purported to be a Notice to Proceed. A central issue in these proceedings is whether that document was effective. In my opinion, it was not.
[5]
The course of events
On 27 September 2018, some nine months after entering the Building Contract, the Principal entered into a Facility Agreement with CVS Lane Funding 57 Pty Ltd ("the Financier") pursuant to which the Financier agreed to provide the Principal with a Development Sub-Limit of $22,618,268 and a "Contingency Sub-Limit" of $1,053,732 during an "Availability Period" to 31 October 2018. This caused the condition in cl 9(a)(ii)(A) of the Building Contract to be satisfied.
The Facility Agreement :
1. specified that each drawdown must exceed $1 million; and
2. stated that the first drawdown was subject to, amongst other conditions, 42 conditions precedent set out in Schedule 2 to the Facility Agreement.
Also on 27 September 2018, the Principal, the Contractor and the Financier entered into a "Builder's Side Deed". This caused the condition in cl 9(a)(ii)(C) of the Building Contract to be satisfied. The Builder's Side Deed provided that the security to be provided by the Contractor to the Principal was to be by way of bank guarantee. [4]
On 31 October 2018, the Principal served on the Contractor the purported Notice to Proceed.
On 19 February 2019 the Financier served the Principal a "Conditional Waiver Letter" in which the Financier waived a number of the conditions precedent specified in the Facility Agreement. This stated to be in order to facilitate the first drawdown under the facility Agreement and on the basis that the first drawdown did not exceed $50,000 [5] and that each of the conditions precedent be fulfilled in relation to subsequent drawdowns.
On 16 April 2019 the Principal served a Notice to Show Cause on the Contractor and stated that if the Contractor failed to show reasonable cause by the date specified it would, under cl 39.4 of the Building Contract, take the work out of the Contractor's hands and terminate the contract. [6]
The Contractor responded to that notice on 26 April 2019 stating, amongst other things, that it was "willing and able to complete its obligations under the Contract" and that it would regard any purported termination by the Principal of the Building Contract "as a repudiation".
Despite its threat in its Notice to Show Cause on 16 April 2019, the Principal did not purport to terminate the contract, whether under cl 39.4 or at all.
Instead, as I have set out at [2], the parties entered a Deed of Termination in which it was recited:
"A. The Principal and the Contractor entered into the Contract in respect of construct and design works on the Property.
B. The parties have agreed to mutually terminate the Contract, on the terms set out in this Deed."
By the operative part of the Deed:
"The Parties agree to mutually terminate the Contract on the terms set out in this Deed as and from the date of this Deed."
The parties agreed to preserve all their rights in relation to any breach arising before termination of the Contract.
[6]
Are the conditions precedent in Clause 9 to formation or performance?
There was a debate between the parties as to whether the conditions precedent in cl 9 of the Building Contract were to the formation of the Building Contract or to the obligation of the parties to perform under the Building Contract. Both parties referred to the familiar observations of Mason J (as his Honour then was) in Perri v Coolangatta Investments Pty Ltd. [7]
In my opinion, the language used by the parties shows that their intention was that the conditions precedent were not to the formation or existence of the Building Contract but, rather, to the parties' obligation to perform their obligations under the contract.
Although cl 9(a)(i) stated that "the Contract is subject to, and conditional upon" the specified conditions precedent, cl 9(a)(ii) stated that the Contractor "is under no obligation to perform" any Work Under Contract until such time as the conditions precedent were satisfied. That made clear, in my opinion, that the parties intended that the conditions precedent were only to performance of, and not to existence of the contract.
In any event, the parties' subsequent conduct, which is receivable to show whether the parties considered there to be a contract between them [8] points in the same direction.
For example, the language used by the parties in the 1 May 2019 Deed of Termination set out above is premised on, and consistent only with parties having considered themselves hitherto to be in contract with each other.
Further, the language used by the Principal in its Notice to Show Cause and by the Contractor in its Response proceeds on the same basis. For example, in the Notice to Show Cause the Principal asserted that the Contractor had "failed to commence work under the Contract" to which the Contractor responded that this was "rejected" and that "the Contractor has secured the site and is currently in control of the site". These exchanges proceeded on the basis that the both parties understood there was a contract between them.
There are many other examples.
[7]
Is there a tension between cl 50.4 of the Building Contract and the Builder's Side Deed?
Clause 50.4 of the Building Contract provided that the Contractor must provide evidence of home warranty insurance within 20 business days of receiving a Notice to Proceed.
On behalf of the Principal it was submitted that this was inconsistent with, and overwritten by, provisions in the Builder's Side Deed to the effect that the Contractor was obliged to effect and maintain home warranty insurance and to "promptly provide" the Financier with evidence of that insurance.
I see no tension between the provisions. They are directed to different questions.
One, the Building Contract, limited the time within which the Contractor must provide such evidence to the Principal. The other, the Builder's Side Deed, was directed to a different question, namely the time by which the Contractor was to provide such evidence to the Financier.
[8]
The Contractor's failure to provide the Principal with a bank guarantee and home warranty insurance
The Principal's submissions focused on what it described as the Contractor's "twin failures".
Thus Mr Tam, who appeared with Ms Hamilton-Jewell for the Principal, submitted:
"(1) In breach of contract, [the Contractor] failed to provide 'contractor's security' by way of bank guarantee.
(2) In breach of contract, [the Contractor] failed to provide evidence of [Home Warranty Insurance].
(3) These twin failures caused significant delay, which [the Financier] was unwilling to accept. [The Financier] commenced charging the Principal] the line fee and the administration fee before [the Principal] drew down on the Facility.
(4) [The Principal] persisted with [the Contractor] in the hope that it would perform its obligations under the Contract, based on [Mr Dai's] assurances that contractual promises would be kept.
…
(7) Yet [the Contractor] failed to provide bank guarantees (but provided non-genuine ones) or evidence of [Home Warranty Insurance].
(8) Without the bank guarantees or the evidence of [Home Warranty Insurance], the Project could not proceed because [the Financier] would not permit the second drawdown on the Facility and the first drawdown was limited to $50,000.
(9) [The Contractor's] twin failures (which were 'substantial breaches' under the Contract) caused an impasse, as did [Mr Dai's] misleading or deceptive conduct.
(10) The impasse ended by [the Principal] and [the Contractor] agreeing to terminate the contract, preserving all accrued contractual rights."
Mr Tam and Ms Hamilton-Jewell devoted a large part of their lengthy written submissions, and Mr Tam directed the majority of his oral submissions, to this topic.
Consistently with the submissions set out at [38], the Principal's claim, as articulated in its Amended Technology and Construction List Statement, is one in contract, save for the ACL Claim to which I have referred.
Nonetheless, in their written submissions, Mr Tam and Ms Hamilton-Jewell made numerous references to "assurances" allegedly given by Mr Dai to the Principal's General Manager, Ms Zhao, that bank guarantees and evidence of home warranty insurance were "forthcoming". They submitted that the Principal acted in reliance on those assurances by giving the Contractor more time to produce the bank guarantee and evidence of home warranty insurance and thereby suffered damage by incurring line fees and other costs with the Financier. That case is not pleaded, as Mr Tam accepted in oral submissions. [9] It is therefore not a case available to the Principal here.
Mr Elliott, who appeared for the Contractor, did not dispute that the Contractor was obliged, under the Building Contract, to provide "contractor's security" by way of a bank guarantee as well as evidence of home warranty insurance; nor that, at the time of the Deed of Termination, it had not done so.
Before turning to the consequences of that failure, I mention a wider point.
That is whether the Principal has suffered any loss by reason of the Contractor not having done the Work Under Contract, as opposed to not having provided the bank guarantee and evidence of home warranty insurance.
In my opinion, the Principal has not suffered such a loss for two reasons. They are that the Principal did not issue an effective Notice to Proceed and that, in any event, the condition referred to in cl 9(a)(ii)(B) of the Building Contract was not satisfied.
I deal with these matters at [54] to [81] below.
The question remains whether, nonetheless, the Principal has suffered loss by reason of the Contractor's failure to provide a bank guarantee or evidence of home warranty insurance.
As to the bank guarantees, by cl 5.1 of the General Terms of the Building Contract, the Contractor was obliged to provide the Principal with "security", required by the Builder's Side Deed to be a bank guarantee, "in accordance with Item 14" of the General Terms. Item 4 was completed, unhelpfully, as "not applicable". In those circumstances, although Mr Tam did not develop any submission to this effect, the Contractor's obligation was to provide the bank guarantee within a reasonable time. [10]
As I describe in more detail below when dealing with the Principal's ACL Claim against Mr Dai, on 22 January 2019 Mr Dai ultimately provided Ms Zhao what appeared to be a bank guarantee issued by the Commonwealth Bank of Australia ("CBA"). It is now common ground that this document was not genuine. I will return to this.
Mr Tam did not develop any submission as to the reasonable time within which the Contractor should have provided the bank guarantee. Instead, he focussed his submissions on the unpleaded allegations to which I referred at [41] above.
Assuming that such a reasonable time was no later than 22 January 2019, when Mr Die did produce what purported to be a bank guarantee, Mr Tam did not point to evidence of what damage the Principal thereby suffered. The Contractor has thus failed to show what damage, if any, it suffered by reason of any breach of the Building Contract constituted by the Contractor's failure to produce a bank guarantee. Its claim must fail for that reason alone.
There are other difficulties with the Principal's damages case, as I describe below.
As to the home warranty insurance, by cl 50.4 of the General Terms of the Building Contract, the Contractor was obliged to provide the Principal with evidence of home warranty insurance within 20 business days of receiving a Notice to Proceed. Thus, the question of whether the Contractor was in breach of its obligation to provide evidence of home warranty insurance depends on whether the Principal served on it an effective Notice to Complete. For the reasons I set out below, my opinion is that it did not.
[9]
There was no effective Notice to Proceed for the purposes of cl 9(a)(ii)(D) of the Building Contract
A question of construction arises.
The question is whether the requirements of cl 9(a)(ii) of the Building Contract are sequential and cumulative such that:
1. the Principal had no entitlement to serve a Notice to Proceed under cl 9(a)(ii)(D); and
2. accordingly, the Contractor had no obligation to perform any of the Work Under Contract,
unless and until each of subclauses 9(a)(ii)(A), (B) and (C) was satisfied.
In my opinion, the answer to this question is yes, for a number of reasons.
First, the condition that the Principal provide a Notice to Proceed to the Contractor is mentioned as the last of the conditions precedent set out in cl 9(a)(ii).
Second, and perhaps more significantly, it is clear that the provisions in cl 9 of the Building Contract were included for the benefit of both parties. Their object was to ensure that the Principal was not obliged to incur the expense of having the Contractor embark on the Work Under Contract and the Contractor was not obliged to take the risk of embarking on that work until such time as the Principal's funding is in place and available to be drawn down.
The language used by the parties bespeaks the parties' intention that the Contractor was not obliged to start performing Work Under Contract, nor that time would start running in relation to the Contractor's obligation to provide evidence of home warranty insurance or to achieve practical completion until all matters associated with the Principal's funding of the project were sorted.
Were cl 9 of the Building Contract to be construed so that the requirements of cl 9(a)(ii) were not sequential, it would be open to the Principal to serve a Notice to Proceed on any date, for example the day after the Contract was made, committing both it and the Contractor to construction of the project notwithstanding that finance had not been, and might never be secured. That would set to nought the protections obviously intended to accrue to both parties by the precise and detailed provisions in cl 9(a)(ii).
Mr Tam submitted that the construction at [55] would "create a circularity" because one of the conditions precedent in the Facility Agreement was the production of evidence that the Building Contract was unconditional, including "the issuance of a notice to proceed".
It followed, Mr Tam submitted, that cl 9(a)(ii)(B) could not be satisfied until a Notice to Proceed was provided and that therefore, by reason of the terms of the Facility Agreement, cl 9(a)(ii)(B) of the Building Contract could not be satisfied until the events referred to in cl 9(a)(ii)(D) had occurred. Thus, Mr Tam submitted, as a practical matter, the Notice to Proceed would have to issue in order that the Principal's finance became unconditional.
But that can have no bearing on the proper construction of the Building Contract. The Building Contract must be construed in the light of matters known to the parties when it was made, and not in light of matters arising from a contract made later between only one of the parties to the Building Contract and a third party, the Financier.
In my opinion, the Principal could only serve a Notice to Proceed once the conditions in cl 9(a)(ii)(A), (B) and (C) were established; particularly that in (B).
When the purported Notice to Proceed was served on 31 October 2018, the conditions precedent to the first drawdown under the Facility Agreement and thus the requirements of cl 9(a)(ii)(B) were not satisfied. The Principal accepts that those conditions were not satisfied until, at the earliest, the 19 February 2019 Conditional Waiver Letter.
It follows that the purported Notice to Proceed was not effective and that, accordingly the Contractor was not obliged to perform any Work Under Contract under the Building Contract nor provide evidence of home warranty insurance.
[10]
The conditions precedent to the first drawdown under the Facility Agreement were not all satisfied for the purposes of cl 9(a)(ii)(B) of the Building Contract
As I have mentioned, the Facility Agreement provided that the drawdowns were to be for no less than $1 million each.
The Conditional Waiver Letter set out the terms in which the Financier agreed that the first drawdown could, nonetheless, be $50,000.
Those terms included the waiver of some of the conditions precedent in Sch 2 to the Facility Agreement, including those requiring production by the Contractor of a bank guarantee and evidence of home warranty insurance.
The Conditional Waiver letter also waived a number of other Conditions Precedent to the first drawdown under the Facility Agreement.
But it did not waive them all; or, at least, the Principal has not shown that it did.
For example, one of the conditions precedent in Sch 2 to the Facility Agreement required:
"An initial report from the Quantity Surveyor instructed by the Financier or on which the Financier can rely which:
…
• verifies that the construction program is reasonable and makes adequate provision for the development of the Project;
• verifies the development costs against the Project Feasibility and verifies the contract sum under the Building Contract and provides a detailed explanation of any variation between the contract sum and any estimate made by the Quantity Surveyor."
The waiver in the Conditional Waiver Letter on this subject was:
"An initial report from the Quantity Surveyor instructed by the Financier or on which the Financier can rely which confirms that the Builder holds home warranty insurance (and all other required insurances) and that the Performance Security has been issued."
Thus the waiver in the 19 February 2019 letter was not a waiver of those parts of the relevant conditions precedent set out at [72] above.
By a Notice to Produce, the Contractor called on the Principal to produce all quantity surveyor reports it had received. Only one was produced. It was dated 16 May 2018 and estimated that construction of the project would cost some $3.6 million more than the contract price and that accordingly there was a "risk to the project being successfully completed". Plainly that report did not satisfy the condition precedent in Sch 2 to the Facility Agreement.
A further condition precedent in Sch 2 to the Facility Agreement was production of "evidence that at least $8,833,000 has been contributed to the Borrower [i.e. the Principal] by way of equity from the Borrower's shareholders or by way of Subordinated Loan".
That condition was not waived in the Conditional Waiver letter and the Principal has adduced no evidence that it was satisfied.
Mr Tam tendered communications between the legal advisors of the Principal and Financier leading up to the 19 February 2019 letter. That correspondence was said to be relevant to what the Financier sought to achieve by the Conditional Waiver Letter. However that might be, the letter must speak for itself.
There is no evidence that the $50,000 drawdown contemplated by the 19 February 2019 letter was drawn down. It may well be that the reason for this is that Conditions Precedent referred to in Sch 2 of the Facility Agreement, including those to which I referred, remain unsatisfied.
In these circumstances, my conclusion is that the Principal has failed to show that, at the time that the Building Contract was terminated, the conditions precedent in cl 9(a)(ii)(B) had been satisfied.
It follows that the Contractor had no obligation to perform the Work Under Contract.
[11]
The exclusion clause
Clause 47 of the General Conditions to the Building Contract provided:
"…neither party is liable to the other under the Contract, law of tort (including negligence, statute, inequity or otherwise) for consequential loss".
"Consequential loss" was defined to mean:
" … any of the following kinds of loss or damage arising out of or in connection with the Works or the [Building Contract]:
"(h) liquidated sums (included liquidated damages), penalties, losses or damages under any other contracts or agreements other than the [Building Contract];
…
(j) In addition to, and without limiting, the kinds of loss or damage set out in subclauses (a) - (i), any kind of indirect or consequential loss or any loss or damage considered as being beyond the normal measure."
The principles of construction applying to contracts generally apply also to exclusion clauses. [11]
The law remains as stated by the High Court in Darlington Futures Ltd v Delco Australia Pty Ltd:
"…the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract and, where appropriate, containing the clause contra proferentum in case of ambiguity." [12]
In their written submissions, Mr Tam and Ms Hamilton-Jewell devoted many pages to an analysis of the authorities concerning the proper construction of exclusion clauses including the observations of Nettle JA (as his Honour then was) in Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [13] and of Martin J in Regional Power Corporation v Pacific Hydro Group Two Pty Ltd. [14]
In those cases their Honours were considering clauses which simply excluded, without elaboration "consequential loss".
Here, the expression "consequential loss" is very precisely defined, on an exclusive basis, to include ten kinds of damage, the two relevant ones being those I have set out.
Accordingly, the question for me is to construe those particular words. Mr Tam's and Ms Hamilton-Jewell's submissions paid little, if any, attention to those words.
Here, "consequential loss" is defined to mean "loss or damage arising out of or in connection with …. [the Building Contract] [being] losses or damages under any other contracts… other than [the Building Contract]. [15]
This is a very wide definition. It includes within the definition of "consequential loss", and thus excludes either party's liability for, loss of damage which arises under a contract other than the Building Contract, notwithstanding the fact that they may also be characterised as arising under the Building Contract itself.
Here "consequential loss" is also defined to include "any loss of damage considered as being beyond the normal measure". [16]
In Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd, Nettle JA said that "normal" loss is loss "every loss a plaintiff in a like situation will suffer", as opposed to "profits lost or expenses incurred through breach". [17]
[12]
Did the exclusion clause survive termination?
An exclusion clause "regulates the manner in which liability for breach of contract is to be established". [18] The Privy Council in Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd [19] reasoned that, generally, given its purpose, an exclusion clause necessarily continues to have effect following the termination of a contract.
An exclusion clause will be found to have survived termination of the contract, if, through the proper construction of the contract, it is found that the parties intended for the clause to continue to operate post-termination.
Clause 39.3 of the Building Contract made provision for the Principal to serve on the Contractor a Notice to Show Cause.
Clause 39.4 provided that if the Contractor failed to show reasonable cause, the Principal could by written notice to the Contractor take the work out of the Contractor's hands and terminate the Contract.
Clause 39.10 provided that if the Contract was so terminated "the parties' remedies, rights and liabilities shall be the same as they would have been under the law governing the Contract had the defaulting party repudiated the Contract and the other party elected to treat the contract as at an end and recover damages".
In their written submissions, Mr Tam and Ms Hamilton-Jewell relied upon these provisions to submit that their effect was that cl 47 (the exclusion clause), did not survive termination.
This submission proceeds on a misconception.
Although the Principal, in its Notice to Show Cause threatened to terminate the Building Contract under cl 39.4, it did not do so.
Instead, as I have set out, the parties entered the Deed of Termination of 1 May 2019 in which they agreed to "mutually terminate" the Building Contract, on terms that, in effect, all rights were reserved.
It follows that the rights reserved to the Principal under the Building Contract were regulated by the terms of that contract including the exclusion clause. Otherwise, the Principal's rights following the mutual termination of the Building Contract would be greater than before. That cannot be correct.
[13]
Damages
I have concluded that the Principal has not suffered damage by reason of the Contractor not performing the Work Under Contract [20] . I have also concluded that the Principal has not shown what damage it suffered by reason of any failure by the Contractor to provide a bank guarantee within a reasonable time. [21]
Nonetheless, I will now consider the various heads of damage claimed by the Principal. I have set out against each head of damage claimed, the amount claimed.
The conclusions I have expressed below are to the effect of submissions made by Mr Elliott at the close of his oral address, which submissions I accept. Although I gave Mr Tam leave to provide written submissions in reply, and although Mr Tam did so, he did not cavil with any of the matters put by Mr Elliott. I assume, in those circumstances, they are not contested.
[14]
Increase in construction price - $681,203.56
The Principal claims that the Contractor's breaches of contract caused it to find a replacement contractor. The Principal claims the "price differential" between the cost to complete the project under the Building Contract and the cost that the Principal will now incur to achieve this result. This is a claim for loss of bargain damages.
Loss of bargain damages are not available unless the contract in question was terminated due to the wrongful conduct of the counterpart. [22] In this case, the Building Contract was not terminated by the Principal due to the Contractor's wrongful conduct. As I have set out above [23] although the Principal threatened in its Notice to Show Cause to terminate the Building Contract for cause, it did not do so. The Building Contract was terminated by mutual agreement on the terms set out in the 1 May 2019 "Deed of Termination". Accordingly, loss of bargain damages are not available.
In any event, the Principal has not proved that it has suffered the loss for which it contends.
The only evidence adduced by the Principal to support this aspect of its case is an extract from a Design and Construct Contract made between the Principal and another contractor. That document shows a "Contract Sum" of $21,455,273; which exceeds the contract price in the Building Contract. However, the extract of the contract does not reveal the nature of the "Works" to be performed by the Principal's new contractor.
Thus, on the evidence, it cannot be determined whether the Works to be conducted by the Principal's new contractor are the same as those subject to the Building Contract. Accordingly, it cannot be determined whether the difference in price between the Building Contract and this second contract represents the value of the lost bargain for which the Principal contends.
[15]
Increase in price of home warranty insurance - $232,791.45
This is a loss under a contract other than the Building Contract and thus loss under paragraph (h) of the definition of "consequential loss" and is thus excluded.
In any event, the Principal has not proved the increase in home warranty insurance cost alleged.
The only evidence before the Court is the current premium paid by the Principal on account of home warranty insurance.
There is no evidence of the extent to which this is an increase in premium over and above that payable during the life of the Building Contract.
[16]
Legal costs - $42,445.10
These are costs paid by the Principal to the Financier for the "drafting and negotiation of various financing documents, including facility agreement for Senior Construction Facility for [the Principal]…" and thus represents the Principal's costs of negotiating its finances with the Financier. There is no evidence to support the conclusion that there is any connection between those costs and any breach of contract by the Contractor.
[17]
Further legal costs - $4,876.13
These represent the Financier's legal costs for the drafting of the Conditional Waiver Letter.
Mr Tam did not offer any submissions as to why that amount could be recoverable by the Principal.
[18]
Borrowing costs - $ 590,148.29
These comprise a late administration fee, a capitalised line fee and capitalised interest paid by the Principal to the Financier.
This is loss "under any other contract" for the purposes of paragraph (h) of the definition of "consequential loss" and is thus excluded.
As I have mentioned, Mr Tam did not identify what, if any, part of this amount was said to be referable to any delay in the provision of the bank guarantee. [24]
[19]
Future land taxes - $106,746
This is also loss under "any other contract".
[20]
Legal costs - $80,040.48
Again, this is loss under "any other contract".
In any event, some of these costs appear to relate to advice given to the Principal in relation to the facility documents.
It is not possible to determine from the evidence what remaining advice was given.
[21]
Project management fees - $30,000
Again, this is loss under "any other contract".
[22]
Water expenses - $1,009.71
This is loss under "any other contract".
[23]
Future council rates and taxes - $7,822.85
This is loss under "any other contract."
[24]
Conclusion on damages
Thus, the Principal has not shown it has suffered any damage by reason of the Contractor's conduct.
[25]
The ACL claim against Mr Dai
I have mentioned that on 22 January 2019 Mr Dai gave Ms Zhao what appeared to be a bank guarantee issued by CBA but which, as the Contractor now accepts, was not a genuine document.
The Principal contends that by proffering that document, Mr Dai engaged in misleading or deceptive conduct within the meaning of s 18 of the Australian Consumer Law. [25] This is the ACL claim to which I have referred.
But Ms Zhao did not rely upon the purported bank guarantee.
She said:
"After looking at the bank guarantees, I formed the view that they were fake."
Ms Zhao said that she then telephoned Mr Dai and said:
"I've checked the bank guarantees that you delivered in China. You'd better give me the real guarantees."
In the light of this evidence, it is obvious that the Principal has not suffered any loss or damage "because of" Mr Dai's conduct. [26]
I find it hard to see how, in the light of Ms Zhao's evidence, which appeared in her first affidavit, the case could have been put.
[26]
Conclusion
The proceedings should be dismissed with costs.
[27]
Endnotes
Clause 50.4 of the General Terms; there is an issue as to whether this requirement was later varied; I return to that at [33]-[36].
Clause 7(a)(ii).
Clause 7(a)(ii) of the Formal Instrument and "Item 7" in the Annexure to the General Terms.
Rather than by bank guarantee or retention, as was originally provided in the Building Contract.
As opposed to the $1 million drawdowns specified in the Facility Agreement.
Clause 39.4 gave the Principal this right if, in fact, the Contractor failed to show reasonable cause.
(1982) 149 CLR 537 at 551-552; [1982] HCA 29.
For example Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547/8 (Gleeson CJ) and see generally K Lewison & D Hughes, The Interpretation of Contracts in Australia (2012, Lawbook Co) at [3.15] and the cases there cited; and J D Heydon, Heydon on Contract (2019, Lawbook Co) at [9.1560].
T106.40.
E.g. see Canning v Temby (1905) 3 CLR 419 at 424; [1905] HCA 45 (Griffth CJ).
Heydon (supra) at [11.80].
(1986) 161 CLR 500 at 510; [1986] HCA 82.
[2008] VR 358; [2008] VSCA 26.
46 WAR 281; [2013] WASC 356.
See para (h) of the definition; incorporating the chapeau
See para (j) of the definition.
(supra) at [87].
Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1980) 144 CLR 300 at 306.
Ibid.
See [44]-[45] above.
See [48]-[51] above.
For example, Upper Hunter Timbers Pty Ltd v Forestry Commission of NSW [1999] NSWCA 125 at [48] (Sheller JA, Priestley and Stein JJA agreeing) and Scott v Ennis-Oakes [2019] NSWSC 1257 at [25]-[38] (especially at [30]) (Darke J).
See s 236 of the Australian Consumer Law.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 10 August 2020