Planet Build (NSW) Pty. Limited v. Lassgol Pty. Limited [2000] NSWSC 861

1 Pursuant to leave given in my judgment of 9th August 2000, Lassgol has sought to present further argument on the interlocutory application. Also, Planet Build has filed an Amended Summons, and also a Notice of Motion, in which it seeks inter alia summary judgment for $259,107.00 or alternatively, $114,421.00. 2 There is also further evidence, of the following matters. 3 On 4th August 2000, the Superintendent issued Payment Certificate 46, showing $353,307.00 due from Planet Build to Lassgol. The changes from the certificate issued on 19th July 2000 were: first, the deduction for non-complying work was increased from $267,000.00 to $359,510.00; and second, $225,000.00 liquidated damages for late completion was also taken into account. 4 On 8th August 2000, Lassgol gave a further notice to Planet Build that it intended to call on the Performance Bond. 5 On 9th August 2000, Planet Build purported to terminate the contract. 6 On 10th August 2000, Lassgol requested Planet Build to cease its suspension of work and to complete its obligations under the contract. 7 On 14th August 2000, Planet Build went into voluntary administration. 8 On 17th August 2000, the Superintendent issued Payment Certificate 47 showing $313,000.00 due from Planet Build to Lassgol. This certificate appears to overlap Payment Certificate 46, because the $313,000.00 is made up of $68,000.00 of further non-complying work, and $245,000.00 liquidated damages for late completion. Accordingly, the amount certified additional to Payment Certificate 46 seems to be the $68,000.00, plus a further $20,000.00 of liquidated damages; and the total amount certified by the two certificates to be due to Lassgol would appear to be $441,307.00. 9 On 18th August 2000, Marrickville Council gave notice that it proposed to give Planet Build an order under s.121H of the Environmental Planning & Assessment Act requiring it to do certain work on the property. 10 It is common ground that the District Court attachment order, referred to in paragraph 47 of the earlier judgment, is now discharged. 11 There is further evidence from Planet Build disputing all of the alleged non-complying work; and also evidence in support of an allegation that the Superintendent is not acting independently. However, Planet Build has put on no evidence that it is not presently liable for liquidated damages of at least $185,000.00 for late completion. The difference from the $215,000.00 mentioned in my earlier judgment is that Planet Build claims that it had done all work necessary for issue of the final certificate by 29th June 2000, although the certificate itself was not issued until 20th July 2000. 12 It is convenient to go through the tentative findings made in my previous judgment, and to indicate the extent, if any, to which they are affected by further evidence and argument. 13 Starting with paragraph 33 of my earlier judgment, as noted above it seems clear that Lassgol is entitled to at least $185,000.00 in liquidated damages. It may be entitled to $215,000.00, or it may be entitled to $215,000.00 plus $10,000.00 per week from 20th July. 14 Turning to paragraph 34, I see no reason to modify the views expressed there. 15 As regards paragraph 35, Mr. Walsh for Planet Build submitted that the Performance Bond had now expired. He pointed to paragraph 2(i) of the Bond, requiring a "certificate that the contractor has defaulted under the contract". He submitted that the suspension of the contract, and now its termination, meant that such a certificate could not honestly be given. In my opinion, however, even if the contract has validly been terminated, the late completion and failure to pay the liquidated damages for late completion, although occurring before termination, are defaults under the contract that could still be certified; so that even the termination of the contract would not in my opinion put at end to the Performance Bond. 16 As regards paragraph 36, my views have changed significantly because of further submissions on two matters: first, the necessity for a statutory declaration, and second, the effect of later certificates issued by the Superintendent. 17 Dealing first with the statutory declaration, the Annexure Part A of the original contract provided, in relation to cl.42.1of the contract, that there should be "each twenty-one days for claims", "seven days for certification", and "four days for payment". Clearly, that meant that payment claims were to be made each twenty-one days, the Superintendent was to issue the payment certificate within seven days of receipt of the claim for payment, and payment pursuant to that certificate was to be made within a further four days thereafter. What is not express is whether the period of twenty-eight days for payment, in those cases where the Superintendent does not issue a certificate within the required time, is reduced to eleven days. In my opinion, there is a clear implication that it should be. 18 When one goes to cl.43.2 and cl.43.3, it is clear that those two clauses cannot stand with the varied times required under cl.42: it is not possible that payment be required within eleven days, if it can be withheld until a statutory declaration is provided, which statutory declaration is not to be provided any earlier than fourteen days after each claim for payment. Two possibilities arise from this: first, that cl.43.3 is displaced, so that payment cannot be withheld until the statutory declaration is provided; or alternatively, the fourteen day period referred to in cl.43.2 must be aligned with the fourteen days period for the Superintendent's certificate, and reduced to seven days because the time for the certificate is reduced to seven days. In my initial judgment, I preferred the former alternative. I think the matter is finely balanced, and now I marginally prefer the latter alternative. The further shortening of times by the Deed makes no difference to this agreement. 19 Turning to the question of the later certificates given by the Superintendent, I took the view in the earlier judgment that these were nugatory, because they could not affect a previously crystallised liability. However, I did not take account of a part of cl.42.1, which I omitted when setting out relevant parts of cl.42.1 in paragraph 10 of my previous judgment. This part of cl.42.1 appears between the two excerpts which I previously gave, and is in the following terms: If the Contractor fails to make a claim for payment under this Clause 42.1, the Superintendent may nevertheless issue a payment certificate and the Principal or the Contractor, as the case may be, shall pay the amount so certified within 14 days of that Certificate. 20 Accordingly, if payment claims are not made each twenty-one days (under the original contract), or each seven days under the contract as amended by the Deed, the Superintendent may issue a certificate, which is effective to require the payments as certified. It follows that the later certificates issued by the Superintendent were issued in accordance with the contract. 21 However, a further issue has been raised in relation to the effect of the superintendent's certificates certifying amounts in favour of Lassgol. Planet Build now claims that there is evidence suggesting that the Superintendent may have not acted with impartiality and independence, and this could invalidate the certificates in favour of Lassgol: see Hickman & Co. v. Roberts (1913) AC 229; Dixon v. South Australian Railways Commissioner (1923) 34 CLR 71; Perini Corporation v. Commonwealth of Australia (1969) 2 NSWR 530; Showmat Pty. Limited v. Rubinstein (1995) 124 FLR 284. Since the second hearing of the case, I have received further written submissions on this question. I will proceed on the basis that there is a serious question to be tried on this matter, but not a strong prima facie case. 22 The result of this discussion appears to be: (1) Planet Build is almost certainly entitled to $114,421.00. (2) Planet Build may not be entitled to the balance of its claim of $259,107.00, because it has not yet provided a statutory declaration in relation to that claim. (3) Lassgol is almost certainly entitled to $185,000.00. (4) Lassgol may be entitled to $353,307.00, and possibly to $441,307.00, subject to the question of the independence of the Superintendent. 23 Moving on to paragraph 37 of my previous judgment, further submissions have made me more doubtful on the question of set-off in relation to the Performance Bond. Mr. Henskens for Lassgol referred again to Algons, Blue Chip, and Hortico; and he referred also to Codelfa Construction Pty. Ltd. v. State Rail Authority of New South Wales (1982) 149 CLR 337; Malaysia Hotel Australia Pty. Ltd. v. Sabemo Pty. Ltd. (NSW Court of Appeal, 12/3/93); Burleigh Forest State Management Pty. Ltd. v. Cigna Insurance Australia Ltd. (1992) 2 Qd.R. 54. 24 These submissions have also raised another possible approach. Clause 5.6 of the contract (set out in paragraph 4 of my previous judgment) refers to two remedies: recourse to security and retention moneys, and conversion of security into money. Clause 42.9 (set out in paragraph 14 of my previous judgment), the only relevant clause authorising exercise of remedies, refers to only one of these remedies, namely recourse. In my opinion, the greater remedy includes the lesser; and cl.42.9 would certainly authorise conversion of security into money as a step in having recourse to it. 25 So another approach, which seems consistent with the approach taken by the Court of Appeal in Malaysia Hotels, is that, irrespective of any set-off, the Principal can convert the Performance Bond into money; but then, if there is a set-off, it may have to treat it as security for both parties in the same way as retention moneys. 26 In my opinion, when one takes all these problems into account, it is still not appropriate to finally decide one small aspect of the dispute, namely the effect of cl.2.5 of the Deed, even though my view on that aspect is strongly in favour of the defendant. In my opinion, it is still appropriate to approach the matter as one where there is a serious question to be tried, and go to the balance of convenience. In this regard, the facts relating to the balance of convenience have changed in Lassgol's favour: (1) Lassgol now has a claim for a balance of over $441,000.00. This claim is hotly disputed, but the $425,000.00 referred to in the Deed, is no longer plainly adequate to cover Lassgol's claim. (2) Planet Build's clear claim is only $114,421.00, as against Lassgol's clear claim of $185,000.00; and even this claim of $114,421.00 has been deducted to arrive at Lassgol's claim of $441,000.00. (3) The appointment of an administrator to Planet Build raises doubt as to the value of its undertaking as to damages, and may mean that less weight should be given to the damage to its financial standing which may result from a call on the Performance Bond. 27 Mr. Walsh submitted that the administrator had been appointed to only one member of a group of companies, and the financial standing of the group and the ability of the group to arrange performance bonds was of continuing significance both to the group as a whole and to Planet Build itself. Furthermore, he submitted, Lassgol should not be able to take advantage of the appointment of an administrator when it was reasonable to think that Lassgol's failure to pay the $114,000.000 must have contributed to the situation leading to the appointment of the administrator. 28 Mr. Henskens submitted that s.440D of the Corporations Law meant that there was, between the time of appointment of the administrator and the written instructions of the administrator to continue the proceedings, a gap in the proceedings; so that the undertaking as to damages would need to be renewed. As regards the alternative possibility of allowing the Bond to be called, but requiring that the proceeds be kept as security for both parties, Mr. Henskens submitted that there was no evidence why damages would not be an adequate remedy in relation to that matter. 29 I do not think that the original undertaking as to damages has ceased to apply, but, as mentioned above, its value has become questionable. If I were to permit the defendant to call on the Bond, I do not think the balance of convenience would be in favour of requiring the proceeds to be kept as security. On the whole, in my opinion, the balance of convenience is now against the grant of any interlocutory injunction. 30 For those reasons, I discharge the existing injunction.

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