Security Retirement Pty Limited v Twibill Architects Pty Limited & Anor

Court of Appeal (NSW)|2005-12-08|Before: Mason P, Bryson JA, Young CJ, Ashford J

CITATION: Security Retirement Pty Limited v Twibill Architects Pty Limited & Anor [2005] NSWCA 325

JUDGMENT OF: Mason P at 1; Bryson JA at 2; Young CJ in Eq at 40

CATCHWORDS: LIMITATION OF ACTIONS - claim for Architect's fees on termination of services - construction of handwritten additions to RAIA Client/Architect Agreement (Short Form, including conditions and fees) issued March 1984 revised March 1990 - HELD on construction of document, that Architect's entitlement to fees on termination accrued on termination not earlier when entitled to Progress payment, and was not time-barred - decision on handwritten additions to standard form, no question of general principle.

Pickering v Ilfracombe Railway Co (1868) LR 3 CP 235 Hollis v Palmer (1836) 2 Bing NC 713;132 ER 275 Cheang Thye Phin v Lam Kin Sang [1929] AC 670 (PC) Re Otway Coal Co Ltd [1953] VLR 557 at 565 CASES CITED: The Millstream Pty Ltd v Schultz [1980] 1 NSWLR 547 Archbold v Scully (1861) 9 HLC 360; 11 ER 769. Norton v Ellam (1837) 2 M & W 461; 150 ER 839 Australia and New Zealand Banking Group Ltd v Douglas Morris Investments Pty Ltd [1992] 1 Qd R 478

Security Retirement Ptyp Limited - Appellant PARTIES: Twibill Architects Pty Limited - First Respondent Devine Erby Mazlin Australia Pty Limited - Second Respondent

T. Davie - Appellant COUNSEL: J. Bailey SC/J Donnellan - 1&2 Respondents

Peter Merity - Appellant SOLICITORS: Messrs Harris & Co - 1st & 2nd Respondents

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41177/04

MASON P BRYSON JA YOUNG CJ in Eq

Thursday 8 December 2005 SECURITY RETIREMENT PTY LTD v TWIBILL ARCHITECTS PTY LTD & ANOR Judgment 1 MASON P: I agree with Bryson JA. 2 BRYSON JA: The respondents carry on an architects' practice as Twibill-Devine Erby Mazlin at North Sydney. The respondents, plaintiffs in the District Court, sued the appellant, a developer, for $106,026.00 architects' fees and for interest which they claimed was payable under an Agreement in writing dated 27 November 1995 for architects' services relating to a retirement village project at Northcott Road, Cromer Heights. The respondents' invoice of 20 January 1997 claimed fees for architectural services of $211,026.00, which is 15% of 5.6% of $25,122,222.00, gave credit for $105,000.00 paid earlier and charged the appellant $106,026.00 as the balance. The Agreement was on a standard form of the Royal Australian Institute of Architects called "Client/Architect Agreement (Short Form, including conditions and fees)" issued March 1984 - revised March 1990. There are a number of handwritten additions and special conditions in the Agreement which affect the matters in dispute. The issues now decided arise largely on handwritten additions and not on matters likely to arise on other occasions where the standard form is used. In these reasons the handwritten additions are in italics. Interpretation of the provisions of the Agreement relating to Architect's remuneration is difficult because, whatever may have been the position if the printed clauses had been adopted, the many handwritten additions are not clearly expressed or well integrated with each other. I have not found it possible to reach entirely confident conclusions about the operation of those provisions, and I have acted on the interpretations which seem to me to be the most probably correct ones available. 3 In the Statement of Claim filed on 19 June 2002, the respondents alleged "The agreement provided inter alia that the [Respondents] would provide schematic design and design development to the development application stage for the entire development at a fee of 15% of 5.6% of the estimated construction costs from the project inception to the lodgement of the development application". They went on to allege that they prepared all necessary architectural drawings and supporting documentation leading up to the Development Application and lodged them with Warringah Council on 19 March 1996. They alleged that on 20 June 1996 the appellant requested the respondents, until further notice to do no further work in connection with the project. They went on to allege that they issued interim invoices to the appellant totalling $105,000.00 which was paid, and a final invoice of 20 January 1997 for $106,026.00 which has not been paid. The final invoice "…was calculated in accordance with the agreement…and based on a cost of the construction of the works in the amount of $25,122,222.00." Alternatively they claimed under quantum meruit for the cost of architectural services at a reasonable and commercial rate. 4 The appellant's Notice of Grounds of Defence filed on 20 August 2002 raised a number of matters of defence. Para 4 was a denial, at length with a statement of reasons, of the respondent's entitlement to the amount in the final invoice of 20 January 1997; it was alleged that the respondents' entitlement to fees was based on an agreed construction budget of $12,500,000.00 and that the Progress Payments of $105,000.00 constituted payment in full based on that agreed construction budget. Para 4 also alleged "The plans prepared by the [respondents], when put out to tender, were priced by the sole tenderer on 7 May 1996 at $25,955,220.00…being more than double the agreed construction budget. To the extent that the [respondents] claim a payment based on the tender figure they are seeking to profit from its own failure to comply with their obligations …the [respondents] are thus relying upon their own wrong." 5 Para 5 of the Notice of Grounds of Defence also disputed the quantum meruit claim, and raised a number of other matters of defence which are no longer significant. Para 7 raised a defence under s 14 of the Limitation Act 1969 and contended that under the Agreement the balance of fees for works in Stage A1 of the Appendix to the Agreement being the 'Schematic Design/Development Application/Planning Stage' were to be paid when a complete set of documents in support of the Development Application were to the appellant's satisfaction and ready for lodgement. As is stated in para 3 of the Statement of Claim, the complete set of documents in support of the Development Application was lodged on 19 March 1996. It was alleged that "Any entitlement which the [respondents] may have had for payment first accrued on that date." 6 Neither party contended that there had been a breach by repudiation, or that there had been an accepted repudiation. There are provisions in the Agreement for termination, but neither party contended that the Agreement was terminated in accordance with those provisions. 7 In the Notice of Appeal with Appointment filed on 22 December 2004 the appellant relied on the following grounds:-

The learned Judge should have determined that, under the agreement, payment became due when the DA was lodged with Council, and that the respondent's claim was therefore statute-barred. 2. The learned Judge should have determined that Cordukes Pty Limited (Cordukes) was not a Construction Manager as that term was contemplated by the agreement between the parties (the agreement). 3. The learned Judge should have determined that s C1.01(c) of the agreement was inapplicable in the absence of agreement as to the cost or estimated cost of the works or an estimate by an independent quantity surveyor. 4. The learned Judge should have determined that paragraph C1.01 of the agreement was inapplicable because it applies where the fee payable is a percentage of the cost of the works, not the "estimated cost of the works." 8 Argument on the hearing of the appeal did not follow the grounds in the Notice of Appeal closely. The aspects of her Honour Judge Ashford's disposition of the facts which were challenged related only to the meaning and effect of documents. 9 Her Honour dealt with the issues before her comprehensively in a careful judgment. I particularly note the following conclusions:- Para 27 The [respondents] only completed stage 1 which was the schematic design/development/planning stage. The respondents were entitled to calculate their charge for services on the basis that J.P. Cordukes' estimated cost of work was a Construction Manager's estimate for the purpose of C1.01(c)(i) (paras 26-29). The respondents' cause of action for payment of fees accrued on 20 January 1997 the date of rendering the invoice.

Her Honour rejected the appellant's contention that accrual of the cause of action occurred when the Development Application was lodged with Warringah Council, that is, on 19 March 1996. If the respondents' cause of action accrued on or before 19 June 1996 the claim would have been statute barred under s 14 of the Limitation Act 1969 . Her Honour rejected this defence. 10 The Agreement of 27 November 1995 opens with these words: It is hereby agreed that the Architect will provide to the Client services in respect of the Project and the Client will pay the Architect for these services all in accordance with the terms of this Agreement.

There follow some provisions under a heading 'Services to be provided by the Architect'. The services to be provided at various stages are set out. For Stage A1 the provision is:- A1 Schematic Design/Development Application/Planning Stage Preparation of schematic design, illustrated by preliminary sketch drawings and/or reports, and provision of an opinion of probable construction cost and all other architectural services as may be necessary to get the project through to the Development Application stage and accepted by the Consent Authority. Estimated time to complete is 3 months.

The words in italics are not part of the printed form but are handwritten. 11 The reference to the project being accepted by the Consent Authority is a reference to the Development Application being lodged with and received by the Consent Authority, in this case the Warringah Council. It is not a reference to a grant of Development Consent. The project did not go past this stage, and did not go to tender. Stage A4 'Contract Administration Stage' shows that calling for tenders and reporting on tenders was a responsibility of the Architect which was to follow at a later stage than A1 'Schematic Design/Development Application/Planning Stage' and later than the Development Application and acceptance by the Consent Authority.

12 Clause A(5) 'Other Services' is in handwriting as follows:- Attendance at monthly project control group meetings and at monthly site meetings in between each project control group meeting. For services associated with a Construction Management contract, no additional or reduced fees shall apply.

There is another reference to a Construction Management contract in cl B which is headed 'Conditions'. Clause B 1.02 'Authority' reads:- B1 Architect's Responsibility and Authority B1.02 Authority The Client authorises the Architect under a Construction Management contract to act as the Client's agent in such matters as are set out or implied in this Agreement and as are set out or implied in the particular building contract or contracts adopted for the project. Where the Architect's services include the administration of a building contract, all instructions to the Builder shall be given by the Architect unless the building contract specifically provides otherwise.

The Agreement does not anywhere deal comprehensively with what a Construction Management contract is to provide or when it is to be entered into; handwritten additional terms show clearly that the parties contemplated that there would be a Construction Management contract, with the clear implication that there would be a Construction Manager. The terms of cl C1.01(c)(i) show contemplation that there would be Construction Manager's estimates prior to tender; that is, there was contemplation that there would or could be a Construction Manager at that stage. 13 Clause A concludes with these words: The services to be provided and the bases of payment are as listed in the Appendix. In connection with the services referred to above, Consultants are to be employed as set out in the Appendix directly by the client. 14 Clause B1.05 'Stages of Service' is in these terms:-

B1.05 Stages of Service The Architect shall not initiate or proceed with any Stage of his services as set out on page 2 without the authority of the Client in writing . 15 Printed cl B3 is entitled 'Fee Conditions'. Clause B3.01 'Progress Payments' provides: B3 FEE CONDITIONS B3.01 Progress Payments The Architect is entitled to payment at monthly intervals for each 3-monthly service stage in amounts commensurate with the service provided, unless there are special conditions forming part of this Agreement in which case payment shall be in accordance with those special conditions. Please refer to the special conditions on p6. The handwritten addition refers to Special Conditions on page 6 of the Agreement. Clause B3.02 'Overdue Payment' entitles the Architect to interest on overdue payments. 16 Clause B3.05 'Deferred Services' is as follows:- B3.05 Deferred Services If due to the Client's instruction or lack of instruction a break in the continuity of the Architect's service occurs, and instructions allowing the Architect to continue work are not received within 60 days of being requested by the Architect, then fees for the services completed at the time of cessation shall be determined in accordance with the provisions of this Agreement 17 Clause B4 is entitled 'Other Conditions' and cl B4.02 'Termination' is as follows:- B4 OTHER CONDITIONS B4.02 Termination This Agreement may be terminated by either party after Stage A1 or after Stage A2 & A3 on the expiration of reasonable notice given in writing. Upon termination, the Architect shall be entitled to reasonable payment for services provided to date in accordance with this Agreement. Where this Agreement is terminated by the Client, other than because of default by the Architect, or is terminated by the Architect because of default by the Client, the Architect shall be entitled to reimbursement for any expenses reasonably incurred by the Architect . in contemplation of his providing the balance of services as set out in this Agreement .

Clause B4.02 deals with termination by either party of the Agreement. This is not the same thing as termination of the services of the Architect, with which other provisions deal. These are two different things, both in language and in substance. 18 Clause C1 'Fees' is as follows:- C1 FEES C1.01 Percentage Fee Where the fee payable to the Architect is a percentage of the cost of the Works, the fee shall be calculated by applying each percentage stated in the Appendix to the final cost of the Works, subject to the following conditions: a) The cost of the Works shall include: (i) The cost of all work designed by the Architect and consultants co-ordinated by the Architect. (ii) The cost of service installations, fixed or built-in furniture and equipment, mechanical and electrical equipment appertaining to the building whether covered by a monetary sum, a provisional sum, a prime cost sum, or not, which the Architect has had to co-ordinate or make provision for in the documentation. (iii) The cost of materials calculated as if they were new. (iv) The cost of any material, labour, carriage or part of the Works provided by the Client calculated as if it were provided by the Builder or other contractor. b) Where work is omitted on the instruction of the Client, the Architect shall be entitled to fees for services rendered prior to that instruction in respect of such work prior to its omission. Such fees shall be based on the value of the work omitted. c) For the purposes of assessing progress payments or if the services of the Architect are terminated: (i) Prior to Tender Prior to tender, the cost of the Works shall be the most recent opinion of probable cost based on Builder's or Construction Manager's estimates or, failing agreement, on a cost of the works estimate by an independent quantity surveyor . (ii) After Receipt of Tenders After receipt of tenders but before the Contract is agreed, the cost of the Works shall be the lowest valid tender price or aggregate of valid Trade Contract & Material Supply prices & site labour less any contingency and provisional sums for items not yet documented or co-ordinated by the Architect. (iii) During and After Construction During and after construction, the cost of the Works shall be the Contract Sum as adjusted unless fees are fixed prior to construction of each stage based on agreed budget estimates. d) Progress payments shall be payments on account and subject to adjustment in accordance with the final cost of the Works. Where the Architect's services are terminated prior to completion of the Works, progress payments are adjusted in accordance with the most advanced stage reached under C1.01.c). 19 There are also provisions in cl C1 'Fees' for a lump sum fee and for time charges; these do not need close examination now. Clause C3.01 gives the Architect an entitlement to reimbursement for expenses. The respondents did not claim expenses in this case.

20 In relation to the time at which the respondents became entitled to payment for their work on Stage A1 it is necessary to notice a number of different provisions. Clause A1 defines the Schematic Design Stage so as to include all architectural services necessary to get the project accepted by the Consent Authority. Clause B4.02 gives each party a right to terminate; relevantly this is an entitlement to terminate after Stage A1 on reasonable notice in writing. Upon termination the Architect is given an entitlement to reasonable payment for services provided in accordance with the Agreement. Neither party claimed to have followed the procedure for termination. The Architect is also given an entitlement to reimbursement for expenses, on narrower grounds than the entitlement to reasonable payment for services. 21 Provisions of cl C1.01(c) and (d) refer to events in which the services of the Architect are terminated. These provisions are not closely or necessarily tied to termination by notice under cl B4.02. Clause B4.02 relates to termination of the Agreement. Termination of the services of the Architect would be a consequence of termination of the Agreement, but could also arise in other ways than termination of the Agreement by the process provided for in cl B4.02. If the Client abandoned the Project in some definitive way, or did not give the Architect authority in writing under cl B1.05 to initiate a Stage within a reasonable time after completing the previous Stage, the services of the Architect would be terminated. The services of the Architect could in concept be terminated by a supervening event such as liquidation or death, by frustration or agreed discharge of the Agreement, or by its abandonment.

22 Handwritten Special Conditions follow cl C on page 6 of the Agreement. The Special Conditions are as follows (and I have added some numbers to facilitate reference):- SPECIAL CONDITIONS RE B3.01 'PROGRESS PAYMENTS' RE STAGES A1, A2 & A3 [1] Progress Payments for each 3-monthly service stage shall fall due as under: 1 month after commencement of each: 20% 2 months " " " " : 20% [2] 3 months after commencement of each 3-month service stage or upon completion of that service stage, which ever is the later, the balance of 60% of the fee, applicable to that 3-month service stage. RE B3.08 'OTHER SERVICES' [3] For architectural services in connection with a Land & Environment Court Hearing it is estimated that fees on a time charge basis may amount to $12000 and it is agreed that notification be given by the Architect when 25%, 50% & 75% of the estimated fee has been expended. [4] Services not specifically mentioned in the Agreement, unless otherwise approved in advance in writing, shall be taken to be included in the 5.6% fee. EACH STAGE OF THE ARCHITECTURAL SERVICE [5] * Commencement to be authorised in writing. [6] * Stage A1 to be for the entire project with balance of fees to be paid when the complete set of documents in support of the Development Application is to Client's satisfaction and ready for lodgement. [7] * Stages A2 & A3 combined for each Construction Stage with balance fees to be paid when the architectural documentation for each construction stage is to Client's satisfaction and ready for DA lodgement. [8] * Stage A4 fees shall be paid monthly during each construction stage proportionately to the value of the completed work unless otherwise agreed. 23 In the Special Conditions on page 6, the opening passages at [1] and [2] about Progress Payments provide for the balance of 60% of the fee applicable for each stage to be made "three months after commencement of each 3-month service stage or upon completion of that service stage, which ever is the later…" which seems to show that, in relation to Stage A1, the contractual entitlement arose on the completion of that stage as described in cl A1. However, later at [6] the Special Conditions provide "…balance of fees to be paid when the complete set of documents in support of the Development Application is to Client's satisfaction and ready for lodgement". The passage at [6] does not deal comprehensively with when the Architects' entitlement to fees for services related to Stage A1 falls due in any respect other than as to Progress Payments. The function of the passage at [6] is to alter, for Stage A1, what the passages at [1] and [2] provide about when the balance of the Progress Payments of fees falls due: instead of falling due at the later of 3 months after commencement or after completion of the service stage, the balance falls due when the documentation is ready for lodgement. The passage at [6] does not depart from the subject in hand, which was the time at which the balance of Progress Payments falls due. 24 From time to time before the Development Application was submitted the respondents sent the appellant invoices for Progress Claims. Three Progress Claims totalled $87,500.00. The Development Application and supporting documents for Stage A1 of the Works were submitted to Warringah Council on 19 March 1996. On 29 March 1996 the respondent sent the appellant a memorandum of fees described as "Fourth Progress Claim for professional services rendered in relation to the above project from its inception to DA lodgement" with a statement that the total fee of $105,000.00 was subject to adjustment on confirmation of agreed construction budget. Credit was given for $87,500.00 earlier progress payments received. The fees claimed were $17,500.00, and they were paid. $105,000.00 is 15% of 5.6% of $12,500,000.00. There were communications with Warringah Council but Council did not deal with the application within 40 days of lodgement and the appellant made an application to the Land and Environment Court on 29 April 1996. The respondents continued to provide architectural services relating to the Development Application. Warringah Council refused the Development Application on 18 June 1996. The Land and Environment Court had by that time fixed a hearing date to commence on 29 September 1996. 25 On 20 June 1996 the respondents received a facsimile message from the appellant stating:- Until further notice, please do no further work in connection with the "Cromer Highlands" project.

It will be seen that at the time when the appellant directed the respondents to do no further work the respondents had completed all the services in Stage A1 as described in cl A1 of the Agreement. On 2 July 1996 Warringah Council sent the respondents a formal notice of refusal and on 4 July 1996 the respondents forwarded this to the appellant. Thereafter matters appear to have been at a stand until the respondents forwarded their invoice for fees on 20 January 1997. Neither the appellant nor the respondent gave the other notice of termination and the appellant did not follow its fax message of 20 June 1996 with any direction to do any further work, or any indication that the respondents were no longer retained; matters were simply left at a stand. The appellant did not take its appeal to hearing at the Land and Environment Court. 26 If the entitlement to payment for which the respondents sued accrued under passage [6] of the Special Conditions on page 6 when the complete set of documents in support of the Development Application was ready for lodgement, the claim was statute barred because that happened in March 1996. If the entitlement accrued when the appellant sent the fax message on 20 June 1996 and directed the Architects to do no further work the claim is not statute barred. If the entitlement accrued later, for example at an indeterminate time when the parties both abandoned further action under the contract, or at the time of the invoice on 20 January 1997, the claim is not statute barred. 27 The judgment of the Trial Judge contains findings about the circumstances in which J.P. Cordukes Pty Limited (hereinafter Cordukes) became Construction Manager. After discussion between Mr Twibill, a director of the first respondent and Mr McIntyre, a director of the appellant, letters were sent to six potential providers of Construction Management Services inviting them to tender; proposals were received and considered and some further information obtained, and on 19 February 1996 a file note of the respondents records that the appellant advised that Cordukes were to be appointed for pre-construction services for the payment of $3,000.00. On 20 February 1996 the respondents wrote to Cordukes confirming that its proposal and fee quotation for the provision of Construction Management Services had been accepted by the appellant. The letter went on to say that the acceptance related to pre-construction services, which were defined, and that four conditions were to apply prior to formal appointment of Cordukes as Construction Manager for the project. On 7 May 1996 Cordukes provided the respondents with a completed budget estimate for the project in a total sum of $25,955,222.00. This was not a tender. 28 There were respects in which the appointment of Cordukes' Construction Manager had a preliminary character; the Trial Judge referred to them as "…appointed as construction managers elect subject to the four conditions…" not all of which were fulfilled. As her Honour said "…it seems Cordukes P/L nor any other company were ever appointed as managers for the construction phase. However, Cordukes P/L were appointed to perform as construction manager to provide preconstruction services set out in clause 3.00…This document is specifically provided for provision of services including estimate of construction costs which they had done on 7 May 1996." Her Honour treated Cordukes as Construction Manager for the purpose of the application of cl C1.01(c)(i). Although it is clear that Cordukes' appointment had a preliminary character and was not an appointment for the construction phase, cl C1.01(c)(i) contemplates that there may be a Construction Manager prior to tender. In my view it was correct of her Honour to treat Cordukes as Construction Manager for the purposes of cl C1.01(c)(i) when retained for the provision of Construction Management Services which were pre-construction services. 29 What I regard as the best order of reading to reveal what the Agreement provides about the entitlement of the Architect on termination of the Architects' services after Stage A1 begins at the end of cl A:- The services to be provided and the bases of payment are as listed in the Appendix.

30 The Appendix on page 7 of the Agreement is in these terms: APPENDIX SUMMARY OF PAYMENTS Service Basis of Payment 15% of 5.6% of the total estimated cost of the Works comprising A1 Schematic Design/Development all the buildings, site Application/Planning Stage development construction and utility service installations for the entire village project. ) 75% of 5.6% of the A2 Design Development/Development ) total cost of the Works Application/Planning Stage ) as above based on ) each construction ) stage loss fees A3 Contract Documentation Stage ) received re A1 above ) on account prorata. 25% of 5.6% of the A4 Contract Administration Stage total cost of the Works as above described in paragraph A1. A5 SPECIAL CONDITIONS + The percentage (5.6%) quoted re A2, A3 & A4 above is based on Construction Stages of not less than 16 residential units. Smaller stages would require a higher percentage to be agreed prior to commencement, in the same cost of works to percentage ratio as the appended'CONVENTIONAL' graph. + Fees for Services A2/A3 &/or A4 may be converted by agreement to fixed fees based on the APPROVED BUDGET ESTIMATE for each construction stage derived from the lowest acceptable tender or total of trade quotations, material supply quotations and site labour assessments in the event of Construction Management.

31 The main subject of the Appendix and the summary of payments in it is the total amount of the payments to be made to the Architect. The Appendix is not primarily directed to establishing when payments are to be made, does not mention Progress Payments and is not limited to establishing the amount to which the Architect is entitled as Progress Payments. The Appendix contains Special Conditions on page 7 of the Agreement, and these are Special Conditions relating to the subject with which the Appendix deals. The Basis of Payment for Stage A1 refers to "the total estimated cost of the Works" and by contrast the Basis of Payment for later Stages is "the total cost of the Works." The Basis of Payment and the Appendix deal with payment for the Architects' services in whatever circumstances they come to be paid for, including (to take cases with which the Agreement expressly deals elsewhere), when there is an entitlement to a Progress Payment and when the services of the Architect are terminated, and when the Project does not go further than one of the described stages. 32 When considering ascertainment of the amount of the fee for Stage A1 it is necessary to notice provisions of cl C1.01(c)(i), which operates if the services of the Architect are terminated prior to tender. So cl C1.01(c)(i) is next in the order of reading. It gives machinery for ascertaining the cost of the Works prior to Tender, and it is on this machinery that the reference in the Basis of Payment to "the total estimated cost of the Works" relies when it uses the word "estimated", derivatives of which appear in the handwritten additions to cl C1.01(c)(i). The next passage to read after the Appendix and cl C1.01(c)(i) is cl C1.01(d). The words of cl C1.01(c)(i) and (d) show that they were intended to apply to Progress Payments and also to termination of services. 33 The order of reading then turns to Progress Payments in cl B3.01. The printed words of cl B3.01 contemplate that there may be Special Conditions about Progress Payments, and its handwritten words expressly refer to the Special Conditions on page 6 of the Agreement (these are not the Special Conditions in the Appendix on page 7). The Special Conditions on page 6 open with passages [1] and [2] dealing with cl B3.01 and Progress Payments. They then turn aside to passages [3] and [4] dealing with cl B3.08 relating to 'Other Services', and specifically with architectural services in connection with a Land and Environment Court hearing. There is no provision for Progress Payments for 'Other Services'. The Special Conditions then turn to passages dealing with 'Each Stage of the Architectural Service'. These passages do not deal only with Progress Payments: they open with passage [5] which says "Commencement to be authorised in writing." and then return to dealing with payments, and what they say about Stages A1, A2 and A3 is very obscurely expressed; what they say about Stage A4 in passage [8] is clearly related to monthly payments, that is to Progress Payments. To my mind the context shows that what passage [6] says about Stage A1 relates to the subject with which the Special Conditions opened, the subject for which the reader was directed from cl B3.01 to page 6, that is, to Progress Payments. To my mind it is not the correct reading of what passages [6] and [7] say about Stages A1, A2 and A3 that they were intended to deal comprehensively with the Architect's entitlement to payment for services relating to Stage A1. Passage [6] makes specific, in the case of Stage A1, the reference higher at passage [2] to Progress Payments of 60% payable "3 months after commencement of each 3-month service stage or upon completion of that service stage, which ever is the later" by substituting, in the case of Stage A1, the time "when the complete set of documents in support of the Development Application is to Client's satisfaction and ready for lodgement" as the time for payment of the balance in substitution for the less clearly indicated time for payment of the balance earlier provided for. Passage [6] does not in any way diminish or affect a right, such as the right to an adjustment under cl C1.01(d), which may arise at a later time. 34 The Special Conditions on page 6 of the Agreement establish when Progress Payments are to be made but they do not establish how much is to be paid: to what the figures of 20% and 60% relate. The machinery for assessing Progress Payments is found in cl C1.01(c)(i) and can produce different results at different times. For example, when a second Progress Payment came to be payable, the most recent opinion of probable cost available and conforming to cl C1.01(c)(i) might be greater or less than the opinion of probable cost available when the earlier Progress Payment became payable; a Progress Payment should be a percentage of the currently most recent opinion. The respondents' fourth Progress Claim, which claimed $17,500.00 and took the total fees to date to $105,000.00, and was made on 29 March 1996, does not neatly fit into the scheme of Progress Claims authorised by passages [1] and [2] in the Special Conditions on page 6; it is a Progress Claim for less than 60%, but it took the total Progress Claims for Stage A1 to the 100% which was to fall due upon completion of a Service Stage, and it can be mathematically inferred that the Progress Claims were calculated on the basis that the appropriate most recent opinion of probable cost was then $12,500,000.00; the estimate by Cordukes was not made until later. The assumption apparently implied about $12,500,000.00 as the reference figure and the split into four Progress Payments and not three were not challenged, the invoice of 29 March 1996 was paid and the respondents did not sue to enforce the entitlement, referred to in passage [6] of the Special Conditions on page 6, to the balance of fees payable when the complete set of documents was ready for lodgement. In my opinion this provision of the Special Conditions on page 6 does not establish any relevant accrual date for the debt which the respondents have actually claimed. 35 In the ordinary workings of the Agreement and if all stages of the project were carried out, no occasion would ever arise to establish finally the quantum of entitlement of the Architect to payments for Stage A1. The Architect would be paid Progress Payments for Stage A1, and the fees received for Stage A1 would be deducted from the 75% of 5.6% of the total costs of the Works payable for Stage A2. To ascertain the fees payable for Stages A2 and A3 it would be necessary to establish the total cost of the Works, but it would be an academic question how much should have been paid for Stage A1 or whether the total estimated cost upon which payments for Stage A1 had been based was correct. Final ascertainment of the entitlement of the Architect to fees for Stage A1 could only become significant if the project were interrupted in some way and the Architect did not perform the services in Stages A2 and A3; that is what actually happened. 36 Notwithstanding the general obscurity of the Agreement I am of opinion that the Agreement contemplates, and at least by implication provides for an entitlement of the Architect to payment for services if his services are terminated, which entitlement is different to entitlements to Progress Payments, for Stage A1 or for any Stage. This most clearly appears from the second sentence in cl C1.01(d):- Where the Architect's services are terminated prior to completion of the Works, progress payments are adjusted in accordance with the most advanced stage reached under C1.01.c).

There is also a reflection of this entitlement in the statement in cl C1.01(c) of the application of that provision for the purposes of assessing Progress Payments and also and alternatively "if the services of the Architect are terminated". These references are to termination of the services of the Architect, not as in cl B4.02 to termination of the Agreement. There is also some recognition of the Architect's entitlement to payment when his services are brought to an end in cl B3.05, and possibly in the second sentence of cl B4.02, which (although the better reading is probably otherwise) may confer entitlements on the Architect on termination of his services. 37 If the process of adjustment referred to in cl C1.01(d) produces an entitlement in addition to Progress Payments already made, that entitlement is in my opinion a new debt and a new cause of action different to whatever entitlement and cause of action may have earlier existed for Progress Payments. It is not an entitlement to a Progress Payment, and it is not created by the provisions of the Agreement (including the Special Conditions on page 6) which confer rights to Progress Payments. The accrual date of the cause of action for money payable under an adjustment, whenever it is, cannot be earlier than the date when the Architect's services were terminated. When it was that the respondents' services were terminated is not a subject on which the facts yield an answer which can be specific to a date. It is quite clear however that it was not earlier than 20 June 1996 when the appellant by a fax message directed the respondents to do no further work. At some time in the period when there was no activity furthering the project, which ended with the invoice of 20 January 1997, the facts and events reached a point where the only reasonable interpretation of them was that the services of the respondents were terminated. The facts included the respondents' not being involved in preparations for the hearing of the appeal to the Land and Environment Court, and the appellant's not going on with the appeal; the appellant's not giving any written authority under cl B1.05 to proceed to any other stage of service, and not giving the respondents any instructions or any other authority at all. In the nature of the Agreement, continuing co-operative activity from both sides was necessary if the respondents were to perform services under the Agreement. By the time Warringah Council refused consent there was little prospect of the project proceeding: when the appellant did not carry on with its appeal the project was as dead as the Dodo. In my opinion the absence of relevant activity before the invoice of 20 January 1997 was rendered continued for so long as to make it clear that, although the appellants had not said so in any express communication, the appellant had terminated the Architects' services. In my interpretation this occurred some months earlier than the date of the invoice (which was the date adopted by the Trial Judge) but still well within the time available under s 14 of the Limitation Act 1969. 38 In the circumstances I am of the opinion that at some time after 20 June 1996 the respondents became entitled under cl C1.01(d) to payment of the amount of the adjustment of the Progress Payments in accordance with the most advanced Stage reached under cl C1.01(c). In my opinion Cordukes' estimate fulfils the reference to "the most recent opinion of probable cost based on Builder's or Construction Manager's estimates…". In a document which is not distinguished for precise language the references to "opinion" and to "estimates" are references to the same concept and are fulfilled by Cordukes' estimate. The expression "failing agreement" in cl C1.01(c)(i) is difficult to understand as there is no reference elsewhere or earlier to any need for an agreement; it would not be necessary to refer to any agreement of the parties (or of whom? the document does not say) to identify "the most recent opinion of probable cost". In my opinion the words "failing agreement" are fulfilled if there is some positive disagreement, expressed in some such way as a call for a works estimate by an independent quantity surveyor; but unless some disagreement of that kind emerged within a reasonable time, meaning more or less contemporaneously with the termination of the services of the Architect, it should not be said that agreement had failed. 39 In my opinion the learned Trial Judge acted correctly in determining that the Architect had an entitlement to fees for services calculated in accordance with cl C1.01(c)(i) and by reference to Cordukes' estimate. Her Honour's rejection of the defence under s 14 of the Limitation Act 1969 was correct. The appeal should be dismissed with costs. 40 YOUNG CJ in EQ: I have read the reasons for judgment of Bryson JA which fully and fairly set out the relevant facts and documents. 41 With respect, I am convinced that his Honour's reasons on all aspects of the case, with the exception of [37], are clearly correct. 42 If Bryson JA's view in [37] is correct, that is, that the claim of the respondent for the adjustment referred to in cl 1.01 (d) of the relevant contract creates a new debt and a new cause of action, then it is clear that, as his Honour has determined, the appeal must be dismissed. 43 I will confine myself as to whether this view is correct. If it is not, and the correct way of regarding the claim is that it is an adjustment to the claim for progress payments due in Stage 1, the appeal should be allowed as the claim is statute barred. 44 To make this point clear, I should set out my basic reasoning. 45 It is quite clear on the authorities, that the cause of action in respect of a progress payment arises when the progress payment is due and payable; see eg Pickering v Ilfracombe Railway Co (1868) LR 3 CP 235. 46 It is also clear that if the claim to a principal debt is barred, so also is any claim for interest, adjustments or other accessory amounts, unless the latter are the subject of a separate and distinct covenant; see eg Hollis v Palmer (1836) 2 Bing NC 713;132 ER 275; Cheang Thye Phin v Lam Kin Sang [1929] AC 670 (PC) and Re Otway Coal Co Ltd [1953] VLR 557 at 565. 47 The fact that some additional damage occurs after the cause of action accrues or that some circumstance changes which redetermines the amount, does not affect the date of accrual of a cause of action: The Millstream Pty Ltd v Schultz [1980] 1 NSWLR 547. 48 In the ordinary case of breach of contract, one can have successive breaches of a covenant which will each create a new cause of action. The usual example is successive breaches of a covenant to pay rent; see eg Archbold v Scully (1861) 9 HLC 360; 11 ER 769. However, with a promise to pay a debt, there can only be one breach and that occurs when the debt is not paid as and when promised. Even with a debt, repayable on demand, there is only one time of accrual of the cause of action, namely when the debt is incurred, notwithstanding that interest accrues after that date: Norton v Ellam (1837) 2 M & W 461; 150 ER 839. 49 In Australia and New Zealand Banking Group Ltd v Douglas Morris Investments Pty Ltd [1992] 1 Qd R 478 at 489, McPherson J said:

"With respect to the particular indebtedness comprehended by that demand, the limitation period begins to run; and that it cannot be made to commence again by making a fresh demand which incorporates the old indebtedness as a part of the new balance. Quite plainly, time cannot repeatedly be set running again by the simple expedient of making successive demands for precisely the same amount of balance…". 50 As the case most recently cited shows, it is difficult to read all the cases on when time runs with guaranteed running accounts with financial institutions without getting the impression that there are inconsistent approaches to the problems. However, the key is to consider the precise wording of the contract in question as to what is the debt that is being created. 51 Thus, the vital question is whether, on the true construction of the contract, the present claim is for an adjustment of the progress payment or a separate and new claim. 52 One thus needs to look carefully at the contract in this case. It is not a very well crafted document. (I have given this question considerable independent thought). I have reached the conclusion that the conclusion reached by Bryson JA is the correct one principally for the reasons he gives. 53 I thus agree with the orders which Bryson JA proposes.

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