Southern Cross Constructions (NSW) Pty Limited (Administrators Appointed) v Bucasia Pty Limited

Introduction 1This is the determination of a separate question relating to the proper construction of a contract ("the Contract") made in about late 2010 between the plaintiff, Southern Cross Constructions (NSW) Pty Limited ("Southern Cross") and the defendant, Bucasia Pty Limited ("Bucasia"). 2Pursuant to the Contract, Southern Cross undertook to design and construct a mixed-use development in Eastwood. 3The Contract comprised a number of documents including a "Formal Instrument of Agreement" (which specified a "Contract Sum" of $26,296,634), AS4902-2000 General Conditions of Contract for Design and Construct ("the General Conditions") and various annexures including a document called annexure "Part E" which varied many of the provisions in the General Conditions. 4The Contract obliged Southern Cross to provide "contractor's security" in the form of two unconditional insurance bonds each of 2.5 per cent of the Contract sum. 5Clause 5.2 of the Contract provided that Bucasia could have "recourse" to that security in the following circumstances: - "5.2 Recourse The Principal may have recourse to Security after first giving not less than 5 Business Days [sic] notice to the Contractor where: a) the Principal has become entitled to exercise a right or power under the Contract in respect of the Security; b) the Contractor is in default or breach of the Contract; c) the Contractor has repudiated or given notice of intention to repudiate the Contract; d) the Contractor has failed to pay the Principal amount certified as owing by the Contractor to the Principal in accordance with clause 37.2A; or e) the Contractor is otherwise indebted to the Principal and the Principal remains unpaid after 5 business days has [sic] elapsed since the Principal issued an invoice to the Contractor seeking payment of the debt." 6On or about 5 April 2011, Southern Cross provided security in the form of unconditional undertakings, identified as Bond No. 201101-0047 and Bond No. 201101-0049, each in the amount of $723,157.44. 7Southern Cross alleges that on 15 October 2012, Bucasia, by its officers and agents, entered Southern Cross's site office without permission, forcibly removed a large number of Southern Cross's files and documents comprising project records, changed the locks to the site office, threatened Southern Cross's staff and informed those present that it was terminating the Contract. 8Southern Cross claims that Bucasia thereby evinced an intention to no longer be bound by the Contract and that Southern Cross accepted Bucasia's repudiation of the Contract by: - (a)between 15 and 17 October 2012, ceasing work other than to make the site safe, closing its site office and off-hiring plant and equipment used on the project; or (b)alternatively, by notice in writing on 23 October 2012 in which it purported to terminate the Contract. 9On 24 October 2012, Bucasia issued notice of its intention to call on the security. 10Bucasia has not yet filed a Response to Southern Cross's List Statement. However Mr Kalyk, who appears for Bucasia, informed me that Bucasia disputes that it has repudiated the Contract and that Southern Cross has effectively terminated the Contract. Resolution of that dispute must await another day. 11In those circumstances, on 16 November 2012, and with the consent of the parties, Sackar J ordered the separate determination of an issue concerning the proper construction of the Contract. 12Before me it was agreed, and I ordered, that the separate question be reformulated as follows: - "Whether, on the proper construction of the Contract, and assuming Southern Cross terminated the Contract on or before 23 October 2012, Bucasia was entitled to issue a notice of intention to have recourse to security under clause 5.2 of the Contract." 13Southern Cross accepts that, prior to its purported termination of the Contract on 23 October 2012, it was "in default or breach of the Contract" within the meaning of clause 5.2(b) of the General Conditions.