SPIERS EARTHWORKS PTY LTD -v- LANDTEC PROJECTS CORPORATION PTY LTD [No 2] [2012] WASCA 53 (13 March 2012)

SPIERS EARTHWORKS PTY LTD -v- LANDTEC PROJECTS CORPORATION PTY LTD [No 2] [2012] WASCA 53 (13 March 2012) - WASCA 2012 case summary — Zoe

[172]

100 At the outset, it should be noted that it is not contended by the contractor that it was unreasonable or implausible to expect that the 32 lots in stage 1A of the proposed subdivision would be the subject of contracts for sale and ready for completion (subject to the issue of certificates of title) by 6 May 2005. Moreover, the submission ignores the existence of the alternative planning proviso. There was evidence from the developer to the effect that there were negotiations with the shire around the time of entry into the first contract, for obtaining approval for the stage 1A works without having to complete the whole of Curtis Lane at that time (ts 187, 301, 302). The contractor did not prove that the developer had no capacity to pay a bond. Nor did it prove that it was unlikely, or even that there was a serious risk, that the developer would not have reached an arrangement to complete the works within a reasonable period satisfactory to the WAPC, or that there were other circumstances which would have prevented the developer from utilising the alternative planning proviso, prior to the agreed date for completion of the works by the contractor under the first contract. Whilst it is true that, as events transpired, the developer did not make arrangements to bond Curtis Lane until mid-2005, as the first contract was drawing towards delayed completion, that fact does not seem to me to be probative of any assessment of the likely course of events judged as at 21 February 2005. Once the delays in the execution of the works under the first contract were apparent, it was presumably premature to attempt to reach a bonding agreement with the shire for the undertaking of the second tranche of work on Curtis Lane, at least until there could be some confidence in the date for the completion of the first tranche of works. Further, it is apparent that once the works under the first contract were actually at or near completion, bonding was readily arranged. The contractor led evidence from a representative of the shire that Curtis Lane was bonded because of the site conditions in winter (ts 697). It has not been shown that as at 21 February 2005, the same consideration would not be expected to have similar force in the event that bonding was sought by early May 2005 on the basis that the works under the first contract were duly completed.

[179]

(1) A delay in completion did not delay the receipt of sale proceeds as the [developer] was unable to settle the sales until it had constructed the full length of Curtis Lane as a condition of subdivisional approval, which it did not contract to construct until 11 September 2005 being well after the parties entered into the first contract on 21 February 2005 and actual practical completion on 26 July 2005.

(2) The learned Judge did not properly consider the effect of the requirement for the construction of the whole of Curtis Lane on the [developer's] claim for liquidated damages.

(3) No account was taken of possible delays by the services contractor, Unified Contracting.

(4) No allowance was made for the vagaries of the market at the contractual completion date when fixing the amount of liquidated damages. Although the learned Judge found that there was a rising market (at the time of the sales), this was, according to the learned Judge, an irrelevant issue.

(5) A delay in completion did not prevent sales, as the [developer] intended to sell lots off the plans and had sold more than half of the Lots before the end of 2005. The [developer] did not give discovery in relation to the sales of the Lots, as the calculation of the rate of liquidated damages in paragraph 6 of the Reply was not provided until the last business day before the trial.

(6) The amount claimed for liquidated damages was out of all proportion to the sum which ought to have been paid by reason of any delay.

(7) The Superintendent nominated an amount of $1,874.00 per week for liquidated damages, which was approximately 13.5% of the amount claimed.

(8) The sum of $13,896.00 was based on a loss of interest on the sale proceeds of all lots in the subdivision (i.e. total revenue as opposed to loss of profit) from the contractual date of completion, namely 6 May 2005 without any allowance or reduction for expenses incurred, including development costs and interest paid on monies expended in carrying out the works.

[200]

In determining whether the Contractor is or will be delayed in reaching Practical Completion regard shall not be had to:

- whether the Contractor can reach Practical Completion by the Date for Practical Completion without an extension of time;

- whether the Contractor can, by committing extra resources or incurring extra expenditure, make up the time lost.

If the Contractor desires an extension of time for Practical Completion, the Contractor shall within 28 days after a delay occurs give the Superintendent a written claim setting out the facts on which the claim is based.

With the claim, or as soon as practical after giving the claim, the Contractor shall give the Superintendent written notice of the number of days extension claimed.

If the Contractor is entitled to an extension of time for Practical Completion the Superintendent shall, within 28 days after receipt of the notice of the number of days extension claimed, grant a reasonable extension of time. If within the 28 days the Superintendent does not grant the full extension of time claimed, the Superintendent shall before the expiration of the 28 days give the Contractor notice in writing of the reason.

Notwithstanding that the Contractor is not entitled to an extension of time the Superintendent may at any time before the issue of the Final Payment Certificate by notice in writing to the Contractor extend the time for Practical Completion for any reason.

A delay by the Principal or the failure of the Superintendent to grant a reasonable extension of time or to grant an extension of time within 28 days shall not cause the Date for Practical Completion to be set at large but nothing in this paragraph shall prejudice any right of the Contractor to damages.

35.6 Liquidated Damages for Delay in Reaching Practical Completion.

If the Contractor fails to reach Practical Completion by the Date for Practical Completion, the Contractor shall be indebted to the Principal for liquidated damages at the rate stated in the Annexure for every day after the Date for Practical Completion to and including the Date of Practical Completion or the date that the Contract is terminated under Clause 44, whichever first occurs.

...

[226]

133 Secondly, in relation to the pleaded 'requests for extensions of time', the one dated 10 June 2005 appears to be a summary of delays alleged up to that point in time, thereby encompassing the preceding requests. The 10 June 2005 document alleges a total of 42 days of delay resulting from causes which would entitle the contractor to an extension of time under cl 35.5, ie, 35 days for latent conditions or rainfall (inclement weather), and seven days for variations to culverts. The 10 June document also referred to 'unsuitable material ... (2 days)', but there was no allegation that this was a cause under cl 35.5 which would entitle the grant of an extension of time. The next document pleaded by the contractor, dated 24 June 2005, referred to an electrical trench that had 'sunk', and requested that it be fixed before completing 'Road 2'. It does not itself record whether and to what extent any delay eventuated as a result of the sunk trench, and nor were we taken to any other communications dealing with that topic. The letter of 24 June 2005 also referred to an absence of work on site on 23 June 2005 due to rain, but did not allege that as a result, the contractor is or would be delayed in reaching practical completion. The document dated 18 July 2005 outlined 'a list of days which rained on site'. It did not state whether and to what extent delays in the performance of the works occurred as a result of the rain. The days mentioned included 1 - 10 June (to which the 10 June 2005 document apparently related) and 23 June (presumably the subject of the 24 June notice). The last document pleaded is dated 2 August 2005. It referred to 13 items, without dates and without indicating whether notice was given within 28 days of the delays mentioned, and without indicating to what extent the alleged items would delay the reaching of practical completion. At least one of the items, item 10, appears to relate to the variations for culverts claimed in the 10 June 2005 document.

At a glance

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Judgment (396 paragraphs)

SPIERS EARTHWORKS PTY LTD -v- LANDTEC PROJECTS CORPORATION PTY LTD [No 2] [2012] WASCA 53 (13 March 2012)

Whether the liquidated damages clause is a penalty (grounds 1 and 2)

Contractor's defence, set-off and counterclaim

Developer's reply and defence to set-off and counterclaim

Contractor's reply to developer's defence to set-off and counterclaim

Contractor's proposed amendments in course of trial

Legislation Cited (1)

Cases Cited (18)