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[2013] NSWCA 104
Court of Appeal (NSW)
2013-04-02
Meagher JA, Emmett JA, Hammerschlag J
Original judgment source is linked above.
Judgment 1MEAGHER JA: I agree for the reasons given by Emmett JA and Sackville AJA that this appeal should be allowed and the orders proposed by Emmett JA made. 2EMMETT JA: This appeal is concerned with the construction of provisions of a building contract (the Contract) entered into on 6 November 2008 between the appellant, St Hilliers Contracting Pty Limited (the Contractor), and the respondent, Fitzpatrick Investments Pty Limited (the Principal). More particularly, it is concerned with the effect of certificates purportedly issued under the Contract by consultants to the Contractor (Consultants). The question is whether the certificates satisfied the prerequisites under the Contract for the reduction of the security provided by the Contractor for the performance of its obligations under the Contract. A judge of the Court concluded that they did not. The Contractor has appealed from that determination. 3By the Contract, the Contractor agreed to carry out the Works (as defined). The Works consisted of the design and construction of a commercial office building in the Docklands area of Melbourne, comprising a basement carpark, a retail area and main entrance on the ground floor and seven office levels. The Contract consists of:
The Relevant Provisions of the General Conditions 5Clause 3.1 of the General Conditions provides that the Contractor must execute and complete the work under the Contract in accordance with the requirements of the Contract and that the Principal must pay to the Contractor, in accordance with the Contract, the Contract Sum. One of the critical provisions in the present dispute is found in section 5 of the General Conditions, which deals with "Security and Performance Undertakings". Clause 5.1 provides that security and performance undertakings are for the purpose of ensuring the Contractor's due and proper performance of the Contract. 6The effect of clause 5.2 and annexure part A of the General Conditions is that the Contractor must provide security consisting of three bank guarantees, one for an amount equal to 2.5 per cent of the Contract Sum, one for an amount equal to 2.5 per cent of the Contract Sum less $200,000 and one for the amount of $200,000. Clause 5.3 provides that the security is to be in the form of unconditional and irrevocable undertakings issued by a trading bank carrying on business in Australia. 7Clause 5.8, which deals with "Reduction of Security", is critical to the present dispute. Under clause 5.8(A) the Principal's entitlement to security is to be reduced to 50 per cent upon the later of: a) issue of the Certificate of Practical Completion; and b) the provision of all of the items referred to in paragraphs (c) to (h) inclusive of [clause] 42.3. Under clause 5.8(B), on the expiration of the Defects Liability Period pursuant to clause 37, the Principal's entitlement to security remaining after the reduction under clause 5.8(A) is to be reduced so that the security then held by the Principal will be $200,000. Clause 37 provides that the Defects Liability Period of one year was to commence at 4pm on the Date of Practical Completion. 8The Date of Practical Completion is defined in the Contract as meaning, relevantly, the date certified by the Superintendent in a Certificate of Practical Completion to be the date upon which Practical Completion was reached. The Superintendent under the Contract was Pyramid Pacific Pty Limited (the Superintendent). Certificate of Practical Completion is defined as the certificate referred to in clause 42.3. 9Thus, both limbs of clause 5.8(A) refer to clause 42.3. Clause 42.3 provides that the Contractor must give the Superintendent at least 21 days' notice of the date upon which the Contractor anticipates that Practical Completion will be reached. When the Contractor is of the opinion that Practical Completion has been reached, the Contractor must request the Superintendent to issue a Certificate of Practical Completion. The Contractor must include in its notice to the Superintendent advice in writing as to the status and as to the anticipated dates for completion or provision of the following: a)any defects and omissions identified in the Works to date; b)reports on preliminary commissioning of services installations; c)operating and maintenance manuals; d)as built Design Documents; e)all manufacturers' and suppliers' warranties and guarantees required to be assigned, novated or provided to the Principal; f)a declaration and statement, made as at that date, in the form of annexure part F; g)the Depreciation Schedule in a form approved by the Superintendent; and h)each other document or matter required to be provided or satisfied for Practical Completion. Clause 42.3(h) is also critical for the purposes of the present dispute and it will be necessary to return to that provision. 10It is significant that clause 42.3(f) refers to a declaration and statement in the form of annexure part F. It will also be necessary to return to annexure part F. 11Clause 42.3 then provides that, within 14 days after the receipt of the Contractor's request to the Superintendent to issue a Certificate of Practical Completion, the Superintendent must either, give to the Contractor and to the Principal a Certificate of Practical Completion, or give to the Contractor the reasons for not issuing a Certificate of Practical Completion. When the Superintendent is of the opinion that Practical Completion has been reached, the Superintendent may issue a Certificate of Practical Completion, whether or not the Contractor has made a request for its issue. However, the Contractor must use all reasonable endeavours to complete and provide all of the items in paragraphs 42.3(e) to (h) above on the Date of Practical Completion and must, in any event, complete and provide all of such items within 28 days after the Date of Practical Completion. 12Under clause 42.3, the Certificate of Practical Completion to be given by the Superintendent to the Contractor and to the Principal must certify the Date of Practical Completion. As indicated, the Date of Practical Completion is the date certified in a Certificate of Practical Completion to be the date upon which Practical Completion was reached. While the Contractor may be of the opinion that Practical Completion has been reached, the Contractor cannot know with certainty the Date of Practical Completion until a Certificate of Practical Completion has been issued by the Superintendent. Therefore, it is more likely than not that, in the ordinary course, the second limb of clause 5.8(A) would occur after the first limb. That is to say, it might be expected that the Contractor would normally provide all of the items referred to in paragraphs 42.3(c) to (h) after the issue of the Certificate of Practical Completion by the Superintendent. 13Clause 42.5 provides that, within three months after the Date of Practical Completion, the Contractor must provide to the Superintendent a final payment claim endorsed "Final Payment Claim", accompanied by declarations, statements and proof as required by paragraphs 42.1(a) to (d). Clause 42.1 relevantly provides that the Contractor must, at the prescribed times, deliver to the Superintendent claims for payment supported by evidence of the amount due to the Contractor, together with such information as the Superintendent may reasonably require. Each claim for payment must detail the percentage of the work under the Contract completed to date and must be accompanied by: a)a statutory declaration and statements from the Contractor in the form of annexure part F and annexure part I; b)a statement from each relevant Consultant and Major Sub-contractor who is responsible for design of any component of the work under the Contract that the work by the Contractor for which payment is claimed has been performed in accordance with the applicable Design Documents and the Contract. Each statement is to be in the form of annexure part F, attachment 2; c)a cash flow schedule; and d)where the payment claim includes certain kinds of work, a survey report in relation to that work. 14Clause 42.6 then provides that the Superintendent must issue to the Contractor and to the Principal a final payment certificate endorsed "Final Certificate" within 10 business days of the later of:
The Circumstances Giving Rise to the Dispute 25Before dealing with the precise question of construction raised in the appeal, it is necessary to say something more about the progress of the Works, the giving of a Certificate of Practical Completion by the Superintendent and of the provision of statements by the Consultants. 26In accordance with section 5 of the General Conditions, the Contractor provided three guarantees by National Australia Bank Limited (NAB) as follows:
The Question in the Appeal 33The question before the primary judge and the question in the appeal is whether the documents signed by the Consultants, which were given to the Principal and the Superintendent in March 2012, satisfy the condition specified in clause 9.9 of the General Conditions. That is to say, the question is whether it can be said that, by reason of those documents, all of the Consultants had certified in writing that the relevant work under the Contract had been completed "in accordance with the Contract and the approved design documents". 34The primary judge concluded that the documents did not satisfy that prerequisite in clause 9.9. His Honour considered that the words "[w]ork to the date of this [s]tatement" constituted a qualification and that therefore the statements constituted less than the fulfilment of the condition. His Honour considered that the Principal was entitled to receive, and clause 9.9 requires, an unqualified certification that the relevant work has been completed, not that work to a particular date has been completed. His Honour considered that the words in question constituted an important and unjustified qualification to the certification and that that conclusion was bolstered by the fact that the form of the documents was clearly an adaptation of the form to be used in relation to progress payments, which envisages future payments for future work yet to be done. 35The question is whether, in the circumstances in which the documents were provided by the Principal and the Superintendent, each of the Consultants, by the language used, was to be understood, viewing the matter objectively, to be certifying that the relevant work under the Contract had been completed "in accordance with the Contract and the approved design documents". The reference to "relevant work" in clause 9.9 must be understood as reference to the work relevant to the particular discipline of the certifying Consultant. 36It is important that, while the documents in question were clearly adapted from attachment 2 to annexure part F, significant changes were made to the form in attachment 2. Thus, there is no reference in the documents to "progress claim statement", or to a progress claim number. Rather, there is a reference to "CSC Docklands - M07140". It is common ground that that is a reference to the Contract. In lieu of a reference to a progress claim number, there is a reference to "Practical Completion". Further, the following words have been inserted into the statement: "for the purposes of all progress claims and practical completion of the Project". The express reference to Practical Completion in two different places can only indicate that the Consultant who signed a document was intending to do more than simply provide a certification in connection with a progress claim. It is quite apparent that the respective Consultants were intending to say something about the work necessary to achieve Practical Completion. 37In that context, the reference to "[w]ork to the date of this [s]tatement" must be understood as a reference to work necessary to achieve Practical Completion. The definition of Practical Completion itself contemplates that the Works may not be complete because of minor omissions and minor defects that do not prevent the Works from being used for their intended purpose. It must be remembered that, on 14 November 2011, the Superintendent had certified 31 October 2011 as the Date of Practical Completion. Further, the Principal had actually been in occupation of the works for more than 12 months. 38The documents could not reasonably have been understood by the Principal or the Superintendent as being anything other than a statement by the relevant Consultant that the work necessary to achieve Practical Completion had been completed in accordance with the applicable Design Documents and the Contract. That is the relevant work contemplated by clause 9.9. The reference to "the approved design documents" in clause 9.9 must, in the context of the General Conditions, be understood as a reference to "the applicable Design Documents", an expression that is defined for the purposes of the Contract. 39The provision by the Contractor to the Superintendent and the Principal of the documents in question satisfied the condition precedent provided for in clause 9.9. The primary judge erred in reaching the contrary conclusion.
Notice of Contention 40The Principal filed a notice of contention raising a question that should not have been seriously raised. The Principal contended that the primary judge erred in rejecting several affidavits sworn by Consultants. An example is an affidavit sworn on 11 April 2012 by Ms Jennifer Nolan, a director of the Consultant for the architectural services discipline. 41 Ms Nolan asserted that the statements contained in the document signed by her on behalf of the architect Consultant were made in respect of the agreement between the Contractor and the architect. She asserted, specifically, that "the Contract" referred to in paragraphs (b) and (c) of the document signed by her is the contract between the architect and the Contractor. Ms Nolan then asserted that the statements contained in the certificate signed by her were not made in respect of any other contract, including any contract between the Principal and the Contractor. She asserted that she had not been provided with, and was not aware of, the terms of any contract between the Contractor and the Principal and that the architect had never been provided with a copy of the Contract between the Contractor and the Principal. 42Clearly, the assertions in the affidavit are concerned with what may have been a subjective understanding on the part of Ms Nolan as to the meaning of the document signed by her. As such, they were clearly inadmissible. The document must be construed according to its terms, in the context in which it was provided, and having regard to the relevant surrounding circumstances. The fact that Ms Nolan may have intended, if she did, to refer to some agreement between the architect and the Contractor, an intention that was not conveyed to anyone else by the document, can have no bearing on the meaning of the document. The notice of contention must be rejected.
Conclusion 43It follows from the above that the appeal should be upheld. The order made by the primary judge that the proceeding be dismissed should be set aside. In lieu of the orders made by the primary judge, there should be a declaration that, as at 21 March 2012, the date when the documents in question were provided to the Principal and the Superintendent, the Principal's entitlement to security under the Contract was reduced to 50 per cent of the security provided by the Contractor under clause 5.2 of the Contract. The Principal should be ordered to return bank guarantee number M07140-2 in the sum of $941,748.90 issued by NAB on 17 November 2008. The Principal should be ordered to pay interest on the sum secured by the bank guarantee at the rate prescribed by the Court, calculated from 21 March 2012. The Principal should pay the Contractor's costs of the appeal. 44It would appear to follow that the Principal should pay the Contractor's costs of the proceeding before the primary judge. However, the Court has heard no argument as to that question. If the parties wish to be heard on the question of costs, they should be directed to make written submissions on that question within seven days. 45SACKVILLE AJA: I agree with the orders proposed by Emmett JA and with his Honour's reasons. I add the following brief observations. I use the same abbreviations as Emmett JA. 46As Emmett JA has noted, the critical issue in this appeal is whether the "Consultants and Subcontractor Statements" ("Statements") issued by the various Consultants satisfied the requirement in cl 9.9 of the General Conditions. Clause 9.9 provides as follows: Certifications by Consultants It shall be a condition precedent to the issue of each payment claim, any Certificate of Practical Completion, acceptance of defects rectification and the Final Certificate that all Consultants (but in relation to a payment claim, limited to those Consultants whose disciplines are relevant to any of the work under the Contract the subject of the payment claim) certify in writing that the relevant work under the Contract has been completed in accordance with the Contract and the approved design documents, where the certification relates to a claim for the payment of money, using the form of certification in annexure Part F. Certifications are required from the following Consultants for the parts of the work under the Contract that relate to their disciplines: ... 47The Statements completed by each consultant (set out in the hyperlink to Emmett JA's judgment and as attached) were clearly adapted from Attachment 2 to Part F of the Annexure to the General Conditions. Under the General Conditions, Attachment 2 is intended to be the statement used in relation to a claim for money, as appears from cll 9.9, 42.1(b) and the heading to Attachment 2 ("Progress Claim Statement - Progress Claim No"). As Emmett JA has pointed out, the Statements completed by the consultants incorporated some important amendments to the form of statement set out in Attachment 2. 48The dispute as to construction comes down to this. The Principal says that the language of sub-para (b) of the Statement, insofar as it states that "Work to the date of this Statement has been completed in accordance with applicable Design Documents and the Contract", refers to work that has been completed at the date of the Statement, regardless of whether it has been completed in a manner that satisfies sub-para (a) of the definition of "Practical Completion" (cl 2). The Contractor's interpretation is that sub-para (b) of the Statement is intended to certify that the work done at the date of the Statements has been completed in a manner that satisfies sub-para (a) of the definition of "Practical Completion". 49It is common ground that the contractual documents are to be construed objectively, paying close attention to the language used by the parties, the commercial circumstances that the document addresses and the objects it is intended to secure: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at [22], per Gleeson CJ; Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522, at [15], per Gleeson CJ, McHugh, Gummow and Kirby JJ. It is also common ground that the Statements must be construed objectively having regard to the same matters. 50On this basis, the Contractor's interpretation is to be preferred. The heading to the Statements (one of the changes to Attachment 2) makes it clear that they have been prepared for the purposes of "Practical Completion". The first line of the Statements records that the Consultant is making the various statements (including that in sub-para (b)) "for the purposes of all progress claims and practical completion of the Project". In my opinion, the bolded words can only convey to an objective reader that the Statement has been prepared to satisfy the requirement of cl 9.9 that the Consultants certify in writing that "the relevant work under the Contract has been completed in accordance with the Contract and the approved design documents". And that, in substance, is the language used in sub-para (b) of the Statement itself. 51The inclusion in sub-para (b) of the words "to the date of this Statement" does not detract from this conclusion. The likelihood is that these words were included because the Statements were adapted from Attachment 2, which includes the words to which I have referred. In any event, the words are not mere surplusage. The General Conditions contemplate that some minor works may have to be carried out by the Contractor and, presumably, Subcontractors after the date of Practical Completion (see sub-para (a) of the definition of "Practical Completion"). The words in sub-para (b) of the Statement reflect the fact that minor remedial works and the like may still have to be undertaken after the date of Practical Completion and that the Statements do not relate to any such additional work. 52The conclusion that the Contractor's construction of cl 9.9 and of the Statements is to be preferred can be reached without reference to the commercial context. However, the context adds force to the conclusion. The relevant matters include the following:
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: 09 May 2013
St Hilliers Construction Pty Ltd
Fitzpatrick Investments Pty Ltd