Tresedar Pty Ltd v Property Builders

Supreme Court of NSW|2014-03-21|Before: Ball J

ty Builders (Constructions) Pty Ltd (Defendant/Cross Claimant) Representation: Counsel: I Faulkner SC with B Phillips (Plaintiffs/Cross Defendants) R P Freeman (Defendant/Cross Claimant) Solicitors: Mahony Law (Plaintiffs/Cross Defendants) Hugh Ford (Defendant/Cross Claimant) File Number(s): 2009/298902 Publication restriction: Nil

Introduction 1The first plaintiff in these proceedings, Tresedar, is a property developer. The second plaintiff, Tetbury, is its parent company and the third plaintiff, Mr Aris Evanian, is the person who controls Tetbury and its subsidiaries. The first (and only remaining) defendant, Property Builders (Constructions) Pty Ltd (PBC), is a builder. It is now in liquidation. Leave to proceed against it was given by the court on 22 June 2012. Before its liquidation, PBC was controlled by Mr Michael Phontos, who was the second defendant in these proceedings. 2The proceedings arise out of a building contract (the Gordon BC4) for the construction of an apartment development at Gordon (the Gordon Project) between PBC, as builder, Tresedar, as owner, and Tetbury, as guarantor, and a deed of settlement (the Settlement Deed) entered into between the parties to the Gordon BC4 and Mr Evanian, also as guarantor, in relation to a payment claim that was made by PBC under the Gordon BC4 in accordance with s 14 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). Under the terms of the Settlement Deed, Tresedar agreed, among other things, to make certain payments to PBC and to grant a second (unregistered) mortgage over another project that it was developing at Turramurra (the Turramurra Project) as security for some of its obligations under the Settlement Deed. Tresedar lodged a caveat over the Turramurra land in relation to that mortgage. The plaintiffs claim that, by refusing to consent to the registration of the strata plan in respect of the Turramurra Project, which it is alleged prevented Tresedar from raising money from the sale of lots in that project, and by refusing to agree to a number of variations in the contract works the subject of the Gordon BC4 except on certain conditions, PBC breached implied terms of the Settlement Deed and the Gordon BC4, with the result that receivers were appointed to the Gordon Project and Tresedar lost the opportunity to earn profits from the sale of units in that project. 3PBC has filed a cross-claim claiming amounts said to be due to it under the Gordon BC4 and Settlement Deed together with consequential losses it says it has suffered because those amounts were not paid to it.

Factual Background 4The Gordon BC4 was entered into on 10 August 2007 and was substantially in the form of the BC4 Contract published by The Master Builders Association of New South Wales. The contract was for the demolition of 3 dwellings in Dumaresq Street, Gordon and the construction in their place of a development comprising a double level basement carpark with two 5 storey buildings containing a total of 39 apartments. The total contract price for the building works was $11,200,000 (including GST). The Bank of Western Australia Ltd (Bankwest) provided financing for the project. 5Clause 10(a)(i) of the Gordon BC4 required the builder (that is, PBC) to commence the works on the date specified in Item 6(a) of Schedule 2. The date specified in that item was 3 September 2007. Clause 10(b) provided that the builder was to proceed with due diligence and bring the works to Practical Completion within the construction period stated in Item 6(b) of Schedule 2. The time specified in that item was "280 working days after completion of rock excavation". 6Delays and extension of time were dealt with in cl 11. Clause 11(a) provided that the builder must receive "a fair and reasonable extension of time to the Construction Period" for delays resulting from various matters including, relevantly, variations (cl 11(a)(i)), the suspension of the works under clause 21 (cl 11(a)(ii)) and "any act, default, delay or omission on the part of [Tresedar] in providing instructions, making payment or doing a thing necessary to allow the works to proceed (including signing instructions concerning variations)" (cl 11(a)(v)). 7Clause 11 contained a procedure by which the builder was to notify the owner in writing within a reasonable time of any matters that caused delay. The builder was entitled to the extension it claimed unless the owner, within 5 days of receiving the notice, objected. If the owner objected, the dispute was to be referred to an independent third party for determination. 8Clause 11(f) provided a mechanism for the contract price to be adjusted where the delay was the responsibility of the owner and increased the costs of the work. It relevantly provided: If the delay results from any of the matters listed in paragraphs (i), (ii)...(v) ... of clause 11(a), then the contract price is to be adjusted to include an amount calculated to cover the cost or expense of the delay incurred by the Builder. The amount payable will be determined with reference to Item 3 (b) of Schedule 2. In addition any actual costs incurred by or payable by the Builder because of the delay which in total exceed the amount payable with reference to the period of delay and the amount stated at Item 3 (b) of Schedule 2, to the extent of the difference, will also be payable by the Owner. Item 3(b) of Schedule 2 had the word "Nil" written in. 9Variations were dealt with in cl 14. Clause 14(b) provided: The Builder is not obliged to vary the Contract works or carry out any extra work unless he consents. 10Under cl 14(c), any variation had to be detailed in writing and signed by the owner and the builder. 11Clauses 14(d) to 14(h) were in the following terms: Builder to Advise Value of Variations (d) The Builder, within a reasonable time of receipt of instructions to execute a variation (i.e. an instruction signed by the Owner or Owner's agent), is to notify the Owner, in writing, of the value of the variation. Less Work due to a variation (e) Where the works are decreased or omissions from the works are made the cost of the work not now required is to be deducted from the contract price. Cost in this case means the actual expense or amount saved by the Builder because the work is now not required to be done. No other deduction is required by reason of the work or aspect of work being decreased or omitted. Additional work due to a variation (f) Where the work to be done is increased, the cost of the extra work is to be added to the contract price. The Builder can choose when and how often to claim payment for variation work and is not required to wait until the next progress claim. (g) Where a price has not been previously agreed, the Builder may proceed with the variation work and the price to be paid for the work will be the cost as calculated in accordance with Sub-Clause (h) below, together with the allowance specified in Item 1 of Schedule 2 for supervision, overhead and profit. (h) The cost referred to in (g) above, unless otherwise agreed, will be calculated as follows: (i) for the Builder's employees work, the rates for such labour are those set out in item 2 of Schedule 2. If no rates are shown, then the rates to be used are the rates published by the Master Builders Association of NSW current at the time the variation is made; (ii) where the work or some part of it is executed by a sub-contractor, the cost to be paid for that work is the amount properly paid or payable to the sub-contractor which will be established by provision of a proper tax invoice from the sub-contractor engaged to do the extra work. (iii) the price for materials is the cost of the materials to the Builder. The Builder is not entitled to any discount other than a discount for prompt or cash payment. The allowance specified in Item 1 of Schedule 2 was 20 percent. No amount was specified in Item 2. 12The Gordon BC4 provided for the payment of progress claims, which had to be paid within 5 days of the date the claim was submitted to the owner. Under cl 20(f), interest was payable on late payments at the rate of 10 percent per annum. 13Clause 21 gave the builder a right to suspend the works if the owner (that is, Tresedar) failed to pay or cause to be paid any amount due under the contract or failed to confirm in writing instructions regarding a variation or failed to provide written instructions in a manner and time so as to reasonably avoid delay to the progress of the works. 14Clause 26 of the Gordon BC4 contained a dispute resolution clause. Essentially, it required one party to give to the other written notice of a dispute and required the parties to meet within 10 days following such a notice in an attempt to resolve the dispute. Neither party was entitled to terminate the contract until the meeting occurred. 15Annexed to the Gordon BC4 was a cost plan summary showing the estimated cost of each element of the building works. 16Work commenced on the site in September 2007. 17PBC made a number of progress claims for work performed on the Gordon Project which were the subject of dispute. The basis of the dispute is not entirely clear from the evidence. The procedure for the payment of claims under the contract was for PBC to submit a payment claim to Tresedar and WT Partnership, the quantity surveyors appointed by Bankwest. WT Partnership would provide Bankwest with a certificate showing what proportion of each item of work which was shown on the cost plan, and which was the subject of a claim, had been completed and Bankwest would pay that proportion of the total amount shown on the cost plan as being payable in respect of that item of work. Tresedar took the view that it was entitled to keep any amount advanced by Bankwest and that it was responsible for paying subcontractors and suppliers directly as well as any amount payable to PBC in respect of its own services. In fact, many, although not all, subcontracts entered into by PBC contained the following terms: (1) The Builder enters into this subcontract as the disclosed agent of Tresedar Pty Limited, the owner of the Site (Principal). (2) Despite the Builder being obliged to receive and pay claims for payment, the Principal is to be served with any progress claim and is to pay the claim as required by the terms of the Subcontract. PBC took the view, at least initially, that all amounts advanced by Bankwest should be paid to it. 18Matters came to a head in June 2008. On 5 June 2008, PBC served its fifth progress claim for $1,001,015.33. The progress claim was expressed to be calculated as follows: Value of Contract Work Performed (i) $ 942,156.99 Variation Work (ii) $ 266,146.76 ^ $ 1,208,303.75 Less: Total Retention (iii) 5% -$ 47,107.85 Previously Paid (excl GST) (iv) -$ 454,818.33 Amount Claimed (i)+(ii)+(iii)-(iv) $ 706,377.57 Plus: GST 10% $ 70,637.76 $ 777,015.33 Plus: Deposit 2% $ 224,000.00 $ 1,001,015.33

The contract work performed related largely to excavation work carried out by Stallion Civil Group Pty Ltd. The variation work related to additional excavation work that Stallion was required to carry out as a result of amended architectural drawings. Initially, Stallion had claimed $423,168 in respect of that additional work. However, Tresedar conducted direct negotiations with Stallion (although Stallion's subcontract was not one of those that included the terms quoted above) and compromised that claim at $243,963.20. The amount claimed in respect of variations includes that amount. The amount of $454,818.33 shown as having been previously paid largely consisted of amounts paid directly by Tresedar for insurance and workers compensation and subcontractors (including Stallion) together with $50,000 paid to PBC. The deposit of $224,000 was an amount payable to PBC under the Gordon BC4 which had not been paid. At least one of PBC's complaints was that it was entitled to be paid that deposit. Tresedar's position appears to have been that, since it was paying subcontractors directly, there was no reason why PBC should be paid the deposit. 19The progress claim was expressed to be a payment claim under the Act. Tresedar did not serve a payment schedule in response to that claim within the time specified in s 14(4) of the Act. As a consequence, under s 15 of the Act, PBC became entitled to recover the amount of its claim as a debt due in any court of competent jurisdiction. It commenced proceedings in this court on 16 July 2008 (the SOPA Proceedings) to recover that debt. It also exercised its right to suspend further work under cl 21 of the Gordon BC4 and ss 15(2)(b) and 27 of the Act. 20On 14 October 2008, Tresedar, together with Tetbury and Mr Aris Evanian as guarantors of Tresedar's obligations, and PBC entered into the Settlement Deed in settlement of the SOPA Proceedings. 21Recital J of the Settlement Deed provides: The parties agree that the amount due to PB [that is, PBC] is $1,225,650 (incl GST) which includes $925,650 for the builders margin and supervision to complete the Work. 22"Work" is defined in para 1.1(h) to mean: ... the work under the Contract which includes the demolition of 3 dwellings and construction of 2 residential buildings comprising 39 units and basement carpark for 61 vehicles at the Project. "Contract" is defined to mean the Gordon BC4 and "Project" is defined to mean the Gordon Project. 23Clause 2.1 states that, at the time of execution of the Settlement Deed, the parties must execute the terms of settlement attached to the deed as annexure A. The terms of settlement relevantly provide that by consent the plaintiff (PBC) and the defendant (Tresedar) had settled the matter on terms that included "verdict and judgment for the plaintiff in the amount of $1,001,015.33 (inclusive of GST)". 24Clause 3 of the Deed is in the following terms: 3. Obligations of the parties 3.1 At the time of executing the Deed, Tresedar is to execute an unregistered second mortgage over the Development being Lot 101 in DP 1128185 in favour of PB in the amount of $224,634.67 in the form attached hereto and marked "B". 3.2 The parties agree the unregistered mortgage will give PB a caveatable interest in the Development and PB may, at its sole discretion, lodge a caveat over the Development. 3.3 PB must discharge the unregistered second mortgage once payment of the amount of in clause 5.1 has been paid in full by Tresedar. 3.4 Within 5 days of entering into this Deed the parties are to execute a Tripartite Deed in substantially the same terms as the existing tripartite deed between the parties and the Bank but which incorporates this Deed. The "Development" referred to in cl 3.1 is the Turramurra Project. 25Clause 4.1 provides: Tresedar will pay PB the amount of $925,650 (incl GST) for the following: (a) PB's builders margin for the Work - $605,000 (incl GST); and (b) PB's supervision for the Work - $320,650 (incl GST). 26Under cl 4.2(a), the $605,000 was payable in one instalment of $110,000 payable on 17 October 2008, one instalment of $55,000 payable on the last business day of October 2008 and instalments of $44,000 payable on the last business day of each month starting in November 2008 and finishing in August 2009. Under cl 4.2(b), the amount of $320,650 was payable in one instalment of $23,650 payable on or before 17 October 2008, instalments of $22,000 payable on the last business day of each month commencing in October 2008 and ending in October 2009 and an instalment of $11,000 payable on the last business day of November 2009. 27Clause 4.3 provides that, if practical completion under the Gordon BC4 occurred before 30 November 2009, Tresedar would pay on practical completion the balance of the amount of $925,650 then owing. 28Clause 5.1 provides: Tresedar will pay PB the amount of $300,000 (incl GST) within 6 weeks after the registration of the strata plan of the Development but in any event before 30 December 2008. Tresedar must raise this amount from the development finance, proceeds of sale and/or refinance (or other finance) of the Development or by any other means. 29Clause 6 provides: 6.1 In respect of clause 4.2 above, if the Works are delayed by inclement weather during any month, then the payment due 3 days after the last business day of that month is extended by the number of business days approved as an extension of time for inclement weather during that month, provided that the payment made on the extended due date in respect of PB's supervision pursuant to paragraph 4.2(b) above is increased on a pro rata basis to account for the extension of time. 6.2 PB may, in its absolute sole discretion, consider a reasonable request to extend the date of 30 December 2008 referred to in paragraph 5 above. 30Clause 7 provides: Penalty for Non Payment by Tresedar 7.1 Subject to clause 7.3, in the event Tresedar fails to make any of the payments set out in paragraphs 4 and 5 above within the time required all amounts in the Deed ("the Penalty Amounts") become payable immediately and PB may: (a) enforce the judgment in the Supreme Court Proceedings 55058 of 2008 to recover the Penalty Amounts under the Deed forthwith against Tresedar and the Guarantors; and (b) suspend work immediately until payment of the Penalty Amounts is made to PB. 7.2 Subject to clause 7.3, the judgment debt outstanding will be immediately enforceable against Tresedar and the Guarantors in the event of a breach of the Deed. 7.3 PB cannot take any steps under clause 7.1 or 7.2 unless the Bank has had the opportunity to make an election under clause 5.1(g) of the Tripartite Deed. 7.4 In the event the Bank makes an election under clause 5.1(g) of the Tripartite Deed, and provided the Bank complies with the election made by it, the judgment shall not be enforceable in respect of the default by Tresedar to make the relevant payment/s. 31Clause 9.1 provides: Tresedar must on the 15th of each month or as requested by PB, inform PB of the sales, strata registration and financing of the Development. 32Clause 11.1 contains a release by the parties of all claims which any party may have had "in any way related to the Project or the Contract or on any account whatsoever between the parties hereto up to and including the date of these presents". 33Clause 12.1 provides: Tresedar hereby indemnifies PB against all Claims made against PB or incurred by PB as a result of the excavator, [Stallion], or any Person who performs a part of the Work. "Claim" is defined broadly to include demands, claims, actions, suits etc. "Person" is defined to mean an individual or corporation. 34The Tripartite Deed referred to in cl 7 was a deed entered into on 20 October 2008 between Bankwest, Tresedar and PBC. Clause 4 of that deed required PBC to give Bankwest at the same time as it gave Tresedar a copy of any notice of "Contract Default" and, as soon as practicable, "details of the occurrence and circumstances of any Contract Default and any action or payment which the Builder considers appropriate to remedy any Contract Default or compensate the Builder for the Contract Default". Clause 5.1 of that deed provided that PBC could not suspend performance of its work or exercise any right or remedy in respect of a Contract Default unless it first gave Bankwest at least 14 business days' notice of its intention to do so. Clause 5.1(g) gave the bank a right exercisable within 21 days of receiving that notice to elect to remedy any default that could be remedied or to assume Tresedar's obligations under the Gordon BC4 if the default could not be remedied. 35The mortgage that Tresedar was required to execute under cl 3.1 of the Settlement Deed contains the following special conditions: 1 This mortgage secures the repayment by the mortgagor to the mortgagee of $224,634.67 ("principal sum") and other money ("secured money") referred to in this mortgage and Memorandum V849099 ("memorandum"). 2 The mortgagor will have repaid the principal sum or the balance of it and all secured money once payment of the amount of $300,000 has been paid in full by the mortgagor pursuant to clause 5.1 of the Deed of Settlement and Release made between the Mortgagor, the Mortgagee, Tetbury Pty Limited and Aris Michael Evanian dated 14 October 2008. Clause 14 of the memorandum of mortgage gave PBC the power to appoint a receiver to the mortgaged property in the event of a default by Tresedar. 36Following the execution of the Settlement Deed, work resumed on the Gordon Project. During the period from 28 October 2008 to 7 April 2009, Tresedar paid PBC a total amount of $540,650 in respect of its obligations under that deed. However, it did not pay the $300,000 that was payable under cl 5.1 by 30 December 2008 and, on 31 December 2008, PBC served what purported to be a payment claim under the Act for that amount together with instalments due under cl 4.2. No payment schedule was served in respect of that claim. 37Two other series of events occurred following the resumption of work which are of particular relevance to the current dispute. 38First, PBC made a number of claims in respect of variations to the contract works. The variations were designed principally to deal with a substantial shortfall in the allowance that had been made in the original cost plan for brickwork. The variations involved substituting concrete blockwork for the brickwork. The overall effect of the variations was to increase the project costs by approximately $5,000. However, a number of variations involved substantial increases in the cost of the contract works (associated with the concrete blockwork), which were offset against decreases resulting from other variations (associated with a reduction in the brickwork). In the variations showing cost increases, PBC claimed under cl 14(h)(i) of the Gordon BC4 additional amounts for the cost of having its foreman on site for the additional time it was claimed it would take to undertake the varied work. PBC also claimed under cl 14(g) an allowance of 20 percent of the cost of the additional work for supervision, overhead and profit. 39In addition, on 23 April 2009, PBC served Delay Claim 1. In that claim, PBC claimed an amount of $307,294.36 in respect of delays said to have arisen from its variation claims. In all, 99 days of delay were claimed. The amount of $307,294.36 was calculated by taking the amount claimed for "Forgone Builders Margin" of $40,000 per month and "Foregone Foreman Costs" of $20,000 per month and calculating the average number of working days per month as being 19.33 to arrive at a figure for the foregone margin and costs per day of $3,103.98 and multiplying that figure by 99. A revised claim (Delay Claim 1A) was sent on 31 May 2009. It claimed $248,318.68 for 80 days' delay calculated on the same basis. 40Variation 7 was a credit of $156,818.18 arising from reduction in scaffolding associated with the reduced brickwork. It was stated to be contingent "upon the owner accepting all prior numbered variations in respect of the Works". The prior variations showed increases in the costs of the work including increases in the amount allowed for builders margin and foreman costs. 41Similarly, Variation 9 showed large reductions in the cost of the brickwork. Variation 10 showed a reduction in administration costs. Both variations were expressed to be "contingent upon the owner consenting to Variation 11". Variation 11, which like Delay Claim 1 was dated 23 April 2009, did not show any variation to the actual work. Rather, it showed variations to the budget which involved creating a new budget item called "Builders Contingency" comprising amounts proposed to be saved as a consequence of other variations (including Variations 9 and 10). It also showed payments to the builder in respect of Delay Claim 1 (of $307,294.36) and the additional claims for having its foreman on site ($47,520.00) and the additional claim for supervision, overhead and profit ($157,833.29) arising out of a number of the variations. The result was that PBC would not agree to the reduction in the brickwork unless Tresedar agreed to pay it an additional $512,647.65. Tresedar took objection to that claim. 42The second relevant series of events concerned the recovery of the $300,000 payable under the Settlement Deed. As I have said, the obligation to pay that amount was secured by a mortgage over the Turramurra Project. That project consisted of 6 townhouses and 6 villas. PBC was also the builder of that project. Although there is a dispute about when practical completion of work under the relevant building contract occurred, it is clear that the project was substantially complete in early 2009. PBC lodged a caveat over the property on 19 February 2009 and, at about the same time, Tresedar sought to register the strata plan in respect of the development. In view of the caveat, it required PBC's consent to do so. Tresedar's position was that it intended to use the proceeds of sale of lots in the Turramurra Project to pay the $300,000 due under the Settlement Deed. 43Mr Hovig Evanian (Mr Aris Evanian's son, who also worked for Tresedar) met with Mr Phontos in early March and asked him why he had lodged the caveat and asked him to remove it. According to him, Mr Phontos replied "I am trying to put pressure on you to accept my variations at the Gordon project". Mr Phontos denies that he said that and Mr Evanian's evidence seems contrived and is difficult to reconcile with what happened subsequently. I do not accept it. 44On 16 March 2009, Gilbert + Tobin, who were PBC's lawyers at the time, responded to Mr Evanian's request to remove the caveat to Raj Lawyers, who acted for Tresedar at the time. The letter said in part: Our client has provided the following instructions: 1. our client will not agree to the removal of the registered caveat as this is not necessary for your client to register a strata plan over the Property; 2. formal consent will be provided by the caveator to enable the registration of the strata plan over the Property subject to our client's caveated rights being preserved; 3. upon the registration of the strata plan our client's caveat is to be registered over all strata lots created; 4. the second mortgage provided over the Property will be amended so that the mortgage will be over all strata lots created; 5. Tresedar's solicitor are to prepare all necessary consents, amendments to the second mortgage and any other documentation necessary; and 6. Tresedar to pay all costs including our client's legal costs incurred up to date in registering the caveat, and to be incurred in relation to the above. As you are aware your client is in breach of the Deed of Settlement and Release and substantial amounts are owing to our client. If and when our client is paid in full, our client will provide consent for the removal of the caveat. It appears that by this stage Tresedar had exchanged contracts in relation to one of the units in the development. 45Raj Lawyers responded to that letter on 23 March 2009. In that response, they said relevantly: ... We note that your client has agreed to give its formal consent to registration of the SP, subject to preservation of your client's caveated rights. Our client agrees to this course of action and seeks to enter further discussions on the issue of the caveat once the consent is lodged and the SP is registered. 46On 3 April 2009, Mr Hovig Evanian wrote to PBC. The letter was largely concerned with PBC's claims in respect of the variations and asked PBC to remove the claim "for extra builder's foreman, supervision, overhead & profit" in an invoice that PBC had sent Tresedar on 31 March 2009. The letter also said: We have agreed PBC may after consenting to registration of strata replace their mortgage and caveat interest on 4 lots which would more than cover the mortgage amount secured in the deed. The reason for this is that Tresedar would agree to then auction four lots and pay PBC from the proceeds of these sales. ... The letter asked for an urgent response "as considerable delays have already been caused by PBC in not consenting to registering of the strata and refusing to communicate any resolution as to the above". 47Mr Phontos responded to that letter by email on the same day saying that PBC would respond to the letter in due course. In response to that email, Mr Hovig Evanian sent Mr Phontos a fax on 4 April 2009. He referred back to Gilbert + Tobin's letter dated 16 March 2009 and stated that Tresedar would agree to grant caveats over the 12 strata lots and to vary the second mortgage. The letter went on: Furthermore, as per the spreadsheet which has been provided to you as an attachment to our letter dated 3 April 2009 in respect of payment to the builder under clause (5) we foresee that payment will be finalized on the sale of the fifth lot. We will use our best endeavours to ensure this occurs. Mr Phontos said in evidence that this condition was unacceptable to him. His position was that the payment secured by the second mortgage was already overdue, and he was not prepared to wait until the sale of the fifth lot to receive it. 48On 9 April 2009, Mr Deutsch of Raj Lawyers sent PBC's solicitors an email attaching an amended mortgage and a consent to registration of the strata plan. The email said: My client has asked that I emphasize the urgency of this matter and that any delay may cause the expected sale [of one of the villas] to fall through. 49Nothing further happened in relation to the caveat until 30 April 2009. In addition, PBC served two additional claims. One was dated 24 April 2009 and was expressed to be a progress claim for $1,839,015.56. The details of the claim are not important. The second was dated 30 April 2009 and was expressed to be a payment claim under the Act for $1,381,994.05. That claim related to a number of variations that increased the costs of the work together with Delay Claim 1. 50On 30 April 2009, Tresedar wrote to PBC objecting to the progress claim dated 24 April 2009 and asking for a response in relation to the variation of the second mortgage over the Turramurra land. 51On 4 May 2009, PBC sent a fax replying to Tresedar's faxes dated 3 April 2009 and 30 April 2009. In that response, it reiterated its position that it still required a caveat over all 12 lots to be created on registration of the strata plan. 52On 6 May 2009, Mr Hovig Evanian wrote to PBC setting out the then current position in relation to lots in the Turramurra Project. At that time, contracts had been exchanged on the sale of one lot (lot 2), contracts for sale in relation to a second lot had been issued but not yet exchanged, a number of lots were tenanted and all the remaining lots (including those tenanted) were available for sale. 53On 12 May 2009, Mr Phontos sent an email to Mayne Investments Limited, the lender in respect of the Turramurra Project, which was copied to Mr Evanian. In that email Mr Phontos said: Considering there is 1 exchanged contract to date we seek your approval to the following: 1. We receive $150,000 from the settlement proceeds of the sale of lot 2 for a withdrawal of caveat over that lot; 2. We receive $150,000 from the settlement proceeds of the sale of the next lot for a withdrawal of caveat over that lot, but if a third sale has exchanged prior to that settlement, then we receive $75,000 from the second settlement and $75,000 from the third settlement for the respective withdrawal of caveats over the particular lots as they settle; 3. Any other money secured by the second mortgage, costs, interest etc, be included with the last instalment due as above and be accompanied with a withdrawal of caveat of all of the other lots; and 4. If any new security is created over the properties then the balance owing is to be paid. In addition to your approval, the above is also subject to: 1. The approval of the owner including to interest on the amount owing at 20% pa from 30 December 2008; 2. The owner and the builder resolving the builders variation claims in respect of the Gordon job; and 3. The approval of our lawyers and appropriate documentation. The actual first mortgagee was Perpetual Nominees Limited. The precise relationship between it and Mayne Investments is not apparent from the evidence. Nothing, however, turns on the relationship and it is convenient to refer to the first mortgagee in respect of the Turramurra land interchangeably as Mayne Investments and Perpetual, as the parties did in their correspondence. As at May 2009, Mayne Investments was owed approximately $5.7 million in respect of the Turramurra Project. 54Also on 12 May 2009, Tresedar served what was described as a payment schedule pursuant to s 14 of the Act in respect of the payment claim dated 30 April 2009. In that schedule, Tresedar asserted that the only amount due was $66,000, which was said to be payable under cls 4.2(a) and 4.2(b) of the Settlement Deed. The schedule asserted that the balance was not payable because, among other things, the variations were carried out without the prior consent of the owner. It paid the $66,000 on the same day. 55On 20 May 2009, Walters Solicitors, acting for Mayne Investments, wrote to Mr Phontos proposing that PBC provide a withdrawal of caveat in relation to the first three sales in exchange for $100,000 - presumably from each sale. Mr Andersen of Mayne Investments followed up that letter by email on 27 May 2009. Mr Phontos replied that he had forwarded the letter to Tresedar's lawyers who had come back with a series of questions which he needed to consider and discuss with them. What those questions were is not clear from the evidence. 56On 5 June 2009, in purported exercise of rights conferred by the Act, PBC served a notice of intention to suspend work on the Gordon Project relying on the claim it had made on 30 December 2008 for the payment of the $300,000 under cl 5 of the Settlement Deed. A copy of that notice was sent to Bankwest on the same day. On 9 June 2009, PBC served a default notice on Tresedar in relation to the payment of the $300,000 and the failure to make the payments said to be due under cl 4 on 28 November 2008 and 29 May 2009 totalling $132,000. A copy of that notice was sent to Bankwest on 10 June 2009 inviting it to make an election under cl 5.1(g) of the Tripartite Deed in respect of that default. By notice dated 11 June 2009, PBC gave notice that it suspended the carrying out of construction work in exercise of its rights under s 27(1) of the Act, relying on the notice it had sent on 5 June 2009. PBC never resumed work on the site. 57On 15 June 2009, Mr Andersen sent Mr Phontos a further email asking for a response to his earlier proposal. 58On 17 June 2009, Tresedar paid PBC the amount of $132,000. 59On 18 June 2009, PBC sent Tresedar a notice of dispute under cl 26 of the Gordon BC4. The notice of dispute complained that Tresedar had failed to provide it with reasonable evidence of Tresedar's capacity to pay for the works in response to requests that it do so that were sent on 4 May 2009 and 11 June 2009. It also complained that Tresedar had failed to provide written instructions to PBC in a timely and proper manner in breach of cl 2(d) of the Gordon BC4. It proposed a meeting in accordance with cl 26. 60It appears that Mr Andersen rang Mr Phontos on 22 June 2009. Following that telephone call, Mr Phontos sent Mr Andersen an email in which he said: We are in a continuing relationship with Tresedar P/L and our mortgage makes provision for other monies which have or may become due by it to be also secured by the mortgage. In those circumstances, we propose to consent to the registration of the strata plan on the basis that we receive $100,000 from each of the first three settlements. We will provide a withdrawal of caveat for the particular unit sold only, in exchange for each $100,000 payment. This proposal is made subject to our lawyers satisfaction and without prejudice to our rights to obtain payment from Tresedar by other means. 61A day later, on 23 June 2009, PBC sent a copy of the notice it had sent to Tresedar under cl 26 of the Gordon BC4 to Bankwest. The letter to Bankwest did not propose any specific steps that Bankwest should take to rectify the breaches about which PBC complained. It did refer on a "without prejudice basis" to various steps that might be taken including the establishment of a project management committee. The letter concluded: We propose a meeting as soon as possible with representatives of Bankwest to discuss the above for the mutual advantage of all involved. Alternatively, the consultants of the builder and owner and the banks Quantity Surveyor could meet to discuss the above. We welcome your comments. 62On 3 July 2009, Colin Biggers and Paisley, who then acted for Tresedar, wrote to Gilbert + Tobin reiterating Tresedar's request that PBC consent to registration of the strata plan and proposing (assuming that Mayne Investments agreed) that PBC receive $100,000 from the sale of each of the first 3 strata lots. It also proposed that, on receipt of those payments, PBC deliver withdrawal of caveats in relation to the other lots. If that proposal was acceptable, Tresedar agreed to pay PBC's reasonable legal costs and interest on the outstanding balance calculated at 10 percent per annum from 31 December 2008. 63On 10 July 2009, PBC provided its consent to registration of the strata plan. On the same day, it served a further notice suspending work on the site on the basis that Bankwest had not made an election to remedy the default under cl 5.1(g) of the Tripartite Deed in respect of the notice it served on 10 June 2009. 64There was then further correspondence between Colin Biggers & Paisley and Gilbert + Tobin. It appears from the correspondence that there was some urgency in completing one sale and that PBC had agreed to sell two units to relations of Mr Evanian. Gilbert + Tobin pressed for more information in relation to those two sales and for an agreement that settlement would occur by a particular date. Colin Biggers & Paisley pointed out that Tresedar could not settle by the date indicated and made it clear that, on payment of the $300,000, PBC should withdraw the other caveats. 65In August 2009, Tresedar retained Bransgroves for a period of time. Bransgroves wrote to Gilbert + Tobin on 19 August 2009. They indicated that the properties were encumbered to Perpetual for an amount that "far outweighs the equity which your client purports to maintain in these three properties". They offered an undertaking that Tresedar would ensure that 100 percent of the sale proceeds would be paid to the first mortgagee. On that basis, they demanded that the caveats be withdrawn and threatened to commence court proceedings if they were not. They also made it clear that, once the first mortgagee had been paid in full, Tresedar would pay the sum of $224,634.67 into court and that it was entitled to the balance of any amount realised from the sale of the properties. Tresedar commenced these proceedings on the same day seeking damages on the basis that PBC had wrongfully suspended the building works. 66There was subsequent correspondence between the parties' solicitors. The details are not important to the way in which Tresedar puts its case. PBC permitted the sale of one lot to settle on 4 September 2009. However, agreement was not reached on the terms on which PBC would remove the other caveats. 67On 12 October 2009, PBC sent Tresedar a letter purporting to set out further reasons which were said to justify the suspension of works on the Gordon Project on 11 June 2009. Three reasons were advanced. The first was that Tresedar had not obtained Bankwest's consent to the variation work in accordance with a request that PBC had made on 1 May 2009. The second was that Tresedar had not paid a number of subcontractors. The third was that on 4 May 2009 PBC had requested Tresedar to provide it with reasonable evidence of its capacity to pay for the works in accordance with cl 2(c) of the Gordon BC4 and Tresedar had failed to do so. 68On 28 October 2009 Tresedar filed a motion in these proceedings seeking an order that PBC provide a withdrawal of caveat over a number of lots and, on 25 November 2009, PBC appointed a receiver to the Turramurra Project. On 26 November 2009, the court made an order that the caveats be withdrawn on condition that Tresedar pay PBC the sum of $312,107.93. On or about 3 December 2009, Mayne Investments appointed a receiver to the Turramurra Project. In the meantime, on or about 9 November 2009, Tresedar terminated the Gordon BC4. 69No progress was made on the Gordon Project and, on 14 July 2010, Bankwest appointed a receiver to that project. On or about 20 January 2011, the receiver sold the property comprising that project for $6,988,264.28.

The issues 70The List Statement has been amended on a number of occasions. The history of the amendments is no longer important. The current version of the List Statement, which is incorrectly described as the Fourth Further Amended Commercial List Statement (4FACLS), was filed during the course of the hearing. It makes a number of complaints against PBC. Essentially, however, what is alleged is that it was an implied term of the Gordon BC4 and the Settlement Deed that "the parties deal with each other in good faith and cooperate to allow the parties to meet their obligations under those agreements" and that PBC breached that implied term by:

Refusing to consent to the registration of the strata plan in respect of the Turramurra Project or refusing to consent to the registration of that plan unless Tresedar paid PBC a sum to which it was not entitled;
Refusing to prepare or authorise adjustments to the cost plan summary for provision to Bankwest or refusing to prepare or authorise those adjustments unless Tresedar paid PBC sums of money to which it was not entitled. 71The sums of money claimed by PBC to which Tresedar says it was not entitled are:
The amounts claimed in respect of margin and as payment for PBC's foreman in relation to a number of variations;
The amount claimed in Delay Claim 1 issued on 24 April 2009. 72It is also alleged that PBC was in breach of the Building Contract or the Deed by suspending construction work on 11 June 2009. 73Finally, in the 4FACLS it is alleged that in breach of the implied obligation of good faith and co-operation, PBC refused to remove caveats over a number of lots so as to permit those lots to be sold. However, that claim was not pressed in final submissions. 74As a consequence of the breaches it identifies, Tresedar claims that it has lost the opportunity to earn profits from the completion of the Gordon Project and the sale of the units in it. It does not claim a specific amount in relation to that lost opportunity. Rather, it submits that the value of that lost opportunity is equal to or greater than the amount of PBC's cross-claim, that it should be entitled to set off the damages it claims against the amount of that cross-claim and that therefore the cross-claim should fail. In making that submission, it relied on expert valuation evidence from Mr Theo Stamoulis who expressed the view that Tresedar could have sold 26 of the 39 units for a total of $21,034,000. As at 31 December 2009, Tresedar owed Bankwest $5,309,000 in respect of the project. WT Partnership estimated the cost to complete at $8,880,000. On that basis, the surplus would have been $6.845 million. Even discounting that amount substantially, Tresedar says that its loss is greater than the amount claimed by PBC. 75The plaintiffs also sought in the 4FACLS to allege that by engaging in the pleaded conduct, PBC engaged in unconscionable conduct in contravention of what was then s 51AC of the Trade Practices Act 1974 (Cth) and claimed damages in respect of that contravention. However, I did not permit that amendment and indicated at the time that I would give reasons in this judgment. 76In its cross-claim PBC seeks to recover amounts said still to be owing to it under the Gordon BC4 and the Settlement Deed. It also claims that it lost the opportunity to reinvest the money to which it says it is entitled in other projects from which it would have earned profit and has incurred additional costs and charges as a consequence of the plaintiffs' failure to pay it. 77Since the claim is essentially defensive in nature it is convenient to start with the cross-claim.

The cross-claim 78The cross-claim has a number of components. During the course of the hearing, PBC modified its cross-claim. As formulated in PBC's final submissions, it had the following elements:

The balance of the amounts due under cls 4.1 and 5.1 of the Settlement Deed which is said to total $475,887.13;
The amount due in respect of the judgment debt of $1,001,015.33;
An amount of $128,327.36 in respect of variation costs comprising the following: Claim for variation 2 $27,000.00 Claim for variation 3 $5,656.40 Claim for variation 4A $29,738.82 Claim for variation 5 $15,529.80 Claim for variation 6A $38,347.26 Claim for variation 8A $12,055.08

An amount of $202,249.58 said to be owing in respect of delay costs; * An amount of $185,455.20 said to be owing in respect of the Turramurra Project; * An amount of $560,000 for loss of profits to complete the Gordon Project; * Amounts claimed in respect of consequential loss; * Amounts claimed to indemnify PBC in respect of subcontractor claims against it; * Amounts said to be owing in respect of other costs.

Amounts due under cls 4.1 and 5.1 of the Settlement Deed 79Tresedar accepts that these amounts are payable under the Settlement Deed, and, subject to a minor adjustment in relation to the calculation of interest, it accepts PBC's most recent calculations of the amount owing. Tresedar's only defence to the claim is that it is entitled to set off the amount of its claim against the sum to which PBC is entitled. 80It is agreed that the principal now outstanding under the Settlement Deed (after deducting GST) is $442,727.27. It is also agreed that the outstanding interest up until 30 December 2008 on amounts due under cl 4.1 is $1,188.33. 81Leaving interest aside, it is also agreed that the total amount due under cls 4.1 and 5.1 was $862,726.41. Tresedar submits - correctly - that PBC wrongly added interest up until 30 December 2008 to calculate interest going forward. It points out that that involves the payment of interest on interest. After making that adjustment, and allowing for subsequent payments, the interest calculation for the period 30 December 2008 to 17 June 2009 is as follows: $862,726.41 for 20 days at 10% pa = $4,727.27 $802,726.47 for 28 days at 10% pa = $6,157.90 $742,726.53 for 21 days at 10% pa = $4,273.22 $682,726.59 for 28 days at 10% pa = $5,237.35 $622,726.65 for 35 days at 10% pa = $5,971.35 $562,726.71 for 36 days at 10% pa = $5,550.18 Interest continues to run on the sum of $442,727.27 at the rate of 10 percent per annum from 17 June 2009 - which is a daily rate of $121.30. On that basis, interest from 17 June 2009 up to the date of judgment (4 April 2014) is $212,387.79. Consequently, the total amount owing under the deed is: Outstanding principal: $442,727.27 Interest up to 30.12.08 $1,188.33 Interest from 30.12.08 to 17.6.09 $31,917.27 Interest from 17.6.09 to 4.4.14 $212,387.79 Total $688,220.66

The judgment debt 82PBC claims that the judgment debt is payable in addition to the amounts payable under cls 4.1 and 5.1 of the Settlement Deed. Tresedar submits that those amounts are payable in substitution for the amount payable in respect of the judgment debt. I accept Tresedar's submission. 83The principles applicable to the interpretation of the Settlement Deed are not in dispute. They were most recently stated by the French CJ, Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation t/a Verve Energy v Woodside Energy Ltd [2014] HCA 7 at [35] in these terms: The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties ... intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". [footnotes omitted] 84The wording of the Settlement Deed is not entirely clear. However, the surrounding circumstances are significant. The Settlement Deed resulted from the SOPA Proceedings. In those proceedings, PBC claimed the amount of $1,001,015.33. That amount included amounts payable to subcontractors and the amount of the deposit. Tresedar took the view that those amounts were not payable because the arrangement was that it would pay subcontractors directly. That arrangement was reflected in the terms of many but not all of the subcontracts. In fact, PBC had not made any payments to subcontractors. It is evident that the Settlement Deed was intended to resolve the question of what was to be paid to PBC in those circumstances. 85Clauses 4 and 5 of the Settlement Deed set out the amounts to be paid by Tresedar. Clause 7 sets out what happens if Tresedar does not make any of those payments. It provides that the whole of the amounts payable under cls 4 and 5 become payable immediately. It defines those amounts as "the Penalty Amounts". Presumably, the parties adopted that description because the amounts in question became payable immediately rather than in accordance with cl 4.2. Clause 7.1 goes on to say that PBC may enforce the judgment "to recover the Penalty Amounts" - that is, the amounts due under cls 4 and 5, which have become immediately payable. There is nothing in the Settlement Deed which specifically says that the judgment is not enforceable immediately. However, that is implicit in clause 7.1. It would make no sense to give PBC a discretion to enforce the judgment amount in the event that moneys payable under cls 4 and 5 are not paid if the judgment was enforceable in any event. And it would make no sense to say that the judgment was enforceable to recover the Penalty Amounts unless what was intended was that the amounts payable under cls 4 and 5 were intended to be payable in substitution for the judgment amount. 86Mr Freeman, who appeared for PBC, submitted that the Settlement Deed only resolved the question of payments in the future. It did not deal with what was to be paid in respect of the past, including the amount the subject of the judgment debt. However, in my opinion, that is an over-simplification. The purpose of the Settlement Deed was to resolve the question of how and what would be paid to PBC in circumstances where it seemed to have been accepted that Tresedar would have the responsibility for paying subcontractors directly. It made no sense in that context for PBC to recover amounts due in respect of subcontractors; and it is understandable why, in those circumstances, Tresedar took the view that PBC should not be paid a deposit. On the other hand, the effect of the Act was to make the amount of its payment claim recoverable as a debt. It was entitled to judgment for that amount and it was natural for it to seek to use that mechanism as a means of securing the payments due under the Settlement Deed. That is what it did. 87If Mr Freeman's interpretation of the Deed is right, Tresedar was faced with a claim for $1,001,015.33 to which it had no defence. It chose to settle that claim by agreeing to judgment against it for that amount and by agreeing to pay a further amount of $1,225,650, the balance of which would become payable immediately if any part of it was not paid on time. It makes no sense that Tresedar would have agreed to settle the claim it faced on those terms.

Variations costs 88PBC claims $128,327.36 in variation costs. Generally speaking, in its final submissions, it calculated that amount as 20 percent for supervision, overhead and profit on the total amount claimed in respect of each relevant variation less the amount claimed in those variations in respect of work done by the builder's employees (the deduction was made on the basis that no amount was specified in Item 2 of Schedule 2 in respect of those costs and there was no evidence of the rates published by the Master Builders Association of NSW current at the time the variation was made so as to make them recoverable under cl 14(h)(i) of the Gordon BC4). 89One argument advanced by Tresedar for why PBC is not entitled to recover the amount claimed is that the Settlement Deed fixed the amount that PBC was to be paid under the Gordon BC4, including for variations. In support of that argument, Mr Faulkner SC, who appeared for Tresedar, pointed out that the variation drawings were all prepared before the parties entered into the Settlement Deed. I do not accept that submission. The amounts payable under cl 4.1 to PBC are the amounts for PBC's builders margin and supervision "of the Work". "Work" is defined as the work "under the Contract". At the time the Settlement Deed was executed, there was identifiable work that had to be performed under the Gordon BC4. It was for that work that Tresedar had agreed to pay the amount set out in the Settlement Deed, not some other work. On any view, at the time the Settlement Deed was executed, that work did not include the variations. 90Another objection that Tresedar makes to the variation claims is that the way in which the claims are now put is quite different from the way in which the claim was pleaded and the way in which the claim was put before PBC's final submissions. In its Technology and Construction List Cross-Claim Statement, PBC claimed a 20 percent margin on variations said to have exceeded $900,000, although it did not identify what those variations were. In its written submissions (which were originally prepared as part of its opening and then amended following oral evidence), PBC maintained that "the total variation to concrete works as per the Gordon BC4 was $920,868.00" which was said to include Variation 2. It claimed a margin of 20 percent on that amount. Although the submission is not easy to follow, it appears that the variations relied on were Variations 2, 3, 4A, 5, 6A and 8A and Delay Claim 1A. In my opinion, the claim that PBC now makes was sufficiently identified in its earlier submissions to permit it to pursue the claim. 91The evidence is that Variation 2 was approved by Tresedar orally. PBC claimed a total of $146,400 in respect of that variation and that amount was approved by WT Partnership. On the basis of that evidence, I am satisfied that the relevant work was done. Applying the approach adopted by PBC in its submissions, it would be appropriate to calculate its margin of 20 percent on the $146,400 less builder's costs of $12,000. On that basis, PBC is entitled to $26,880 in respect of Variation 2. PBC claimed half of that amount in Progress Claim 7 submitted on 20 November 2008 and half that amount in Progress Claim 12 submitted on 16 March 2009. On that basis, it is entitled to interest on $13,440 from 26 November 2008 to 21 March 2009 ($423.45) and interest on $26,880 from 22 March 2009 to the date of judgment (4 April 2014) ($13,535.74). Consequently, PBC is entitled to judgment in the sum of $40,839.19. The claim in respect of that variation is a claim under the Gordon BC4, not a claim under the Settlement Deed. Consequently, it is only entitled to judgment in that amount against Tresedar and Tetbury. 92Tresedar objects to this claim on the basis that the claim does not take into account the work previously required to be carried out. However, that does not appear to be correct. The variation allows $30,000 for that work. 93There is no evidence that Variations 3, 4A, 5, 6A and 8A were approved by Tresedar. Indeed, what evidence there is suggests that Variation 3 was disputed by Mr Hovig Evanian in a schedule he sent to PBC on 26 May 2009. For that reason, the claims in respect of these variations must fail.

Delay costs 94PBC relied on two types of delay. First, it claims that it was delayed during the course of the building work. Second, it claims that it was delayed by the suspension. 95As I have already explained, under the Gordon BC4, PBC is only entitled to claim compensation for delays that are caused by certain specified events - relevantly, variations, suspensions to the work and delays caused by the failure of Tresedar to give timely instructions and take any other steps necessary to allow the work to proceed. Under cl 11(f), in the absence of any amount specified in Item 3(b) of Schedule 2, PBC is only entitled to recover "any actual costs incurred by or payable by [it] because of the delay". 96PBC also submits that it is entitled under cl 6.1 of the Settlement Deed to claim compensation for delays caused by inclement weather. That clause provides for an extension of time in respect of the payments due under cl 4.2 in the case of inclement weather on the proviso that "the payment made on the extended due date in respect of PB's supervision pursuant to paragraph 4.2(b) above is increased on a pro rata basis to account for the extension of time". 97In my opinion, cl 6.1 does not provide for an increase in the overall amount that is payable to PBC under the Settlement Deed. Rather, it provides for an increase in the amount of a particular instalment if the payment date of that instalment is extended as a result of inclement weather. The amounts payable to PBC are fixed by cl 4.1. Clause 4.2 deals with the question when those amounts must be paid. The fact that cl 6.1 provides for the pro rata increase in a particular instalment is not a reason for treating the clause as providing for a pro rata increase in the total amount payable under the deed. If that is what had been intended, the clause would have specifically said that there would be a pro rata increase in the amount payable under cl 4.1(b). 98As to other causes of delay apart from suspension, PBC sought to rely on two types of evidence. First, Mr Freeman referred to a range of contemporaneous material which he said demonstrated that the reason the project was delayed was that work stopped and started because Tresedar had insufficient money to pay subcontractors. Second, PBC relied on evidence given by Mr Harry Costas, the foreman on site (and Mr Phontos's brother-in-law), as an expert concerning the delays. 99However, neither type of evidence was sufficient to establish either that any delay resulted from a relevant cause or that PBC has suffered any actual loss as a result of one of those causes. There is evidence that Tresedar did not pay subcontractors in a timely manner and that it was facing financial pressures in connection with the project. However, it is not possible from that evidence to determine precisely what delay was caused by those matters or whether any delay that did occur caused PBC to suffer an actual loss. 100Mr Costas prepared two bar charts. One showed the progress of the actual works. The other showed the expected progress of the works. By comparing the two charts, Mr Costas expresses the opinion that "as at 12 June 2009 the actual work completed at the Gordon Project would have been completed by 2 February 2009". However, it is not possible to determine from Mr Costas's analysis the cause of the delay. The delay could have been caused by other events; and indeed Mr Costas's own daily diary attributes substantial delays to other factors - such as the weather. What PBC had to do is establish that, but for the variations or the failure of Tresedar to give timely instructions and pay subcontractors, the work that had been done by 12 June 2009 would have been completed earlier. Mr Costas's evidence does not do that. Moreover, as Mr Faulkner pointed out, on 11 March 2009, Mr Phontos sent an email to Mr Hovig Evanian which included a bar chart program. According to Mr Phontos, the bar chart demonstrated that "[a]ctual work on site [is] progressing in accordance with the program". It is difficult to reconcile that comment with the evidence of delay. 101In addition, PBC did not lead evidence of the actual costs it says it incurred as a consequence of the delay said to be caused by the variations and Tresedar's failure to give instructions and pay subcontractors in a timely manner. Rather, as I have explained, its approach was to take the builders margin and foreman costs it expected to earn each month, divide the total of those two amounts by the number of working days per month to come up with a daily figure and multiply that by the number of days of delay claimed. However, that figure at best represents an opportunity cost of the delay. It does not represent the actual costs incurred or suffered by PBC as a consequence of the delay. 102As to suspension, Tresedar puts its case in two ways. First, it says that PBC was not entitled to suspend work under the Act because the payment of $300,000 under the Settlement Deed was not a progress payment under a construction contract and consequently the Act does not apply to it. Second, it submits that PBC was not entitled to suspend work under cl 7.1(b) of the Settlement Deed because it had not given Bankwest at least 14 business days' notice of its intention to do so in accordance with cl 5.1 of the Tripartite Deed. 103During the course of final submissions, Mr Freeman also suggested that PBC was entitled to suspend work under the Gordon BC4. However, it is plain that the right to suspend for non-payment of the $300,000 was a right governed by the Settlement Deed, not the Gordon BC4. Consequently, the right of suspension under the Gordon BC4 can be put to one side. 104Section 7 of the Act states that the Act applies to any construction contract. "Construction contract" is defined in s 4 to mean "a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party". "Construction work" is defined broadly in s 5. 105Section 13(1) of the Act provides: A person referred to in section 8 (1) who is or who claims to be entitled to a progress payment (the "claimant") may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. "Progress payment" is defined in s 4 to mean: ... a payment to which a person is entitled under section 8, and includes (without affecting any such entitlement): (a) the final payment for construction work carried out (or for related goods and services supplied) under a construction contract, or (b) a single or one-off payment for carrying out construction work (or for supplying related goods and services) under a construction contract, or (c) a payment that is based on an event or date (known in the building and construction industry as a "milestone payment"). Section 8 provides: (1) On and from each reference date under a construction contract, a person: (a) who has undertaken to carry out construction work under the contract, or (b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment. (2) In this section, "reference date", in relation to a construction contract, means: (a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or (b) if the contract makes no express provision with respect to the matter-the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month. 106In my opinion, the Settlement Deed is a construction contract. It provides for the payment of amounts to PBC in exchange for PBC undertaking the "Work". The "Work" is the work under the Gordon BC4 and "includes the demolition of 3 dwellings and construction of 2 residential buildings comprising 39 units and basement carpark for 61 vehicles". That is clearly "construction work". It is true that the nature of the work is identified in the Gordon BC4. But it is an implied if not an express term of the Settlement Deed that PBC will carry out that work. The parties could not have intended that PBC would be entitled to be paid the amounts due to it under cl 4 of the Settlement Deed if it did not carry out that work and Tresedar had otherwise complied with its obligations under the deed. 107However, in my opinion, the amount of $300,000 is not a progress payment. In order for the payment to be a progress payment, it must be a payment made in respect of the construction work. The $300,000 does not have that character. It is payable whether or not any construction work is carried out and is not dependent upon what stage the construction work has reached. It is payable independently of the construction work in connection with the settlement of the SOPA Proceedings. It follows that PBC did not have a right of suspension under the Act. 108The position in relation to the suspension of the work under the Settlement Deed is more complicated. The right to suspend work must be understood as a continuing right not to undertake work while a default remains uncured. It is not simply a right to issue a notice of suspension or to engage in the single act of stopping work. It is a right not to do work during a particular period of time. I do not accept that that right had accrued by 11 June 2009. In order for that right to accrue, Bankwest had to be given an opportunity to make an election. In order to be given that opportunity, the default on which PBC intended to rely had to be identified so that the bank could decide whether to cure that default itself or not. The only default identified by PBC as giving rise to a right to suspend work was the failure to pay the $300,000 and other amounts payable under the Settlement Deed referred to in its notices served on 5 June 2009 and 9 June 2009. Until its letter dated 12 October 2009, it never sought to rely on other defaults. 109To the extent that PBC relied on the notices served on 5 June 2009 and 9 June 2009, the right to suspend had clearly not accrued by 11 June 2009 because PBC had not given Bankwest 21 business days to remedy the defaults on which it relied. But I do not think that that means it could never rely on those defaults to exercise the right not to do further work or that it had to resume work before it could do so. Bankwest was on notice of the default on which PBC relied. It knew that the default had to be remedied if work was to continue. It seems clear that it elected not to remedy the default itself. It was open to it to do so during the time specified in the Tripartite Deed; and if it had done so, PBC would have had to resume work. In addition, PBC would have had no claim in respect of its wrongful suspension and may have been liable both to Tresedar and Bankwest for any damages they suffered as a consequence of its wrongful suspension. However, it does not follow that the right of suspension was lost because it was exercised prematurely. The Tripartite Deed still gave PBC the right not to continue to perform the work once the time in which Bankwest had a right to make an election had expired and it had elected not to remedy the default that gave rise to the right of suspension. It follows that, at least by 10 July 2009, when PBC gave its second notice, PBC was entitled to suspend work. 110In its written submissions, PBC sought to calculate its costs of delay as the lost opportunity to earn its builders margin and foreman costs. It did not, for example, seek to identify amounts it paid to staff who, as a result of the suspension, had nothing to do. For reasons I have already explained, that is not a measure of the actual costs it has incurred as a consequence of the suspension. 111In its final submissions, PBC puts its claim for costs arising from delay differently. It relies on Delay Claim 3. That claim refers to the extension of time claimed in Delay Claim 2 of 135 working days and claims a further 32 working days from 1 August 2009 to 15 September 2009 (as a result of the suspension), making a total of 167 days. Delay Claim 3 claims costs of $116,388.57. That amount is calculated by taking the amount calculated as the daily rate for forgone builders margin and foreman costs, multiplying that by the number of days claimed delay (32) and adding GST. 112In its submissions, PBC treats Delay Claim 3 as a claim for delay from 9 February 2009 to 15 September 2009 (that is, the 135 days claimed in Delay Claim 2 and the further 32 days claimed in Delay Claim 3). It submits that Tresedar did not dispute that claim within 5 days of the date on which it was served in accordance with cl 11 of the Gordon BC4. Consequently, it says it was entitled to an extension of time of the amount claimed - that is, from 9 February 2009 to 15 September 2009. It also submits that, during that time, it made payments to Satsoc Pty Ltd in respect of services provided to Mr H Costas of $84,500, to BK Co Pty Ltd and Madi Project Management Pty Ltd in respect of services provided by Mr E Costas of $93,500 (who also worked as a builder on the project) and to GL Zakos & Associates for consultancy fees of $3,003. It says that it is entitled to recover those amounts as the cost of delay. In addition, it claims $21,246.58 as a pro rata share of Mr Phontos's director's fees. 113There are a number of difficulties with this way the claim is put. First, Delay Claim 3 is a claim for 32 days, not a claim for 167 days. The claim for 135 days had been the subject of a previous claim. Second, cl 11 provides a procedure for granting PBC an extension of time. It does not relieve PBC of the obligation to prove that it suffered an actual loss as a consequence of delay. Third, proof of payment for the relevant services depends on documents that were not admitted into evidence. Fourth, there was no evidence of why PBC was liable to make those payments during the period of delay. Consequently, it is impossible to conclude from the invoices alone that the amount of those invoices represented the actual costs of delay. Lastly, the claim in respect of Mr Phontos's director's fees is not a claim for actual loss. Those fees were payable to Mr Phontos irrespective of any delay.

The amount claimed in respect of the Turramurra Project 114The amount claimed in respect of the Turramurra Project is calculated by taking the amount shown in annexure C to the Turramurra building contract as being payable in respect of builders margin ($285,454.60) and deducting from that the amount that is said to have been paid in respect of builders margin. 115This claim must fail for two reasons. 116First, PBC issued a certificate of practical completion on 26 June 2008. Clause 23 of the Turramurra building contract relevantly provides: (a) When Practical Completion is achieved, the Builder is entitled to and must receive the unpaid balance of the Contract price or sum together with any other monies which are payable in connection with this Contract. (b) The amount due under this Clause must be paid to the Builder within two (2) days of a written request for payment due because practical completion has been reached. This request is to give brief, accurate particulars of the claim. There is no evidence that PBC ever provided a written request for payment of the amount now claimed or that it gave brief and accurate particulars of that claim. 117Second, it is clear that on PBC's case the amount claimed accrued on or before 26 June 2008, before the Deed of Settlement was executed. Under cl 11.1 of that deed, the parties released one another from all Claims that any of them had "on any account whatsoever between the parties hereto up to and including the date of these presents". Any claim under the Turramurra building contract fell within that description.

The claim for lost profits 118The claim for lost profits is calculated on the basis that, if the contract had not been terminated, PBC would have earned its builders margin of $40,000 per month during the period it would have taken to remobilise (September 2009 to December 2009) and the 10 months it would have taken to complete the project (January 2010 to October 2010). The 10 months is based on an estimate provided by WT Partnership in a report dated 23 December 2009. 119In my opinion, there is no merit in this claim. Under the Settlement Deed, PBC was entitled to be paid the amounts set out in that deed in relation to the Gordon Project. For the reasons I have already explained, it was also entitled to be paid any actual costs it had incurred as a consequence of delay as well as any amounts that had been agreed in respect of variations. It was not entitled to be paid any further amounts. In particular, if the contract had proceeded, it would not have been entitled to recover the amount it now claims as lost profits.

Consequential loss claims 120There is no dispute concerning the applicable legal principles in relation to claims for consequential loss. They were stated by the Court of Exchequer in Hadley v Baxendale (1854) 9 Exch 341 at 354; 156 ER 145 at 151 in these terms: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. The principle has been adopted and approved by the High Court on a number of occasions: see, for example, Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 at 471-2 per Gibbs J; Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653 at 667 per Wilson, Deane and Dawson JJ; Hungerfords v Walker (1989) 171 CLR 125 at 142 per Mason CJ and Wilson J; Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 91-2 per Mason CJ and Dawson J, at 98-9 per Brennan J and at 135-6 per Toohey J; Baltic Shipping Company v Dillon (1993) 176 CLR 344 at 364-5 per Mason CJ, at 368 per Brennan J and at 380-1 per Deane and Dawson JJ; Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 at 434-5 per McHugh J; Clark v Macourt [2013] HCA 56; (2013) 304 ALR 220 at [119]-[120] per Keane J. 121The claim for consequential loss has 6 components: * Loss of an opportunity to sell at a profit 2 of the remaining villas in a 5 villa project that was developed by PBC on Twin Road, North Ryde; * Loss of an opportunity to acquire 3 adjoining houses in Mosman and redevelop the site; * Loss of an opportunity to develop other specific projects; * An alternative claim based on PBC's rate of return on capital; * A further alternative claim based on the expected profits that PBC could have earned; * Claims for other costs. 122The first 4 claims depend on evidence that I rejected. In the absence of that evidence, the claims are not pressed. However, I indicated at the time I rejected the evidence that I would explain in this judgment my reasons for doing so. 123PBC sought to prove the first 4 claims for consequential loss by evidence given by Mr Phontos, together with expert accounting evidence from Mr Haley. 124Mr Phontos gave evidence concerning the projects that PBC (or its parent company) were involved in or that he identified. He then sought to explain how he calculated the profit that PBC would have earned on those projects and Mr Haley, at least in the case of 2 heads of claim, gave evidence that, in his opinion, the approach adopted by Mr Phontos did "not appear unreasonable". 125However, there were difficulties with the evidence given by both Mr Phontos and Mr Haley. 126In relation to the claim in respect of the 2 villas that formed part of the Twin Road Project, the evidence was that the villas were owned by Property Builders Pty Ltd (PB), not by PBC. Mr Phontos sought to overcome this difficulty by giving evidence that PB and PBC were related companies, that PB was the landowning vehicle and that it was PBC that undertook the development of the project as "owner/builder/developer". That evidence, however, was given in conclusory form. It did not overcome the difficulty that the villas were owned by PB and that, consequently, any loss arising from the forced sale of the villas would have been a loss suffered by PB rather than PBC. Moreover, Mr Haley gave evidence that the overall methodology adopted by Mr Phontos to calculate PBC's loss was not reasonable. In those circumstances, I rejected the evidence on the basis of relevance and on the basis that the probative value of the evidence was substantially outweighed by the danger that the evidence might cause or result in undue waste of time and consequently should be rejected under s 135 of the Evidence Act 1995 (NSW). 127In relation to the Mosman development, Mr Phontos gave evidence of 3 adjoining houses he had identified in Mosman which were available for sale. It appears that the properties were bought by another developer, developed and sold. Mr Phontos gave evidence of the purchase price of the properties, the cost of the development that was actually undertaken on them and their current market value. He gave evidence that, if PBC had been in a position to contribute total equity of $1,168,550, it would have been able to develop the project itself. The difficulty, however, is that Mr Phontos's evidence simply consisted of assertions. There was no evidence of the actual prices for which the properties were sold. There was no explanation of how Mr Phontos's estimate of building costs was arrived at. There was no actual evidence of the price for which the development was sold. In those circumstances, Mr Phontos's evidence was inadmissible hearsay, inadmissible opinion evidence or evidence that I considered should be excluded under s 135 of the Evidence Act. Since Mr Haley was simply expressing an opinion on what Mr Phontos had done, his evidence without that evidence was irrelevant. In addition, Mr Phontos assumed for the purpose of his analysis that PBC would have been in a position to contribute total equity of $1,168,550 because it was entitled to recover more than that amount from Tresedar under the Settlement Deed. On the findings I have made, there was no basis for that assumption. 128Mr Phontos also sought to give evidence of other specific projects PBC could have invested in. However, that evidence suffered from the same flaws as the evidence he gave in relation to the Mosman development; and I rejected it for similar reasons. 129The alternative claim is not easy to follow. Mr Phontos purports to calculate the internal rate of return PBC earned on its capital and to apply that rate of return to the sum PBC says it was entitled to be paid under the Settlement Deed and the Gordon BC4. Mr Haley expressed an opinion on whether he thought that the approach taken by Mr Phontos was reasonable. 130In calculating PBC's internal rate of return, Mr Phontos relied on assertions concerning the rate of return said to have been earned by a business largely conducted by his parents during the period 1966 to 1990 and on an expert accountant's report prepared in 1995 for Federal Court proceedings against the Commonwealth Bank, which was not in evidence. Based on that analysis, Mr Phontos concluded that PBC's internal rate of return was 24.34 percent. On the findings I have made, Mr Phontos applied that rate of return to amounts that are not recoverable by PBC. Mr Haley in his report points out that the internal rate of return derived for the period 1966 to 1990 had been applied to the period 2009 to 2013 notwithstanding that "the economic and business conditions in the latter period were different to the period used to determine the [internal rate of return]". Nonetheless, he purported to express the opinion that "having regard to my experience with businesses undertaking similar operations to PBC, then the [internal rate of return] of 24.34% is not unreasonable". Mr Haley gave no reasons for that conclusion. 131In my opinion, the evidence given by Mr Phontos and Mr Haley was clearly inadmissible. It was based on material that was not in evidence or on inadmissible evidence given by Mr Phontos concerning a business largely conducted by his parents. To the extent that it involved the expression of opinions, no explanation was given for those opinions. 132The assessment of PBC's consequential loss based on its expected income was introduced by PBC's final submissions. It involved calculating PBC's gross profit by taking the amounts to which it was allegedly entitled under the Settlement Deed (including the judgment amount) and the amounts claimed in respect of the Turramurra Project and the variation and delay claims (said to total $2,731,273.03) and deducting from that total expenses incurred by PBC said to be obtained from its Business Activity Statements lodged with the Commissioner of Taxation to arrive at a figure of $2,051,979.21. PBC then deducted estimated income tax from that figure (using a rate of 30 percent) to arrive at a net profit from trading as a builder of $1,436,385.45. It then purported to calculate from that figure a monthly net profit of $47,879.51. It then used that figure to calculate an expected net profit for the period November 2010 to March 2014 of $1,963,060.11. It discounted that figure by 20 percent, on the basis that its claim was for the loss of a chance, to arrive at a figure of $1,570,448.09. 133In order to prove its expenses, PBC relied on a spreadsheet that it claims was prepared in connection with its Business Activity Statements. In a supplementary written submission, Tresedar submitted that that document was not in evidence - a submission that was disputed by PBC. The ruling that I made was that the document was not admitted. There was no evidence of how that document came to be prepared; and for that reason I was not prepared to admit it as a business record. 134In any event, whether the document is admitted or not to prove PBC's expenses, in my opinion, there is no merit in PBC's revised claim for consequential loss. The claim depends on assumptions concerning the amount that PBC is entitled to recover under the Settlement Deed that are not made out. It also depends on the assumption that it would be able to earn similar profits in the future to the profits it would have earned assuming it was entitled to be paid the amounts claimed without giving any justification for that assumption. 135The claim for other costs has three components. One is an amount for interest said to be owing in respect of a loan from a company known as Carlamax Properties Pty Ltd (Carlamax). The second is amounts that PBC has paid or is liable to pay to the liquidator. The third is amounts said to be owing to Phontos Legal, a legal practice that was carried on by Mr Phontos. 136The claim in respect of the loan owed to Carlamax depends on a letter dated 20 April 2010 from Raj Lawyers acting for Carlamax to PBC. In that letter, Raj Lawyers asserts that PB had entered into a facility agreement dated 17 June 2005 with Carlamax, PBC (and Mr Phontos) had guaranteed that facility, PB had failed to make repayments required under the agreement and that as a consequence PB (and PBC under its guarantee) were indebted to Carlamax in the following amounts: * $160,000 being the principal sum under the agreement; * $224,245.48 being interest calculated from 17 June 2005 to 16 April 2010 at the default rate of 29 percent per annum. 137PBC claims that, if Tresedar had paid the $300,000 owing to PBC under the Settlement Deed, PBC would have used that amount to discharge PB's liability to Carlamax and consequently PBC would not have incurred the liability it did under its guarantee. 138Even assuming that the letter dated 20 April 2010 from Raj Lawyers is admissible to prove all the assertions made in it, I do not accept that PBC has made out this aspect of its claim. There is no evidence that PBC would have used the $300,000 for that purpose. At the time the $300,000 was due for payment, there had been no claim on the guarantee and it is simply unclear how PBC would have used the money. Moreover, there is no evidence that, at the time the Settlement Deed was entered into, Tresedar knew of the Carlamax loan or that PB had no means of repaying it and that PBC was dependent on receipt of the $300,000 in order to avoid its liability under the guarantee. In those circumstances, the claim must fail. 139The claim for liquidator's fees depends on the assertion that, if Tresedar had complied with its obligations under the Settlement Deed and Gordon BC4, PBC would not have been placed into liquidation. There is no evidence to support that assertion. Nor is there any evidence that Tresedar was aware that the failure to pay the amounts owed by it would cause PBC to go into liquidation. For those reasons alone, this claim must fail. 140As to the claim for legal fees, section 69(2) of the Evidence Act 1995 (NSW) creates an exception to the rule (which is set out in s 59) that hearsay evidence is inadmissible in the case of documents that "[form] part of the records belonging to or kept by a person, body or organisation in the course of, or for the purposes of, a business" and "[contain] a previous representation made or recorded in the document in the course of, or for the purposes of, the business". It is not disputed that invoices issued by a business in the normal course of its business fall within that description. However, s 69(3)(a) creates an exception to s 69(2) where the document "was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding". 141The only evidence that was produced in support of the claim for legal fees was an invoice dated 5 October 2012 addressed to the liquidator of PBC for $1,214,033.49. The invoice purports to record time for Mr Phontos in connection with the Gordon Project including, for example, liaising with PBC's lawyers. It is not clear that any of the work that Mr Phontos did was done by him as PBC's solicitor. In any event, the invoice was prepared well after these proceedings were commenced and was clearly prepared in connection with these proceedings. Consequently, it was not admissible as a business record under s 69 of the Evidence Act. For that reason, I was not prepared to admit the invoice. In the absence of the invoice, there is no evidence to support this aspect of PBC's claim.

Subcontractor claims 142PBC claims that it is entitled to be indemnified by Tresedar under cl 12.1 of the Settlement Deed in respect of 4 subcontractor claims. Those are: * A claim made by Stallion; * A claim made by DR Formwork Pty Ltd for $1,105,502.47; * A claim made by Worldmark Plumbing Pty Ltd for $200,911.52; and * A claim by CPA Electrical for $143,924.43. 143The claim by Stallion can be put to one side. Listed for hearing at the same time as these proceedings was a claim brought by Stallion against Tresedar and PBC. That claim settled on the first day of the hearing. The terms of settlement are not in evidence. However, as part of that settlement, Stallion discontinued its claim against PBC. As a result, PBC has no liability to Stallion in respect of which it could be indemnified. 144PBC sought a declaration in these proceedings that it was entitled to be indemnified in respect of any costs it was ordered to pay in the Stallion proceedings. However, there was no evidence before the court concerning the costs that PBC had incurred in connection with the Stallion proceedings; and, in my opinion, it would be preferable to deal with any argument that PBC is entitled to be indemnified in respect of the costs of the Stallion proceedings at the time the court deals generally with the costs in those proceedings. 145Tresedar submits that by its terms cl 12.1 only indemnifies PBC against "Claims" arising from conduct engaged in by Stallion or any subcontractor. It does not require Tresedar to indemnify PBC against claims made by Stallion or other subcontractors. I do not accept that submission. Clause 12.1 of the Settlement Deed makes little grammatical sense. However, the indemnity was given in a context where the parties expected Tresedar to be responsible for paying subcontractors. It would be natural in those circumstances for the parties to agree that Tresedar would indemnify PBC against the claims made by subcontractors. The expression "as a result of", although inelegant, is adequate to cover claims of that type. 146There are, however, other problems with this aspect of PBC's claim. PBC relies on invoices issued by the 3 subcontractors and affidavits sworn by the principals of each of the 3 subcontractors. PBC sought to tender those invoices as business records to prove the amounts owing to the subcontractors. I rejected that tender. 147Each of the 3 invoices is similar and each is dated 28 June 2010, well after these proceedings were commenced. The invoice from Worldmark Plumbing is typical. It was in the following terms: Progress Claim Plumbing @ 29-33 Dumaresq Street Gordon Money outstanding from previous claim $15,000.00 Retention held $4,000.00 Works completed and not Claimed $15,000.00 Material purchased for site by foreman on account $1,500.00 Loss of income/profit ($950,000) (balance of work Hutchinsons quote $910,000.00) 17.5% of $910,000.00) $159,250.00 Sub Total $194,750.00 Interest on money owed from 28/01/2010 $841.52 10% of $194,750.00 Additional fees for management 50hrs @ $80.00/h $4,000.00 Legal fees 4hs @ $330.00/h $1,320.00

Sub Total $200,911.52

Total amount due and payable includes GST $200,911.52

148It is apparent from this invoice that it is not a genuine invoice for work done. It is an unparticularised claim for breach of contract. Mr Donald Bejjani, the principal behind Worldmark Plumbing, did not in his affidavit purport to give evidence of precisely what work he did for which he has not been paid. No evidence was given in his affidavit for how other amounts claimed in the invoice were calculated. The invoices do not form part of the records of the relevant businesses. They were clearly created for the purpose of advancing a claim in these proceedings. For that reason, they are inadmissible under s 69 of the Evidence Act. 149Moreover, each of the 3 relevant subcontracts contains the terms quoted at para 17 of this judgment making it clear that PBC entered into the subcontracts as disclosed agent of Tresedar and that Tresedar was to be responsible for paying any claims. It is not suggested that PBC has paid any of the subcontractors any part of the amount that they claim. It seems clear that if any of the subcontractors have a claim it is against Tresedar, not PBC. 150The word "Claims" is defined broadly. However, that does not alter the fact that what is given by cl 12.1 is an indemnity. It is not a simple obligation to pay. In order to be indemnified, PBC must suffer some loss or incur some liability that can be the subject of the indemnity. In circumstances where it has paid nothing, no proceedings have been commenced against it and the subcontracts themselves make it clear that it is Tresedar and not PBC that is responsible for paying subcontractors, there is nothing in respect of which the indemnity operates.

Tresedar's claim 151Tresedar's claim raises 2 main issues: * The reasons for rejecting Tresedar's application to amend its claim to include a claim that PBC engaged in unconscionable conduct; * Whether a term should be implied in the Gordon BC4 and Settlement Deed as alleged and, if so, whether PBC has breached that term and, if so, whether Tresedar is entitled to recover any damages in respect of that breach.

The claim for unconscionable conduct 152The principles which the court should apply in determining whether to permit an amendment to a party's claim are set out in ss 56-60 of the Civil Procedure Act 2005 (NSW). It is not necessary to set out those provisions in full. Section 56 provides that the overriding purpose of the Civil Procedure Act and the rules of court is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Section 57 provides that, in furthering the overriding purpose referred to in s 56, the proceedings in any court are to be managed having regard to the following objects: (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. Section 58 provides that in deciding whether to make an order, among other things, for the amendment of a document, the court must seek to act in accordance with the dictates of justice. Section 58(2) provides that in determining what are the dictates of justice in a particular case, the court must have regard to the overriding purpose set out in s 56 and the objects set out in s 57. It may also have regard to a number of other matters including such other matters as the court considers relevant in the circumstances of the case. 153Commenting on similar provisions in the Court Procedure Rules 2006 (ACT), the plurality in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 said: [93] Rule 21(2)(b) indicates that the rules concerning civil litigation no longer are to be considered as directed only to the resolution of the dispute between the parties to a proceeding. The achievement of a just but timely and cost-effective resolution of a dispute has an effect upon the court and upon other litigants. ... [96] An important aspect of the approach taken by the plurality in J L Holdings [Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146] was that it proceeded upon an assumption that a party should be permitted to amend to raise an arguable issue subject to the payment of costs occasioned by the amendment. So stated it suggests that a party has something approaching a right to an amendment. That is not the case. The "right" spoken of in Cropper v Smith needs to be understood in the context of that case and the Rule, which required amendment to permit the determination of a matter already in issue. It is more accurate to say that parties have the right to invoke the jurisdiction and the powers of the court in order to seek a resolution of their dispute. Subject to any rights to amend without leave given to the parties by the rules of court, the question of further amendment of a party's claim is dependent upon the exercise of the court's discretionary power. [Footnotes omitted] 154In my opinion, applying these principles, it was not appropriate to permit Tresedar to amend its claim to plead that PBC had engaged in unconscionable conduct. I reached that conclusion for a number of reasons. 155First, as I have said, Tresedar sought to amend its claim on the first day of the hearing. The claim that Tresedar sought to bring depended, with one important qualification, on the same facts as those that Tresedar relied on for its claim that PBC was in breach of an implied duty of good faith and cooperation. In particular, Tresedar sought to allege that PBC engaged in unconscionable conduct by making claims for builders margins and foreman costs in variation claims and by making its acceptance of those variations dependent on Tresedar's acceptance of those claims, by refusing to consent to registration of the strata plan, by suspending the work and by declining to remove the caveats when requested to do so. 156The significant addition in the unconscionable conduct claim was an allegation that PBC knew or ought to have known that it was not entitled to do any of those things. That addition raised a significant new factual issue that had not been addressed by PBC in its evidence. In my opinion, PBC was entitled to a reasonable amount of time to consider that issue. The likelihood is that that would have involved some postponement of the commencement of the hearing. 157Second, the proceedings had already been on foot for a lengthy period of time. During that time, Tresedar had already amended its claim 4 times. The further application to amend was only made on the first day of the hearing and then without any explanation for the delay. 158Third, in my opinion, the proposed amendment to the pleading did not properly plead a claim of unconscionable conduct. In order to make out a claim of unconscionable conduct, it is necessary for the conduct to involve a high degree of moral obloquy: Attorney-General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557 at [121] per Spigelman CJ. It must also involve the "taking advantage by one party of some disabling condition or circumstance that seriously affects the ability of the other party to make a rational judgment as to his or her own best interests": Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 87 ALJR 708 at [118]. 159In the present case, it was not possible to identify from the proposed pleading the conduct that could be said to have involved a high degree of moral obloquy. The allegation that PBC knew it was not entitled under the Gordon BC4 and Settlement Deed to do what it did may have satisfied that requirement. However, it was far from clear that the allegation that PBC ought to have known that it was not entitled to do what it did satisfies that requirement; and yet that was an essential part of what was alleged. Moreover, it was not possible from the pleading to identify the disabling condition or circumstance that it is said affected Tresedar's ability to act in its own best interests. Had the claim been brought in a timely manner, it may have been possible to address these defects in the pleading. PBC may have asked for particulars or for a further explanation of precisely the case it had to meet. However, having regard to the time when the amendments were sought to be made, none of the pre-trial procedures were available to PBC so that it could understand precisely the case it had to meet. In my opinion, it was not in the interests of justice to permit Tresedar to make the amendments in those circumstances.

The implied term 160The circumstances in which a court will imply a term requiring each to act in good faith remains uncertain: see Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [144] per Bathurst CJ. For discussion see, K Lewison & D Hughes, The Interpretation of Contracts in Australia, (2012, Law Book Company) at [6.14]. There is authority that the terms should be implied in all commercial contracts: see, for example, Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 268 per Priestley JA. Other cases have suggested that the term should only be implied as a matter of fact in accordance with the principles stated in the BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266: see e.g. Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212 at [108]; R & J Lyons Family Settlement Pty Ltd v 155 Macquarie Street Pty Ltd [2008] NSWSC 310; (2008) 13 BPR 25,161 at [68] per Bryson AJ; Tote Tasmania Pty Ltd v Garrott [2008] TASSC 86; (2008) 17 Tas R 320 at [16]; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228 at [25] per Buchanan JA; Australian Hotels Association (NSW) v TAB Limited [2006] NSWSC 293 at [78] per Bergin J. In that case, the implication of the term depends on the presumed intention of the parties. 161One feature of the implied term is that it is expressed at such a level of generality and abstraction that it can be difficult to determine its content in any particular case. Consequently, to suggest, as some cases do, that the term should be implied as a matter of law in all commercial contracts has the effect of moving the enquiry from whether a particular term should be implied in the circumstances of the case to the question of the content of the general term in light of those circumstances. 162In the present case, Tresedar seeks through the implied term to impose two obligations on PBC. One is an obligation to give its consent to registration of the strata plan within a reasonable time of a request by Tresedar that it do so. The other is essentially an obligation to cooperate with Tresedar in making variations to the contract works to enable the works to be constructed within the original budget. 163It is difficult to see why the first obligation should not be implied. The parties anticipated at the time the Settlement Deed was signed that at least one, and possibly the most likely, source of the payment of the $300,000 was from the sale of units in the Turramurra Project. The parties also specifically agreed that PBC could lodge a caveat to protect its interest as second mortgagee. They must have known it would not be possible to raise funds from the sale of lots in that development without registration of the strata plan and that if PBC lodged a caveat, as was contemplated, its consent would be required in order for that to happen. Having regard to what was contemplated, the parties must have intended that PBC would give its consent or at least not act unreasonably in refusing it. Whether that obligation should be seen as an aspect of an implied term of good faith or the implication of a specific term on the basis of the implied intention of the parties is of little practical significance. 164On the other hand, I do not accept that PBC was in breach of that implied obligation. Its initial position was that it would give its consent to the registration of the strata plan. That consent was delayed largely because Tresedar sought PBC's agreement not to maintain a caveat over all lots in the development; and then the question whether consent should be given became bound up with the question whether PBC should maintain a caveat over all lots and whether it should receive any amount before the first mortgagee was paid in full. In my opinion, it was reasonable for PBC to insist that it maintain a caveat over all lots. It was far from clear that its position would be adequately protected unless it did so. There was some delay in PBC giving its consent. But that delay had its origins in Tresedar's demand that PBC relinquish its caveat over some lots. Having regard to those circumstances, I do not think that the delay was unreasonable. 165Even if PBC was in breach of the implied obligation, I do not accept that Tresedar suffered any loss as a consequence of that breach. There is no evidence that Tresedar was unable to market units in the development in the absence of registration of the strata plan. In fact, it had exchanged contracts for the sale of one lot before registration of the strata plan. It was concerned that the strata plan be registered quickly so that it could complete that sale. However, the sale was completed. It appears that Tresedar had difficulty selling the other lots even after the strata plan was registered. There is no reason to believe that those difficulties were caused by any delay in registration of the strata plan. 166It is much more difficult to see how an obligation of the second type contended for by Tresedar can be implied. Clause 14(b) of the Gordon BC4 expressly provided that PBC was not obliged to vary the contract works. It was part of Tresedar's case that by the Settlement Deed the parties had agreed that PBC would be paid a fixed amount for the building work and was not entitled to claim any additional amounts in respect of variations. Mr Faulkner's initial submission in opening was that PBC's position was protected by the fact that it could refuse to agree to a variation. In those circumstances, it is difficult to see why an obligation should be implied that PBC would act reasonably in consenting to variations. 167Even if such an obligation were to be implied, I am not satisfied that it was breached by PBC. There is no evidence before the court concerning the question of what the variations sought by Tresedar would have involved from the point of view of PBC. Tresedar bore the onus of proving that, having regard to the additional costs and time that would be involved in the variations from PBC's point of view, it was unreasonable for PBC not to consent to them except on the terms it sought. Tresedar has led no evidence from which that conclusion could be drawn. 168In addition, I am not satisfied that Tresedar has suffered any loss as a consequence of PBC's breach. Again, the onus is on Tresedar to prove that but for PBC's breach it would have been able to complete the project - that is, that Tresedar had sufficient funds to fund the project to completion. There is, however, no evidence from which that conclusion could be drawn. The evidence is that the budgeted cost of the works was $11,200,000 of which Bankwest was to provide $10,050,000. It appears that Tresedar expected to fund the balance from sales of units in the Turramurra Project. However, the sale of units in that project was delayed for reasons that were unconnected to PBC's conduct. As I have said, there is some evidence that Tresedar was having difficulties funding the costs of the project. I am not satisfied that the position would have been any different if PBC had agreed to the variations on the terms sought by Tresedar.

Orders 169The orders of the court are: (1)The plaintiffs' summons be dismissed. (2)Judgment for the cross-claimant on its cross claim against: (a)The cross defendants in the sum of $688,220.66; (b)The first and second cross defendants in the sum of $40,839.19. 170I will hear the parties in relation to costs. ********** 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: 04 April 2014

Court Procedure Rules 2006(ACT)

Trade Practices Act 1974(Cth)

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