Tricontinental Corporation Ltd v HDFI

Supreme Court of NSW|2012-07-02|Before: Hammerschlag J

Introduction 1HIS HONOUR: On 6 November 2008 the plaintiff (as Contractor) and the defendant (as Principal) entered into a written design and construct building contract ("the contract") for the construction of a commercial building in the Docklands area of Melbourne in the State of Victoria for a contract sum of $37,669,956. 2Clause 5 of the contract, read with paragraph 13 of Annexure Part A, obliged the plaintiff to provide three bank guarantees: one for an amount equivalent to 2.5 per cent of the contract sum (i.e. $941,748), one for an amount equal to 2.5 per cent of the contract sum less $200,000, and one for $200,000. The plaintiff duly provided the guarantees. 3Clause 5.8(A) of the contract provides relevantly as follows: 5.8 Reduction of Security (A) Upon the later of: (a) issue of the Certificate of Practical Completion; and (b) the provision of all of the items referred to in paragraphs (c) to (h) inclusive of 42.3, the Principal's entitlement to security shall be reduced to the percentage thereof stated in Annexure Part A or, if no percentage is stated, to 50% thereof. If at any time after Practical Completion the Superintendent is of the opinion that it is reasonable to further reduce the Principal's entitlement to security, that entitlement shall be reduced to the amount which the Superintendent determines to be reasonable. 4No percentage is stated in the Annexure. 5In these proceedings the plaintiff claims an entitlement to have the security reduced by 50 per cent, i.e., by the amount of the first guarantee. It claims return of the guarantee.

the dispute 13On 14 November 2011, the Superintendent issued a Certificate of Practical Completion to the effect that the entirety of the work under the contract was Practically Complete as at 31 October 2011. On or about that date, the defendant took physical possession of the works and remains in possession. 14On 15 May 2012, the plaintiff went into voluntary administration and on 28 May 2012, the defendant exercised a power given to it under the contract to bring the contract to an end. 15It is common cause that when the Certificate of Practical Completion was issued, and the plaintiff took possession of the works, there had been no certification, as contemplated by cl 9.9 of the contract, by consultants, in writing, that the relevant work under the contract had been completed in accordance with the contract and the approved design documents, had not been fulfilled. 16However, the plaintiff puts that such certification occurred by not later than 13 March 2012 by the execution of written statements signed by each of the relevant consultants in the following form: ATTACHMENT 2: CONSULTANTS & SUBCONTRACTOR STATEMENTS I, the undersigned, for the purposes of all progress claims and practical completion of the Project, and with regard to the discipline for which I am responsible, acknowledge that we have a duty of care to the Principal and state that: (a)There are/are no material disputes between myself and St Hilliers Contracting ("the Contractor") in connection with the Works. [Details of any material dispute are/are not attached.] (b)Work to the date of this Statement has been completed in accordance with applicable Design Documents and the Contract, and there are no apparent defects that have not been notified to the Superintendent. (c)We are/are not aware of any matters which may result in the Site or the Works not being fit for their intended use, or which could result in the Works not complying with all the requirements of the Contract and all Legislative Requirements. [Details of these matters are/are not attached.] (d)We have been paid for all claims for payment. 17Each form identifies the relevant discipline, the name of the party giving it, the qualification of the party and the date of the acknowledgement. 18The plaintiff puts that these statements meet the requirements of cl 5.8(A)(b) and that it is, in the circumstances, entitled to a 50 per cent reduction in the security it has provided. 19In the alternative, it puts that the defendant waived the entitlement to the provision of the relevant certificates by exercising an inconsistent election to take possession of the works. The plaintiff puts that, in addition, this amounted to the exercise of an election inconsistent with the maintenance of a right to continue to hold the guarantee.

CONSIDERATION 20There was no issue between the parties that the provision of the relevant certificates is a condition precedent to the entitlement of the plaintiff to a reduction in the security. 21It is well settled that it is meaningless to speak of the substantial performance of a condition precedent. Either it has been performed or it has not: see Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689 at 705 and Newtown Management Pty Ltd v Owners of Strata Plan 67219 [2009] NSWSC 150 at [80] and [84]-[85]. 22The first issue for resolution is thus whether that condition precedent has been fulfilled. This is to be answered by examining whether the certificates meet with the requirements of cl 9.9 (and in turn, cl 5.8(A)) of the contract. 23As may be readily observed, the certificates are (with the exception of the inclusion of subparagraph (d)) in the form of Attachment 2 in Annexure Part F to the contract. This is the form which the contract mandates for claims for the payment of money. 24The certificates contemplated by cl 9.9 are important instruments. Their provision has the consequence that the plaintiff becomes entitled to a reduction in, and the defendant must forego a significant part of, the valuable security which the plaintiff has provided for its performance. 25Clause 5.8(A)(b) makes it clear that there must not only be a Certificate of Practical Completion, but that the certificates by the consultants must be provided. It is to be remembered that the consultants do not have contractual privity with the principal. 26The statements in question contain the qualification "work to the date of the statement" has been completed. This is less than the fulfilment of the condition. The defendant is entitled to receive, and the provision requires, an unqualified certification that the relevant work has been completed, not that work to a particular date has been. 27That these words contain an important and unjustified qualification is bolstered by the fact that the form of the document used is undoubtedly the form which is intended to be used in relation to progress payments. The form envisages future payments for future work yet to be done. 28In my view, the certificates proffered do not amount to performance of the condition precedent. 29I note that the defendant put further submissions that: (a)the Certificate of Practical Completion was itself invalid amongst others because the existence of valid consultants' certificates was necessary for it to issue; (b)compliance with cl 9.9 of the contract required certificates in the precise words of the clause; and (c)the certificates were of no force because, as a matter of subjective intention, the consultants did not intend to give the certificates contemplated by cl 5.8(A)(b). 30Given the conclusion that I have reached, it is not necessary to deal with these submissions. 31I turn to the submission that the defendant has waived its entitlement to fulfilment of the condition precedent and, accordingly, to maintain the security. 32In Sargent v ASL Developments Limited (1974) 131 CLR 634 at 641 Stephen J set out the relevant principles as follows: The doctrine of election as between two inconsistent legal rights is well established, but certain of its features are not without their obscurities. The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence. As Williston points out (Contracts, 3rd ed, vol 5, par 683) the doctrine is not out of harmony with the general rule that a binding surrender of a right requires a sealed release or consideration; by surrendering one right the elector thereby gains an advantage not previously enjoyed, the ability to exercise to the full the other, inconsistent right. 33The plaintiff's submission that the defendant has exercised an election amounting to a waiver of the entitlement to comply with certification is unsustainable for two reasons. 34Taking possession (even if it was unauthorised) of the works is not necessarily inconsistent (or inconsistent at all) with the defendant's entitlement to require production of the certificates. Taking possession does not involve the corollary that the defendant has foregone its right to have the certificates. 35That this is so is demonstrated by the fact that cl 5.8 distinguishes between Practical Completion, and the provision of the certificates respectively. Possession is to be given on Practical Completion only (see cl 35.2). 36The second difficulty with the submission is that cl 48 of the contract protects the defendant precisely against the assertion now being made.

CONCLUSION 37It follows that the proceedings are to be dismissed. I so order. 38The plaintiff is to pay the defendant's costs.

Amendments 14 August 2012 - Heading repositioned Amended paragraphs: 19 & 20 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: 14 August 2012

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