Upon the applicant by its counsel undertaking to abide by any order the Tribunal may make as to damages, in case the Tribunal may hereafter be of opinion that the first respondent shall have sustained any by reason of this order, which the applicant ought to pay.

1. That pending further order, the first respondent by its officers, servants or agents establish and maintain a trust account into which is to be paid a sum of money not less than $36,813 being retention monies deducted from progress payments made pursuant to a contract entered into on 16 March 1999 between the applicant and the firstnamed respondent for the construction of 21 independent living units at 74 Warrandyte Road, Ringwood.

2. That pending further order the first respondent by its officers, servants or agents establish and maintain a trust account into which is to be paid a sum of money not less than $88,111 being retention monies deducted from progress payments pursuant to a contract entered into on 16 March 1999 between the applicant and the firstnamed respondent for the construction of an aged-care facility at 74 Warrandyte Road, Ringwood.

3. That on or before 4.00 pm on Friday 24 March 2000 the first respondent by its solicitor provide details of the trust accounts established pursuant to orders 1 and 2 hereof and if such sums are not held in such solicitor's trust account, the name and location of the financial institution at which the account is held and the name and number of the account, such details to be provided by facsimile transmission to the applicant's solicitor, Brendan J Archer, Fax No: 9416 3690.

That the first respondent have liberty to apply to the Tribunal upon 48 hours written notice to the applicant's solicitors for orders that sums be paid out of the aforesaid trust accounts in respect of

(i) costs incurred by the first respondent to complete the works under each contract;

(ii) rectification of defects in construction of the works the subject of each contract.

That any such application be supported by an affidavit containing a detailed description of the works undertaken and exhibiting copies of all relevant receipts, invoices and other documents.

6. That this proceeding together with proceeding number 59/2000 be granted a speedy hearing and that the Principal Registrar fix a date for a directions hearing to be held on the earliest convenient date.

Mr Andrew Laird, instructed by Brendan J Archer, solicitor for the Applicant

Mr John Langmead, instructed by McMahon Fernley, solicitors on behalf of both Respondents

It is appropriate that I recount a short history of this proceeding. R V Walpole Pty Ltd ("the Contractor") issued an application in the Domestic Building List of the Tribunal on 14 February 2000. That application sought a declaration that the purported termination on 22 January 2000 of two building contracts entered into on 16 March 1999 between the Contractor and the Proprietor, Rangeville Manor Pty Ltd (" the Proprietor") be declared to be of no force or effect. Pending the determination of the proceeding the applicant sought a mandatory injunction that the Proprietor establish and maintain a trust account into which retention monies payable under the contracts in question in a sum of $150,000 should be retained. The second respondent ("Barrington") is the guarantor of the obligations of the Proprietor under the contracts.

An application for an interlocutory injunction in respect of the retention money was brought on notice to both respondents before the Deputy President in charge of the Domestic Building List, Associate Professor Cremean, on 16 February 2000. On that day a consent order was made by Professor Cremean whereby the Proprietor agreed to pay $60,000 into an interest bearing trust account held by its solicitors. By reason of the application for injunctive relief the proceeding was adjourned to be heard by me on 23 February 2000.

When the proceeding came before me, an immediate issue of concern to me was whether or not the Tribunal has jurisdiction in respect of the two contracts in dispute. Both parties to the proceedings submit that the contracts in question are within the jurisdiction of the Tribunal. The two contracts relate to the construction of a facility for aged persons situated in Warrandyte Road, Ringwood. One contract relates to the construction of 21 "independent living units." Each such construction is an independent building designed to be a home for a person or for a couple, and the contract in respect of the construction of such buildings is, I readily accept, a domestic building contract within the meaning of the Act.

The issue raised by me with the parties as to jurisdiction relates to the second contract which is a contract for the construction of a 56 bedroom "aged-care facility." At the commencement of the hearing of this application before me I raised with the parties my concern that the contract for construction of the aged care facility, in reality relates to the construction of a "nursing home." A nursing home is excluded by s.3 of the Domestic Building Contracts Act 1995 from the definition of "home." If the facility is a nursing home the Tribunal has no jurisdiction to hear the part of the proceeding which relates to its construction. The parties advised me that the aged-care facility is not designed to be a nursing home and that the only requirement for entry as a resident is that the residents be above the age of 55 years. The parties advised me that there is no requirement for any person who is to be resident at the facility to be suffering from any disability and that the residents of the facility are free to come and go from the home as they wish. I requested that a plan of the facility be produced before reaching any decision about the matter of jurisdiction. After a short delay a plan of the aged-care facility was tendered by the respondents (Exhibit "1"). Somewhat unfortunately, taking into account the tenor of the issues of concern raised by me with the parties, the plan bore the title; '"The Willows" nursing home.' However, notwithstanding the title of the plan a consideration of the plan by me revealed that there are 56 bedrooms, each of which has its own en suite bathroom. The facility has a communal dining and lounge room. It has a chapel and a hairdressing facility as well as a private dining facility. There is no nurse's station nor is there any surgery or medical post. While provision is made for a drug room, and the doorways and corridors appear to be wider than usual and consistent with a facility which may have beds taken out of rooms, the facility does not otherwise bear many of the hallmarks of a nursing home. For example there is no mortuary. Butterworths Australian Legal Dictionary refers to the term 'nursing home' in the following terms:

"residential premises for patients who have a continuing need for nursing care, by reason of infirmity or chronic disease, incapacity or disability and for those lodged exclusively for the purpose of providing them with accommodation and nursing care."

The Macquarie Dictionary refers to 'nursing home' in the following terms:

"nursing residence equipped for the care of patients who have chronic or terminal disease or who are handicapped in some way."

A number of Commonwealth Acts, including the National Health Act and the Nursing Homes Assistance Act, deal with the provision of services by nursing homes. I was informed by the parties that the contemplated structure does not fall within the auspices of and does not require registration pursuant to Commonwealth legislation.

Accordingly, although the building in question contains some of the hallmarks of a nursing home, I am satisfied that it cannot be defined as a nursing home within the meaning of the Domestic Building Contracts Act 1995 as it is not designed or equipped to accommodate persons who are chronically ill or incapacitated. No doubt in the future some of its residents from time to time will fall into that category. However it is apparent on the evidence before me that the overwhelming majority of residents of the facility will be living in a facility which is designed to provide them with a significant degree of independence but at the same time with appropriate security and support, taking into account their age. They are not intended to be routinely provided with medical and nursing care. I accordingly accept the submission of the parties that the Tribunal does have jurisdiction in relation to the contracts before it.

Each contract entered into by the parties was in the form of the Master Builders Association Form GCC3. The contract for the construction of the Aged Care Facility ("ACF") was for the fixed sum of $2,093,864. The contract for the construction for the independent living units ("ILU") was for a fixed sum of $1,136,136. Both contracts were dated 16 March 1999. Barrington personally guaranteed the performance of the contracts by the Proprietor.

Clause 1(j) of the ACF contract provided for a retention fund of up to $100,000 to be retained and the same clause of the ILU contract provided for a retention fund of up to $50,000 to be retained in respect of that contract. Each contract contained an addendum whereby it was agreed that the "total retention amount of $150,000 will be deducted from progress payments at 5 per cent from each payment until the full amount is reached." As at the date of the application before me it would appear that pursuant to this provision the total sum of $124,924 had been deducted from progress payments made by the Proprietor.

Each contract provided by Clause 23 for the retention and disbursement of the retention fund in the following terms:

23(i) An amount referred to in Clause 1(j)(i) as the Retention Fund may be retainable by the Proprietor and held in trust as security that the Contractor should carry out his obligations under this contract.

(iii) Within 7 days of the date of Practical Completion or, pursuant to Clause 19(c)(i) within 14 days of the date on which the Works are deemed to be practically completed the Proprietor shall pay to the Contractor half the amount of the Retention Fund.

(iv) On expiry of the defects liability period and the completion of the works required to be executed pursuant to Clause 21 the Proprietor shall pay to the Contractor the balance of the Retention Fund retained pursuant to this clause."

Practical completion is that stage in the execution of the Contract Works when the Works are complete except for minor omissions and/or defects which do not prevent the Works from being reasonably fit for occupation and/or use by the Proprietor for the purpose intended.

(i) When in the Contractor's opinion the Works have reached the stage of Practical Completion as defined in sub-clause (a) of this clause he shall forthwith give to the Proprietor written 'Notice of Practical Completion', and the Proprietor within a reasonable time but not exceeding seven days of receipt of such notice shall

(ii) If reasonably satisfied that the Works have reached the stage of Practical Completion as defined in sub-clause (a) of this clause, issue to the Contractor a written notice of Practical Completion stating the date on which the Contractor claimed Practical Completion of the Works was achieved; or

(iii) If not reasonably satisfied that the Works have reached the stage of Practical Completion the Proprietor should give the Contractor written notice of those matters or things which in his opinion require to be done to achieve that stage; and

(iv) The Contractor on receipt of the Proprietor's notice pursuant to sub-clause b(iii) of this clause shall attend to those matters which he considers reasonable ....

(v) Should the Proprietor or the Contractor be in dissent of the other's notice ... then either or both parties shall have the right to refer the matter to arbitration ...

(i) In the absence of a written notice of Practical Completion by the Proprietor to Contractor, pursuant to this clause, if the Proprietor occupies and/or uses the Works, the date of commencement of such occupancy and/or use should be deemed to be the date of Practical Completion."

It should be noted that the Contractor has provided no "Notice of Practical Completion" to the Proprietor pursuant to clause 19.

The relevant part of Clause 16 of each contract dealing with default by the contractor is as follows:

16. In the event of the Contractor .......... failing to proceed with the Works with due diligence after seven days notice in writing from the Proprietor alleging such failure, then the Proprietor may determine the employment of the Contractor but only after he has given the Contractor 14 days written notice of his intention to do so. The Proprietor may call in any other person or persons to complete the Works and pay such person or persons the costs of completion out of any monies which would otherwise be or become payable to the Contractor and if such costs be more than such monies then the difference should be a debt due from the Contractor to the Proprietor."

The ACF contract provided for a completion date of 30 September 1999. The ILU contract provided for a completion date of 31 October 1999.

The Contractor commenced work on the ACF works on or about 23 March 1999. It commenced the ILU works on or about 13 April 1999. During the course of the ACF works the Contractor submitted 12 progress claims for a total sum of $2,166,506 of which it was paid $1,768,942.20 (less retention). By my calculation the retention fund to be held on trust pursuant to the ACF contract should have amounted to $88,111 as at the time of the last progress payment. During the course of the ILU works the Contractor submitted 9 progress claims for a total sum of $1,086,843 of which it paid $736,262.40 (less retention). By my calculation the retention fund held on trust pursuant to the ILU contract should have amounted to $36,813 at the time of the payment of the last progress payment.

It is not necessary to set out in full detail here the chronology of the disputes which arose between the parties near the conclusion of the work. The Contractor asserts that most progress payments paid under both contracts were substantially underpaid by the Proprietor and in most cases were paid late. It asserts that practical completion of the ACF contract took place on 29 November 1999 when tenants took possession of the site and commenced the delivery of furnishings. It asserts further that delays beyond the contracted completion dates took place partly because of inclement weather, but substantially because of the failure of the Proprietor to pay most progress claims either in full or on time. The Proprietor on the other hand asserts that progress payments as claimed were not paid in full because the Proprietor made payments directly to trade creditors of the Contractor and also paid for materials which were the contractual responsibility of the Contractor. (Barrington, by Exhibits WMB3 and WMB4 to his affidavit sworn 22 February 2000 set out summaries of the deductions made from progress payments but provided no receipts, invoices or other original documents in respect of such deductions.) The Proprietor asserts that it was apparent from July 1999 that the Contractor was not proceeding with the works with due diligence. The Proprietor asserts that it was because of this failure that a "final notice" was sent from the Proprietor to the Contractor pursuant to Clause 16 of both contracts providing 14 days in which the Contractor was to rectify defects in respect of both contracts. The Proprietor asserts that both contracts were lawfully terminated by notice dated 22 January 2000. The Proprietor claims that the Proprietor became entitled to have recourse to the Retention Fund pursuant to the provisions of Clause 16 of each contract upon such termination. In particular, the Proprietor asserts that between 22 January 2000 and 12 February 2000 the sum of $101,422 was paid by it to creditors of the Contractor and for the purchase of materials and services required to complete the works. The Proprietor asserts that as at 19 February 2000 the Contractor owed it a debt of $171,501.

As is clear from the foregoing summary there is a substantial dispute between the parties about the issue of practical completion. The Proprietor asserts that practical completion had not been achieved in respect of the ACF contract as of the date of the hearing of this application. It concedes that practical completion of the ILU project was achieved on 7 February 2000 and that certificates for occupancy were issued for all 21 units between December 1999 and 7 February 2000.

The Respondents concede that there is a serious issue to be tried in this proceeding. In my view this concession is properly made. It is apparent that there are between the parties substantial issues of fact which are in dispute. These issues are to be determined at the final hearing of this matter.

The Contractor submits that the retention fund established pursuant to Clause 23 of the contract should have been held in a separate account on trust and should be the subject of an order of the Tribunal to retain such fund pending the hearing and determination of the proceeding. It submits that the balance of convenience overwhelmingly favours it and that damages are not an adequate remedy. The Proprietor asserts that the Contractor has failed to demonstrate that there is any possibility of grave damage in the future and that this must be demonstrated before mandatory relief of the type sought in this case might be granted. Furthermore the Proprietor submits that the balance of convenience falls against the Contractor. Barrington submits there is no basis upon which an order should be made against him in his capacity as guarantor of the Proprietor.

As a general principle a mandatory interlocutory injunction requires a high degree of assurance that the Applicant will succeed at trial. Data Force Pty Ltd & Ors v Brambles Holdings Ltd [1988] VicRp 73; [1988] VR 771 and T R Nominees Investments Pty Ltd v Multiplex Constructions Pty Ltd & Anor 12 BCL 219 (Supreme Court of Victoria, 11 December 1995, Byrne J.) Although there does appear to be a basis from which it may be said that many of the Contractor's difficulties were caused by the failure of the Proprietor to promptly and fully pay progress claims, it is not possible on the material present before me to conclude with a high degree of assurance that the Contractor will finally succeed in its claim against the Proprietor. However, Mr Laird of Counsel for the Contractor submits that the fact that retention monies were to be held on trust by the Proprietor is an issue of significance which distinguishes this application from the usual application for mandatory injunction. He submits that as the Proprietor is both trustee and a co-beneficiary with respect to the Retention Fund, it owes the Contractor a fiduciary duty to ensure that that position of trust is not abused for personal gain. An injunction may be granted to restrain an apprehended breach of fiduciary duty or the continuation of an existing breach (see Park v Dawson [1965] NSWR 298). The Contractor submits that the retention money should have been held in a separate trust account and because the Proprietor has failed to establish such a trust account it is in breach of its duties. It is clear that the Proprietor at no stage created any separate account to hold the retention monies on trust. In a letter dated 10 February 2000 addressed to the solicitors to the Contractor, the solicitors for the Proprietor stated that the retention monies were held in two bank accounts at the Ringwood branch of the ANZ bank. However it is clear that one of these accounts is a trading account and it is also clear that the retention money is (or was) mixed in with other money. Furthermore the sums of money then in both accounts bore no similarity to the sums which should have formed the retention fund under each contract. In KBH Construction Pty Ltd v Lidco Aluminium Products & Ors (1992) 7 BCL 183 Giles J considered a similar issue arising under a JCC form of contract. In the course of his judgment His Honour helpfully reviewed a number of other authorities relating to whether or not retention monies might be regarded as being held on trust and whether or not any obligation arose to hold such retention monies in a separate account or in a separate fund.

Having considered the reasons of Giles J for his decision in KBH Constructions and the authorities cited by him, I conclude that in the case before me the Proprietor was obliged by both contracts to appropriate and set aside the retention monies in a fund to be held on trust for the Contractor subject to the entitlement of the Proprietor to have recourse thereto in the circumstances permitted by the contract. I have come to that conclusion for the following reasons. First, the clear words of Clause 23(i) are that if the proprietor retained a Retention Fund (as distinct from bank guarantee or other form of security) then it was to be "held in trust as security". In my view, unless Clause 23(i) is construed as imposing an obligation to set aside as a separate fund the amount "retainable by the proprietor and held in trust" the clause would have no practical effect. Obviously, if the retention fund were mixed in with other monies of the Proprietor, there would be no security for the Contactor in the event of the Proprietor becoming insolvent. Secondly, other provisions of the contracts in question are in a language calling for the existence of a separate fund. Clause 1(j) refers to a "Retention Fund". The heading to Clause 23 is entitled "Retention Fund". As pointed out above Clause 23 provides that the fund may "be retainable" and "held in trust as security". As Giles J said in KBH Constructions at page 190:

"Although not in direct terms, this is language of a fund. Security is not provided, money is not held, there is not a 'retention' and security is not available when there is no more than the recognition of an existing indebtedness."

Thirdly, and taking a wider view of the contract it was clearly the intention of the parties that both the Proprietor and the Contractor should be protected against the risk of the insolvency of the other. The Proprietor is to be protected by the retention of part of the money otherwise due to the contractor, being money which the Contractor has earned, and its contractual entitlement to have recourse to that money in certain circumstances. The Contractor is to be protected by its beneficial interest in the money so retained being money earned by it subject to such recourse. This intention is given effect only if the Proprietor must set aside the retention monies as a fund to be held on trust.

The fact that Clause 16 provides that if there is a default by the Contractor the Proprietor may call in other persons to complete the works and pay such persons the costs of completion out of monies which would otherwise become payable to the Contractor does not mean that there can be no trust of the money. It does not mean that the Proprietor is entitled to use trust monies as its own. Rather the provisions of Clause 16 qualify the Proprietor's obligations as trustee and limit the Contractor's beneficial entitlement. Accordingly, the Proprietor was obliged to the Contractor to place the amounts retained by it in accordance with the contract in a separate account and hold the fund thus created as trustee subject to the recourse thereto permitted by the contract. For these reasons I conclude that a mandatory injunction may be granted to compel the Proprietor to place such monies as are appropriate in a separate trust account notwithstanding the fact that I am unable to conclude that the Contractor has established that there is a high degree of assurance that it will succeed in relation to the claims it makes under the contract. The question now to be decided is whether or not in all of the circumstances of this case it is appropriate to do so.

If I could be satisfied with a high degree of assurance that the Contractor will succeed in establishing that the contract was not validly terminated on 22 January 2000 and furthermore that practical completion of the works the subject of the ACF and ILU contracts was achieved prior to termination of the contracts, it appears to me that I would be entitled to order that the monies appropriated to the retention fund be placed in a separate fund and held on trust pending the hearing of this proceeding. I do not have a high degree of assurance that the contracts were unlawfully terminated on 22 January 2000. This is an issue which requires the hearing of all of the evidence and no doubt the evaluation of the credit of the two major principals in this case. However, it must be remembered that the only right of recourse to the trust fund if the contract was validly terminated relates to the right of the Proprietor to call in any other person or persons to complete the works and to pay such person or persons the costs of completion out of any monies which would otherwise be or become payable to the Contractor. It is apparent in the circumstances of this case that the monies which were deducted from the progress payments pursuant to the contracts were mixed in with other monies of the Proprietor and were paid out for a variety of purposes other than the specific payment of completion of the works. Accordingly, in my view, it is appropriate to look at such sums as may have become properly open to be deducted by the respondent from the retention fund in respect of each contract. In his affidavit sworn 22 February 2000, Barrington stated that purchases of materials and services required to complete the work, which was incomplete under both contracts at the date of termination, totals $98,206.35. Exhibit "WMB 13" to that affidavit set out a summary of total payments made by the Proprietor. That summary however provides no detail of the sums allegedly incurred in order to complete the works. The summary includes an estimate of $32,600 being "other costs" which were required to complete the works. However in terms of practical completion it is apparent that the ILU contract of 21 independent units was near to completion at the time of purported termination. Eleven certificates of occupancy were provided before 22 January 2000. The remaining ten occupancy certificates were issued on 24 January 2000 (ie. two days after the notice of termination was purportedly provided to the Contractor). The Proprietor has provided no specific details or documentary evidence of the nature of work requiring sums to be incurred by it in calling in any other person or persons to complete the works after the alleged default.

By the same affidavit Barrington asserts that at the date of termination both projects were only "approximately 80% completed." However it should be observed that subject to the purported termination and on 8 February 2000, the Proprietor filed an application in this Tribunal (proceeding No. 59/2000) seeking a declaration that it had validly terminated the two contracts and seeking an order for payments due to it by reason of the failure of the contractor to comply with the terms of each such contract. Attached to that application was a list of defects relating to the ACF. No list of defects has been produced in respect of the ILU unit, although on 10 January 2000 the Proprietor wrote to the contractor referring to a number of defects and works to be installed in units 1-7. Each of the above documents referring to defects is more typical of the usual list of defects seen at the conclusion of works than of a list of major work to be completed pursuant to the contracts. There is, in my mind, considerable doubt as to whether the works were, at the date of termination only "80% completed."

The Proprietor is required to comply with its contractual and fiduciary obligations to hold the Retention Fund on trust subject to its rights to recourse under each of the contracts. Accordingly I propose to order that the amounts retained under the contracts be placed in trust so as to enable the Proprietor to fulfil its fiduciary obligations. However, it is not appropriate to make an order that such funds remain held on trust pending the hearing of the applications in this matter. The balance of convenience does not justify such funds being held in escrow (in effect as a security for the claim made by the contractor) pending the resolution of the contractual disputes between the parties. I propose to permit the Proprietor to fulfil its fiduciary obligations to account for sums of money spent by it in completion of the works and in rectification of defects. I propose to give the Proprietor liberty to apply to the Tribunal for payment out of the Retention Fund in respect of each contract upon production of satisfactory and detailed sworn evidence as to the works undertaken to complete each contract and of the defects rectified in respect of each contract and the date and payee of each such payment. In my view such a course provides a remedy for the failure of the Proprietor to comply with its contractual and fiduciary obligations to maintain the retention funds on trust and at the same time gives it appropriate fair and just recourse to such funds for sums properly incurred pending the final determination of the competing contractual claims in this proceeding.

Accordingly, and upon the usual undertakings as to damages having been given by Counsel for the Applicant, I order as follows:

1. That pending further order, the first respondent by its officers, servants or agents establish and maintain a trust account into which is to be paid a sum of money not less than $36,813 being retention monies deducted from progress payments made pursuant to a contract entered into on 16 March 1999 between the applicant and the firstnamed respondent for the construction of 21 independent living units at 74 Warrandyte Road, Ringwood.

2. That pending further order the first respondent by its officers, servants or agents establish and maintain a trust account into which is to be paid a sum of money not less than $88,111 being retention monies deducted from progress payments pursuant to a contract entered into on 16 March 1999 between the applicant and the firstnamed respondent for the construction of an aged-care facility at 74 Warrandyte Road, Ringwood.

3. That on or before 4.00 pm on Friday 24 March 2000 the first respondent by its solicitor provide details of the trust accounts established pursuant to orders 1 and 2 hereof and if such sums are not held in such solicitor's trust account, the name and location of the financial institution at which the account is held and the name and number of the account, such details to be provided by facsimile transmission to the applicant's solicitor, Brendan J Archer, Fax No: 9416 3690.

(a) That the first respondent have liberty to apply to the Tribunal upon 48 hours written notice to the applicant's solicitor for orders that sums be paid out of the aforesaid trust accounts in respect of

(i) costs incurred by the first respondent to complete the works under each contract;

(ii) rectification of defects in construction of the works the subject of each contract.

(b) That any such application be supported by an affidavit containing a detailed description of the works undertaken and exhibiting copies of all relevant receipts, invoices and other documents.

6. That this proceeding together with proceeding number 59/2000 be granted a speedy hearing and that the Principal Registrar fix a date for a directions hearing to be held on the earliest convenient date.