500 Burwood Highway Pty Ltd v Australian Unity Ltd

The matter before the court was between 500 Burwood Highway Pty Ltd and Australian Unity Ltd, concerning a contract for the sale of land. The dispute centred on the construction of an aged care facility that was not completed at the time of sale. The contract required a quantity surveyor to determine the cost to complete the construction works, and it was essential that this surveyor be independent. The central issue was whether the appointed quantity surveyor satisfied the independence requirement under the contract, and if the surveyor's report was valid despite allegations of bias.

The court examined the contractual requirement for independence and whether it was met in the appointment of the quantity surveyor. It was alleged that the surveyor had a conflict of interest due to a prior relationship with the builder, which led to concerns about partiality in the determination of the cost to complete the construction. The court considered whether the surveyor's report could be invalidated due to this bias and whether the contract's mechanism for determining the cost to complete the works had failed. The court applied the principle from Campbell v Bent (1879) 5 VLR (L) 337, which holds that if a contract's essential mechanism fails, the contract itself may be rendered ineffective.

The court found that the appointed quantity surveyor was not independent as required by the contract, and actual bias was established. Consequently, the surveyor's report was invalid. The failure of the contractual mechanism for determining the cost to complete the construction works led to the conclusion that the contract could not be enforced as it stood. The court's judgment was delivered in part by a draft, which the court found advantageous as it promoted the overarching purpose under section 7(1) of the Civil Procedure Act 2010.

The final orders of the court declared that the contract for the sale of land was ineffective due to the failure of the contractual mechanism for determining the cost to complete the construction works. The contract was therefore rendered unenforceable in its current form.