Abigroup Contractors Pty Ltd v River Street Developments Pty Ltd
[2006] VSC 80
•10 March 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4819 of 2006
| ABIGROUP CONTRACTORS PTY LIMITED | Plaintiff |
| v | |
| RIVER STREET DEVELOPMENTS PTY LIMITED | Defendant |
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JUDGE: | COLDREY J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 1 MARCH 2006 | |
DATE OF JUDGMENT: | 10 MARCH 2006 | |
CASE MAY BE CITED AS: | ABIGROUP CONTRACTORS PTY LIMITED v RIVER STREET DEVELOPMENTS PTY LIMITED | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 80 | 1st Revision 7/9/2007 |
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Application for interlocutory injunction – Issue whether defendant entitled to access security provided by plaintiff for performance of obligations under building contract – Injunctive relief granted
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | J. Burnside QC with I. Waller | Clayton Utz |
| For the Defendant | E. Magee QC with G. Costello | Phillips Fox |
HIS HONOUR:
This is an application for injunctive relief brought by the plaintiff, Abigroup Contractors Pty Limited, against the defendant, River Street Developments Pty Limited. The background to such application is as follows. The plaintiff and the defendant are parties to an agreement (the Contract) by which the plaintiff agreed to design and construct an apartment complex known as "The Riviera Apartments" at 69-73 River Street, Richmond for the contract price of $68,654,467. Pursuant to the contract the plaintiff provided the defendant with two Unconditional Undertakings issued by QBE Insurance (Australia) Ltd (QBE), each in the sum of $1,716,362, to secure Abigroup's performance of its contractual obligation.
Following practical completion, on or about 11 November 2005, the defendant released one of the Undertakings. The remaining Undertaking was due to be released within 14 days of the Final Certificate being issued under the Contract. The Final Certificate is due to issue at the end of a defects liability period in about November 2006.
On 22 February 2006, without notice to the plaintiff, the defendant called upon the remaining Undertaking and received a cheque from QBE in the sum of $1,716,362.
On 22 February 2006, the plaintiff obtained an ex parte interim injunction restraining the defendant until 5.00 p.m. on 27 February 2006, from presenting the cheque or using, disbursing or applying the proceeds of it.
On 27 February 2006, the interim injunction was extended until 5.00 p.m. on 1 March 2006. The matter was heard before me on that date with the plaintiff seeking an interlocutory injunction in the same terms as the interim injunction, an order that the defendant return the cheque to QBE, and a further order preventing the defendant from calling upon the Undertaking without prior notice to the plaintiff.
The plaintiff contests the right of the defendant to call upon the remaining Undertaking given the terms of the Contract, and submits that such legal entitlement constitutes a serious question to be tried.
The material before the Court indicates that there are disputes between the parties as to whether the plaintiff has rectified building defects in accordance with the Contract, but the contention of the defendant is that the terms of the Contract itself enabled it to have recourse to the moneys the subject of the Undertaking, without having to prove any unremedied breach of the plaintiff's obligations. Indeed, it was argued that, pursuant to the terms of the Contract, the defendant's right to call upon the bond was unconditional. It was submitted that, in the circumstances, there was no serious question to be tried.
In order to determine whether there is such serious question, it is necessary to briefly examine the relevant contractual terms.
The plaintiff's contention is that the right to call upon the Undertaking is governed by cls.42.8 and 42.9 of the Contract which state:
"42.8The Principal may deduct from moneys due to the Contractor any money due from the Contractor to the Principal otherwise than under the Contract and if those moneys are insufficient, the Principal may, subject to Clause 5.6, have recourse to retention moneys and, if they are insufficient, then to security under the Contract."
"42.9Where, within the time provided by the Contract, a party fails to pay the other party an amount due and payable under the Contract, the other party may, subject to Clause 5.6, have recourse to retention moneys, if any, and, if those moneys are insufficient, then to security under the Contract and any deficiency remaining may be recoverable by the other party as a debt due and payable."
Clause 5.6 is in these terms:
"A party may have recourse to security, retention moneys or both and may convert into money security that does not consist of money where the party has become entitled to exercise the right under the Contract in respect of the security, retention moneys or both."
It was argued by the plaintiff that, at the time the defendant made its call upon the Undertaking on 22 February 2006, no amount was due and payable by the plaintiff to the defendant under the Contract (cl.42.9); and no money was due by the plaintiff to the defendant other than under the Contract (cl.42.8). It was further argued that the defendant had not become entitled to exercise a right under the contract in respect of the remaining Undertaking (cl.5.6).
I interpolate that there is no evidence of any money being expended by the defendant in the rectification of alleged building defects and no quantified claim has been made upon the plaintiff by the defendant.
In the course of argument a number of authorities were cited by counsel relating to various contractual agreements. Ultimately, of course, each case must turn upon the specific terms and conditions of the contract under consideration.
In my view the contentions made on behalf of the plaintiff as to the effect of the above provisions of the Contract are correct. Indeed the submissions are fortified by the decision of Byrne J in Regan Constructions Pty Ltd v Manningham Medical Centre Pty Ltd[1]. I refer in particular (but without quoting) to paragraphs [22]-[24] and [37]-[39].
[1](2003) 19 BCL 451
In any event the meaning of the effect of the contractual terms, and specifically the ambit of cl.5.6 constitute, in my view, a serious question to be tried.
Further, whether or not non-compliance with the provisions set out in cl.37 (Defects liability) may trigger the operation of cl.5.6, the facts before the Court do not, in my opinion, constitute the occurrence of any necessary pre-conditions for such activation. At the very least it is a live legal issue.
The question of the balance of convenience next falls for consideration. In this regard the plaintiff first raised the issue of the damage to its commercial reputation if the defendant were permitted to present the QBE cheque. Secondly, it was argued that failure to restore the Undertaking may jeopardise the plaintiff's ability to obtain an increased bond facility from QBE currently the subject of negotiaton. Thirdly, concern was expressed at the ability of the plaintiff to ultimately recover damages from the defendant. This was an assertion disputed by the defendant and about which there is no evidence before the Court.
Fourthly, attention was drawn to the fact that the plaintiff, having paid QBE the full amount of the security bond on 22 February 2006 was some $1.7 million out of pocket.
In light of considerations 1, 2 and 4 I am of the opinion that the balance of convenience favours the granting of the injunctive relief sought.
An additional factor in reaching this view is the undertaking of the plaintiff to reinstate the security.
The final matter for determination is whether any order should include a provision that the defendant not again call upon the Undertaking without giving the plaintiff sufficient notice to enable it to seek relief in Court.
In light of what has occurred to date the plaintiff urges this course. In arguing against it, the defendant submits that this would place the plaintiff in a position superior to that contained in the current Contact (cl.5.6 having no requirement for the giving of notice.)
I have concluded that I should not make any order in those terms. There is no evidence before the Court that the defendant was not acting bona fide in calling upon the Undertaking. Having found that the existence or otherwise of that right constitutes a serious question to be tried, I would not expect the defendant to act in any manner which might frustrate such ruling.
Moreover, to make the order sought would place the plaintiff in a position which is superior to the agreed terms of the Contract.
Accordingly, subject to any argument, I would propose to make an order in the terms of the draft submitted on behalf of the plaintiff, save that I would not give leave for the plaintiff to amend its summons filed on 24 February 2006 to include paragraph 1(c).
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CERTIFICATE
I certify that this and the 4 preceding pages are a true copy of the reasons for judgment of Coldrey J of the Supreme Court of Victoria delivered on 10 March 2006.
DATED this 10th day of March 2006.
Associate
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