Bost Civil Pty Ltd v Cornerstone Building Developments Australia Pty Ltd (No 2)
[2023] ACTMC 17
•30 June 2023
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Bost Civil Pty Ltd v Cornerstone Building Developments Australia Pty Ltd (No 2) |
Citation: | [2023] ACTMC 17 |
Hearing Date: | 5 June 2023 |
Decision Date: | 30 June 2023 |
Before: | Magistrate Theakston |
Decision: | 1. The application in proceeding filed by the defendant on 3 March 2023 is dismissed. 2. The plaintiff is to pay the defendant’s costs of the application in proceedings. |
Catchwords: | BUILDING AND CONSTRUCTION – Application for summary judgment for defendant – contractual bar to make final payment claim – estoppel |
Legislation Cited: | Court Procedures Rules 2006 (ACT), r 425, 506, 1147, 1148 |
Cases Cited: | BMD Major Projects Pty Ltd v Victoria Urban Development Authority [2007] VSC 409 Bost Civil Pty Ltd v Cornerstone Building Developments Australia Pty Ltd [2022] ACTMC 27 Dey v Victorian Railways Commissioners [1949] HCA 1 Etlis v New Age Constructions (NSW) Pty Ltd [2005] NSWCA 165 Financial Integrity Group Pty Limited v Farmer [2009] ACTSC 143 Fortescue Metals Group Ltd v Australian Securities and Investment Commission [2012] HCA 39 Galovac Pty Limited v Australian Capital Territory [2010] ACTSC 132 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69 Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 McKay v Findex Group Ltd [2022] ACTSC 191 Queensland Truss and Frame Pty Ltd v Grenadier Constructions No. 2 Pty Ltd [1992] 2 Qd R 428 Seven Network Ltd v News Ltd (No 4) (2005) 214 ALR 686 Spencer v Commonwealth [2010] HCA 28 Spicers & Detmold Ltd v Australian Automatic Cigarette Paper Company Pty Ltd [1942] VLR 97 Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd [2012] WASCA 53 Wallingord v Mutual Society (1880) 5 App Cas 685 West v New South Wales [2007] ACTSC 43 |
Parties: | Bost Civil Pty Ltd ( Plaintiff) Cornerstone Building Developments Australia Pty Ltd ( Defendant) |
Representation: | Counsel B Buckland ( Plaintiff) J Hastie ( Defendant) |
| Solicitors Mills Oakley ( Plaintiff) Shand Taylor Lawyers ( Defendant) | |
File Number: | CS 150 of 2022 |
MAGISTRATE THEAKSTON:
Introduction
The plaintiff is seeking payment of money withheld under a building contract. It has been pleaded in different ways. Under the current pleadings it can be characterised as a claim for damages arising from the breach of a separate agreement between the parties following the discovery of a mistake made by a surveyor. Originally, the claim was for unpaid monies under the original building contract or in the alternative a claim for quantum merit.
Before the pleadings were changed, the defendant unsuccessfully applied for summary judgment. My reasons for refusing that application are in Bost Civil Pty Ltd v Cornerstone Building Developments Australia Pty Ltd [2022] ACTMC 27.
The current applications in proceedings are:
(a)the defendant applies for the amendments to the Statement of Claim to be disallowed or struck out and for the proceedings to be dismissed; and
(b)the plaintiff applies for leave to amend the Originating Claim by reducing the amount claimed, in accordance with the loss now pleaded in the Amended Statement of Claim.
Background
The defendant was the head contractor for the construction of a public building in Canberra. The plaintiff was contracted by the defendant to conduct civil earth works. As part of that agreement, the plaintiff was responsible for ‘set out’ work, and consequently engaged a surveyor for that purpose. The surveyor made errors when marking where the bored piers were to be located. Those errors resulted in losses for the plaintiff and possibly the defendant.
The plaintiff’s pleadings now claim there was a second agreement between the parties, which required the defendant to withhold monies equivalent to its losses; the defendant to provide evidence substantiating its losses; and the defendant to not claim any damages from the plaintiff until the plaintiff had been paid for those damages from the surveyor or its insurer. The plaintiff also pleads the defendant did not provide adequate evidence of its losses; the plaintiff was consequently unable to receive payment from the surveyor or the surveyor’s insurer for the plaintiff’s losses; and the plaintiff was therefore out of pocket for the amount the defendant claimed as losses but did not substantiate.
The evidence suggests there was a verbal agreement between the parties shortly after the surveyor’s error became known and it involved the withholding of payment by way of a credit variation, the plaintiff was expected to make a claim against the surveyor for both its and the defendant’s losses, and the defendant was to provide information, of some form, to the plaintiff for that purpose. That agreement was later referred to in correspondence, but it was unclear if all terms of the agreement were reflected within that correspondence. The evidence also suggests there were repeated requests by the plaintiff to the defendant for substantiation of the defendant’s claimed losses, but the defendant only provided a basic breakdown of those losses, and ultimately the plaintiff settled its claim against the surveyor without indemnification for the defendant’s losses. The evidence also suggests that correspondence continued between the parties about the $92,904.12 withheld, while the deadline for a final payment claim passed without a final payment claim being made in accordance with the terms of the contract.
The defendant says the claim is doomed to fail because:
(a)the claim is barred by the contract as it was made after the time for a final payment claim;
(b)the claim is barred by the contract because the plaintiff failed to adequately notify the defendant of its claim within 10 business days of becoming aware of the same; and
(c)the subsequent agreement did not require the defendant to provide to the plaintiff substantiation of its losses.
The plaintiff submitted in response:
(a)the contractual provision imposing a deadline for a payment claim did not apply in circumstances where no final payment claim was actually made by the plaintiff;
(b)there was adequate notification of the claim;
(c)the agreement did include the requirement that the defendant provide to the plaintiff substantiation of its losses; and
(d)the defendant should be estopped from relying upon the contracting terms that may bar a claim, and the details of which should be pleaded in the plaintiff’s response to the defendant’s Defence and not in the plaintiff’s Statement of Claim.
Ultimately, I am not convinced that the plaintiff’s case is doomed to fail. It does appear weak in relation to the questions of a contractual bar. However, there remain questions of fact in relation to the bar and the issue of estoppel remains live. Separately, the defendant’s third point involves a question of fact and that should be left to a hearing.
The applications
The defendant applied in accordance with rule 506 of the Court Procedures Rules 2006 for the Amended Statement of Claim to be disallowed and the proceedings to then be dismissed. That rule provides:
506 Amendment—of pleadings disallowed
(1)If a party makes an amendment without the court’s leave before the close of pleadings, another party may, not later than 14 days after the day the amendment is served on the party, apply to the court to disallow all or part of the amendment.
Note Pt 6.2 (Applications in proceedings) applies to an application under this rule.
(2)On the application, the court may make any order it considers appropriate.
(3)However, the court must disallow all or part of the amendment if satisfied that, had an application for leave to make the amendment or part been made, it would not have given leave to make the amendment or part.
It was common ground that the application in proceedings was not made within the required 14 days following the filing of the amendment. Accordingly, this part of the application must fail.
In the alternative, the defendant applied in accordance with rule 435 that the Amended Statement of Facts be struck out in its entirety and the proceedings then be dismissed. That rule provides:
425 Pleadings—striking out
(1)The court may, at any stage of a proceeding, order that a pleading or part of a pleading be struck out if the pleading—
(a)discloses no reasonable cause of action or defence appropriate to the nature of the pleading; or
(b)may tend to prejudice, embarrass or delay the fair trial of the proceeding; or
(c)is frivolous, scandalous, unnecessary or vexatious; or
(d)is otherwise an abuse of the process of the court.
Note 1 The registrar may also reject a document that is filed if it does not comply with these rules (see r 6140 (Rejecting documents—noncompliance with rules etc) or if it is an abuse of the court’s process or is frivolous or vexatious (see r 6142 (Rejecting documents—abuse of process etc)).
Note 2 Pt 6.2 (Applications in proceedings) applies to an application for an order under this rule.
Note 3 Rule 6901 (Orders may be made on conditions) provides that the court may make an order under these rules on any conditions it considers appropriate.
(2)The court may receive evidence on the hearing of an application for an order under this rule.
(3)If the court makes an order under this rule, it may also make any other order it considers appropriate, including, for example—
(a)if the court makes an order under subrule (1) (a)—an order staying or dismissing the proceeding or entering judgment; and
(b)an order about the future conduct of the proceeding.
The defendant’s ultimate goal was clearly to have the proceedings summarily resolved in favour of the defendant. An application of this type is usually made under rule 1147 – Summary judgment – for defendant. However, that application had already been made and refused and rule 1148(2) requires that any further application under rule 1147 be made with the Court’s leave. Presumably, that is why the current application was made under rules 425 and 506. The defendant’s submissions made it clear that its application was based on the contention that the plaintiff did not have, on its new pleadings, a reasonable cause of action against the defendant.
The principles to be applied
McWilliam AsJ, as she was then, in McKay v Findex Group Ltd [2022] ACTSC 191 at [17] noted the discretionary nature of these applications and cited the key applicable principles compiled by Jagot J in Galovac Pty Limited v Australian Capital Territory [2010] ACTSC 132 at [5], namely:
(1) The party seeking summary judgment faces a “very high threshold” (Financial Integrity Group Pty Limited v Farmer [2009] ACTSC 143 at 12).
(2) The lack of a cause of action must be “clearly demonstrated” (General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129).
(3) The procedure calls for “exceptional caution” (General Steel at 129).
(4) The necessity for argument, even extensive argument, is no bar. However, as soon as it appears that there is a “real question” to be determined on which relief depends, the summary judgment procedure is not available (General Steel at 130 citing Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91).
(5) Mere implausibility of the claim or improbability of success is insufficient; there must clearly be no real question to be tried in the sense that the claim is bound to fail (Seven Network Ltd v News Ltd (No 4) (2005) 214 ALR 686; [2005] FCA 244 at [14] citing Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (Ch D) at 5; [1991] 4 All ER 961 at 965).
(6) The application is to be assessed on the assumption that every fact pleaded by the plaintiff is true (West v New South Wales [2007] ACTSC 43 at [9]).
(7) The application must be determined on the substance, not the mere form or expression, of the claim (Financial Integrity Group at [15]).
I also note the observations made in Spencer v Commonwealth [2010] HCA 28 by French CJ and Gummow J at [25]:
Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue.
Final payment claim deadline and requirement to notify a claim
As described in my earlier judgment, the contract at clause 37.4 required all claims to be made before a particular deadline. It had not been in issue that a final claim had not been made before that deadline. However, for this application, the plaintiff conceded that a final payment claim had not been made at all and submitted that the provision therefore did not apply. That submission relied on an interpretation that the following words, from clause 37.4, only applying when a final claim had been made:
After the time for submission of the final payment claim, the Subcontractor releases the Main Contractor from, and shall indemnify the Main Contractor against, any claim not included in the final payment claim.
However, that cannot be correct. I adopt my observations, about the purpose of the provision and scheme within the contract for finalising all claims, from my earlier decision at [9] and [12]. The reference in the paragraph to ‘time for submission’ and the overall purpose of the provision within a scheme designed to bring finality to claims, must mean the release and indemnity are triggered by the passing of the deadline, and not when a final payment claim is made. It is the only sensible construction of the paragraph based on its plain reading, purpose and context. The contract creates an elaborate scheme to provide finality of all claims, and it would be inconsistent with that arrangement if that arrangement could be negated by a subcontractor simply not making the final payment claim. For the purposes of this application, I make that finding of law.
The defendant also pointed to clause 41.1 of the contract that provided:
41.1 Notification of claims
Except as otherwise provided in this Subcontract, the Main Contractor will not be liable upon any claim by the Subcontractor in respect of any matter arising out of or in connection with the Subcontract, the subject matter of the Subcontract or otherwise, including but not limited to, any claim for any form of loss or damages unless:
(a) a notice of claim, together with full particulars thereof is lodged in writing with the Main Contractor and the Subcontract Superintendent not later than the time specified in this Subcontract, or if no time is stated, 10 business days after the date the Subcontractor becomes aware or should have become aware of the occurrence of the events or circumstances on which the claim is based; and
(b) the notice outlines the legal basis of the claim and full details of the likely quantum.
The term ‘claim’ is defined very broadly within the contract at clause 1 as:
Claimmeans any claim, right of action or demand (or similar legal entitlement), in any jurisdiction, including but not limited to at law, in tort (including negligence), under statute, in equity including quantum meruit or restitution based on unjust enrichment, for rectification, frustration or for any other legal or equitable remedy
The defendant said there was no such notification, and the plaintiff said there was. It is ultimately a question of fact whether or not there was such notification and that must be left to a hearing. This is the case even if I were to have a view about whether the correspondence between the parties was sufficient to amount to a notice as contemplated by clause 41.1.
Additionally and separately, the plaintiff submitted three reasons why I could not find that at certain times it was aware of the claim and failed to lodge a notice as required. First, it suggested the requirement to do so would be an absurdity because the claim arose due to a breach by the defendant. It cited Etlis v New Age Constructions (NSW) Pty Ltd [2005] NSWCA 165 at [31]. However, the example from that decision related to an asserted requirement for one party to notify the other party that the other party had given a direction to the first party. That can be readily distinguished from what is required here by clause 41.1. The Etlis example involved a requirement to remind one party about what it had directed the other party to do. That would amount to no new information. In contrast the present requirement relates to informing the main contractor fully and quickly about any new claim. It expressly requires that notification is to be in writing and to include details such as the legal basis for, and the likely quantum of, the claim. While the main contractor may be aware of some of the facts giving rise to a claim, it may not be aware of all the relevant facts and circumstances, that a legal basis for a claim may have arisen, or that the subcontractor is contemplating making such a claim. The requirement allows the main contractor to be put on notice about the possibility of a claim and provides it with the opportunity to then take action, such as remedying the issue, making inquiries or preparing for litigation. It is difficult to see how the requirement could be described as an absurdity.
Secondly, the plaintiff submitted that no notice in accordance with the clause was required because the exchange of correspondence between the parties provided ‘effective notice’. That expression is not used within the contract, and the provision expressly requires notice to be in writing and contain defined information. The plaintiff cited BMD Major Projects Pty Ltd v Victoria Urban Development Authority [2007] VSC 409 at [10] as authority that the provision should be construed with business common-sense, and that such an approach would allow for the provision to be understood as allowing for effective notice. I accept the contract should be construed with business common-sense. However, that authority must be distinguished because it involved the interpretation of the requirement to give written notice ‘forthwith’, and it was in that context that the Court held that initially engaging in verbal discussions and undertaking further investigations before providing a written notice was consistent with providing that notice forthwith. In the instant case, the temporal requirement is expressly stated as 10 business days. That deadline is not described by an indeterminant term such as ‘forthwith’. This submission therefore cannot succeed.
Thirdly, the plaintiff submitted that the preventative principle applied to the circumstances such that the defendant cannot insist on the performance of a contractual obligation by the plaintiff, if the defendant is the cause of the plaintiff’s non-performance: Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd [2012] WASCA 53 at [47]. The submission suggests that the failure to comply with the requirement to give the required notice was directly due to its reliance on the understanding that the defendant would ultimately fulfil its obligations. It is unclear to me if such a reliance would be adequate to trigger the preventative principle, or if something more is required. In any event, whether or not the defendant was the cause of any non-performance by the plaintiff, it is most likely a question of fact that would need to be decided at a hearing. However, I do note that the defendant’s letter to the plaintiff’s then solicitors of 1 May 2019, must have put the plaintiff on notice that the defendant may not re-credit the amount or provide substantiation.
Estoppel
The plaintiff has indicated that it intends to rely upon estoppel with respect to the time bars. It has not pleaded that within its Amended Statement of Claim, and nor should it: See Spicers & Detmold Ltd v Australian Automatic Cigarette Paper Company Pty Ltd [1942] VLR 97 at 101 and Fortescue Metals Group Ltd v Australian Securities and Investment Commission [2012] HCA 39 at [24]. As suggested in Spicers, doing so may lead to confusion and the proper place for it to be pleaded is as a response to the defendant’s pleadings in the plaintiff’s Reply, assuming that to be necessary.
The defendant contends that the plaintiff has not identified any representation that would justify the defendants being estopped from relying on the bar provisions within the contract, nor provided any sworn evidence to support that argument. They rely upon Queensland Truss and Frame Pty Ltd v Grenadier Constructions No. 2 Pty Ltd [1992] 2 Qd R 428 at 432 which adopted Lord Blackburn’s observations in Wallingord v Mutual Society (1880) 5 App Cas 685 at 704 about affidavits needing to condescend upon the particulars of a proposed defence:
Now I think what we have to see here is, what is it that the Judge is to be satisfied of, in order to induce him to refuse to make the order for the Plaintiff to sign judgment. If he is satisfied upon the affidavits before him that there really is a defence upon the merits, it is a matter of right, unless there be something very extraordinary (which I can hardly conceive), that the Defendant should be able to raise that defence upon the merits, either to the whole or to a part. He may fall far short of satisfying a Judge that there is a defence upon the merits; still he may do so if he discloses such facts as may be deemed sufficient to entitle him to defend.
And that, my Lords, raises another question altogether. There may very well be facts brought before the Judge which satisfy him that it is reasonable, sometimes without any terms and sometimes with terms, that the Defendant should be able to raise this question, and fight it if he pleases, although the Judge is by no means satisfied that it does amount to a defence upon the merits. I think that when the affidavits are brought forward to raise that defence they must, if I may use the expression, condescend upon particulars. It is not enough to swear, “I say I owe the man nothing.” Doubtless, if it was true, that you owed the man nothing, as you swear, that would be a good defence. But that is not enough. You must satisfy the Judge that there is reasonable ground for saying so. So again, if you swear that there was fraud, that will not do. It is difficult to define it, but you must give such an extent of definite facts pointing to the fraud as to satisfy the Judge that those are facts which make it reasonable that you should be allowed to raise that defence. And in like manner as to illegality, and every other defence that might be mentioned.
It is the case that the plaintiff has not fully articulated how they may rely upon estoppel, nor put before the court sworn evidence directed to each element of the same to demonstrate that there may be merits in such an argument. However, a plaintiff’s potential reliance on estoppel should be distinguished from a defendant’s defence. As described above, it is likely to be premature for a plaintiff to fully articulate their position with respect to estoppel until they have seen the defence pleadings. In those circumstances and noting the key principles associated with these applications, it does not appear appropriate to require a plaintiff to demonstrate the merits of an estoppel argument before a defence has been pleaded. If I am wrong about that, then I remain unconvinced at this stage that I could say with the necessary certainty that the plaintiff has no reasonable cause of action. I say that because, while the correspondence in evidence may individually fall short of establishing a clear and unambiguous representation adequate to found estoppel, the secondary agreement was not in writing and the terms of which are a question of fact and will need to be determined at hearing. Accordingly, I would nevertheless not exercise the discretion to strike out the pleadings and or dismiss the proceedings.
I will hear further from the parties in relation to the plaintiff’s application in proceedings for leave to amend its Originating Claim.
Orders
The Court made the following orders:
1. The application in proceeding filed by the defendant on 3 March 2023 is dismissed.
2. The plaintiff is to pay the defendant’s costs of the application in proceedings.
| I certify that the preceding twenty-eight [28] numbered paragraphs are a true copy of the Reasons for Decision of his Honour Magistrate Theakston Associate: Alyssa Zanardo Date: 30 June 2023 |
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