Core Building Group Pty Ltd v Dickson Developments

[2024] ACTSC 93

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:

Core Building Group Pty Ltd v Dickson Developments Precinct 5 Pty Ltd

Citation: 

[2024] ACTSC 93

Hearing Date: 

5 April 2024

Decision Date: 

8 April 2024

Before:

McCallum CJ

Decision: 

The application is dismissed.

Catchwords: 

CIVIL LAW – PRACTICE AND PROCEDURE – Application to strike out pleading – whether pleading disclosed any reasonable cause of action or was frivolous, scandalous, unnecessary and/or vexatious – building contract – where developer served notice certifying date of practical completion 175 days after contractual date triggering builder’s liability for liquidated damages  – where builder alleges superintendent represented notice would not be relied upon – where developer later called on security bond for liquidated damages in reliance on notice – whether pleading disclosed any reasonable case that builder suffered any loss

Legislation Cited: 

Building and Construction Industry (Security of Payment) Act 2009 (ACT)

Competition and Consumer Act 2010 (Cth), s 236

Court Procedures Act 2004 (ACT), s 5A

Court Procedures Rules 2005 (ACT), r 425(1)

Cases Cited: 

Core Building Group Pty Ltd v Dickson Developments Precinct 1 Pty Ltd [2023] ACTSC 202

Core Building Group Pty Ltd v Dickson Developments Precinct 1 Pty Ltd (No 2) [2023] ACTSC 221

Dickson Developments Precinct 5 Pty Ltd v Core Building Group Pty Ltd [2024] FCA 86

Galovac Pty Ltd v Australian Capital Territory [2010] ACTSC 132; 19 ACTLR 238

Parties: 

Core Building Group Pty Ltd ( Plaintiff)

Dickson Developments Precinct 5 Pty Ltd ( First Defendant)

Johnny Roso ( Second Defendant)

Marinko Vukoja ( Third Defendant)

Representation: 

Counsel

D Cook SC with W Chan ( Plaintiff)

M Dempsey SC with B Buckland ( Defendants)

Solicitors

Crisp Law ( Plaintiff)

HFW Australia ( Defendants)

File Number:

SC 346 of 2023

McCALLUM CJ:       

EX TEMPORE REASONS (REVISED)

1․Dickson Developments Precinct 5 Pty Ltd retained Core Development Group Pty Ltd as the builder for a development in the suburb of Dickson.  Their contractual relationship was governed by an agreement titled the “Design and Construct Agreement Mulberry” entered into on 6 September 2019.  In this judgment, I refer to the parties to that agreement as the developer and the builder respectively.

2․The agreement required the builder to achieve practical completion of the works 24 months from the start date.  The original date for practical completion on that basis was 3 November 2021.  That was extended, in accordance with the agreement, to 9 November 2021.  There was a liquidated damages clause which provided that, if the builder failed to bring the works to practical completion by the date for practical completion, it was required to pay or allow the developer the sum of $24,000 for every day after the date for practical completion: clause 48.1.  The builder was required to provide security for its performance of its duties and obligations under the agreement: clause 16.1.  In accordance with that requirement, securities in the amount of $4,499,796 were provided by the builder in the form of Vero insurance bonds.

3․The agreement provided for the appointment of a superintendent who was authorised, among other things, to assess practical completion: clause 8.2.  The superintendent appointed under the agreement was Mr Marinko Vukoja.  On 2 May 2022, Mr Vukoja certified to the developer that the actual date of practical completion was 2 May 2022.  On that premise, the builder was liable to the developer for liquidated damages for 175 days, giving a total liability of $4.2 million.  In written submissions on the present application, the developer explained that the certification that practical completion had been achieved on 2 May 2022 “served only to cap the liquidated damages which by then had accrued in the sum of $4.2 million”.

4․Upon service of the superintendent's certification of the actual date of practical completion, the builder was entitled within a period of 10 days to issue a dispute notice if it disputed the date stated on the certificate of practical completion: clause 46.6.  The builder alleges that, although it did in fact dispute the date, it did not issue a dispute notice because it relied on assurances and representations made by Mr Vukoja, said to be with the authority of the developer, to the principal of Core Building Group, Mr Cappello, to the effect that the developer would not claim damages for delay and would return the bonds once notified that defects were addressed.

5․Over a year later, on 5 July 2023, without notice to the builder, the developer called on the entire amount of the Vero insurance bonds, relying in part on its claim by reference to the sum owed by way of liquidated damages in accordance with the notice of practical completion.  That prompted the builder to approach this Court for freezing orders, which were granted by Mossop J on 28 July 2023: Core Building Group Pty Ltd v Dickson Developments Precinct 1 Pty Ltd [2023] ACTSC 202.

6․Although the developer was represented on that application, it was brought on short notice and the developer did not have a full opportunity to address the Court.  His Honour accordingly revisited the appropriateness of the freezing orders in a second judgment published on 11 August 2023: Core Building Group Pty Ltd v Dickson Developments Precinct 1 Pty Ltd (No 2) [2023] ACTSC 221. Order 3 made by his Honour on that date was in the following terms:

The freezing order made in relation to Dickson Developments Precinct 5 Pty Ltd on 28 July 2023 is continued until further order of the court but the freezing order is discharged if by 4pm on 25 August 2023 the plaintiff has not commenced proceedings seeking final relief against Dickson Developments Precinct 5 Pty Ltd or sought leave to amend these proceedings so as to seek such relief.

7․I will return to explain the significance of that order.  

8․The builder commenced these proceedings within the time allowed. The current version of the pleading is an amended statement of claim filed 27 October 2023, claiming declaratory relief and damages for breach of contract or compensation pursuant to s 236 of the Australian Consumer Law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth). There is a separate claim for a judgment debt based on a payment claim made by the builder under the Building and Construction Industry (Security of Payment) Act2009 (ACT). The amount claimed on that basis is $106,162.84.

9․By amended application in proceeding filed on 4 April 2024, the developer moves to have the whole of the amended statement of claim struck out on the grounds that it fails to disclose a reasonable cause of action and “in any event the allegations made in the statement of claim are frivolous, scandalous, unnecessary and/or vexatious”.  It is not clear the extent to which that second basis was maintained at the hearing.  In any event, this judgment determines that application.

10․The application invokes the Court's power under r 425(1) of the Court Procedures Rules 2005 (ACT).  The principles to be applied in determining an application under that rule were summarised by Jagot J, then sitting as an additional judge of this Court, in Galovac Proprietary Limited v Australian Capital Territory [2010] ACTSC 132; 19 ACTLR 238 at [5] as follows:

(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) 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) 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 State of 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]).

11․The central attack on the pleading was that the builder has not pleaded sufficient facts to establish any loss.  Mr Dempsey SC, who appears for the developer, noted that a central premise of the builder's claim is that at the point when the date of practical completion was certified, the builder could have done something to achieve a better outcome.  Mr Dempsey submitted that upon an examination of the relevant clauses of the contract, it appears that the builder could have done nothing to prevent the call on the Vero bonds.

12․The developer further contends that, if the builder did not lose any opportunity under the contract by relying upon the alleged representations, it cannot have suffered the loss pleaded or indeed any loss.  The argument turns on the terms of clause 46.6 of the contract, which provides:

If the builder disputes the date stated in the Certificate of Practical Completion for the Works or a Separable Part, it must give written notice of the dispute to the Superintendent within 10 calendar days after the receipt by the Builder of the Certificate of Practical Completion for the Works or a Separable Part, and the Date of Practical Completion of the Works or a Separable Part will (unless otherwise agreed) be determined under clause 51 but otherwise the Certificate of Practical Completion will be conclusive of the date on which the Works or a Separable Part were brought to Practical Completion.

13․The developer noted that the date for practical completion could be extended for limited reasons if the builder made a claim for an extension of time under clause 42 of the agreement.  That clause imposes specific requirements, including a requirement for notice and a requirement that any claimed delay be a qualifying delay.  The developer sought to establish by affidavit evidence that there was and could be no qualifying extension of time application in the present case.  However, as I think may ultimately have been accepted during the course of argument, that must necessarily be a matter for trial.  I permitted the affidavits to be read in evidence on the application, but a more disciplined approach would have been to reject them.

14․The developer otherwise submitted that, in order for the builder to establish that it lost anything in failing to dispute the date of practical completion, the builder needed to plead, at a minimum, that the works had achieved practical completion at a specific date earlier than 2 May 2022; that it had notified the first and third defendants that it expected practical completion to be achieved at a date earlier than 2 May 2022, as required under clause 46; and that practical completion should have been certified at a date earlier than 2 May 2022.

15․The developer invited the Court to infer that the reason the builder has not pleaded those matters is because it knows that it cannot hope to show that practical completion had been achieved at an earlier date.  In support of that submission, the developer relied upon the list of outstanding works stated on the certificate granting practical completion, which, it was contended, demonstrates that the works did not in fact comply with the contractual definition of practical completion as at 2 May 2022, let alone on any earlier date.

16․The builder submitted that the developer's first argument misconceived the plaintiff's claim, which is based on an alleged loss of opportunity.  The alleged loss is pleaded at paragraph 33 of the amended statement of claim, where it is contended:

But for the Mulberry Representations, the Plaintiff would have submitted a Dispute Notice and taken steps to deploy the dispute resolution process under the Mulberry Agreement in respect of Extension of Time requests not granted, in which event:

a)the plaintiff would have had an opportunity of successfully deploying the dispute resolution process under the Mulberry Agreement to obtain:

i)a determination that the Date of Practical Completion occurred at some date earlier than the date stated in the Certificate of Completion; and

ii)a determination that the Date for Practical Completion, for the purposes of cl. 48.1, was extended by reason of the Plaintiff’s claims for Extensions of Time under cl.42 for which the Third Defendant, as Superintendent, failed to allow a reasonable amount of time, or, in some instances, any, and which determination the Plaintiff disputed.

b)in that event, the First Defendant would not have been entitled to any claim for liquidated damages under cl 48.1 the Mulberry Agreement (or only to a lesser claim);

c)the First Defendant would not have had any entitlement to call upon the bonds (or at least the full value of the bonds) at the time that it did;

d)the Plaintiff would not have become liable to Vero Insurance in the amount of the bonds; and

e)the Plaintiff would not have been exposed to the risk of recovering the bonds from the First Defendant on an unsecured basis.

17․The builder's case is that, had Mr Vukoja not given the assurances and made the representations he did, the builder could have resorted to the dispute resolution mechanisms under the contract and argued, first, that previous extensions of time requests that had not been granted should have been granted (which, if successful, would have pushed out the date for practical completion) and, secondly, that the date of practical completion should be earlier than 22 May 2022.

18․Mr Cook SC, who appears with Mr Chan for the builder, noted in oral submissions that even if either of those arguments reduced the number of days for liquidated damages by only one day, it would follow that the developer’s application must fail.  Mr Cook noted that the matters identified by the developer as necessary averments in the pleading, which are directed to what the builder in fact did or could have done, are of themselves of no significance under the contract.  He submitted:

What is of significance is the Date of Practical Completion, and the only way that could have changed was if the Plaintiff had successfully disputed that date through the dispute resolution mechanism under the contract.

19․Mr Cook submitted that, provided the prospect of successfully arguing that matter was not illusory, it had an economic value sufficient to give rise to loss capable of being claimed by the builder.  

20․The developer’s response to that submission was that the builder had not pleaded sufficient facts to establish that there was loss of any valuable opportunity.  To the extent that the claim is based on the loss of an opportunity to challenge the date of practical completion, the builder would have to allege, so it was submitted, that it had in fact achieved practical completion at an earlier date, and no such allegation is pleaded.  The developer submitted that the pleading is silent as to whether the claim is based on the loss of an opportunity to obtain an extension of time for practical completion or to invoke the dispute process as to the completion date.  The developer submitted that, for that reason, the current pleading is bound to cause embarrassment and delay and that it should be struck out.

21․In my assessment, the resolution of this issue lies in the nature of the present application and the principles summarised by Jagot J set out above.  Paragraph 33 of the amended statement of claim sets out the contractual mechanism by reference to which opportunities are said to have been lost.  The process for claiming extensions of time is governed by clause 42 of the agreement.  Clause 42.2 requires the builder to give notice if it becomes aware of anything likely to cause delay to the works, while clause 42.3 allows the builder to apply for an extension of time for carrying out the works as reasonably determined by the superintendent.

22․The agreement also includes a clause headed “Avoidance of Conflict”, which provides for any dispute arising out of the agreement, if it cannot be resolved, to be referred to an expert.  In the event of failure to agree upon the identity of the independent expert, the expert is to be a person appointed by the President for time being of the Institute of Arbitrators and Mediators of Australia.

23․Mr Cook submitted that the builder could not sensibly be expected to plead the material facts that would govern the likely outcome of any such process, hence the builder’s reliance on a claim for loss of a chance rather than anything more certain.  While there is force in that point, I am inclined to think that the builder could nonetheless have specified the particular disputes or grounds for extensions of time or an earlier completion date on the strength of which it contends that the opportunity it has lost is of some value.  

24․However, the strike-out application has been brought in circumstances where no request for particulars has been made.  Mr Dempsey submitted that the qualifying clause for extensions of time, the terms of any notice of delay and the claim that would have been made all have to be established in order to establish the loss of a valuable opportunity.  He submitted that the matters missing from the pleading in that respect are material facts, not simply matters for particulars.  

25․I do not accept that submission. The content of the obligation to plead material facts, as opposed to setting out the facts, matters and circumstances relied upon to support a pleaded allegation in correspondence, must be informed by the modern understanding of case management and the obligation of the parties to assist the Court in achieving the main purpose of the civil procedure provisions stated in s 5A of the Court Procedures Act 2004 (ACT). That section provides:

5A Main purpose of civil procedure provisions

(1)The main purpose of the civil procedure provisions is to facilitate the just resolution of disputes—

(a)according to law; and

(b)as quickly, inexpensively and efficiently as possible.

26․The absence from the pleading of particulars of the claims that might have been made had the builder availed itself of the opportunity to make them (and not, as it alleges, relied on the representations made by the superintendent) do not warrant its being struck out under r 425.  The developer could have sought particulars of paragraph 33 of the amended statement of claim.  Had adequate particulars been provided, the need to occupy more than half a day of the Court’s time could have been obviated.

27․The developer’s second argument flowed from remarks made by Mossop J when his Honour heard the application for the continuation of the freezing orders on 10 August 2023.  According to the material before me, his Honour said during argument:

“If your client said, 'We will let you file a notice of dispute, notwithstanding that you’re beyond the 10 days after 2 May,' then that would resolve any potential proceedings”.

28․It should go without saying that a remark made by a judge during argument should not govern the course of proceedings in the way a statement made in a published judgment might.  In any event, on 24 August 2023, the day the builder was required to commence proceedings in accordance with the orders made by Mossop J, the developer wrote to the builder in terms including the following:

Noting His Honour’s comment and notwithstanding our client's position that the relevant representation was never made, in the interests of narrowing the issues in dispute between the parties, our clients give notice of the following:

If a notice of dispute in relation to the date stated in the Certificate of Practical Completion issued for the Mulberry Project on 2 May 2022 is received from your client within 10 calendar days from the date of this letter, then our client will waive its rights to require that any notice served under clause 46.6 must be served within 10 calendar days of the date of receipt of the Certificate of Practical Completion.

29․The developer submitted that, as this offer was not taken up, the builder cannot now prove that reliance upon the alleged representation caused any loss, as any loss is now not the result of any reliance on the alleged representation but of the builder's election not to take up the defendant's invitation to put in a dispute notice.  It was submitted that the additional basis for the builder's claim that did not invoke the dispute resolution process in relation to extensions of time falls into the same category.

30․The builder submitted that this argument also misapprehends its claim.  It submitted that the offer, flowing from the remarks of Mossop J, did not adequately address the builder’s loss because, by the time that offer was made, the developer had already called upon the Vero insurance bonds.  Accordingly, acceptance of the offer, if followed by a successful argument that the date of practical completion was earlier than the date certified (such that the developer’s entitlement to liquidated damages was reduced), would not have restored the builder to the position it would have been in had it deployed the dispute process before the bonds were called upon.

31․Plainly, there will be complexities in the prosecution of that argument.  However, I do not think it can be concluded on a strike-out basis that the fact that the builder did not avail itself of the offer, made on the very day it was required to commence these proceedings, means the claim is manifestly untenable.  There is some force in the proposition that the builder’s position has deteriorated, or may have, as a result of its requirement now to rely upon the assets available to the first defendant, as opposed to the more secure position it was in before the call was made on the Vero bonds.

32․The third argument raised by the developer concerns the builder’s payment claim under the Building and Construction Industry (Security of Payment) Act 2009 (ACT). The developer’s strike-out application did not initially include that claim. However, since the filing of the statement of claim, the Federal Court has held that the determination of the builder’s payment claim under that Act was void: Dickson Developments Precinct 5 Pty Ltd v Core Building Group Pty Ltd [2024] FCA 86 at [69] (Jackman J).

33․The builder accepted that, if what the developer contends about the security of payment claim is correct, it may well have a defence to the builder's claim.  However, the builder submitted that the correctness of the developer's contention and whether the builder has a reply to that contention is a matter for hearing, not for a strike-out application.

34․Mr Cook developed that proposition in oral submissions by contending that, assuming the correctness of Jackman J's decision, that would be a matter for the developer to plead by way of defence, such as a defence of issue estoppel, and that the builder may well have a reply to any such defence.  Whilst that is speculative, the content of the submission demonstrates the inappropriateness of dealing with that matter, which has arisen after the pleadings were filed, on a strike-out basis.

35․As noted by Mr Cook, the developer does not contend that the builder is engaging in any abuse of process by maintaining the claim for the debt, albeit through the rubric of the Building and Construction Industry (Security of Payment) Act. Again, the determination of that issue falls to be considered by reference to the nature of the application now brought.  I am not persuaded on any of the three grounds argued by the developer that the existing pleading should be struck out.

Orders

36․For those reasons, the application is dismissed.

I certify that the preceding thirty-six [36] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice McCallum

Associate:

Date: