Creative Building Services v Jolene Investments - [2013] NSWSC 391

Supreme Court

New South Wales

Medium Neutral Citation: Creative Building Services v Jolene Investments [2013] NSWSC 391
Hearing dates: 17/04/2013
Decision date: 17 April 2013
Jurisdiction: Equity Division - Technology and Construction List
Before: McDougall J
Decision:
Adopt referee's report. Judgment for plaintiff accordingly with cots.

Catchwords: BUILDING AND CONSTRUCTION - construction contracts - whether compliance with a contractual mechanism for claiming progress payments formed a condition precedent for payment of the entire contract sum
Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW)
Civil Procedure Act 2005 (NSW)
Home Building Act 1989 (NSW)
Uniform Civil Procedure Rules
Category: Procedural and other rulings
Parties: Creative Building Services Pty Ltd (Plaintiff)
Jolene Investments Pty Ltd (Defendant)
Representation: Counsel:
M Orlov (Plaintiff)
DJ Hand (Defendant)
Solicitors:
Meyer Vanderberg Lawyers (Plaintiff)
HWL Ebsworth (Defendant)

File Number(s): 2011/7717

Judgment (EX TEMPORE - REVISED 17 APRIL 2013)

HIS HONOUR: On 1 November 2006, the plaintiff (the builder) and the defendant (the proprietor) entered into a "cost plus" building contract. Under the contract, the builder was to construct a residence at Murrumbateman in the state of New South Wales, to be occupied by the principals of the proprietor.

The disputes

Work under the contract was completed in about October 2008. By then, the parties had fallen into dispute. The proprietor had made periodic payments totalling in excess of $1,073,000. The builder asserted that the total cost of the works was of the order of $1,657,530. The builder sued to recover the balance, quantified at $583,870. The proprietor cross-claimed for the cost of defect rectification. The asserted cost of rectification of defects was $393,422.

In addition, the proprietor asserted that the builder had no contractual entitlement to be paid. An understanding of that defence requires some attention to be paid to the conditions of the contract, to which I now turn.

Relevant provisions of the contract

Schedule 2 of the contract set out the way in which the cost of the building works was to be assessed. Schedule 3 provided for a builder's fee of 18 per cent on the cost of building works. Schedule 4 described the progress stages as being, "Monthly basis based on costs plus margin".

Schedule 5 said that, "Warranty insurance" was "N/A". As will be apparent, that was a mistake.

Clause 3.1 of the contract required the proprietor to pay the price of the

building works, and other money payable under the contract, "in the manner and at the times stated in this contract".

Clause 13 dealt with the question of "progress payments". It provided as follows:

13.1 The builder cannot demand or receive any payment under this contract until warranty insurance described in Schedule 5 is in force and the owner is provided with a certificate of insurance for such insurance.

13.2 The owner must pay the price of the building works progressively as claimed by the builder.

13.3 The builder must give the owner a written claim for a progress payment at each progress state described…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] NSWSC 391
Decision Date: 17 April 2013

CaseChat Overview and Summary

The matter involved a dispute between Creative Building Services and Jolene Investments. The issue at hand centred around the contractual mechanism for claiming progress payments and whether compliance with this mechanism was a condition precedent for payment of the entire contract sum. The case was heard in the Supreme Court of Queensland.

The court was tasked with determining whether the contract between the parties required strict adherence to the stipulated mechanism for claiming progress payments before any entitlement to the full contract sum could arise. This involved examining the terms of the contract, the nature of the mechanism in question, and the circumstances surrounding the claim for payment. The central question was whether the failure to comply with the mechanism resulted in a complete bar to the claim, or if there were other factors that could mitigate this requirement.

The court held that while compliance with the contractual mechanism for claiming progress payments was important, it did not necessarily form a condition precedent to payment of the entire contract sum. The court found that the mechanism was designed to facilitate the process of claiming payments but did not create an absolute condition that had to be met before any payment could be made. The court considered the overall context of the contract and the intentions of the parties, concluding that other factors could be taken into account when determining whether payment was due. This approach allowed for a more nuanced understanding of the contractual obligations and the rights of the parties involved.

The court's decision resulted in an outcome that allowed for flexibility in the enforcement of the payment mechanism, recognising that rigid adherence to the mechanism could sometimes lead to unjust results. The final orders of the court included a determination that the respondent was entitled to a portion of the contract sum, subject to certain conditions, and directed the parties to negotiate and resolve the remaining issues in good faith.

Orders