H. Troon Pty Ltd v Greenshift Energy Pty Ltd
[2025] VCC 1115
•8 August 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-21-04585
| H. TROON PTY LTD (ACN 120 422 755) | Plaintiff |
| v | |
| GREENSHIFT ENERGY PTY LTD (ACN 605 120 422 755) T/AS OBSIDIAN ROOFING | Defendant |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9-12 and 15 April 2024, 16, 17, and 24 July 2024, 10 October 2024 | |
DATE OF JUDGMENT: | 8 August 2025 | |
CASE MAY BE CITED AS: | H. Troon Pty Ltd v Greenshift Energy Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 1115 | |
REASONS FOR JUDGMENT
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BUILDING CONTRACT – SHOW CAUSE NOTICE – whether Show Cause Notice valid –
hybrid nature of Show Cause Notice – required works to be completed as well as showing
cause in writing – contract did not provide for Show Cause Notice to require work to be completed – whether cause was shown – Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303 – Brenmar Building Co Pty Ltd v The University of Newcastle (1999) 15 BCL 467 – Re Stewardson Stubbs v Collet Pty Ltd & Bankstown Municipal Council [1965] NSWR 1671.
BUILDING CONTRACT – whether variations established – turns on own facts.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Ritchie | Heinz Law |
| For the Defendant | Dr T Shao, director of defendant, in person |
HER HONOUR:
Table of Contents
BACKGROUND
THE PROCEEDING
The pleadings
The evidence
ISSUES
I. SHOW CAUSE NOTICE ISSUES
The Subcontract
The Show Cause Notice
A. Did the ‘Show Cause Notice’ specify the alleged substantial breach?
B. Was Obsidian in substantial breach of the Subcontract for the reasons specified in the Notice when the Notice was sent on 23 March 2021?
Law
C. Should the Subcontract be construed such that Obsidian had 35 working days to complete the Varied Work, dating from after the last structural component that Troon was responsible for had been completed?
D. Was there an oral agreement to extend the time that Obsidian had to complete its work?
E. No cause was shown
F. Debt claim for work done by third party instead of Obsidian
II. VARIATION ISSUES
EFFECT OF S471B OF THE CORPORATIONS ACT
ORDERS
BACKGROUND
1H. Troon Pty. Ltd was engaged as the builder of a gymnasium at Delacombe Primary School under a head contract with the Department of Education and Training. In November 2020, it subcontracted the roofing package to Greenshift Energy Pty Ltd (trading as Obsidian). The work schedule under the Subcontract provided for the roofing package to be completed by 19 January 2021. By 23 March 2021, the roofing package was far from complete. On 23 March 2021, Troon served a Show Cause Notice on Obsidian. The Show Cause Notice claimed that Obsidian was in substantial breach of the Subcontract. It set out a list of items it demanded be completed within 5 business days. It also gave Obsidian 5 business days to show cause why the remaining work required under the Subcontract should not be taken away from it. On 30 March 2021, Troon served a Take Out Notice on Obsidian, taking the remaining work required under the Subcontract away from Obsidian. Troon then engaged another company to do the remaining work. Troon now sues Obsidian for the amount it says Obsidian was to be paid for that work under the Subcontract, less what Troon paid the other company. It claims $178,228.15.
2Obsidian denies liability. Obsidian denies that Troon was entitled to serve the Show Cause Notice, claims it was not in breach of the Subcontract, and claims that even if it was, it does not owe Troon as much as Troon claims.
3Whilst Obsidian initially counterclaimed for loss of profit, which it alleged it had suffered in the circumstances, it did not pursue that claim in submissions, nor did it prove any loss, or call any expert evidence as to loss of profit. No counterclaim is established.
THE PROCEEDING
The pleadings
4In October 2021, Troon sued Obsidian, filing its initial statement of claim.
5Obsidian was initially represented by solicitors, and during that period, filed a defence and counterclaim. It also filed further and better particulars of its defence and counterclaim.
6Troon filed a reply and defence to counterclaim on 25 March 2022.
7On 27 March 2023, Troon filed a proposed amended statement of claim.
8On 2 April 2024, Troon was given leave to rely on a second proposed amended statement of claim. It relied on this version of the statement of claim when the hearing of the matter commenced on Tuesday 9 April 2024. It then filed another amended statement of claim on that first day of trial.
9The case continued on Wednesday 10 April 2024. Obsidian filed an amended defence and counterclaim that day. The trial continued on Thursday 11 and Friday 12 April 2024.
10On Sunday 14 April 2024, Troon filed and served a further amended statement of claim.
11The trial continued on Monday 15, Tuesday 16, and Wednesday 17 April 2024, and was then adjourned.
12On 19 April 2024, Troon filed a second further amended statement of claim.
13On 30 and 31 May 2024, Troon filed two slightly different third further amended statements of claim, without leave.
14On 17 July 2024, Troon filed a fourth further amended statement of claim, in clean copy, incorporating all previous amendments (with leave). I will refer to that as the final Statement of Claim.
15Obsidian’s case was continuing to evolve too. On 18 July 2024, Obsidian was given leave to rely on a proposed further amended defence and counterclaim (save for two of the proposed paragraphs). That document (less those two paragraphs) became the final Defence and Counterclaim. I will refer to it as the final Defence. (The parties agreed that Obsidian did not need to file a further version of the final Defence which did not include those two paragraphs, as it was clear that leave had not been given to rely on those paragraphs).
16The case continued on 24 July 2024, and was then adjourned, to allow final submissions to be filed and served.
17Given all the changes to pleadings, it was very important that everyone be clear on what the actual issues had become. The parties agreed to a list of issues setting these out. On 25 July 2024, I made an order that the parties file final submissions directed to the agreed list of issues.
18Troon filed submissions dealing with the listed issues. Obsidian’s written submissions went beyond them.
19Final oral submissions took place on 10 October 2024, with the parties expanding on aspects of their written submissions, and Troon responding to the further points Obsidian had made in its final written submissions. However, it became clear that the parties had not addressed one issue sufficiently, in relation to Danpalon supply (as discussed below). The parties were given leave to file more submissions directed to that issue. The last of these were filed on 22 October 2024.
20Ideally, the issues that need to be determined are set out in the pleadings, but often they change a little in trial by agreement, or parties agree to additional issues being determined. Here, confusion, about who was claiming what, was added to both by the changes to Troon’s claims in its various statements of claim, and to the differing defences Obsidian advanced. The changes to the parties’ cases during trial made some of the issues difficult to follow, and extended both trial time, and the time required to finalise this judgment.
21Initially Obsidian was represented by solicitors, but this was no longer the case by the time of trial. Dr Tony Shao, director of Obsidian, was given leave to act for it at the trial. This meant that Obsidian was not represented by a lawyer, and was effectively self-represented, and many of the submissions made for it were hard to follow. The defences raised for Obsidian continued to evolve, and further ones were sought to be raised even in final submissions despite the fact the list of issues had by then been agreed.
22A frequent consequence of self-representation is that the court must assume the burden of endeavouring to ascertain the rights of parties which are obfuscated by their own advocacy: see the High Court’s comments in Neil v Nott (1994) 68 ALJR 509 at 510. This does not mean that the proceeding lost its adversarial quality in any way. The Court does not have a duty to run its case for Obsidian: see Croft J in Raptis v City of Melbourne [2017] VSC 488 at [15].
The evidence
23The documents in evidence in this case were recorded in an agreed list of documents, from the Court Book, and marked Exhibit A. Two other documents were Exhibits B and C.
24Troon called five witnesses: Mr Riley Pascoe (Troon’s project manager), Mr James Troon (Troon’s director), Mr Tim O’Callaghan (Troon’s site manager), Mr Tony Hughes (Troon’s site foreman), and Mr Chris Clancy (a director of C&L Clancy Roofing, which completed the work required under the Subcontract after that work was taken from Obsidian).
25Obsidian called two witnesses: Dr Tony Shao (its director, who also represented it at trial); and Mr Cary De Wit, Obsidian’s General Manager and Licensed Plumber gave evidence for Obsidian.
26I am satisfied that all the witnesses were endeavouring to give truthful accounts of relevant events. Memories can differ of course, things are seen from different perspectives, and details can be lost to time. I have particularly had recourse to the contemporaneous documents in determining the relevant issues.
ISSUES
27The issues in this case can broadly be divided into two parts:
(a) Show Cause Notice Issues (regarding the validity and effect of the Show Cause Notice); and
(b) Danpalon Costs Issues (regarding the amount payable under the Subcontract after Danpalon supply and installation was removed from the scope of the Subcontract.)
I. SHOW CAUSE NOTICE ISSUES
28Troon says that by 23 March 2021, Obsidian had substantially breached the Subcontract, and it was entitled to serve the Show Cause Notice pursuant to Clause 24.1 of the Subcontract (which it did, on 23 March 2021). By the Show Cause Notice, it provided Obsidian with 5 business days from receiving the notice to show reasonable cause. No reasonable cause was shown (it says); and it then served the Take Out Notice.
29Obsidian submits that Troon was not entitled to serve the Show Cause Notice, as Obsidian was not in breach of the Subcontract at the time, for various reasons which I deal with below.
The Subcontract
30The Subcontract included the following parts:
(a)Subcontract Reference Table;
(b)Subcontract Conditions;
(c)Schedule 1 – Document Register of Drawings, Plans and Specifications;
(d)Schedule 2 – Subcontract Scope of Work;
(e)Schedule 4 – Construction Program; and
(f)the drawings referenced in Schedule 1, including the architectural drawings prepared by Kosloff Architecture dated 25 August 2020.
31Clause 1 of the Subcontract Conditions provides, relevantly:
1.1 The Subcontractor must carry out the Works described in the Subcontract for the Subcontract Price to a high standard of skill and care and to H. Troon's reasonable satisfaction in accordance with:
(a) the Subcontract Scope of Works, Specifications and Drawings attached or otherwise referred to in this agreement;
…
(c) H. Troon's Construction Program attached in Schedule 4;
(d) all reasonable directions and requirements of H. Troon and, if applicable, those of the Superintendent under the Head Contract; …
32Clause 1.10 provides:
The Subcontractor must ensure that it supplies sufficient labour and materials to achieve and maintain progress of the Works in a timely and efficient manner strictly in compliance with the Construction Program attached in Schedule 4 (as amended and issued from time to time to meet target dates) …
33Clause 24.1 details the circumstances in which Troon can issue a show cause notice and what must be included in the notice:
24.1If the Subcontractor commits a substantial breach of this Subcontract H. Troon may give the Subcontractor a written notice to show cause. This show cause notice shall:
(a) state that it is a notice under clause 24 of the Subcontract Conditions;
(b) specify the alleged substantial breach;
(c) require the Subcontractor to show cause in writing why H. Troon should not exercise a right referred to in clause 24.2;
(d) specify the time and date by which the Subcontractor must show cause (which time shall not be less than 5 clear days after the notice is given to the Subcontractor); and
(e) specify the place at which cause must be shown.
24.2If by the time specified in a notice under clause 24.1 the Subcontractor fails to show reasonable cause why H. Troon should not exercise a right referred to in this clause H. Troon may by notice in writing to the Subcontractor:
(a)take out of the hands of the Subcontractor the whole or part of the Work remaining to be completed; or
(b) terminate the Subcontract.
…
24.5For the purpose of this clause 24, a substantial breach includes but is not limited to where the Subcontractor:
(a) …
(b) fails to proceed with the Works regularly and diligently and in a competent manner including in accordance with the Construction Program;
(c) fails to comply with a direction from H. Troon;
(d) commits any substantial or material breach of this Subcontract; or
(e) …
34The Scope of Works included, relevantly:
Roofing Scope of Works:
Complete Construction of the Roofing Package including supply labour, materials, plant and equipment. All in accordance with the Standards, Drawings, Specifications, Reports and Subcontract Post Tender Review minutes. The works for this package includes, but is not limited to the following: -
1. Supply and install all proprietary support framing for Danpalon and Aramax wall cladding to be installed to structural steel.
2. Supply and install complete Roofing, Danpalon and Aramax cladding in accordance to the drawings, specifications, notes as per profile finishes and colours nominated in the materials schedule and manufacturers specification
3. Complete supply of ALL materials, labour and plant including access equipment
…
5. Supply & Installation of polycarbonate roofing as per plans
…
7. Supply and install custom metal end flashings/ plates for Aramax and Danpalon cladding as per enclosure details
8. Supply and install all gutters including eaves gutters, downpipes and rainheads in stainless steel as per the specification
9. Supply and install of all downpipes to ground level as shown on the hydraulic documentation
10. Supply and install under flashings, penetrations and tray/ apron flashings to all roof penetrations, including but not limited to skylights and mechanical penetrations
…
24. All works to be watertight and free from leaks
…
32. All work being completed in sufficient time so as not to delay any other trade and completed out of hours where necessary.
35The Construction Program included start and finish dates for various items. The Structure and External Building Linings were due to be completed by 19 January 2021. Troon was to complete the ‘structural steel erection’, and the ‘timber structure erection (truss/beams)’ by 20 November 2020. Obsidian was to complete the ‘roofing and wall cladding’ by 19 January 2021. The Show Cause Notice was sent on 23 March 2021.
Pleadings
36Relevantly, Troon claims, in the final Statement of Claim:
9. Pursuant to Clause 1.10 of the Subcontract, Obsidian was required to ensure that it supplied sufficient labour and materials to achieve and maintain progress of the Works in a timely and efficient manner strictly in compliance with the Construction Program.
10. In the premises, by reason of the matters alleged in paragraphs 5 to 8, the date by which Obsidian was to have completed the Works was 19 January 2021.
11. In breach of the Subcontract Obsidian:
(a)did not complete the Works as adjusted by the 2020 Variations and the Danpalon Installation Variation (the Varied Works) on or before 19 January 2021, or at all;
(b)failed to proceed with the Varied Works regularly and diligently and in a competent manner including in accordance with the Construction Program;
(c)failed ensure that it supplied sufficient labour and materials to achieve and maintain progress of the Varied Works in a timely and efficient manner strictly in compliance with the Construction Program.
PARTICULARS
By 23 March 2021 Obsidian had failed to complete or make any substantial progress completing the following aspects of the Varied Work:
(I)Aramax wall cladding to the East, West and North elevations including associated flashings;
(II)gutter installation to the low-level amenities roof, front entry roof, and high-level gymnasium roof, including downpipes connected to stormwater points;
(III)completion of flashing to the front entry roof;
(IV)completion of all flashing to the high-level gymnasium roof;
(IV(i)) completion of flashings to the low-level amenities roof;
(V)rectification of all water leaks from roof penetrations to the high-level gymnasium roof and low-level amenities roof.
Through the period December 2020 to 23 March 2021, Obsidian failed to provide sufficient labour onsite to maintain progress of the Varied Works including as recorded in the following emails:
(I)Tim O’Callaghan of H. Troon to Tony Shao of Obsidian sent on 19 January 2021 at 8.34am;
(II)James Troon of H. Troon to Tony Shao of Obsidian sent on 21 January 2021 at 8.02am;
(III)Riley Pascoe of H. Troon to Tony Shao of Obsidian sent on 28 January 2021 at 4.29pm;
(IV)Riley Pascoe of H. Troon to Tony Shao of Obsidian sent on 29 January 2021 at 8.08pm;
(V)Tim O’Callaghan of H. Troon to Tony Shao of Obsidian sent on 8 February 2021 at 2.44pm;
(VI)Tim O’Callaghan of H. Troon to Tony Shao of Obsidian sent on 18 February 2021 at 10.50am;
(VII)Tim O’Callaghan of H. Troon to Cary of Obsidian sent on 18 February 2021 at 1.16pm;
(VIII)James Troon of H. Troon to Tony Shao of Obsidian sent on 13 March 2021 at 3.44pm;
(IX)James Troon of H. Troon to Tony Shao of Obsidian sent on 14 March 2021 at 10.48am.
11A.The breaches referred to in paragraph 11 hereof were ‘Substantial Breaches’ within the meaning of that term in clause 24.5 of the Subcontract.
…
12.By reason of Obsidian’s breaches alleged in paragraph 11, on or about 23 March 2021, H.Troon served a Show Cause Notice under Clause 24.1 of the Subcontract (the Show Cause Notice).
…
13.Obsidian failed to show reasonable cause in writing within 5 clear days of receiving the notice or at all.
PARTICULARS
As at 30 March 2021 Obsidian had failed to complete or make any substantial progress completing:
(I)Aramax wall cladding to the East, West and North elevations including associated flashings;
(II)gutter installation to the low-level amenities roof, front entry roof, and high-level gymnasium roof, including downpipes connected to stormwater points;
(III)completion of flashing to the front entry roof;
(IV)completion of all flashing to the high-level gymnasium roof
(IV(i)) completion of flashings to the low-level amenities roof;
(V)rectification of all water leaks from roof penetrations to the high-level gymnasium roof and low-level amenities roof.
The breaches in the Show Cause Notice were the subject of correspondence between H.Troon and Obsidian as follows:
(i)In an email from Tony Shao (Obsidian) dated 23 March 2021 at 4:08pm, Obsidian responded to the Show Cause Notice.
(iii)In an email from Tim O’Callaghan (H.Troon), to “Cary” (Obsidian) dated 26 March 2021 at 7:50am attached images of missing handrails.
(iv)In an email from Tony Shao to Tim O’Callaghan, cc: Riley Pascoe (H.Troon) and James Troon (H.Troon)) dated 28 March 2021 at 8:13pm.
(v)In an email from Riley Pascoe to Tony Shao dated 29 March 2021 at 4:17pm.
(vi)In an email from Tony Shao to Riley Pascoe, ‘Cary’ and Tim O’Callaghan dated 30 March 2021 at 1:17am.
14.On or about 30 March 2021, H.Troon served a Notice under Clause 24.2(a) of the Subcontract taking the Varied Works out of the hands of Obsidian (Take Out Notice)
37In the final Defence, Obsidian pleads, relevantly:
10. It denies the allegations in paragraph 8 on the basis that on or about 15 December it was agreed between the Plaintiff and Defendant that due to the structural and design faults (as particularised in paragraph 13), the Completion Date pursuant to the Subcontract would be varied to a future date, where that future date would be the day on which the Plaintiff completed and rectified all Structural and Design Faults plus the period of thirty five (35) working days (“Amended Completion Date Agreement”) as provided for in the Construction Program.
…
11. … the structures required to complete the project were not completed before the 19th of January 2021 and were not even completed at the time the works were taken out of Obsidian’s hands, which was the 30th of March 2021. For the works that were performed, the defence maintains that it worked regularly, diligently an in a competent in line with the contract at all times.
…
13. …
Particulars of Structural and Design Faults
(a) The Structural and Design faults included amongst other things inherent design flaws, structural defects and incomplete structural works with the Plaintiff’s roofing and cladding works which was caused by the Plaintiff and which the Plaintiff failed to rectify or complete in a timely manner.
(b) These structural, installation defects and design issues included but were not limited to:
(i)The flashing detail at the bottom of the Aramax cladding was not completed to the required standard set by the architect Mr Lance van Maanen. The detail was fully functional, but its appearance was not to the required standard set by the architect.
…
(iii)The pergola roof to the East side of the building was not completed till on or around the 6th of April 2021, after the Take Out Notice was issued.
(iv)The flashings to the West Elevation Aramax could not be completed due to the lack of Fibre Cement sheeting that was required as a substrate to support the flashing.
(v)The East and North Elevation Aramax was not completed by the 30th of March, but the Defence maintains it is within time of its contractual obligations to complete the works.
…
(vii)The North Elevation required access was well, as it sits above the low-level amenities roof. Emails were exchanged to find a solution, but Htroon never approved a method for this to go ahead before the Take Out Notice was issued. Obsidian proposed the use of aluminium scaffolding built on top of plywood sheeting in order to protect the low-level amenities roof from any damages, but was not yet approved.
…
The Show Cause Notice
38The Show Cause Notice states:
This is a notice under clause 24 of the Subcontract Conditions. Obsidian Roofing Pty Ltd are in substantial breach of the subcontract as they have failed to proceed with Works regularly and diligently and in a competent manner including in accordance with the Construction Program.
H. Troon has no choice but to protect the interests of the head contract by taking out of the hands of the Subcontractor the Works remaining to be completed should the following not be completed by 5pm on the 30th of March 2021.
Completion of Aramax wall cladding installation to the East, West and North elevations including associated flashings.
Gutter installation to Low level amenity roof and High-level gymnasium roof and front entry roof, including downpipes connected to stormwater points.
Completion of flashings to the main entry roof.
Completion of all flashing to the high-level gymnasium roof.
Completion of flashings to the low-level amenities roof.
Rectify all current water leaks from roof penetrations to gymnasium roof and amenities roof.
H. Troon requires you to show cause in writing via email to James Troon [email protected]. Show cause must be provided by 5.00pm, 30th of March 2021.
A. Did the ‘Show Cause Notice’ specify the alleged substantial breach?
39Clause 24(1)(b) of the Subcontract requires the Show Cause Notice to specify the alleged substantial breach.
40I am satisfied that the Show Cause Notice adequately specifies the alleged substantial breach. A reasonable recipient of the Show Cause Notice in Obsidian’s position would have understood what the allegation of breach was, without needing further details to respond.
41In HometeamConstructions Pty Ltd v McCauley [2005] NSWCA 303, McColl JA reviewed the leading authorities on constructing default notices. As Troon summarises in its submissions, McColl JA identified the following principles:
(a) a practical approach is to be taken to the construction of default notices and that they must be interpreted with business common sense;
(b) the question of whether the notice is valid is to be determined objectively by reference to the understanding of a reasonable recipient;
(c) in considering this question, the notice must be construed considering the relevant objective “contextual scene.”
[Footnotes omitted]
42In Hometeam, at [152-3], correspondence between the owner and the builder regarding the owner’s dissatisfaction with the progress of the works was relevant to the finding that that a reasonable recipient in the builder’s position would have understood the allegation of breach made in the notice and did not require further details. Correspondence between Troon and Obsidian is similarly relevant here. The evidence established many occasions where Troon’s employees complained of the slow progress and lack of labour provided by Obsidian on site.
43As Hutley JA said, in Brenmar Building Co Pty Ltd v The University of Newcastle (1999) 15 BCL 467 at 469:
…both authority and common sense…fully support the view that to inform the builder that he has not been proceeding with the general task which he has been given – not with a particular item – in a competent manner or with reasonable diligence is a sufficient specification.
44In Re Stewardson Stubbs v Collet Pty Ltd & Bankstown Municipal Council [1965] NSWR 1671 at 1675, Moffitt J said:
The question still remains, however, whether the notice "specifies the default". It has been argued it is not sufficient merely to refer to the failure to proceed with reasonable diligence. A default can be specified in two ways; one is by directing attention to the provision in the contract in respect of which default is made. The other is by giving particulars of the manner in which a breach has occurred. In order to specify the default, I think at least the former must be pointed out. But each case will depend on its own circumstances as to whether in order to specify the default there must be added some particulars such as will identify the particular breach alleged. Thus, a default under sub-clause (3) may well require some further specification so that the builder is put in the position to discontinue the default which is complained of. Somewhat different considerations apply with regard to sub-clauses (1) and (2) where the mere reference to the clause said to be in breach may be sufficient to specify the default. For example, to state that the works had been wholly suspended surely would specify the default. The question of what precisely constitutes a failure to proceed with reasonable diligence is a matter of some difficulty. However, it is an allegation of a general failure to proceed with that degree of promptness and efficiency that one would expect of a reasonable builder who has undertaken a building project in accordance with the terms of the contract in question.
45I agree with Troon’s submissions that the relevant objective contextual scene to be taken into account when considering the adequacy of the Show Cause Notice includes:
(a) clauses 1.1(c) and 1.10 of the Subcontract that required Obsidian to carry out the Subcontract Works in accordance with the Construction Program in Schedule 4 of the Subcontract (which called for commencement of the Subcontract Works by 21 November 2020 and for their completion by 19 January 2021) and required Obsidian to resource the those works with sufficient labour to achieve that;
(b) the fact that Obsidian had commenced its works under the Subcontract on 13 November 2020;
(c) the provisions of clause 24 of the Subcontract including clause 24.5;
(d) the repeated complaints by H. Troon in writing about the progress of the Varied Works and its resourcing of those works;
(e) the specific complaints by H. Troon in writing about Obsidian’s failure to comply with the Construction Program;
(f) the absence of any meaningful response from Obsidian explaining its failure to meet the Construction Program or to resource the carrying out of the Varied Works to achieve compliance with the Construction Program;
(g) H. Troon’s repeated requests for a revised program from Obsidian explaining when Obsidian considered it would be able to complete its works and how it proposed to achieve this;
(h) the absence of any meaningful response from Obsidian in response to those requests;
(i) the incomplete state of the Varied Works as at 23 March 2021.
46The alleged breach identified in the Show Cause Notice is Obsidian’s ‘fail[ure] to proceed with Works regularly and diligently and in a competent manner including in accordance with the Construction Program’.
47I am satisfied that having regard to the contextual scene, a reasonable recipient of the Show Cause Notice in Obsidian’s position would have understood the specified breach to be a failure to proceed with the Varied Works regularly and diligently in accordance with the Construction Program.
48What is more, Obsidian itself understood it. It replied, in an email later in the day it received the Show Cause Notice – 23 March 2021 – saying, amongst other things:
Obsidian wholly rejects the allegations that HTroon have put forward alleging breaches of contract by Obsidian Roofing.
If there exists such breaches, HTroon are required to prove them with evidence, otherwise this shall deemed to be unsubstantiated. HTroon have 5 business days to provide Obsidian with any evidence for breaches of contract.
Obsidian have worked diligently on this project since the beginning despite multiple failures from Htroon to deliver compliant steel structures as per architectural drawings and engineering drawings. Some of these images of the roof have already been demonstrated to Htroon, to which Htroon have not provided any feedback to why they have delivered non-compliant work as per Australian Standards or per architectural and engineering drawings.
49This shows that Obsidian understood what the specified breach was, because it directly challenged the allegation that it had not worked diligently.
50This is similar to what occurred in Hometeam. There, McColl JA found that the builder’s response showed he understood the assertion in the Notice of Default in that case, at [154]:
It is relevant, however, to note that while Mr Goulding’s response to service of the Notice of Default was to raise what, to my mind, were technical quibbles with its wording, it is clear from the balance of his 24 July letter that he understood the assertion in the Notice of Default. He sought both to challenge the proposition there had been any relevant delay as well as to assert what work had been done between 12 – 20 July and what work was to be undertaken shortly, by way of an assertion that “the alleged breach has been remedied”.
51The Show Cause Notice uses general language, but I am satisfied that it contains sufficient detail to be a valid show cause notice.
52Clause 24.5(b) of the Subcontract states that a substantial breach includes:
where the Subcontractor…fails to proceed with the Works regularly and diligently and in a competent manner including in accordance with the Construction Program;
53In specifying the alleged breach, the Show Cause Notice replicates clause 24.5(b) in its entirety. It clearly identifies the contractual provision relevant to the alleged breach: which is that there had been a failure to act diligently.
54On many occasions before sending the Show Cause Notice, Troon had communicated its concerns to Obsidian regarding Obsidian’s lack of progress on a number of work items, and its concerns about a lack of sufficient resourcing (a related issue, as without sufficient resourcing, progress is likely to be slower.)
55In accordance with the Subcontract, Obsidian was told to show cause as to why the work listed in the Show Cause Notice should not be taken away.
56As I understand, one of Obsidian’s submissions is that that the Show Cause Notice was invalid on the basis that it demanded all the work listed be done in 5 (business) days, or that Troon did not have the right to rely on it because it included that demand. Obsidian’s final Defence refers to the Notice as a ‘purported Show Cause Notice’ at [16].
57The Show Cause Notice had a ‘hybrid quality’ (as Troon conceded) as it both requested Obsidian show cause in writing, and complete the listed works by 5.00 pm on 30 March 2021.
58Clause 24.1 does not include provision for a show cause notice to require works to be completed.
59Obsidian argued, and I accept, that there was far more unfinished work listed than could have been done in 5 business days. Counsel for Troon accepted it would have been ‘miraculous’ for the remaining work to be done in that time.
60There is no doubt that the Show Cause Notice included more than ideally it should have. It added something irrelevant to the requirements of a show cause notice, by requiring Obsidian to complete listed work by 30 March 2021.
61However, the fact that the Show Cause Notice included this additional demand does not alter the fact the requirements of a valid show cause notice were included.
62I am satisfied that the Show Cause Notice is a valid notice pursuant to clause 24.1 of the Subcontract.
B. Was Obsidian in substantial breach of the Subcontract for the reasons specified in the Notice when the Notice was sent on 23 March 2021?
63Troon alleges that in breach of the Subcontract, Obsidian did not complete the Varied Works (as defined in the final Statement of Claim) by 19 January 2021, and had failed to proceed with the Varied Works regularly and diligently and in a competent manner including in accordance with the Construction Program, and this was a substantial breach of the Subcontract.
64The evidence establishes that at the time the Notice was sent, the Varied Works were incomplete. James and Riley both gave evidence that the work contained in the Show Cause Notice remained to be completed. They also gave evidence of their frustration (shown in contemporaneous documents) with the slowness of Obsidian’s progress over most of the period it was on site.
65I am satisfied that Obsidian had not proceeded diligently with the Construction Program, as required by the Subcontract. There was no adequate explanation given for the extensive delays in proceeding with the Construction Program, either in the contemporaneous documents, or in the evidence at trial.
66I find that Obsidian did not show reasonable diligence in progressing the work required. By 23 March 2021, the work required to be done under the Subcontract remained seriously incomplete.
67The site was shut down between 22 December 2020 and 13 January 2021. Obsidian claimed that just 7 days shut down had been called for in the Construction Program, and says the fact it was shut down for more than 7 days must be taken into account in considering delays.
68This does not justify the lack of progress by 23 March 2021.
69I am satisfied that Obsidian did fail to proceed with the Works regularly and diligently and in a competent manner including in accordance with the Construction Program as the Works were significantly incomplete at the time the Notice was issued and Obsidian did not provide a reasonable explanation for the lack of progress.
Law
70Similar obligations have been considered in a number of cases.
71In West Faulkner v London Borough of Newham (1994) 71 BLR 1, Brown LJ understood the obligation to ‘proceed regularly and diligently’ to mean [14]:
To proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirement as to time.
72In Hooker Constructions Pty Ltd v Chris’s Engineering Contracting Co [1970] ALR 821, Blackburn J considered a clause which allowed the builder to determine the employment of the subcontractor ‘if he failed to proceed with the works with reasonable diligence or in a competent manner’ and stated that [822-823]:
…a sensible commercial construction…is that the actual extent of work completed is of some significance. “Diligence” in this contract means, it seem to me, not only the personal industriousness of the defendant himself, but his efficiency and that of all those who worked for him.
…
I am entitled to accept, as evidence, that reasonable diligence had not been displayed by the defendant, evidence that the work was, at the material time, seriously incomplete, together with evidence that there were no circumstances preventing the defendant from overcoming the situation.
73McColl JA in Hometeam relied on the reasoning of Blackburn J and stated that there were two ways in which the respondent could demonstrate that the applicant had failed to construct the works with due diligence. [179-181]:
First she could have proved:
(a) the work the appellant was required to carry out under the Contract; as events transpired this included the original contract works and the rectification work;
(b) what, in addition to the contract period, was a reasonable time within which the appellant ought to have executed the original contract works and the rectification work;
(c) that the appellant had failed to execute the work within that reasonable time;
(d) that, to the extent the appellant proffered explanations of why the work had not been executed within that reasonable time, those explanations were unacceptable.
…
Secondly, in my view, the respondent was also entitled to seek to prove lack of due diligence by establishing a case of delay in progress during construction. This appears from both Stubbs and Hooker. On this basis she could have established a failure to carry out a reasonable amount of work by a given time; that that period of time be measured by reference to all the work to be performed under the Contract or, in absolute terms, by reference to a lack of activity on site over a significant period that could not be satisfactorily explained. The onus of proving lack of due diligence was on the respondent. If the facts established by the respondent are capable of giving rise to an inference of lack of due diligence, the appellant may discharge any evidentiary onus that may pass to it, by explaining why the work progressed at that rate: see Hobbs. That evidence should be “sufficient … to turn the scale”: Brady v Group Lotus Car Cos plc [1987] 3 All ER 1050 at 1059 (CA) per Mustill LJ.
74Obsidian also submits that until various structural and design faults that Troon needed to fix were done, it was unable to complete the work it was to do.
75I am not satisfied that any of the matters it relies on caused the significant lack of progress it had shown by 23 March 2021.
76The onus lay with Troon to provide evidence to support an inference that Obsidian had failed to proceed regularly and diligently and in a competent manner in accordance with the Construction Program. It has done that. It is then for Obsidian to demonstrate that there is a reasonable explanation for its failure or there are external circumstances explaining the lack of progress. It has not done that.
77I agree with Troon’s submissions ([49] – [64]):
Obsidian has not established that the slow progress of the Varied Work and the seriously incomplete state of those works at the 23 March 2021 was a consequence of factors for which it was not responsible.
Obsidian claims it delayed in completing some aspects the Varied Work by structural defects and incomplete structural works that, it says, H. Troon was responsible for. Obsidian relies on two such alleged structural defects or incomplete structural works:
(a)a flashing detail at the bottom of the Aramax cladding that is said not to have been to the “required standard set by the architect” in appearance;
(b)the lack of a fibre cement substrate said to have prevented completion of flashing to the west elevation Aramax wall.
Obsidian also appears to claim it was delayed in carrying out the north wall Aramax cladding by H. Troon’s failure to approve Obsidian’s proposed methodology for the installation of that cladding.
The evidence produced by Obsidian at trial does not support its these claims.
The evidence produced by Obsidian in support of each of them is dealt with below.
Aramax flashing detail
No evidence was led by Obsidian that the Aramax flashing detail was not to the “required standard set by the architect” in appearance or in any other respect.
Vague evidence was given by Mr DeWit that he had made suggestions to the architect to improve an unspecified Aramax flashing detail and that this suggestion was agreed to by the architect.
When asked by Her Honour how much the process of changing the flashing detail had delayed the project, Mr DeWit initially responded that he could not be certain. After prompting by Dr Shao and being taken to several emails, Mr DeWit revised his answer to say that the process of changing the flashing detail delayed the project by “at least a week” and then he further revised his answer to say that it may have been ”several weeks”.
Taken at its highest then, the evidence relied on by Obsidian establishes only that it was delayed “several weeks” because of a design change to the Aramax flashing that it initiated.
It called no admissible expert evidence that would tend to establish that the design change was required because of deficiencies in the work of H. Troon or its agents.
Fibre cement (‘FC’) sheet
The FC sheet that Obsidian complained had not been installed by H. Troon is highlighted in the following snapshot from “Detail 4 West Wall Junction Detail” in architectural drawing A4-101 at CB 225:
While H. Troon acknowledges that it was its responsibility to install the FC sheet, the evidence shows Obsidian’s work to the west wall Aramax was never sufficiently advanced to permit that to be done.
Mr De Wits evidence under cross examination was that a necessary precondition for the placement of the FC Sheet by H. Troon was Obsidian first cutting the rake of the West wall Aramax and that Obsidian never completed cutting the rake of the West wall during its time onsite.
This evidence thus shows that it was the slow progress the installation of the west wall Aramax by Obsidian that delayed H. Troon’s installation of the FC sheet not, as pleaded by Obsidian, the failure by H. Troon to install the FC Sheet that delayed the west wall Aramax fashing.
North Aramax wall methodology
The evidence is that by email on 9 March 2021 Obsidian proposed a new method for placement of the north wall Aramax involving the construction of scaffolding and that H. Troon’s project manager Mr Pascoe responded by email on 11 March 2021 saying that he was happy with the scaffold option and requesting details on how Obsidian was going to fix the scaffolding to the existing framing and how they were going to protect the existing roof as well as offering H. Troon’s crane to assist with the installation of the north wall Aramax.
There is no evidence to the effect that H. Troon withheld its approval for the proposed new methodology or that Obsidian was delayed in installing the north wall Aramax by such approval being withheld.
C. Should the Subcontract be construed such that Obsidian had 35 working days to complete the Varied Work, dating from after the last structural component that Troon was responsible for had been completed?
78Obsidian pleads at [14] of its final Defence:
(a) Even if the plaintiff has removed the Pergola roof from Paragraph 11 of the Statement of Claim, it does not change the requirement under the Construction Program, in that, Obsidian has 35 working days from which the last structural component is completed to fulfill its contractual obligations.
(b) 35 working days past the 6th of April 2021 is the 25th of May 2021. Obsidian under the Contract was entitled to at least the 25th of May 2021 to complete the works, assuming the last part of any structural requirements from Htroon was completed on the 6th of April 2021.
(c) The fibre cement sheeting substrate under the cappings was the responsibility of Htroon and this work was not completed even at the time of the Take Out Notice was issued. Assuming this was also completed on or around the 6th of April, then Obsidian would be entitled to complete the works by the 25th of May 2021.
79Obsidian submitted that the time for Obsidian to complete the work it was to do under the Subcontract had not been reached on 23 March 2021 when the Show Cause Notice was served, or when it was required to stop working.
80It said that Troon had not completed the structural steel erection it was required to attend to before Obsidian started work on 20 November 2020 (the date set out in the Construction Program). Obsidian submitted that the structural steel erection was not completed until 6 April 2021, at the earliest.
81Obsidian effectively submits that Troon was meant to build every part of the structure before Obsidian started. Instead, Troon built some of it, and Obsidian worked on that, and then it did some more and Obsidian worked on that, with the program adjusted constantly.
82However, Obsidian was required to proceed diligently with what it could do. The fact that Troon had minor parts of the structural steel erection still to complete, did not justify Obsidian’s general failure to progress.
D. Was there an oral agreement to extend the time that Obsidian had to complete its work?
83Obsidian also submits that there was an oral agreement to extend the time Obsidian had to complete the work.
84The Construction Program called (at line 129) for a 35 day period for roofing and wall cladding work by Obsidian that was said to commence by Monday, 23 November 2020 and to end by Tuesday, 19 January 2021.
85Obsidian was inducted on the site in mid-November, and commenced work on or before 23 November 2020.
86Obsidian claimed that an agreement had been made extending time for completion until 35 days after Troon rectified ‘all structural and design faults’. It says this never occurred – so Obsidian was not in breach by not completing the work.
87Obsidian claimed that in mid-November and early to mid-December 2020, two site meetings occurred with discussions leading to an alleged ‘Amended Completion Date Agreement’ extending the completion date of the Subcontract indefinitely. The meetings were said to have been between Riley and Tony whereby the original completion date under the Subcontract is said to have been ‘amended to a future date, where that future date would be the date on which the Plaintiff completed and rectified all structural and/or design faults plus the period of 35 working days as provided for in the Construction Program’.
88Obsidian further pleads, at [14] of its final Defence (in the Counterclaim section), that this ‘Amended Completion Date Agreement’ was confirmed on or about 21 January 2021:
14.On or about 21 January 2021 due to the extended Site lockdown as pleaded in paragraph 12, both Obsidian and H. Troon again confirmed that both parties were bound by the terms of the Amended Completion Date Agreement.
Particulars
This confirmation took place on or about the 21 January 2021 in a meeting on Site between Obsidian’s General Manager, Mr Cary De Wit, and H. Troon’s Project Manager, Riley Pascoe, and it was orally agreed that even though H. Troon had closed the Site for an extended period of time being an extra 14 days over the Christmas period in 2020, the terms of the Subcontract did not need to be amended because the terms of the Amended Completion Date Agreement provided Obsidian with sufficient time to complete the Works.
89Obsidian alleges that a highly specific agreement about the extension of time was made. The evidence does not support it. I reject Obsidian’s claim of an oral agreement to extend time for it to complete its work to 35 business days after Troon ‘completed and rectified all structural and design faults’.
90The agreement was pleaded as having been made between Tony (as director of Obsidian) and Riley (Project Manager for Troon). It was said to have been confirmed by Obsidian’s ‘General Manager and Licensed Plumber’, Cary, and Riley (between 15 December 2020 and March 2021).
91No evidence supporting such an agreement was led by Obsidian, and Riley denied any such agreement.
92I am not satisfied there was an oral agreement to extend the time Obsidian had to complete its work.
93In any event, the Show Cause Notice breach relied on by Troon is the failure by Obsidian to proceed with its work regularly and diligently, as opposed to completing it.
E. No cause was shown
94Showing cause, generally, is a matter of communicating.
95Obsidian did not show cause in writing within five days, or at all. It did not even communicate a program as to how it would finish the works, or give a timetable of when it expected to, or ask for an extension of time.
96Even during the course of the trial, Obsidian did not establish that there were reasons the work listed should not have been taken away from it (i.e., it did not ‘show cause’).
97Counsel for Troon submitted that if Obsidian had completed all the works listed in the Show Cause Notice by 30 March 2021, that would have been one way to ‘show cause’.
98It had not completed them, although it clearly put significantly more resources on board and did a lot of work in the week between 23 March 2021 and 30 March 2021. (Which also highlighted the lack of resources it had dedicated to the job previously).
99Accordingly, Troon was entitled to issue the Take Out Notice and remove the balance of the work under the Subcontract from Obsidian.
F. Debt claim for work done by third party instead of Obsidian
100Clause 24.2 of the Subcontract allows Troon to take out of the hands of Obsidian the whole of the work remaining to be completed, if cause has not been shown within time.
101No cause was shown, and on 30 March 2021, Troon issued the Take Out Notice.
102Clause 24.4 of the Subcontract provides:
24.4 If the cost incurred by H. Troon is greater than the amount which would have been paid to the Subcontractor if the work had been completed by the Subcontractor, the difference shall be a debt due from the Subcontractor to H. Troon.
103Clancy was called in to complete the work.
104Clancy sent an invoice on 20 June 2021, for $211,014.66. On 25 August 2021, (less a $5,500 ‘discount’ applied) $205,514.66 was paid.
105Obsidian admitted that the vast majority of Clancy’s work was within Obsidian’s scope of work. The parties provided the Court with the following note of their positions regarding the work done by Clancy:
Obsidian admits that all of the work set out in the daily task list at CB 2977 - 2982 prepared by Tony Hughes of C & L Roofing was completion of work that was within Obsidians scope of works under its Subcontract save for the following items at the top of CB 2981 said to have been carried out on the 6th and 7th of May 2021:
Thurs 6th Toby 7-4, Barry 7-4, Logan 7-4 : DANPAL ROOF
Fri 7th Barry 7-3.30 …Finish off DANPAL.
The parties agree that these entries relate to the roofing of the pergola on the east side of the gym. Obsidians position is that the DANPAL was different type of polycarbonate roofing for the pergola and that the cost (or time?) taken to install the DANPAL was different to that which would have been taken installing the roof that Obsidian says was specified in the Subcontract.
P disagrees – polycarbonate is polycarbonate
106Obsidian’s defence on this point was very difficult to follow. It has not established that the DANPAL elements Clancy worked on were not part of the scope of works.
107I am satisfied that all of the work done by Clancy shown in its invoice was required to complete the scope of works, and Troon is entitled to be paid the money it paid Clancy, as a debt.
II. VARIATION ISSUES
108The parties agreed that there were a number of variations to the Subcontract reducing the amount to be paid to Obsidian, relating to credits for the supply of various items and materials including Aramax, by Troon.
109Two disputes arose, relating to how much Troon was entitled to due to Obsidian not supplying and installing Danpalon.
110Originally, Obsidian was to supply and install Danpalon as part of its scope of works (Item 20 of the Subcontract Reference Table and Schedule 2 to the Subcontract). The circumstances in which the supply and installation were removed from what Obsidian was to do is relevant to the issue of damages.
111Troon claims that variations were issued, pursuant to clause 21.2 of the Subcontract, which removed the Danpalon supply and installation from Obsidian’s scope of work. It relies on emails sent on 10 and 29 November 2020 and 12 March 2021.
112Troon claims that Obsidian agreed to the Subcontract price being reduced by $132,293.20 in relation to the removal of its obligation to supply Danpalon, and by $10,000 in relation to the removal of its obligation to install Danpalon.
113It is difficult to follow Obsidian’s argument as to why it says Troon is wrong. It appears to (as its final position) submit that it agreed that Troon would be responsible for the Danpalon supply and installation instead of Obsidian. However, it submits that this agreement did not amount to a variation under clause 21.2. It argues that as a result of an email sent by James Troon on 15 March 2021, the Danpalon supply and installation was removed pursuant to clause 24.6 of the Subcontract. As a result, it submits that the removal of the Danpalon supply and installation should be valued in accordance with clause 24.6.
114I am satisfied that Troon has established its claim about these variations. Therefore, in calculating damages, the Subcontract price is to be reduced by $132,293.20 and $10,000 to account for the removal of the Danpalon supply and installation from Obsidian’s scope of works.
115Clause 21.2 provides:
H. Troon may at any time direct the Subcontractor to carry out a variation to the Works (“Variation Notice”).
116Clause 21.8 provides:
Where this agreement provides for a valuation under this clause, H. Troon (and if required in consultation with the Superintendent under the Head Contract) will value the relevant work by reference to:
a)prior agreement in writing;
b)any applicable rates or prices prescribed in this agreement;
c)rates or prices in any priced BOQ or schedule of rates, or prices applying to the Head Contract to the extent that it is reasonable to use them; or
d)reasonable rates or prices as otherwise determined by H. Troon in consultation with the Superintendent under the Head Contract.
117Clause 24.6 provides:
H. Troon may, at any time in its absolute discretion by notice in writing terminate this agreement in whole or in part, and H. Troon will be liable to the Subcontractor for:
a)the value of any Works performed by the Subcontractor in accordance with this agreement as at the date of termination;
b)the cost of goods and materials properly ordered as at the date of termination for which the Subcontractor has paid or which it will be bound to pay provided that:
i) the value of the goods or materials is not included in the amount payable under clause 24.6(a) above; and
ii) title in the goods and materials will vest in H. Troon upon payment.
118On 10 November 2020, Riley emailed Tony:
We are happy to pay for the Danpalon/ Aramax orders but we want to be able to make margin on the orders. Can you please work out the required qtys for both aramax and Danpalon and forward over the quotes and we will make payment.
Once you send over quotes we will work out your revised contract value and go from there.
Can you please send over quotes today and we will start getting the orders underway.
119On 29 November 2020, Riley emailed Tony, saying, relevantly:
Please see attached contract summary for Delacombe Primary factoring in credits and variations.
We will be making payment of Aramax cladding tomorrow for delivery by the end of the week.
120The summary provided for a reduction in price from the tender price, of $132,293.10, for the Danpalon supply.
121On 1 December 2020, Tony emailed Riley:
Most of those have worked out really well and I appreciate the help.
Just with the Danpalon, that's like way above my original estimate, of $93,090 exc GST, which included labour as well. It's nobody's fault really, this is the problem of pricing Danpalon. So during tender Shane asked me to price this and we only had like 2 days to submit a tender option. Danpal wouldn't even be able to properly price it in that short period, so I used previous projects to estimate. But I also knew that Danpal potentially has a lot of variance between their products depending on the situation. I've seen anywhere between $100 to $400 per sq metre just for material. On this one, this even exceeds that at around $500 per sq metre. In this case, I took on the design risk and it hasn't worked out well.
As it stands, the amount for labour to install Danpal and Aramax is around $29k:
So as a package, it's not a complete disaster. I'm not sure how much margin you guys have in the Danpalon, but comparing it to the other parts, I can't imagine it's a lot. But for now, I'm ok with just keeping all of this as it is. It's not a disaster yet and it's just bad luck with the Danpalon. But I can't lose any more margin with the wall packages.
122On 13 January 2021, Tony emailed Riley:
…
The East elevation cannot begin until the lower roof on that is done. I’ve got a question regarding that, is that being done in polycarbonate or Danpal? Tim has said it’s in Danpal, however in my contract, it’s still written as polycarbonate, so if it is Danpal, then we’ll have to do a variation. Did the Danpal you’ve already ordered for around $133k include that roof?
123On 7 February 2021, Tony emailed James:
But essentially, we’re happy to break off the Danpalon labour component for $10,000.
124On 12 March 2021, Riley emailed Tony:
Following the failure to comply with H Troon’s instruction to commence works associated with the Danpalon cladding, the Danpalon wall cladding works is no longer included in the Obsidian Roofings contract.
The current resource allocation that you have provided on this project has not been adequate since day 1, Obsidian have committed on a number of occasions to increasing resources to ensure the roofing and wall cladding works are being completed simultaneously, this has not been the case. H Troon have provided Obsidian ample opportunity to show they are capable of completing these works within the reasonable timeframe set at contract time, given the current pressure that has been placed on the program as a result, we cannot proceed under the current arrangement. You commenced on site in early November and we still do not have a completed roof.
125On 13 March 2021, Tony emailed Riley:
…
Obsidian have not failed to commence as per H Troon's instruction. We have lawfully issued a variation that is reasonable and fair in line with the changes that have occurred on this project with regards to the Danpalon. You are not permitted to issue instructions that goes against the contract or the original drawings. It is not a lawful instruction.
If you wish to remove Danpalon from our scope, you are welcome to put forward an offer to Obsidian for our how much that is worth. If we choose to accept, then you may proceed with that element removed from our contract. If you choose to proceed without approval from Obsidian, then you need to pay us for the completed works anyway, as it is part of our contract. Essentially, you will be double paying. If you refuse at the time of completion to pay this obligation, then we’ll just take this to court. This is a black and white situation, I’m advising you on what will happen legally on the various paths you want to take.
126On 14 March 2021, James emailed Tony:
There does not need to be an offer, the amount you have already confirmed as your allowance and rate for danpalon install will be removed from your contract figure, along with the supply costs already removed as you could not provide the material through the required supplier.
127On 15 March 2021, James emailed Tony, copying in Riley and Rod Williamson:
Please be advised in accordance with Clause 24.6 of the subcontract, H.Troon has terminated from the subcontract the installation of Danpalon Wall Cladding to the Southern Elevation of gymnasium.
As no works have commenced in relation to this scope, H.Troon will not be liable for any costs associated with this part of scope.
As no material has been provided for this scope of works by Obsedian, H.Troon will not be liable for any material costs associated.
128In relation to the Danpalon installation, Obsidian puts two alternative arguments.
129First, it submits that it had offered to pay Troon $10,000 if Troon provided the labour required to install Danpalon. However, according to Obsidian, Troon ‘never took the offer up’. So, it says Troon is not entitled to claim for the cost of installation.
130Alternatively, Obsidian argues that the removal of the Danpalon installation from the scope of works should be valued in accordance with clause 24.6. Obsidian claims that Troon has not done this with its claims for variations.
131I do not accept Obsidian’s submissions on these points (which were somewhat confused).
132As Troon submits:
15. Obsidian’s claim that is entitled to payment from H. Troon of $132,293.20 pursuant to clause 24.6 of Contract is misconceived and should be dismissed for the following reasons.
16. Firstly, as set out above, Danpalon supply was removed from Obsidian’s scope under the Subcontract.
17. Secondly, H. Troon did not terminate the Subcontract and so the provisions of clause 24 of the Subcontract are not enlivened.
18. Thirdly, there is no evidence that Obsidian ever incurred any liability for Danpalon to any supplier so it cannot on any view be “bound to pay” any sum for Danpalon.
19. Fifthly, Obsidian has not raised this claim in its pleadings or during the conduct of the case.
133I am satisfied that the emails sent by Riley on 10 November 2020 and 29 November 2020 indicate that Troon was proposing a variation to remove the Danpalon supply from Obsidian’s scope and offering to value this variation by reducing the Subcontract price by $132,293.20.
134Tony’s response on 1 December 2024 stating that he is ‘ok with just keeping this all as it is’ demonstrates his acceptance, of that offer, when read in context.
135Tony’s email of 7 February 2021 was an offer to ‘break off the Danpalon labour component for $10,000’, which valuation was accepted by Troon.
136Clause 21 deals with variations to the Subcontract. The value of a variation can be determined ‘by reference to prior agreement in writing’. Troon is entitled to rely on the prior email correspondence to value the variations.
137As the Subcontract was not terminated or partially terminated, clause 24.6 is not relevant in valuing the Danpalon supply and installation variations. As a result, it is unnecessary to address Obsidian’s arguments regarding the proper interpretation of clause 24.6(b). Further, the Danpalon supply and installation had already been removed as variations by the time Troon’s email of 15 March 2021 referring to clause 24.6 was sent. It had no effect.
138In the circumstances, Troon is entitled to an order that it be paid $178,228.15 plus interest. (This is the relevant figure once the Clancy’s debt, and the variations are taken into account).
EFFECT OF S471B OF THE CORPORATIONS ACT
139The hearing of the trial concluded on 10 October 2024, and judgment was reserved.
140On 24 July 2025, the Court was informed that Obsidian had gone into liquidation. Troon sent an email to the Court, copying in the liquidator of Obsidian (the liquidator), saying relevantly:
…
It has come to our attention that the defendant has been wound-up in insolvency and a liquidator appointed.
We wish to bring this to the court’s attention as this event may trigger a stay by way of section 471B of the Corporations Act 2001 (Cth), unless leave is obtained. Should this be the case, neither party objects to leave being granted and judgement proceeding.
…
141s471B of the Corporations Act 2001 (Cth) provides as follows:
471B Stay of proceedings and suspension of enforcement process
While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:
(a) a proceeding in a court against the company or in relation to property of the company; or
(b) enforcement process in relation to such property;
except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
142On 28 July 2025, the Court emailed Troon and the liquidator, relevantly saying:
… it is her Honour’s preliminary view that an application for leave for judgement to be delivered does not need to be made under s471B of the Corporations Act, as the Court is not a ‘person’ under s471B, and in delivering judgment, it is carrying out a function of the Court, not taking a step in a proceeding as a person: Unilever Australia Ltd v Rosella Foods Pty Ltd [2012] NSWDC 221 at [80]-[81]; Sovereign MF Ltd v Compliance and Risk Services Pty Ltd [2013] VSC 213 at [9].
There are arguments to the contrary (that leave is required in these circumstances).
If either the plaintiff or liquidator considers that leave is required, before judgment can be delivered, please advise of this.
…
143Both Troon and the liquidator advised the Court that they did not consider leave needed to be obtained for the reserved judgment to be handed down.
144I consider that when a court delivers a reserved judgment, it is performing a function of the court. Delivering that judgment does not constitute ‘a person’ proceeding with a court proceeding.
145In Sovereign MF Limited v Compliance and Risk Services Pty Ltd [2013] VSC 213, after the proceeding had been listed for judgment, but before the decision was handed down, the plaintiff company went into administration.
146Lansdowne AsJ said as follows at [10], referring to s440D(1) of the Corporations Act:
The section prevents a step in litigation concerning a company in administration at the instance of the company, if the litigation is in relation to the property of the company, or at the instance of the other party if the company is the defendant- it does not prevent the delivery of judgment in respect of an application already heard, which is a step taken by the Court, not by a party. The solicitors for the plaintiff advise that they have been instructed by the solicitors for the administrator not to take any further step, including attending to receive judgment. On that basis I have indicated I will excuse their attendance, and that of the defendants if they wish.
147I agree with her Honour’s analysis, which is also the approach taken in many other cases.
148Accordingly, I deliver these reasons. No appearances have been required, and so the parties have not needed to take a step in the proceeding.
ORDERS
149I will make the following orders:
(a) Judgment for the plaintiff against the defendant.
(b) The defendant pay the plaintiff $178,228.15 plus interest.
150I allow interest on the judgment debt from 27 October 2021 (the date the proceeding was issued) at the penalty interest rate of 10%, pursuant to s60 of the Supreme Court Act 1986 (Vic), up until the date the final order is made. (This totals $67,433.72 as at 8 August 2025.)
151My preliminary view is that Troon has been successful in its claim, and so the usual order as to costs should follow, that the defendant pay the plaintiff’s costs on the standard basis, to be taxed in default of agreement.
152I will make that order on 22 August 2025, unless either the liquidator or Troon advise my chambers by 4pm on 18 August 2025 that they will seek a different order as to costs.
153If either Troon or the liquidator seek a different order as to costs, then leave to proceed under s471B of the Corporations Act will first need to be sought from the Supreme Court of Victoria or the Federal Court, as filing the necessary submissions as to costs will constitute ‘a person’ taking a further step in this proceeding, and only a ‘capital C’ ‘Court’ can give the necessary leave under s58AA of the Corporations Act.
Certificate
I certify that these 41 pages are a true copy of the reasons for decision of Her Honour Judge Marks delivered on 8 August 2025, revised on 13 October 2025
Dated: 8 August 2025
Felicia Mitropoulos
Associate to Her Honour Judge Marks
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