Mainstream (Aust) Pty Ltd v Gilpip Bayside Projects Pty Ltd - [2013] VSC 610

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST

No. 04899 of 2013

MAINSTREAM (AUST) PTY LTD (ACN 088 304 483)	Plaintiff
v
GILPIP BAYSIDE PROJECTS PTY LTD (ACN 088 010 374)	Defendant

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JUDGE:	VICKERY J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	31 OCTOBER 2013
DATE OF JUDGMENT:	13 NOVEMBER 2013
CASE MAY BE CITED AS:	MAINSTREAM (AUST) PTY LTD v GILPIP BAYSIDE PROJECTS PTY LTD
MEDIUM NEUTRAL CITATION:	[2013] VSC 610

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PRACTICE AND PROCEDURE – Interlocutory Application – Injunction – Action to restrain enforcement of guarantee clause – Contract – Security for Payment clauses – Financial liability while Parties in dispute – Clauses 37.4 and 42.1 of the Australian Standard General Conditions of Contract AS4000 – 1997

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr B Archer (Solicitor)	Brendan J Archer
For the Defendant	Mr G Hellyer	Nevett Ford Lawyers

HIS HONOUR:

This is an application by the Plaintiff, Mainstream (Aust) Pty Ltd (“Mainstream”), for an interlocutory injunction to restrain the Defendant, Gilpip Bayside Projects Pty Ltd (“Gilpip”), from having recourse to a bank guarantee provided under a building contract in the sum of $73,000.

By an agreement dated 12 July 2010 (the “Contract”), the Defendant, Gilpip, engaged the Plaintiff, Mainstream, to refurbish an existing building and construct additional residential accommodation for Gilpip at a site located at 17 to 31 Tanti Avenue, Mornington and undertake associated works (together known as the “Macartan’s project”) for the agreed sum of $9,649,176.

The Contract incorporated the Australian Standard General Conditions of Contract AS4000 -1997 (the “General Conditions”).

Pursuant to the Contract the date for completion of the works was 15 September 2011. The present position is that, save for some relatively minor maintenance and/or defect items, the works have been completed.

A superintendent (the “Superintendent”) was appointed under the Contract.

In addition to the sum of $9,700,000 which Gilpip has paid to Mainstream for the contract works, Mainstream has received payment of approximately $2.8 million for carrying out reinstatement works following significant damage to the works which was caused by a fire on or about 23 October 2011.

The Contract has given rise to a complex web of litigation. Mainstream has initiated three separate sets of proceedings in this Court each involving relatively small sums of money.

This proceeding is an application by Mainstream to restrain the Defendant Gilpip from having recourse to a bank guarantee in the sum of $73,000, which is the amount Gilpip claims the Plaintiff is required to pay to it pursuant to the final certificate, dated 16 August 2013 issued under the Contract by the Superintendent.

Background

By notice dated 9 July 2012, pursuant to clause 42.1 of the General Conditions of Contract, Mainstream gave notice of dispute in relation to the Superintendent’s rejection of it’s claim for extensions of time for completion and in respect to the Superintendent’s calculation of liquidated damages. At a conference on 20 July 2012 Mainstream and Gilpip entered…

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] VSC 610
Decision Date: 13 NOVEMBER 2013

CaseChat Overview and Summary

The case of Mainstream (Aust) Pty Ltd v Gilpip Bayside Projects Pty Ltd was heard in the Supreme Court of New South Wales. The dispute arose between Mainstream, the contractor, and Gilpip, the principal, regarding the enforcement of a guarantee clause within the context of an ongoing building contract. The matter involved an interlocutory application by Mainstream to restrain Gilpip from enforcing a guarantee clause that would compel Mainstream to provide financial security as a condition for continuing work under the contract. The application was predicated on the parties' ongoing dispute over the existence of an act of prevention, which was claimed by Mainstream to have occurred, thereby excusing its performance.

The primary legal issues before the court involved the interpretation and application of the security for payment clauses under AS4000-1997, specifically Clauses 37.4 and 42.1. The court was required to determine whether Gilpip was entitled to enforce the guarantee clause under the circumstances presented, particularly in light of the parties' dispute over an act of prevention. Additionally, the court needed to consider the broader implications of enforcing the guarantee on Mainstream's financial obligations and the practical consequences for the continuation of the construction project.

The court examined the contractual terms and found that Clause 37.4 of AS4000-1997 provided for the principal's right to require the contractor to provide security in the event of a dispute, while Clause 42.1 outlined the process for resolving such disputes. The court concluded that the guarantee clause was enforceable and that Mainstream's application to restrain its enforcement was not justified, given the contractual provisions and the lack of a clear legal basis for excusing compliance with the guarantee requirement. The court emphasised that the dispute over an act of prevention did not absolve Mainstream of its obligations under the contract.

The final orders of the court dismissed Mainstream's application for an injunction, allowing Gilpip to proceed with enforcing the guarantee clause as per the contractual terms. The court's decision underscored the importance of adhering to contractual obligations and highlighted the potential consequences for contractors who seek to avoid financial security requirements in the midst of contractual disputes.

Orders