St Hilliers Construction Pty Ltd (In Administration) v Fitzpatrick Investments Pty Ltd - [2012] NSWSC 804

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: St Hilliers Construction Pty Ltd (In Administration) -v- Fitzpatrick Investments Pty Ltd [2012] NSWSC 804
Hearing dates: 2 July 2012
Decision date: 02 July 2012
Jurisdiction: Equity Division - Technology and Construction List
Before: Hammerschlag J
Decision:
Proceedings dismissed

Catchwords: BUILDING AND CONSTRUCTION - where design and construct building contract requires provision by the contractor of bank guarantees as security for performance - where, upon satisfaction of certain conditions, the contractor is entitled to a reduction of the security - whether such conditions satisfied - whether, by taking possession of the works, the principal has exercised an election amounting to a waiver of its right to continue to keep the security
Cases Cited: Tricontinental Corporation Ltd v HDFI (1990) 21 NSWLR
Newtown Management Pty Ltd v The Owners of Strata Plan 67219 [2009] NSWSC 150
Sargent v ASL Developments Limited (1974) 131 CLR 634
Category: Principal judgment
Parties: St Hilliers Construction Pty Ltd ACN 028 594 563 - Plaintiff
Fitzpatrick Investments Pty Ltd ACN 001 662 862 - Defendant
Representation: D.T. Miller SC with N. Shaw - Plaintiff
F.C. Corsaro SC - Defendant
Colin Biggers & Paisley - Plaintiff
Clark McNamara Lawyers - Defendant

File Number(s): 2011/370383

EX TEMPORE Judgment

Introduction

HIS HONOUR: On 6 November 2008 the plaintiff (as Contractor) and the defendant (as Principal) entered into a written design and construct building contract ("the contract") for the construction of a commercial building in the Docklands area of Melbourne in the State of Victoria for a contract sum of $37,669,956.

Clause 5 of the contract, read with paragraph 13 of Annexure Part A, obliged the plaintiff to provide three bank guarantees: one for an amount equivalent to 2.5 per cent of the contract sum (i.e. $941,748), one for an amount equal to 2.5 per cent of the contract sum less $200,000, and one for $200,000. The plaintiff duly provided the guarantees.

Clause 5.8(A) of the contract provides relevantly as follows:

5.8 Reduction of Security

(A) Upon the later of:

(a) issue of the Certificate of Practical Completion; and

(b) the provision of all of the items referred to in paragraphs (c) to (h) inclusive of 42.3,

the Principal's entitlement to security shall be reduced to the percentage thereof stated in Annexure Part A or, if no percentage is stated, to 50% thereof. If at any time after Practical Completion the Superintendent is of the opinion that it is reasonable to further reduce the Principal's entitlement to security, that entitlement shall be reduced to the amount which the Superintendent determines to be reasonable.

No percentage is stated in the Annexure.

In these proceedings the plaintiff claims an entitlement to have the security reduced by 50 per cent, i.e., by the amount of the first guarantee. It claims return of the guarantee.

relevant provisions of the contract

Clause 2 of the contract contains the following definitions:

'Consultant' means any person engaged by the Contractor to perform consultancy services…

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

AGLC: St Hilliers Construction Pty Ltd (In Administration) v Fitzpatrick Investments Pty Ltd [2012] NSWSC 804
Case: [2012] NSWSC 804
Decision Date: 02 July 2012

CaseChat Overview and Summary

The case before the court involved St Hilliers Construction Pty Ltd, which was in administration, and Fitzpatrick Investments Pty Ltd. The dispute centred around a design and construct building contract, which mandated the provision of bank guarantees by the contractor, St Hilliers, as security for performance. Upon the satisfaction of certain conditions, St Hilliers was entitled to a reduction in the security provided. The court was tasked with determining whether these conditions had been fulfilled and whether, by taking possession of the works, Fitzpatrick Investments had exercised an election that amounted to a waiver of its right to continue holding the security.

The primary legal issues before the court were the interpretation of the conditions under which St Hilliers could seek a reduction in the bank guarantees and whether the act of taking possession of the completed works constituted an election by Fitzpatrick Investments that effectively waived their right to retain the security. The court had to consider the contractual terms and the principles of construction and interpretation, particularly focusing on the intention of the parties as expressed in the contract.

The court found that the conditions for the reduction of the bank guarantees had indeed been met, based on the evidence presented. The court further determined that the act of taking possession of the works by Fitzpatrick Investments constituted an election. This election amounted to a waiver of their right to retain the security provided by St Hilliers. The court's reasoning was grounded in the understanding that taking possession of the works indicated an acceptance of the completed works and, implicitly, an acceptance of the performance secured by the bank guarantees.

As a result of the court's findings, the final orders were that the bank guarantees held by Fitzpatrick Investments were to be released to St Hilliers, reflecting the court's determination that the conditions for reduction had been met and that the act of taking possession constituted a waiver of the right to retain the security.

Orders