State Concrete (NSW) Pty Ltd v Elpara Pty Ltd

[2005] NSWSC 1008

CITATION:	State Concrete (NSW) Pty Ltd v Elpara Pty Ltd [2005] NSWSC 1008
HEARING DATE(S):	27 September 2005
JUDGMENT DATE :	27 September 2005
JURISDICTION:	Equity Division Technology & Construction List
JUDGMENT OF:	Palmer J
DECISION:	Application to strike out Defence to Cross Claim dismissed.

CATCHWORDS:	STRIKE OUT - BUILDING CONTRACT - CONSTRUCTION - Whether arguable case that contract not an "entire contract".
CASES CITED:	Nguyen v Luxury Design Homes Pty Limited [2004] NSWCA 178
PARTIES:	State Concrete (NSW) Pty Ltd - Plaintiff/Cross Defendant Elpara Pty Ltd - Defendant/Cross Claimant
FILE NUMBER(S):	SC 55037/05
COUNSEL:	D.J. Catts - Plaintiff/Cross Defendant D. Smallbone - Defendant/Cross Claimant
SOLICITORS:	Summit Law - Plaintiff/Cross Defendant Birch Partners - Defendant/Cross Claimant

LOWER COURT JURISDICTION:

Ex tempore

1    The Defendant/Cross Claimant seeks to strike out the Defence to the Cross Claim in these proceedings on the basis that the essential position of the Cross Defendant is so demonstrably unarguable as to justify the Defence being struck out at this stage rather than proceeding to trial. Of course, the hurdle that an applicant in a strike out application has to surmount in order to succeed is an extremely high one. One has to show that the case as pleaded is so clearly unarguable as not to warrant the case proceeding to trial.

2    The essential question which requires resolution for the purposes of the strike out application is whether there is a sufficiently arguable case to be made by the Defendant to the Cross Claim that the building contract, the subject of these proceedings, is not an entire contract, as that concept is understood in law: i.e., if the builder does not complete the work in accordance with the contract, is the builder entitled to be paid nothing, or is this a contract under which the builder is entitled to payment for such work as was done prior termination by the owner?

3    Mr Smallbone of Counsel, who appears for the Defendant/Cross Claimant, urges that the Defence sought to be put forward by the Cross Defendant that the contract is not an entire contract is unarguable and he relies upon the decision of the Court of Appeal in Nguyen v Luxury Design Homes Pty Limited [2004] NSWCA 178.

4    In that case there was a contract in which clause 24 provided for what was to happen upon the termination of the building contract due to the fault of the contractor. The clause is very similar to the clause in the present contract, which is clause 26. However, Mr Smallbone points to a dissimilarity in wording between clause 26 of the present contract and clause 24 of the contract in the Luxury Design Homes case. He says that in the present case clause 26(a) provides that if specified occurrences happen:

"… THEN the Owner may, without prejudice to any other rights or remedies, by notice by registered mail, determine the employment of the Builder under this Contract. …"

Clause 26(b) provides that:
"In the event that the Owner determines the employment of the Builder in accordance with clause 26(a) the Owner may thereupon engage another Builder …"

Then follow provisions for adjustment between the owner and the builder for building work done prior to termination.

5    Mr Smallbone says that clause 26 of the present contract, unlike clause 24 in the Luxury Design Homes contract, acknowledges that the owner may terminate under the common law rather than solely upon the occurrence of events specified in clause 26(a). He says that if termination under the common law occurs then there has not been a termination "in accordance with clause 26(a)" within the meaning of clause 26(b), so that a termination under common law does not give rise to rights of adjustment under clause 26(b).

6    In my opinion it cannot be said that the proposition to the contrary is unarguable to such an extent that the case should not proceed to a hearing. In my view, a permissible construction of the words of clause 26(a) which are said to be different from clause 24 in the Luxury Design Homes case is that the words "without prejudice to any other rights or remedies" may mean simply that the owner may terminate but does not lose any accrued rights or remedies under the contract that have become available by reason of previous breaches of the contract by the builder.

7    I do not suggest that this is necessarily the correct construction but it is a possible construction. Generally, I do not think that the wording of clause 26(a) and (b) is so remarkably different from the wording of clause 24 in the Luxury Design Homes case as to demonstrate that the parties in the present contract had a quite different and opposite intention from the intention of the parties as construed by the Court in the Luxury Design Homes case.

8    In short, I am satisfied that there is a sufficiently arguable case presented by the Defendant to the Cross Claim to warrant the matter proceeding to a final hearing. I note in this respect that the final hearing is scheduled for some two months time.

9    Accordingly, I decline to strike out the Defence to the Cross Claim on the basis that no arguable case has been demonstrated.

10    I direct that by 4pm on 7 October 2005 the Plaintiff notify the Defendant in writing of the facts and circumstances upon which the Plaintiff relies in alleging that the subject contract is not an entire contract.

11    I direct that the Plaintiff file and serve a Statement of Claim and an Amended Defence to the Cross Claim by 4pm on 11 October 2005.

12    I direct the Defendant to file and serve a Defence to the Statement of Claim and an Amended Cross Claim, if any, by 4pm on 25 October 2005.

13    I direct the Plaintiff to file and serve all affidavits on which it intends to rely by 4pm on 11 October 2005.

14    I direct the Defendant to file and serve all affidavits in response by 4pm on 1 November 2005.

15    I vary the provisions of paragraph 9 of the usual Order for Hearing in the Technology & Construction List by requiring the parties’ legal representatives to deliver their outlines of submissions by 4:30pm on 2 December 2005.

16    I direct the Defence to the Cross Claim to be verified by a further affidavit.

17    The Defendant/Cross Claimant seeks costs of today. The Plaintiff/Cross Defendant seeks an order that costs be reserved. The Defendant/Cross Claimant's application to strike out the Defence to the Cross Claim has failed but, on the other hand, much time has been spent today in making sure the matter is ready to proceed to a hearing. Many of those difficulties have been caused by the Plaintiff's failure to comply with previous directions and the lateness with which it filed a Defence to the Cross Claim.

18    I think that the Plaintiff should have its costs of the application to strike out and the Defendant/Cross Claimant should have its costs otherwise occasioned today by reason of the interlocutory steps necessary to bring the matter to readiness for hearing.

19    It seems to me that a fair apportionment of those costs by reference to the time spent in argument and consideration today would be that 50% of the costs of today are attributable to the strike out application and 50% of the costs are attributable to other matters required to be dealt with. Those are my assessments only for the guidance of the costs assessor.

20    The Defendant/Cross Claimant seeks an order that the caveat which has been lodged by the Plaintiff against the title to the land, pursuant no doubt to the building contract, be removed because the Plaintiff has not, so it is said, complied with an undertaking to prosecute these proceedings with due diligence.

21    I note that the trial is fixed for 12 December and that, despite serious delays in the filing of its Defence to the Cross Claim and breach of the Court's directions on three occasions, the Plaintiff has, in affidavits of its director and its solicitor, given reasons explaining the cause of that delay.

22    I accept those explanations, but that is not to say that I regard the breaches of the Court's directions as of no consequence. I regard them seriously and it is obvious that they have contributed to the expense of conducting this litigation. That will be a matter which will figure in the costs assessment.

23    However, in view of the fact that the failure on the part of the Plaintiff to comply with Court directions has been explained and that the trial is now fixed for 12 December and no immediate prejudice has been demonstrated by the Defendant consequent in the continuation of the caveat, I will not require the removal of the caveat.

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