Tynan Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd
[2001] VSC 493
•20 December 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 8316 of 2001
| Tynan Nominees Pty Ltd (ACN 005 428 151) | Plaintiff |
| V | |
| Australia and New Zealand Banking Group Limited (ACN 005 357 522) | Defendant |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12,17,18 December 2001 | |
DATE OF JUDGMENT: | 20 December 2001 | |
CASE MAY BE CITED AS: | Tynan Nominees Pty Ltd v ANZ Bank | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 493 | |
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Contract – Building Contract – Bank Bond – whether terminated – “Date of Final Completion” – Triable issue – discretion – construction of bond – summary judgment.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G. H. Golvan QC with Mr G. D. Bloch | Fixler & Associates |
| For the Defendant | Mr P. W. Almond QC with Mr J.L. Evans | ANZ Dispute Resolution Group |
HIS HONOUR:
On or about 8 May 1998 the plaintiff, Tynan Nominees Pty Ltd (“the Proprietor”), entered into a building contract with Construction Engineering (Aust) Pty Ltd (“the Builder”) for the redevelopment of the Northcote Plaza Shopping Centre. The contract was in the standard form JCC-F 1994 subject to certain amendments contained in Schedule A. The administration of the contract was entrusted by cl. 5.01.01 (as amended) to the Project Manager, Clifton Project Management & Associates Pty Ltd (“Clifton”) which was to perform the functions of Architect under the JCC-F general conditions.
Pursuant to cl. 10.20 of the building contract the Builder was obliged to provide security for due performance of its obligations under the contract in the sum of $429,000.00. It provided the security in the form of two unconditional bank undertakings given by the defendant, Australia and New Zealand Banking Group Limited (“the Bank”), each for $214,500.00. These undertakings were numbered 50338 and 50339 respectively and each was dated 1 April 1998. These bonds, as I shall call them, took the usual form whereby the Bank unconditionally undertook to pay to the Proprietor on written demand any sum not exceeding the value of the bond. Each contained the following provision:
“The Bank will pay this amount or any part of it to the Principal on demand without reference to the Customer and even if the Customer has given the Bank notice not to pay the money and without regard to the performance or non-performance of the Customer or Principal under the terms of the contract or agreement.”
Each of the bonds provided for its determination upon the occurrence of the first of three stipulated events. The first two events are of no present concern. The third was described as “4.00pm on the 30th day of November, 1998” in bond 50338, and “4.00pm on the 30th day of November, 1999” in bond 50339. These bonds were forwarded by the Builder to Clifton on 7 April 1998 but the Proprietor did not accept them. In accordance with its requirement, the Bank issued two amended bonds each dated 4 May 1998 bearing the same numbers but with the description of the third event of termination changed. In bond 50338 the amended event was “the Date of Practical Completion”; in bond 50339 it was “the Date of Final Completion”.
The work was brought to practical completion on 7 December 1998 and bond 50338 was returned by the Proprietor for cancellation.
On 26 September 2001 the Proprietor made demand upon the Bank under bond 50339 for payment of $204,835.78. It was not challenged that this demand formally complied with the requirements of the bond. Notwithstanding this, the Bank has refused to pay the sum demanded on the basis that the date of final completion had occurred on or about 7 December 1999 so that the bond had been cancelled.
By writ filed on 14 November 2001 the Proprietor sues the Bank seeking declarations that the Bank is obliged to make payment of the sum demanded, that the guarantee remains in force; and seeking:
“An injunction (interlocutory and permanent) requiring the [Bank] to forthwith pay to the [Proprietor] pursuant to the second Bank Guarantee the sum of $204,835.78 in accordance with the written demand by the [Proprietor] made 26 September, 2001.”
It is this interlocutory relief which the Proprietor now seeks in the present application.
The application is brought by a document entitled “application” which otherwise resembles the summons filed in accordance with R. 46.04. The relief sought is an injunction (without specifying whether it be interlocutory or permanent) in terms of the prayer for relief quoted above. When I queried the precise nature of the application I was told by counsel for the Proprietor that their client sought a mandatory injunction to be granted in the exercise of the inherent jurisdiction of the court and, later, that it was an interlocutory mandatory injunction.
I must say that I am uncomfortable about certain procedural aspects of this application. It is difficult to see it as an interlocutory application, for the order sought is permanent and not temporary. If the application is one for an interlocutory injunction, then it is for the applicant to show that there is a serious issue to be tried, that it is entitled to the relief ultimately sought and that, on the balance of convenience, the injunction should go. Furthermore, the applicant will normally be required to give the usual undertaking as to damages.
If, on the other hand, the claim of the Proprietor, properly understood, is for payment of the sum to which it is entitled under the bond, its claim is a common law claim for that sum. In such an event, its entitlement to payment without trial is one for summary judgment pursuant to O. 22. On such an application the requirements of evidence are different and the applicant will recover judgment only where there is no triable issue which, if successful, would defeat the claim. This is not such an application.
Whilst the Proprietor’s application was characterised as an interlocutory mandatory injunction, it was in fact presented as an amalgam of the above two procedures. Counsel for the Proprietor, at the outset of their submissions, identified the following as the question for determination: “Is there a serious question to be tried or is the case a clear one that ought to be decided at once in a summary way?” They contended that there was no serious issue to be tried so that the Court should enforce the bond. Counsel for the Bank appeared to approach the matter in the same way. They agreed that, if I concluded that the date of final completion had arrived or that there was a serious issue to be tried as to this, the application must fail.
I shall return to these procedural matters at the conclusion of the judgment. It is sufficient that I record that, following some encouragement from me, Counsel for the Proprietor applied, and on 18 December 2001 I granted leave, to amend the application to seek summary judgment as well as injunctive relief which remained its primary objective. A second affidavit of Jack Silberscher, a director of the Proprietor, sworn 17 December 2001 was filed in which he deposed to a belief that there was no defence to the proprietor’s claim. No further affidavit was filed on behalf of the Bank. Having regard to the way the case was argued on 12 December, it was not necessary for the parties to present further submissions, and each was content that I consider the amended application on that basis.
I turn to the substance of the application. Both parties were in agreement that there is only one broad issue: whether prior to the demand there had occurred “the Date of Final Completion”. The Bank’s submission in opposition to the contention that there was a triable issue as to this, depended upon its contention that the works were finally completed, alternatively that in terms of the building contract the date of final completion means a date 12 months after the date of practical completion, alternatively that a final certificate had been issued on 14 April 2000 and that this was the date of final completion.
Under cl 1.02.04 of the building contract the works to be performed by the Builder are the whole of the work to be executed in accordance with the agreement including variations. There is in the building contract no definition of or, indeed, no use of the expression “Final Completion” or “Date of Final Completion”. It may be, then, that, in ordinary parlance, final completion means that the Builder has executed the whole of the works and that the date of final completion is the date on which this is done.
Practical completion was achieved on 7 December 1998. The defects liability period as fixed by cl 9.11 is 52 weeks, unless the Project Manager fixes a second defects liability period under cl 6.11.06. There is no evidence of such a second period. The Project Manager has issued an instruction to the Builder to rectify defective floor tiling, perhaps on 12 July 2000, and the performance of this work is part of the work to be executed under the building contract. Until it is performed the Builder has not achieved final completion in the ordinary sense of that expression.
Although there is in evidence a letter from the Builder dated 2 August 2000 asserting that “our contracted works have been completed” there is no evidence of this. It is denied by Mr Silberscher, in his affidavit of 7 November 2001. Jason Wong, an employee of Cliftons who has been the representative on site of the Project Manager since September 1999, confirmed this denial in his affidavit of 14 November 2001. On 1 December 1999, Mr Wong instructed the Builder to attend to a list of defects which included floor tiles. He says that the rectification of the floor tiles was not done and that the Builder on 25 August 2000 adopted the position that the standard of tiling was satisfactory. Mr Wong said, too, that, following this, the Proprietor had its own contractor attend to the defective tiles at a cost of $225,286.78. This, less the amount of $20,451.00 owing by the Proprietor to the Builder, remains unpaid by the Builder and is the amount of the demand made upon the Bank. The Proprietor’s rectification work on the tiling was completed on 23 August 2001.
I conclude for the purposes of this application that the evidence discloses that, at the date of the demand, all of the work required to be performed under the building contract had been performed. I include in this, that part of the Builder’s work which was in fact carried out by the Proprietor in August. There may well be an issue between the Builder and the Proprietor as to the financial responsibility for this rectification. I am not concerned with that issue.
Counsel for the Proprietor, however, put this to one side. They submitted that, as a matter of construction, the termination of the bond could not be taken to depend upon such an uncertain event. Final Completion and the Date of Final Completion (with initial capitals), are expressions well known in the building industry and they should be given this meaning in the bond. It was pointed out that mention is made of the building contract in the bond and that bond 50338 was fixed to expire on the Date of Practical Completion (also with initial capitals) which is another term of art in the building industry. Practical completion is an expression defined in cl 1.02.10 (as amended) and much used in the building contract.
Counsel developed this submission by contending that bond 50338, as originally issued, was expressed to expire on 30 November 1998 which was the date for practical completion and the date on which one half of the security was to be released. This is not, strictly speaking, correct. The date for practical completion is in fact 23 November 1998[1] but it may be extended pursuant to Section 9 of the building contract. Under cl 10.22.03 as amended, one half of the security is to be released when the project in fact reaches practical completion or upon deemed practical completion pursuant to cl 9.09.04[2]. Even so, it is clear enough that this bond, as originally issued and as amended, was timed to expire more or less by reference to practical completion.
[1]Appendix, item B.9.
[2]cl 9.10.04 relating to deemed practical completion upon occupation by the Proprietor has been deleted by Schedule A, item 29(b).
And so, it was put, the term of the second bond was expressed so that it expired at the end of the contract. In this way it might serve the purpose of securing to the Proprietor the performance by the Builder of its functions during and consequent upon the defects liability period[3]. Under the building contract this security is to be released by the Proprietor on the fifteenth day after presentation of the final certificate to the Proprietor[4]. The submission put on behalf of the Proprietor was that this means that, in the present context, the expression “Date of Final Completion” means the date of issue of the final certificate, an event which marks the end of the project, and that this event has not yet occurred.
[3]See cl 9.12.
[4]Clauses 11.10.02, 11.09.01. Compare Appendix, item S.3.
Again, accepting for the moment the general logic of such a submission, it does not entirely resolve the uncertainty. In this building contract, the issue of the final certificate does not necessarily signal the end of the project. The obligation of the Proprietor to make the last payment and to release the security does not arise until the fifteenth day after the final certificate has been presented to the Proprietor, and, further, this is only where no notice of dispute or difference is given pursuant to cl 13.01[5]. The obligations of the Builder are not discharged by the final certificate because cl 11.12 of the JCC-F general conditions has been deleted[6].
[5]Clause 11.09.
[6]Schedule A, item 44.
Notwithstanding this, I conclude as a matter of construction of the bond, that the submission put on behalf of the Proprietor is, in principle, correct. The expression “Date of Final Completion” in the bond is a date to be elicited by an application of the terms of the building contract to the facts. I am, of course, conscious of the cases which emphasise the autonomy of the security[7]. This means that the obligations of the Bank under such a bond will not normally be dependant upon the liability of the Builder to the Proprietor pursuant to the underlying contract between them. Indeed, in this case this is dealt with in the passage from the bond which I have set out above in paragraph [2]. A feature of this bond is that its date of termination, like that of bond 50338, is fixed by reference to an event in the performance of the underlying building contract, an event over which the Bank is not likely to have any control and of which it may have no direct knowledge.
[7]Olex Focas Pty Ltd v Skodaexport Co Ltd [1998] 3 VR 380, and the cases referred to.
What was put on behalf of the Bank was that the date of final completion means 12 months after the date of practical completion. There is absolutely nothing in terms of the bond to support such a contention. The analysis of the relevant terms of the building contract which I have undertaken shows that, 12 months after practical completion, the defects liability period expires, unless extended; nothing more. There is nothing in the building contract which ties the security to that date.
The provenance of this contention appears to be Clifton’s fax to the Bank of 12 February 1999 which contains the statement, “The other Bank guarantee shall be held until the expiry of the Defects Liability Period”. Additionally, in a letter from the Builder to the Bank dated 20 June 2001, the Builder refers to the expression, “Date of Final Completion”, adding, “We submit this means the date of expiration of the Defects Liability Period which occurred on 7 December 1999”. It appears that this letter is part of correspondence in which the Builder has sought the cancellation of bond 50339. This contention was met by the Bank’s not unreasonable request that it provide a letter from the Proprietor which would trigger the first event of termination, or alternatively a copy of the certificate of final completion, which was presumably directed to the third event. In the circumstances, this letter from the Builder does not advance matters. In any event, my concern is to construe the terms of the bond. Self serving contentions of a contracting party cannot assist. Nor do I construe the contents of Clifton’s fax of 12 February 1999 as an admission by the plaintiff, even if it be assumed that it was authorised to make such an admission.
I should record at this stage that a foreshadowed estoppel argument depending upon one or both of these communications was not pursued.
Finally, it was put that the issue of progress certificate No. 14 on 19 April 2000 marked final completion because it was in fact a final certificate. There is no substance to this contention. The certificate on its face is entitled a Progress Certificate and is expressed to have been given pursuant to cl 10.02, which is the clause dealing with progress certificates. The final certificate and final payment are dealt within Section 11 of the building contract. While it is true that the certificate contains information which must be contained in a final certificate, this does not transform it into such a document. Given its important function in the administration of this building contract, the final certificate must comply with the requirements of that contract[8].
[8]CMR Builders (Vic) Pty Ltd v Rosebud Hotel Pty Ltd (1996) 13 BCL 55 (SC, Vic, Byrne J); Algons Engineering Pty Ltd v Abigroup Pty Ltd (1997) 14 BCL 215 (SC, NSW, Rolfe J).
I conclude, then, that the expression “Date of Final Completion” in the bond means a date in some way related to the issue of the final certificate. No such certificate has been issued. I am satisfied, therefore, that there is a serious issue to be tried that the bond is still on foot. Indeed, on the evidence before me, the case of the Proprietor for payment of the sum demanded is overwhelming.
I turn now to the matters affecting discretion. I was pressed on behalf of the Proprietor with arguments which emphasise the special nature of securities of this kind and the concern of the Court that they be permitted to perform their role as being functionally the equivalent of cash[9]. It was put that the value in the building industry of a bond of such as the present would be significantly undermined if the Proprietor was not entitled to rely upon the Bank’s undertaking to pay. The importance of this cannot be denied and it is true that the circumstances are very limited in which the Court will interfere to prevent a Proprietor from exercising the rights conferred by the bond in accordance with its terms or to prevent the Bank from exceeding to a demand for payment made in accordance with these terms. The difficulty with this argument is that it begs the question which the Bank raises. This is whether the bond is still on foot so that its terms continue to give rise to the entitlement of the party for whose benefit it was given.
[9]ADI Limited v State Electricity Commission of Victoria, unreported, CA (Vic), 12 August 1997 at p. 12, per Callaway JA.
A feature of applications for interlocutory injunctions is that they will be successful only where an order is appropriate to preserve the interests of the contending parties until the time of the final determination of their rights[10]. In this case there is no present risk to either party if the money is left with the Bank pending that time. If, on the other hand, it is released to the Proprietor and used by it as part of its ordinary working capital, the money will have to be repaid if, upon trial, the present claim should fail. The usual undertaking as to damages adds little to this by way of security. I do not wish to be taken as expressing any apprehension that the Proprietor may in due course be unable to repay the money. I have no knowledge of its financial circumstances. It is just that the making of the order and its compliance creates an uncertainty which does not now exist.
[10]Spry, Equitable Remedies, 6th ed. at p. 557.
Furthermore, the Proprietor’s claim is for the payment of money. If it should hereafter appear that it is entitled to the money, the fund in the hands of the Bank will have earned interest. This interest is functionally the equivalent of damages for non-payment. Where damages are available to compensate a plaintiff for a wrong, this is a powerful reason for refusing injunctive relief of the kind sought.
A further consequence of this aspect of the claim is that the orders which the Proprietor would have made are, in effect, a final disposition of the proceedings. I accept that it may be appropriate in certain cases to make an order with such an effect, but it causes me to be cautious in acceding to the present application.
On balance, therefore, in the exercise of my discretion, I would refuse the application for interlocutory injunctive relief.
I turn now to the alternative relief under Order 22. Here the applicant needs to show more than a serious issue to be tried as to its entitlement to final relief; it must show that the builder has no defence to the claim[11]. Where the applicant makes out its claim and swears to a belief that there is no defence, the respondent may, nonetheless, resist summary judgment where it appears to the Court
“that in respect of the claim…a question ought to be tried or that there ought for some other reason be a trial of that claim…”[12].
This rule and its predecessors have been construed to mean that the applicants should have judgment unless “there is a real uncertainty without full argument or further investigation of the facts as to the applicant’s right to judgment”[13]. I proceed on that basis, noting that the power to order summary judgment is one to be exercised with care and only where it is clearly shown that there is no real question to be tried[14].
[11]Rule 22.02(1).
[12]Rule 22.06(1) (b).
[13]Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 at 334, per Herring CJ, Lowe J.
[14]See Williams, Supreme Court Practice at para [I 22.06.15] and the cases there referred to.
There is in this case no factual conflict. I proceed on the basis that all the work to be performed by the Builder under the building contract had, prior to the demand, been performed by the Builder or by the Proprietor itself. The terms of the bond and of the building contract are not an issue, nor the fact nor the terms of the certificate of 19 April 2000. There is no further factual issue to be investigated at trial.
The issues here are issues of construction of documents. I have heard full argument on them and, following consideration, I have formed a clear view upon each of them. These conclusions, for reasons which I have already outlined, are the following:
(a) The expression “Date of Final Completion” in the bond is directed to the final completion of the work in terms of the building contract and its administration. It is not used in an ordinary or non-technical sense.
(b) The provision in the bond that it terminates on the Date of Final Completion does not mean that it terminates 12 months after the Date of Practical Completion. The event of termination is related to the issue of the final certificate pursuant to Section 11.
(c) The certificate of 19 April 2000 is not a final certificate.
There is to mind no purpose to be served in receiving further argument upon these issues or in deferring a final conclusion of the proceeding for some further factual or other investigations.
I am satisfied, therefore, that the plaintiff should have the summary judgment it seeks. I will hear counsel further as to the terms of the orders to be made to give effect to this conclusion.
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