Watpac Australia Pty Ltd v. Spring Hill Developments (No 1) Ltd - [2006] QSC 269

SUPREME COURT OF QUEENSLAND

[2006] QSC 269

CIVIL JURISDICTION

FRYBERG J

No 7802 of 2006

WATPAC AUSTRALIA PTY LTD (ACN 010 462 816)	Applicant
and
SPRING HILL DEVELOPMENTS (No 1) LIMITED (ACN 103 062 826)	Respondent

BRISBANE

..DATE 14/09/2006

ORDER

HIS HONOUR: This is an application for an interlocutory injunction by a builder against the owner, or principal, as I shall call it, in relation to a building contract for a non-domestic building.

The contract was due to reach practical completion in April last year and reached practical completion in September last year. The defects maintenance period of 12 months will shortly expire and shortly after that, by the operation of the mechanism for a final certificate, the principal will become required to release the security provided in the form of a bond by the builder.

The principal matter in dispute for present purposes is whether the delay in the practical completion entitles the principal to charge liquidated damages. The builder contends that it is entitled to extensions of time for the period between the date for practical completion and the date of practical completion, a proposition denied by the principal and negated by the most recent certificate issued by the supervisor.

The principal claims that an amount of the order of $1.3 million is owing by way of liquidated damages. The security which has been provided is in a sum slightly in excess of $1 million and it is provided by an insurance company in the form of a bond. The contract permits the principal to have access to the proceeds of the bond effectively at any time.

The builder seeks the injunction pursuant to the provisions of s 67J of the Queensland Building Services Authority Act 1991,
as amended prior to 2004. That section provides:

"67J Set-offs under building contracts

(1) The contracting party for a building contract may reduce an amount payable under the contract by an amount owed under the contract, or use a security for the building contract, wholly or partly, to obtain an amount owed under the contract, only if-

(a) the reduction of the amount payable or the use of

the security is permitted under the contract; and

(b) the contracting party has given-

(i) written notice (the "first notice") to the
contracted party for the contract advising of the
proposed reduction or use and, if the amount owed
can be quantified when the first notice is given,
of the amount owed; and

(ii) if the amount owed can not be quantified when
the first notice is given, a further written notice
(the "second notice") to the contracted party
advising of the amount owed.

(2) The first notice must be given within 28 days after

the contracting party becomes aware, or ought reasonably
to have become aware, of the contracting party's right to
obtain the amount owed.

(3) If the second notice is required to be given, it

must be given within 3 business days after the contracting party becomes…

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: [2006] QSC 269
Decision Date: 14/09/2006

CaseChat Overview and Summary

Watpac Australia Pty Ltd sought an interlocutory injunction against Spring Hill Developments (No 1) Limited in the Supreme Court of Queensland. The application was brought by the builder against the owner in relation to a building contract for a non-domestic building. The contract was due to reach practical completion in April last year but was not completed until September last year. The defects maintenance period of 12 months was about to expire and shortly after that, by the operation of the mechanism for a final certificate, the principal would become required to release the security provided in the form of a bond by the builder. The builder claimed that it was entitled to extensions of time for the period between the date for practical completion and the date of practical completion, a proposition denied by the principal. The principal claims that an amount of the order of $1.3 million is owing by way of liquidated damages. The security provided was slightly in excess of $1 million provided by an insurance company in the form of a bond. The contract permitted the principal to have access to the proceeds of the bond effectively at any time.

The builder argued that the principal had not provided the notice required by the Queensland Building Services Authority Act 1991. The builder contended that the principal must have been aware of its entitlement to liquidated damages when the practical completion was certified to both parties. The principal argued that the reference in s 67 J(1) to an amount owed under the contract was effectively a reference to the final amount payable under the contract and that the obligation lies upon the superintendent in issuing certificates under clause 42.1.3 of the contract to adjust the amount payable to account for the amount of any liquidated damages. The principal also sought to rely upon the second part of clause 5.6 to assert that the builder was prohibited from taking steps to restrain the owner from making a demand under the security or receiving payment under it. The principal argued that the requirement in subsection (2) for the notice to be given within 28 days was not a requirement the breach of which invalidated a notice under subsection (1). The builder submitted that failure to comply with the time requirement did not invalidate the notice but might be a factor in considering whether, by reason of breach of the statutory provision, an injunction ought to be issued to restrain the realisation of the security. The court found that the better construction of the section was that failure to comply with the time requirement did not invalidate the notice but might be a factor in considering whether, by reason of breach of the statutory provision, an injunction ought to be issued to restrain the realisation of the security.

The court found that the balance of convenience clearly favoured the grant of the injunction. The builder offered to consent to the principal retaining the security pending the determination of the proceedings and to provide $50,000 for security for interest payable under the contract. The builder also submitted that its reputation as a builder would be damaged if the bond was called-up. The court found that the balance of convenience clearly favoured the grant of the injunction.

Orders