Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd (No 2) [2021] QSC 301

SUPREME COURT OF QUEENSLAND CITATION: Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd (No 2) [2021] QSC 301 PARTIES: BUILT QLD PTY LIMITED ACN 108 064 099 (plaintiff) v PRO-INVEST AUSTRALIAN HOSPITALITY OPPORTUNITY (ST) PTY LIMITED (FORMERLY KNOWN AS AUSTRALIAN HOSPITALITY OPPORTUNITY (ST) PTY LTD) AS TRUSTEE FOR THE PRO-INVEST AUSTRALIAN HOSPITALITY OPPORTUNITY (BRS SPRING HILL) TRUST ACN 163 479 221 (defendant) FILE NO/S: BS No 5426 of 2017 DIVISION: Trial Division PROCEEDING: Claim ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 19 November 2021 DELIVERED AT: Brisbane HEARING DATE: 28 September 2020 to 14 October 2020; 12 November 2020 to 13 November 2020 JUDGE: Williams J ORDER: 1. The parties are to prepare an order containing the final judgment, including updated interest calculations to the date of the draft order and submit it to my Associate. 2. The parties are to confer and agree on directions for the provision of further submissions in respect of costs, if the appropriate costs order cannot be agreed. CATCHWORDS: INTEREST – RECOVERABILITY OF INTEREST – IN GENERAL – where the plaintiff’s obligations under the contract were secured by an unconditional performance bond – where the defendant made a call on the bond in April 2019 – where the plaintiff filed an application for an interlocutory injunction to prevent the defendant drawing on the bond – where the Court dismissed the application – where the plaintiff offered to pay the defendant cash security in the amount equal to the performance bond so that the defendant did not need to call on the bond and the proposal was accepted – where the plaintiff contends that interest is to be paid pursuant to section -- 1 of 8 -- 2 67P of the Queensland Building and Construction Commission Act 1991 (QBCC Act) in respect of the remaining security amount, that is, the balance of the security amount not attributable to defects – where the defendant submits that the penalty rate in section 67P of the QBCC Act is not applicable and that the contractual interest rate is also not applicable – whether the plaintiff is entitled to interest in respect of the remaining security amount Civil Proceedings Act 2011 (Qld), s 58 Queensland Building and Construction Commission Act 1991, s 67P Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2021] QSC 224, cited Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity (ST) Pty Limited as Trustee for the Pro-Invest Australian Hospitality Opportunity (BRF Springhill) Trust [2019] QSC 108, cited Central Electrics (Contracting) Pty Ltd & Anor v A & P Constructions Pty Ltd (in liq) [1997] QCA 372, cited COUNSEL: P L O’Shea QC with M Steele and B Reading for the plaintiff T P Sullivan QC with J Mitchensen for the defendant SOLICITORS: Clayton Utz for the plaintiff Thomson Geer for the defendant [1] On 3 September 2021 I published reasons1 and subsequently made directions for further brief submissions addressing particular topics to assist in the formulation of the appropriate orders in light of the published reasons. [2] Submissions have been received on behalf of the plaintiffs and defendants. Agreed position on further topics [3] The parties agree that the topic of joinery delay does not need to be considered further given the opinions expressed by Mr Bell and Mr King at pages 14 and 15 (item 2.1) of their joint expert report dated 19 July 2019. [4] Further, the parties have agreed the following amounts in respect of the claims addressed in the further submissions: Item Agreed Position Schedule 3 and 4 Variations Schedule 4 – VP60 – “Bathroom light switch – off master switch” The plaintiff is entitled to $10,755.18 plus GST, being a total of $11,830.70. 1 Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2021] QSC 224. -- 2 of 8 -- 3 Schedule 4 – VP67 – “Supply and Installation of power socket and wiring for led lighting” The plaintiff is entitled to $38,186.39 plus GST, being a total of $42,005.03. Schedule 5 Schedule 5 provisional sums The plaintiff is entitled to $28,910.78 plus GST, being $31,801.86.2 Other Claims by the Plaintiff Utility back charges The plaintiff is entitled to $10,025.62. Amounts withheld for defects The plaintiff is entitled to $141,626.65 plus GST, being a total of $155,789.32. Amounts certified and claimed but unpaid – Progress Claim No. 24 The plaintiff is entitled $53,758.37 plus GST, being a total of $59,134.21. Balance of security amount not attributable to defects The plaintiff is entitled to $91,757.29.3 [5] In respect of the calculation of the amount for the Mechanical Variation, the parties have agreed the following amounts for the outstanding items: Item Agreed Position BWIC (being the sum of the amounts awarded at paragraphs [966]-[990] of the reasons). $28,006.36 Builders Profit & Overheads on Deductions (2%) $4,040.31 Builders Profit & Overheads on Additions (10%) $95,760.22 Total of amounts in paragraph [991] $855,401.97 [6] The issue of the plaintiff’s entitlement to interest, and the basis for calculation of the interest, was the subject of further submissions. 2 The defendant does not appear to expressly concede this amount but does not challenge the plaintiff’s entitlement nor the calculation of the amount. This was expressly stated as “agreed” in the plaintiff’s reply submissions and the defendant has not raised any issue with the Court proceeding on the basis it is an agreed position. 3 The defendant does not appear to expressly concede this amount but does not challenge the plaintiff’s entitlement nor the calculation of the amount. This was expressly stated as “agreed” in the plaintiff’s reply submissions and the defendant has not raised any issue with the Court proceeding on the basis it is an agreed position. -- 3 of 8 -- 4 [7] The parties agree that the plaintiff is entitled to interest at the Penalty Rate prescribed by s 67P of the Queensland Building and Construction Commission Act 1991 (QBCC Act), calculated in accordance with the affidavit of Mr Dale Brackin sworn 7 October 2021, in respect of the following: (a) For the Schedule 3 and 4 amounts (being $110,846.08); (b) For the Schedule 5 amount (being $31,801.86); (c) For the “Vintech” amount (being $155,789.32); (d) For the unpaid portion of progress claim 24 (and unpaid contract sum) (being $59,134.21); and (e) For the utility backcharges (being $10,025.62). [8] Consequently, the parties agree the plaintiff is entitled to the following interest in respect of these items: Item Base Amount Interest at 7 October 2021 Daily interest thereafter Total at 1 November 2021 Schedule 3 and 4 amounts $110,846.08 (GST inclusive) $55,994.00 $30.40 $56,753.98 Schedule 5 amount $31,801.86 (GST inclusive) $16,064.74 $8.72 $16,282.78 “Vintech” amount $155,789.32 (GST inclusive) $75,334.25 $42.72 $76,402.37 Unpaid portion of progress claim 24 and unpaid contract sum $59,134.21 (GST inclusive) $28,595.23 $16.22 $29,000.66 Utility backcharges $10,025.62 (GST exclusive) $4,848.04 $2.75 $4,916.78 [9] The interest calculation will need to be updated to reflect the total interest as at the date the final judgement order is made. Calculation of interest in relation to Remaining Security Amount [10] The one issue that remains in dispute between the parties is the interest payable in respect of the plaintiff’s entitlement to the Remaining Security Amount, being an amount of $91,757.29. [11] It is not contentious that the plaintiff’s obligations under the Contract were secured by an unconditional performance bond. The defendant made a call on that bond on -- 4 of 8 -- 5 11 April 2019. The plaintiff filed an application for an interlocutory injunction to prevent the defendant drawing on the bond. The Court dismissed the application.4 [12] Following the dismissal of the application, the plaintiff offered to pay the defendant cash security in the amount equal to the performance bond so that the defendant did not need to call on the bond. The proposal was accepted. [13] The Remaining Security Amount is the balance of the security amount not attributable to defects. Plaintiff’s position [14] The plaintiff contends that the security amount paid was to satisfy the defendants call on the bond. Since 9 May 2019, the defendant has had the benefit of the full amount of $834,150.68 being the full equivalent of the security. [15] The plaintiff submits that the fact that it was paid to the defendant rather than the bond being called upon does not change the fact that the amount was paid to satisfy the defendants calling on the security. [16] The plaintiff’s position is that had the defendant called on the performance bond itself, it would be liable to the plaintiff for interest on that part of the security for which it was not in fact entitled to call on. It is in these circumstances that it is submitted that there is no reason in principle why the same result should not flow merely because of the particular form in which the defendant’s call on the security was answered. [17] Under the Contract, clauses 5.2 and 37.6 govern the defendant’s entitlement to security. Clause 5.2 provides that the defendant is entitled to “have recourse to security and may convert into money security that does not consist of money where an entitlement exists pursuant to subclause 37.6”. [18] Clause 37.6 provides: “Without limiting the Principal’s rights under any provision in the Contract, the Principal may deduct from any moneys due to the Contractor pursuant to the Contract, any amount which is payable by the Contractor to the Principal, whether or not the Principal’s right to payment arises by way of damages (whether liquidated or unliquidated), debt, restitution or otherwise. If the moneys payable to the Contractor are insufficient to discharge the liability of the Contractor to pay such sum to the Principal, the Principal may have recourse to the security or any retention moneys. Nothing in this subclause 37.6 shall affect the right of the Principal to recover from the Contractor the whole of any such moneys or any balance that remains owing.” [19] The plaintiff submits that the balance of $91,757.29 is the amount which the defendant would not have been permitted to call on or retain. The amount was not released and the defendant continued to retain the full equivalent amount of security. 4 Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity (ST) Pty Limited as Trustee for the Pro-Invest Australian Hospitality Opportunity (BRF Springhill) Trust [2019] QSC 108. -- 5 of 8 -- 6 [20] The defendant was required to release and return forthwith the security to the plaintiff upon its entitlement to the security ceasing pursuant to clause 5.4 of the Contract. The plaintiff submits that it had a contractual right to payment of the amount of the security that the defendant was not otherwise entitled to claim pursuant to clause 37.6. That is, the plaintiff had a contractual right to payment of $91,757.29. [21] The plaintiff contends that the remaining amount of security was an amount payable to the plaintiff pursuant to the terms of the Contract and was a “progress amount” within the meaning of s 67P(1)(a) of the QBCC Act. It was payable as part of the final payment claim and, in this case, that necessarily included the return of the remaining amount of the security (or its equivalent). [22] The plaintiff claims the amount of $23,678.36 as at 1 November 2021 pursuant to s 67P of the QBCC Act. [23] Alternatively, the plaintiff claims an entitlement to interest on the remaining security sum at the contractual interest rate of 10 per cent (being at 1 November 2021 the amount of $22,801.98). [24] The claim to the contractual interest rate proceeds on the basis that the Remaining Security Amount was an amount in fact payable to the plaintiff by the defendant by reason of the proper construction of the Contract. The obligation pursuant to clause 5.4 to “release and return forthwith” the amount continued. The plaintiff contends that the form of security that was specifically provided may be treated as security for the purposes of the Contract.5 [25] Alternatively, the plaintiff claims interest on the sum pursuant to s 58 of the Civil Proceedings Act 2011 (Qld). This is based on the fact that the defendant has had the benefit of the payment of $834,150.68, being the full amount of the security since 9 May 2019. It is contended that the defendant only had an entitlement to the amount of $742,393.39 and the defendant was never in fact entitled to the Remaining Security Amount of $91,757.29. [26] It is contended that the defendant has wrongfully retained the sum of $91,757.29 since 9 May 2019 and that it would be appropriate to order interest on a rate of 10 per cent interest for unpaid amounts which would be in the amount of $22,801.98 as at 1 November 2021. Defendant’s position [27] The defendant’s ultimate position is that it is not appropriate to award any interest on the Remaining Security Amount. [28] The statement of claim pleads the plaintiff’s claim in respect of the Remaining Security Amount in paragraph 57M(d) which states: “the defendant is liable to pay the sum of $834,150.68 to the plaintiff as restitution of the amount paid to the Defendant by the Plaintiff in respect of the Security Amount”. 5 See Central Electrics (Contracting) Pty Ltd & Anor v A & P Constructions Pty Ltd (in liq) [1997] QCA 372 at p 4 [2]. -- 6 of 8 -- 7 [29] The defendant points to the preconditions in s 67P(1) of the QBCC Act in support of its contention that the Remaining Security Amount was not claimed as a “progress payment” and is not a “progress payment” under the legislation. [30] Nor is it a claim pursuant to a contractual right under the Contract. It is a claim in restitution. [31] It is in these circumstances that the defendant submits that the penalty rate under s 67P(1) of the QBCC Act is not applicable and further that the contractual interest rate pursuant to clause 37 and item 35 of the Contract is also not applicable. In respect of the contractual claim, the defendant contends that these are not “overdue payments” pursuant to clause 37 of the Contract. [32] The defendant also submits that while the Court has a broad discretion pursuant to s 58(3) of the Civil Proceedings Act 2011 to determine whether or not, and how much, interest ought to be awarded, interest should not be awarded on the Remaining Security Amount in the particular circumstances of this case. [33] The defendant points to the unconditional performance bond and the circumstances in which the security amount was paid rather than the defendant calling on the bond. The defendant submits that had the bond been called on the issue of interest would not arise and no loss (such as financing fees or other costs) has been claimed. Consideration [34] While there appears to be some logic to the plaintiff’s contention that interest is to be paid pursuant to s 67P of the QBCC Act or item 35 of the Contract, the claim by the plaintiff in the statement of claim appears to be on a different basis. The claim appears to be framed as a claim in restitution and does not appear to be a contractual claim in a strict sense. [35] Given the particular way that the amount was claimed in the statement of claim in this case, it is not entirely clear that an entitlement to interest under s 67P of the QBCC Act or under the Contract would arise. [36] In these circumstances, it is not appropriate nor necessary for me to conclusively determine whether s 67P of the QBCC Act or contractual interest could apply to a retained security amount such as the Remaining Security Amount. [37] However, as the defendant has had the benefit of the sum of $91,757.29 since 9 May 2019, it is appropriate to order interest on that sum pursuant to s 58 of the Civil Proceedings Act 2011 (Qld). [38] Accordingly, the agreed rate of 10 per cent interest for unpaid amounts would be applicable to the Retained Security Amount. On the basis of the calculations in the submission, this would be the amount of $22,801.98 as at 1 November 2021 and will need to be updated to the date of the final judgment. Next steps [39] The parties are to prepare an order containing the final judgment, including updated interest calculations to the date of the draft order and submit it to my Associate. -- 7 of 8 -- 8 [40] The issue of costs remains outstanding. The parties are to confer and agree on directions for the provision of further submissions in respect of costs, if the appropriate costs order cannot be agreed. -- 8 of 8 --