Clyde Contractors Pty Ltd v Northern Beaches Developments Pty Ltd [2001] QCA 314

SUPREME COURT OF QUEENSLAND CITATION: Clyde Contractors P/L v Northern Beaches Dev. P/L [2001] QCA 314 PARTIES: CLYDE CONTRACTORS PTY LTD T/A CLYDE CONSTRUCTIONS ACN 060 294 975 (plaintiff/respondent) v NORTHERN BEACHES DEVELOPMENTS PTY LTD ACN 052 996 371 (defendant/appellant) FILE NO/S: Appeal No 7741 of 2000 DC No 71 of 2000 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal Application for Security for Costs ORIGINATING COURT: District Court at Mackay DELIVERED ON: 7 August 2001 DELIVERED AT: Brisbane HEARING DATE: 19 July 2001 JUDGES: McMurdo P, Williams JA, Philippides J Separate reasons for judgment of each member of the Court, each concurring as to the orders made. ORDER: 1. Appeal dismissed 2. Application for security for costs dismissed 3. Order that the appellant pay the respondent’s costs of and incidental to the appeal and the application for security for costs to be assessed CATCHWORDS: CONTRACTS – BUILDING ENGINEERING AND RELATED CONTRACTS – PERFORMANCE OF WORK – EFFECT OF ACCEPTANCE OR CERTIFICATE OF PAYMENT ON RIGHTS OF OWNER – whether or not practical completion had been achieved, and if so at what time – where letter issued by superintendent stated that practical completion had been reached – whether respondent entitled to return of retention moneys CONTRACTS – BUILDING ENGINEERING AND RELATED CONTRACTS – THE CONTRACT - CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – OTHER MATTERS - definition of “practical completion” -- 1 of 6 -- 2 COUNSEL: A J Moon for the appellant D V C McMeekin SC for the respondent SOLICITORS: Deacons as town agents for Suthers Taylor Lawyers (Townsville) for the appellant Swanwick Murray Roche Lawyers (Rockhampton) for the respondent [1] McMURDO P: I agree with the reasons for judgment of Williams JA and with the orders he proposes. [2] WILLIAMS JA: The respondent/plaintiff entered into a contract with the appellant/defendant pursuant to which the respondent was to carry out certain work (earthworks, roadworks, drainage, water supply, and sewerage reticulation) with respect to a land development for the appellant. General Conditions of Contract AS2124-1992 (as amended) formed part of the contractual documents. [3] The respondent claims that a stage of practical completion had been achieved on 22 March 1999, and that the appellant failed, in accordance with its contractual obligations, to pay monies owing to it. Proceedings were commenced by the respondent in the District Court seeking to recover two separate liquidated sums: (i) $14,535 being the shortfall between the total of progress payment certificates issued by the superintendent appointed pursuant to the contract and the amount actually paid by the appellant; (ii) $35,670 being retention monies to be released in accordance with the terms of the contract at the expiration of the defects liability period which ran for 12 months from the date of practical completion. [4] Both the statement of claim and defence and counterclaim particularised progress payment certificates totalling $790,837, and actual payments by the appellant of $776,302. But the appellant denied that the balance, namely $14,535, was owing to the respondent. No basis for that denial was alleged in the pleading. Further, the defence admitted that the appellant was holding $35,670 as retention money, and inferentially asserted that it had not been paid because the defects liability period had not expired. [5] The appellant counterclaimed against the respondent for liquidated damages on the basis that practical completion had not been achieved; it claimed a right to liquidated damages at the rate of $200 per day from 16 March 1999. The counterclaim also sought $6,420.50 from the respondent on the basis that the respondent had failed to carry out turfing and landscaping work as required. [6] There was no allegation in the defence and counterclaim that the appellant was entitled to set-off any amounts it owed the respondent (for example, the $14,535) against the amount of its counterclaim. [7] Against that background the respondent applied for summary judgment with respect to each of the amounts it claimed, and also for summary dismissal of the appellant's counterclaim. The learned District Court judge hearing that application gave judgment for the respondent for $14,535 and $35,670 with interest, and also -- 2 of 6 -- 3 ordered that the counterclaim be dismissed. From that decision the appellant has appealed to this Court. [8] Counsel for the appellant conceded that, given the terms of the contract, the appellant had no defence with respect to the respondent's claim for $14,535. In accordance with the progress certificate and cl 42.1 of the general conditions that amount was due and payable. All that counsel for the appellant could say with respect to that amount was that, if the appellant had a viable claim for liquidated damages, then (providing the defence and counterclaim was amended to allege an entitlement to a set-off) the sum of $14,535 could be set off against such liquidated damages. [9] Counsel for the appellant also conceded that there was no foundation for the appellant's claim for $6,420.50. Though there had been some mention in pre-contractual documents of turfing and landscaping work, it is clear that such work had been deleted prior to the acceptance of the respondent's tender. The contractual documents and correspondence from the superintendent (all of which were before the District Court judge on the hearing of the summary judgment application) clearly established that the turfing and landscaping was the responsibility of the appellant. [10] The respondent's claim with respect to the $35,670 retention monies, and the appellant's claim for liquidated damages were each dependent on whether or not (and if so, when) a stage of practical completion had been achieved. The critical letter is that of 19 May 1999 from the superintendent appointed in accordance with the contractual provisions to the respondent; a copy thereof was also sent by the superintendent to the appellant. That letter dealt with an application by the respondent for an extension of time, primarily because of weather conditions. That letter confirmed a grant by the superintendent of a total extension of time of 56 days which took the date for practical completion to 16 March 1999. The letter then went on, significantly for present purposes, to state: "However in this instance we consider the works to have reached practical completion on 22 March 1999 and as such practical completion was reached 4 days beyond the revised date of practical completion". [11] That was followed by a letter the following day, 20 May 1999, from the superintendent to the respondent which relevantly stated: "Please find herewith Progress Certificate No 6 in the amount of $10,234 for works completed to 30 April 1999. The project is nearing completion and money is being withheld now only on items 1.2, 1.3, 2.6, 2.10, 3.10, 3.12(b), 3.13, 4.6 and 4.7. In addition the development is considered to have reached practical completion and as such the security being held in the form of a bank guarantee for $35,670 is attached. Also attached is a previously submitted bank guarantee for $35,670 for retention, as retention is now being withheld as cash". In other words, on two separate occasions in May 1999 the superintendent informed the respondent that a stage of practical completion had been reached. Further, the superintendent returned bank security, undoubtedly on the basis that as a stage of practical completion had been reached cash retention was adequate. Because the -- 3 of 6 -- 4 first letter (at least) was also forwarded to the appellant, it is clear that the appellant was aware in May 1999 that the superintendent was asserting that a stage of practical completion had been reached. [12] The contract does not provide a specific form for a certificate of practical completion, but in the absence of any evidence to the contrary the clear statement in the letters of 19 and 20 May 1999 establishes that practical completion was reached on 22 March 1999. [13] In a letter dated 8 September 1999 the solicitor for the appellant wrote to the respondent (in reply to a letter invoking certain contractual provisions applicable where the appellant was in default of making a payment due pursuant to the contract) stating that "our client is firmly of the belief that practical completion has not yet occurred and accordingly we have advised our client that the liquidated damages clause therefore applies". But significantly neither the appellant, nor its solicitor then raised with the superintendent any issue as to the statements made by the superintendent in the letters of 19 and 20 May 1999. [14] The claim and counterclaim was filed on 24 February 2000 and the defence and counterclaim on 12 May 2000. The application for summary judgment was then filed on 20 July 2000 with a return date of 9 August 2000. An affidavit by the appellant's solicitor, exhibiting some correspondence, was filed on the appellant's behalf on 4 August 2000. Then a further affidavit by a director of the appellant was filed on 8 August 2000. In that affidavit the director asserted that a stage of practical completion had not been reached. He also swore: "I have obtained correspondence from the Contract Superintendent for which privilege is claimed, confirming that, as at 14 August 2000, no Certificate of Practical Completion had been issued". It is difficult to see how a claim of privilege could be made with respect to such correspondence, but importantly for present purposes no documentation was then placed before the court substantiating the appellant's contention that practical completion had not been achieved even by August 2000. [15] On the day of the hearing another affidavit was filed on the appellant's behalf exhibiting a letter from the superintendent bearing the date 8 August 2000 in the following terms: "We confirm that a Certificate of Practical Completion has not yet been issued for Contract No 21199-0. This is because 'As Constructed' documentation required under Clause 1.12 of the specification has not been received". Significantly, the superintendent did not address in that letter the statements made in his letters of 19 and 20 May 1999. It is a matter of some significance that the only document from the superintendent relied on by the appellant comes some 17 months after the critical letters and on the eve of the hearing of the summary judgment application. [16] "Practical Completion" is defined in the contract as the stage when "the Works are complete except for minor omissions and minor defects" and when "documents and other information required under the Contract which, in the opinion of the Superintendent are essential for the use, operation and maintenance of the Works have been supplied". Essentially "Practical Completion" is a question of fact and it -- 4 of 6 -- 5 is for that reason that the statements in the letters of 19 and 20 May 1999 are significant. The appellant primarily concentrates on the absence of a certificate, but a certificate is not essential; it is no more than evidence. No particulars have ever been supplied identifying work yet to be done by the respondent. Further, insofar as the supply of documents is relevant (given the terms of the definition) the superintendent has not stated his opinion that documents "essential for the use, operation and maintenance of the Works" have not been supplied. For those reasons the letter of 8 August 2000 is not determinative of the position. [17] There was an onus on the appellant to demonstrate that there was some issue to be tried or some other good reason for the matter to go to trial. In all the circumstances it cannot be said that the learned District Court judge was wrong in concluding that on the evidence practical completion had been reached in March 1999 and there was no triable issue with respect thereto. [18] Once it is accepted that practical completion was reached in March 1999 the only remaining question is whether or not, pursuant to the terms of the contract, the respondent is entitled to the return of the retention monies. They were strictly repayable to the respondent once the Certificate of Final Completion issued. In accordance with cl 42.8 of the general conditions, at the expiration of the period of 28 days after the defects liability period (12 months from practical completion) "the Superintendent shall issue to the Contractor and to the Principal a final payment certificate endorsed Final Certificate". Then within 14 days of the issue of that certificate the retention monies must be released. Neither in the defence and counterclaim, nor in submissions to the District Court judge, did the appellant take the point that no final certificate had issued as a condition precedent to the release of the retention money. That point was taken for the first time on the hearing of the appeal. Counsel for the respondent answered that by saying that if the point had been taken then the respondent would have formally applied for a final certificate and, as the superintendent was obliged to issue it, an order could have been sought from the court in that regard if the superintendent failed to do so. In other words, if the point was taken below it could have been remedied. In any event there is no material before this Court indicating any proper basis on which the superintendent could refuse to issue a final certificate in accordance with the provisions of the contract. [19] It therefore follows that the respondent is entitled to retain the judgment which it obtained in the District Court. [20] The notice of appeal was filed 5 September 2000. On 26 October 2000 the solicitor for the respondent wrote to the solicitor for the appellant expressing concern as to the appellant's capacity to pay costs of the appeal and foreshadowing an application for security for costs of the appeal if an appropriate response was not forthcoming. In a further letter of 2 November the respondent's solicitors indicated that, consequent upon there being no response to the earlier letter, steps were being taken to make an application for security for costs. That application, and supporting material, was filed on 10 November 2000. Thereafter there was correspondence relating to satisfaction of the judgment. Again, on 13 December the solicitors for the respondent sought material enabling them to determine whether or not to proceed with the application for security for costs. Some material was forthcoming from the appellant's solicitors on 15 January 2001 and ultimately on 16 January 2001 the solicitors for the respondent intimated that, in view of the documentation -- 5 of 6 -- 6 provided, the application for security for costs would be adjourned to a date to be fixed. [21] The application for security for costs was adjourned by consent and then brought before the Court on the hearing of the appeal. The respondent seeks an order for costs with respect to that application. [22] The material before this Court indicates that there were reasonable grounds on which to bring the application, and the appellant failed to respond in a timely way to requests for information as to its capacity to satisfy an order for costs. In all the circumstances the respondent should get the costs of and incidental to that application. [23] The orders of the Court will therefore be: (1) Appeal dismissed. (2) Application for security for costs dismissed. (3) Order that the appellant pay the respondent's costs of and incidental to the appeal and the application for security for costs to be assessed. [24] PHILIPPIDES J: I agree with the orders proposed by Williams JA and with his reasons. -- 6 of 6 --