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Supreme Court of South Australia Decisions |
Last Updated: 18 December 2000
Judgment of the Honourable Justice Duggan
First Defendant: SOR PTY LTD
Counsel: MR A L DAL CIN - Solicitors: N MINICOZZI
Second Defendant: WOODHEAD INTERNATIONAL PTY LTD
Counsel: MR J E LUNN - Solicitors: PHILLIPS FOX
SCGRG-98-1553
Judgment No. [2000] SASC 414
6 December 2000
On Appeal from HIS HONOUR JUDGE KELLY (MASTER OF THE SUPREME COURT)
(Civil)
Civil
1 DUGGAN J. This litigation arises out of a building dispute. SOR Pty Ltd (SOR), the building owner, contracted with the builder, Multiplex Constructions Pty Ltd (Multiplex) to design and construct a building known as the IMAX Theatre. Woodhead International Pty Ltd (Woodhead) was appointed to act as the superintendent under the contract. I will refer later in these reasons to the duties of the superintendent.
2 Initially, proceedings arising out of the dispute were commenced in 1998 when Multiplex, the plaintiff, sought payment from SOR, the defendant, of retention monies which Multiplex claimed to be entitled to under the contract. It was alleged that a total sum of $167,020 was held by SOR by way of retention monies and that this sum was to be paid to Multiplex in two equal instalments -
* the first when the superintendent issued a Certificate of Practical Completion; and
* the second when the superintendent issued a Final Certificate.
3 In the initial proceedings the amount of $85,510 was claimed as being due to the plaintiff on the basis that the Certificate of Practical Completion had been issued on 21 April 1998 and that SOR refused to release this amount.
4 The trial of that action commenced before Martin J on 22 June 1999. After some discussion with the learned trial judge, the parties asked him to adjourn the matter sine die with liberty to the parties to have the matter called back on after the giving of reasonable notice. The court was also advised that certain terms had been agreed between the parties, but that they remained confidential. The learned trial judge made the order requested by consent of both parties. Then, on 24 March 2000 Multiplex applied to a master of the court for an order joining Woodhead as a defendant in the proceedings. The application also sought leave to amend the statement of claim to add new causes of action against SOR.
5 The applications to join Woodhead as a defendant and to amend the statement of claim were allowed by the master and the present appeal is against those orders.
6 The causes of action now pleaded against the defendants are as follows:-
(a) breach of a contractual obligation by SOR to use its best endeavours to ensure that Woodhead issued a Final Certificate;
(b) breach of a tortious duty by SOR to use its best endeavours to cause Woodhead to issue a Final Certificate;
(c) repudiation by SOR of the agreement entered into between the plaintiff and SOR on the occasion of the appearance before Martin J; and
(d) breach of a tortious duty by Woodhead in failing to issue a Final Certificate.
7 Before dealing with the grounds of appeal it is necessary to say something further about the contract and some of the matters pleaded in the amended statement of claim.
8 The contract is dated 18 September 1997. The only parties to the contract are SOR and Multiplex. The contract states that it is comprised of the Australian Standard General Conditions of Contract for Design and Construct together with two annexures, a schedule and four appendices. Amendments and alterations to the standard contract are effected by the annexures.
9 Clause 23 of the agreement between SOR and Multiplex provides for the appointment by SOR of a superintendent. It states:
"The Principal shall ensure that at all times there is a Superintendent and will use all reasonable endeavours to ensure that in the exercise of the functions of the Superintendent under the Contract, the Superintendent -
(a) acts honestly and fairly;
(b) acts within the time prescribed under the Contract or where no time is prescribed, within a reasonable time; and
(c) arrives at a reasonable measure or value of work, quantities or time.
If pursuant to a provision of the Contract enabling the Superintendent to give directions, the Superintendent gives a direction, the Contractor shall comply with the direction.
Except where the Contract otherwise provides, a direction may be given orally but the Superintendent shall as soon as practicable confirm it in writing.
If the Contractor in writing requests the Superintendent to confirm an oral direction, the Contractor shall not be bound to comply with the direction until the Superintendent confirms it in writing.
The Superintendent shall have -
(i) access to the Site and the work under the Contract; and
(ii) after reasonable notice to the Contractor, access to any place other than the Site where work under the Contract is being carried out or materials are being prepared or stored,
for the purposes of discharging the functions of the Superintendent under the Contract."
10 The contract provides for the retention by the owner of amounts which are deducted from the claims for progress payments. I have already pointed out that Multiplex alleges that the sum of $167,020 was retained by SOR under these provisions. Upon the issue of the Certificate of Practical Completion the owner's entitlement to the retention monies is reduced by 50 per cent of the amount retained (Clause 5.8).
11 Clause 42.3 provides for the issuing of a Certificate of Practical Completion. It states:
"The Contractor shall give the Superintendent at least 14 days notice of the date upon which the Contractor anticipates that Practical Completion will be reached.
When the Contractor is of the opinion that Practical Completion has been reached, the Contractor shall in writing request the Superintendent to issue a Certificate of Practical Completion. Within 14 days of the receipt of the request, the Superintendent shall give to the Contractor and to the Principal a Certificate of Practical Completion certifying the Date of Practical Completion or give the Contractor in writing the reasons for not issuing the Certificate.
When the Superintendent is of the opinion that Practical Completion has been reached, the Superintendent may issue a Certificate of Practical Completion, whether or not the Contractor has made a request for its issue."
12 "Practical Completion" is defined as meaning the stage when the works are complete except for certain minor omissions and defects.
13 On the Date of Practical Completion a Defects Liability Period comes into effect. As soon as possible after that date the builder is required to rectify any defects or omissions. At any time during the Defects Liability Period the superintendent may direct the contractor to rectify promptly any omission or defect for which the contractor is responsible. The Defects Liability Period in the present case was fixed at 12 months.
14 Clause 42.6 provides for a Final Certificate. It states:
"Within 14 days of receipt of the Contractor's Final Payment Claim or, where the Contractor fails to provide such claim, the expiration of the period specified in Clause 42.5 for the lodgement of the Final Payment Claim by the Contractor, the Superintendent shall issue to the Contractor and to the Principal a final payment certificate endorsed 'Final Certificate'. In the certificate the Superintendent shall certify the amount which, in the Superintendent's opinion, is finally due from the Principal to the Contractor or from the Contractor to the Principal arising out of the Contract or any alleged breach thereof. In such Final Certificate the Superintendent shall also set out such of the allowances in Clause 42.1(a) to (f) inclusive as are appropriate to such Final Certificate.
Unless either party, either before the Final Certificate has been issued or not later than 21 days after the issue thereof, serves a notice of dispute under Clause 47, the Final Certificate shall be evidence that the Works have been completed in accordance with the terms of the Contract and that any necessary effect has been given to all the terms of the Contract which require additions or deductions to be made to the Contract Sum, except in the case of -
(a) fraud, dishonesty or fraudulent concealment relating to the work under the Contract or any part thereof or to any matter dealt with in the said Certificate;
(b) any defect (including omission) in the Works or any part thereof which was not apparent at the end of the Defects Liability Period, or which would not have been disclosed upon reasonable inspection at the time of the issue of the Final Certificate; or
(c) any accidental or erroneous inclusions or exclusions of any work, plant, materials or figures in any computation or any arithmetical error in any computation.
Within 14 days after the issue of a Final Certificate, the Principal shall release to the Contractor any security, retention moneys or both then held by the Principal." (emphasis added)
15 I have drawn attention to the pleading which alleges that the Certificate of Practical Completion was issued on 21 April 1998 and that no retention moneys were released to Multiplex on that date or subsequently. Under the contract, the Defects Liability Period concluded on 21 April 1999. Clause 42.5 provides that the builder shall provide the superintendent with a Final Payment Claim within 28 days of the expiry of the Defects Liability Period. It is pleaded that Multiplex submitted a Final Payment Claim to Woodhead on 9 July 1999. I have set out Clause 42.6 which requires the superintendent to issue a Final Payment Certificate within 14 days of the receipt of that claim.
16 As the basis of the plaintiff's claim is for the release of retention monies it is necessary to say something about the provisions relating to retention monies under the contract. Subject to adjustment in accordance with the provisions discussed below, the retention monies are to be released in two equal instalments, the first upon the issue of the Certificate of Practical Completion and the second when the Final Certificate is issued. Clause 5.1 states that the purpose of retention monies is to ensure the proper performance of the contract. Clause 5.6(a) provides that-
"The Principal may resort to and use the Retention Moneys in whole or in part to meet any unremedied default of the Contractor hereunder or other obligation of the Contractor under this Contract which has not been met or complied with."
17 The determination by the superintendent as to the amount which is finally due to the principal or the contractor is to be included in the Final Certificate. (Clause 42.6)
18 The Statement of Claim in its original form was restricted to a claim for payment of that portion of the retention monies due to Multiplex upon the issue of the Certificate of Practical Completion. Apart from joining Woodhead as a defendant, the amendments extend the claim to the retention monies said to be due upon the issue of the Final Certificate and the pleadings complain of the failure of Woodhead to issue the Final Certificate and the failure of SOR to ensure that Woodhead performed this duty. In addition, there is the claim against SOR which is based on the alleged agreement between the parties at the time of the hearing before Martin J.
19 I deal first with the new causes of action pleaded against SOR. The first alleges breach of a contractual duty by SOR in failing "to use all reasonable endeavours to ensure that Woodhead issued a Final Certificate" (Statement of Claim para 13.9). It is claimed that the contractual duty arises from Clause 23 of the contract, the terms of which I have set out above. It is not specified in the Statement of Claim which of the duties referred to in Clause 23 is or are relevant. I think that should be made clear.
20 However, there is a further hiatus in the pleading in that the mere failure to issue a Final Certificate would not, of itself, entitle the plaintiff to the damages claimed in the prayer for relief which include the two payments of $83,510. The second payment of $83,510 which is of particular relevance to this pleading would not be payable unless there was a certification that Multiplex was entitled to that amount and no deductions were appropriate or, at the very least, some monies were due to Multiplex after appropriate deductions. The pleadings assert that there was no lawful reason for refusing to issue a Final Certificate but they make no reference to the absence of any entitlement residing in SOR to deduct from retention monies which would otherwise be payable upon the issue of the Final Certificate. I think the plaintiff's position in this respect should be made clear.
21 Apart from these criticisms, I do not think that any ground exists for refusing to allow the amendments in relation to this cause of action.
22 I do not agree with the submission of Mr Dal Cin, for SOR, that the requirement that the superintendent should be independent in the performance of its duties in some way requires inaction on the part of the principal in all aspects relating to the issue of the Final Certificate. If the superintendent is required to act within certain time limits in relation to the Final Certificate then it is arguable that, under the contract, the principal has a duty to use reasonable endeavours to ensure that these requirements are observed (Clause 23(b)). This duty does not conflict with the requirement that the principal is not to influence the superintendent in relation to the professional assessments which are required in preparing the Certificate.
23 The next cause of action pleaded is breach of a duty of care owed by SOR to Multiplex to ensure that Woodhead acted in accordance with its duties under Clause 23 of the Contract. In the case of this pleading paragraphs (a), (b) and (c) of Clause 23 are specifically referred to.
24 Mr Dal Cin submitted that the principal in a construction contract would not be liable for the negligence of a superintendent acting in his capacity as a certifier. He referred to Hudson's Building and Engineering Contracts (11th ed) Vol 1 para 6-097. The learned author of Hudson relies on Pacific Associates v Baxter [1990] 1 QB 993 for this proposition. In my view this is stating the matter too broadly. In P & E Phontos Pty Ltd v McConnell Smith & Johnson Pty Ltd (1993) 9 BCL 259 Cole J expressed the view that the decision in Pacific Associates turned on the particular circumstances of that case and that the court should approach each case in which negligence is alleged by considering the particular circumstances said to establish a duty of care. Cole J was of the view that in the imprecise area of the law of negligence the burden upon an applicant seeking to strike out a summons is greater because of the developing nature of the concept of duty of care. That statement is just as true now as it was when it was made by Cole J in 1993. (cf Perre & Ors v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180). Nor do I agree with Mr Dal Cin's argument that the contractual relationship necessarily excludes the existence of a duty of care. In my view the pleadings disclose a reasonably arguable cause of action against SOR based on breach of duty of care.
25 Paragraph 15.3 of the Statement of Claim raises a further alternative cause of action that SOR breached its duty of care by acting in a manner so as to delay the issue of the Final Certificate. The particulars of this alleged breach simply refer to paragraphs 13 and 14 of the Statement of Claim with the added assertion that:
"These are the best particulars which can be provided until SOR and Woodhead have made full discovery and inspection." (Statement of Claim para 15.5.2).
26 In my view, the particulars presently available are inadequate to support this cause of action and the plaintiff should not have been permitted to amend the Statement of Claim so as to include it in its present form.
27 Next it is pleaded that SOR breached the agreement entered into when the matter was before Martin J. The pleadings on this cause of action are as follows:
"16. On 22 June 1999 during the first day of the trial of these proceedings Multiplex and SOR reached a settlement agreement ('the 22 June 1999 agreement') on terms:-
16.1 That the matter would be adjourned sine die with liberty to apply to the trial Judge;
16.2 That SOR would pay the sum of $85,510.00 to the joint trust account of N Minicozzi and Nosworthy Partners to be placed on deposit pending the issue of a Final Certificate;
16.3 That Multiplex would lodge a Final Payment Claim pursuant to paragraph 42.5 of the contract with Woodhead on or before 25 June 1999;
16.4 That subpoena would use its best endeavours to cause Dare Sutton Clark to examine and report on or before 7 July 1999;
16.5 That both parties would use their best endeavours to cause Woodhead to issue a Final Certificate within 14 days of receiving the Final Payment Claim;
16.6 If the Building Surveryor's certificate became an issue which it did then both parties would use their best endeavours to obtain the necessary certificate by 14 July 1999;
16.7 Both parties would use their best endeavours to obtain a release for SOR from MTM Funds Management Limited upon the issue of a Final Certificate.
16.8 This agreement was reached at the Supreme Court building during an adjournment of these proceedings between Jan Gyrn of Multiplex and Patrick Farrugia of SOR in the presence of their respective legal advisers and counsel.
17 SOR has repudiated the 22 June 1999 agreement.
17.1 SOR instructed its solicitor to write the letter pleaded in paragraph 13.5 hereof by which letter SOR evinced an intention not to consider itself bound by the terms of the 22 June 1999 agreement.
17.2 SOR has failed to pay the sum of $85,510.00, or any other amount, to the joint trust account of N Minicozzi and Nosworthy Partners.
17.3 SOR has failed to use all reasonable endeavours to cause Woodhead to issue a Final Certificate within 14 days of receiving the Final Payment Claim.
17.4 These are the best particulars which can be provided until SOR and Woodhead have made full discovery and inspection."
28 Although the agreement which is pleaded is referred to in the pleadings as a "settlement agreement" it was not a final compromise of the action. It is for this reason that I reject Mr Dal Cin's argument that the plaintiff must elect to proceed under this agreement or pursue the original action in relation to the release of the detention monies said to be payable under the contract upon the issue of the Certificate of Practical Completion. There is nothing inconsistent in relying upon the original contract and the additional requirement arising out of the alleged agreement on the first day of the trial.
29 There seems to be no relevance for present purposes in that aspect of the agreement which required the sum of $85,510 to be paid into the joint trust account of N Minicozzi and Nosworthy Partners. This appears to have been no more than a stakeholder arrangement which would not, of itself, justify payment of the money to SOR.
30 However, as I have said, the other aspect of the alleged agreement requiring both parties to use their best endeavours to cause Woodhead to issue a Final Certificate within 14 days of receiving the Final Payment Claim is an obligation which, in my view, can be pleaded in addition to those causes of action which relate to the original contract.
31 Mr Dal Cin submitted that paragraph 17.3 of the Statement of Claim is inadequate in that it fails to provide particulars of the alleged failure to issue the Final Certificate. However, I do not agree that further particulars are required as to these matters which may not be within the knowledge of the plaintiff.
32 I come then to the appeal by Woodhead. The amendments to the Statement of Claim allowed by the learned master allege that Woodhead has breached a duty of care owed to Multiplex. Particulars of the circumstances which are said to give rise to the duty of care are pleaded as follows:
"14.1 Woodhead has:-
14.1.1. purported to assume the role of Superintendent under the contract;
14.1.2 issued instructions to Multiplex during the course of the Works;
14.1.3 received payment claims from Multiplex;
14.1.4. certified payment certificates to Multiplex; and
14.1..5 received the Final Payment Claim from Multiplex.
14.2 By reason of the foregoing Woodhead owed Multiplex a duty of care to:-
14.2.1 act honestly and fairly;
14.2.2 act within the time prescribed under the contract, or where no time was prescribed, within a reasonable time; and
14.2.3 arrive at a reasonable measure or value of work, quantities or time."
33 Pleadings to support a breach of the duty of care followed:
"14.3 Woodhead has breached its duty of care by:-
14.3.1 not acting honestly and fairly by failing to issue the Final Certificate;
14.3.2 failing to issue the Final Certificate within the time prescribed in the contract or within a reasonable time;
14.3.3 failing to arrive at a reasonable measure of the work performed by Multiplex by failing to issue the Final Certificate.
14.3.4 The Final Payment Claim was lodged with Woodhead by a facsimile dated 25 June 1999 from Jan Gyrn, Project Manager of Multiplex to Jim Williams of Woodhead.
14.3.5 Jim Williams of Woodhead responded by letter dated 30 June 1999 addressed to Jan Gyrn of Multiplex identifying three matters that Woodhead alleged must be dealt with prior to the issue of the Final Certificate.
14.3.6 The Woodhead letter of 30 June 1999 was copied to Patrick Farrugia of SOR.
14.3.7 Jan Gyrn of Multiplex responded by letter dated 7 July 1999 addressed to Jim Williams of Woodhead confirming that three matters raised had been dealt with.
14.3.8 Jan Gyrn of Multiplex by further letter dated 15 July 1999 addressed to Jim Williams of Woodhead confirmed that all of Woodhead's requirements had been met.
14.3.9 A further letter dated 28 July 1999 from Jan Gyrn of Multiplex addressed to Jim Williams of Woodhead confirmed that all of Woodhead's requirements had been dealt with and requested that the Final Certificate be issued by 30 July 1999.
14.3.10 Jim Williams of Woodhead responded by letter dated 4 August 1999 addressed to Jan Gyrn of Multiplex wanting further matters dealt with.
14.3.11 The Woodhead letter of 4 August 1999 was copied to Patrick Farrugia of SOR.
14.3.12 Nathan Kuperholz, solicitor instructed by Multiplex, wrote to Jim Williams of Woodhead on 10 August 1999 advising that in Multiplex's view the contract required the issue of a Final Certificate without further delay.
14.3.13 Simon Gray of Multiplex copied Nathan Kuperholz's letter of 10 August 1999 to Patrick Farrugia of SOR by facsimile dated 11 August 1999.
14.3.14 Jan Gyrn of Multiplex by further letter dated 16 August addressed to Jim Williams of Woodhead again confirmed that all Woodhead's requirements had been met.
14.3.15 Minter Ellison, a firm of solicitors instructed by Woodhead, wrote to Nathan Kuperholz on 13 and 16 August 1999.
14.3.16 The Minter Ellison letter of 16 August 1999 was copied to Patrick Farrugia of SOR.
14.3.17 The Minter Ellison letter of 16 August 1999 stated in part:-
'The Superintendent urges both the Principal and Contractor to give serious consideration to the contents of its letter dated 9 July 1999 and to properly address the issues outlined in that letter.'
14.3.18 There was no response to the Minter Ellison letter of 16 August 1999 from SOR.
14.3.19 Simon Gray of Multiplex copied to Patrick Farrugia of SOR by facsimile of 19 August 1999 Minter Ellison's letters of 13 and 16 August 1999.
14.3.20 Jim Williams of Woodhead responded to Jan Gyrn of Multiplex's letter of 16 August, as pleaded in paragraph 14.3.14, by letter dated 18 August 1999 addressed to Jan Gyrn of Woodhead.
14.3.21 Jan Gyrn of Multiplex responded to the letter of 18 August 1999 by letter dated 14 September 1999 addressed to Jim Williams of Woodhead.
14.3.22 Jim Williams of Woodhead responded to the letter of 14 September 1999 by letter dated 28 September 1999 addressed to Jan Gyrn of Woodhead.
14.3.23 Jan Gyrn of Multiplex responded to the letter of 28 September 1999 by letter dated 11 October 1999 addressed to Jim Williams of Woodhead.
14.3.24 These are the best particulars which can be provided until SOR and Woodhead have made full discovery and inspection."
34 Mr Lunn, for Woodhead, did not argue that a relevant duty of care could not be owed by Woodhead to Multiplex in these circumstances and I did not understand him to argue that the duty could not include a requirement to issue a Final Certificate. However, he argued there was no positive allegation by Multiplex that it constructed the building in accordance with the specifications and the contract and he claimed that none of the material facts pleaded "allege a trigger to perform a duty to certify". In short, he submitted that insufficient particulars were put forward to make out an arguable case of a breach of whatever duty might have been owed.
35 In my view, there is merit in this complaint. In paragraph 12 of the Statement of Claim there is a bald assertion that "Woodhead has had no legal reason for refusing to issue a Final Certificate pursuant to the contract". However, the particulars of the alleged breach in paragraphs 14.3.4 to 14.3.24 inclusive are confusing. They refer to a direction by Woodhead that certain matters be dealt with followed by an assertion made by Multiplex to Woodhead that the directions in relation to these three matters had been met (14.3.8). Then there is mention of Woodhead requiring further matters to be dealt with (14.3.10). In paragraph 14.3.2 there is an assertion that Multiplex's solicitor wrote to Woodhead advising that in Multiplex's view the contract required the issue of a Final Certificate without further delay. This was followed by a letter from Multiplex to Woodhead making a similar claim.
36 Paragraph 4.3.17 makes no sense in the absence of any indication of the relevant contents of Woodhead's letter. The bare references in paragraphs 14.3.19 to 14.3.23 to correspondence are of no use in providing an understanding of the claim.
37 There is no need to set out in the Statement of Claim extensive detail relating to Woodhead's directions, but I think it should have been made clear in the pleadings, if such is the plaintiff's case, that the various conditions precedent to the giving of a Final Certificate had been fulfilled; that there was a requirement to provide the Final Certificate in the circumstances; and, as I mentioned before, that the effect of the Final Certificate would be to provide the basis for at least some payment to be made to the plaintiff.
38 In summary, therefore, I uphold the appeal in so far as it alleges inadequate particulars on the aspects dealt with in paragraphs 19 and 20 of these reasons in relation to the case against SOR. The appeal against the decision to permit the cause of action alleged in paragraph 15.3 of the Statement of Claim to be pleaded will also be allowed. The appeal against the inclusion of the cause of action pleaded against Woodhead is also allowed on the ground of the inadequate particularisation which I have dealt with in paragraphs 35, 36 and 37 of my reasons.
39 However, I am of the view that, except in the case of the cause of action pleaded in paragraph 15.3, the plaintiff should be given the opportunity to bring into court at this stage amendments which address the inadequacies to which I have referred.
40 If the deficiencies in the particulars are properly addressed it may then be appropriate to allow amendment of the Statement of Claim and joinder of Woodhead. If the matter can be dealt with as part of the appeal it will result in a saving of time and expense.
41 I will hear the parties as to the orders which should be made.
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