H & M Constructions (NSW) Pty Ltd v Golden Rain Development Pty Ltd (No 4)

1. [1]

   On 20 October 2015 the plaintiff, H & M Constructions (NSW) Pty Ltd (“the Builder”), entered into a design and construct contract (“the Contract”) with the defendant, Golden Rain Development Pty Ltd (“the Developer”) to design and construct 109 high rise apartments known as the Sugarcube Apartments (“the Apartments”), eight terraces known as the Honeycomb Terraces (“the Terraces”) and various public domain roads (“the Dedicated Public Roads”) on a former industrial site in Erskineville. [1]

2. [2]

   The contract price was approximately $44 million (exclusive of GST).

3. [3]

   As was known to both the Builder and the Developer, the site was contaminated in the soil and groundwater. This was because, for most of the last century, the site had been occupied by pipe, oven, and boiler manufacturers; including Metters Limited, which occupied the site from 1936 to 1973.

4. [4]

   On 24 September 2015, City of Sydney Council (“the Council”) granted development approval for the project subject, relevantly, to conditions 98, 99 and 100. Those conditions, which I will call “the Remediation Conditions”, were summarised in the Builder’s opening submissions as follows:

5. [5]

   The Site Auditor was Dr Ian Swane.

6. [6]

   The relevant Remediation Action Plan was made on 28 October 2015. The parties referred to this document as “RAP4”.

7. [7]

   The Builder’s scope of work under the Contract included remediating the site contamination in accordance with the requirements of the Remediation Conditions. Under the Contract, all risks relating to remediating the contamination were allocated to the Builder.

8. [8]

   The Contract required the Builder to give security (“the Security”). The Security was in the form of two guarantees issued by the Commonwealth Bank of Australia, each for some $1.1 million, representing 5% of the contract price.

9. [9]

   The Builder performed remediation works from around late 2016 to mid-2017 and commenced construction of the Apartments and the Terraces in 2017. By July 2018, the Builder contended that it had completed the works.

10. [10]

    The focus of the dispute in these proceedings is on a Conditional Certificate of Practical Completion (“the Conditional Certificate”) issued on 24 September 2018 by the Superintendent under the Contract, Urban Pty Ltd. The Contract provided that the Superintendent was the agent and representative of the Developer. [2] The effect of the Conditional Certificate and the consequences which flow from it are at the heart of this litigation. The Conditional Certificate purported to specify 7 September 2018 as the date of practical completion under the Contract. However, as its title suggests, the Conditional Certificate was qualified by a number of conditions, including the issue of an occupation certificate. I return to this below.

11. [11]

    An interim occupation certificate was issued on 16 November 2020 in respect of the Apartments. However, no occupation certificate, interim or otherwise, has yet been obtained in relation to the Terraces which remain unoccupied. Further, the Dedicated Public Roads have not been completed to the satisfaction of the Council.

Issues and disposition

1. [12]

   The ultimate issues are whether the Developer is entitled to the benefit of the Security and also to liquidated damages of some $22 million.

2. [13]

   Those alleged entitlements depend, in substance, on the status and effect of the Conditional Certificate and, in particular, whether the effect of that document was that practical completion of the works under the Contract was validly certified as having been achieved on 7 September 2018, and that 7 September 2018 was to be applied by the parties to determine their respective entitlements to liquidated damages and delay costs.

3. [14]

   My conclusion is that the Conditional Certificate had no contractual effect and that, even if it had contractual effect, it was not conclusive as to when practical completion took place.

4. [15]

   The Builder’s case is that, if that be the correct conclusion, the Developer is not entitled to liquidated damages or access to the Security by reason of an estoppel, alleged unconscionable conduct and operation of the “prevention principle”.

5. [16]

   My conclusion is that the Builder has not established any of these matters.

6. [17]

   The Builder accepts that, if that be the correct conclusion, there is no impediment to the Developer having access to the Security and recovering the liquidated damages it seeks.

The Conditional Certificate

1. [18]

   The Superintendent issued the Conditional Certificate on 24 September 2018. A copy of the Conditional Certificate is attached to these reasons.

2. [19]

   The Conditional Certificate purported to “certify”, pursuant to cl 34.7 of the Contract, that the Builder had been awarded practical completion. The document stated that the “Date of Practical Completion” was 7 September 2018.

3. [20]

   However, the document then contradicted, or at least qualified that purported certification by stating that it was “conditional upon the completion” of 10 identified “issues”, seven of which were, in terms, requirements of “Practical Completion” as defined in the Contract.

4. [21]

   Those seven requirements were those stated in italics in the Conditional Certificate, namely that:

5. [22]

   So qualified, the Conditional Certificate did not comply with the requirements of the Contract for a “Certificate of Practical Completion”. Those requirements were contained in cl 34.7 of the Contract which provided:

6. [23]

   By reason of cl 34.7(b), once the Builder gave the Superintendent a request to issue a Certificate of Practical Completion, the Superintendent had a choice. Either it could issue a “Certificate of Practical Completion evidencing the Date of Practical Completion” or it could give “written reasons as to why Practical Completion has not been achieved”. [3] Clause 34.7(b) did not permit or authorise the Superintendent to take any other step.

7. [24]

   I do not see how the Conditional Certificate could be construed as a document in which the Superintendent gave “reasons as to why practical completion has not been achieved”. To the contrary, the document stated that “Practical Completion has been awarded” albeit conditionally upon “completion” of the 10 identified issues. The Builder did not submit otherwise.

8. [25]

   Nor did the Conditional Certificate comprise a document “evidencing the Date of Practical Completion”. In order to be such a document, the Conditional Certificate would have had to specify what, as at the date of its issue, was the actual date of practical completion; not what date would be the date of practical completion if all of the specified “issues” were completed.

9. [26]

   The Conditional Certificate purports to specify a retrospective date, namely 7 September 2018, on which practical completion would be taken to have been achieved in the event of “completion” by the Builder of the identified issues. As I have set out, one of those “issues” was the issue of an occupation certificate, an event that has still not come to pass so as concerns the Terraces.

10. [27]

    If such a document was taken to be a Certificate of Practical Completion, it would leave the parties in a state of uncertainty as to whether that date was 7 September 2018; as this would depend on if and when the specified “issues” were completed.

11. [28]

    This was the conclusion to which Rees J came in Parkview Constructions Pty Ltd v Futuroscop Enterprises Pty Ltd [4] in relation to a contract with indistinguishable wording. I agree. The Builder pointed to the fact that, unlike the contract in Parkview, the Contract permitted the Superintendent to consult with the Developer before issuing the Conditional Certificate. [5] The Builder also pointed to the facts that in Parkview, two certificates were issued at different times, that the certificates specified dates by which the relevant conditions were to be completed and that the contract in Parkview did not provide for the possibility of the superintendent directing that there be separable portions. [6] However, the Builder did not develop any submission as to what significance lay in these differences. I see none.

12. [29]

    The Conditional Certificate was thus a document for which there was no authority in the Contract and thus had no contractual effect.

13. [30]

    In any event, even if the document did have contractual effect, it would not have been conclusive as to when practical completion in fact took place. That is because the “Date of Practical Completion” was defined in the Contract to mean:

14. [31]

    In this “litigation”, and pursuant to the Contract, I am asked to determine “the date upon which practical completion was reached”, that is, on which date practical completion, as defined in the Contract, was in fact reached. As no occupation certificate has yet been issued in relation to the Terraces, practical completion has not yet occurred.

The Builder’s alternative arguments

1. [32]

   The Builder’s case is that if this be the correct conclusion as to the contractual status of the Conditional Certificate:

2. [33]

   Consideration of these arguments directs attention to the events leading up to the issue by the Superintendent of the Conditional Certificate, and events thereafter.

The events leading to the issue of the Conditional Certificate

1. [34]

   By June 2018, construction of the Apartments and Terraces was all but completed.

2. [35]

   By June 2018, the date for practical completion of both the Apartments and the Terraces had passed. The original date for practical completion was 17 July 2017. The date for practical completion of the Apartments was later extended to 19 March 2018, and for the Terraces to 3 May 2018. Accordingly, as at June 2018, unless the Builder obtained extensions of time to achieve practical completion, it would be liable to pay liquidated damages to the Developer at an agreed daily rate of $13,628. [8]

3. [36]

   On 5 July 2018, the Site Auditor, Dr Swane, issued a site audit report which reported that:

4. [37]

   On 13 July 2018, the Council wrote to the Developer, and sent a copy to the Superintendent stating:

5. [38]

   On 16 July 2018, the Superintendent issued a Superintendent’s Instruction stating that the Builder had completed the Apartments except for matters identified in a letter from the Council of 29 June 2018 and that practical completion for the apartments “would have been issued on” 29 June 2018 if a number of items were completed, including the issue of an occupation certificate and compliance by the Builder with the Remediation Conditions.

6. [39]

   On 23 July 2018, the Builder wrote to the Superintendent stating that the Superintendent’s Instructions:

7. [40]

   On 25 July 2018, the Builder’s Environmental Consultant, EI Australia Pty Ltd, wrote to the Developer and the Superintendent stating that, amongst other things, the soil underneath the Dedicated Public Roads still contained asbestos in quantities exceeding the applicable criteria, and that those matters were proposed to be managed under environmental management plans.

8. [41]

   On 25 July 2018, the project manager of the Builder, Mr Jan-David Storm, wrote to the Superintendent:

9. [42]

   The Superintendent replied that day:

10. [43]

    On 7 August 2018, the Builder wrote to the Superintendent:

11. [44]

    The Builder’s reference to the “3rd bonus payment” was a reference to the Builder’s entitlements to “bonus payments” under a bonus payment deed made between the Builder and the Developer on 11 May 2016.

12. [45]

    The Developer, by its director Ms Rosemary Ren, responded by saying:

13. [46]

    Ms Ren was referring to a provision in the bonus payment deed that required a quantity surveyor to express an opinion as to the bonus payment that should be paid to the Builder.

14. [47]

    On 8 August 2018 the Superintendent issued a further Superintendent’s Instruction stating:

15. [48]

    On 4 September 2018, in response to an enquiry from the Superintendent as to when sales agents might have access to the site, Mr Storm wrote to the Superintendent:

16. [49]

    So began the Builder’s agitation for the issue of a certificate of practical completion.

17. [50]

    The Superintendent replied that “access needs to be provided” and that “you know I cannot issue [practical completion].”

18. [51]

    On 5 September 2018, the Builder made an application to the Superintendent for an extension of time until 7 September 2018 to achieve practical completion. The parties referred to this as “EOT9”.

19. [52]

    As I have set out above, the dates for practical completion at that stage were 19 March 2018 for the Apartments and 3 May 2018 for the Terraces.

20. [53]

    The Builder claimed an entitlement to an extension of time on the basis of the “ongoing delay in Council approval” of the Remediation Conditions.

21. [54]

    However, the Builder was only entitled to claim an extension of time for a “Qualifying Cause of Delay” and only if the Builder did not “contribute to the cause of the delay”. [9] Any delay by the Council in certifying compliance with the Remediation Conditions was not a “Qualifying Cause of Delay”.

22. [55]

    In any event, the Council’s “delay” in certifying compliance with the Remediation Conditions was because of its lack of satisfaction that those conditions had been satisfied, a matter for which the Builder was responsible under the Contract. The “delay” was thus one to which, at the very least, the Builder “contributed”.

23. [56]

    The Builder also claimed, for the same reason, “associated delay costs from completion of the Contract Works to the date of [practical completion] due to delays outside the control of [the Builder] being this ongoing delay in approval of DA conditions 99 and 100”. [10]

24. [57]

    By EOT9, the Builder claimed an extension of time to 7 September 2018 on the basis:

25. [58]

    On 6 September 2018, the Council wrote to the Developer:

26. [59]

    The Builder continued to seek establishment of a date of practical completion. Thus, also on 6 September 2018, Mr Storm for the Builder wrote to the Superintendent:

27. [60]

    On 7 September 2018, Mr Evan Torbica from the Superintendent replied:

28. [61]

    Later on 7 September 2018, Mr Torbica wrote to the Developer (Ms Ren):

29. [62]

    Thus, the Superintendent announced to the Developer its intention to certify “conditional practical completion”. However, it was not correct for the Superintendent to say that Dr Swane had “endorsed” the proposed environmental management plans. On 5 July, Dr Swane had said that they were not appropriate because the Council had not approved them. [11] The day before, 6 September 2018, Council had stated, in terms, that they were not approved. [12]

30. [63]

    Mr Torbica continued:

31. [64]

    On 12 September 2018, Ms Ren wrote to Mr Torbica asking him to “please clarify the draft [practical completion]” and asking Mr Torbica to “please also send us the possible costs after the [practical completion]”.

32. [65]

    Later on 12 September 2018, Mr Torbica wrote to Ms Ren:

33. [66]

    A short time later on 12 September 2018, Ms Ren replied:

34. [67]

    Finally, also on 12 September 2018, Mr Torbica replied:

35. [68]

    The last paragraph of this email suggests that the Superintendent contemplated that the effect of the Conditional Certificate might be to reduce delay costs claimed by the Builder. As I set out below, Ms Ren agreed that the Superintendent had told her that this was the purpose of the document.

36. [69]

    On 13 September 2018, Ms Ren sought advice from Mr Emanuel Confos at Norton Rose Fulbright:

37. [70]

    On 14 September 2018, Mr Confos replied to Ms Ren stating that “the [practical completion] certificate can be issued” and that “the Builder is still liable for defects after [practical completion]”.

38. [71]

    Ms Ren replied:

39. [72]

    At around that time, also on 14 September 2018, Ms Ren wrote to the Superintendent:

40. [73]

    On 17 September 2018, Mr Confos wrote to Ms Ren:

41. [74]

    Later on 17 September 2018, Mr Torbica from the Superintendent wrote to Mr Confos:

42. [75]

    Later on 17 September 2018, Ms Ren wrote to Mr Torbica:

43. [76]

    On 14 September 2018, the Council wrote to Norton Rose Fulbright expressing the Council’s dissatisfaction with the proposed environmental management plan and stating:

44. [77]

    Later on 17 September 2018, Ms Ren wrote to Mr Torbica:

45. [78]

    On 18 September 2018, Mr Bart O’Callaghan from the Superintendent wrote to Mr Storm:

46. [79]

    On 19 September 2018, Mr Storm replied to Mr O’Callaghan with comments in relation to the particular condition specified in the “draft [practical completion]”.

47. [80]

    One matter that Mr Storm sought was that “the letter is to state confirmation that no Liquidated Damages are applicable to [the Builder]”. As can be seen from the form of the Conditional Certificate, as issued, it contained no such confirmation.

48. [81]

    On 21 September 2018, the Superintendent issued an extension of time purportedly extending the date of practical completion to 7 September 2018. The status of this document is problematic, as it attributed delay to alleged “delayed responses” from the Site Auditor. There was debate before me as to whether there was any such material delay by Dr Swane. However, I do not find it necessary to resolve that debate as none of the issues arising in the proceedings depends on its resolution. Nothing in these reasons should be construed as a finding that there was any such delay.

49. [82]

    On 24 September 2018, the Superintendent issued the Conditional Certificate.

50. [83]

    Within hours of the issue by the Superintendent of the Conditional Certificate, Mr Storm wrote to Ms Ren, asking her to “confirm when you will be making payment for the $500,000”.

51. [84]

    Ms Ren replied the following day:

Ms Ren’s state of mind concerning the Conditional Certificate

1. [85]

   Ms Ren accepted in cross-examination that she understood from the Superintendent that the reason the Superintendent had issued the Conditional Certificate was to protect the Developer from possible applications by the Builder for delay costs.

2. [86]

   Thus, Ms Ren gave this evidence:

3. [87]

   A short time later, Ms Ren said:

4. [88]

   Ms Ren was also asked questions about her state of mind concerning the legal validity of the Conditional Certificate.

5. [89]

   She gave this evidence:

6. [90]

   Ms Ren was then taken to her email that I have set out at [86] above and gave this evidence:

7. [91]

   Ms Ren, a short time later, gave this evidence, initially in response to questions from me, and then in response to a question from Ms Simpson who appeared with Mr Hanscomb for the Builder:

8. [92]

   The Builder relies on this evidence, particularly Ms Ren’s answer to Ms Simpson’s question following my questions, as showing that at all material times, Ms Ren’s state of mind was that the Conditional Certificate had no legal effect. As I set out below, this proposition loomed large in Ms Simpson’s closing submissions.

9. [93]

   As Mr Kidd SC, who appeared with Mr Dooley for the Developer accepted, the evidence that Ms Ren gave in response to Ms Simpson’s questions, immediately after my questions, taken alone provides some support for that submission.

10. [94]

    However, I do not think that a fair reading of Ms Ren’s evidence, taken as a whole, justifies that conclusion. Ms Ren, whose first language is not English, appeared to me to be saying that, although she understood that the Superintendent had caused the Conditional Certificate to be issued to protect the Developer from delay costs, she did not believe that the Builder had any entitlement to delay costs (a matter she consistently asserted in the contemporaneous correspondence to which I have referred) nor that the Conditional Certificate had “legal validity” in the sense of operating so as to give the Builder an entitlement to delay costs.

11. [95]

    However that may be, the wider point is that it is no part of the Builder’s case as articulated in its List Statement that Ms Ren had a belief, that she did not disclose to the Builder, that the Conditional Certificate had no legal effect. This point is particularly important in light of the manner in which Ms Simpson ultimately put the Builder’s case in relation to unconscionable conduct. I will return to this below.

Events thereafter

1. [96]

   On 26 September 2018, the Builder sent the Superintendent a “Variation Notice”. The document was headed:

2. [97]

   The document stated:

3. [98]

   Thus, within three days of the issue of the Conditional Certificate, the Builder’s position was that it had no further obligations to perform any additional works, and that it sought release of the final payment under the bonus payment deed and return of 50% of the Security.

4. [99]

   On 27 September 2018, and again on 5 October 2018, Mr Storm for the Builder wrote to Ms Ren requesting payment of the $500,000 bonus.

5. [100]

   On 5 October 2018, Ms Ren replied:

6. [101]

   On 25 October 2018, the Builder served on the Developer a “Notice of Dispute” formally requesting payment “of the agreed $500,000 ex GST for the Bonus Payment in accordance with the Bonus Payment Deed”. Payment was requested by the following day, 26 October 2018. The Builder stated that if payment was not received by that date it would “proceed with legal proceedings to obtain the payment of the agreed figure”.

7. [102]

   Ms Ren replied the same day:

8. [103]

   Ms Ren thus made clear to Mr Storm, and thus to the Builder, that the Developer’s position was that there had not yet been “final” practical completion.

9. [104]

   On 27 October 2018, Mr Storm sent Ms Ren an email stating that he would need to notify the Developer’s bank, ANZ, of the dispute that was brewing. Mr Storm agreed that he took this step to apply pressure on the Developer to make the bonus payment.

10. [105]

    On 27 November 2018, the Developer made the final bonus payment of $500,000 to the Builder.

11. [106]

    As I set out below, Mr Storm understood at this time that the Developer’s position was that the Conditional Certificate had certified practical completion conditionally, but not on a final basis. [14]

12. [107]

    On 6 February 2019, the Builder sent the Superintendent a “Letter of Concern” in which the Builder expressed “concern in relation to inaction” by the Developer in dealing with the Council in relation to the Remediation Conditions. The letter included:

13. [108]

    In February 2019, the Developer sought access to the site for the purpose of “service locating and concrete coring” and certain “drilling works”.

14. [109]

    The Builder required that the Developer execute a “general indemnity prior to any works being undertaken” and arranged for its lawyers to prepare a Deed of Indemnity and Release that Mr Storm sent Ms Ren on 18 February 2019, under cover of an email stating:

15. [110]

    The proposed deed recited that “Practical Completion under the Contract was achieved on 7 September 2018” and contained a clause in the following form:

16. [111]

    On 26 February 2019, Norton Rose Fulbright for the Developer replied:

17. [112]

    Mr Storm was taken to this document in cross-examination and gave this evidence:

18. [113]

    And a short time later:

19. [114]

    This evidence is important in relation to the Builder’s estoppel case as it confirms that the Builder knew that the Developer’s position was that practical completion had not been achieved. However, as I discuss below, the Builder’s case in relation to estoppel changed by the time of closing submissions, leaving this evidence of less significance.

20. [115]

    On 27 February 2019, the Builder sent Norton Rose Fulbright a revised Deed of Indemnity and Release which “as a compromise” changed the provision set out at [110] above to the following:

21. [116]

    On 4 March 2019, Ms Ren wrote to Mr Storm saying that the proposed deed was “not acceptable” in its current form.

22. [117]

    On 6 March 2019, the Developer served on the Builder a “Notice of Required Access under subclause 24.2” of the Contract.

23. [118]

    On 8 March 2019, the Builder replied, referring to the Conditional Certificate, and concluding:

24. [119]

    On 12 March 2019, the Builder requested return of half of the Security and attached a purported “Deed of Release – Practical Completion”. The document was in the form of a deed poll and executed on behalf of the Builder by its directors, Mr Matthew Green and Mr Shaun O’Connell. The purported release by the Builder was subject to a large number of exceptions which, as the Developer has submitted, were “so broad as to include almost any conceivable liability” that the Builder might have to the Developer.

25. [120]

    This document loomed large in the Builder’s estoppel case as articulated in its List Statement. It has less, if any, significance in light of Mr Storm’s evidence of his understanding of the Developer’s position concerning the Conditional Certificate as at 27 November 2018 [15] and as at 26 February 2019, [16] and the manner in which the Builder articulated its estoppel case in closing submissions. I return to this below.

26. [121]

    On 18 April 2019, Allens Linklaters, who were now the solicitors for the Developer, wrote to the Builder:

27. [122]

    The letter concluded:

28. [123]

    Allens set out the details of work that the Builder had not completed and concluded:

29. [124]

    On 23 April 2019 the Builder’s solicitor responded by asserting that practical completion “was achieved by the [Builder] on 7 September 2018” and stating that as the Builder “has achieved Practical Completion [it] is under no obligation to effect any of the works suggested in your letter”.

Estoppel

1. [125]

   Until delivery of the Builder’s closing written submissions, it contended for a conventional estoppel arising from the alleged fact that from the date of the Conditional Certificate of 24 September 2018 to the date of the Allens letter of 18 April 2019, the parties conducted themselves on the basis of a common assumption that:

   1. (1)

      practical completion was achieved on 7 September 2018; or

   2. (2)

      the Superintendent was permitted under the Contract to issue the Conditional Certificate; and

2. [126]

   This was described in the List Statement as “the Assumption” and was said to arise from nine identified events grouped under the heading “Project handover following Practical Completion”.

3. [127]

   Alternatively, the Builder contended that the Developer represented to the Builder that it was proceeding on the basis of that assumption. This was described in the List Statement as “the Representation”. [18]

4. [128]

   In closing written submissions, the Builder no longer pressed its case for a conventional estoppel and relied instead on an equitable estoppel of the kind described by Brennan J in Waltons Stores (Interstate) Limited v Maher. [19]

5. [129]

   Thus, it was stated in closing submissions that “the primary way in which estoppel was pleaded in this case was an estoppel by convention” and that “it was pleaded in the alternative that the estoppel arose by reason of a Representation (being that [the Developer] was proceeding on the basis of the Assumption)”.

6. [130]

   The submission continued that “as it turns out, the estoppel arose by way of a Representation because Ms Ren (for [the Developer]) gave evidence that, at all relevant times, she considered the [Conditional] Certificate to be of no legal validity at all”. This was a reference to the evidence of Ms Ren, to which I have referred at [88] to [94] above. As I have there set out, I do not accept that Ms Ren’s evidence should be understood as meaning that, at the time of the issue of the Conditional Certificate, her state of mind was that it had no legal effect. In any event, as I have said, no such allegation is pleaded by the Builder. It is therefore not a matter on which the Builder can rely.

7. [131]

   This was confirmed during oral submissions, when Ms Simpson confirmed that the Builder’s case was now summarised in the following passage from the Builder’s closing written submissions:

8. [132]

   This passage puts the Builder’s estoppel by representation differently to its case as articulated in its List Statement. In its List Statement, the Builder alleged that the Developer represented that it was proceeding on the basis of the “Assumption” by issuing the Conditional Certificate and engaging in six identified acts (including sending emails) and remaining silent in the face of four identified communications from the Builder.

9. [133]

   As can be seen from the passage that Ms Simpson stated summarised the Builder’s final position, that final position was that the Developer induced the Builder to assume that the effect of the Conditional Certificate was to specify 7 September 2018 as the date by reference to which the Developer’s entitlement to liquidated damages and the Builder’s entitlement to delay costs be determined by:

   1. (1)

      “asserting”, which I understand to mean representing, that the Conditional Certificate was valid, which I understand to mean validly issued under the Contract; and

   2. (2)

      failing to issue a notice of dispute concerning the Conditional Certificate: see subpar (b) of the submission.

10. [134]

    Thus, the Builder no longer contended for the Representation alleged in its List Statement.

11. [135]

    The “correspondence” referred to in [(b)(i)] of the Builder’s submission set out at [131] above said to comprise assertions as to the “validity” of the Conditional Certificate, comprised, in addition to the Conditional Certificate itself: [20]

12. [136]

    Assuming that these matters do amount to an assertion by the Developer as to the “validity” of the Conditional Certificate, an assertion that the Conditional Certificate was valid, or issued validly under the Contract is different from an assertion that its effect was to fix 7 September 2018 as the date from which the parties’ entitlements as to liquidated damages and delay costs were to be calculated.

13. [137]

    The Builder does appear to have assumed that, as Mr Storm said in cross-examination, the effect of the Conditional Certificate was that time stopped running for the Builder to make a delay claim and the Developer to be entitled to liquidated damages. As Ms Simpson submitted, the Builder in fact ceased claiming extensions of time and delay costs once the Conditional Certificate was issued.

14. [138]

    But, bearing in mind the terms of the Conditional Certificate, I cannot see how a representation by the Developer to the Builder that it was “valid”, without more, could reasonably have induced the Builder to make that assumption.

15. [139]

    I can see nothing in the Conditional Certificate itself, nor in the matters set out at [135], that could amount to a representation that the legal effect of the Conditional Certificate was as the Builder contends it understood.

16. [140]

    None of the emails upon which the Builder now relies were capable of inducing such an understanding.

17. [141]

    The Conditional Certificate contains no reference to delay costs or liquidated damages despite the fact that, as I have set out above, [21] Mr Storm sought to have included in the Conditional Certificate a “confirmation that no liquidated damages are applicable” to the Builder. The fact that, despite that request, no such “confirmation” was included in the Conditional Certificate shows that the Conditional Certificate itself was incapable of inducing the Builder to make the assumption it claims it made.

18. [142]

    As I have said, it appears that the Builder assumed that the effect of the Conditional Certificate was that it was no longer necessary for it to seek extensions of time or delay damages.

19. [143]

    In that regard, Mr Storm gave this evidence, including in answer to questions from me:

20. [144]

    Thus, Mr Storm’s position was that he understood that time had stopped running because the Conditional Certificate “says the date certified for practical completion and the date listed”.

21. [145]

    But this ignores the clear statement in the Conditional Certificate that those statements were qualified, if not contradicted, by the statement that the “award” of practical completion was conditional on completion by the Builder of the 10 items listed in the Conditional Certificate. My conclusion is that the position that the Builder now finds itself in is as a result of its unilateral misunderstanding of the effect of the Conditional Certificate, and not because of any inducement by the Developer.

22. [146]

    As to the payment by the Developer to the Builder of the $500,000 bonus on 27 November 2018, the difficulty for the Builder is that Mr Storm agreed that, by this time, he understood that practical completion as defined in the Contract had not been achieved and that the Developer’s position was that the Conditional Certificate had certified practical completion conditionally, but not on a final basis.

23. [147]

    Thus, Mr Storm gave this evidence:

24. [148]

    The fact that the Developer did not make a claim for liquidated damages until after Allens’ letter of 18 April 2019 appears to me to be neutral on this question, as does the alleged fact that the Developer did not serve a notice of dispute “as regards the Effect of the Certificate”.

25. [149]

    In its List Statement, the Builder asserts that it relied on the Representation “by taking no further steps in respect of the matters” specified as conditions in the Conditional Certificate, including obtaining a final occupation certificate and effecting site remediation compliance with the Remediation Conditions. [22]

26. [150]

    However, as the Developer has pointed out, the Conditional Certificate made it clear that the Builder remained responsible for obtaining the occupation certificate and performing the remediation obligations.

27. [151]

    I accept the Developer’s submission that the fact that the Builder unreasonably ignored those conditions cannot amount to detrimental reliance.

28. [152]

    Following the issue of the Conditional Certificate, the Builder wrote to numerous of its subcontractors asserting, inconsistently with its case in these proceedings, that practical completion had not been achieved. This was in the context of those subcontractors seeking to have released to them amounts held by the Builder by way of retention.

29. [153]

    The Developer did not invite me to find that it followed from these matters that I should not accept that the Builder genuinely believe that practical completion had been achieved or should be taken to have been achieved; and I do not find it necessary to make any finding to this effect. However, it does show that the Builder was prepared to make assertions to its subcontractors contradicting the case it seeks to maintain in these proceedings.

30. [154]

    The Builder has not established its estoppel case.

Unconscionable conduct

1. [155]

   The Builder alleges that the Developer has engaged in unconscionable conduct within the meaning of s 21 of the ACL.

2. [156]

   Under s 21 of the ACL, the question of what conduct is unconscionable is not limited by the unwritten law relating to unconscionable conduct. [23]

3. [157]

   What must be shown is conduct that:

4. [158]

   Factors relevant to whether conduct is unconscionable in this sense include asymmetry of power or information, and the risk and worth of the bargain. [29]

5. [159]

   It has also been held that:

6. [160]

   In every case, it is necessary to engage in a careful examination of the facts. [32]

7. [161]

   As formulated in its List Statement, the Builder’s case was that the Developer engaged in unconscionable conduct for the purposes of s 21 of the ACL by seeking, allegedly contrary to its entitlements under the Contract, to levy liquidated damages and call on the Security in circumstances where it:

   1. (1)

      did not challenge the Conditional Certificate;

   2. (2)

      acted “on the apparent basis” that practical completion had been achieved under the Contract, or alternatively that the date for determining the parties’ respective entitlements to liquidated damages and delay costs have been certified as 7 September 2018;

   3. (3)

      independently of the Builder, sought modification to the Remediation Conditions. [33]

8. [162]

   In opening written submissions, the Builder’s case on unconscionability was put this way:

9. [163]

   In closing submissions, the Builder’s case in relation to unconscionable conduct changed dramatically, evidently based on the evidence of Ms Ren to which I have referred concerning her state of mind as to the legal validity of the Conditional Certificate.

10. [164]

    Thus, it was submitted:

11. [165]

    This is a fundamentally different case to that articulated in the Builder’s List Statement and, as Ms Simpson accepted in closing submissions, was now based on Ms Ren’s alleged state of mind that the Conditional Certificate was of no legal effect.

12. [166]

    As I have set out earlier, I do not accept Ms Ren had such a state of mind.

13. [167]

    In any event, the unconscionability case sought to be made on behalf of the Builder in closing bears no resemblance to the case in its List Statement and, in my opinion, is not one that is available to the Builder.

14. [168]

    The Builder has not sought to make out the unconscionability case in its List Statement. It is not entitled to make out the unconscionability case articulated in its closing submissions.

Prevention

1. [169]

   The “prevention principle” is that “a party cannot insist on the performance of a contractual obligation by the other party if it itself is the cause of the other party’s non-performance”. [34]

2. [170]

   The Builder’s case is that the operation of the prevention principle in this case has the effect that the Developer “cannot insist on the performance” by the Builder of what would otherwise be its contractual obligation to pay liquidated damages by reason of two matters.

3. [171]

   The first is the contention that on and from 7 September 2018, the Developer by its conduct “took over” the Builder’s obligations under the Contract to satisfy the Remediation Conditions and thereby “prevented” the Builder from performing its obligation to satisfy the Remediation Conditions. [35]

4. [172]

   The second is the contention that on and from 7 September 2018, the Developer “took out of the Builder’s hands” [36] the ability to prepare a delay claim under cl 34.2 of the Contract. This is alleged to have “prevented” the Builder from making an extension of time claim for practical completion because the Builder “did not, and could not provide the details required under clause 34.3” of the Contract “because it did not have detail of the matters required to be set out in such a claim”. [37]

5. [173]

   Clause 34.2 of the Contract obliged the Builder to notify the Superintendent of anything that would probably cause delay to the works and provide “details of the nature and where possible the extent of the possible delay and the probable cause of delay”.

6. [174]

   Clause 34.3 provided that the Builder was entitled to claim for an extension of time for practical completion if there was delay in reaching practical completion by a “Qualifying Cause of Delay”, subject to various conditions including compliance with cl 34.2 and that the Builder “did not contribute to the cause of the delay”.

7. [175]

   Ms Simpson’s submissions on this topic were directed primarily, if not exclusively, to the first of the two contentions that I have outlined.

8. [176]

   However, the evidence shows that, following the issue of the Conditional Certificate, the Developer neither “took over” the Builder’s obligations under the Contract nor “took out of the Builder’s hands” its ability to exercise its rights under the Contract.

9. [177]

   Rather, following the issue of the Conditional Certificate, the Builder announced, and repeatedly reiterated, that it had no further obligations under the Contract; seemingly based on its misunderstanding of the status and effect of the Conditional Certificate.

10. [178]

    As I have set out above, [38] on 26 September 2018, immediately after the issue of the Conditional Certificate, the Builder wrote to the Superintendent:

11. [179]

    And on 23 April 2019, following Allens’ letter of 18 April 2019 requesting the Builder to return to the site, the Builder’s solicitors stated:

12. [180]

    As to the Builder’s contentions concerning the Remediation Conditions, although it is true that there is no evidence that the Developer invited the Builder to participate in negotiations with the Council concerning this matter, there is no evidence that the Developer prevented the Builder from performing its obligations under the Contract concerning the Remediation Conditions. As the Developer submitted, the Builder did not ever indicate that it was to be involved in the remaining tasks, stating consistently that its position was that it had no further obligations to perform. The Builder’s “letter of concern” of 6 February 2019 [40] made clear that the Builder was aware of the Developer’s negotiations with the Council but did not request that the Builder be involved in those negotiations.

13. [181]

    As to the Builder’s contentions concerning its inability to make an extension of time claim and of its ability to do so being taken out of its hands by the Developer, the evidence to which I have referred establishes that after the issue of the Conditional Certificate, the Builder never intended to seek an extension of time of the date for practical completion, again evidently because of its misunderstanding of the status and effect of the Conditional Certificate.

14. [182]

    As the Developer pointed out in closing submissions, the point is clearly made in a paragraph of Mr Storm’s affidavit in which he stated that until receipt by the Builder of Allens’ letter of 18 April 2019:

15. [183]

    Further, my attention has not been drawn to any evidence that the Builder was in fact prevented from making an extension of time claim, nor to any evidence from an officer or employee of the Builder that they would have made an extension of time claim, but had been prevented from doing so by not knowing the details of the Developer’s dealings with the Council.

16. [184]

    In any event, the contents of the Builder’s 6 February 2019 “letter of concern” [41] show that the Builder did have knowledge of the Developer’s conduct which the Builder believed had delayed the obtaining of an occupation certificate and had sufficient details to be able to express the opinion that the Developer had failed to take sufficient action to obtain an occupation certificate, including by commencing proceedings in the Land and Environment Court.

17. [185]

    I find these matters to be sufficient to conclude that the Builder has not established its case concerning the operation of the “prevention principle”.

The Securities and liquidated damages

1. [186]

   Ms Simpson accepted that if the Builder was unsuccessful in relation to its case concerning the status of the Conditional Certificate and in relation to its estoppel, unconscionability and prevention arguments, there was no impediment to the claim made by the Developer to recover the Security and to liquidated damages referred to in its cross-claim.

Conclusion

1. [187]

   I will invite the parties to consider these reasons and make submissions as to what, if any, further matters require resolution, and as to the orders needed to give effect to these reasons and finalise the proceedings.