FEDERAL COURT OF AUSTRALIA

Total Development Supplies Pty Ltd v GRD Building Pty Ltd No 2 [2008] FCA 1501

Trade Practices Act 1974 (Cth)

TOTAL DEVELOPMENT SUPPLIES PTY LTD (ACN 108 294 051) v GRD BUILDING PTY LTD (ACN 114 871 082)

NTD19 of 2007

REEVES J

8 OCTOBER 2008

DARWIN

THE COURT ORDERS THAT:

1.                  Judgment is entered for GRD Building Pty Ltd, the cross-claimant, against Total Development Supplies Pty Ltd, the cross-respondent in the sum of $1,366,977.72.

2.                  The cross-respondent pay the cross-applicant’s costs of these proceedings.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

INTRODUCTION

1                     This is an assessment of damages in the respondent’s, GRD Building Pty Ltd (‘GRD’), cross-claim against the applicant, Total Development Supplies Pty Ltd (‘Total’).  It is necessary to briefly explain how it is that the respondent in these proceedings has effectively become the applicant.

PROCEDURAL HISTORY AND FACTUAL BACKGROUND

2                     GRD’s cross-claim against Total has been made under the terms of a Standard Minor Works Sub-Contract (‘the sub-contract’) for the supply and installation of work and materials by Total (as the sub-contractor) to GRD (as the head-contractor) for a building project in Darwin.

3                     As the title to these proceedings suggests, they began life as a claim by Total against GRD.  Total’s claim was for payments due under the sub-contract and for damages for misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth).  Total’s original claim was for approximately $124,000. That was later amended to approximately $128,000.  

4                     Sometime after these proceedings were commenced, GRD filed a cross-claim.  In it GRD essentially claimed the loss and damage it claimed it had incurred in completing the sub-contract when Total had failed to do so.  I was subsequently informed by the counsel for GRD that the total amount of GRD’s cross-claim was estimated to be in the vicinity of $1.4 million. The cross claim, therefore, far exceeded Total’s original claim.

5                     On 27 May 2008, I tentatively set the claim and cross-claim proceedings down for hearing on the five days commencing 8 September 2008.  On the same date, I made an order for security for costs against Total (see [2008] FCA 844). 

6                     Total did not provide that security.  On 21 August 2008, Mr Maher, Total’s solicitor, filed a notice of ceasing to act for Total. 

7                     The proceedings were then listed before me on 25 August 2008.  At that hearing, I gave a Mr Sprigg, who was not a legal practitioner, limited leave to appear for Total.  Mr Sprigg then informed me that Total intended to file a notice of discontinuance of its claim.  Based on that indication, I vacated the hearing dates (which had since been confirmed) and adjourned the matter to 9 September 2008 for a hearing of GRD’s cross-claim.

8                     Total’s notice of discontinuance was duly filed on 26 August 2008.  Not surprisingly, there was no appearance for Total at the hearing on 9 September 2008.  GRD’s cross claim was then adjourned for further hearing on 16 September 2008 and 18 September 2008.

9                     On 16 September 2008, I entered judgment by default against Total on GRD’s cross-claim with damages to be assessed.  I then received a large quantity of affidavit evidence directed to establishing GRD’s damages and reserved my decision on that issue on 18 September 2008. 

THE BUILDING PROJECT, THE WORKS AND THE SUB-CONTRACT

10                  In or about November 2005, GRD commenced construction of an eight level residential apartment building known as ‘The Cascade Apartments’ at Brewery Place in Woolner, Northern Territory (‘the project’).  The project involved the construction of 30 residential apartments.  GRD was appointed the principal contractor for the project on behalf of the owners of the land, Bishop 88 Pty Ltd.

11                  In late 2005, GRD called tenders from sub-contractors in relation to various aspects of the work involved in the project.  Among those tenders was one for the following works (‘the works’):

1.                  Supply and installation of kitchen joinery, including granite tops;

2.                  Supply and installation of walk-in wardrobes, laundry and pantry cupboards;

3.                  Supply and installation of glass shower screens;

4.                  Supply and installation of floor and wall tiles; and

5.                  Supply of vanities.

12                  On or about 18 January 2006, Total submitted a tender to GRD for the works.  Thereafter, a series of negotiations occurred between GRD and Total about various aspects of Total’s tender including the construction program and the payments schedule.  Both of these matters were eventually agreed between GRD and Total.

13                  As a consequence, on or about 22 February 2006, Mr Day, a Director of GRD, executed the sub-contract document on behalf of GRD.  At about the same time, the sub-contract document was also executed by Mr Stirrup on behalf of Total. The lump sum amount of the contract was $1,005,290, or $913,900 excluding GST. The evidence before me establishes that the sub-contract was erroneously dated 17 January 2006.

14                  Since I have mentioned GST, it is appropriate to interpolate that GRD’s counsel, Mr Morris, has agreed that the damages in GRD’s cross claim against Total should be calculated exclusive of GST.

VARIATIONS, PERFORMANCE, PROGRESS CLAIMS AND PAYMENTS

15                  In accordance with clause 11 of the sub-contract, the terms of it were varied on a number of occasions after 22 February 2006 with the consequence that the final varied lump sum amount of the sub-contract was $1,015,924.71 exclusive of GST. 

16                  After the sub-contract was signed, Total undertook various parts of the works and submitted progress claims for that work. Between 13 April 2006 and 7 December 2006, GRD paid Total $704,540.35 pursuant to those progress claims. At the same time GRD withheld $25,458.95, or 2.5%, by way of retention, as it was entitled to do under the terms of the sub-contract.

17                  Based on the final varied total lump sum amount of the sub-contract (above) and making allowance for these payments and the amount withheld by way of retention, GRD accepts that there remains a sum of $285,925.41 due to Total under the terms of the sub-contract.

TOTAL FAILS TO PERFORM

18                  By early September 2006, it became apparent to GRD that Total was unable to meet the construction program under the sub-contract.  A number of meetings were held in September 2006 to discuss the construction program for the project. As a result, GRD agreed to revise the construction program and extend the completion date to 29 November 2006.  Apart from this revision of the construction program, Total did not ever request, and GRD did not ever grant, any other extensions of time pursuant to clause 10.3 of the sub-contract, or otherwise. 

19                  Leading up to the revised completion date of 29 November 2006, it became apparent to GRD that Total would not be able to complete the tiling works on the apartments in accordance with the sub-contract. To attempt to remedy this problem, GRD made arrangements to obtain additional tilers to assist Total with the tiling works.  This led to a dispute between Total and GRD. 

20                  Eventually, on 22 November 2006, GRD instructed Total not to commence any new work under the sub-contract until all the tiling work for the apartments on levels one to five of the project had been completed to handover standard.  In response to this instruction, Total withdrew its entire staff from the site.

21                  As a result, by the revised completion date of 29 November 2006, Total had not completed the works it was required to do under the sub-contract.

GRD COMPLETES THE SUB-CONTRACT WORKS

22                  GRD then decided to complete the works under the sub-contract and claim the costs, expenses and damages it incurred from Total.

23                  In taking this course, GRD was relying upon clause 17.3 of the sub-contract which provides that: “Contractor may, either itself or by a third party, perform an obligation under the sub-contract which the sub-contractor was obliged to perform but which it failed to perform within the time required in accordance with the contract.  The costs, expenses and damages suffered incurred by contractor in so performing such sub-contract obligations will be a debt due from the sub-contractor to contractor and shall be deductible from any monies due from the contractor to the sub-contractor.”

24                  The work required to complete the sub-contract included the rectification and completion of the tiling work; the rectification and completion of the kitchen joinery, including granite bench tops; the installation of shower screens; and the installation of bathroom furniture.

25                  To complete the works under the sub-contract GRD had to incur the costs of employing other subcontractors. In addition, it incurred costs and expenses employing its own labourers, employing a construction manager, employing foremen, retaining a site office and securing the site.

26                  GRD has tendered in evidence various affidavits sworn by Mr Andrew Phillip Myers, GRD’s Construction Manager, Mr George Ronald Day, a Director of GRD, and Mr Robert Michael Shepherd, a Director of RST Tiling Pty Ltd, the sub-contractor that GRD employed to rectify and complete the tiling works under the sub-contract.

27                  Together these affidavits depose to the details of the rectification and completion works undertaken by GRD under the sub-contract and the costs and expenses incurred by it which are directly referable to the works Total failed to perform under the sub-contract. These affidavits show that GRD has made deductions for any costs or expenses that were not reasonably caused by Total’s failure to perform the works and that GRD has been careful to avoid any overlaps or duplication in its calculations.

28                  Based upon this affidavit evidence, GRD has prepared a document entitled ‘TDS – Cascade Reconciliation’ setting out a summary of the costs and expenses incurred by GRD in completing the sub-contract works.

29                  I find that this reconciliation represents an accurate calculation of the items of costs and expenses incurred by GRD in completing and rectifying the works under the sub-contract and therefore represents an accurate calculation of the amount claimable by GRD against Total under clause 17.3 of the sub-contract. The total amount of this calculation is $1,211,903.13.

LIQUIDATED DAMAGES

30                  The sub-contract has never been terminated. 

31                  The evidence before me establishes that the actual date for practical completion of the project was 3 July 2007. 

32                  Clause 13.4 of the contract provides that: “If the sub-contractor does not reach completion by the date for completion, it must pay liquidated damages at the rate specified in the sub-contract particulars for every day after the date for completion until it reaches completion or the sub-contract is terminated whichever is first.  This amount is a genuine pre-estimate of the loss contractor will suffer if completion is not achieved by the date for completion.” 

33                  The amount specified in the sub-contract particulars for liquidated damages is $2,100.00 per day.  I find that GRD is entitled to liquidated damages at this rate per day from the original date of practical completion of 29 November 2006 to the actual date of practical completion of 3 July 2007.  This claim totals $441,000.00. 

SUMMARY AND CONCLUSION

34                  In summary therefore, I find that GRD has incurred costs, expenses and damages under clause 17.3 of the sub-contract totalling $1,211,903.13. In addition, GRD is entitled to liquidated damages under clause 13.4 of the sub-contract totalling $441,000.00.  These two sums total $1,652,903.13 excluding GST.  From this sum must be deducted the amount of $285,925.41 that GRD accepts remains due to Total under the terms of the sub-contract. The balance is $1,366,977.72.

35                  I find this to be an accurate calculation of the net amount payable by Total to GRD under the terms of the sub-contract as detailed above.

36                  I will therefore enter judgment for GRD against Total in the amount of $1,366,977.72.

Executive Assistant:

Dated:         8 October 2008