St Hilliers Construction Pty Ltd (In Administration) -v- Fitzpatrick Investments Pty Ltd [2012] NSWSC 804

Supreme Court New South Wales

Medium Neutral Citation: St Hilliers Construction Pty Ltd (In Administration) -v- Fitzpatrick Investments Pty Ltd [2012] NSWSC 804 Hearing dates: 2 July 2012 Decision date: 02 July 2012 Jurisdiction: Equity Division - Technology and Construction List Before: Hammerschlag J Decision: Proceedings dismissed Catchwords: BUILDING AND CONSTRUCTION - where design and construct building contract requires provision by the contractor of bank guarantees as security for performance - where, upon satisfaction of certain conditions, the contractor is entitled to a reduction of the security - whether such conditions satisfied - whether, by taking possession of the works, the principal has exercised an election amounting to a waiver of its right to continue to keep the security Cases Cited: Tricontinental Corporation Ltd v HDFI (1990) 21 NSWLR Newtown Management Pty Ltd v The Owners of Strata Plan 67219 [2009] NSWSC 150 Sargent v ASL Developments Limited (1974) 131 CLR 634 Category: Principal judgment Parties: St Hilliers Construction Pty Ltd ACN 028 594 563 - Plaintiff Fitzpatrick Investments Pty Ltd ACN 001 662 862 - Defendant Representation: D.T. Miller SC with N. Shaw - Plaintiff F.C. Corsaro SC - Defendant Colin Biggers & Paisley - Plaintiff Clark McNamara Lawyers - Defendant File Number(s): 2011/370383

EX TEMPORE Judgment

Introduction 1HIS HONOUR: On 6 November 2008 the plaintiff (as Contractor) and the defendant (as Principal) entered into a written design and construct building contract ("the contract") for the construction of a commercial building in the Docklands area of Melbourne in the State of Victoria for a contract sum of $37,669,956. 2Clause 5 of the contract, read with paragraph 13 of Annexure Part A, obliged the plaintiff to provide three bank guarantees: one for an amount equivalent to 2.5 per cent of the contract sum (i.e. $941,748), one for an amount equal to 2.5 per cent of the contract sum less $200,000, and one for $200,000. The plaintiff duly provided the guarantees. 3Clause 5.8(A) of the contract provides relevantly as follows: 5.8 Reduction of Security (A) Upon the later of: (a) issue of the Certificate of Practical Completion; and (b) the provision of all of the items referred to in paragraphs (c) to (h) inclusive of 42.3, the Principal's entitlement to security shall be reduced to the percentage thereof stated in Annexure Part A or, if no percentage is stated, to 50% thereof. If at any time after Practical Completion the Superintendent is of the opinion that it is reasonable to further reduce the Principal's entitlement to security, that entitlement shall be reduced to the amount which the Superintendent determines to be reasonable. 4No percentage is stated in the Annexure. 5In these proceedings the plaintiff claims an entitlement to have the security reduced by 50 per cent, i.e., by the amount of the first guarantee. It claims return of the guarantee.