Prevention in 2012: Spiers Earthwords PL v Landtec Projects Corporation PL (No. 2) [2012] WASCA 53

In construction law the 'prevention' or 'Peak' principle was considered to have taken a turn for the worse after the two decisions of Turner Corporation Ltd v Co-ordinated Industries Pty Ltd (1995) 11 BCL 202 and Turner Corporation Ltd (receiver & manager appointed) v Austotel Pty Ltd (1997) 13 BCL 378. In the Turner cases, the New South Wales Supreme Court held (by way of summary) that a contractor is not able to claim that the principal prevented the contractor from reaching completion if the contractor failed to exercise its rights under the contract to claim an extension of time for such conduct.

Spiers Earthwords PL v Landtec Projects Corporation PL (No. 2) [2012] WASCA 53 (Spiers v Landtec) revisited the prevention principle in the context of the AS 2124-1986 standard contract (which is similar to the often used AS2124-1992 contract). The contractor claimed that it was prevented from reaching practical completion in respect of a contract for road works which had a 10 week completion period, and that the principal could not impose liquidated damages for the delay beyond the date for practical completion. The contractor claimed that the principal failed to supply sufficient or suitable material, that rectification was performed with unsuitable material, that additional works were undertaken at the principal's requests, that the principal made design changes and that there was inclement weather and also latent conditions.

The principal responded by saying that the contractor had not given notice requesting an extension of time (relying on the principle from the Turner cases). The contractor responded to this by saying that the principal requested additional work and the principal and superintendent had not responded to the contractor's requests for extensions of time, and was therefore estopped from relying on the contractor's failure to issue a notice under the contractual extension of time provisions.

The trial judge found that the principal was estopped from relying on the notice requirements of clause 35.5 in relation to 42 days, being a combination of additional work and rain delay, and that the date of the contract should be extended by 42 days. The contractor appealed this (although the finding was in the contractor's favour) as the contractor's position was that it didn't seek an extension of time, but instead sought that time be 'at large' (i.e. that completion occur within a reasonable time) by reason of the preventative conduct of the principal. The New South Wales Court of appeal upheld the trial judge's decision.

The contract in question (AS2124-1986) had a clause which expressed that principal or superintendent caused delays do not cause time to be set 'at large', in clause 35.5:

A delay by the Principal or the failure of the Superintendent to grant a reasonable extension of time or to grant an extension of time within 28 days shall not cause the Date for Practical Completion to be set at large but nothing in this paragraph shall prejudice any right of the Contractor to damages.

McLure P said that the Court was bound to follow Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211, which upheld the Turner cases. Peninsula Balmain approved the Turner cases, and also is authority for the proposition that the power of the superintendent to extend time in the absence of the required contractual notice from the contractor was to be exercised in the interests of both the principal and the contractor, and the superintendent is obliged to act honestly and impartially in considering whether to do so. The result in Peninsula Balmain was that the referee appointed by a court extended the date for practical completion as it considered that the superintendent (which didn't extend the time) ought to have done so.

In obiter, McLure P cast doubt on the proposition that anyone other than the superintendent can grant an extension of time (at [57]). That is, in Peninsula Balmain the referee exercised the power of the superintendent to extend time, but McLure P didn't consider that this was a power that could have been exercised by anyone other than the superintendent.

In Spiers v Landtec the contractor argued, along the lines set out in Peninsula Balmain, that (at [58]):

1. the respondent had breached its duty to ensure the superintendent acted honestly and fairly as a result of the superintendent's breach of his duty to consider and, if appropriate, grant the appellant's requests for an extension of time regardless of the absence of any relevant notice; and
2. in the alternative, by reason of waiver and/or estoppel of the requirement for notice, the superintendent was in breach of his obligation to consider and, if appropriate, grant an extension of time.

McLure P noted that the contractor's propositions ignored the paragraph in clause 35.5 set out above and that its purpose was 'to prevent the prevention principle having the effect of setting time at large' (at [61] and [62]):

61 Whether and to what extent cl 35.5 is intended to exclude the application of the prevention principle is a matter of contractual construction. The objectively determined purpose of cl 35.5 is at least twofold. The first is to provide contractual machinery to prevent the time for practical completion being set at large as a result of the application of the prevention principle. The second is to place on the principal the risk of delay caused loss not attributable to any contractual party. However, it would appear its purpose is not to exclude the prevention principle itself insofar as it applies to delay caused by the principal's breach of the building contract. In the absence of an extension of time under cl 35.5, the contractor would be entitled to damages against the principal for its breach of contract, including any damages (liquidated or otherwise) it suffered as a result of principal-caused delays in practical completion. Whether or not that could be relied on as a defence (such as equitable set-off) does not have to be decided. In the result, cl 35.5 brings the prevention principle back into line with the general contractual principles relating to the implied duty to cooperate. Accordingly, it is unnecessary to determine whether contractual parties are free to exclude the implied duty to cooperate, which is a term implied by law. 

62 The same analysis would apply to a (derivative) breach by the principal arising from a superintendent's breach of the duty to consider the exercise of the power in cl 35.5. Moreover, it is arguable that the prevention principle is a relevant consideration in the exercise of the superintendent's discretion to extend time in relation to the 'non-breach' causes of delay specified in cl 35.5. If a court or another decision-maker concludes that the superintendent should have exercised the power and granted an extension of time, the principal will be prevented from claiming liquidated damages for the relevant (proven) delay. In summary, the relevant purpose of cl 35.5 is to prevent the prevention principle having the effect of setting time at large.

McLure P held that on her analysis the principal would not be entitled to liquidated damages for the period for which the appellant should have been given an extension of time under clause 35.5, and upheld the decision of the trial judge. Newnes JA agreed with McLure P on these grounds.

Spiers v Landtec is particularly important for two reasons (in the context of the 'prevention principle'):

1. The Court has questioned whether anyone other than the superintendent can extend time. This requires an analysis of the relevant contract the subject of a dispute to ascertain the scope of the power to extend time, and to determine whether anyone else can exercise this power.
2. The Court has noted that the prevention principle is alive and well, at least to the extent that a principal may be precluded from relying on a claim for liquidated damages for a particular period of time during which that principal has contributed to the delay.

One of the difficulties, however, with the analysis of McLure P is that it is unclear how the conclusion is reached that the principal is not entitled to liquidated damages for the 42 days. For instance, it is not characterised by McLure P as an entitlement of the contractor in estoppel, despite the trial judge finding that this is how it was to be characterised.

Assignment of restitutionary rights: Equuscorp Pty Ltd v Haxton; Equuscorp Pty Ltd v Bassat; Equuscorp Pty Ltd v Cunningham's Warehouse Sales Pty Ltd [2012] HCA 7

The matter of Equuscorp Pty Ltd v Haxton; Equuscorp Pty Ltd v Bassat; Equuscorp Pty Ltd v Cunningham's Warehouse Sales Pty Ltd [2012] HCA 7 was an appeal to the High Court from the Victorian Court of Appeal in respect of loans entered into by investors for the purpose of facilitating investments in managed investment schemes.

The schemes had the usual tax effective structure in which investors would pay an amount to a management company for planting, maintenance and harvesting fees and the investors would get a return on harvest, together with a tax deduction for their initial investment. The investors entered into loans with Rural Finance Pty Ltd (Rural), the financier of the schemes. The purpose of these loans was to fund their investments in the schemes.

Equuscorp Pty Ltd (Equuscorp) became a mortgagee of the land and chargee of the assets of the various group entities for the schemes just before the schemes collapsed. When the schemes collapsed the receivers and managers assigned the loans from the investors to Equuscorp under a deed of assignment.

Equuscorp sued the investors for loan defaults in the Supreme Court of Victoria. The investors defended the proceedings claiming, amongst other things, that the loan agreements were unenforceable for illegality.
Because of this, Equuscorp claimed that the amounts loaned to the investors were recoverable by way of a restitutionary claim for money had and received on the basis of failure of consideration by reason of the loan agreement being unenforceable, and that the restitutionary claim was validly assigned from Rural to Equuscorp.

The High Court agreed with the investors that the loan agreements were unenforceable for illegality because they were entered into in breach of the requirement in the then Companies Code for certain public offerings to have a registered prospectus.

The High Court held that there was no claim for money had and received, by reason of Rural being not an arm's length party when arranging the loans (at [45] per French CJ, Crennan and Kiefel JJ, at [110] to [111] per Gummow and Bell JJ):

45. Had a right to claim restitution for money had and received been available to Rural in this case, it would have been able to recover by such claims what the policy of the law denied it in respect of the loan agreements. Rural was not an arms length financier. It was part of the closely related group of companies that were involved in the promotion of the schemes. The loan agreements were an integral part of the schemes and in so far as they involved the issue of invitations and offers to investors to take up prescribed interests without the benefit of the protections required by the Code, furthered that illegal purpose. As in the Hurst case, while not essential to the investments, the loans made the investments more attractive. Recovery from the investors would have been recovery from persons whose protection was the object of the statutory scheme. The respondents were not in pari delicto with Rural. The failure of consideration invoked by Equuscorp was the product of Rural's own conduct in offering the loan agreements in furtherance of an illegal purpose. This is a clear case in which the coherence of the law, and the avoidance of stultification of the statutory purpose by the common law, lead to the conclusion that Rural did not have a right to claim recovery of money advanced under the loan agreements as money had and received. There was therefore no right to claim such relief available for assignment to Equuscorp. In any event, for the reasons that follow, any such rights, if they had existed, would not have been assigned by the Deed.

... 

110. The explanation of the money lending cases given by Mason and Wilson JJ in Pavey & Matthews is in point here. Their Honours said:

"The relevant provisions in those cases explicitly rendered unenforceable contracts executed by the money-lender. The statutes were directed at making unenforceable an obligation to repay money already lent and a security already given in respect of such an obligation. It was not possible to interpret these provisions so that they left on foot any quasi-contractual causes of action on the part of the lender. Request and receipt by the borrower of the money lent were integral elements in a situation in which the contract and all securities were expressed to be unenforceable. An additional feature of the money-lending cases is that the legislation was designed to protect borrowers by imposing onerous obligations on money-lenders to comply with the statutory requirements." (emphasis added)

111. The prospectus provisions have a long history. This was traced by Mahoney JA in Hurst v Vestcorp to the mid-19th century. As Heerey J later remarked when dealing with the prospectus provisions of the Code, so seriously did the legislature regard these provisions, including s 170, that a breach not necessarily fraudulent and not necessarily causing monetary loss nevertheless could result in a five year term of imprisonment. This supports the conclusion that in a case such as is presented by these appeals, the investors who received prescribed interests should not be in the same position as if Pt IV Div 6 of the Code had not been enacted or had been complied with by Rural, and the loan agreements had been effective in accordance with their terms. The respondents correctly submit that to permit recovery on the actions for money had and received would stultify the statutory policy evident in Pt IV Div 6 of the Code. We agree with what is further said on this point by French CJ, Crennan and Kiefel JJ at [45] in their reasons. Equuscorp, as successor to Rural, in these circumstances cannot complain that the loss is left to lie where it has fallen.

However the High Court held that if there was a right to restitution, then that right was assignable (at [53] per French CJ, Crennan and Kiefel JJ, at [159] per Heydon J):

53. A restitutionary claim for money had and received under an unenforceable loan agreement is inescapably linked to the performance of that agreement. If assigned along with contractual rights, albeit their existence is contestable, it is not assigned as a bare cause of action. Neither policy nor logic stands against its assignability in such a case. The assignment of the purported contractual rights for value indicates a legitimate commercial interest on the part of the assignee in acquiring the restitutionary rights should the contract be found to be unenforceable. Equuscorp fell into the category of a party with a genuine commercial interest in the restitutionary rights. Notwithstanding the difficulties that may attend the claims having regard to particular circumstances and defences which might affect their vindication, the better view is that adopted by the Court of Appeal, namely, that the restitutionary claims were assignable. The question that next arises is whether they were assigned.

... 

159. The respondents also submitted that a claim for money had and received is a personal one, infused with equitable notions of conscience, requiring a detailed analysis and balancing of the particular merits of the case, and so personal in nature as to be incapable of assignment. They cited authority relating to the non-assignability of the benefit of a contract involving personal skill and confidence. This case has nothing to do with the assignment of the benefit of a contract involving personal skill and confidence. And the circumstance that, like other legal rights, a claim for money had and received might rest on a detailed analysis of matters of fact that call for judgment does not prevent the right, once established, from being assignable.

However the issue of whether the deed of assignment would have been effective to assign the restitutionary rights had a split answer. French CJ, Crennan and Kiefel JJ held that the deed of assignment was not cast in wide enough terms to include the assignment (at [66]) whereas Gummow and Bell JJ (at [75]) and Heydon J (at [160]) held that a robust construction of the deed was preferred, such that the right to restitution was assigned.

Caveats - how does someone remove a caveat (part 2)

In my previous post on this topic I discussed the formal requirements for seeking a Court order to remove a caveat from a title. In this post I have discussed below the considerations a Court has when faced with an application to remove a caveat from a title.

Caveats - how does someone remove a caveat (part 1)

When a caveat is lodged on a title to land, the consequences are severe: generally speaking, the registered proprietor is prevented from disposing of the land the subject of the caveat (see s91 Transfer of Land Act 1958 (Vic) (the TLA).

A person may seek to have a caveat removed by several means, including (by way of summary):

• by the Registrar issuing a notice requesting the caveator either to give notice abandoning the claim or  issuing proceedings to substantiate the claim (s89A TLA);
• by a person lodging a dealing on the title and 30 days have passed since the registrar gave notice to the caveator that the caveat will lapse (s90(1) TLA); or
• By application to the Court to have the caveat removed (s90(3) TLA).

This post and the discussion below concerns application to a Court under s90(3) TLA. Application to the Court is probably the quickest and most certain way to seek to have a caveat removed or substantiated. By way of observation, the provision by the caveator of a notice under s89A TLA that proceedings have been issued to substantiate a claim is not a very high hurdle, and will probably result in delay pending the determination of the proceedings.

Caveats - accuracy of information and amendment

In my previous posts I discussed what is a caveat and what interests a caveat protects. When a person lodges a caveat, the document is quite simple in appearance but it has a great effect upon a registered proprietor's ability to deal with their land.

I have included a link here to the DPI approved caveat form.

The section which is headed 'Estate or Interest claimed' requires a caveator to state the interest which the caveator is seeking to protect. The section which is headed 'Grounds of claim' requires a caveator to state how the estate or interest claimed arises. These sections attract a lot of attention in litigation because a failure to get these details right could render the caveat defective and lead to a Court order that it be removed.

A Court has a discretion to order the removal of an unintelligible caveat. The Court also has a discretion to amend an unintelligible caveat so that it reflects what is actually claimed by the caveator. So how does a Court decide whether to remove or amend a caveat that is unintelligible? I have discussed these issues below in further detail.

Caveats - which interests in land are caveatable interests?

In my previous post on this topic, I noted that the following phrase in s89(1) of the Transfer of Land Act 1958 (Vic) (TLA) determines what interests are capable of protection by a caveat: 'any estate or interest in land under any unregistered instrument or dealing or by devolution in law or otherwise'. I then discussed what is an interest in land for the purpose of this provision.

The interest in land must arise from 'any unregistered instrument or dealing or by devolution in law or otherwise'. In Victoria, there is a divergence of views on what interest in land is afforded protection by a caveat.

I have discussed the divergence of views below.

Caveats - a caveatable interest must be an 'interest in land'

I noted in my previous post on this topic that the following phrase in s89(1) of the Transfer of Land Act 1958 (Vic) (TLA) determines what interests are capable of protection by a caveat: 'any estate or interest in land under any unregistered instrument or dealing or by devolution in law or otherwise'.

Several things are apparent from this sentence. Firstly, the interest to be protected must be an 'interest in land'. Secondly, the interest in land must arise from 'any unregistered instrument or dealing or by devolution in law or otherwise'.

This article and the discussion below concerns what is an interest in land within the meaning of s89(1).

Caveats - the basics

I am involved in a trial in respect of the removal of a caveat. In that matter the parties are debating whether or not the particular instruments executed by them give the caveator an interest in land capable of supporting a caveat.

Rather than let all of my good research go to waste (i.e. into the pile of authorities sitting on my shelving awaiting filing), I have decided to publish a series on caveats to discuss what is a caveat, what protection does the caveat afford, what is a caveatable interest, when may a caveat be registered on a title and how to remove a caveat.

This article below discusses the basics - what is a caveat.

Simpson v Rowe [2011] VSC 149 - barrister's lien over settlement proceeds

The matter of Simpson v Rowe [2011] VSC 149 (Simpson) involved a hearing in the Supreme Court of Victoria before Habersberger J. In Simpson, a barrister successfully argued that he had a lien over a client's settlement proceeds. I have included a case summary below.