Alliance Building and Construction Pty Ltd v Veesaunt Property Syndicate 1 Pty Ltd [2024] QCA 75

David Pearce  |  Clare Turner  |  Connor Wright

Key takeouts

• A notice or direction to proceed with work issued by, or on behalf of, a principal to a construction contract, may constitute a waiver of conditions precedent under the contract, even if the notice or direction is not expressly communicated to be a waiver of those conditions precedent.
• Even if a contract provides that it will terminate if conditions precedent are not satisfied or waived by a certain date, the effect of this may be that the contract is voidable from that date, rather than it automatically terminating.
• A party in default of a contract will not be permitted to take advantage of its own default to trigger the termination of the contract. 

Facts

Veesaunt Property Syndicate 1 Pty Ltd (Veesaunt) and Alliance Building and Construction Pty Ltd (Alliance) entered into a construction contract (contract) pursuant to which Veesaunt engaged the Alliance to carry out and complete the design and construction of residential townhouses on the Gold Coast.  The contract was subject to the satisfaction of conditions (conditions precedent), some of which were not satisfied by Alliance by the date specified in the contract. Specifically, Alliance failed to provide bank guarantees and evidence of insurance.

A dispute arose as to whether the contract had been automatically terminated because the conditions precedent had not been satisfied or waived, or whether the contract remained on foot. Veesaunt wanted the contract to continue, while Alliance argued the contract had been terminated. 

The court at first instance held that Veesaunt had affirmed the contract and it remained on foot, even though Veesaunt had not validly waived the conditions precedent.   Central to the primary judge’s reasoning was the principle that a party in default will not be permitted to take advantage of its own default to trigger a termination of the contract.  We covered the primary decision here: Contractor cannot take advantage of its own default to terminate a contract – Construction Law Made Easy

Alliance appealed the decision, arguing that the failure to meet the conditions precedent did not occur solely because of its own default. Veesaunt also contended that the primary judge had erred in finding that by the superintendent issuing a Notice to Proceed under the contract, it had not validly waived the conditions precedent.

Decision  

The Court of Appeal dismissed Alliance’s appeal, however conculded that the contract was to be upheld on different grounds to the primary judge.

The court accepted Veesaunt’s argument that the primary judge erred in concluding that the Notice to Proceed was an ineffective waiver of the unsatisfied conditions precedent. The proper construction of the contract allowed Veesaunt, or an agent purporting to act on Veesaunt’s behalf, to give written notice waiving the conditions precedent. The contract had allowed the superintendent to issue the Notice to Proceed on Veesaunt’s behalf.

The court found that the Notice to Proceed was a notice that waived further compliance with the conditions precedent, for four reasons:

• As the Superintendent was Veesaunt’s agent, a reasonable businessperson would have concluded that the notice was intended to be regarded as a notice given on Veesaunt’s behalf.
• A reasonable businessperson would have been aware that the four month period to satisfy the conditions precedent was about to expire.
• The terms of the Notice to Proceed were adverse to the idea that Veesaunt wished to terminate the contract, as the Notice to Proceed instructed Alliance to proceed with the contract works.
• The effect of the Notice to Proceed was that the contract had become unconditional and Alliance was authorised to proceed with the contract works.

The outstanding conditions precedents were caused by Alliance’s failings only.  Alliance did not expressly challenge the primary judge’s conclusion that it could not take advantage of its own failings to establish that the contract had ended