Veesaunt Property Syndicate 1 Pty Ltd v Alliance Building and Construction Pty Ltd [2023] QSC 129

Sian Keast  |  Megan Sharkey  |  Samuel O’Loughlin

Key takeout

•  Where a contractor fails to satisfy conditions precedent, whether the contract is automatically terminated or merely voidable, is a question of contractual construction.

• Even where contractual construction favours automatic termination, a party in default will not be permitted to take advantage of its own default to trigger termination.

• Any waiver of conditions precedent must be clearly and unequivocally communicated. The power of a superintendent to effect waiver on behalf of a principal must be expressly provided for in the relevant contract and clearly communicated to the contractor.

Facts

In March 2022, Veesaunt Property Syndicate 1 Pty Ltd (Veesaunt) entered into a written contract with a contractor, Alliance Building and Construction Pty Ltd (Alliance), for the design and construction of residential townhouses on the Gold Coast (contract). The contract was subject to the satisfaction of specified conditions (conditions precedent), some of which were not satisfied by Alliance by the date specified in the contract. Specifically, Alliance failed to provide insurances and bank guarantees.

A dispute arose between the parties 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, whereas Alliance argued that the contract had been terminated.

Principal’s arguments

Veesaunt argued that it waived the conditions precedent when the superintendent, acting as the principal’s agent, issued a notice to proceed with works. Alternatively, Veesaunt contended that the notice was a waiver at general law.

Even if the waiver could not be established, Veesaunt submitted that Alliance’s failure to satisfy the conditions precedent had rendered the contract voidable and therefore it was open to Veesaunt to affirm the contract remained on foot.

Veesaunt  also asserted that Alliance should not be able to take advantage of its own default regarding the conditions precedent to avoid the contract.

Contractor’s arguments

Allaince argued that the notice did not amount to waiver of the conditions precedent because:

• the contract required waiver to be effected by Veesaunt;
• it was not communicated that the superintendent issued the notice on behalf of the principal nor that the superintendent possessed the authority to waive the conditions precedent;
• the notice could not be construed as a ‘deliberate, clear and unequivocal’ waiver; and
• the contract specified that waiver could only occur in accordance with the contract, such that there could be no waiver under general law.

Alliance argued that the contract automatically terminated where the conditions precedent had not been satisfied or waived.

Alliance denied that it had sought to take advantage of its own default as it did not interfere with Veesaunt deciding whether the conditions precedent were satisfied or waived. 

Decision

Justice Brown held that the Veesaunt had affirmed the contract and it remained on foot. This was even though Veesaunt had not validly waived the conditions precedent,

Waiver under the contract

The notice was not a valid waiver as it did not provide a ‘clear, unequivocal notice’ that all conditions precedent had been waived. The court noted that while that some of the conditions precedent were referred to in the notice, it was silent in relation to other conditions Alliance had failed to comply with.

The notice was issued by the superintendent in its capacity as a superintendent (as opposed to as the agent of the principal). The authority of the superintendent to waive the conditions precedent had not been communicated to Alliance. As the superintendent’s powers specified under the contract did not extend to the waiver of conditions precedent, the notice issued by the superintendent did not constitute valid waiver.

Waiver under general law

The notice could not constitute waiver under the general law for the same reasons as to why the notice was insufficient under the contract.  Waiver under general law was excluded on the proper construction of the contract, which explicitly provided that waiver must comply with the terms of the contract.

Consequences arising from failing to satisfy or waive conditions precedent

On the question of whether, upon conditions precedent not being satisfied or waived, the contract automatically terminated or merely became voidable (therefore requiring the election of a party), the court stated that this was a question of construction and contractual interpretation. However, even where construction generally favours automatic termination, a party in default will be prevented from taking advantage of its own default to terminate a contract.

The court held that the proper construction of the contract was that it would terminate automatically unless the conditions precedent had been waived or satisfied by the required date. However, Alliance was precluded from relying on its own failure to satisfy certain conditions precedent to assert that the contract had automatically terminated.

As Veesaunt clearly expressed a desire to proceed with the contract, the court held that the contract had been affirmed and remained on foot.