Renbar Constructions Pty Ltd v Sader [2022] NSWSC 172

Andrew Hales  |  Laura-Rose Lynch  |  William Vu

Key takeout

A failure to strictly comply with the payment provisions of a building contract, especially where the principal has not enforced strict compliance, will not be a barrier to the builder’s entitlement to payment for the cost of building work carried out.  Where a contract is silent on this, a term allowing for such payment will be implied.

Facts

In 2014, Renbar Constructions Pty Ltd (builder) entered into a ‘costs plus’ contract with Dr Sader (owner) to construct a new residence, with works to be complete within 52 weeks.

The builder provided 15 progress claims across four tranches (sometimes several months after the building work claimed for in a progress claim was complete).  The owner paid the first 12 progress claims totalling $1,690,432, despite the parties agreeing they did not comply with the contract.  In 2017, the parties had met to discuss the cost of the development. The owner was advised the estimated cost was now over $3 million.

The building was handed over to the owner in mid-2018 without a final payment claim. Following this, the builder made two further payment claims (13 and 14) which the owner did not pay. The owner terminated the contract on the grounds the builder did not rectify defective and incomplete work, following which the builder made a further payment claim (repeating payment claims 13 and 14). This was rejected on the basis it was made after the contract was terminated for defective work.

The builder sought payment of the outstanding amounts it claimed it was owed.  The owner argued that the builder was estopped from claiming such further amounts.

Decision

The court found that:

• the builder was entitled to payment of the cost of the works carried out as a term was implied into the contract allowing for such payment; and
  
• the builder was not estopped (that is, prevented) from making further payment claims.

Implied term for payment for work carried out

Clause 2.2 of the contract provided that ‘the owner must pay the price of the building works’.  ‘Price of the building works’ was defined as the total of the ‘cost of the building works’.  However, the contract did not mandate that the contractor could submit progress claims. It was silent (or there was a ‘lacuna’) in the circumstance where the builder carried out the work called for by the contract but did not serve any progress claims at all or, if it did serve payment claims, they did not comply with the requirements of the contract.  

The contract was also silent on the manner or time within which the owner must pay in those circumstances.

The court found it must be an implied term of the contract that the builder is entitled to payment for work carried out, notwithstanding non-compliance with provisions governing progress claims. The owner was obliged to pay the price of the building works within a reasonable time of the work being done and of adequate particulars as to the work being provided.  The court applied the BP Refinery test as follows:

• the implied term was reasonable and equitable, as it placed no additional burden on the owner than already contained in clause 2.2;
• the contract would not operate effectively without the implied term, as it would leave the builder in the untenable position of doing work at its own expense;
• the implied term ‘goes without saying’, as there was no suggestion the builder was providing the works gratuitously; and
• the contract did not preclude the builder being paid outside of monthly progress payments.

This also applied to the last payment claim, although made after the contract was terminated and not compliant with the contract, as the builder’s right to be paid arose or accrued upon those works being completed.

Builder not estopped

The owner had argued the builder was estopped from claiming further payment because the builder departed from the mutual assumption that sufficient records would accompany progress claims, and that caused the owner detriment (by way of the cost blowout).  The court disagreed, finding that the owner was aware of the increasing costs (at least from the 2017 costs update meeting).