liquidated or unliquidated debts?

CONSTRUCTION l Claims on security – liquidated or unliquidated debts?
August 2014
The case of Beyfield Pty Ltd v Northbuild Constructions Sunshine Coast Pty Ltd [2014] QSC 12 provides a timely
reminder to principals and contractors of the statutory requirements in relation to calling upon securities for
unliquidated claims.
In this case, the applicant (Beyfield) entered into a contract as a subcontractor with the respondent (Northbuild). In
accordance with the subcontract, Beyfield provided Northbuild with two bank guarantees as security for the
performance of the work under the subcontract. In May 2013 Northbuild told Beyfield of its intention to have recourse
to the bank guarantees on the basis that Northbuild had incurred additional costs as a result of Beyfield’s alleged
breach of the subcontract. In addition, to the incurred costs Northbuild made a number of claims for damages.
Beyfield said that Northbuild were not entitled to convert the bank guarantees because clause 5(e)(ii) of the
subcontract was void as it contravened Part 4A of the Queensland Building and Construction Commission Act 1991
(“the Act”) or alternatively, it was inoperative as it was an attempt to contract out of the provisions of the Act.
The operative term in section 67J is “amount owed”. This term is defined as an amount, that under the contract, is a
debt due from the contracted party to the contracting party because of circumstances associated with the contracted
party’s performance of the contract.
Beyfield argued that clause 5(e)(ii) of the subcontract operated to limit the power of a party to access or convert
retention or security monies to “debts due”. It submitted that section 67J sets out the only way in which retention
amounts can be accessed or converted and that clause 5 purports to grant a power to access or convert retention
amounts in circumstances where there is not a debt due, that is, where unliquidated damages are claimed. Therefore
clause 5 was void to the extent that it was inconsistent with section 67J.
Martin J accepted Beyfield’s submissions to find that section 67J confined the operation of retention clauses to “debts
due”. To argue, as Northbuild did, that the section applies to matters other than “debts due” was inconsistent with the
scheme of that part of the Act.
This case serves as a good reminder to Principals and Contractors of when and in what circumstances securities may
be called upon. It is important for Principals and Contractors to be aware that securities are generally not able to be
called upon for unliquidated claims.
Paul Lutvey
Mullins Lawyers
t +61 7 3224 0240
[email protected]
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Melany Dowse
Mullins Lawyers
t +61 7 3224 0242
[email protected]