the principal becomes entitled to exercise all or any of its rights ‘If under the contract in respect of the security, the principal may convert the security’ The Victorian Position Bachmann v BHP shall not convert into money security that does not consist of ‘A money until the party becomes entitled to exercise a right under the Contract in respect of this security.’ Clause 5.5 of the Contract not dissimilar to Pearson Bridge – Purchaser may deduct from monies otherwise due to the Supplier, ‘The any monies from the Supplier to the Purchase and if those monies are insufficient, the Purchase can have recourse to the security under the Contract’ Clause 22.4 principal has security and can take that security. – its clear this was contemplated and allowed it – An irreconcilable divide? Refurbishing & Construction Pty Ltd v John Goubran & Associates Pty Ltd Similar clause to Pearson Bridge – Distinguish between use of instead of as finding a ‘whenever’ ‘if’ negative stipulation Hughes Bros Pty Ltd v Telede Pty Ltd is not the same as entitled’ .. may be entitled’ ‘whenever ‘is Reed Construction Services Pty Ltd v Kheng Seng (Australia) Pty Ltd required more than be entitled’ be entitled’ ‘shall ‘may One for Victorians Approach in is focussed on giving effect to the intention of the parties Bachmann interpreted as be entitled’ entitled’ ‘may ‘is Who should be out of pocket in the event of a dispute? Parties have agreed contract as to who is out of pocket as to a dispute. Principal is entitled to call on the security before the dispute is resolved If found against them, then must pay it back. Contractor usually providing security for contractor obligations under the contract Entitlement Fletcher Construction v Vansdorf Contextual construction process nature of performance bonds ‘unconditional’ Trade usage Intended risk allocation Distinction between rights against a beneficiary versus rights against the surety
‘If the principal becomes entitled to exercise all or any of its rights under the contract in respect of the security, the principal may convert the security’ The Victorian Position Bachmann v BHP ‘A shall not convert into money security that does not consist of money until the party becomes entitled to exercise a right under the Contract in respect of this security.’ Clause 5.5 of the Contract – not dissimilar to Pearson Bridge ‘The Purchaser may deduct from monies otherwise due to the Supplier, any monies from the Supplier to the Purchase and if those monies are insufficient, the Purchase can have recourse to the security under the Contract’ Clause 22.4 – principal has security and can take that security. – its clear this was contemplated and allowed it An irreconcilable divide? Refurbishing & Construction Pty Ltd v John Goubran & Associates Pty Ltd Similar clause to Pearson Bridge – Distinguish between use of ‘whenever’ instead of ‘if’ as finding a negative stipulation Hughes Bros Pty Ltd v Telede Pty Ltd ‘whenever .. may be entitled’ is not the same as ‘is entitled’ Reed Construction Services Pty Ltd v Kheng Seng (Australia) Pty Ltd ‘shall be entitled’ required more than ‘may be entitled’ One for Victorians Approach in Bachmann is focussed on giving effect to the intention of the parties ‘may be entitled’ interpreted as ‘is entitled’ Who should be out of pocket in the event of a dispute? Parties have agreed contract as to who is out of pocket as to a dispute. Principal is entitled to call on the security before the dispute is resolved If found against them, then must pay it back. Contractor usually providing security for contractor obligations under the contract Entitlement Fletcher Construction v Vansdorf Contextual construction process ‘unconditional’ nature of performance bonds Trade usage Intended risk allocation Distinction between rights against a beneficiary versus rights against the surety
Construction_Law.docx