Show Cause Notice Case Study

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Dura (Aust) Constructions Pty Ltd v Hue Boutique Living Pty Ltd6
• To be valid, a show cause notice must comply with the requirements of the contract under which it is issued and convey to the reader what is amiss.
• Detailed particulars are not necessarily required for a valid show cause notice.
• The level of detail required in a show cause notice depends on a number of factors including the type of breach and the response to be given by the contractor. More detail would be required for a self-executing notice to rectify (which is not a concept found in AS 2124).
• In Victoria, courts are unlikely to imply a term of reasonableness when issuing a show cause notice or evaluating whether cause has been shown. The opposite approach has
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The principal engaged the contractor under an AS 2124 – 1992 (Construct only) form of contract.
Eighteen months into the project, the principal expressed concern regarding what it said was the slow progress, poor quality of the works and the quantum of progress claims submitted by the contractor. Accordingly, the principal served four show cause notices on the contractor under the contract, alleging that the contractor was in default by separate substantial breaches of the contract and requiring the contractor to show cause (in writing) why the principal should not:
1. Take the whole or part of the remaining work out of the contractor’s hands; or
2. Terminate the contract.
Under the contract, the show cause notices must (among other things) specify the alleged substantial breach.
The allegations of substantial breach made against the contractor in the show cause notices were that, among other things, it had failed to:
1. Proceed with the works with due expedition and without delay;
2. Comply with directions of the superintendent; and
3. Use the standard of materials or workmanship required by the
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Disputes arose between the parties regarding defects and incomplete work. The dispute came to a head when Cordon required Lesdor to sign the strata plan in order for it to start selling units and realising its return. Lesdor refused to sign the strata plan, arguing that it did not have to do so until Cordon had fully completed construction according to the plans and specifications. There was no definition of “Completion” in the contract.
Lesdor terminated the joint venture agreement with Cordon on the basis of Cordon’s unwillingness to properly complete the work and claimed damages for defective work. Cordon commenced proceedings against Lesdor on the basis that Lesdor’s purported termination amounted to repudiation and claimed damages for resulting loss. Lesdor cross-claimed for damages resulting from Cordon’s defective work.
The Court found that the works had not achieved “completion” which the Court interpreted to mean “full completion”. Accordingly, Lesdor was not required to sign the strata plan and, following Cordon’s unwillingness to properly complete the work, Lesdor had lawfully terminated the
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