Cirocco Constructions Pty Ltd v Clarke (No 2) - [2015] SADC 107

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CIROCCO CONSTRUCTIONS PTY LTD v CLARKE (No 2)
[2015] SADC 107
Judgment of His Honour Judge Tilmouth
9 July 2015
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION
Held 1. The Building Work Contractors Act 1995 (SA) does not displace common law remedies available under domestic building work contracts.
2. On its proper construction the contract between the parties is to be read as providing for the enforcement of the building contractor's right to certified payments, undiminished by any rights of set-off or remediation, irrespective of the extant contest over remedial work.
3. An order for summary judgment does not impinge upon the statutory warranties and remedies conferred by the Building Work Contractors Act and does not thereby effect any 'exclusion, limitation, modification or waiver' of such rights, contrary to s 42 thereof.
4. One progress payment certificate thereunder, was validly issued, whereas it is arguable the other was not.
Building Work Contractors Act 1995 (SA) s 37, s 37(2) & (3), s 37(5), s 37(6)-(8), s 40(1), s 40(1)(a), s 40(1)(b); Magistrates Court Act 1991 (SA) s 10(2), s 19(2), s 40(1) & (2); Gilbert-Ash (Northern) Ltd v Modern Engineering (Briston) Ltd [1974] AC 689; Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd (1985) 1 BCL 363; Triden Contractors Pty Ltd v Belvista Pty Ltd (1986) 3 BCL 203; John Holland Construction and Engineering Pty Ltd v Majorca Projects Pty Ltd & Anor Supreme Court of Victoria 27 July 1995 unreported; Blue Chip Pty Ltd v Concrete Constructions Group Pty Ltd [1997] 1 Qd R 6; Lamac Developments Pty Ltd v Devaugh Pty Ltd [1999] WASC 76; Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd [1997] NSWSC 478; Beckhaus Civil Pty Ltd v Council of the Shire of Brewarrina [2002] NSWSC 960; Minson Nacap Pty Ltd v Aquatec-Maxcon Pty Ltd (2001) 17 BCL 269; Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd [2005] VSC 388; Daysea Pty Ltd v Watpac Australia Pty Ltd (2001) 17 BCL 434, referred to.
Cirocco Constructions Pty Ltd v Clark [2015] SADC 98; Mottram Consultants Ltd v Bernard Sunley & Sons Ltd [1975] 2 Lloyd's Rep 197; Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd NSW Supreme Court No 55026 of 1997 unreported; Wedgewood Builders Pty Ltd v Jason Karas & Anna Baillie AMCCI-07-6381; Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314, applied.
AJ Lucas Operations Pty Ltd v Mac-Attack Equipment Hire Pty Ltd (2009) 25 NTLR 1, distinguished.
LU Simon Builders Pty Ltd v HD Flowles & Ors [1992] 2 VR 189, discussed.
Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689; Triden Contractors Pty Ltd v Belvista Pty Ltd (1986) 3 BCL 203; Sabemo Pty Ltd v de Groot (1991) 8 BCL 132, considered.

PROCEDURE - INFERIOR COURTS - SOUTH AUSTRALIA - DISTRICT AND LOCAL COURTS PROCEDURE UNDER FORMER LOCAL COURT RULES - PRACTICE - COSTS AND ENFORCEMENT OF JUDGMENTS
5. Despite the extreme caution with which the court is to proceed in applications for summary judgment, this is an appropriate case to make an order with respect to the valid certificate according to a long line of persuasive authority to that effect.
District Court Civil Rules 2006 (SA) 6 DCR 232(2); Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1, referred to.
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, applied.

CIROCCO CONSTRUCTIONS PTY LTD v CLARKE (No 2)
[2015] SADC 107
The Issue

A significant point of construction has emerged in the plaintiff’s application for summary judgment, for work done pursuant to a domestic building work contract entered into between the parties.
This concerns the construction of State wide standard agreements between builders and property owners for domestic construction in South Australia. The issue is whether a builder is entitled to payment according to certificates issued for work done pursuant to such contracts, even though the home owner has legitimate claims for rectification work and, for which the home owner could bring proceedings by way of defensive set-off and counter-claim.
The ‘Simple Works Contract’ between the parties was developed by the Australian Institute of Architects and Master Builders Australia, for the construction of domestic housing in South Australia. The parties advise this form of agreement is in widespread use throughout South Australia for this purpose.
The underlying contract
The subject contract was executed in late 2012 with respect to the construction of a new residence and renovation of an old Church Hall in Alexandra Avenue, Rose Park in the near Eastern suburbs of Adelaide. The contract price was $2.117m. Architects were appointed by the home owner (the respondent Mrs Clarke) to administer the contract, inspect the contract works, issue progress payment certificates and certify practical completion as required under the terms thereof. Building work was performed between 2012 and 2014. A number of progress certificates were issued and duly paid by Mrs Clarke in that time.
Practical completion was scheduled for April 2014, but was in fact certified on 1 December 2014 to have occurred on 31 July 2014.
In July 2014 possession was taken by her. The act of taking possession is deemed by Clause M8.1 of the subject contract to ‘be treated as practical completion’. Progress Certificate 11 was issued on 3 September 2014 in the sum of $58,875. A further progress payment Certificate 12 was issued on 3 November 2014, in the sum of $99,484.79. Cirocco Constructions duly rendered tax invoices with respect thereto, on 4 September and 12 November 2014, respectively. It is upon these two certificates that the application for summary judgment is based.
The application is resisted on the generic basis that certain works were not undertaken in a proper and workmanlike manner. Mrs Clarke claims she has ‘lost all confidence in the plaintiff’s ability and preparedness to undertake the work to an acceptable schedule and level of finish’, and further states that she is ‘not willing to pay for unsubstantiated Prime Costs and Provisional sums, unapproved variations or defective work which has remained un-remedied for many, many months’.[1]
[1] Affidavit Mrs Clarke (FDN 14) paras 63 and 65.
There are a number of machinery provisions within the subject contract to note, before turning attention to the certificate and related contractual provisions. The structure of the arrangement is such that the architect engaged is considered to be the home owner’s agent ‘for giving instructions to the [building] contractor’, and the home owner is obliged to issue instructions to the contractor only through the architect’: Clauses A6.3 and A4.1(f) respectively. The architect however ‘in acting as assessor, valuer or certifier … acts independently and not as the agent of the owners’: Clause A6.3.
Upon receiving a claim for a progress payment in compliance with Clause N3, the architect ‘must assess’ the claim and issue to the building contractor and to the owner, a certificate setting out the payment due: Clause N4. Such certificates may be disputed by the owner in writing within 20 working days of becoming aware of the certificate, a dispute the architect is required to assess within 10 working days: Clause A8.1-.3. Clause A8.2 provides that ‘in the event that no notice of dispute is given the party will not be entitled to dispute the matter at all’.
Questions of disputation aside, ‘any certificate given under the contract must be paid within the period shown in Item 10 of Schedule 1 after delivery of the certificate and the tax invoice’ (if applicable). That period is seven calendar days in this instance: Clause N6. Otherwise Clause P4 applies. This provides:[2]
[2] Formatting here and hereafter taken from the original document.
Legal Rights
Nothing in this section prevents either *party from taking action at any time to enforce payment due under a certificate issued in accordance with this contract or to seek urgent court relief to prevent the detrimental action of the other *party.
The requirements for certification of practical completion are provided for in Clause M1:
M1    *Practical completion
.1The contractor must being the *works to *practical completion, by the date for *practical completion when, in the reasonable opinion of the architect:
a      they are substantially complete and any incomplete *necessary work or *defects remaining in the *works are of a minor nature and number, the completion or rectification of which is not practicable at that time and will not unreasonably affect occupation and use
b     all commissioning tests in relation to the plant and equipment shown in item 23 of schedule 1 have been carried out successfully and
c      any approvals required for occupation have been obtained from the *relevant authorities and copies of *official documents evidencing the approvals have been provided to the architect.
.2Subject to Clause M11, the owner takes possession of the *works at 4.00pm on the date the architect issues the notice of *practical completion.
Once the architect certifies practical completion, the contractor becomes entitled to release of 50 per cent of the security bond, in accordance with Clause C6 of the contract. This provides:
C6     Owner’s release of security on *practical completion
.1When the architect issues the notice of *practical completion, the contractor is entitled to the release of 50% of the amount of the security then held.
.2     If the security is cash retention:
a      the architect must give to the contractor a certificate equal to 50% of the amount of the security then held at the same time that the notice of *practical completion is issued.
b     the contractor, on receiving the certificate, must prepare a *tax invoice in accordance with Clause N5 and give both documents to the owner for payment.
c      the amount stated in the certificate must be paid in accordance with Clause N6.
.3If the security is by *unconditional guarantees, the owner must return one of the guarantees to the contractor within the period shown in item 10 of schedule 1.
The amount in question here is $52,925 inclusive of GST. A claim to that sum was incorporated in the progress payment Certificate 11.
Having so certified, the architect is required to give written notice thereof and to certify the release of the security in accordance with Clause M4. This reads:
M4 Architect to decide if the *works have reached *practical completion
.1If the architect decides that the *works have reached *practical completion, the architect must given written notice of *practical completion to the contractor and to the owner within 5 *working days after completing the inspection. The notice must state the date when *practical completion was reached.
.2The architect must also notify the owner in writing that security must be released in accordance with Clause C6.
So far as defects are concerned, notification of defects and the period with respect thereto are provided for in Clause M13 to the subject contract:
M13 Defects liability period
.1The defects liability period is shown in item 25 of schedule 1 and commenced on the date of *practical completion of the *works.
.2The architect may notify the contractor that, in respect of any part of the *works that has undergone significant correction within the first defects liability period, a further defects liability period of equal length to the first defects liability period may run for that part. The notification must be given at the time of acceptance of the corrected *necessary work.
There follows a provision for giving notice by the home owner to the contracting builder of a claim to remedy defaults, as provided for in Clause Q1:
Q1 Owner may require contractor to remedy default
.1If the contractor fails to meet a substantial obligation under this contract, the owner may given the contractor a written notice requiring the contractor to remedy the default within 10 *working days.
.2If the default is not remedied, or the contractor fails to show reasonable cause why it cannot be remedied within 10 *working days, or such additional days as agreed with the architect, the owner may terminate the engagement of the contractor by giving the contractor a written notice of termination.
.3The notice of termination must state that it is given under this Clause and a copy must be given to the architect.
The submission for Cirocco Constructions is that the certificate provisions being satisfied, the obligation to make the two payments specified above arises, irrespective of the legitimacy of any remedial work claims, particularly given that no notice of dispute pursuant to Clause A8 was given. That there was no such notice, is admitted by the defendant.
Contract construction – common law rights
The first question calling for determination relates to the interrelation between the standard form contract and the obligations to effect remedial work conferred by s 37 of the Building Work Contractors Act 1995 (SA). As pointed out in the proceedings related to the question of jurisdiction, that section furnishes additional wide remedial powers for the correction and enforcement of deficient building work.[3] As also pointed out therein, proceedings by builders for the recovery of monetary claims with respect to work done under domestic building work contracts, may be issued in any civil court of competent jurisdiction in this State. The enforcement mechanism of the statutory warranties and supervision of remedial work, are vested in the sole jurisdiction of the Magistrates Court by reason of the combined effect of s 37(2) & (3) and s 40(1) of the Building Work Contractors Act. Consistent with the policy evident in s 10(1b) of the Magistrates Court Act 1991 (SA), proceedings are to be determined in the one court at the one time. The courts retain wide procedural powers of referral and transfer to effect that purpose, through ss 10(2), 19(2) and 40(1) & (2) of the Magistrates Court Act, and in the statutory remit in s 37(5) of the Builders Work Contractors Act to ‘ensure that the hearing and determination of any question as to the performance of work … is not unduly delayed’.
[3] Cirocco Constructions Pty Ltd v Clark [2015] SADC 98, [13].
A proper reading of the Building Work Contractors Act taken as a whole does not suggest that anything contained therein displaces common law remedies available under contracts, such as defences for equitable set-off, or counter-claims for liquidated damages, based on the failure to employ proper standards of workmanship, or to perform residential building contracts to the standard required by the Building Work Contractors Act. Clearly there would have to be strong words indicating an intention to displace long established common law rights to achieve that purpose: Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd,[4] Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd,[5] Triden Contractors Pty Ltd v Belvista Pty Ltd.[6] The express recognition of ‘monetary’ claims for amounts falling due under domestic building works contracts in s 40(1)(a) of the Building Work Contractors Act, supports that conclusion. The reference to claims ‘for relief in the nature of an order to carry out work’ pursuant to s 37(6)-(8) in s 40(1)(b), supports the conclusion that the statutory remedies and warranties conferred by the Building Work Contractors Act were intended to be in addition to, rather than in derogation of common law defences and remedies.
[4] [1974] AC 689, 717.
[5] (1985) 1 BCL 363, 367-368.
[6] (1987) 3 BCL 203, 213.
Contract construction – payment before set-off
It is a different question whether the building contractor is entitled to the payment of certified progress payments without deduction when a dispute arises as to the standard of building work undertaken, or as to remediation. That too is a question to be determined by an examination and consideration of the terms of the particular contract in question: Mottram Consultants Ltd v Bernard Sunley & Sons Ltd.[7]
[7] [1975] 2 Lloyd’s Rep 197, 204-205.
Questions of this kind are not unfamiliar to the courts in the context of building construction contracts. As long ago as 1973, the House of Lords held that upon the true construction of the subcontract in question, no provision ousted the right of set-off in respect of unliquidated cross-claims: Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd.[8] Lord Reid added during his speech, that there was no presumption of any general rule that sums due under an architect’s certificate must be paid at once without waiting for the determination of claims for set-off based on breaches of warranty in respect of the work to which the certificate relates.[9]
[8] [1974] AC 689.
[9] Above at 699 A-B.
In Triden Contractors Pty Ltd v Belvista Pty Ltd,[10] a dispute arose between the architect and the builder after the architect required the builder to carry out remedial work and the builder disputed the obligation by serving a Notice of Dispute. The architect had also issued a progress certificate delivered to the builder. Smart J concluded the amount of the certificate became due and payable on presentation.[11] His Honour continued:[12]
It would be curious if the proprietor could refuse to pay a certificate because of a cross-claim when the builder is entitled, upon non-payment of the certificate within seven days and subject to non-compliance by the proprietor with the seven-day notice, to suspend the operations or determine his employment. Cl28(a)(i) and cl28(a)(v) sets out clearly identifiable events relating to the issue and payment of certificates upon which a builder may act to so suspend or determine. It would be equally curious if the proprietor could raise some cross-claim to prevent these Clauses taking effect when not a hint of such right is to be found in these Clauses. They should take effect according to their terms.
In my view the terms of cl28, especially cl28(a), and cl28(a)(i) and cl28(a)(v), when read with the remainder of the conditions, lead to the conclusion that upon the true construction of this contract the proprietor is bound to pay the amount of the architect's certificate without deduction.
[10] (1987) 3 BCL 203.
[11] At p 211.
[12] At p 215.
Similar issues were explored by Giles J in Sabemo Pty Ltd v de Groot.[13] Of particular significance was a Clause10.07, which provided:
On the Builder presenting to the Proprietor any Progress Certificate issued under Clauses Cl0.02 .. the Builder shall be paid by the Proprietor the amount specified by that Certificate within the period stated in Item J of the Appendix to this Agreement or otherwise within five (5) days.
His Honour assessed this to be an even stronger case than Triden Contractors, because of the absence of any qualification in relation to progress certificates. He further considered other matters supported that conclusion, including the requirement for the builder to continue with the work notwithstanding the reference of a dispute to arbitration. His Honour considered that since the builder continued to incur costs, the proprietor's reciprocal obligation to pay should not be suspended by raising a cross-claim or a reference to arbitration of the dispute. He concluded:[14]
The scheme of the contract is that claims and cross-claims which are disputed will go to arbitration, but that each party shall continue to fulfil its part of the contract - performance of the works by the builder and payment by the proprietor - notwithstanding the reference of disputes to arbitration. At the end of the contract account will be taken of the disputes in relation to the payment of the final certificate. The disputes may have been resolved by an award prior to that time, but if they have not the result of the arbitration will determine what monetary adjustment (either way) will be made.
[13] (1991) 8 BCL 132.
[14] Above at 29.

Next in LU Simon Builders Pty Ltd v HD Fowles & Ors,[15] Smith J heard an application for summary judgment by a builder suing a proprietor to recover moneys owing under progress certificates for work done under a building contract. The proprietor claimed an entitlement to liquidated and other damages against the builder arising from inadequate performance of the contract. It was held the proprietor could not raise questions of cross-claim under the contract, and further that the proprietor could not avail itself of the defence of set-off, in applications for summary judgment, because the parties by their contract had limited the operation of the general law. Smith J concluded:[16]
It might be argued that the entitlement to payment on progress certificates, considered on its own, gives rise to a right to payment under the contract like any other right to payment under contract and, therefore, can be contested in court proceedings by cross-claims and set-offs. The final certificate provisions, however, strongly suggest that this is not so. That conclusion is strengthened by consideration of other terms of the contract and is strengthened to the point, in my view, where there can be no real argument.
An additional component in his Honour’s reasoning process was this:[17]
Further, if the builder is not rendered bankrupt by non-payment of progress payments, its efficient performance of the contract will be put at risk and, in many cases, frustrated. Such consequences cannot have been the intention of the parties. The entitlement to progress payments is clearly the quid pro quo for the obligation to continue working while the parties are in dispute.
Smith J declined to stay the entitlement to summary judgment pending determination of cross-claims, as that would be ‘contrary to the agreement between the parties’.[18] This decision was followed and applied in John Holland Construction and Engineering Pty Ltd v Majorca Projects Pty Ltd & Anor.[19]
[15] [1992] 2 VR 189.
[16] At pp192-193.
[17] At 193.
[18] At 196.30.
[19] Supreme Court of Victoria - Hansen J - 27 July 1995 - unreported.
The Court of Appeal (Queensland) considered much the same type of questions in Blue Chip Pty Ltd v Concrete Constructions Group Pty Ltd.[20] It ruled the home owner was not entitled to deduct liquidated damages or any other alleged debts from a progress claim under the relevant building contract. A similar result was reached in Lamac Developments Pty Ltd v Devaugh Pty Ltd.[21]
[20] [1997] 1 Qd R 6.
[21] [1999] WASC 76, Master Bredmayer (AS 2545-1993).
Later in Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd,[22] Rolfe J was called upon to consider the questions:[23]
Firstly, whether in all the circumstances summary judgment should be granted rather than allowing the matter to go to trial, and, secondly, whether, having regard to the provisions of the sub-contract the defendant can set up a defence of equitable set-off for the liquidated damages for delay in completion and unliquidated damages for failure to use proper standards of workmanship, against the claim for payment of a progress claim.
In this instance the obligation to make payment was expressly not suspended. Rolfe J determined the circumstances raised many of the same considerations as in Triden Contractors, but that the stronger contractual context supported the conclusion that progress claims were to be made without deduction. He further considered the circumstances to be stronger than they were in LU Simon Builders:[24]
In my opinion, the contract in the present case is at least as cogent in pointing to the conclusion that there should be no right of set-off against a progress certificate, save as provided in the contract, as the contracts in the cases to which I have just referred. I consider it is more so, but whether that be so the terms of the contract and the reasoning of the authorities to which I have referred lead me to the clear conclusion that the subcontract must be construed as denying the defendant the right to make a deduction from a progress payment in the circumstances.
[22] New South Wales Supreme Court No. 55026 of 1997; BC9703398 1 August 1997, unreported, BC9703398.
[23] Ibid BC 4.
[24] Ibid BC 28.
His Honour concluded there was under the test then applicable, no real issue or question to be tried:[25]
The subcontract, on its proper construction, requires the defendant to pay the amount of the progress claim, in the circumstances of this case, without any deduction for amounts claimed by way of set-off or cross-claim. Accordingly, conformably with the test laid down in General Steels and the other authorities on the point, I think that I should give effect to that view.
As to the ‘heavy reliance’ upon any right of claim to an equitable set-off, Rolfe J reasoned:[26]
It seems to me that the requirements of equitable set-off are not met in the present case because, firstly, the parties by their contract have excluded the applicability of a set-off, unless it is made in a certificate issued by the defendant's representative, until a later time; and, secondly, because at that later time the defendant, in the circumstances of this case, will be able to rely upon that set-off in adjusting the financial rights and obligations between the parties. I do not consider that this gives rise to any real issue to be tried.
[25] Ibid BC 38.
[26] Ibid BC 42.
In a later ruling in the same action, Rolfe J made the following determination in Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd:[27]
As appears from my earlier reasons the effect of a payment certificate is to require the recipient to pay the amount stated. Failure to do so can lead to summary judgment and there is no right to dispute the amount payable until the dispute resolution procedures are activated. Accordingly, the recipient of the certificate is required to pay money during the course of the contract which, at the end of the day, it may be found it does not owe. The requirement to pay money may lead to financial difficulties for the payer, just as the failure to receive money during the course of the contract may cause financial difficulties to the payee. Also the payee may not be able, at the end of the day, to refund any overpayment. Considerations such as these lead me to the conclusion that a certificate must comply strictly with cl42.1 if it is to have the consequences specified.
[27] [1997] NSWSC 478; BC9708283, p 7.
Substantially the same contractual terms appearing in Algons were considered again and applied in Beckhaus Civil Pty Ltd v Council of the Shire of Brewarrina.[28] Another case in point producing the same result is Minson Nacap Pty Ltd v Aquatec-Maxcon Pty Ltd.[29] Applying the Queensland decision in Blue Chip Pty Ltd v Concrete Constructions Group Pty Ltd and the New South Wales decision in Algons, Byrne J gave summary judgment based on progress certificates, for identical reasons. Similarly in Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd,[30] Habersberger J granted an application for summary judgment based on six progress certificates issued under a building contract.
[28] [2002] NSWSC 960; BC200206167, [16]-[19].
[29] (2001) 17 BCL 269.
[30] [2005] VSC 388.
Two further decisions ought to be mentioned before applying the above principles to the case at hand. In the first A J Lucas Operations Pty Ltd v Mac-Attack Equipment Hire Pty Ltd,[31] Kelly J cited without demur the decision in Algons, which she distinguished on the basis that the contract under consideration was ‘materially different’ and because the issue she was deciding was quite different.
[31] (2009) 25 NTLR 1, [24].
The second is of more moment as it concerned the construction of a residential building contract containing indistinguishable terms to the present contract. Magistrate Forrest sitting in the Adelaide Magistrates Civil (Consumer and Business) Division, gave summary judgment in Wedgewood Builders Pty Ltd v Jason Karas & Anna Baillie,[32] on the basis of a certificate of payment issued by an architect under a building works contract. His Honour reasoned:
[34] In my view, in this instance, the defendants have given to the architect the power to determine the issues which the defendants now seek to put into contention. That is, the defendants have agreed by the contract that the architect was to decide whether the standard of work was adequate and to decide what payments were to be made to the plaintiff by the defendants
[35] In my further view, the allegations made by the defendants are properly construed as being in the nature of complaints that Mr Batsiris has incorrectly certified in a number of respects. If that is so, then it may give rise to a right of action by the defendants against Mr Batsiris but it does not afford a basis for overriding what I regard as clear and unambiguous terms of the contract regulating the terms of payment between the defendants and the plaintiff.
[36] I accept the submission made on behalf of the plaintiff that the contract displaces the general common law presumption in favour of a set off and that the contract further imposes on the defendants an absolute obligation to pay the amount or amounts certified by the architect.
[32] AMCCI-07-6381, 14 March 2008.
In so ruling, the Magistrate paid particular regard to the Clauses A6.2, N6.1, N11, N13 and N14 of the contract, which as I have said, are direct equivalents to those in issue here. Although he referred a second time to Clause N6.1 (at [37]) in the context of the requirement for the architect to ‘take into account various matters including any claim by the defendants for a set off of monies due under the contract’, this was undoubtedly a typographical error, meant as a reference to Clause N4.1.
All the above cases stand for the universal proposition that each contract must be construed according to its own terms. They singularly march in the same direction in concluding that when a contract provides that obligatory progress payments must be made according to certified sums, as they fall due for payment without deduction on account of defective work, irrespective of the existence of valid set-off, counter-claim or other defences. Such defences therefore fall for later determination, according to established contractual principles. In other words translated to the facts of the instant case, it was the parties’ intention, expressed in the subject contract, that Cirocco Constructions be paid the full amount of each progress payment duly certified, in order to ensure its ability to continue completing the contract works. Invariably, when the contract fits the latter description, summary judgment can be entered. It is therefore necessary to return to the provisions of the subject residential building contract.
To so conclude involves no ‘exclusion, limitation or waiver of a right’ conferred or implied by the Building Work Contractors Act, and involves therefore no infringement of s 42 thereof, which prevents any ‘contracting out’ of such rights. Such rights the defendant otherwise holds such as defensive set-off and the like are preserved undiminished. The above conclusion simply gives effect to the terms of the subject contract, properly construed. The situation is no different from that described by Rolfe J in Algons Engineering Pty Ltd v Abigroup Constructions Pty Ltd:[33]
There is no doubt that it can be said that the progress claim by the plaintiff is closely related to the claim under the same contract by the defendant to set-off liquidated and other damages. All claims arise pursuant to the same contract and by virtue of what was done or not done thereunder. However, it does not seem to me that the parties are entitled to disregard the terms of their contract which, in my opinion, the setting up of the equitable set-off would achieve … I do not see that there is any unjustness in requiring the parties to abide by the terms of their contract, particularly when in so doing the Court is not precluding the defendant, ultimately, from raising the amounts sought to be set-off as a defence to the final claim and allowing the defendant to rely upon its entitlement to such a set-off under the contract, but in due course. It was submitted on behalf of the defendant that if it had a defence that defence can be availed of immediately. I think the answer to that submission is that on a proper construction of the contract, and in the circumstances which have occurred, it does not have a present right to raise that defence. The defence will be available at a later point, the right to bring it being deferred by the terms of the contract.
[33] Above at BC 40.
No question of deference to the statutory rights and remedies available to the defendant arise, here nor is there any question of the postponement of such rights. The statutory warranties implied into this contract pursuant to s 32(2) of the Building Work Contractors Act, apply undiminished and the remedies available for the enforcement of remedial work furnished by s 37(6)-(8) thereof remain intact, unaffected by any payment due on certification by the supervisory architect. All issues in respect of the enforcement of statutory warranties and remedies will proceed to trial and fall for determination in exactly the same way as would have transpired without the application for summary judgment.
There is no need of an analysis Clause by Clause between the contractual Clauses at issue here and those in the above cases, apart from those in Wedgewood Builders. The central question is the proper construction of this particular contract. The fact remains that the architect assessed the two subject claims for payment and issued certificates with respect thereto pursuant to Clause N4. As to each there was no notice of dispute under Clause A8 thereof. Even if there had been, the parties remained obliged to perform whatever obligations accrued pursuant to Clause P1. In any event, the payments independently fell due and payable within 7 days of the certificates under Clause N6 and Schedule 1, Item 10. The right to enforce such payments persisted under Clause P4.1.
In these circumstances there can be no doubt that upon its proper construction, this contract can only be construed as providing for the enforcement of the building contractor’s right to enforce certified payments, undiminished by rights of set-off, irrespective of extant contests over remedial work. If it comes to it, I respectfully agree with the conclusion of Magistrate Forrest in Wedgewood Builders in that respect.
Payment enforcement – contract compliance
The next issue calling for resolution arises from the contention of counsel for Mrs Clarke, Mr Dal Chin, that both certificates were not issued in accordance with the contract, so that they were either invalid, or ineffective. This analysis begins with the uncontroversial proposition that an architect’s certificate must be issued in accordance with the procedures established in the underlying contract: Daysea Pty Ltd v Watpac Australia Pty Ltd.[34] As observed by McHugh JA in Legal & General Life of Australia Ltd v A Hudson Pty Ltd:[35]
While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless, the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract.
[34] (2001) 17 BCL 434, [22].
[35] (1985) 1 NSWLR 314, 335G-336B.
Progress Certificate 11
The Progress Certificate 11 of 3 September 2014, charged in invoice 0536 ($52,925), primarily relates to release of one half of the retention sum. The defendant submits that Cirocco Constructions is not entitled to payment as the certificate was unauthorised. The submission begins with the observation that by a combination of Clauses C1, C2 and items 7b and 8 of the Schedule, the plaintiff was required to provide cash security to Mrs Clarke in the amount of 5 per cent of the contract sum of $2,117,000, namely $105,850. Next, by virtue of Clause C6, Mrs Clarke was required to release one half of the cash retention at the time the architect issues a ‘notice of practical completion’. The submission continued with the proposition that the architect could only issue a certificate for the release of the cash retention at the time of issuing a notice of practical completion pursuant to Clause M4. This requires the architect to be satisfied the works have in fact reached the practical completion stage. Accordingly, so the submission proceeds, a valid progress certificate for the release of half of the retention amount can only be issued once notice is given of practical completion. In effect the submission is that notice of practical completion is required before, or no later than at the same time as the progress certificate, in this instance in respect of Certificate 11.
It is not possible to identify in the subject contract read as a whole, why this should be so. Assuming for the moment that the issuance of a progress certificate is necessary in order to generate the liability to release retention funds, progress certificates under Clause N4 can be issued at any time, whereas practical completion is a one-off event. To read Clause C6 as requiring a notice of practical completion as a condition precedent to the right to issue a progress certificate, is to read too much into it. That Clause merely provides that on practical completion ‘the contractor is entitled to release’. It may be accepted that practical completion is a condition of release, but there is nothing to suggest that an anticipatory claim cannot be made beforehand, even though the liability for release will not mature until practical completion. It follows that due delivery of certificates for payment may trigger the contractual right to release of 50 per cent of the amount of security held, but that the entitlement to enforce only triggers on practical completion. This aspect of the defendant’s case must therefore be rejected.
However the unstated assumption in this submission that the capacity to obtain security release is dependent on a progress claim with respect thereto, exposes a difficulty of a different order. Certificate 11 in the sum of $58,875, specifically included the ‘release of 50 per cent retention’, namely $52,925. That certificate was in terms, with respect to ‘a progress claim from the builder’. The making of progress claims are governed by Clause N3 under the subject heading ‘Payment for the works’. These expressly relate to building ‘work completed’, or ‘materials and equipment delivered to the site for incorporation in the works’. A claim for security return does not fit these descriptions. Hence a question arises as to how the obligation to regain retention sums can be governed by Clause N of the subject agreement at all.
Clause C6.2 appears at first sight to require its own separate certificate confined to the release of security ‘equal to 50 per cent of the amount of the security’, and the creation of its own separate tax invoice with respect thereto. The contractor ‘on receiving the certificate, must prepare a tax invoice in accordance with Clause N5 …’: Clause 6.1.b. There is no evidence of the existence of such a discrete certificate or tax invoice here. Accordingly it is not appropriate to make an order for summary judgment with respect to the Certificate 11 sum as a reasonable basis for defending this aspect of the claim emerges.
Progress certificate 12

Here again the contention is that Certificate 12 was not been issued in accordance with the contract. Counsel made the largely unsubstantiated submission that by nominating in the certificate the ‘original cost of the building work’, the architect overstated the correct figure thus rendering the certificate void. In her affidavit of 12 May 2015, Mrs Clarke suggests at paragraphs [49]-[52] that this difference might be attributable to GST miscalculations, although the maths is by no means self-evident.
It was submitted that this was fundamental rather than error relating to the exercise of a discretion or professional judgment by the architect, in the manner contemplated by McHugh AJ in the passage quoted above. This contention must be rejected. In the first place (mis)calculations of this kind, (assuming but not deciding this was the case), are aptly dealt with through the dispute mechanisms contained within the subject contract. Secondly, this type of calculation falls squarely within the enforcement category being the type of ‘mistake or error on the part of the [architect] not … itself sufficient to invalidate the decision or the certificate’: Legal & General Life of Australia Ltd v A Hudson Pty Ltd.[36] The facts of that case serve to illustrate the point. The court there held nothing in the contract under consideration enabled the valuation to be set aside, on the simple ground that the valuer prepared a valuation based on an over calculation of the floor space demised. If anything, the facts of that case presented a stronger ground for invalidity than this one does.
[36] Ibid 335G.
A second basis for attacking both Certificates 11 and 12, is that the contractual pre-requisites for payment were not met, to the extent that they purport to relate to claims for variations, $5,409.10 in the case of Certificate 11 and $59,253.66 in the case of Certificate 12.
Cirocco Constructions was required to make valid claims for variations under Clause H1.1. Clause H1.1(b) provides for the submission of ‘a detailed claim to adjust the contract’ within 20 working days ‘after becoming aware of the event that has resulted in the claim’, unless some other time is mutually agreed in writing. Should variations produce price or practical time completion adjustments, the contractor must ‘promptly’, i.e. ‘as soon as practicable’, notify the architect in writing as required by Clause J2.3. Thereafter the contractor must submit a detailed claim in terms requested by the architect to adjust the contract, within 20 working days after completion of the work: Clause J.4. The claim to adjust the contract must furnish the details required in Clause H2.
The submission on the defence side is that these provisions require strict compliance. Absent proof of same, Cirocco Constructions fails to establish the contractual entitlement to the payments as they relate to variations.
The complete answer to this contention is the same as it is on the primary construction issue. These are in the first place matters for resolution according to the dispute mechanisms within the contract. If not, they are evidentiary issues for resolution at trial. A fundamental defect with this contention is that the defence has pointed to no material suggesting there is a realistic issue about variations, except for a plea in paragraph 24b of the third party statement of claim issued against the architect, that both certificates ‘insofar as they relate to variations … Cirocco Constructions was not entitled to contract price adjustments … particulars will be supplied following disclosure and inspection’.[37]
[37] See also T81.28-82.5, 24 June 2015.
Summary judgment
The principles attaching to the circumstances in which orders for summary judgment are not contentious. The fundamental position is that the applicant must establish no more and no less, there is no reasonable basis for defending the claim: 6 DCR 232(2) District Court Civil Rules 2006 (SA). The courts have necessarily proceeded cautiously with great care before making such orders, because they effectively amount to final judgment: Fancourt v Mercantile Credits Ltd.[38] Furthermore, the court must remain guarded to ensure ‘the interests of justice are not sacrificed on the altar of efficiency and expedition’: Ceneavenue Pty Ltd v Martin.[39] Bearing these fundamental principles in mind, this case nevertheless remains an appropriate one to enter summary judgment in respect of Certificate 12, because a consistent long line of persuasive authority applies to the circumstances.
[38] (1983) 154 CLR 87, 99.
[39] (2008) 106 SASR 1, [87].
Summary and orders
There is no basis upon which to conclude that the Building Work Contractors Act displaces common law remedies available under domestic building work contracts, including the contract presently before the court. On its proper construction that contract is to be read as providing for the enforcement of the building contractor’s capacity to enforce certified payments, undiminished by any right to set-off, irrespective of the extant contest over remedial work, or the merits thereof. No infringement of s 42 of the Building Work Contractors Act occurs in this situation.
Certificate 12 was validly issued, whereas it was reasonably arguable Certificate 11 was not. Despite the extreme caution with which the court is to proceed in applications for summary judgment, as there is no reasonable basis for defending the claim with respect to Certificate 12, this is an appropriate case to make such an order according to established and persuasive authority.
Accordingly it is proposed to enter judgment in favour of the plaintiff against the defendant in the sum of $99,484.79. Before so doing, the parties are to be heard on the terms of final orders, including interest thereon as provided for in the subject contract, as well as all consequential issues arising from these reasons. These include the further management of the underlying litigation.