| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : DANELLO PTY LTD -v- WALSEC PTY LTD [No 2] [2013] WADC 38 CORAM : BRADDOCK DCJ HEARD : 15 & 26 OCTOBER 2012 DELIVERED : 14 MARCH 2013 FILE NO/S : BUN CIV 4 of 2011 BETWEEN : DANELLO PTY LTD Plaintiff
AND
WALSEC PTY LTD
Defendant
Catchwords: Summary judgment - Appeal from decision of deputy registrar - Building contract - General conditions of contract AS 2124-1992 - Progress certificate - Final certificate - Clause 42 of AS 2124-1992 Legislation: Rules of the Supreme Court 1971 (WA) O 14
District Court Rules 2005 (WA) r 15
(Page 2)
Result: Appeals dismissed
Representation: Counsel:
Plaintiff : Mr D F Beere
Defendant : Ms C H Meighan
Solicitors:
Plaintiff : D F Beere
Defendant : Talbot Olivier
Case(s) referred to in judgment(s):
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 322
Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2003] NSWCA 4
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194
Daysea Pty Ltd v Watpac Australia Pty Ltd [2001] QCA 49
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Southern Region Pty Ltd v Minster for Police and Emergency Services, for and on behalf of the State of Victoria [2003] VSCA 105
Southern Region Pty Ltd v State of Victoria (No 3) [2001] VSC 436
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1 BRADDOCK DCJ: These reasons relate to two appeals from decisions by Deputy Registrar Hewitt on 5 July 2012. Orders were made on 16 July 2012.
2 The two applications for summary judgment arose in respect of two separate actions: 4 of 2011 and 3 of 2012, in the Bunbury Registry. 3 The actions concerned one contract between the same parties. In both actions the plaintiff is Danello Pty Ltd, a company which traded under the name of Tate Construction, the contract or builder in relation to the contract. The defendant in each action is Walsec Pty Ltd, the developer/proprietor in relation to the contract. 4 The deputy registrar heard the two applications for summary judgment together. In 4 of 2011, the application was dismissed and unconditional leave to defend the action was granted. 5 In 3 of 2013, the application succeeded and judgment was given for the plaintiff in the sum of $107,249.75. 6 The plaintiff appeals against the granting of leave to defend in 4 of 2011 and the defendant appeals against judgment entered in 3 of 2012. The appeals were heard together. 7 For convenience in these reasons I will refer to the parties as plaintiff and defendant. 8 Pursuant to r 15 of the District Court Rules 2005 (WA), an appeal lies from the decision of a registrar to a judge of this court. Rule 15(2) requires that such appeal is lodged within 10 days, or within such time as is permitted. In this case, both notices of appeal were filed some days late. However, no prejudice was claimed to arise and no objection was taken by either party to the late filing. I extended time for the lodging of both the notices at the hearing on 15 October 2012. 9 An appeal from a registrar pursuant to r 15 of the District Court Rules is a new hearing, that is a hearing 'de novo'. It is not necessary to demonstrate error on the part of the learned deputy registrar, and no grounds specifically need to be pleaded. The matter is to be decided on the materials before the court at the time of hearing: Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194, [14]. (Page 4)
The facts 10 On 30 March 2009, the plaintiff and the defendant entered into a contract under which the plaintiff, as contractor, was to construct a 24 unit development at Tingle Avenue in Margaret River. The contract incorporated the Australian Standard AS 2124-1992 general conditions of contract. 11 The architects for the project were Wilcox & Associates. The contract was priced at just short of $4 million. The precise details of the project are not relevant for current purposes. The contract provides for the appointment of a superintendent to exercise specific functions pursuant to the contract. Wilcox & Associates was appointed as Superintendent. 12 The contract provides for progress payments to be made and detailed provisions are set out for that purpose. 13 Action 4 of 2011 concerns a claim for payment 21, a progress claim, issued by the plaintiff on 20 November 2010. 14 Action 3 of 2012 concerns the final claim for payment made by the plaintiff on 29 November 2011. 15 The statement of claim (in 4 of 2011) relevantly provides: 4. The Plaintiff and the Defendant entered into a building contract on the 30th March 2009 pursuant to which the Plaintiff agreed to construct for the Defendant twenty four (24) units to be located on Lot 852. 5. The Contract included Australian Standard AS 2124-1992 ('AS 2124'). 6. The Contract provided for the Plaintiff to make various progress claims during the course of construction of the units on Lot 852 pursuant to clause 42.1 of AS 2124. 7. The Contract appointed Willcox & Associates Pty Ltd as the Superintendent thereof ('the Superintendent'). 8. On the 20th November 2010 and in accordance with clause 42.1 aforementioned the Plaintiff issued a progress claim to the Superintendent in the sum of $154,943.19. 9. Pursuant to clause 42.1 of AS 2124 the Superintendent was required to issue to the Plaintiff and the Defendant a payment certificate stating the amount of the payment which in the opinion (Page 5)
of the Superintendent was to be made by the Defendant to the Plaintiff in respect to the Plaintiff's claim. 10. The Superintendent failed to issue the payment certificate as required by clause 42.1. 11. Clause 42.1 provided that within 28 days after the receipt by the Superintendent of the claim for payment (in the event that no payment certificate was issued by the Superintendent) the Defendant was required to pay to the Plaintiff the amount stipulated in the Plaintiff's claim. 12. Pursuant to the aforementioned clause the amount of the Plaintiff's claim became due and payable by the Defendant on the 17th December 2010, but notwithstanding that fact the Defendant has failed neglected and refused to pay the amount claimed save as to the sum of $17,399.04 which was paid in part reduction thereof. 16 In 3 of 2012, the statement of claim relevantly provides: 8. On the 29th November 2011 and in accordance with clause 42.7 of AS 2124 the Plaintiff issued a final claim to the Superintendent in the sum of $107,249.75. 9. Pursuant to clause 42.8 of AS 2124 the Superintendent was required to issue a final payment certificate indorsed 'final certificate' within fourteen (14) days after receipt of the Plaintiff's final payment claim but failed to do so. 10. Pursuant to clause 42.1 of AS 2124 in the event that the Superintendent failed to issue the aforementioned certificate the Defendant became liable to pay the Plaintiff's claim within twenty eight (28) days of receipt thereof by the Superintendent. 11. Pursuant to the aforementioned clause the amount of the Plaintiff's claim became due and payable by the Defendant on or about the 29th December 2011 but notwithstanding that fact the Defendant has failed, neglected and refused to pay the amount claimed. 17 Clause 42.1 of the Australian Standard General Conditions provides: [1] At the time for payment claims stated in the Annexure and upon issue of a Certificate of Practical Completion and within the time prescribed by Clause 42.7, the Contractor shall deliver to the Superintendent claims for payment supported by evidence of the amount due to the Contractor and such information as the Superintendent may reasonably require. Claims for payment shall include the value of work carried out by the Contractor in the performance of the Contract to that time together with all amounts (Page 6)
then due to the Contractor arising out of or in connection with the Contract or for any alleged breach thereof. [2] Within 14 days after receipt of a claim for payment, the Superintendent shall issue to the Principal and t o the Contractor a payment certificate stating the amount of the payment which, in the opinion of the Superintendent, is to be made by the Principal to the Contractor or by the Contractor to the Principal. The Superintendent shall set out in the certificate the calculations employed to arrive at the amount and, if the amount is more or less than the amount claimed by the Contractor, the reasons for the difference. The Superintendent shall allow in any payment certificate issued pursuant to this Clause 42.1 or any Final Certificate issued pursuant to Clause 42.8 or a Certificate issued pursuant to Clause 44.6, amounts paid under the Contract and amounts otherwise due from the Principal to the Contractor and/or due from the Contractor to the Principal arising out of or in connection with the Contract including but not limited to any amount due or to be credited under any provision of the Contract. [3] If the Contractor fails to make a claim for payment under Clause 42.1, the Superintendent may nevertheless issue a payment certificate. [4] Subject to the provisions of the Contract, within 28 days after receipt by the Superintendent of a claim for payment or within 14 days of issue by the Superintendent of the Superintendent's payment certificate, whichever is the earlier, the Principal shall pay to the Contractor or the Contractor shall pay to the Principal, as the case may be, an amount not less than the amount shown in the Certificate as due to the Contractor or to the Principal as the case may be, or if no payment certificate has been issued, the Principal shall pay the amount of the Contractor's claim. A payment made pursuant to this Clause shall not prejudice the right of either party to dispute under Clause 47 whether the amount so paid is the amount properly due and payable and on determination (whether under Clause 47 or as otherwise agreed) of the amount so properly due and payable, the Principal or Contractor, as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable. [5] Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be a payment on account only, except as provided by Clause 42.8. (Paragraph numbers have been added.) 18 The matters pleaded by the plaintiff in relation to 4 of 2011 were supported by three affidavits of Mr Barry Tate. Firstly, 10 May 2011, (Page 7)
which annexed the contract and other documentation concerning correspondence and claims; his second affidavit was sworn on 20 January 2012 and a third affidavit on 21 February 2012. Further, there was an affidavit of Daniel Michael Rolfe sworn 3 October 2011. Mr Tate's first affidavit deposed to the facts pleaded in 4 of 2011 and went on to say that subsequent to the progress claim 21, the defendant paid $17,399.04. Mr Tate asserted, as required, that he did not believe the defendant had any defence to the action. He acknowledged that there had been a certificate issued on 10 January 2011, and a revision of the said certificate subsequently, reducing the amount said to be due to $17,399.04. Mr Tate asserted that the reduction in the revised certificate was in the main due to an adjustment made by the Superintendent in respect of a liquidated damages claim made by the defendant for late completion. The damages sum is detailed in the 'contracts sum adjustment', number 15 as $94,545. 19 Mr Tate outlined facts underlying dispute between the plaintiff and the defendant concerning a sub-contractor, Fortress Home Building Systems Pty Ltd (Fortress). A dispute had arisen as to whether the sub-contractor was the plaintiff's or the defendant's sub-contractor. The conduct of Fortress caused delay in the completion of the contract, and it is for that delay that the plaintiff claimed an extension of time and adjustment in claim 21. The defendant, via the Superintendent's revision of the contract, claimed for delay at the plaintiff's expense. Essentially, the plaintiff sought to claim payment for delay caused by Fortress and the defendant claimed penalty for the delay caused by Fortress, as the plaintiff's subcontractor. 20 The plaintiff submitted the matter for adjudication under the provisions of the Construction Contracts Act 2004. Reasons were issued by Mr Alan Riley, which were annexed to Mr Tate's first affidavit. Those reasons show that Mr Riley dismissed the application for adjudication, due to it being filed out of time. However, notwithstanding he effectively declined to hear the matter Mr Riley expressed an opinion on the merits of the claim which favoured the plaintiff. Subsequently, the solicitors for the plaintiff wrote to the defendant demanding payment of claim 21, on 24 February 2011. Mr Tate said that no response was ever received to that letter. 21 In opposition to the application for summary judgment, the defendant relied upon an affidavit of Ms Alana Rebecca Salsano, sworn 3 May 2012, which exhibited correspondence passing between the plaintiff's solicitor and Wilcox & Associates, the architects, and the plaintiff's solicitors and defendant's solicitors. Further, it annexed a copy of the writ (Page 8)
in action 3 of 2012. Prior to that, Mr Kimberley William Hyman had sworn an affidavit on 15 December 2011, annexing the sub-contract between the plaintiff and Fortress and correspondence relevant to it. Mr Hyman deposed to the fact he was the consultant engaged by the defendant, confirmed the contract between the plaintiff and the defendant, referred to the provisions for sub-contractors to the contract and the provisions for claims for payment and recounted the history of the engagement of Fortress under the contract, with reference to the correspondence. 22 In relation to claim 21, he specifically referred to items 63 and 64 of that claim, item 63 being the sum of $39,730 (EOT number 5 – window delays), and item 64 for $4,415 (EOT number 6 – five days). He asserts that, to the best of the defendant's knowledge, Mr Tate did not and has not provided supporting evidence for those claims. He states the defendant is not aware of whether the plaintiff submitted a written claim for EOT 5 and EOT 6. He deposed to the fact that the plaintiff had previously submitted to the Superintendent an extension of time claim and associated delay costs in respect of delays caused by Fortress, in January 2010. He asserted that there was a real dispute between the plaintiff and the defendant as to the issue of whether Fortress was a sub-contractor of the plaintiff, whether the plaintiff is entitled to an extension of time as claimed, and if the plaintiff is not liable for the delay caused by Fortress, the reasonableness of the time and costs claimed in respect of the delay caused by Fortress, and, if Tate is liable for the delay caused by Fortress, the validity of the liquidated damages claim made by the defendant. 23 Mr Rolfe's affidavit, filed after the decision of the learned deputy registrar and shortly before the hearing of the appeal, produced further correspondence between the plaintiff and the Superintendent. Mr Rolfe was the project manager of the plaintiff in respect of the construction. Apart from extensive commentary upon the materials filed on the appeal by the defendant, and the submissions, he deposed to the circumstances in relation to EOT 6, which is described as delay due to adverse weather conditions. He asserted that the requirements in relation to such claims had been varied orally, as a result of discussion between himself and the Superintendent. He recounted a history of conversations in relation to this issue, concerning whether the claim for inclement weather delays should be supported by evidence of the weather conditions at Karridale, or Witchcliffe which was situated nearer to the construction site. He asserted that the Superintendent requested site diaries in support of an earlier claim. (Page 9)
24 In his affidavit of 21 February 2012, Mr Tate produced correspondence between the plaintiff and the Superintendent, which made claims for EOT 5 and EOT 6. It is clear from this correspondence that EOT 5 related to the delay caused by Fortress and the supply of glazing. EOT 6 related to inclement weather in June 2010. 25 The matters pleaded by the plaintiff in 3 of 2012 were supported by one affidavit of Mr Tate sworn on 8 March 2012, confirming the final payment claim had been made as pleaded, had not been paid pursuant to the contract, and he claimed interest. The only affidavit filed by the defendant in relation to 3 of 2012 concerned the extension of time. 26 No issue arises between the plaintiff and the defendant as to the applicability of Australian Standard 2124 of 1992 or the dates of the significant events in either action. 27 The defendant filed a defence and counterclaim in 4 of 2011 on 29 September 2011. By that pleading, the defendant denies that the plaintiff's claim was submitted in accordance with clause 42.1 of the contract, in that it failed to support the claim with evidence of the amount due to the plaintiff as required and therefore was not a valid progress claim under the contract. The defendant admits the payment to the plaintiff of $17,399.04 on 10 February 2011 and relies upon the payment certificate issued by the Superintendent on 7 February 2011, which it is asserted, assessed the plaintiff's claim in that sum. That assessment was that the plaintiff was not entitled to damages for the EOT 5, or the delay damages in EOT 6 or to a further $2,800 in relation to landscaping. It also claims that the defendant was entitled to liquidated damages at the rate of $650 per day from 14 June 2010 to 22 November 2010. There is a counterclaim in the sum of $104,000 as liquidated damages and set-off the same sum, if the defendant is liable to the plaintiff. 28 No defence, nor affidavit on the merits of the summary judgment application, was filed in 3 of 2012.
Chronology 29 It is convenient therefore now to set out the significant dates in relation to these matters: (Page 10)
| 30/3/2009 | Contract | | 14/06/2010 | Contractual date for completion | | 20/11/2010 | Plaintiff issues claim # 21 | | 22/11/2010 | Practical completion | | 18/12/2010 | Defendant to have paid on # 21 Dispute | | 22/12/2010 | Superintendent issues certificate # 22 | | 10/01/2011 | Certificate # 22 posted to plaintiff | | 15/01/2011 | Last date for application for adjudication | | 25/01/2011 | Plaintiff applied for adjudication | | 02/02/2011 | Superintendent issues contract adjustment | | 07/02/2011 | Superintendent issues # 22 revised | | 23/02/2011 | Adjudicate or dismisses claim | | 24/02/2011 | Letter of demand on # 21 | | 08/03/2011 | Action 4 of 2011 filed | | 29/11/2011 | Plaintiff issues final claim for payment | | 23/01/2012 | Plaintiff files 3 of 2012 | | 11/04/2012 | Superintendent issues final certificate |
The issues - 4 of 2011 30 The following issues are: 1. Was claim number 21 validly made; was it supported by evidence as required under the contract? 2. If it was a valid claim, is the plaintiff entitled to summary judgment, based upon it, after the expiry of 28 days, if no certificate issued in that time? (Page 11)
31 Behind all this, it is clear that there was an ongoing significant dispute between the plaintiff and the defendant concerning the delay caused by the installation of windows at the premises under construction, and whether Fortress had been engaged as a contractor for the plaintiff or for the defendant in respect of those works. That issue had not been resolved by any consensus, or any form of adjudication, as at 20 November 2010.
Summary judgment 32 Order 14 of the Rules of the Supreme Court governs applications for summary judgment. The power to order summary or final judgment is one that should be exercised with great care, and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99. There is a legal burden upon an applicant to establish effectively that there is no defence to his action. A respondent may bear an evidential burden in that regard. An application may require extensive argument and may not be simple. The test is whether, after the matter has been explained to the court, there is a real uncertainty (as to the plaintiff's right to judgment) without further argument or further investigation of the facts: Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 322, 335. If there is uncertainty there must be a trial. If the facts which are established are inconclusive, or if it is not possible to say on the whole of the material that there is no issue to be tried, there should be leave to defend.
Discussion - 4 of 2011 33 Clause 42.1 of the Australian Standard applicable to this contract provides that at times specified, the contractor shall deliver to the Superintendent claims for payment supported by evidence of the amount due to the contractor and such information as the Superintendent may reasonably require: 42.1 [1] 34 The issue raised by the defendant was that the progress claim 21 was not fully supported by evidence as required under the contract. Whether a claim is supported by evidence, or adequately so supported according to the contract is a matter of fact. It was argued that no such evidence was (Page 12)
required due to the fact that this was a fixed sum contract and the Superintendent already, at the time of claim 21, had all the necessary information. 35 The requirement that payment claims be supported by evidence and information is closely followed in cl 42 by the provision that, within 14 days after receipt of a claim for payment, the Superintendent shall issue a payment certificate. There is clearly a relationship and a connection between the provision of evidence and information and the issue of a payment certificate. The obligation to issue a certificate is subject to a condition precedent that the claim was supported with evidence: Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2003] NSWCA 4 (Ipp J). 36 The plaintiff relies upon the next provision for payment: that 14 days after the receipt of a claim for payment the Superintendent shall issue a payment certificate stating the amount which, in the opinion of the Superintendent, is to be paid. Further, subject to the provisions of the contract, the principal has to pay the contractor the amount claimed, if no payment certificate has been issued within 28 days. 37 Such payment does not prejudice the parties' rights to dispute any matter under clause 47, nor does it evidence the value of the work done or amount to an admission or evidence that work has been done satisfactorily. 38 The context here is that the progress payment provisions and certificates are designed to ensure that during the life of a contract the contractor is paid from time to time for work already done, notwithstanding there may be issues about matters arising from it, so that the project may efficiently continue. 39 The obligation to make a payment of the contractor's claim when no payment certificate has been issued is, under clause 42.1, expressed to be subject to the provisions of the contract. Therefore, in my view, under the contract the validity of progress claim 21 depends upon whether or not there was a provision of evidence or information required by the Superintendent such as to comply with the contractual requirements. If the contractual requirements are complied with, the claim is a valid claim and the following provision concerning payment of it would apply. If the claim did not comply with the contractual provisions it would not be a valid claim and accordingly payment would not be required pursuant to the contract on account of the claim. (Page 13)
40 In Brewarrina Shire Council v Beckhaus Civil Pty Ltd Ipp J discussed the precise nature of the condition and found it might be validated in more than one manner, either as a non-promissory condition to which a Superintendent's obligation to issue a payment certificate is subject, or as an obligation imposed on the contractor the performance of which conditioned the Superintendent's obligation to issue a payment certificate. Ipp J concluded at [42] that the obligation was a condition precedent and without the requisite evidence and information supporting the claim the Superintendent was not obliged to issue a payment certificate in response to it. 41 Ipp J further said that the evidence and information in question must be delivered at the time each payment is delivered, referring to the requirement for claims to be delivered at times for payment claims stated in the annexure. In context, Ipp J was referring to information subsequently delivered. The objective is that the Superintendent have the information, prior to making an assessment of the claim. 42 Mr Tate said that there was no request for additional information from the Superintendent in relation to claim 21 and that subsequently, out of time, the Superintendent issued certificate 22. There is no dispute as to that fact. It is apparent from the correspondence annexed to Mr Tate's affidavit of 21 February 2012, that there was prior correspondence concerning the specific calculation of EOT 5 and EOT 6. Once possibility might therefore be, on the evidence, that it could be concluded that the Superintendent had the necessary information prior to the claim being lodged and did not reasonably require any further information. 43 There is no evidence from the Superintendent or from any other source as to the basis upon which he made his later certification, or the reason why he did not make the certification within time. The letter accompanying certificate 22, from Mr O'Reilly the project architect at Wilcox & Associates, refers to specific items, including shower screens, mirrors and landscaping, which otherwise do not figure in the evidence filed. He refers to EOT 5, stating it is not approved (as letter previously emailed to Mr Rolfe on 1 October 2010), and EOT 6 as being (not approved as per previous discussions and correspondence). 44 In my view, a number of factual issues arise from those assertions, which are relevant to the question of whether the claim was supported by evidence. Mr Rolfe does not depose to any correspondence or discussion with Mr O'Reilly concerning a letter of 1 October 2010, and EOT 6 does not concern Fortress but the weather. (Page 14)
45 Further, subsequent to Mr O'Reilly's response, the contract adjustment # 15 claims liquidated damages in the sum of $94,545, as previously noted, and progress payment certificate 22 (revised), issued shortly thereafter, incorporates this adjustment. Two points have been made in relation to that. Firstly, that the contract does not provide for the architect to issue variations for liquidated damages and, secondly, the contract provides for revised certificates where there is an error in the certificate that has been issued. 46 These observations illustrate the uncertainties on the present evidence as to whether, in fact, the Superintendent had in his possession all relevant information prior to or at the lodging of the claim or not. 47 Whether or not the information supplied to the Superintendent was within the terms of the clause is a contested factual matter requiring an assessment of all the evidence and a judgment whether under the contract the condition precedent was satisfied. The plaintiff's claim depends upon the validity of claim 21. 48 It is inappropriate to consider the further questions posed as they cannot arise until the initial validity of the claim is determined. To do so would be to replicate the problem which occurred in Southern Region Pty Ltd v Minster for Police and Emergency Services, for and on behalf of the State of Victoria [2003] VSCA 105, when the court at first instance purported to determine legal issues going beyond the issue raised at summary judgment stage.
Conclusion on 4 of 2011 49 For the reasons stated above, there is an issue of fact to be determined which conditions the validity of the claim made by the plaintiff. I am not persuaded that there is no issue which ought to be tried in this case. Accordingly, the appeal will be dismissed.
Claim No 3 of 2012 50 The chronology and background relevant to this application is set out above. The plaintiff claims payment pursuant to the contract upon its final claim submitted to the superintendent on 29 November 2011. The facts are supported by the affidavit of Mr Barry Tate sworn 8 March 2012. It is not disputed that the claim was lodged on the date specified, nor is it disputed that that claim was not paid by the defendant. It is common ground that a purported final certificate was issued by the (Page 15)
superintendant on 11 April 2012. That fact is not disputed either, its effect however, is contested. 51 In relation to the final payment the contract provides: 42.7 Final Payment Claim Within 28 days after the expiration of the Defects Liability Period, or where there is more than one, the last to expire, the Contractor shall lodge with the Superintendent a final payment claim and endorse it 'Final Payment Claim'. The Contractor shall include in that claim all moneys which the Contractor considers to be due from the Principal under or arising out of the Contract or any alleged breach thereof. After the expiration of the period for lodging a Final Payment Claim, any claim which the Contractor could have made against the Principal and has not been made shall be barred. 42.8 Final Certificate Within 14 days after the receipt of the Contractor's Final Payment Claim or, where the Contractor fails to lodge such a claim, the expiration of the period specified in Cause 42.7 for the lodgement of the Final Payment Claim by the Contractor, the Superintendent shall issue to the Contractor and to the Principal a final payment certificate endorsed 'Final Certificate'. In the certificate the Superintendent shall certify the amount which in the Superintendent's opinion is finally due from the Principal to the Contractor or from the Contractor to the Principal under or arising out of the Contract or any alleged breach thereof. Unless either party, either before the Final Certificate has been issued or not later than 15 days after the issue thereof serves a notice of dispute under Clause 47, the Final Certificate shall be evidence in any proceedings of whatsoever nature and whether under the Contract or otherwise between the parties arising out of the Contract, that the Works have been completed in accordance with the terms of the Contract and that any necessary effect has been given to all of the terms of the Contract which require additions or deductions to be made from the Contract Sum, except in the case of – (a) fraud, dishonesty or fraudulent concealment …; (b) any defect (including omission) in the Works or any part thereof which was not apparent at the end of the Defects Liability Period, or which would not have been disclosed upon reasonable inspection at the time of the issue of the Final Certificate; or (Page 16)
52 There follow other provisions for interest, set-offs and recourse for unpaid moneys, which are not presently material. 53 The provisions in 42.7 and 42.8 are cumulative upon the provisions commencing in 42.1 concerning payment claims and certificates. The opening words of par 42.1 are: 'At the times for payment claims stated in the Annexure and upon issue of a Certificate of Practical Completion and within the time prescribed by Clause 42.7, the Contractor shall …'. 54 There is no factual dispute as to the circumstances that, pursuant to the contract, the plaintiff issued a final payment claim, nor that this was within the period prescribed by the contract for the issuing of such a claim, namely within 28 days of the expiration of the defects liability period. Nor is it in dispute that no certificate was issued within the 14 days provided in s 42.8. Neither was any certificate issued by the superintendent within the period specified in 42.7, where there is no final payment claim lodged. 55 The plaintiff claims the defendant must pay on the final claim lodged by the plaintiff. The defendant says that the claim is overridden by the final certificate eventually issued by the superintendant. The defendant also raised but did not pursue the fact that the final payment claim was not endorsed precisely as such. The defendant relies upon the decision in Southern Region Pty Ltd v State of Victoria (No 3) [2001] VSC 436; Southern Region Pty Ltd v Minister for Police and Emergency Services, for and on behalf of the State of Victoria (on appeal). 56 The question arising on this appeal is the interpretation of the contract in circumstances where the facts are not in dispute. The question is whether an apparently valid claim for final payment is defeated by a subsequent issue of a purported final certificate, outside the timeline provided in cl 42 of the contract and subsequent to the issuing of a writ seeking payment pursuant to the contract. (Page 17)
Discussion 57 Clearly, cl 42 of the contract applies to final payment claims, and the provisions in 42.1 require that within the time provided by 42.7 the contractor shall deliver to the superintendent a payment claim, that is 28 days after the expiration of the defects liability period. There does not appear to be any dispute but that this occurred. There is no explanation why there was no response at all to the claim for payment within the time period prescribed by the contract. Pursuant to the contract, payment was due upon the final payment claim (under the fourth paragraph of 42.1) within 28 days after receipt, if no final payment certificate had been issued. At the time of the expiry of 28 days from the delivery of the claim, no certificate had been issued and thus by the timeline established in the contract, the moneys became due and payable. The question therefore is the effect of a late final certificate purportedly issued by the superintendent on 11 April 2012. The defendant relies upon dicta at first instance in the Southern Region case to support its contention that the late final certificate determines the obligation between the parties. 58 It is apposite to note here that at the time of the final claim, litigation was pending between the parties in relation to claim 21. Claim 21 had clearly been the last progress payment claim prior to practical completion. The final claim of the plaintiff was for the balance of the retention monies held by the defendant under the contract. The same underlying issue in relation to delay caused by Fortress is apparent in the final purported certificate. 59 Southern Region was also an application for summary judgment. Byrne J concluded at first instance that there was a triable issue and that the application for summary judgment should fail. The court went on to consider further questions beyond the issue raised on the summary judgment application, including the effect of a late certificate. Having refrained from expressing any view upon subsequent issues originally, upon reconsidering some further evidence, the court dealt with the effect of the final certificate, concluding it must be valid and distinguishing authority on the point. On appeal the Court of Appeal Victoria, noted that difficulty arose because the lower court considered questions on the proper construction of the contract beyond those pertinent to the summary judgment. The Court of Appeal said the judge went beyond what was open to him on the then application. The Court of Appeal expressed no opinion as to whether or not the judge was correct in the construction he placed upon the terms of the contract. What had been (Page 18)
said at first instance was obiter in view of the finding of there being a triable issue. 60 Byrne J had also expressed the view with which I do agree, that the procedures for certification in the contract, both progressive and final, in cl 42.1, carry with them serious consequences for the parties. That led to a conclusion that a strict approach should be taken to their construction and that those considerations had even more force where the procedure was for a final certificate, due to the consequences flowing from that certificate. Thus, a superintendent has limited time under the contract process payment claims. Under the contract, where claims and certificates relate to progress payments the outcome is in context provisional in nature. There may be subsequent adjustments. 61 In Daysea Pty Ltd v Watpac Australia Pty Ltd [2001] QCA 49 the Court of Appeal in Queensland considered Australian Standard 4300 of 1995, which is in similar terms to the current contract. The court held that a late certificate was ineffective. In Southern Region, the court at first instance came to a contrary view drawing distinctions between progress certificates and final certificates, such as the provisional nature of progress payment procedures and the further consequences that flow from a final certificate. Notwithstanding the terminology in cl 42.1 and cl 42.8 and the reasoning in Daysea, Byrne J concluded that a late final certificate was effective. He placed weight upon other consequences provided in cl 42.7 upon the issuance of the final certificate, such as the barring of further claims. With respect, I do not agree. 62 I do not consider myself bound to follow the reasoning of Byrne J. In my view, the contract governs the obligations of the parties in relation to the provision of claims and certificates in accordance with a strict timeline. This involves actions which include obligations of the Superintendent. The consequences to the parties of these claims and certificates are significant and a strict interpretation of those timelines and requirements is appropriate. Once the liability to pay on a claim has arisen, the plaintiff has a right to enforce that payment unless the dispute mechanism has been invoked. 63 In this final payment claim, the dispute resolution mechanism was not invoked by the defendant, and a writ was issued by the plaintiff. It appears that the defendant simply ignored the final payment claim. Under the contract, the superintendent had an obligation to issue his final certificate in response to the final payment claim within the time limit provided. Alternatively he might issue a final certificate of his own (Page 19)
within a specified time period, if he did not consider that a final payment claim had been made, both of which obligations are provided in clear terms in cl 42.8. There is simply no provision in the terms of the contract for the superintendent to issue a final payment certificate at any other time save as provided in cl 42.8. The plaintiff contractor was obliged under cl 42.7 to make all claims for monies which the contractor considered to be due, in the final payment claim, or be barred from doing so. That was done, within the terms of the contract, in this instance. In the face of such clear terms and obligations there is no justification or basis to imply any other term into the contract. It operates effectively by these provisions to detail and determine the obligations to pay at the end of the project. 64 A final certificate may have other consequences, evidential, in relation to the completion of the contract and any additions or deductions to the contract price. It would operate as a bar to claims later made. No issue of that kind arises for decision on these facts. That provision may have the effect of preventing the principal from arguing that the contract was not completed within its terms or that there should be further adjustments, effectively barring counterclaims of that nature. The effects of a certificate on those matters if issued outside the contractual terms does not fall for decision on these facts. The provisions for payment, are clear and are determined by the terms of the contract which require claims to be made within a particular time period and responses to those claims within specific time periods. In my view, the final certificate was not issued within the terms of the contract and has no bearing upon the accrued cause of action that the plaintiff pleads in this matter. 65 I am satisfied that there is no arguable defence on this issue. Accordingly the appeal will be dismissed. 66 I will hear counsel as to the precise form of the orders.
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