Decmil Australia Pty Ltd v Avid Australia Holdings Pty Ltd - [2022] WASC 183

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   DECMIL AUSTRALIA PTY LTD -v- AVID AUSTRALIA HOLDINGS PTY LTD [2022] WASC 183
CORAM:   MASTER SANDERSON
HEARD:   18 MAY 2022
DELIVERED          :   24 MAY 2022
PUBLISHED           :   24 MAY 2022
FILE NO/S:   CIV 2233 of 2021
BETWEEN:   DECMIL AUSTRALIA PTY LTD
Plaintiff
AND
AVID AUSTRALIA HOLDINGS PTY LTD
Defendant

Catchwords:

Practice and procedure - Application for summary judgment - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Judgment for plaintiff

Category: B

Representation:

Counsel:

Plaintiff	:	JE Scovell
Defendant	:	MG Pendlebury

Solicitors:

Plaintiff	:	Tottle Partners
Defendant	:	Summers Legal

Case referred to in decision:

Palaniappan v Westpac Banking Corporation [2016] WASCA 72

MASTER SANDERSON:

This was the plaintiff's application for summary judgment. Rather surprisingly for a straightforward case, there was some argument about the principles applicable to summary judgment. I will briefly deal with the relevant principles. But it is convenient first to outline the facts. In doing so, I am drawing on the plaintiff's statement of claim lodged 20 December 2021.
By an agreement dated 19 October 2020 (Head Contract) between the plaintiff and Robe River Mining Co Pty Ltd (Robe River), the plaintiff agreed to design and construct a laboratory located at the Mesa A Mine Site in the State's northwest. By an agreement dated 13 January 2021 (Mesa A Subcontract) between the plaintiff as contractor and AVRWA as subcontractor, AVRWA agreed to perform and complete the Mesa A project in accordance with the terms of the agreement.
Ordinarily in a contractor/subcontractor relationship, the contract would provide for payment by the contractor to the subcontractor. This agreement did have such a provision but it also contained a provision which contemplated payment by the subcontractor to the contractor. The relevant provision is cl 24.15. I have added cl 24.16 and cl 24.17 for the sake of completeness. They read as follows:
24.15Subject to the provisions of the Subcontract and receipt of a valid tax invoice (if Clause 24.29 is specified in Section B - Subcontract Particulars to be not applicable), where a payment schedule issued by the Contractor:
(a)certifies an amount payable from the Contractor to the Subcontractor, the Contractor must, within the time specified in Section B - Subcontract Particulars, pay to the Subcontractor an amount not less than the amount shown on the payment schedule; or
(b)certifies an amount payable from the Subcontractor to the Contractor, the Subcontractor must pay to the Contractor an amount not less than the amount shown on the payment schedule within 10 Business Days.
24.16Without limiting Clause 24.14, the Contractor may issue a revised payment schedule at any time correcting any omission or error discovered in any previous payment schedule or modifying any previous payment schedule issued by it, including as a result of the provision of information under Clause 24.5.
24.17If the Subcontractor fails to make a progress claim in accordance with the Subcontract, the Contractor may nevertheless issue a payment schedule under Clause 24.14 but is not obliged to do so for the benefit of the Subcontractor.
So far as the regime for the contractor claiming from the subcontractor is concerned, the position could not be clearer. If the contractor issues an invoice specifying an amount it says the contractor owes, then 10 days after the issue of that invoice, payment is due. There is no qualification on that obligation - at least not in cl 2.15. Nor is there any qualification in the dispute resolution procedure. I will deal with this issue later in these reasons but it is important to note that if the subcontractor disputes the invoice issued by the contractor, there is no provision of the contract which would defer payment until resolution of the dispute.
Pursuant to the Mesa A Subcontract, the defendant provided a guarantee and indemnity by deed dated 15 January 2021. This guarantee is entitled 'Annexure J - Parent Company Guarantee' (Mesa A PCG). Clause 1 of that guarantee reads as follows:
1.The Guarantor absolutely, irrevocably and unconditionally:
a.guarantees to the Contractor the full and punctual performance and observance of all the Subcontractor's obligations expressed or implied in or under the Contract; and
b.as an independent principal obligation, indemnifies the Contractor against any and all liability, loss, damage, cost or expense suffered or incurred by the Contractor and all proceedings or claims made against the Contractor as a result of:
i.a default by the Subcontractor under the Contract;
ii.any express or implied obligation of the Subcontractor under the Contract being unenforceable; or
iii.the Subcontractor going into liquidation (except for the purpose of amalgamation or reconstruction) or making any arrangements or compromise with its creditors.
On 17 September 2021, pursuant to the Mesa A Subcontract, the plaintiff issued AVRWA a payment schedule certifying that an amount of $957,572.66 was payable by AVRWA to the plaintiff (Mesa A amount). AVRWA failed to pay the plaintiff the Mesa A amount or any part of it. By letters of demand to the defendant dated 11 October 2021 and 18 October 2021, the plaintiff demanded the defendant pay the plaintiff the Mesa A amount pursuant to the Mesa A PCG. The defendant has failed to pay the amount demanded or any part of it.
The plaintiff also pleads another contract and subcontract entered into between the plaintiff and AVRWA. These agreements are defined as the Mesa J Head Contract and the Mesa J Subcontract. Once again, a guarantee was provided by the defendant and that is defined as the Mesa J PCG. A similar situation arose where the plaintiff made demand of AVRWA based on an invoice for an amount of $358,538.63. This is defined as the Mesa J amount. Once again, when AVRWA failed to pay, demand was made pursuant to the Mesa J PCG. The defendant has failed to pay the amount of the demand.
The only other clause which is relevant is cl 35 of the Mesa A Subcontract which deals with dispute resolution. It is only relevant to the extent that it does not provide any grounds for a stay or deferral of a payment pending resolution of the dispute. For the sake of completeness, I will quote the clause in full.
35.DISPUTE RESOLUTION
DISPUTE NOTICE
35.1If a Dispute arises then either Party may serve the other Party with a Dispute Notice.
CONFERRAL
35.2Within 5 Business Days of receipt of a Dispute Notice, representatives of the Parties having authority to bind the Parties shall confer in an attempt to resolve the Dispute, which conferral shall be confidential and without prejudice.
35.3If a resolution or method of resolution has not been agreed within 15 Business Days of the service of the Dispute Notice, the General Manager (or their equivalent) of the Parties shall confer for the same purpose as the Parties' representatives, which conferral shall be confidential and without prejudice.
ARBITRATION
35.4If the Dispute is not resolved within 35 days of the service of the Dispute Notice, then either Party may submit the Dispute to arbitration by giving written notice to the other Party (Arbitration Notice).
35.5The arbitrator shall be the person appointed by the then current Chair of the Resolution Institute (WA Chapter) .
35.6The arbitration shall be conducted:
(a) by a single arbitrator;
(b) in Perth, Western Australia; and
(c)in accordance with the then current Resolution Institute Arbitration Rules.
35.7Notwithstanding the existence of a dispute, the Subcontractor shall continue to carry out the work under the Subcontract.
35.8Neither Party may commence legal proceedings (except for urgent interlocutory relief) in relation to any Dispute unless the procedure referred to in this Clause 35 has been strictly complied with.
The plaintiff's position is very simple. It says it issued invoices under the two subcontracts as it was entitled to do. Payment of those invoices had to be made within 10 days of the issue date - there is nothing in the subcontract allowing for deferral of payment if a dispute arose. The defendant guaranteed the subcontractor's obligation and the terms of the guarantee are wide enough to allow the plaintiff to seek payment from the defendant of the amounts of the invoices which AVRWA has not paid. The plaintiff says the defendant has no defence to its claim.
Before dealing with the defendant's position, I should deal briefly with the law in relation to summary judgment. The overarching principle is that summary judgment ought be granted only in the clearest of cases. What O 14 of the Rules of the Supreme Court 1971 (WA) (the Rules) requires of a plaintiff is that an affidavit is filed verifying the contents of the statement of claim and stating a belief there is no defence to the claim. Strictly speaking, it is unnecessary for a plaintiff to put before the court the evidence supporting the material facts pleaded in the statement of claim. That is however, routinely done and was done in this case. In this jurisdiction, that practice is now so firmly entrenched that it is probably safe to say provision of the relevant evidence which underpins the statement of claim, is a requirement if summary judgment is to be granted.
Once the plaintiff has complied with the requirements of O 14 r 2 of the Rule, the evidentiary onus falls on the defendant to show there is a serious question to be tried. The version of the facts most favourable to the defendant must be assumed. But the defendant must produce some material which demonstrates there is a defence to the claim - to use a rather quaint phrase the defendant must 'condescend upon particulars'. It is not for the defendant to produce evidence which shows it will successfully defend the claim. Rather, it must show a plausible contention which requires further inquiry.
In this case, AVRWA is in liquidation. This has complicated the defendant's attempts to obtain copies of relevant documents which AVRWA would have relied upon in disputing the plaintiff's right to payment of the invoice amounts. It is appropriate to make an assumption that not only would AVRWA have disputed the invoice amounts, but that it would have been successful in that claim. In his submissions, counsel for the plaintiff did not go so far as to concede the application ought be approached on the basis AVRWA would be successful in the dispute resolution process. He conceded only that the matter had to be approached on the basis AVRWA had an arguable case. In my view, it is necessary to go further and I have approached the matter on the basis that AVRWA has a good claim and in an arbitration it would have succeeded in overturning both invoices.
It was the defendant's position that absent an arguable liability on the part of AVRWA, there would be no finding of an arguable liability on the part of the defendant. It was submitted that the meaning and effect of the express terms of the subcontract was not clear and unambiguous and there was not the requisite degree of certainty to allow the entry of summary judgment.
Dealing with the subcontracts, counsel for the defendant in his written submissions, put the position this way:
8.In the relevant subcontracts:
(a)No primacy is given to any of the express provisions of the subcontracts that are relied upon by the Plaintiff. To the extent there is any provision dealing with the obligation to pay monies, it is not said to have paramountcy over the other terms of the subcontract.
(b)In particular, there is no provision ruling out or fettering the entitlement of the subcontractor to avail itself of other provisions in the agreement, including those which provide a method for the determination of disputes (such as the correctness of payment schedules issued by the contractor (Plaintiff)).
(c)It would be internally inconsistent for the subcontract to have a detailed process for determining disputes while at the same time the subcontractor is (without clear wording) denied from availing itself of that process in respect of (clearly) an important subject matter.
It was counsel's submission that interpreting the provisions of the subcontracts in a way which required payment of the invoices prior to any dispute being resolved was commercially unreasonable and could not have been the aim of the contract. Counsel for the plaintiff responded by saying that the provision requiring payment prior to the dispute resolution procedure being concluded was a 'pay to play' provision. In fact, suspension clauses (to use a more technical description) are not uncommon, particularly in guarantees. The effect of such clauses was considered by the Court of Appeal in Palaniappan v Westpac Banking Corporation [2016] WASCA 72. The relevant clause under consideration in that appeal was as follows:
41.Clause 9 provided:
As long as any of the guaranteed money remains unpaid, you may not, without our consent:
(a)reduce your liability under this guarantee and indemnity by claiming that you or the customer or any other person has a right of set‑off or counterclaim against us; or
(b) exercise any legal rights to claim to be entitled to the benefit of another guarantee, indemnity, mortgage, charge or other security given in connection with the guaranteed money or any other amount payable under this guarantee and indemnity …; or
(c)claim an amount from the customer, or another guarantor of the customer's obligations, under a right of indemnity; or
(d)claim an amount in the insolvency of the customer or another guarantor of the guaranteed money (including a person who has signed this guarantee and indemnity with you).
The question the court had to consider was whether or not a defence could be run despite cl 9 of the guarantee. The court assumed the appellant had a good cause of action. Against that background, the court concluded the suspension clause was effective and enforceable. That clause was more draconian in its effect than the terms of the contract in this case. What is required under the terms of the contract is payment of the invoice within a timeframe. If the invoice is not paid, the subcontractor is not precluded from initiating the dispute resolution procedure. To that extent, there is no suspension of the subcontractor's rights. Nor would the defendant as guarantor be prohibiting from standing in the shoes of the subcontractor and pursuing the subcontractor's rights. Accordingly, there is no basis upon which it could be said that the regime found in the subcontract is in some way commercially improper.
The further argument put by the defendant was that it was possible to imply a term into the subcontracts that if the dispute resolution procedure was initiated, there would be a stay of the obligation of the subcontractor to make payment. With respect, there is no basis upon which such a term could be implied. Apart from anything else, it would run counter to the clear terms of the contract itself. Nor would it be necessary to give efficacy to the contract. The 'pay to play' provision of the contract is a perfectly sensible commercial arrangement.
That said, I would accept as was submitted by the defendant, that it is possible to imply terms into the subcontracts. For instance, if the claim the subject of the invoice was blatantly fraudulent to the point where on even a cursory examination of the documents, it was clear no money was owed by the subcontractor to the contractor, then it would be possible to imply a term to the effect that fraudulent claims would not be made. But there is no suggestion this is such a case. In reaching that conclusion, I am mindful of the difficulties the defendant has with respect to obtaining copies of the relevant documents and assessing any liability of ARVWA. In the circumstances, every consideration has to be extended to the defendant. But in the situation where there is nothing at all to suggest the plaintiff's invoice is fraudulent or issued pursuant to an obvious mistake, the defendant is, with respect, doing nothing more than speculating. Some evidence to support its position would have been required.
This is a clear case where the plaintiff is entitled to summary judgment. There will be judgment for the plaintiff in the amount set out in the statement of claim. The parties should confer and lodge an agreed minute to reflect these reasons. The costs of the application and costs of the action should be paid by the defendant. If no agreement can be reached as to the terms of the order, each party ought file a minute of orders they propose within seven days of the publication of these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AH
Associate to Master Sanderson
24 MAY 2022