Devaugh Pty Ltd v DOGGART
[2004] WASC 270
DEVAUGH PTY LTD -v- DOGGART & ANOR [2004] WASC 270
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2004] WASC 270 | |
| Case No: | CIV:1881/2004 | 22 NOVEMBER 2004 | |
| Coram: | MASTER SANDERSON | 15/12/04 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Subsequent certificate not properly issued Judgment for plaintiff | ||
| A | |||
| PDF Version |
| Parties: | DEVAUGH PTY LTD (ACN 008 792 265) RICHARD CLIVE DOGGART GERALDINE MARGARET REILLY |
Catchwords: | Building contract Architect certifying progress certificates Replacement architect concluding certificate not properly issued Further certificate issued purporting to reduce amount payable Whether contract permits issue of subsequent certificate |
Legislation: | Nil |
Case References: | Daysea Pty Ltd v Watpac Australia Pty Ltd [2001] QCA 49 Thiess Constructions Pty Ltd v Pavements & Excavations Pty Ltd (2000) 16 BCL 42 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 Hunt & Anor v Knabe (No 2) (1992) 8 WAR 96 L U Simon Builders Pty Ltd v H D Fowles & Ors [1992] 2 VR 181 Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109 Sabemo Pty Ltd v de Groot (1992) 8 BCL 132 Westwind Air Charter Pty Ltd v Hawker de Havilland Ltd (1990) 3 WAR 71 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
RICHARD CLIVE DOGGART
GERALDINE MARGARET REILLY
Defendants
Catchwords:
Building contract - Architect certifying progress certificates - Replacement architect concluding certificate not properly issued - Further certificate issued purporting to reduce amount payable - Whether contract permits issue of subsequent certificate
Legislation:
Nil
Result:
Subsequent certificate not properly issued
Judgment for plaintiff
(Page 2)
Category: A
Representation:
Counsel:
Plaintiff : Mr J D Finlay
Defendants : Mr L E James
Solicitors:
Plaintiff : J D Finlay & Co
Defendants : Kott Gunning
Case(s) referred to in judgment(s):
Daysea Pty Ltd v Watpac Australia Pty Ltd [2001] QCA 49
Thiess Constructions Pty Ltd v Pavements & Excavations Pty Ltd (2000) 16 BCL 42
Case(s) also cited:
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Hunt & Anor v Knabe (No 2) (1992) 8 WAR 96
L U Simon Builders Pty Ltd v H D Fowles & Ors [1992] 2 VR 181
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
Sabemo Pty Ltd v de Groot (1992) 8 BCL 132
Westwind Air Charter Pty Ltd v Hawker de Havilland Ltd (1990) 3 WAR 71
(Page 3)
1 MASTER SANDERSON: This is the plaintiff's application for summary judgment. At the commencement of the hearing, counsel for the plaintiff sought to amend the amount of the claim to $166,826.03. There being no objection, leave was given to make that amendment. Although this application is relatively straightforward, it involves a point of principle of wide general application to building contracts. While I am conscious of the importance of the point under consideration, I am satisfied that it is a matter which can be disposed of in a summary judgment application.
2 The facts can be briefly summarised. The defendants are registered proprietors of a property in Spencer Road, Busselton. The plaintiff carries on business as a builder. On 30 October 2002 the plaintiff agreed to construct a residence, amenities building and chalet on the defendants' land for the sum of $2,115,672.90. The contract was in a standard form described as a Building Works Contract - JCC-D1994. A copy of the contract appears as annexure "MJW1" to the affidavit of Mervyn John Waugh, sworn 15 July 2004. Section 5 of that contract deals with "administration". Clause 5.01 appoints the owner's architect as the owner's agent. By cl 5.02 the architect is given authority to do certain things on behalf of the owner. Clause 5.02 is then in the following terms:
"ARCHITECTS AUTHORITY
The Proprietor and the Builder expressly agree:
5.02.01 …
5.02.02 That the Architect is hereby authorised to act as the assessor, valuer or certifier in respect of the following matters:
…
.09 progress certificates (Clauses 10.02 and 10.06);
…
5.02.03 Either the Proprietor or the Builder may refer to dispute resolution under Section 13 a decision made by the Architect as to any of the matters referred to in paragraph 5.02.02."
3 By cl 6.10 of the contract, the architect could instruct variations as defined in cl 1.02.11 of the contract and the plaintiff was required to carry out all such variations subject to the terms and conditions contained in
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- cl 6.10 of the contract. By cl 10.16 of the contract, all variations instructed or sanctioned by the architect would be valued according to the provisions of cl 10.16 of the contract, which included, inter alia, agreement by the plaintiff and the defendants as to the value of any variation.
4 By cl 10.01 of the contract, the plaintiff would submit to the architect claims for progress payments showing inter alia, the plaintiff's valuation of the work executed, including variations completed or partly completed. By cl 10.02 of the contract the architect was required within 14 days of the receipt of the progress claim made by the plaintiff in accordance with cl 10.01, inter alia, to assess the contract value of the work executed, including variations completed or partly completed, and issue a progress certificate to the plaintiff showing the architect's assessment in accordance with cl 10.02.
5 Clause 10.07 has the subheading "Progress Payments". It is in the following terms:
"On the Builder presenting to the Proprietor any progress certificate issued under either of Clauses 10.02 and 10.06, the Builder shall be paid by the Proprietor the amount specified by that certificate within the period stated in Item L of this Appendix. Notwithstanding the foregoing provisions of this Clause 10.07 and of any other provisions of this Agreement, the legislation of the State or Territory in which the Site is situated requires the Builder to provide evidence of payment of wages due to his employees on the Works on or before payment of any amount due to the Builder, the Proprietor shall not be obliged nor liable to pay the amount specified in any progress certificate unless and until the Builder complies with such legislation as it affects or applies to payment of the amount the subject of that progress certificate."
6 By cl 10.08 of the contract, should the defendants fail to pay any amount of any progress certificate as provided by cl 10.07, then the plaintiff is entitled to interest at the rate of 5 per cent over the 90 day Commonwealth Bank of Australia bill rate.
7 Pursuant to the terms of the contract, the defendants appointed one Robert Nicholson ("Mr Nicholson") as the architect, for the purposes of the contract. The plaintiffs commenced carrying out works on the land in February 2003. From time to time the architect instructed the plaintiff to
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- carry out variations within the terms of the contract. By instruction in writing dated 19 September 2003, the architect, pursuant to cl 6.10 of the contract, instructed the plaintiff to carry out additional work, namely to construct an additional chalet on the land. This additional work is defined in the statement of claim (par 8) as "the Variation". It is pleaded that the value of the Variation was agreed between representatives of the plaintiff and the defendant at $621,500.
8 On 16 April 2004 the plaintiff submitted a claim for a progress payment to the architect in an amount of $178,006.77. By certificate dated that same day the architect certified by certificate 13(a) the value of the work performed pursuant to the Variation was $135,711.69. By certificate 13(b) the architect certified that the value of the work performed as part of the works was $42,295.09.
9 On 6 May 2004 the plaintiff submitted a claim for progress payments in an amount of $319,483.60. By certificate 14(a), the architect certified a value for work performed pursuant to the Variation in an amount of $206,338. By certificate 14(b) the architect certified a value for the work performed as part of the works at $113,145.60.
10 The total amount certified by the architect then, pursuant to certificates 13(a), 13(b), 14(a) and 14(b) was $497,490.38. Between 29 April 2004 and 5 July 2004, the defendants paid the plaintiff $183,006.98. That left a balance of $314,483.60. As I have mentioned above, further payments have been made by the defendants to the plaintiff since the issue of these proceedings. The amount now outstanding is $166,826.03. The plaintiff says it is entitled to judgment for that amount.
11 Some time prior to September 2004, Mr Robert Hart ("Mr Hart") replaced Mr Nicholson as the architect. Mr Hart has sworn an affidavit dated 5 October 2004 in opposition to this application. It seems after his appointment Mr Hart reviewed the progress certificates issued by Mr Nicholson when he was architect. As a consequence of that review, Mr Hart determined that the plaintiff had overcharged the defendants in an amount of $173,510.93. He then issued what is termed certificate number 16. A copy of that certificate appears as annexure "RH4" to Mr Hart's affidavit. It specifies an amount payable to the contractor (the plaintiff) of "Minus One Hundred and Seventy Three Thousand, Five Hundred & Ten Dollars & Ninety Three Cents". Based upon that certificate the defendants say that they are not indebted to the plaintiff and the application for judgment must fail.
(Page 6)
12 For its part, the plaintiff does not accept that there is any basis at all upon which the amount it has charged for the work that it has undertaken can properly be reduced. In other words, the plaintiff rejects any argument that it has overcharged the defendants. However, for the purposes of this application, it accepts that there is a genuine dispute about this issue. But it says that even allowing for that genuine dispute it is entitled to payment on the progress certificates pursuant to the provisions of the contract.
13 The plaintiff says that the purported certificate, certificate number 16, is of no effect for three reasons. First, progress certificates are issued pursuant to cl 10.02 of the contract and require a progress claim from the builder pursuant to cl 10.01 before cl 10.02 is triggered. Second, it is said that the only contractual power the architect has to issue other certificates under the contract is a special progress certificate (cl 10.06), semi-final certificates (cl 11.06) or a Final Certificate (cl 11.04). Thirdly, it is said that there is no provision in the contract to issue a replacement certificate for any reason. The plaintiff points to the fact that certification involves a discretionary valuation by the architect and that pursuant to cl 5.08, a replacement architect is bound by the determination of the first architect. This point requires further examination.
14 Clause 5.07 allows for the replacement of the architect during the course of the contract. The clause also requires notification of the replacement to be given to the builder. Clause 5.08 is headed "PREVIOUS DECISIONS BINDING". It is in the following terms:
"Any Architect appointed under the provisions of Clause 5.07 shall be bound in respect of any decision, expression of reasonable satisfaction, consent or instruction given by any former Architect to the same extent as the former Architect would have been bound thereby."
15 In this case, it is the plaintiff's position that the issue by Mr Nicholson of the progress certificates 13(a), 13(b), 14(a) and 14(b) is a discretionary matter. What Mr Hart has purported to do in certificate 16 is reverse the exercise of the discretion by Mr Nicholson. That, it is said, is impermissible.
16 Two further points are made on behalf of the plaintiff. First, it is said that once a certificate is issued by the architect, the architect is functus officio in respect of that certificate and cannot amend or withdraw that particular certificate. There is simply no power in the contract which
(Page 7)
- allows him to do so. Second, it is said that even if certificate 16 was validly issued (and that is disputed), the defendants are obliged to pay the outstanding balance of certificates 13 and 14. That, it is said, is the clear intent of the contract.
17 In reality, the point at issue in this case is whether or not it is open to Mr Hart, in his role as architect, to issue certificate number 16. The authorities make it clear that a principal is bound to make payment of a properly issued progress certificate. There can be no real doubt on that point: see for example Daysea Pty Ltd v Watpac Australia Pty Ltd [2001] QCA 49 per Williams JA at 19. So as the plaintiff is entitled to be paid the amount claimed in progress certificates 13(a), 13(b), 14(a) and 14(b), was it open to Mr Hart to issue certificate number 16?
18 In my view it was not. The issue of such a certificate is not authorised by the contract. The procedure which leads to the issue of progress certificates is clearly set out. One necessary precursor is a claim by the builder. Prior to the issue of certificate 16 there was no claim and consequently there could not be a certificate issued by the architect. But even if a certificate had been issued pursuant to a claim by the builder, it is not permissible for the architect to revisit an earlier decision certifying payment. If a mistake has been made then the principal can refer the matter to arbitration. But nothing in the contract authorises an architect to rectify mistakes, real or perceived, made in a certification in a subsequent certification. That is simply not the structure of the contract.
19 It was argued on behalf of the defendants that where there was an obvious error in the certification, it could be corrected in a subsequent certificate. Particular reference was made to the judgment of Williams J in Thiess Constructions Pty Ltd v Pavements & Excavations Pty Ltd (2000) 16 BCL 42. His Honour said (at 43):
"The contract, as I read it, does not specifically permit an architect to withdraw a certificate once it has been formally presented to the builder and make a substitution. Clearly if an obvious error was made in a certificate, an adjustment could be made in a later certificate; but prima facie the amount of a progress certificate is, in terms of the contract, payable immediately by the proprietor".
20 What is not clear from this paragraph is what his Honour meant when he referred to "an obvious error". If there was, for instance, an arithmetical error in a certificate, such that the certified items were
(Page 8)
- incorrectly totalled and the error was plain on the face of the certificate, then it may be that such an error could be rectified in a later certificate. But such a rectification would be a recognition of practical reality, not a matter authorised by contract. Even accepting, as I repeat the plaintiff has done for the purposes of this application, that Mr Nicholson's certification was in error, payment must be made on the certified claims and no further claim can be issued to reduce the amount owed to the builder. It is simply not permitted by the contract.
21 There should be judgment for the plaintiff in the amount claimed. Subject to hearing from counsel, the plaintiff ought pay the costs of the action and the costs of this application, including reserved costs.
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