Devaugh Pty Ltd v Lamac Developments Pty Ltd - [1999] WASCA 280

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: DEVAUGH PTY LTD -v- LAMAC DEVELOPMENTS PTY LTD [1999] WASCA 280

CORAM: MALCOLM CJ
MURRAY J
PARKER J

HEARD: 2 SEPTEMBER 1999

DELIVERED : 8 DECEMBER 1999

FILE NO/S: FUL 87 of 1999

BETWEEN: DEVAUGH PTY LTD
Appellant
AND
LAMAC DEVELOPMENTS PTY LTD
Respondent

Catchwords:

Contracts - Building subcontract - Construction and interpretation - Remuneration - Progress payments - Main Contractors' Representative to assess claims - No Main Contractors' Representative appointed - Implication of term - Claims to be assessed by main contractor

Contracts - Building subcontract - Remuneration - Progress payments - Provision for subcontractor to be paid claims not assessed within 35 days - Summary judgment for amount of claims not so assessed

Legislation:

Nil

Result:

Appeal dismissed

Representation:

Counsel:

Appellant: Mr C L Zelestis QC & Mr J D Finlay
Respondent: Mr K J Martin QC & Mr G J Dunne

Solicitors:

Appellant: J D Finlay & Co
Respondent: Slee Anderson & Pidgeon

Case(s) referred to in judgment(s):

Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353
Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215
Ashville Investments Ltd v Elmer Contractors Ltd (1987) 37 BLR 55
Australian Can Co Pty Ltd v Levin and Co Pty Ltd [1947] VLR 332
Blue Chip Pty Ltd v Concrete Constructions Group Pty Ltd (1996) 13 BCL 31
Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600
BP Refinery (Westernport) Pty Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Dey v Victorian Railway Commissioners (1979) 78 CLR 62
Dowell Australian v Tridan Contractors [1982] 1 NSWLR 6
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Fillight (Runcorn) v Aqua-lift (1989) 45 BLR 27
Fitzgerald v Masters (1956) 95 CLR 420
Government of Gibraltar v Kenney [1956] 2 QB 410
Graham v Seagoe [1964] 2 Lloyd's Rep 564
Heimann v Commonwealth (1938) 38 SR (NSW) 691
Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
Lewis Construction (Engineering) Pty Ltd v Southern Electrical Authority of Queensland (1976) 50 ALJR 769
Overseas Union Insurance Ltd v AA Mutual International Insurance Co Ltd [1988] 2 Lloyd's Rep 63
Paterson v Chadwick [1974] 2 All ER 772
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221
Roose Industries Ltd v Readymix Concrete Ltd [1974] 2 NZLR 246
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Shepperd v Council of Ryde (1952) 85 CLR 1
Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206
The Damianos [1971] 2 QB 588
The Moorcock (1889) 14 PD 64
Trustees Executors and Agency Co Ltd v Riley [1941] VLR 110
Ulysses Compania Naviera SA v Huntingden Petroleum Services Ltd [1990] 1 Lloyd's Rep 160
Watson v Phipps (1985) 60 ALJR 1
White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 26
Woolf v Collis Removal Service [1948] 1 KB 1

Case(s) also cited:

Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84
Croudace Ltd v The London Borough of Lambeth (1986) 33 BLR 20
Dickinson v Motor Vehicle Insurance Trust (1987) 61 ALJR 553
Drinkwater v Caddyrack Pty Ltd, unreported; SCt of NSW (Young J); No 3970/96; 25 September 1997
General Credits (Finance) Pty Ltd v Shipton Holdings Pty Ltd, unreported; SCt of WA (Brinsden J); Library No 2054; 19 May 1977
Grundt & Ors v The Great Boulder Pty Gold Mines Ltd (1938) 59 CLR 641
Gronow v Gronow (1979) 144 CLR 513
Hickman & Co v Roberts [1913] AC 229
Miles v Bull [1969] 1 QB 258
Mulvena v Commissioner for Railways (1888) 3 QLJ 108
New Zealand Shipping Company v Societe des Ateliers et Chantiers de France (1919) AC 1
Rede v Farr (1817) 6 M&S 121
Roberts v Bury Improvements Commissioners (1870) LR 5 CP 310
Sabemo Pty Ltd v De Groot (1991) 8 BCL 132
Watson v Phipps (1985) 60 ALJR 1

MALCOLM CJ: This is an appeal against an order for summary judgment by Master Bredmeyer dated 25 June 1999 by which the learned Master ordered that the appellant ("Devaugh") pay the respondent ("Lamac") the sum of $737,757.13 and costs to be taxed. The amount of the judgment represented an amount claimed of $675,147.14 together with $62,609.99 interest. These amounts were found to be payable by Devaugh to Lamac pursuant to a sub‑contract entered into by the parties on or about 26 November 1996 ("the sub‑contract"). Devaugh had previously entered into a contract ("the main contract") to construct a hospital and associated facilities to be known as the Bunbury Health Campus. The sub‑contract was a lump sum contract in respect of the plumbing and hydraulic works for which the agreed price was a lump sum of $3,698,419. The works under both the main contract and the sub‑contract had been completed by 15 March 1999.
The amount claimed represented amounts claimed by Lamac in respect of variations to the scope of work under the sub‑contract as directed by Devaugh during the course of the work. The defence to the claim was essentially that the variations had not been directed by a Main Contractor's Representative ("MCR") appointed under the terms of the sub‑contract which incorporated the Australian Standard Sub-Contract Conditions 2545-1993 ("AS 2545"). Lamac's answer to Devaugh's defence was that no such person had been appointed and that Devaugh had itself fulfilled the functions of the MCR during the course of the work until 23 April 1999, after the work had been completed.
The main issues raised on the appeal were whether, in the absence of appointment of an MCR by Devaugh as the Main Contractor, cl 42.1 of AS2545 had no application or whether, in the absence of such an appointment, it was to be implied that Devaugh would itself perform the functions of the MCR under the contract between the parties. The first of these issues was raised by the appellant. The second was raised by the respondent by a Notice of Contention.
The respondent also raised in its Notice a contention that the appellant:
"… was estopped from asserting that the term MCR as used in cl 42 of Australian Standard Sub‑Contract Condition 2545‑1993 when incorporated into the sub‑contract, did not mean (during any period of failure by the Main Contractor to appoint an MCR) the Main Contractor in person."
This second point prompted an application by the respondent to file a minute of an amendment to ground 2 of the grounds of appeal. In the result, I do not find it necessary to deal with either the estoppel issue or the issue raised in the proposed amendment.
The sub‑contract was based on an offer in the form of a quotation by Lamac dated 15 October 1996 in respect of the sub‑contract works which was for a fixed price of $3,698,419. The offer was accepted by letter dated 20 November 1996 from Devaugh to Lamac which also contained "our order to proceed". The letter of acceptance specified that:
"Interim payments will be monthly if requested by the 28th of each month.
Retention: 5 per cent (One half of retention released as Practical and Final Certificate of the Head Contract as certified by the Architect).
Acceptance of this order will be deemed to imply acceptance by the Sub‑contractor of the Conditions of Contract embodied in the latest issue of AS 2545 1993. Any terms or conditions normally imposed by the Sub‑contractor which are at variance with this form will be deemed to be deleted.
Commencement and completion. The Sub‑contractor shall commence the sub‑contract works on 20.11.96 or as requested and shall complete the works of each section thereof in accordance with the programme attached.
The following documentation will form the basis of the sub‑contract, please complete and return the acknowledgement as soon as possible. These documents are either enclosed or should already be in your possession."
The first point to note about the letter of acceptance is the provision for the 5 per cent retention to be released on the basis of certification by the Architect under the Main Contract. There is no reference to the MCR. The documents listed in the letter of acceptance included Order Number 29083, Contract Requirements, Acknowledgement of Order, Preliminaries, Specification Pages P1 - P45 inclusive, various Drawings and "Lamac Quotation Letter dated 15/10/96".
Order Number 29083 was a "purchase order" from Devaugh to Lamac as follows:
"Supply and install the complete hydraulic services installation for the quoted lump sum fixed price of $3,698,414 all as your letter dated 15/10/96."
There was also a reference in the letter of acceptance to quality assurance, together with a memorandum from Devaugh to all sub‑contractors which was headed "Contract Requirements", in which a number of "conditions" were specified, and in respect of which it was stated that such conditions "shall be observed by all contractors and sub‑contractors". Of these, conditions 14 and 19 were as follows:
"14.Being the preferred sub‑contractor [sic you] agree to carry out your works to the full extent of all plans, specifications and documents pertaining to this contract."
"19.Satisfy yourself that you have received all documents and fully understand all aspects of your contractual obligations and will ensure completion of your contract scope of work."
There was also enclosed with the acceptance letter an "Acknowledgement of Order" which confirmed that Lamac had read the acceptance letter and "contract requirements" and agreed that it "will/have … adhere to the contract requirements".
The Acknowledgement concluded:
"To be completed and signed by sub‑contractor and returned to Devaugh Pty Ltd prior to commencing work in site.
No payment will be approved until such time."
The Acknowledgement was completed for Lamac on 25 November 1996 and returned to Devaugh. It was common cause that the sub‑contract was concluded on 26 November 1996.
While the acceptance by Lamac of the purchase order was "deemed to imply acceptance" of the conditions of contract in AS 2545, neither of those documents were expressly identified as being included in the documentation which was to "form the basis of the sub‑contract". There was no formal contract executed by the parties.
AS 2545 is an Australian Standard set of sub‑contract conditions. It is a form drafted to be used in conjunction with a form of general conditions of contract for a head or main contract between the head or main contractor and the principal, namely AS 2124 1992 which I will refer to as "AS 2124".
In the context of AS 2545 Devaugh was the "main contractor" and Lamac was the "sub‑contractor". By cl 3.1 Lamac was bound to "execute and complete the work under the sub‑contract". The expression "work under the sub‑contract" was defined by cl 2 as:
"… the work which the sub‑contractor is or may be required to execute under the sub‑contract and includes variations, remedial work, Construction or Plant and Temporary Works."
The term "works" was defined by cl 2 as meaning:
"The whole of the work to be executed in accordance with the sub‑contract, including variations provided for by the sub‑contract, which by the sub‑contract is to be handed over to the Main Contractor."
Clause 3.1 provided that:
"The Main Contractor shall pay the Sub‑contractor -
(a)for work for which the Main Contractor accepted a lump sum, the lump sum;
…
adjusted by any additions or deductions made pursuant to the Sub‑contract."
Clause 23 provided that:
"23. The Main Contractor shall ensure that at all times there is a Main Contractor's Representative and that in the exercise of the functions of the Main Contractor's Representative under the Sub‑contract, the Main Contractor's Representative -
(a)acts honestly and fairly;
(b)acts within the time prescribed under the Sub‑contract or where no time is prescribed, within a reasonable time; and
(c)arrives at a reasonable measure or value of work, quantities or time.
If, pursuant to a provision of the sub‑contract enabling the Main Contractor's Representative to give directions, the Main Contractor's Representative gives a direction, the sub‑contractor shall comply with the direction."
By cl 2, the expression "Main Contractor's Representative" was defined as:
"… the person stated in the annexure as the Main Contractor's Representative or other person from time to time appointed in writing by the Main Contractor to be the Main Contractor's Representative for the purposes of the sub‑contract, and notified as such in writing to the sub‑contractor by the Main Contractor."
At the time the sub‑contract was concluded, no person was stated in the annexure as the MCR and no person was appointed by Devaugh as the MCR during the period 26 November 1996 to 23 April 1999. Consequently, there was never an MCR appointed during the currency of the works the subject of the sub‑contract.
Clause 24 contemplated that the MCR may from time to time appoint "individuals" to exercise any functions of the MCR, but no direction was to have any force or effect unless given by the MCR or an individual authorised by the MCR to give that direction. Clause 40.1 made provision for variations by the MCR, including the execution of additional work within the general scope of the sub‑contract, but it was expressly provided that:
"The Sub‑contractor shall not vary the work under the Sub‑contract except as directed by the Main Contractor's Representative or approved in writing by the Main Contractor's Representative under Clause 40."
Clauses 40.2, 40.3 and 40.5 set out a procedure for proposing variations, pricing variations and the valuation of variations, all of which involved the MCR. In the absence of a specified or agreed price for a variation, cl 40.5(c) required that:
"… reasonable rates or prices shall be used in any valuation made by the Main Contractor's Representative."
Clause 42.1 provided that:
"At the times for payment of claims stated in the Annexure and upon issue of a Certificate of Substantial Completion and within the time prescribed by Clause 42.7, the Sub‑contractor shall deliver to the Main Contractor's Representative claims for payment supported by evidence of the amount due to the Sub‑contractor and such information as the Main Contractor's Representative may reasonably require. Claims for payment shall include the value of work carried out by the Sub‑contractor in the performance of the Sub‑contract to that time together with all amounts then due to the Sub‑contractor arising out of or in connection with the Sub‑contract or for any alleged breach thereof.
Within 21 days after receipt of a claim for payment, the Main Contractor's Representative shall issue to the Main Contractor and to the Sub‑contractor a payment certificate stating the payment which, in the opinion of the Main Contractor's Representative, is to be made by the Main Contractor to the Sub‑contractor or by the Sub‑contractor to the Main Contractor. The Main Contractor's Representative 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 Sub‑contractor, the reasons for the difference. The Main Contractor's Representative 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 Sub‑contract and amounts otherwise due from the Main Contractor to the Sub‑contractor and/or due from the Sub‑contractor to the Main Contractor arising out of or in connection with the Sub‑contract including but not limited to any amount due to be credited under any other provisions of the Sub‑contract.
If the Sub‑contractor fails to make a claim for payment under Clause 42.1, the Main Contractor's Representative may nevertheless issue a payment certificate.
Subject to the provisions of the Sub‑contract, within 35 days after receipt by the Main Contractor's Representative of a claim for payment or within 14 days of issue by the Main Contractor's Representative of the Main Contractor's Representative's payment certificate, whichever is the earlier, the Main Contractor shall pay to the Sub‑contractor or the Sub‑contractor shall pay to the Main Contractor, as the case may be, an amount not less than the amount shown in the Certificate as due to the Sub‑contractor or to the Main Contractor as the case may be, or if no payment certificate has been issued, the Main Contractor shall pay the amount of the Sub‑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 Main Contractor, or Sub‑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.
Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work had been executed satisfactorily but shall be a payment on account only, except as provided by Clause 42.8 …"
Clause 42.7 provided that:
"Within 21 days after the expiration of the Defects Liability Period, or where there is more than one, the last to expire, the Sub‑contractor shall lodge with the Main Contractor's Representative a final payment claim and endorse it 'Final Payment Claim'.
The Sub‑contractor shall include in that claim all moneys which the Sub‑contractor considers to be due from the Main Contractor under or arising out of the Sub‑contract or any alleged breach thereof.
After the expiration of the period for lodging a Final Payment Claim, any claim which the Sub‑contractor could have made against the Main Contractor and has not made shall be barred."
Clause 42.8 provided that:
"Within 28 days after receipt of the Sub‑contractor's Final Payment Claim or, where the Sub‑contractor fails to lodge such a claim, the expiration of the period specified in Clause 42.7 for lodgement of the Final Payment Claim by the Sub‑contractor, the Main Contractor's Representative shall issue to the Sub‑contractor and to the Main Contractor a final payment certificate endorsed 'Final Certificate'. In the certificate the Main Contractor's Representative shall certify the amount which in the Main Contractor's Representative's opinion is finally due from the Main Contractor to the Sub‑contractor or from the Sub‑contractor to the Main Contractor under or arising out of the Sub‑contract or any alleged breach thereof.
Unless either party, either before the Final Certificate has been issued or not later than 8 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 Sub‑contract or otherwise between the parties arising out of the Sub‑contract, that the Works have been completed in accordance with the terms of the Sub‑contract and that any necessary effect has been given to all the terms of the Sub‑contract which require additions or deductions to be made pursuant to the Sub‑contract, …"
The provisions for certification by the MCR in cl 42 and, in particular, cl 42.8, are inconsistent with the provisions in the letter of acceptance regarding the issue of a certificate of practical completion and final completion by the Architect under the Main Contract, which govern the payment of the retention money of 5 per cent of the lump sum contract price.
Clause 44.7 provides for the Sub‑contractor to give the Main Contractor notice to show cause, if the Main Contractor commits a substantial breach of contract in respect of which the Sub‑contractor considers damages may not be an adequate remedy. Substantial breaches include but are not limited to:
"(a)failing to make a payment, in breach of Clause 42.1;
(b)failure by the Main Contractor's Representative to issue a Certificate of Substantial Completion or give the Sub‑contractor, in writing, the reasons for not issuing the Certificate, within 14 days of receipt of a request by the Sub‑contractor to issue the Certificate, in breach of Clause 42.5 …"

Clause 44.9 provides that if, by the time specified in a notice under cl 44.7, the Main Contractor fails to show reasonable cause, the Sub‑contractor may by notice in writing to the Main Contractor suspend the whole or any part of the work under the Sub‑contract. The Sub‑contractor is required to lift the suspension if the breach is remedied, but if the breach is not remedied or is not capable of remedy, or the Main Contractor fails to make other arrangements to the reasonable satisfaction of the Sub‑contractor, the Sub‑contractor is entitled to terminate the contract. Provision is also made in cl 47.1 for the Sub‑contractor to give notice of a dispute between the Sub‑contractor and the Main Contractor, including a dispute concerning a direction given by the MCR.
AS 2545 contains a number of annexures including Part A which was "to be read as part of the Sub‑contract" and required the stipulation of the names of various persons and other information related to specified clauses. In order for AS 2545 to operate, it was necessary to identify the persons and incorporate the information provided. One of the persons to be specified in Part A was the MCR. Various matters were also required to be stated in Part A with respect to cl 42 including the time for payment of claims. Part B of the annexures provided for the identification of clauses deleted from AS 2545, those clauses which had been amended, and any additional clauses. The annexures also included a form of agreement by way of sub‑contract.
In fact, none of the annexures to AS 2545 were completed by either party. Consequently, the clauses contained in AS 2545 which depended for their operation on the completion of the information contemplated by the annexures, had no basis upon which to operate. In particular, no times for the payment of claims were stated in the annexure for the purposes of cl 42.1 As previously mentioned, no MCR was identified.
Parker J has identified in his judgment a number of other matters the subject of express agreement between Devaugh and Lamac as terms of the sub‑contract which differ from and are inconsistent with the express provisions of AS 2545. In particular, the Acknowledgement of Order completed by Lamac on 25 November 1996 expressly accepted that Lamac was obliged to complete its contracted scope of work "to the satisfaction of Devaugh". Further, the document headed "Contract Requirements" included in the acceptance provided in cl 21 that Lamac:
"Agree … to assure [sic] completion of the contract within the time frame and to the high standard required by Devaugh Pty Ltd and the site supervisor."
These provisions were quite inconsistent with AS 2545 and, in particular, inconsistent with the role contemplated for the MCR.
Counsel for Devaugh contended that the rights of the parties fell to be determined entirely or substantially in accordance with the true construction of AS 2545. It was pointed out that this was an Australian Standard document in widespread use in the construction industry. In my opinion, however, while AS 2545 was included within the contract documents, it could only apply to the extent that it was incorporated by reference and was not inconsistent with the terms expressly agreed between the parties.
As has been seen, there was an express agreement for monthly progress payments to be claimed by Lamac and paid by Devaugh. During the course of the works under the sub‑contract Lamac submitted monthly claims for payments directly to Devaugh. Devaugh assessed these claims itself and made payments accordingly. By about 10 March 1999 Devaugh and Lamac were in dispute over a number of claims which had not been paid. The disputed claims all related to variations to the sub‑contract work. The learned Master dealt with 17 claims amounting to the judgment sum of $675,147.14 plus interest.
Lamac's claim relied upon the provision in cl 42.1 of the General Conditions of Contract which provided that, if no payment certificate had issued within 35 days of the receipt of a progress claim, Devaugh should pay the full amount of the claim to Lamac. No payment certificates were issued within 35 days in respect of any of the 17 claims. The learned Master held that by virtue of the terms of the sub‑contract, including cl 42.1, Devaugh was bound to pay the amount of the claims. He also held that Devaugh had not shown that there was any issue or question in dispute which ought to be tried.
The appeal raises two questions relevant to the proper construction of the agreement between the parties. Devaugh contended that cl 42.1 required that a claim by Lamac for payment had to be received by the MCR before the 35 day period specified in cl 42 could commence to run. As no MCR had been appointed, the period could not commence to run. Hence, Lamac had no entitlement to payment of any of the claims. In order to remedy this situation Lamac should have taken steps to require Devaugh to appoint an MCR.
Devaugh also contended that the claims, or most of them, were for additional work outside the sub‑contract and not variations of the agreed work within the meaning of the sub‑contract. This is said to be because only the MCR could direct or approve the variations. It was also submitted that AS 2545 required that any variation be dealt with by a procedure, including a report of an estimate of cost by Lamac and a valuation by the MCR, before the work could constitute a variation for the purposes of the sub‑contract. It was further submitted that these matters gave rise to triable issues whether the work the subject of the variation claims had been directed or approved as required by the sub‑contract, and whether Lamac had complied with the terms of the sub‑contract regarding the report and an estimate of cost in respect of each of the contested variations.
Devaugh also contended that the MCR whom it appointed on 23 April 1999, after the works had been completed, had determined the value of proper variations and had assessed the claims for $675,147.14 at $168,480 so that no sum greater than this amount could have been the subject of summary judgment.
Lamac contended that the decision of the Master was correct for the reasons stated by him and also gave notice of contention pursuant to O 63 r 9(2) that the decision was also correct on the ground that in the event that Devaugh failed to appoint an MCR, references in AS 2545 to the MCR should be read as references to Devaugh itself.
Alternatively, as I have mentioned Lamac also sought to contend by its notice of contention that Devaugh was estopped from asserting that references in AS 2545 to the MCR did not mean or include Devaugh itself in the absence of an appointment. This ground in the notice of contention led to Devaugh proposing a further ground of appeal. As already mentioned, for reasons which will appear, I do not find it necessary to consider the issue of estoppel or the proposed additional ground of appeal by Devaugh.
As a matter of fact, apart from the variations the subject of these proceedings, there were many other variations requested by Devaugh, carried out by Lamac, claimed by Lamac and paid for by Devaugh, which were not the subject of any dispute. Progress claims for payment were submitted directly to Devaugh, assessed by its employees and payments made upon approval by Devaugh. There are other matters in dispute which are the subject of arbitration proceedings under cl 47 of AS 2545.
It was common ground that cl 42.1 of AS 2545 governed the rights and obligations of the parties with respect to progress payments under the sub‑contract. The question which arises concerns the true construction and effect of cl 42.1 in the context of this sub‑contract. In short, Devaugh contended that Lamac's claim in the proceedings depended for its success on the claims for payment having been delivered to the MCR in accordance with cl 42.1 Absent an MCR, the claims were never delivered to the MCR so that there never had been a claim for payment by Lamac for the purposes of cl 42.1 in respect of any of the subject claims. Consequently, in the absence of a claim within the meaning of cl 42.1, there could be no entitlement to be paid "the amount of the sub‑contractor's claim" referred to in the clause. Further, in the absence of such a claim, the 35 day period referred to in cl 42.1 could not commence to run.
The learned Master rejected these contentions. He noted that cl 42.1 of AS 2124 had been authoritatively interpreted by the Court of Appeal of Queensland in Blue Chip Pty Ltd v Concrete Constructions Group Pty Ltd (1996) 13 BCL 31. That decision was followed by Rolfe J in the Construction List in the Common Law Division of the Supreme Court of New South Wales in Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215. As the learned Master put it:
"The Blue Chip case established:
1.That progress claims and payments made under building contracts are intended to be provisional only.
2.The superintendent in issuing a payment certificate can deduct sums due by the contractor to the principal but, if he fails to do so, there is no implied power in the principal to deduct such sums. There is no power, for example, to deduct liquidated damages before making a progress payment.
3.The correct construction of general condition 42.1 when taken in its entirety (and despite 'Subject to the provisions of the contract'), is that what is certified is intended to be paid.
In Algons (supra) the sub‑contractors submitted a progress claim to the contractor's representative but no payment certificate issued. The contractor filed a notice of motion seeking summary judgment. The contractor pleaded that, should it be found ultimately that the sub-contractor was entitled to any money, the contractor had a defence by way of set‑off. In the cross‑claim, the contractor claimed liquidated damages for delay and damages for the sub‑contractor's alleged failure to use standards of workmanship required by the sub‑contract. It was held following Blue Chip (supra), that the contractor was bound to pay the amount of the progress claim without recourse to equitable set‑off on the basis that the amount was due and payable under the contract. The failure by the contractor to issue a payment certificate merely returned the parties to the position where there was an obligation on the contractor to pay the amount of the progress claim. The question of whether summary judgment should be granted depended on whether there was a triable issue with respect to the alleged right to equitable set‑off. As the construction of the clause did not give rise to any real issue or question to be tried, this was an appropriate case for summary judgment."
Rolfe J went on to hold that the requirements of an equitable set‑off were not met.
The learned Master also noted that by the fourth paragraph of cl 42.1, if the MCR fails to make any deduction and issues a certificate for the full amount of the sub‑contractor's claim, the claim is to be paid. He went on to say that:
"Similarly, if the representative does not process the claim and does not issue a certificate at all, then the sub-contractor is entitled to be paid his claim in full 35 days after he has submitted the claim. I consider it a logical and proper construction of this clause to say that if no representative has been appointed and a claim is submitted, then the main contractor is not allowed to deduct any offsetting claim and the claim must be paid in full 35 days after receipt. Clause 42.1 contains an important default procedure in favour of the sub-contractor. As the two cases cited show, payments to the sub-contractor are provisional payments only and the clause itself states that payment of such moneys 'shall not be evidence of the value of the work or an admission of liability or evidence that the work has been executed satisfactorily but shall be a payment on account only …'.
The defendant said in this case that the payments claimed by the sub-contractor all relate to variations of contract and that is not disputed. None of the claims relate to the lump sum price of $3,689,414. The progress claims totalling that sum have been paid in full. The defendant argued that variations are different to other claims from a sub-contractor and, as such, do not come within the scope of par 42.1. The first paragraph of 42.1 reads:
'… The sub-contractor shall deliver to the main contractor's representative claims for payments supported by evidence of the amount due to the sub-contractor and such information as the main contractor's representative may reasonably require. Claims for payment shall include the value of the work carried out by the sub-contractor in the performance of the sub-contract to that time together with all amounts then due to the sub-contractor arising out of or in connection with the sub-contract or any alleged breach thereof.'
The defendant in argument emphasised the word 'due' in the last sentence quoted. He said that a claim for a variation carried out by the sub-contractor can only be 'due' to the sub-contractor if the variation has been valued under cl 40.1. He said that, until such time as the work involved in the variation has been valued in accordance with that clause, the agreement to carry out a variation is simply a new contract. If the price is not agreed, the sub-contractor is entitled to be paid on a quantum meruit basis. He can be paid outside the contract altogether or he can claim under cl 47 in an arbitration. Clause 40.1 permits the representative to order the sub-contractor to execute a variation. The sub-contractor is only bound to execute a variation which is within the general scope of the sub-contract. Upon receipt of a notice from the representative ordering a proposed variation, the sub-contractor is to provide an estimate of the cost. Unless the representative and the sub-contractor agree upon the price for the variation, the variation directed or approved by the representative shall be valued under cl 40.5. Under that sub-clause the representative is to determine the value of the variation and certain guidelines are given there. The defendant has argued that unless the variations claimed have been valued by the representative in accordance with cl 40, no sums in respect of them are due to the sub-contractor, and hence he cannot get the benefit of the default procedure of cl 42. Indeed cl 42 is simply not applicable.
The last sentence of the first paragraph of cl 42.1 refers to claims for payment 'arising out of or in connection with the sub-contract …'. I consider that the plaintiff's claims for variations clearly arise out of or in connection with the sub-contract. I also consider that the words in that sentence 'claims for payment shall include the value of work carried out by the sub-contractor in the performance of sub-contract to that time together with all amounts then due to the sub-contractor …' do not mean claims for payment then finally due to the sub-contractor or claims for work then properly due to the contractor. On the latter point, contrast the use of the word 'due' in the first paragraph compared to phrase 'amount properly due and payable' referred to in the fourth paragraph. I remind myself that cl 40 does not provide a procedure whereby claims for variations are to be paid, whereas cl 42 does. On a proper construction of the contract, the sub-contractor, who claims payment for a variation, gets the benefit of cl 42.1 notwithstanding that the value of his work has not been determined under cl 40. A proper construction would allow the sub-contractor to submit such a claim. It can be supported by evidence of the work due. The representative can request information about the claim. The claim can include the value of the work carried out. The representative should then allow it, or disallow it in whole or in part, in accordance with the fourth paragraph, and issue a certificate for payment. As stated in the clause, payment of moneys is not to be taken as evidence of the final value of the work done, or an admission of liability, or evidence that the work has been executed satisfactorily, but is simply a payment on account. I consider it would be capricious, unreasonable, inconvenient and unjust interpretation to require the sub-contractor claiming a variation where there is no representative to first give a notice of dispute under cl 47 and proceed to arbitration under that clause, or to proceed against the main contractor outside the contract.
Subject to some other matters which I mention in a moment, the 17 claims for variations submitted in the plaintiff's amended schedule are claims due to be paid to the sub-contractor and they arise out of the contract and should be paid. It was not primarily the plaintiff's fault that no representative was appointed. In all cases the 35 day period elapsed without any payment being made. The last claim No 25 was submitted on 2 February 1999 and the 35 days elapsed on 9 March 1999."
All of this occurred before the MCR was appointed on 23 April 1999, several weeks after the expiration of the 35 day period under cl 42.1.
While the learned Master did not say so in terms, the approach which he adopted was consistent with an interpretation and application of the sub‑contract and AS 2545 on the basis that, if no MCR was appointed, the sub-contract was to be interpreted so that by necessary implication Devaugh itself was required to fulfil the role of MCR. In this context I agree with Parker J that AS 2545, when read as a whole and standing on its own, had the result that the failure by Devaugh to appoint an MCR was a breach of cl 23, by which MCR was required to "ensure that at all times there was a Main Contractor's Representative …". Failure to appoint an MCR would constitute a substantial breach of contract by the Main Contractor. This would justify the sub‑contractor suspending the work under cl 44.9. If an MCR was not then appointed, the contract could then be terminated and damages for breach as in repudiation recovered pursuant to cl 44.10.
I also agree with Parker J that this case did not require that AS 2545 be construed in isolation, standing on its own. It was to be construed in the context of the other terms expressly agreed by the parties. There were a number of particular express terms agreed by the parties which were inconsistent with AS 2545. The commencement date was expressly agreed as 20 November 1996 or "as requested" by Devaugh; the work was to proceed in the order and at the rate of progress stipulated in Devaugh's programme as varied by Devaugh from time to time; completion was to be to the satisfaction of Devaugh; and, significantly, there was a provision for interim payments on account of the lump sum to be made monthly if submitted by the 28th of each month, with a retention of 5 per cent, one half of which was to be released upon the certificate of practical completion and the other on final completion as certified by the architect under "the Head Contract".
In these circumstances, I am of the opinion that, on the proper construction of the contract between the parties it was to be implied that, in the event that no MCR was appointed and no steps were taken by Lamac to procure Devaugh to appoint an MCR, a term was to be implied into the contract that reference in cl 42.1 to an MCR would constitute a reference to the Main Contractor where no MCR has been appointed. In BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 180 CLR 266 Lord Simon, Viscount Dilhorne and Lord Keith said at 283:
"… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

This test was adopted by the High Court in Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596 at 605 - 606 per Mason J (with whom Barwick CJ, Gibbs, Stephen and Aickin JJ agreed).
The notion of "business efficacy" was referred to by Bowen LJ in The Moorcock (1889) 14 PD 64 at 68 - 70. As Jordan CJ put in Heimann v Commonwealth (1938) 38 SR (NSW) 691 at 695:
"… it is essential that it is clearly necessary to imply the term in order to make the contract operative according to the intention of the parties as indicated by the express terms. It must be clearly necessary. And the test whether it is clearly necessary is whether … both parties, treating them as reasonable men … must clearly have intended the term, or, if they did not advert to it would certainly have included it if the contingency involving the term had suggested itself to their minds."
In the following year Mackinnon LJ said in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227:
"Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common 'Oh, of course'."
In the present case, although the contract was made with reference to the printed form of AS 2545, it is clear that the parties expressly intended to and did agree upon terms which were inconsistent with the operation of AS 2545 in accordance with its terms. They failed to complete the annexure. While no MCR was appointed, the parties contemplated their work would commence. They proceeded to deal with each other directly with respect to progress payments. They expressly agreed that one half of the retention would be paid on the issue of a certificate of practical completion by the architect under the Head Contract and the balance of retention on the issue of a final certificate by that architect. A number of undisputed variations were paid. In other words, they dealt with each other directly on a basis consistent with an implication of a term that where no MCR had been appointed cl 42.1 would be interpreted and applied as if references to the MCR were references to the Main Contractor itself.
It is, of course, a general rule of construction of contracts that evidence of extrinsic matter is not admissible to subtract from, add to, vary or contradict the language of a written instrument. Extrinsic evidence is, however, admissible in support of an implied term: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347-353 per Mason J, with whom Stephen, Wilson and Aickin JJ agreed.
I agree with Parker J for the reasons stated by him however that the implication of such a term was reasonable and equitable; it was necessary to give business efficacy to the contract which would otherwise be ineffective without it; it was so obvious in the context that it went without saying; it was capable of clear expression; and it did not contradict any express term of the contract in the absence of the appointment of an MCR. While the documentary material contemplated that an MCR might be appointed, there was no express agreement by the parties that an MCR must be appointed. Failure to appoint was a breach by Devaugh which was waived by Lamac. The terms expressly agreed, to which I have referred, are inconsistent with the incorporation by reference of all the general conditions, except so far as they are consistent with what the parties expressly agreed: cf Fitzgerald v Masters (1956) 95 CLR 420 at 426 - 427 per Dixon CJ and Fullagar J.
The events which happened, to which I have referred, while not necessarily directly relevant to the implication of the relevant term, demonstrate that the term was necessary to make the agreement work or to give it "business efficacy" : cf Shepperd v Council of Ryde (1952) 85 CLR 1; and Lewis Construction (Engineering) Pty Ltd v Southern Electrical Authority of Queensland (1976) 50 ALJR 769.
I agree with Parker J that on the proper construction of AS 2545 that variations directed by the MCR in accordance with cl 40 come within "the

value of work carried out … in the performance of the Sub‑contract …", in the last sentence of the first paragraph of cl 42.1. I also agree that in the events which have happened the respondent was entitled to be paid "the amount of the sub‑contractor's claim" under cl 42.1 as no payment certificate had issued within 35 days of the relevant claims. The payment was provisional, subject to the final payment claim and final certificate procedures and, finally, to the dispute resolution procedure under cl 47. In the event the claims were found to be excessive Lamac would be obliged to refund any excess to Devaugh.

Finally, I agree with Parker J that all of the other reasons advanced on behalf of the appellant why summary judgment ought not to have been granted in any event should be rejected.
For these reasons I would dismiss the appeal.
MURRAY J: In this matter I have had the considerable advantage of access to the reasons of Malcolm CJ and Parker J. I agree with them and with their Honours' conclusion that the appeal should be dismissed. I could usefully add nothing to the comprehensive discussion of the issues which Parker J has undertaken or to the additional reasons of Malcolm CJ.
PARKER J: On 25 June 1999 Master Bredmeyer made an order for summary judgment in favour of the respondent (plaintiff) ("Lamac") by which he ordered that the appellant (defendant) ("Devaugh") pay the respondent the sum of $737,757.13 together with taxed costs. That judgment sum comprised an amount of $675,147.14 plus interest of $62,609.99.
Lamac is a plumbing company. Devaugh is a builder. Both conduct their businesses from Bunbury. Devaugh secured a substantial contract to construct a hospital and associated facilities known as the Bunbury Health Campus. By a contract concluded on or about 26 November 1996 ("the subcontract"), Devaugh subcontracted the plumbing and hydraulic works to Lamac for a lump sum figure of $3,698,414. The Health Campus opened for patients on 15 March 1999 by which time the works, both under the main contract and the subcontract, had been completed.
There was an express provision of the subcontract that claims for progress payments might be made monthly by Lamac. General conditions of contract which were "deemed" to be accepted as part of the subcontract provided for claims to be submitted to the Main Contractor's Representative (the "MCR") who was to assess Lamac's claims and issue certificates to Devaugh for payment to Lamac. However, Devaugh failed

to appoint an MCR until 23 April 1999, ie, after the works had been completed. During the course of the works under the subcontract, Lamac submitted its claims for progress payments directly to Devaugh. Devaugh assessed these claims itself and made payments according to its assessment. Toward the end of the contract, by about 10 March 1999, Devaugh and Lamac were in dispute over a number of claims which had not been paid. These disputed claims all related to variations to the work originally agreed by the subcontract. At the hearing before the Master on 10 June 1999 the number and amounts of these disputed claims were limited to 17 claims totalling the $675,147.14, plus interest. This is the amount which is the basis of the summary judgment. These 17 claims appear to have been lodged by Lamac with Devaugh between 5 August 1998 and 2 February 1999.

Relying on cl 42.1 of the general conditions of contract, which provided that if no payment certificate had issued within 35 days of the receipt of a progress claim Devaugh should pay the full amount of the claim to Lamac, Lamac issued the writ in these proceedings to recover the amount of its unpaid claims. No payment certificates had issued within 35 days in respect of any of the 17 claims. That was necessarily the case because, at that stage, Devaugh still had not appointed an MCR to consider claims and issue payment certificates.
The Master was persuaded, on the evidence before him, that by virtue of the terms of the subcontract, including cl 42.1, Devaugh was bound to pay the claims totalling 675,147.14. He was further persuaded that Devaugh, which had been represented before him by senior counsel, had not shown that there was any issue or question in dispute which ought to be tried. In his view Devaugh was in effect "hoisted with its own petard" by virtue of its failure to appoint an MCR. It was on this basis that the learned Master came to order summary judgment pursuant to Rules of the Supreme Court O 14.
Devaugh appeals from the decision of the Master. It seeks the setting aside of the whole of the decision and in lieu orders that the summons for final judgment be dismissed with costs in its favour of the application before the Master and this appeal.
The precise grounds of appeal are extensive. They raise issues of law and of fact. It is unnecessary, however, to set out the grounds in full. When the matter was argued it was presented by senior counsel for the appellant on the basis that, in essence, two substantive questions were raised by the grounds. At their heart is the true construction of the subcontract concluded between Devaugh and Lamac.
First, Devaugh primarily contends that, on its true construction, cl 42.1 required that a claim by Lamac for payment had to be received by the MCR before the 35‑day period specified in cl 42 could commence to run. As no MCR had been appointed, it is submitted the 35 day period could not and had not commenced to run. Hence, it is Devaugh's submission that Lamac had no entitlement to be paid any of the claims which comprised the $675,147.14 and, therefore, no entitlement to summary judgment in any sum. In the submission of Devaugh, Lamac should have taken steps under the terms of the subcontract, at its commencement or in its early days, to require Devaugh to appoint an MCR failing which, ultimately, it should have regarded the subcontract as breached and at an end by virtue of Devaugh's failure to make an appointment.
Secondly, Devaugh contends the claims, or almost all of the claims, of Lamac which comprise the $675,147.14 are for additional work which is outside the subcontract, and not for variations of the agreed work within the meaning of the subcontract. This is so, Devaugh contends, principally because under the terms of the subcontract only the MCR could direct or approve variations. Further, it is submitted that the general conditions require that any variation be dealt with pursuant to a procedure which included a report and estimate of cost by Lamac and a valuation by the MCR before it could be a variation within the meaning of the subcontract. Devaugh also contends that the matters just referred to gave rise to triable issues whether the work the subject of these claims had been directed or approved as required by the subcontract and whether Lamac had complied with requirements of the subcontract for it to provide advice and an estimate in respect of any variation.
In addition, it is also contended for Devaugh that the MCR whom it appointed on 23 April 1999 after the works had been completed had determined the value of proper variations and had assessed the claims which comprised the $675,147.14 at only $168,480 so that no sum greater than this could have been the subject of any summary judgment.
Other matters are also advanced by Devaugh why summary judgment should have been refused.
Lamac submits that the decision of the Master was correct for the reasons given by the Master and further, pursuant to par (a) of a Notice of Contention - Rules of Supreme Court O 66 r 9(2) - that the decision may also be supported by the implication of a term into the subcontract that absent the appointment by Devaugh of an MCR, references in the general conditions of contract to the MCR should be read as references to Devaugh itself.
As a further alternative, Lamac also foreshadowed by par (b) of its Notice of Contention that Devaugh was estopped from asserting that references in the general conditions to the MCR did not mean or include Devaugh itself. This foreshadowed contention provoked a proposed further ground of appeal from Devaugh. In my view, questions of an estoppel in these circumstances would inevitably give rise to the need for a trial. I do not see how summary judgment could properly have been justified on the basis of the estoppel which Lamac now seeks to raise by way of contention. The Master did not rely upon estoppel for his decision. I would not be able to support his decision to order summary judgment on the basis of estoppel. For this reason the second contention of which notice has been given by Lamac, ie, par (b) of its Notice of Contention, may be put aside and with it the proposed further ground of appeal by Devaugh.

The subcontract

Lamac submitted a lump sum quotation to Devaugh dated 15 October 1996 in respect of identified segments of the works under Devaugh's principal contract. Certain identified items from those segments were expressly excluded. The quotation was for a single fixed price of $3,698,414. The quotation was comprised in a single typewritten page.
By a two‑page letter described as an order to proceed dated 20 November 1996 Devaugh accepted Lamac's quotation (the "acceptance"). It was in these terms (omitting deletions) -
"RE:    SOUTH WEST HEALTH CAMPUS, BUNBURY
We are pleased to accept your quotation for the                at the above and this letter institutes our order to proceed.
Your quotation dated: 15.10.96   Ref: _________
Value: 3,698,414
Interim payments will be monthly if requested by the 28th of each month.
Retention: 5% (One half of retention released each as Practical and Final Certificate of the Head Contract as certified by the Architect).
Acceptance of this order will be deemed to imply acceptance by the Sub-contractor of the Conditions of Contract embodied in the latest issue of AS 2545 1993. Any terms or conditions normally imposed by the Sub-contractor which are at variance with this form will be deemed to be deleted.
Commencement and completion. The Sub-contractor shall commence the sub-contract works on 20.11.96 or as requested and shall complete the works of each section thereof in accordance with the programme attached.
The following documentation will form the basis of the subcontract, please complete and return the acknowledgment as soon as possible. These documents are either enclosed or should already be in your possession.
Order No.     29083
Contract Requirements.
Acknowledgment of Order.
Preliminaries.
Specification pages. P1 - P45 inclusive
Drawings     H1 - H12 incl.
A200 - A214 incl.
Lamac Quotation Letter dated 15/10/96
Memo Quality Assurance.
Quality and Safety Plans will operate on this project. The Sub‑contractor will be required to abide by the provisions of these documents, copies of which are available at the Site/Head office. The Sub-contractor shall at all times maintain his own copy of the safety plan at site.
Yours faithfully
for DEVAUGH PTY LTD
MERV WAUGH
MANAGING DIRECTOR
November 20, 1996
cc        Russel Lines - Safety Officer
Eric Morris - Site Manager/Contract Manager
Don Bun - Supervisor"
Accompanying that was a "purchase order" No 29083 from Devaugh to Lamac for:
"Supply and install the complete hydraulic services installation for the quoted lump sum fixed price of $3,698,414 all as your letter dated 15/10/96."
That purchase order included the notation "this purchase order number must be quoted on invoices and claims".
Referred to in the acceptance and accompanying it was a one page memo on quality assurance and a two page memo addressed by Devaugh to all subcontractors which was headed Contract Requirements in which there were 21 "conditions" specified which "shall be observed by all contractors and subcontractors". Of these conditions 14, 19, 20 and 21 were as follows:
"14.Being the preferred subcontractor agree to carry out your works to the full extent of all plans, specifications and documents pertaining to this contract.
19.Satisfy yourself that you have received all documents and fully understand all aspects of your contractual obligations and will ensure completion of your contract scope of work.
20.Acknowledge you are aware that the programme presented is a guide only and could vary during the course of the construction period.
21.Agree to work in harmony with the guidelines set down by the contract and documents and liaise with other subtrades to assure (sic) completion of the contract within the time frame and to the high standard required by Devaugh Pty Ltd and the site supervisor."
Also enclosed with the acceptance was a one page Acknowledgment Of Order which in part read:
"We confirm that we have read your letter and 'contract requirements' (ref 8102), and agree that we will/have:
(a)conform to the requirements of Occupational Safety and Health Act 1984 and OHS and Regulations 1988
(b)attend induction meetings
(c)attend and participate in tool box meetings
(d)submit copies of all accident/incident reports to Devaugh Pty Ltd
(e)adhere to the contract requirements (ref 8204)
(f)acceptance (sic) our obligations to complete our contracted scope of work to the satisfaction of Devaugh Pty Ltd
…"
This document concluded with two notes:
"To be completed and signed by subcontractor and returned to Devaugh Pty Ltd prior to commencing work in site.
No payment will be approved until such time."
This Acknowledgment Of Order was completed for Lamac on 25 November 1996 and returned to Devaugh. That appears to constitute the conclusion of the subcontract between Devaugh and Lamac and it will be convenient to refer to that as having occurred on 26 November 1996.
It is to be observed that while the acceptance was deemed acceptance by Lamac of the conditions of contract embodied in AS2545 1993, neither the acceptance nor that Australian Standard were identified as being among the documentation which "will form the basis of the subcontract" as stipulated in the acceptance. Nevertheless, it appears clearly enough from the totality of the correspondence that the acceptance together with its provision deeming acceptance by the subcontractor of AS2545 1993 formed part of the subcontract which was thus concluded between Devaugh and Lamac.
It is implicit in this summary of the contractual situation that no formal instrument of agreement was prepared or executed by the parties nor is there any one document which can be identified as the subcontract. Instead it is necessary to piece together, from these documents which passed between Devaugh and Lamac, the terms by which they bound themselves and which together comprise the subcontract. As will appear this process of piecing together involves some reconciliation of inconsistencies and, as the argument on the appeal reveals, it also gives rise to a significant question of construction.

Subcontract Conditions AS2545 1993

Acceptance by Lamac of Devaugh's order to proceed was "deemed to imply acceptance" by Lamac of the conditions of contract embodied in AS2545 1993. This document is an Australian Standard set of subcontract conditions. It is an extensive and comprehensive document containing some 49 clauses and a number of annexures. By its preface it is said to have been designed to provide a set of compatible subcontract conditions on projects where another Australian Standard AS2124‑1992 was used as the general conditions of contract for the head contract between the main contractor and the principal. AS2545 1993, and in particular cl 42.1, is at the heart of the present appeal.
For the purposes of AS2545 1993 Devaugh was the "main contractor" and Lamac the "subcontractor". Lamac was obliged by cl 3.1 to "execute and complete the work under the subcontract" and by cl 2 the phrase "work under the subcontract" was defined as "means the work which the subcontractor is or may be required to execute under the subcontract and includes variations, remedial work, Construction or Plant and Temporary Works". "Works" was also defined as meaning "the whole of the work to be executed in accordance with the subcontract, including variations provided for by the subcontract, which by the subcontract is to be handed over to the Main Contractor".

Other provisions of AS2545 1993 relevant to this appeal include:
•"3.1 … The Main Contractor shall pay the Subcontractor-
(a)for work for which the Main Contractor accepted a lump sum, the lump sum;
…
adjusted by any additions or deductions made pursuant to the Subcontract."
•"23 The Main Contractor shall ensure that at all times there is a Main Contractor's Representative and that in the exercise of the functions of the Main Contractor's Representative under the Subcontract, the Main Contractor's Representative-
(a)acts honestly and fairly;
(b)acts within the time prescribed under the Subcontract or where no time is prescribed, within a reasonable time; and
(c)arrives at a reasonable measure or value of work, quantities or time.
If, pursuant to a provision of the subcontract enabling the main contractor's representative to give directions, the main contractor's representative gives a direction, the subcontractor shall comply with the direction.
…"
•"24 The Main Contractor's Representative may from time to time appoint individuals to exercise any functions of the Main Contractor's Representative under the Subcontract but not more than one such individual shall be delegated the same function at the same time. The appointment of such an individual shall not prevent the Main Contractor's Representative from exercising any function.
…
No direction shall have any force or effect under the Subcontract unless given by the Main Contractor's Representative or an individual authorized to give that direction.
If anyone other than the Main Contractor's Representative or any individual so authorized by the main Contractor's Representative purports to give the Subcontractor a direction, the Subcontractor shall forthwith notify the Main Contractor's Representative."
•"40.1   Variations to the Work
The Main Contractor's Representative may direct the Subcontractor to -
(a)increase, decrease or omit any part of the work under the Subcontract;
(b)change the character or quality of any material or work;
(c)change the levels, lines, positions or dimensions of any part of the work under the Subcontract;
(d)execute additional work; and/or
(e)demolish or remove material or work no longer required by the Main Contractor.
The Subcontractor shall not vary the work under the Subcontract except as directed by the Main Contractor's Representative or approved in writing by the Main Contractor's Representative under Clause 40.
The Subcontractor is bound only to execute a variation which is within the general scope of the Subcontract.
The Subcontractor shall not be bound to execute a variation directed after Substantial Completion unless the variation is in respect of rectification work referred to in Clause 37."
•"40.2   Proposed Variations
Upon receipt of a notice in writing from the Main Contractor's Representative advising the Subcontractor of a proposed variation under Clause 40, the Subcontractor shall advise the Main Contractor's Representative whether the proposed variation can be effected. If the variation can be effected, the Subcontractor shall -
(a)advise the main Contractor's Representative of the effect which the Subcontractor anticipates that the variation will have on the construction program and time for Substantial Completion; and
(b)provide an estimate of the cost (including delay costs, if any) of the proposed variation.
The Main Contractor shall reimburse the Subcontractor for the reasonable costs of complying with the requirements of Clause 40.2."
•"40.3   Pricing the Variation
Unless the Main Contractor's Representative and the Subcontractor agree upon the price for a variation, the variation directed or approved by the Main Contractor's Representative under Clause 40.1 shall be valued under Clause 40.5.
The main Contractor's Representative may direct the Subcontractor to provide a detailed quotation for the work of a variation supported by measurements or other evidence of cost.
… "
•"40.5   Valuation
Where the Subcontract provides that a valuation shall be made under Clause 40.5, the Main Contractor shall pay or allow the Subcontractor, or the Subcontractor shall pay or allow the Main Contractor, as the case may require, an amount ascertained by the Main Contractor's Representative as follows -
…
(c)to the extent that neither Clause 40.5(a) or 40.5(b) apply, reasonable rates or prices shall be used in any valuation made by the Main Contractor's Representative;
… "
•"42.1   Payment Claims, Certificates, Calculations and Time for Payment
At the times for payment claims stated in the Annexure and upon issue of a Certificate of Substantial Completion and within the time prescribed by Clause 42.7, the Subcontractor shall deliver to the Main Contractor's Representative claims for payment supported by evidence of the amount due to the Subcontractor and such information as the Main Contractor's Representative may reasonably require. Claims for payment shall include the value of work carried out by the Subcontractor in the performance of the Subcontract to that time together with all amounts then due to the Subcontractor arising out of or in connection with the Subcontract or for any alleged breach thereof.
Within 21 days after receipt of a claim for payment, the Main Contractor's Representative shall issue to the Main Contractor and to the Subcontractor a payment certificate stating the payment which, in the opinion of the Main Contractor's Representative, is to be made by the Main Contractor to the Subcontractor or by the Subcontractor to the Main Contractor. The Main Contractor's Representative 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 Subcontractor, the reasons for the difference. The Main Contractor's Representative 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 Subcontract and amounts otherwise due from the Main Contractor to the Subcontractor and/or due from the Subcontractor to the Main Contractor arising out of or in connection with the Subcontract including but not limited to any amount due or to be credited under any other provisions of the Subcontract.
If the Subcontractor fails to make a claim for payment under Clause 42.1, the Main Contractor's Representative may nevertheless issue a payment certificate.
Subject to the provisions of the Subcontract, within 35 days after receipt by the Main Contractor's Representative of a claim for payment or within 14 days of issue by the Main Contractor's Representative of the Main Contractor's Representative's payment certificate, whichever is the earlier, the Main Contractor shall pay to the Subcontractor or the Subcontractor shall pay to the Main Contractor, as the case may be, an amount not less than the amount shown in the Certificate as due to the Subcontractor or to the Main Contractor as the case may be, or if no payment certificate has been issued, the Main Contractor shall pay the amount of the Subcontractor'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 Main Contractor, or Subcontractor, 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.
Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work had been executed satisfactorily but shall be a payment on account only, except as provided by Clause 42.8.
… "
•"42.7   Final Payment Claim
Within 21 days after the expiration of the Defects Liability Period, or where there is more than one, the last to expire, the Subcontractor shall lodge with the Main Contractor's Representative a final payment claim and endorse it 'Final Payment Claim'.
The Subcontractor shall include in that claim all moneys which the Subcontractor considers to be due from the Main Contractor under or arising out of the Subcontract or any alleged breach thereof.
After the expiration of the period for lodging a Final Payment Claim, any claim which the Subcontractor could have made against the Main Contractor and has not made shall be barred."
•"42.8   Final Certificate
Within 28 days after receipt of the Subcontractor's Final Payment Claim or, where the Subcontractor fails to lodge such a claim, the expiration of the period specified in Clause 42.7 for lodgement of the Final Payment Claim by the Subcontractor, the Main Contractor's Representative shall issue to the Subcontractor and to the Main Contractor a final payment certificate endorsed 'Final Certificate'. In the certificate the Main Contractor's Representative shall certify the amount which in the Main Contractor's Representative's opinion is finally due from the Main Contractor to the Subcontractor or from the Subcontractor to the Main Contractor under or arising out of the Subcontract or any alleged breach thereof.
Unless either party, either before the Final Certificate has been issued or not later than 8 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 Subcontract or otherwise between the parties arising out of the Subcontract, that the Works have been completed in accordance with the terms of the Subcontract and that any necessary effect has been given to all the terms of the Subcontract which require additions or deductions to be made pursuant to the Subcontract, …"
•"44.7   Default of the Main Contractor
If the Main Contractor commits a substantial breach of contract and the Subcontractor considers that damages may not be an adequate remedy, the Subcontractor may give the Main Contractor a written notice to show cause.
Substantial breaches include but are not limited to-
(a)failing to make a payment, in breach of Clause 42.1;
(b)failure by the Main Contractor's Representative to issue a Certificate of Substantial Completion, or give the Subcontractor, in writing, the reasons for not issuing the Certificate within 14 days of receipt of a request by the Subcontractor to issue the Certificate, in breach of Clause 42.5;
… "
•"44.9   Rights of Subcontractor
If, by the time specified in a notice under Clause 44.7, the Main Contractor fails to show reasonable cause why the Subcontractor should not exercise a right referred to in Clause 44.9, the Subcontractor may by notice in writing to the Main Contractor suspend the whole or any part of the work under the Subcontract.
The Subcontractor shall lift the suspension if the Main Contractor remedies the breach but if within 28 days after the date of suspension under Clause 44.9, the Main Contractor fails to remedy the breach or, if the breach is not capable of remedy, fails to make other arrangements to the reasonable satisfaction of the Subcontractor, the Subcontractor may by notice in writing to the Main Contractor terminate the Subcontract.
The Subcontractor shall be entitled to recover from the Main Contractor any damages incurred by the Subcontractor by reason of the suspension."
•"47.1   Notice of Dispute
If a dispute between the Subcontractor and the Main Contractor arises out of or in connection with the Subcontract, including a dispute concerning a direction given by the Main Contractor's Representative, then either party shall deliver by hand or send by certified mail to the other party and to the Main Contractor's Representative a notice of dispute in writing adequately identifying and providing details of the dispute.
Notwithstanding the existence of a dispute, the Main Contractor and the Subcontractor shall continue to perform the Subcontract and subject to Clause 44, the Subcontractor shall continue with the work under the Subcontract and the Main Contractor and the Subcontractor shall continue to comply with Clause 42.1.
A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration."
AS2545 1993 included a number of annexures. One of these, identified as part A and which was "to be read as part of the subcontract", required the stipulation in the annexure of persons and of a considerable variety of other information which related to identified clauses in AS2545 1993. The completion and stipulation of this information in part A was, in general, necessary for AS2545 1993 to operate according to its terms. Part A included provision for the identification of the MCR. Some five matters were required to be stipulated in part A with respect to cl 42, including "times for payment claims". Other annexures to AS2545 1993 included an approved form of unconditional undertaking by a financial institution pursuant to cl 5.3, another detailed annexure identified as part B which identified clauses deleted from the principal document and those which had been amended and those which had been added to the clauses of the principal document. There was also a general conditions of tendering, a form of tender and a form of formal instrument of agreement for subcontract. The annexures concluded with a comprehensive index of AS2545 1993.
No part of the annexures to AS2545 1993 were ever completed by either Devaugh or Lamac. All were left entirely blank. As a necessary consequence, those many clauses of AS2545 1993, which required or depended on information to be set out in the annexures, were without the intended foundation for their operation. A critical example is the clause at the heart of this dispute, cl 42.1, which commences
"At the times for payment claims stated in the Annexure …"
cl 42.1 could not operate in its intended form as no times for payment had been stated in the annexure.
A further and critical example is provided by the failure to identify the MCR in the annexure. By cl 2 of AS2545 1993, the Main Contractor's Representative was defined as meaning
"… the person stated in the annexure as the Main Contractor's Representative or other person from time to time appointed in writing by the Main Contractor to be the Main Contractor's Representative for the purposes of the subcontract, and notified as such in writing to the subcontractor by the Main Contractor."
At the time the subcontract was concluded, no MCR had been stated in the annexure. While that could have been remedied by subsequent appointment in compliance with the definition, no person was ever appointed by Devaugh as the MCR during the period 26 November 1996 to 23 April 1999, so there never was an MCR within the defined meaning during the currency of the works the subject of the subcontract.
There are a number of other differences between the subcontract conditions contemplated by AS2545 1993 and those expressly agreed by the parties as part of the subcontract. These include:
•In its acceptance Devaugh expressly stipulated outside of AS2545 1993, that "interim payments will be monthly if requested by the 28th of each month".
•Clause 35 of AS2545 1993 made provision for the commencement of the works by the subcontractor and for the Substantial Completion (defined in cl 2) of each Separable Portion (defined in cl 2) of the works, and in cl 33 for the progress and programming of the works. The acceptance stated, however:
"Commencement and completion. The subcontractor shall commence the subcontract works on 20/11/96 or as requested and shall complete the works of each section thereof in accordance with the programme attached."
This appears to cut across the intended operation of cl 35 and cl 33 of AS2545 1993. This is reinforced by the Contract Requirements document of Devaugh which was referred to in and enclosed with Devaugh's acceptance and which included the provision:
"20.Acknowledge you are aware that the programme presented is a guide only and could vary during the course of the construction period."
•The document Memo, Quality Assurance, which was identified in the acceptance as among the documents which formed "the basis of the contract" required Lamac to submit a quality manual to Devaugh for approval and Devaugh reserved the right to audit Lamac's quality system. In these respects, the Memo, Quality Assurance appears to contemplate a direct role for Devaugh rather than, or in addition to, the detailed and exclusive role for the MCR provided by cl 30 and cl 31 of AS2545 1993.
•By cl 42 and in particular cl 42.8 it was contemplated by AS2545 1993 that the MCR should issue a Final Certificate which, in the absence of a notice of dispute:
" … shall be evidence in any proceedings of whatsoever nature and whether under the subcontract or otherwise between the parties arising out of the subcontract, that the works have been completed in accordance with the terms of the subcontract …"
This provision represents the end point of a scheme which is evident from a number of the clauses of AS2545 1993, especially cl 30.3, which detail the role of the MCR where material or work is not in accordance with the subcontract, and cl 42.5 which provides for a certificate of substantial completion, from which it is clear that pursuant to AS2545 1993 it is the MCR which determines whether the work of the subcontractor satisfies the requirements of the subcontract. Yet, by the Acknowledgment of Order which was enclosed with Devaugh's acceptance and was completed by Lamac on 25 November 1996, it was expressly provided that:
"(f)acceptance (sic) our obligations to complete our contracted scope of work to the satisfaction of Devaugh Pty Ltd." (emphasis added).
On the face of it, what was contemplated by this term was a direct role by Devaugh in the determination of whether and when Lamac had completed its obligations under the subcontract.
•Somewhat similarly, Devaugh's document "Contract Requirements" which was included with and referred to in the acceptance provided:
"21.Agree …to assure (sic) completion of the contract within the time frame and to the high standard required by Devaugh Pty Ltd and the site supervisor."
Not only did this contemplate a direct role by Devaugh, but it also provided that the site supervisor might determine the standard required of Lamac's work. In both cases, this contradicted the express terms of AS2545 1993 as to the role it contemplated for the MCR.
•Clause 5.7 made specific provision with respect to security and retention moneys which included their reduction to a percentage stated in the annexure, or if none was there stated to 50 per cent, on the issue of the Certificate of Substantial Completion by the MCR. That clause also contemplated that there might be further reduction if in the opinion of the MCR that was reasonable. A quite different arrangement with respect to retention was made by Devaugh's acceptance which provided for a five per cent retention, one-half to be released as each of the practical and final certificates of the head contract were certified by the Architect.
Hence, the acceptance and the documents to which it refers reveal that terms were intended by the parties and agreed which, in a number of respects, differed from and in some cases were quite inconsistent with those which AS2545 1993 would have provided had it been the intention of the parties that AS2545 1993 should apply as a complete, or substantially complete, document.
A primary submission for Devaugh on this appeal is that the rights of the parties fall to be determined solely or substantially according to the true construction of AS2545 1993. It was stressed that this was an Australian standard document in widespread use in the construction industry so that inevitably the ramifications of the decision would be widespread. Much reliance was placed, therefore, on the need to maintain the integrity of AS2545 1993 as a document.

It follows that, on the basis of par (a) of the respondent's Notice of Contention, the first of the two substantive questions raised by this appeal, the question of construction of cl 42.1, should be resolved in the respondent's favour.

The second question

This involves the interaction of cl 40 and cl 42.1 of AS2545 1993. In essence, the issue posed by the appellants is whether the claims for payment of Lamac which found the order for summary judgment, were "claims for payment" properly made under and within the meaning of cl 42.1.
The claims are in respect of alleged variations to the works the subject of the subcontract. It is the appellant's submission that, on its proper construction, cl 42.1 applies only to claims for payment that were properly claimed under and capable of becoming payable under the subcontract. Accordingly, it is submitted that cl 42.1 is inapplicable to any claim for an alleged variation which variation has not been effected in accordance with cl 40 of AS2545 1993. It is submitted that such an alleged variation is in truth a claim for work outside the subcontract and that no amount could become payable under cl 42.1 in respect of any claim for work outside the contract.
Under cl 40.1, variations include changing the character or quality of the work and the execution of additional work. The subcontractor is not to vary the work except as directed or approved by the MCR. Even so, the subcontractor is bound only to execute a variation within the general scope of the subcontract, although there is no term which precludes him from executing directed or approved variations outside the general scope of the contract.
By cl 40.2, where the MCR gives notice of a proposed variation, the subcontractor shall advise the MCR whether the proposed variation can be effected and, if so, the effect on the construction programme and on the time for substantial completion. The subcontractor is also to provide an estimate of the cost, including costs related to delay. By cl 40.3, the main contractor and the subcontractor may agree upon the price for a variation. In the absence of agreement, cl 40.5 provides for a valuation by the MCR who relevantly is to apply "reasonable rates or prices". It is also provided by cl 40.3 that the main contractor may direct the subcontractor to provide a detailed quotation for the work of a variation supported by measurements or other evidence of cost.
In the present case, no variations were directed or approved by an MCR as there was no MCR. Devaugh itself directed or approved these variations. It is a necessary consequence in Devaugh's contention that the variations which it directed cannot be variations within the meaning of cl 40 and cl 42.1.
It is also the appellant's submission that, without an agreement as to price under cl 40.3 or a valuation of a variation under cl 40.5, a claim for a progress payment made under cl 42.1 in respect of a variation could not be assessed for its validity; there would be no criterion to guide the process under cl 42.1 of determining the amount due on the claim. It is to be noted, however, that claims under cl 42.1 are to be supported by "such information as the MCR may reasonably require" and are to be "supported by evidence of the amount due to the subcontractor". Where, as here, reasonable rates or prices are to be used in any valuation, leaving interpretative issues aside for the moment, there would in practice appear to be a sufficient procedure in cl 42.1 to enable an assessment of the amount due to the subcontractor in respect of a variation to be made, whether or not there had been agreement or a valuation under cl 40.
The appellant's contentions depend heavily on the construction of AS2545 1993 as the general conditions of contract when construed as a complete document. For reasons already given, that is not the present case. A term is to be implied, at least in cl 42.1, and Devaugh and Lamac intended by the subcontract a contractual relationship which is more direct than AS2545 1993 when read as a complete document and in isolation, would have contemplated.
In my view, in this very particular situation, much turns on the concluding sentence of the first paragraph of cl 42.1, which involves the second limb of the appellant's submission. This sentence is in these terms:
"Claims for payment shall include the value of work carried out by the subcontractor in the performance of the subcontract to that time together with all amounts then due to the subcontractor arising out of or in connection with the subcontract or for any alleged breach thereof."
The appellant points to par 6 of the statement of claim which did not plead expressly that the claims relied on come within any of the categories identified in that sentence. It is submitted they do not, as they are claims for work outside the subcontract for the reasons already identified. Hence, it is contended, the claim should not have succeeded.
From that sentence, it can be seen that there are several categories identified: "the value of work carried out … in the performance of the subcontract", together with "all amounts then due to the subcontractor arising out of or in connection with the subcontract or for any alleged breach thereof".
Variations authorised and valued in accordance with cl 40 would appear clearly enough to be work carried out in the performance of the subcontract. I note that the appellant sought to confine this phrase to the actual works the subject of the subcontract when agreed, ie without variation. But the phrase must be read in light of cl 3.1 which obliged the subcontractor to execute and complete "the work under the subcontract", for which the main contractor was to pay, relevantly, the lump sum "adjusted by any additions or deductions made pursuant to the subcontract". What is intended by cl 3.1 is made the more clear by the definition in cl 2 of "work under the subcontract" which "means the work which the subcontractor is or may be required to execute under the subcontract and includes variations …". In my view it is clear that in cl 42.1 the reference to the value of work carried out in the performance of the subcontract reflects cl 3.1. "In the performance of the subcontract" is not in my view to be distinguished from "under the subcontract", ie, it includes work which "the subcontractor is or may be required to execute" (cl 2) under the subcontract, ie, including duly authorised variations. Hence, in my view, on the proper construction of AS2545 1993, variations which were directed by the MCR in accordance with cl 40 would be within the phrase "the value of work carried out … in the performance of the Subcontract …", in the last sentence of cl 42.1 first paragraph.
It is not immediately apparent that the "value of work … in the performance of the Subcontract" and "amounts … arising out of" the Subcontract and "amounts … in connection with" the Subcontract are entirely distinct in their ambit. Indeed, given the ordinary meaning of these phrases and the body of decided cases on such phrases in similar contexts, to which I will refer shortly, it should not be assumed that the collocation of phrases used in this sentence were each intended to bear a meaning that is distinct, or entirely distinct, from the meaning of the others. The nature of the phrases, the context and the decided cases, all tend to suggest that the objective is more likely to have been to ensure that the intended field was fully covered without unwanted gaps. That being so, attention may be more profitably focussed on the extent of the intended field by virtue of the combined total effect of the phrases used, rather than to seek to discern distinctions between the phrases. In such an exercise it is also important to keep in mind the scheme of the whole of cl 42.1. In particular, the last sentence of cl 42.1 second paragraph may be instructive. So, too, the phrases used in cl 42.7 and cl 42.8, ie, the Final Payment Claim and Final Certificate provisions. Other provisions may also assist.
Turning to the phrases themselves, it can be said that "amounts … arising out of the subcontract" would include payments under the subcontract such as for delay or disruption - cl 36, for suspension of work - cl 34, for unfixed plant and materials - cl 42.1 sixth paragraph. Such payments would not normally be within the phrase "work … carried out in the performance of the subcontract" because they need not involve work carried out. But it can hardly have been intended by a phrase of such apparent breadth and generality to limit its meaning to such matters. That being so, it is not apparent that anything which was within "work … carried out in the performance of the subcontract" would not normally also be within "amounts … arising out of" the subcontract. As will be seen, the decided cases would suggest that "amounts then due to the subcontractor … in connection with" the subcontract would be wider than, and would usually include everything within, the phrase "amounts … arising out of".
The combined phrase "amounts … arising out of or in connection with the subcontract" could hardly be more widely expressed. While the context can be material, the phrase "in connection with" would seem to require no more than a causal or logical relationship to or association with the subcontract. They are words generally accepted as of the widest import, as can be seen from the consideration in many decisions, usually in the context of an arbitration clause. Whether "in respect of" bears as wide a meaning is a question which must be resolved according to the context; see, for example, Trustees Executors and Agency Co Ltd v Riley [1941] VLR 110 at 111 per Mann CJ, Paterson v Chadwick [1974] 2 All ER 772.
"In connection with" has been held wide enough to include questions involving the rectification of the contract; Dowell Australian v Tridan Contractors [1982] 1 NSWLR 6, Roose Industries Ltd v Readymix Concrete Ltd [1974] 2 NZLR 246, Ashville Investments Ltd v Elmer Contractors Ltd (1987) 37 BLR 55 (UK.CA). Even the narrower limb "arising out of" of the composite phrase in cl 42.1 first paragraph has been held to be wide enough to ground an arbitrator's jurisdiction in quantum meruit based on frustration; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 366 and 392; but not a quantum meruit claim where, in truth, there had not been a concluded contract between the parties; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221. I note the observation in Coldefa at 366 that "disputes arising out of" is an expression wider than "disputes under". When "in connection" with is coupled with "arising out of", as in the last sentence of cl 42.1 first paragraph, the intention is necessarily even wider. See also Government of Gibraltar v Kenney [1956] 2 QB 410.
The phrase "in respect of this" contract has been held to be sufficient in an arbitration clause to include an issue of a collateral contract; Overseas Union Insurance Ltd v AA Mutual International Insurance Co Ltd [1988] 2 Lloyd's Rep 63, whereas the narrower phrase "arising under" is not sufficient for this purpose; Fillight (Runcorn) v Aqua-lift (1989) 45 BLR 27 (CA, UK). A supplemental contract, as distinct from a collateral contract, would appear to be within either "arising under" or phrases such as "in connection with" or "in respect of"; Graham v Seagoe [1964] 2 Lloyd's Rep 564 at 567. It has been held that claims in tort with a nexus to the contract can be within phrases such as "in connection with" in the context of arbitration clauses; see Woolf v Collis Removal Service [1948] 1 KB 11, The Damianos [1971] 2 QB 588 at 595, Ulysses Compania Naviera SA v Huntingden Petroleum Services Ltd [1990] 1 Lloyd's Rep 160.
There is no present need to consider the full scope intended for the final phrase in the last sentence of the first paragraph of cl 42.1, ie amounts then due "for any alleged breach thereof". They would appear to include at least any claim for liquidated damages pursuant to the terms of a subcontract although such a claim would also appear to be within each of the phrases "arising out of" and "in connection with" in any event. Whether this final phrase adds to the overall scope of the earlier phrases, or is merely included out of caution and for certainty, is an issue which need not be determined for the purposes of this appeal.
It should be noted that by the second paragraph of cl 42.1, on receipt of the claim contemplated by the first paragraph, the MCR is to issue a payment certificate stating the amount of the payment to be made by the main contractor to the subcontractor. The certificate is to set out the reasons for any difference between the amount claimed and that certified. There are to be allowed in the payment certificate amounts paid "under the subcontract" and "amounts otherwise due from the main contractor to the subcontractor arising out of or in connection with the subcontract" (emphasis added). These amounts are expressly stated to include but not to be limited to "any amount due or to be credited under any other provisions of the subcontract". The provision also requires that there be allowed in the certificate amounts due from the subcontractor to the main contractor "arising out of or in connection with" the subcontract. While there is no express provision authorising such a deduction, it has been held that, in this and similar contexts, amounts due from the subcontractor includes any claim by the main contractor for liquidated damages for delay in practical completion as assessed by the MCR; Blue Chip Pty Ltd v Concrete Constructions Pty Ltd (supra) at 35 and 36, Algon's Engineering Pty Limited v Abbey Group Contractors Pty Limited (supra) at 228 ‑ 229.
It is the amount certified pursuant to the second paragraph of cl 42.1 which must be paid to the subcontractor by the main contractor. Such payment is without prejudice to the subsequent resolution of any dispute as to whether the amount is properly due and payable.
As a matter of commercial sense the intention would appear to be that all matters properly the subject of a claim under the first paragraph are to be assessed and included in the payment certificate under the second paragraph of cl 42.1. There is little persuasive force in the appellant's submission that the phrase amounts due "for any alleged breach thereof" at the end of the first paragraph was included merely to give the main contractor notice, but deliberately excluded from the second paragraph so that they would not become the subject of a payment certificate, thereby further revealing an intention that claims for amounts due "for any alleged breach thereof" were not to be construed as coming within the phrase "arising out of or in connection with" the subcontract in either the first or the second paragraphs.
The correctness of that view is reinforced, not only by the reasoning in the two decisions just referred to, but also by cl 42.7 and cl 42.8 which deal with Final Payment Claims and Final Certificates. These subclauses do not use the phrase in the first paragraph of cl 42.1 "work carried out … in the performance of the subcontract", but do use the balance of the composite phrase in that paragraph, including "for any alleged breach thereof". In respect of the use of this last phrase, it is not apparent why it should have been intended that claims for any alleged breach of the subcontract by the main contractor were to be the subject of both progress claims and the final claim, if the only entitlement of the subcontractor to be paid liquidated damages for such a breach was limited to the final payment. Especially is that so when, as has been held, the main contractor may have its claims for liquidated damages assessed and deducted from progress claims. With regard to the omission from cl 42.7 and cl 42.8 of "work carried out … in the performance of the subcontract", it is necessarily the case that all payments due to the subcontractor for all such work are to be included in the final payment claim and the final certificate, so that in cl 42.7 and cl 42.8 the phrase "all moneys … due … under or arising out of the Subcontract" must be wide enough to include payments due for "work carried out … in the performance of the subcontract".
These matters tend to confirm, in my view, that no distinction in substance is intended by the differences in phraseology between the first and second paragraphs of cl 42.1 which have been considered.
Further, it is to be remembered that by cl 47.1 the parties agreed to continue to perform the subcontract despite a dispute and agreed that both should continue to comply with cl 42.1. The scheme for provisional payments pursuant to cl 42.1 being the price of the bargain whereby the main contractor could ensure the completion of the work and the subcontractor could ensure the continuance of a reasonable cash flow from the main contractor during the progress of the works (and so remain solvent and able to complete the works).
All matters of dispute "arising out of or in connection with the subcontract" are, by cl 47.1, referable to arbitration. The authorities noted earlier, which indicate the breadth of meaning properly accorded to such a composite phrase in that context, indicate that, inter alia, a claim for liquidated damages for breach by either party would be within the ambit of the arbitration clause. If that be so, it is not apparent why in the first and second paragraphs of cl 42.1 similar words in respect of progress claims and the assessment and certification of those claims would not also include claims for liquidated damages for a breach of the subcontract. Similarly, it is clear that all disputes as to payments due to the subcontractor for "work carried out … in the performance of the subcontract" are intended to be within the scope of cl 47.1.
Given the decided cases, the last paragraph of cl 47.1, which allows claims in tort, under statute, for restitution based on unjust enrichment, rectification or frustration to be included in an arbitration, may well be thought to be at least substantially included out of caution and in a desire for certainty.
Clause 45 deals with termination of the subcontract by frustration. By cl 45(a), the subcontractor is entitled, inter alia, to be paid for work executed prior to the date of frustration "the amount which would have been payable if … the subcontractor had made a progress claim on the date of frustration", ie, a claim pursuant to cl 42.1. This provision provides, in my view, a further and quite compelling indication that it was not intended that there should be any narrowing of meaning of the phrases used in the last sentences of the first and second paragraphs of cl 42.1, nor that any differences between their phraseology were intended to result in any difference of meaning. In particular, I find no support for any contention that the phrase in the first paragraph of cl 42.1 "amounts … arising out of or in connection with" the subcontract should be read other than according to the full width of its natural meaning.
In the context of this particular subcontract in which the term identified earlier is to be implied into cl 42.1 and in which Devaugh and Lamac intended that they deal more directly than AS2545 1993, when read as a complete document and in isolation, might otherwise have contemplated, it is, in my view, quite clear that claims for progress payment for variations required by Devaugh and carried out by Lamac constituted claims for payment "arising out of or in connection with" this subcontract within the meaning of cl 42.1 first paragraph as it applied and operated in this subcontract. Hence, each of these claims was "a claim for payment" within cl 42.1 fourth paragraph so that, when cl 42.1 is read with the implied term identified earlier, Lamac was entitled to receive payment from Devaugh of the amount of each of these claims if, within 35 days of its delivery, no payment certificate issued. That was shown to the Master to have been the case.

In further support of this view, there is, in my view, in the circumstances of this case, a clear, causal and logical relationship with, or association between, the works under the subcontract, which by definition included variations, and variations to those works which (although not authorised or processed in accordance with cl 40) were nevertheless variations sought by the main contractor and accepted as such and performed by the subcontractor, even though strictly it may not have been obliged to do so.

Appointment of Main Contractor's Representative

The appellant also contends that by its appointment of an MCR on 23 April 1999 after the works had reached practical completion, the value of the variation subsequently assessed by that MCR, viz $168,480, was binding on the parties and no greater sum could be payable under cl 42.1, so that no greater sum could or should have been ordered by the Master.
In my view, this ignores the clear intention and effect of the fourth paragraph of cl 42.1. No payment certificate had issued within 35 days of the claim. It was that circumstance which gave rise to the entitlement of the subcontractor to be paid "the amount of the subcontractor's claim". As has been indicated this payment is provisional only, it is on account and does not constitute an admission of liability, see the fifth paragraph of cl 42.1. Nevertheless, the subcontractor was entitled to be paid the amount of those claims. Its entitlement is, of course, subject to the final payment claim and final certificate procedures and thereafter to the dispute resolution procedure contemplated by cl 47 as a consequence of which Lamac will be obliged to refund any amount by which these claims were excessive.

Other reasons advanced for refusing summary judgment

Before the learned Master and on this appeal the appellant advanced a number of matters which it was submitted should have persuaded the Master in any event not to order summary judgment. These may be summarised as:
(a)the claims were for progress not final payments,
(b)there was dispute whether the moneys were properly finally due to Lamac,
(c)the capacity of Lamac to repay in the event of an ultimate finding against it was in doubt,
(d)there had been a reference to arbitration,
(e)there were a number of set‑off claims,
(f)the claims had not been directed, approved or considered by an MCR, and
(g)the MCR appointed on 23 April 1999 had assessed the amount payable in respect of the relevant variations at $168,480.
For the most part these matters have already been considered. They reveal the underlying concern of Devaugh that, even if it should succeed in the arbitration being conducted pursuant to cl 47, it will not in fact recover its money, or all of it.
In my view, however, it is apparent from the nature of what is raised that Devaugh is in truth seeking to introduce issues as to its ultimate rights and liabilities under the subcontract into a claim based on a contractual obligation to make provisional payments. None of the matters agitated provides an answer in law to the obligation of the main contractor to have paid to the subcontractor the amounts which comprise the judgment sum. In this respect, I notice cl 47.5 of AS2545 1993 which includes a provision that "Nothing herein shall prejudice the right of a party to institute proceedings to enforce payments due under clause 42 …".

Conclusion

As has been indicated earlier, there is no reason to consider the cross‑appeal. For the reasons which have been set out, I would dismiss the appeal.