Geotech Pty Ltd v Broadspectrum (Australia) Pty Ltd & Anor
[2018] VCC 1047
•12 July 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-18-01879
| GEOTECH PTY LTD | Plaintiff |
| v | |
| BROADSPECTRUM (AUSTRALIA) PTY LTD and COMDAIN CIVIL CONSTRUCTIONS PTY LTD t/a | First Defendant Second Defendant |
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JUDGE:HIS HONOUR JUDGE COSGRAVE
WHERE HELD: Melbourne
DATE OF HEARING: 22 June 2018
DATE OF JUDGMENT: 12 July 2018
CASE MAY BE CITED AS: Geotech Pty Ltd v Broadspectrum (Australia) Pty Ltd & Anor
MEDIUM NEUTRAL CITATION: [2018] VCC 1047
RULING
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Legislation Cited: Building and Construction Industry Security of Payment Act 2002 (Vic); Commercial Arbitration Act2011 (Vic)
Cases Cited:Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd (2009) 26 VR 112; Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140; Nepean Engineering Pty Ltdv Total Process Services Pty Ltd (in liq.) (2005) 64 NSWLR 462; Rinehart v Walker [2012] NSWCA 95; Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183; Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd [2011] NSWSC 195; TS Constructions Pty Ltd v Piecor Pty Ltd [2009] VCC 1045
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Andrew | Champions Lawyers |
For the Defendant | Mr M Bonnell (solicitor) | White and Case |
HIS HONOUR:
Issue
1 The main issue in this application is whether the plaintiff (“Geotech”) is entitled to judgment against the defendants (collectively known as “TransCom”) or whether the proceeding should be stayed and referred to arbitration. Geotech seeks judgment and TransCom wants a stay under section 8(1) of the Commercial Arbitration Act2011 (Vic).
Background
2 Geotech is a company which engages in construction work. The defendants operate an unincorporated joint venture.
3 By an agreement made on about 18 August 2014, Geotech made an agreement with Goulburn Murray Water to construct a weir and fish lock at Box Creek.
4 By an agreement made on about 9 May 2016, Geotech made an agreement with Goulburn Murray Water to construct a weir regulator at the Fish Point Weir in Swan Hill.
5 By a deed of novation made on 5 August 2016 between Geotech, Goulburn Murray Water, and TransCom, the Fish Point Weir agreement was novated from Goulburn Murray Water to TransCom. As a result of the novation, TransCom replaced Goulburn Murray Water as the principal in the agreement as if it were the original party and TransCom assumed all the obligations of Goulburn Murray Water under the agreement.
6 By a deed of novation made on 5 August 2016 between Geotech, Goulburn Murray Water, and TransCom, the Box Creek agreement was novated from Goulburn Murray Water to TransCom. As a result of the novation, TransCom replaced Goulburn Murray Water as the principal in the agreement as if it were the original party and TransCom assumed all the obligations of Goulburn Murray Water under the agreement.
7 On about 29 March 2017, Geotech sent TransCom a payment claim pursuant to Building and Construction Industry Security of Payment Act 2002 (Vic) (“the SOP Act”) seeking $306,264.07 for construction work performed within the meaning of the SOP Act at Fish Point.
8 TransCom did not serve Geotech with a payment schedule within 10 business days of service of the Fish Point payment claim.
9 On about 24 April 2017, TransCom sent a payment schedule to Geotech acknowledging receipt of the Fish Point payment claim.
10 On about 5 April 2017, Geotech sent TransCom a payment claim pursuant to the SOP Act seeking $41,153.12 for construction work performed within the meaning of the SOP Act at Box Creek.
11 TransCom did not serve a payment schedule upon Geotech within 10 business days of service of the Box Creek payment claim.
12 Subsequently, on about 24 April 2017, TransCom sent Geotech a payment schedule acknowledging receipt of the Box Creek payment claim on 5 April 2017.
13 On about 26 March 2018, Geotech served a further payment claim upon TransCom for $560,383.40 in respect of construction work at Fish Point. TransCom responded by sending a payment schedule in early April 2018 relating to that payment claim. The payment schedule showed an amount of $109,305.63. However, in its covering letter to Geotech, TransCom said that Geotech owed it $248,109.94 under the Box Creek agreement and so, because the balance of money owing favoured TransCom to the extent of $138,804.31, it did not intend to make any payment to Geotech.
14 Because Geotech was dissatisfied with the approach taken by TransCom, Geotech arranged for an adjudication of the March 2018 payment claim regarding Fish Point.
15 John McMullan of Rialto Adjudications Pty Ltd acted as the adjudicator in respect of the adjudication application for the March 2018 payment claim. On about 27 April 2018, he delivered an adjudication determination which held that:
· TransCom pay Geotech an amount of $462,162.36 (which amount included the adjudicator’s fees of $24,200.00);
· The adjudicated amount was payable on 12 April 2018; and
· The rate of interest payable on the adjudicated amount was 12% per annum.
16 The March 2018 Fish Point payment claim included all the claims made in the initial Fish Point payment claim made in March 2017 totalling $306,264.07. The March 2018 Fish Point payment claim did not include any claim for interest which accrued upon the amount due under the initial claim.
17 On 2 May 2018, Geotech issued the writ and statement of claim in this proceeding in which it claimed:
· $306,264.07 on its 2017 Fish Point payment claim;
· interest under the Fish Point contract for the period from 19 April 2017 to 2 May 2018 of $37,355.83. This claim was made on the basis that clause 37.2 of the Fish Point agreement provided that TransCom pay Geotech the amount due within 21 days after the superintendent received the payment claim. The date of 19 April 2017 represented 21 days after the Fish Point payment claim was served;
· $41,153.12 on the Box Creek payment claim; and
· interest under the Box Creek contract for the period from 26 April 2017 until 2 May 2018 of $5,114.26. Similar to the provision in the other agreement, clause 39.2 of the Box Creek agreement provided that TransCom pay Geotech the amount due within 21 days after the superintendent received the payment claim. The date of 26 April 2017 represented 21 days after the Box Creek payment claim was served.
18 On 22 May 2018, TransCom paid Geotech $468,065.85 for the adjudicated amount. Geotech claims that in order to cover the amount of interest that was payable, namely $6,077.75, the payment ought to have been $468,239.75.
19 On 23 May 2018, TransCom filed its summons under Section 8 of the Commercial Arbitration Act 2011 (Vic).
Consideration
Geotech’s position
20 In general terms, Geotech claims that it is entitled to immediate judgment against TransCom in relation to payment claims made under the SOP Act. Geotech seeks summary judgment against TransCom pursuant to section 16(2) of the SOP Act.
21 Geotech argued that the affidavit of Andrew Rattray verified the critical factual requirements for a judgment, namely:
a) service of payment schedules under both the Fish Point and Box Creek agreements;
b) TransCom’s failure to provide responsive payment schedules within the time permitted by section 15(4) of the SOP Act;
c) the unpaid portion of the claimed amounts,
Further, Geotech submitted that there was no evidence filed in opposition to Rattray’s affidavit.
22 Geotech sought judgment as follows:
Payment Claim Amount of unpaid payment claim Interest pursuant to the SOP Act to 22 June 2018 Fish Point Nil $36,046.86 Box Creek $41,153.12 $5,709.57
23 Geotech contended that the approach to adopt to its claim was that taken by Judge Shelton in TS Constructions Pty Ltd v Piecor Pty Ltd.[1] His Honour made two pertinent comments in the judgment. First, he said that the approach to be taken to a summary judgment application was that stated by the High Court in Fancourt v Mercantile Credits Ltd[2] as follows:
“The power to order summary or final judgment is one that should be exercised with great care. It should never be exercised unless it is clear that there is no real question to be tried.”
[1][2009] VCC 1045
[2](1983) 154 CLR 87, 89
24 Secondly, to the extent that the respondent had objections to the applicant obtaining a judgment because the applicant had allegedly not complied with the terms of the agreement regarding delivery of payment claims, such matters could not be raised in a summary judgment application if they had not already been raised in a timeously served payment schedule. Where no adjudication was sought, summary judgment could not be resisted on grounds which could have been raised in a payment schedule leading to adjudication.[3]
TransCom’s position
[3]TS Constructions Pty Ltd v Piecor Pty Ltd [2009] VCC 1045 at [14], quoting the New South Wales Court of Appeal in Nepean Engineering Pty Ltdv Total Process Services Pty Ltd (in liq.) (2005) 64 NSWLR 462, 484.
25 TransCom grappled with the essence of the Geotech claim to a limited degree. It referred to certain clauses in the Fish Point and Box Creek construction agreements as follows:
· Clause 42 of the Fish Point agreement[4] provided that disputes were to be commenced by the delivery of a notice of dispute and that disputes could be referred to mediation. If a mediation were terminated before the matter settled, then the dispute was to be referred to arbitration.
[4]Clause 44 was the equivalent provision in the Box Creek agreement.
· Clause 34.7 of the Fish Point agreement[5] provided that liquidated damages were payable to the principal if the contractor did not achieve practical completion by the due date. The clause also allowed for the principal to set-off any liquidated damages against amounts which would otherwise be payable to the contractor.
· Clause 37.2 of the Fish Point agreement[6] dealt with the right of set-off and stated that when a progress claim was made by the contractor, the superintendent was to prepare a progress certificate which showed, among other things, “moneys due from the contractor to the principal under the contract”. In substance, the principal was obliged to pay the contractor the balance of the progress certificate after deducting retention moneys and setting-off such amount as it elected. If the setting-off produced a negative balance, the contractor was to pay that balance to the principal within seven days of receiving the notice.
[5]Clause 36.7 was the equivalent provision in the Box Creek agreement.
[6]Clause 39 is the equivalent provision in the Box Creek agreement.
26 TransCom’s view of Geotech’s claims was that Geotech simply claimed money due under the two construction agreements. From TransCom’s perspective, there was no serious argument that these disputes fell within the scope of the agreement to arbitrate. Under the Fish Point agreement, the disputes to be referred to arbitration were those set out in clause 42,[7] which included “a difference or dispute… between the parties…in connection with the subject matter of the contract”. The clause included in its examples of disputes those concerning “a Superintendent’s direction”.
[7]Clause 44 is the equivalent provision in the Box Creek agreement.
27 Clause 42.4 contained an exception to the arbitration provision. It was headed “Summary relief” and provided that “nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under the contract or to seek injunctive or urgent relief”.
28 However, according to TransCom, this provision did not apply because it related only to claims for payment about which there is no dispute. This proposition was said to be based upon a reading of the heading “Summary relief” and the effect of the words “enforce payment due”. TransCom argued that clauses 42.4 and 44.4 contemplated that a party may have recourse to a court to seek enforcement of a settled sum that was unambiguously due (either because the entitlement to payment was not disputed or because the entitlement had been settled through either arbitration or a statutory adjudication).
29 In the present case, TransCom contended there was a dispute about whether the amount claimed by Geotech was payable. This was because TransCom claimed to be owed money by way of liquidated damages of $193,833 under the Fish Point agreement and $307,018.16 under the Box Creek agreement. Hence, TransCom contended that this was not a summary proceeding but a dispute about whether the liquidated damages claim was valid and whether a right of set-off could be exercised.
30 TransCom submitted that it was open to Geotech to resolve the dispute in one of two ways. Either it could have commenced an adjudication under the SOP Act or it could have pursued its claim against TransCom through the means set out in each of the contracts. Instead, it has done neither and has issued court proceedings – prematurely in the view of TransCom.
31 TransCom appeared to accept that even after allowing for the public holidays at Easter, TransCom served its payment schedule 11 days after receipt of the payment claim from Geotech. Nonetheless, it suggested that the payment claim was the last one made under the Box Creek agreement and clause 39.4 of that agreement provided for a different regime, and a longer response time, for a final progress claim. So, TransCom contended that there was a live question about whether the SOP Act should be applied in the simplistic way proposed by Geotech, disregarding the parties’ rights and obligations under the Box Creek agreement.
32 Even if TransCom were required to serve the payment schedule within 10 business days, TransCom argued in the alternative that it was only slightly late and this occurred in the context of a dispute between the parties. It contended that the Box Creek agreement provided mechanisms for dealing with disputes in these circumstances and there was no obvious reason why the mechanisms should be disregarded.
33 For this reason, TransCom sought a stay of Geotech’s claim pursuant to section 8(1) of the Commercial Arbitration Act 2011 (Vic), which provides:
“a court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the parties first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed”
Accordingly, TransCom submitted that the section was clear – if a dispute fell within the scope of the agreement to arbitrate, the Court must stay the proceedings. It had no discretion to do otherwise.
34 In these circumstances, TransCom contended that the only issue to be determined in respect of its application was whether the dispute the subject of the proceedings fell within the scope of the agreement to arbitrate.
35 Geotech’s response to TransCom’s argument for a stay was to rely upon Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd[8] to say that where one party brought a claim for payment under section 15(2) of the New South Wales legislation (being the equivalent of section 16(2) of the SOP Act) and the other party sought a stay under the equivalent of section 8 of the Commercial Arbitration Act, the stay was refused because the claim under section 15(2) was not arbitrable. The court held that, if there were a power in the agreement between Geotech and TransCom which sought to prevent a party from exercising the right under section 15(2) to bring proceedings, that provision was void under section 34 (being the equivalent of section 48 of the Victorian legislation).
[8][2011] NSWSC 195 (“Siemens”).
36 The New South Wales Court of Appeal in Rinehart v Welker[9] referred with apparent approval to the decision in Siemens. Given the nature of the SOP Act, I regard the New South Wales cases as persuasive. Especially is this the case where TransCom did not take serious issue with the authority or direct me to other cases which it said were of greater relevance or assistance in dealing with the case at hand.
[9][2012] NSWCA 95.
37 In Siemens, Ball J referred to three aspects of the New South Wales version of the SOP Act which suggested that the legislation established a particular regime for the recovery of progress payments and the regime was not the subject of arbitration.[10] His Honour concluded that arbitration could not be substituted for an adjudication under the SOP Act. Further, he said that the supervisory jurisdiction which the court exercised over the adjudication process could not be the subject of an arbitration. The court was exercising a public function to ensure the integrity of a dispute resolution process established by parliament.[11]
[10]Siemens [2011] NSWSC 195 at [40]–[42].
[11]Ibid at [43].
38 TransCom referred in its submissions to the decision of Seabay Properties Pty Ltd v Galvin Construction Pty Ltd,[12] which was authority for the proposition that liquidated damages may not be taken into account to offset a claim for payment made in the context of the SOP Act. According to TransCom, this applied only in the context of an adjudication under the SOP Act. Because there was already an adjudication under the Box Creek agreement, it was said to be irrelevant to that context.
[12][2011] VSC 183.
39 In Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd,[13] Vickery J analysed the SOP Act and its central purposes.[14] In short, some of the main points made were that:
[13](2009) 26 VR 112.
[14]Ibid at [36]-[49].
· The object of the scheme created by the Act was to keep the money flowing in the contracting chain by enforcing timely payment and sidelining protracted disputes.
· A basic feature of the legislation was that nothing affected any of the rights which a party to a construction contract had. The Act aimed to maintain the cashflow of claimants by enabling them to recover quickly amounts which the adjudication process said they were entitled to.
· A person who paid money found due could seek to recover the same in later court proceedings which decided the ultimate rights of the parties.
· The principle that the respondent to a payment claim for a progress payment “should pay now and argue later” was given full effect under the Act.[15] The regime promoted the object of the Act, that is, the facilitation of timely payments between parties to a construction contract and provision for the rapid resolution of disputes arising in respect of progress claims under those contracts.
· The Act removed from consideration in the interim payment regime matters such as claims for non-claimable variations, compensation for events such as latent conditions, time-related costs and damages for breaches of the construction contract. This removal of some claims for later resolution under the general law was designed to give full effect to the concept of “pay now and argue later”.
[15]Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [96].
40 In the circumstances of this case, I consider that Geotech has the better argument and is entitled to the judgment sought. The SOP Act has been referred to as creating a situation in which the guiding principle is “pay now and argue later”. TransCom received the payment claims from Geotech and did not respond in a timely manner with payment schedules in 2017. TransCom was subject to the adverse adjudication in 2018. The SOP Act allows for a claimant to act promptly to recover payment. When that occurs, the respondent cannot advance a crossclaim or raise a defence in relation to a matter arising under the particular construction contract. That being so, it is my view that TransCom should pay Geotech and make different arrangements to pursue its claims against Geotech – for example the claims for liquidated damages.
41 As to the issue of the stay, I note the argument raised by Geotech and its reliance upon the New South Wales Supreme Court in Siemens at paragraph 35. As noted, TransCom did not seriously contest this authority by showing it was irrelevant or distinguishable. It offered no alternate authority on the point. That being so, I am not satisfied that the dispute which TransCom seeks to raise is arbitrable and that Geotech’s proceeding should be stayed pending reference to arbitration.
42 The parties should give effect to these reasons and file and serve by noon on 17 July 2018 any submissions regarding the form of final orders and costs.
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