Harlech Enterprises Pty Ltd as trustee for Harlech Family Trust v Beno Excavations Pty Ltd trading as Benex Pipelines & Anor

[2022] HCATrans 228

[2022] HCATrans 228

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Canberra  No C19 of 2022

B e t w e e n -

HARLECH ENTERPRISES PTY LTD AS TRUSTEE FOR HARLECH FAMILY TRUST

Applicant

and

BENO EXCAVATIONS PTY LTD TRADING AS BENEX PIPELINES

First Respondent

JONATHAN H SIVE

Second Respondent

Application for special leave to appeal

GORDON J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON THURSDAY, 15 DECEMBER 2022, AT 2.49 PM

Copyright in the High Court of Australia

MR A.J. GREINKE:   May it please the Court, I appear with my learned friend, MS H.L. LILLEY for the applicant.  (instructed by Mills Oakley)

MR M. CHRISTIE, SC:   May it please the Court, I appear with my learned friend, MR D.C. ROBENS for the first respondent.  (instructed by Joseph Tallarita)

GORDON J:   Thank you, Mr Christie.  Mr Greinke.

MR GREINKE:   Your Honours, this application calls upon this Court as the apex appellate court to resolve a difference of opinion between lower courts and, in particular, between two intermediate appellate courts on an important question in relation to the construction of the Security of Payment legislation. 

In my submission, this Court ought to take up the case in order to resolve that issue nationally – and I say “nationally” because the Security of Payment legislation, while starting in New South Wales, has grown to the point where, in substance, we submit, it is akin to a national scheme law.  Having regard to what this Court has said in cases such as Marlborough Gold Mines, the importance of uniformity in the interpretation of such legislation is a prime criterion driving the special leave in this case.

We submit, it should not be left for single judges outside the Australian Capital Territory and New South Wales in order to try to work out for themselves what the proper construction of the Act is in relation to issue estoppel, or to grapple with the differing reasons of the two intermediate appellate courts in this case, and other courts.

The respondents to the application say there is no difference of opinion, in reality, between the two courts.  We address that, in particular, in our reply at pages 121 to 123 of the application book.  We refer to his Honour Justice Kennett expressly disagreeing with the reasoning of the majority in Dualcorp and analysis at paragraph 2 in relation to the differing approach that Justice Lee took in relation to Dualcorp, also.

Part of the difference between the approach taken below and the approach taken by Dualcorp and those single judges that followed Dualcorp is illustrated by the quotation from Justice Macfarlan at page 122 of the application book, which was relied upon by his Honour Justice Applegarth in the John Holland Case.  That is a reference to the Act, when read as a whole, manifesting:

an intention to prevent re‑agitation of the “same issues” –

which I have highlighted, and also highlighted that:

if questions of entitlement have been resolved and an adjudication determination, those findings may not in my view be reopened upon a subsequent adjudication.

In contrast, the respondents draw upon what they say is the same result from President Allsop and they refer to a quote from his Honour at page 114 going to 115 of the application book.  While his Honour agrees with Justice Macfarlan in relation to “the repetitious use of the adjudication process”, you will see that his Honour uses the language of the “same claim”.  That is at the top line of page 115.

It is that difference between same claim and same issues where the heart of the difference between the reasoning between the ACT Court of Appeal and the New South Wales Court of Appeal lies in relation to the operation of issue estoppel, and that is the substance of the finding of the ACT Court of Appeal is that the metes and bounds of the principles of finality in regards to security of payment are in regards to wholly repetitious payment claims for the same work, which was the situation factually in Dualcorp.

GORDON J:   So, just so I am clear about the distinction, Dualcorp identifies that as the underlying principle which prescribes the metes and bounds.  How does the inconsistency arise here on the reasons of the ACT Supreme Court?

MR GREINKE:   On the reasons of the ACT Supreme Court, the reliance upon issue estoppel itself was rejected both by Justice Kennett in relation to the application of the construction of the Act and by Justice Lee more broadly in relation to its application.

GORDON J:   Is one way of looking at the way Dualcorp identify it, especially in terms of President Allsop as he then was, in effect, an abuse of process rather than issue estoppel?

MR GREINKE:   That is certainly the way that the President looked at the question and his Honour did not go on to analyse or come to a view about the issue estoppel findings that the other two members of the court agreed with.

GORDON J:   The reason why I ask that is because if, as you say, we have a security of payment system here, it has a statutory purpose, and that is to bring about on one hand a mechanism or a scheme for the ready assessment of claims in circumstances where cashflow is the driving force on one side of the ledger and certainty is the driving force on the other side of the ledger.  I raise those questions because, as I understand the facts here, am I right to read that there is a large number of years between the claims being made here, so that we do not have the sort of considerations that might bear upon the proper statutory construction question?

MR GREINKE:   No, that is incorrect here in relation to the particular facts.  There is a reference by Justice Lee to the work being “years apart”.  It was actually one year apart between two years of a successive tender by Icon Water.

GORDON J:   This is not a final claim, is it?  It is an interim claim.

MR GREINKE:   No, it is an interim claim, and really the issue was the findings of the first adjudication on key issues, namely, did a contract of construction exist as opposed to employment, and what the remuneration rate – in this case, 15 per cent of the gross profit – was that applicable to the renewed tender project for which it had been agreed in the first instance.  In relation to those matters, the adjudicator, we say, was correct to say, having made findings on those questions of entitlement – to use the language of Justice Macfarlan – in relation to the same issue, that issue was resolved because on the adjudicator’s findings it was dealing with the same construction contract between the same parties but simply in relation to two different iterations of an annual tender process in relation to the Icon Water.

GORDON J:   So, different work?

MR GREINKE:   It was different work, and therefore it is not a wholly repetitious payment claim in the sense that Justice Allsop was dealing with, it is different work, but it illustrates the suitability of this case as a vehicle to deal with the special leave point because it does really turn upon the question of issue estoppel, because as you would have seen in the reasons, the error made by the adjudicator was to treat section 24(4), which is a rule about the valuation of work, as having a broader application to other matters about how the adjudicator goes about finding that value and accordingly treat it as interchangeably with issue estoppel.

The argument at first instance, which my client was unsuccessful there at the Court of Appeal, was to say that error does not matter because if issue estoppel was available to the adjudicator, and the adjudicator referred to issue estoppel as a kind of secondary justification, that meant that there was no error because the same result came through a different process.  It was only because his Honour Justice Mossop and the Court of Appeal here found that there was no application at all of issue estoppel, and it is in fact an error from the adjudicator to have relied upon any of the reasoning in the first adjudication.

So, squarely it comes down to a question, partly of policy, in relation to how the Act operates, and if one is thinking about issues such as what will be the interpretation that best achieves the purpose of the Act – to call upon the Acts Interpretation Act considerations – that is a matter that Justice Macfarlan dealt with in Dualcorp, drawing upon the objects of the Act, and, in his view, the availability of issue estoppel would enhance the operation of the Act by reducing disputation and enhancing the efficiency of the process.  He specifically drew upon what this Court said in the case of Kuligowski, which we have referred to in our outline, and found that the reasoning in that case, which was that a quick and cheap and speedy resolution of these matters on an informal basis would not be assisted by an interpretation that precluded issue estoppel.

And his Honour Justice Macfarlan, whose reasoning we embrace and say, on appeal, should be adopted, says that those observations by this Court in Kuligowski apply equally to the Security of Payment legislation, and therefore the practical result in relation to the Court of Appeal below, which is to preclude issue estoppel from one of the matters that an adjudicator can deal with, and limits the scope of finality to wholly repetitious payment claims, is inimical to the effective operation of the legislation and will create uncertainty, cost and so on in relation to the way in which the Act operates.

In relation to errors, there are a number identified in relation to those matters but, more importantly, we make the point that, in answer to the respondent’s submission that this is really just orthodox statutory interpretation, we have identical provisions – interpreted by Justice Macfarlan, Justice Kennett and Justice Lee – neither of which can be reconciled.  And I can identify those in relation to your Honour.

Two examples are Justice Kennett and Justice Macfarlan both find that the sections point to the decisions being relevantly final in the Kuligowski sense.  Justice Lee does not.  Another example is that ‑ ‑ ‑ 

GORDON J:   Is that able to be drawn in circumstances where here you have an interim payment, that seemed to pay quite heavily with Justice Lee.

MR GREINKE:   That works both ways in that Justice Macfarlan’s reasoning was that the fact that the rights of the parties are preserved by section 38, in his view, counted in favour of issue estoppel applying with more strength to the judications on the basis that the parties’ final rights to argue all the matters out in a court or through some arbitration, without being affected by anything that has been ruled on by – and adjudicated – strongly pointed to the adjudicator being able to apply the rules of issue estoppel in that particular case.

This is where we have this difference of a view because, with the same sections, Justice Lee is taking a different position to Justice Macfarlan, and, in relation to the finality question, Justice Lee took the opposite view to Justice Kennett on the same court below in relation to whether the relevant provision was final.

Those are the matters that should not be left to individual single judges in other jurisdictions to try to struggle through and work out, say in Victoria or South Australia or other jurisdictions, but ought to be taken up by this Court so that there is an authoritative statement in relation to how those matters are dealt with.

We also point to one further issue in relation to section 38.  If your Honours have the application book, section 38 is at page 107 of the application book.  Your Honours will see there that the section which I submit is intended to preserve one’s final rights under the contract, and your Honours see it is headed:

Effect of part on civil proceedings

(1)Nothing in this part affects any right that a party to a construction contract –

(a)may have under the contract; or

(b)may have under part 3 (Right to progress payments) –

may have under the Act, and:

(2)Nothing done under this part affects any civil proceeding arising under a construction contract –

For the reasons we have in our written outline, we say that each of Justice Kennett and Justice Lee erroneously interpreted section 38 as doing two things which we say it does not do.  One, 38(1)(b) is said to operate in relation to adjudications under part 4, when plainly it says it does not affect a right a party has under part 3, which is different.  Part 3 is about their right to a progress payment.  Part 4, which this sits under, is about the adjudication progress.  So, the argument that 31(b) can, in a kind of circular fashion, affect the adjudication process does not follow on the expressed words there.

The other one is that 38(2) is referring, in our submission, to a civil proceeding for final rights in relation to the contract.  It is not referring to the adjudication process under the Act, whereas Justice Lee says I can see 38(2) is expansive enough to say that nothing under this part affects further

adjudications, but again, there is a difficulty with that because one of the provisions which is accepted to affect future adjudications is section 24(4).  Section 24(4) is in part 4.  If that reasoning is correct, section 24(4) is also ousted, as is any issue about wholly repetitious payment claims as an abuse of process would also have no room to operate.

So, those are errors which we say point to prospects on appeal.  We say that the questions are fundamental to the jurisdiction of adjudicators across Australia.  There are thousands of these matters heard every year worth billions of dollars in relation to the Australian construction industry, and given that there is this difference between two intermediate appellate courts as well as those State individual judges who followed Dualcorp, our submission is that special leave should be granted so that this Court can resolve the matter on a national basis.

GORDON J:   Thank you, Mr Greinke.  We do not need to hear from you, Mr Christie.

In our opinion, the application of special leave to appeal has insufficient prospects of success and is otherwise not an appropriate vehicle to consider the issue estoppel question raised by the applicant.  Special leave to appeal is refused with costs.  Thank you.

MR GREINKE:   May it please the Court.

GORDON J:   Adjourn the Court, please, to 9.30 am on Friday, 16 December.

AT 3.05 PM THE MATTER WAS CONCLUDED