Illawarra Retirement Trust v Denham Constructions Pty Ltd

[2015] NSWSC 1173

Supreme Court

New South Wales

Medium Neutral Citation:

Illawarra Retirement Trust v Denham Constructions Pty Ltd [2015] NSWSC 1173

Hearing dates:

30 July 2015

Decision date:

20 August 2015

Jurisdiction:

Equity - Technology and Construction List

Before:

McDougall J

Decision:

Summons dismissed with costs.

Catchwords:

BUILDING AND CONSTRUCTION – adjudication determinations – whether adjudicator failed to decide an essential element of contractor’s claim – where principal claimed liquidated damages for delay, and took cash security to set-off those damages – where contractor claimed that extent of delay was reduced by extensions of time that it was or should have been allowed – where an earlier adjudication determination had found that principal’s entitlement to liquidated damages was nil – where that position was re-affirmed in the present adjudication determination – result that it was unnecessary to decide contractor’s submission as to extensions of time – consequence that adjudicator decided all that was necessary for the determination under review – alternative issue estoppel argument does not arise

 

BUILDING AND CONSTRUCTION – adjudication determinations – error of law on the face of the record – unavailability as a ground of review for determinations of adjudicators

  BUILDING AND CONSTRUCTION – adjudication determinations – whether enforcement of statutory right can be restrained by permanent injunction – whether superintendent’s certificate later issued, determined final rights of parties – where that certificate issued under a contractual clause which discharged liability only in relation to termination itself – whether liability in other respects discharged – consequence that both the statutory right to enforce the adjudication determination, and the contractual right to enforce the superintendent’s certificate, remain available to the parties

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW)

Cases Cited:

Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393
Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190
Illawarra Retirement Trust v Denham Constructions Pty Ltd [2015] NSWSC 823
John Holland Pty Ltd v Roads and Traffic Authority of New South Wales (2007) 23 BCL 205
John Holland Pty Ltd v Roads and Traffic Authority of New South Wales (2007) 23 BCL 434
Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd [2009] QCA 329
Musico v Davenport [2003] NSWSC 977
Watpac Constructions v Austin Group [2010] NSWSC 347

Category:

Principal judgment

Parties:

Illawarra Retirement Trust (Plaintiff)
Denham Constructions Pty Ltd (First Defendant)
Ted Smithies (Second Defendant)
Australian Solutions Centre Pty Ltd (Third Defendant)

Representation:

Counsel:

 

M Christie SC / B Michael (Plaintiff)
D M Macfarlane (First Defendant)

  Solicitors:
K&L Gates (Plaintiff)
Crisp Lawyers (First Defendant)

File Number(s):

2015/219583

Judgment

1. HIS HONOUR:   The plaintiff (IRT) and the first defendant (Denham) made a written contract on 27 March 2013 (the contract). Under the contract, Denham undertook to construct a residential aged care facility at Tarrawanna. The contract, based on AS4000-1997, was for a lump sum price. The contract price, subject to variation in accordance with the terms of the contract, was (in round figures) $17.5 million exclusive of GST.

2. The contract was a “construction contract” for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). Denham made a number of payment claims pursuant to its rights under the contract and the Act. There were disputes in respect of at least three of those payment claims. Those disputes were referred to an adjudicator. The issues before me arise out of payment claim 26 and its determination (the July determination) by the second defendant (the adjudicator).

The issues for decision

3. For reasons that do not need to be stated, the hearing of the proceedings was brought on as a matter of urgency, before Denham had filed its Technology and Construction List Response. Accordingly, the issues were not defined by quasi-pleadings. However, the essential issues argued were:

1. Was the adjudicator’s determination in respect of payment claim 26 void (and should it be quashed):

1. because he did not carry out, in good faith or at all, the task entrusted to him by the Act, because he failed to decide an essential element of Denham’s claim, namely its entitlement to a number of days of extension of time (EOT)?

2. For error of law on the face of the record?

2. Alternatively, is IRT entitled to a permanent injunction restraining enforcement of the determination because, after the determination was made, the Superintendent under the contract, in exercise or purported exercise of its functions under cl 40A.2, determined, IRT says by way of a final working-out of rights and liabilities between it and Denham, that Denham was not entitled to any further payment under or in respect of the contract?

Factual background

4. The relevant facts were not in dispute.

5. As I have said, the contract was made on 27 March 2013. The contractual date for practical completion, as from time to time extended by the Superintendent, was 23 October 2014. Denham did not achieve practical completion by that date. It contended that it was entitled to further EOTs totalling over 200 days.

6. Clause 5 of the contract required Denham to provide security. It provided that security in the form of two unconditional undertakings issued by an insurer, each in the sum of $438,040.00.

7. On 12 May 2015, IRT called on the undertakings. On 14 May 2015, it was paid their total value: $876,080.00.

8. On 15 May 2015, IRT gave written notice to Denham exercising IRT’s right under cl 40A.1 of the contract to terminate “for convenience”. The termination took effect at the end of 29 May 2015. (This had been a matter in dispute between the parties, but that dispute was resolved, in the manner just indicated, by Darke J in Illawarra Retirement Trust v Denham Constructions Pty Ltd [2015] NSWSC 823 (see at [27]).)

9. On 29 May 2015, Denham served payment claim 26 on IRT. It was common ground that 29 May 2015, being the last business day of that month, was a reference date under the contract if, as Darke J had held (and the parties accepted they were bound by his Honour’s conclusion), the contract remained on foot during that day.

10. IRT provided its payment schedule on 15 June 2015. By that payment schedule, IRT contended that it owed no money to Denham. On the contrary, it said, Denham owed it (in round figures) $2.4 million. That figure included some $828,400.00 for liquidated damages, which IRT said it had recouped from the security.

11. In the proceedings before Darke J, IRT asserted that payment claim 26 was not valid, and hence could not be the subject of adjudication under the Act. There were two relevant reasons given (I leave aside an allegation of abuse of process, made because payment claim 26 essentially repeated an earlier but since withdrawn payment claim, number 25). Those reasons were:

1. the contract had come to an end no later than 28 May 2015, and thus the reference date of 29 May 2015 was not available; and

2. the claim to recover the sum of $876,080.00 (referred to as “cash held”) was not a claim for payment in respect of construction work, and hence was not amenable to the procedure for recovering progress payments established by the Act.

12. Darke J resolved both those challenges in favour of Denham. I shall refer later in these reasons to aspects of his Honour’s judgment which, the parties asserted, were relevant to the issues argued before me.

13. On 1 July 2015, Denham sought adjudication of the dispute constituted by payment claim 26 and the responding payment schedule. Its adjudication application was referred to the adjudicator.

14. On 8 July 2015, IRT lodged and served its adjudication response.

15. The parties agreed to allow the adjudicator an extension of time (over and above the outer limit of 10 business days specified in s 21(3)(a) of the Act). He made his determination on 22 July 2015. He determined that the adjudicated amount was $1,459,193.47, inclusive of GST.

16. The claimed amount comprised amounts for work under the contract and for variations, and the “cash held” amount. The adjudicator allowed (and I shall give the first two amounts in round figures) $259,000.00 in respect of work under the contract, $190,000.00 in respect of variations, and the cash held amount of $876,080.00. He concluded that IRT had not made good its claim for liquidated damages. Making allowance for my roundings, and adding GST, the adjudicated amount became the figure that I have stated.

17. I shall refer to the adjudicator’s reasons, to the extent necessary, in dealing with the challenges to his determination.

Relevant provisions of the contract

18. By cl 5.1, security was to be provided “for the purpose of ensuring the due and proper performance of the Contract” (this and all other italicised terms were defined).

19. Clause 34 dealt with “Time and progress”. Clauses 34.2 to 34.5 dealt with delay, EOTs, and their assessment and allowance. It is not necessary to set out those subclauses. Clause 34.6 dealt with practical completion. Again, it is not necessary to set out that subclause.

20. Clause 34.7 dealt with liquidated damages. I set out that subclause, so far as it is relevant:

34.7   Liquidated damages

If the Contractor does not achieve practical completion by the date for practical completion, the Superintendent shall certify, and the Contractor shall be liable to pay as a debt due and payable from the Contractor to the Principal, liquidated damages at the rate stated in Item 24 for every day after the date for practical completion to and including the earliest of the date for practical completion or termination of the Contract or the Principal taking WUC [works under the contract] out of the hands of the Contractor under subclause 39.4(a).

If an EOT is directed after the Contractor has paid or the Principal has set off liquidated damages, the Principal shall forthwith repay to the Contractor, such of those liquidated damages as represent, the days the subject of the EOT.

21. Clause 37 dealt with payment. It provided for a regime of payment claims, payment schedules and the like. Clause 37.4 dealt with the topics of “Final payment claim and final certificate”. I set it out:

37.4   Final payment claim and final certificate

Within 28 days after the expiry of the last defects liability period, the Contractor shall give the Principal and the Superintendent a written final payment claim endorsed “Final Payment Claim” being a payment claim submitted in accordance with subclause 37.1, together with all other claims whatsoever arising out of, or in connection with, the subject matter of the Contract.

Within 10 Business Days of receipt of the final payment claim, the Superintendent shall issue to both the Contractor and the Principal, a final certificate evidencing the moneys finally due and payable between the Contractor and the Principal on any account whatsoever arising out of, or in connection with, the subject matter of the Contract.

Those moneys certified as due and payable in the final certificate shall be paid by the Principal or the Contractor, as the case may be, within 10 Business Days after the debtor receives the final certificate.

After the date for submitting the final payment claim under this subclause 37.4 has passed, the Contractor will not be entitled to make, and waives its right to make, any claim against the Principal and releases the Principal from any claim in respect of any fact, matter or thing arising out of, or in connection with, the carrying out of WUC or the Contract which occurred prior to the expiry of the last defects liability period for the Works except for any claim included in the final payment claim which is given to the Superintendent within the time required by, and in accordance with the terms of, this subclause 37.4.

22. Clause 40 dealt with the topic of “Termination by frustration”. I set it out:

40.   Termination by frustration

If the Contract is frustrated:

(a)   the Superintendent shall issue a payment schedule for WUC carried out to the date of frustration, evidencing the amount which would have been payable had the Contract not been frustrated and had the Contractor been entitled to and made a payment claim on the date of frustration;

(b)   subject to subclause 40(d), the Contractor will be entitled to payment of the following amounts determined by the Superintendent:

(ii)   for WUC carried out prior to the date of frustration, the amount which would have been payable to the Contractor under the Contract if the Contract had not been frustrated and the Contractor submitted a payment claim for carrying out that WUC;

(ii)   the cost of goods, plant, equipment and materials reasonably ordered by the Contractor for the carrying out of WUC for which the Contractor is legally bound to pay provided that:

(A)   the value of the goods or materials is not included in the amount payable under subclause 40(b)(i); and

(B)   title in the goods, plant, equipment and materials will vest in the Principal upon payment pursuant to this clause 40; and

(iii)   the reasonable cost of removing from the site all labour, temporary works, construction plant and other things used in the carrying out of the WUC;

(c)   the Principal shall promptly release and return to the Contractor, any security held by the Principal; and

(d)   the Contractor shall:

(i)   take all steps possible to mitigate the costs referred to in paragraphs (b)(ii) and (b)(iii) of this clause 40; and

(ii)   immediately hand over to the Principal, all original copies of documents provided by the Principal or the Superintendent to the Contractor or prepared by the Contractor (or its subcontractors) for the carrying out of WUC to the date of frustration (whether complete or not).

The amount to which the Contractor is entitled under this clause 40 shall be a limitation upon the Principal’s liability to the Contractor arising out of, or in connection with, the frustration of the Contract and the Contractor may not make any claim against the Principal arising out of, or in connection with, the frustration of the Contract, other than for the amount assessed by the Superintendent as payable under this clause 40.

23. As I have said already, there was a right to terminate for convenience given by cl 40A. I set out that clause:

40A.   Termination for convenience

40A.1   Termination for convenience generally

Without limiting any of the Principal’s other rights under this Contract, the Principal may:

(a)   at any time, for its sole convenience, and for any reason, by written notice to the Contractor, terminate the Contract effective from the time and date stated in the Principal’s notice; and

(b)   thereafter, at its absolute discretion, complete the uncompleted part of WUC or the Works either itself or by engaging other contractors to carry out any uncompleted part of WUC or the Works.

40A.2   Entitlements following termination for convenience

If the Principal terminates the Contract for its convenience under subclause 40A.1, the Contractor:

(a)   subject to paragraph (b) of this subclause 40A.2, will be entitled to payment of the following amounts determined by the Superintendent:

(i)   for WUC carried out prior to the date of termination, the amount which would have been payable to the Contractor under the Contract if the Contract had not been terminated and the Contractor submitted a payment claim for carrying out that WUC

(ii)   the costs of goods, plant, equipment and materials reasonably ordered by the Contractor for the carrying out WUC for the Contractor is legally bound to pay provided that:

(A)   the value of the goods or materials is not included in the amount payable under paragraph (a)(i) of this subclause 40A.2; and

(B)   title in the goods, plant, equipment and materials will vest in the Principal upon payment pursuant to this subclause 40A.2: and

(b)   shall:

(i)   take all steps possible to mitigate the costs referred to in paragraphs (a)(ii) and (iii) of this subclause 40.2; and

(ii)   immediately hand over to the Principal, all original copies of documents provided by the Principal or the Superintendent to the Contractor or prepared by the Contractor (or its subcontractors) for the carrying out of WUC to the date of termination (whether complete or not).

The amount to which the Contractor is entitled under this subclause 40A.2 shall be a limitation upon the Principal’s liability to the Contractor arising out of, or in connection with, the termination of the Contract and the Contractor may not make any claim against the Principal arising out of, or in connection with, the termination of the Contract, other than for the amount assessed by the Superintendent as payable under this subclause 40A.2.

This subclause 40A.2 will survive the termination of the Contract by the Principal under subclause 40A.1.

24. Clause 41 dealt with claims, their notification and decisions. It is not necessary to set that clause out in full. Clause 41.1 provided, among other things, that:

If the Contractor wishes to make any claim against the Principal arising out of, or in connection with any act, default or omission by the Superintendent, the Principal or its consultants, agents, employees or other contractors (not being employed by the Contractor), any direction of the Superintendent or the Principal, or any other fact, matter or thing arising out of, or in connection with, the subject matter of the Contract, the Contractor shall give to the Principal and the Superintendent, the prescribed notice or a notice of dispute under subclause 42.1 within 14 days of the earlier of: [and certain times were specified].

25. Clause 42 dealt with dispute resolution. It provided for a staged, or cascading, procedure for the resolution of any “difference or dispute… [that] arises out of, or in connection with, the subject matter of the Contract…”. That procedure specifically extended to disputes concerning “a Superintendent’s direction”. The definition of “direction” included, among other things, a “certificate, decision, [or] determination …”.

26. Clause 42.3A provided that, subject to cl 42.4 (which dealt with summary or urgent injunctive or declaratory relief), compliance with the staged dispute resolution procedure “will be a binding precondition to the commencement of litigation by” either party to the contract.

The April determination

27. On 11 February 2015, Denham served its payment claim 22. The claimed amount was (in round figures) a little under $1.8 million.

28. IRT provided its payment schedule on 25 February 2015. The scheduled amount was (again in round figures) a little under -$1.1 million (i.e., IRT asserted that Denham owed it the scheduled amount).

29. Denham lodged an adjudication application on 11 March 2015. It was referred to the adjudicator, who accepted the referral. IRT’s adjudication response was dated 20 March 2015. The adjudicator delivered his determination (the April determination) on 9 April 2015.

30. The adjudication application and the adjudication response were prolix and complicated documents. They seem to have been drafted with a view to making it as difficult as possible for any adjudicator to identify and deal with the real issues in dispute. They included (particularly, but not exclusively, on IRT’s part) a great deal of largely irrelevant verbiage. The same may be said of the adjudication application and adjudication response that were the subject of the July determination.

31. I understand, of course, that parties to a construction contract will often dispute the amount said to be owed by one to the other. I understand also that each party may be genuine in its belief that the claim (or response) of the other is, wholly or substantially, invalid. Nonetheless, one of the fundamental purposes that the Act seeks to achieve is the swift and cheap resolution of disputes as to interim entitlements. The practice, all too often seen, and clearly manifested by the parties in this litigation, of treating each adjudication application as a full-blown construction dispute seems to me to be inimical to the objects of the Act. That is all the more so when, as here, arguments put and rejected in previous adjudication applications are repeated, so that the adjudicator is required to deal with them again.

27. In the present case, the adjudicator was able to discern, from the unwieldy and unhelpful mass of material placed before him, that IRT appeared to accept that Denham had carried out variations to the value of about $427,000.00. About $96,000.00 worth of claimed variations were disputed. In addition, IRT claimed to be entitled to set off, against any amount otherwise found to be owing to Denham, $471,200.00 for liquidated damages.

28. The claim for liquidated damages was based on the Superintendent’s certificate of 24 February 2015. Although that certificate related to payment claim 22 (the reference date for which was 30 January 2015), the Superintendent certified liquidated damages as at 24 February 2015.

29. The adjudicator resolved the disputed variations in Denham’s favour. As to liquidated damages, he concluded that IRT had not proved any entitlement. Accordingly, he said:

I determine the Liquidated Damages amount at this time as $0.00.

35. The adjudicator later repeated that conclusion when summarising his reasons, and said that “[a]ccordingly, I do not need to make any adjustment to the amount I have calculated for the amount payable”.

36. The adjudicator reached the conclusion that he did, on liquidated damages, after considering an expert report prepared by Tracey Brunstrom & Hammond (TBH), on which IRT relied. The adjudicator also considered submissions put by Denham as to “key preventative acts” on the part of IRT that were said to have led to loss of time.

37. The adjudicator considered that the TBH report was less than persuasive because it adopted the view taken by the Superintendent, to the effect that Denham was not entitled to any (further) EOTs, apparently because it had not complied with the contractual requirements set out in cl 34. The adjudicator seems also to have taken the view that some of the assessments made by TBH were (in my words rather than the adjudicator’s) provisional.

38. In those circumstances, the adjudicator applied what he described as a “sensitivity test”. It is not necessary to describe the test in detail. Using it, the adjudicator ascertained that even if Denham were given substantially less than its claimed entitlement to EOTs, nonetheless it could well be entitled to EOTs of about the same duration as the number of days for which IRT claimed liquidated damages. He took into account that TBH expressed the view that, leaving aside the contractual point, there were delays that could entitle Denham to some EOTs.

39. In its adjudication response referable to payment claim 26 (which also raised the issues of EOTs and liquidated damages), IRT attacked this reasoning of the adjudicator. It is not necessary to go to the detail of that attack.

40. The present significance of the April determination is that, in the course of concluding that Denham was entitled to be paid some $575,735.00 inclusive of GST, it found that the liquidated damages claimed by IRT should be valued at $0.00. Applying the reasoning of Macfarlan JA (with whom Handley AJA agreed) in Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190, the April determination operates to estop the parties (Denham and IRT) from disputing matters necessarily decided in the course of making the determination for which s 22(1)(a) of the Act provides.

The July determination

41. Since IRT’s attack on the July determination related to the way that the adjudicator had dealt with its claim for liquidated damages, I need look only at the adjudicator’s reasoning on that topic. He grouped the parties' submissions by reference to three categories:

1. general or preliminary submissions;

2. the effect of the April determination; and

3. a further report provided by TBH, supplementary to the one that the adjudicator had considered in the April determination.

42. IRT’s claim for liquidated damages comprised two elements. The first was a claim for $775,200.00, in respect of 204 calendar days from 23 October 2014 to 14 May 2015. The former date was, in IRT’s submission, the date for practical completion as extended by the Superintendent. The latter date was the date on which IRT had recourse to the security.

43. The second element was a claim for $53,200.00. That represented 14 days from 15 May 2015 to 29 May 2015. The latter date was the date on which the contract came to an end (or, as Darke J held, the last day on or during which the contract subsisted).

44. It is apparent from the way that IRT calculated its claimed entitlement to liquidated damages that the first component of the claim – $775,200.00 – included liquidated damages in the sum of $471,200.00, for the period from 23 October 2014 to 24 February 2015, that were considered by the adjudicator in the April determination. I repeat that the adjudicator assessed those liquidated damages at $0.00. The adjudicator noted in the July determination that IRT maintained its claim to the sum of $471,200.00 notwithstanding that it had been the subject of analysis and decision in the April determination.

45. The parties’ submissions (as to liquidated damages) to the adjudicator in relation to payment claim 26 in part rehashed what had been put in connection with payment claim 22, and had been dealt with in the April determination. However, there were some fresh matters raised. They included (on IRT’s part) a submission that the adjudicator’s use of the “sensitivity test” demonstrated jurisdictional error because it was not based on submissions put by either party, and thus had reversed the onus of proof by requiring IRT to demonstrate its entitlement.

46. The adjudicator dealt with this submission by saying that in his view, the task that he was required to undertake (in respect of liquidated damages) was to “step into the shoes of the Superintendent”. Thus, he said, he was required to be satisfied, just as the Superintendent had been required to be satisfied, that IRT did have a contractual entitlement to liquidated damages and had made good that entitlement as a matter of fact.

47. Whilst this aspect of the adjudicator’s reasons did not in terms deal with the “sensitivity test”, it is clear, contextually, that the adjudicator regarded the sensitivity test as something that a reasonable superintendent might undertake, in the course of performing that task.

48. IRT complained that the adjudicator had not read the (first) TBH report in detail. The adjudicator rejected that submission and gave reasons, including stating that he had read and considered the report, and that in so doing, he had noted issues that were “sufficient to cast considerable doubt on the TBH assessment outcomes”.

49. I note at this point that to my mind, nothing so far in the adjudicator’s reasons, dealing with liquidated damages, supports the proposition that he failed to turn his mind to the issues that had been posed, or failed to deal with them in a reasoned way. Whether he was right or wrong in expressing the views he did is beside the point.

50. The adjudicator then turned his attention to the second TBH report on which IRT relied. That was apparently dated 8 July 2015. The approach that the adjudicator took was to compare that report with the earlier report (dated 20 March 2015) with a view to seeing whether, and if so to what extent, the later report supplemented what the adjudicator considered to have been deficiencies or inadequacies in the earlier report.

51. In brief, the adjudicator noted that in some respects the later report added little to the store of human knowledge. However, in other respects, he thought that there were (and he identified) sections of the later report which provided “updates… to close out issues that I identified” in respect of the earlier report. In some cases, the adjudicator noted that his previous concerns had been dissipated. In other areas, he did not consider “the more definitive assessment to have any probative force” or was “not satisfied that my original concern has been resolved”.

52. The adjudicator then carried out what he called a “Review of Major Preventable Acts”. That appears to have been referable to an aspect of Denham’s submissions in its adjudication application. Denham submitted that “[m]ajor “preventative acts” of [IRT] and its consultants demonstratively [sic] take the adjusted date for practical completion out to the end of May [2015]”. IRT, in its adjudication response, replied that Denham “has failed to identify or substantiate any acts of prevention by [IRT] or the Superintendent, major or otherwise. It seeks to assert an entitlement to further EOTs, in circumstances where it has none. That position is confirmed by… TBH”.

53. This aspect of the dispute relates to a variation described as DCV [Denham Construction Variation] 023. DCV 023 had featured in the earlier dispute that was resolved (on an interim basis) by the April determination. Thus, in the July determination, the adjudicator said:

I consider that my comments in [the April determination] remain relevant… .

54. The adjudicator then set out what he considered to be relevant parts of the April determination. They included his reasons for concluding that Denham had demonstrated an entitlement to DCV 023, and had concluded that there was some entitlement to an EOT. He then noted that TBH had assessed DCV 023 by adopting the Superintendent’s position, namely that there was no contractual entitlement.

55. The next matter that the adjudicator turned to, in his review of the two reports, was EOT 64: a claim based on inclement weather. He noted that TBH had assessed an upper limit delay of 56 days, but said that Denham was entitled to “substantially greater than 56 days”. Its entitlement “could be between 132 days and 228 days when the unresolved EOTs… are considered i.e. the latest date for practical completion could be between 2 March 2015 and 22 May 2015”. In those circumstances, the adjudicator noted, if the 6 days claimed for EOT 64 were added, the date for practical completion would become 30 May 2015.

First question: failure to carry out the task mandated by the Act

The parties’ submissions

56. Mr Christie of Senior Counsel, who appeared with Mr Michael of Counsel for IRT, submitted that the adjudicator had not dealt with Denham’s case based on “Major Preventative Acts”. Thus, he submitted, the adjudicator had failed entirely to deal with an important – indeed, in his submission, fundamental – element of Denham’s claim.

57. Mr Christie submitted that the adjudicator did not resolve the issue, as to the extent of Denham’s claimed entitlement to EOTs, described at [55] above. He submitted that the adjudicator simply did not attempt to reach a conclusion on the various claimed EOTs that could extend the date for practical completion to between 2 March and 22 May 2015.

58. That submission was based on the adjudication’s reasoning as follows (I regret the need to set it out in full, but the relevant passage really cannot be summarised):

Adjudication Comment

Based on my review of the updated TBH report and comparison with the 20 March 2015 version, I conclude the following:

(i)   TBH approach methodology has assessed the Claimant’s EOT claims against the original programme with no allowance for programme updates, or the relevant programme status. The updated 8 July 2015 assessment retains the approach outlined in the ‘provisional’ 20 March 2015 assessment and is based on TB-H’s version of the programme relevant to the claimed delay / critical paths to completion.

(ii)   While some of the concerns I identified in Adjudication Determination 2015-TASC-023 have been addressed, a number of issues remain resolved. This is particularly concerning given the substantial difference between the Claimant’s EOT claims and the assessment outcome.

(iii)   For DCV023 the Claimant claimed 48 days whereas the TBH reports assessed that the Claimant was delayed by 33 days by the design issues associated with wind load issues of the building framing and the roof trusses. TBH then reverted to the Superintendent’s assessment of 0 days. In Adjudication Determination No. 2015-TASC-107, I disagreed with the Superintendent and concluded ‘that the Claimant was required to address design issues that were outside their scope of work’. I have not seen anything in the information currently before me, which would lead me to depart from this conclusion. It then follows, that as a minimum, the Claimant has an entitlement to 33 days EOT compared with the days approved by the Superintendent.

(iv)    In 2015-TASC-023, I concluded that I was not satisfied that the THB report represents a fully independent assessment of programme delay impacts. Given the updated report contains the same conclusion and / or reliance on the Superintendent’s advice on entitlement with respect to assessing the delay associated with DCV023, I see no basis to change the 2015-TASC-023 conclusion.

(v)   When the TBH assessed delay (33 days) associated with DCV023 is added to the 21 days TBH identify for EOT 40, the Claimant entitlement is 54 days EOT that have not been approved by the Superintendent. The 54 days is opposed to the 56 days referenced in paragraph 269 of the TBH 8 July 2015 report.

If I accept the Claimant’s delay claim for these items, the EOT would be:

EOT 40      84 days

DCV023      48 days

_______________________________________

Total         132 days

(vi)   Noting my unresolved concerns regarding EOT 37 and EOT 45 and using the Claimant’s claims, the Claimant entitlement might be extended for a further 81 days (EOT 37-74 days + EOT 45 – 7 days (Claimant 30 days minus TBH 23 days))

(vii)   Referring to my comment / assessment in ‘Other Issues’ in the above table, the due date for Practical Completion could be as late as 30 May 2015 compared to the date of termination of the contract of 29 May 2015.

7.6 LDs Adjudication Conclusion

Based on the information before me, I conclude the following:

•   The Respondent has submitted a number of times that they rely on the TBH report. Further, the Respondent submits that the TBH report is expert confirmation of their submission that the Claimant has no EOT entitlement beyond that already granted by the Superintendent. However, I retain my conclusion of 2015-TASC-023 that I do not agree that the TBH Report provides authoritative support or confirmation for the following reasons:

_   The report reflects the Superintendent’s position on a 0 days EOT entitlement, rather than providing independent expert advice to that effect

_   The report is ‘expert’ in that it assessed programme delays associated with variations, in particular DCV 023 for which I have previously determined that the Claimant had a variation entitlement

_   The updated report has not adequately addressed a number of the concerns that I previously raised

•   While I have no issue with the LD contract provisions, the Respondent must first demonstrate an entitlement. In this regard, I do not consider that the trigger for the application of the contract LDs entitlement has been clearly established

•   I note the Respondent’s reference to clause 34.7 of the contract and the entitlement deduct LDs now and repay any amount associated with a subsequently approved EOT(s). However, I consider that the scale of LDs sought, and the considerable uncertainty that remains concerning the number of days in question, is well beyond the reasonable intent of this contract provision.

Based on the information before me, and having regard to the foregoing, I see no basis to change the LDs valuation of Adjudication Determination 2015-TASC-023. Accordingly, I value the Liquidated Damages amount as $0.00.

59. Mr Christie submitted that the most that could be said, based on the evidence summarised by the adjudicator in the passage just set out, was that TBH accepted a maximum of 77 days’ EOT. That followed, Mr Christie submitted, by adding the figure of 54 days identified at subpara (v) to the figure of “TBH 23 days” identified in subpara (vi). However, Mr Christie submitted, the adjudicator had not expressed any conclusion as to further EOTs, so that his statement in subpara (vi) that “the due date for Practical Completion could be as late as 30 May 2015” was not in fact resolved, so as to be capable of expression as a conclusion.

60. In essence, Mr Christie submitted, it was necessary for the adjudicator to come to a view that Denham was entitled to EOTs that would take the date for practical completion out to 29 May 2015 at least, and to do so in a reasoned way, applying his mind to and grappling with the competing contentions that the parties put before him.

61. Mr Christie submitted that in the earlier adjudication, the focus had been on the relevant part of IRT’s payment schedule. However, he submitted, in the later adjudication, the focus was on the relevant part of Denham’s adjudication application. In this context, Mr Christie referred to the way that Darke J had characterised the relevant claim.

62. Darke J dealt with this issue at [29] to [33] of his reasons. He said:

[29]   The second issue raises the question whether the inclusion of the “cash held” item of $476,080 [sic; scil: $876,080] renders Progress Claim 26 invalid, either in whole or to that extent.

[30]   Mr Christie essentially made two complaints. The first was that the amount of $876,080 was not related to any identified construction work. The second was that a claim for return of the amount of security taken by a principal calling upon unconditional bonds put in place by a contractor, does not fall within s 13(3)(b) of the Act and is not otherwise a claim that may form part of a payment claim under the Act.

[31]   It is true that the amount of $876,080 is not related to any identified construction work in Progress Claim 26. Progress Claim 26 does identify the construction work to which the claimed progress payment relates, but the amount of $876,080 is not stated to be claimed in respect of such work. Rather, it is tolerably clear that the $876,080 is treated as an amount that is to be included in the accounting exercise that must be undertaken in determining any amount to be paid to the defendant pursuant to its claim.

[32]   As explained by Mr Dempsey, the $876,080 is in effect a repayment to the plaintiff of amounts already paid by it under the contract, and is to be brought to account upon the final reconciliation between the parties contemplated by clause 40A.2 following a termination for convenience. Mr Dempsey pointed out that the plaintiff, in its payment schedule in response to Progress Claim 26, stated that it has used the $876,080 to offset certain liquidated damages owed and overpayment of electrical trades. He submitted that such matters would themselves form part of the exercise an adjudicator would undertake in accordance with s 22 of the Act.

[33]   So understood, the inclusion of the “cash held” item in the payment claim does not in my view invalidate it, either in whole or to that extent. It is merely an item that forms part of the actual monetary position between the plaintiff and the defendant which may be taken into account in the determination of the amount (if any) that should be paid to the defendant in respect of its claim. It is not expressed to be an amount claimed in respect of any particular construction work, and it does not seem to be a claim, as such, for release of an amount held by the plaintiff (c.f. s 13(3)(b) of the Act). Neither is it expressed to be a claim for damages, a quantum meruitor other claim for restitution

63. Mr Macfarlane of Counsel, who appeared for Denham, submitted that the Court must look at the way in which the parties had put their positions before the adjudicator, in order to understand why it was that the adjudicator dealt with this aspect of the dispute in the way that he did. He submitted, by reference to the submissions in the adjudication response referable to payment claim 22 (the subject of the April determination) that the issues raised by IRT were:

1. whether Denham had substantiated (or, indeed, identified) any “Major Preventative Acts”;

1. whether Denham was entitled to seek an EOT in its adjudication application, in circumstances where that was not included in its payment claim; and

2. whether it was open to the adjudicator to determine claims for an extension of time.

64. Mr Macfarlane submitted, correctly, that those approaches to the question of EOTs (and the closely related question of liquidated damages) were reflected in IRT’s adjudication response relevant to payment claim 26.

65. In those circumstances, Mr Macfarlane submitted, the real issue before the adjudicator, in each adjudication, was whether IRT had any entitlement to liquidated damages under the contract. On that issue, he submitted, IRT bore the onus of proof; and in his submission, that was so in each adjudication.

66. In amplification of this submission, Mr Macfarlane submitted that the real question that the adjudicator was required to determine was whether there was a valid reason for withholding payment. In circumstances where the reason relied on by IRT was its entitlement to payment of liquidated damages, that, Mr Macfarlane submitted, was the question (in each adjudication) that the adjudicator was required to decide.

67. Mr Macfarlane submitted that the adjudicator was entitled to deal with this real issue as he did, by reviewing the TBH report to see whether, in effect, it supported the claimed offset for liquidated damages.

68. Mr Macfarlane submitted, in the alternative, that, at least as to the sum of $471,200.00, IRT was estopped from asserting any entitlement. That estoppel arose, Mr Macfarlane submitted, out of the findings of the adjudicator, in the April determination, to which I have referred.

69. Mr Christie submitted in reply that Mr Macfarlane’s primary approach overlooked a fundamental distinction between two payment claims and determinations. In respect of payment claim 22, Denham sought payment for work under the contract and variations. IRT claimed a set-off in respect of liquidated damages. That was one of the matters dealt with by the adjudicator. By contrast, in respect of payment claim 26, Denham claimed repayment of the money that IRT had obtained by calling on the security.

70. In those circumstances, Mr Christie submitted, IRT had borne the onus of proof in the earlier adjudication on the issue advanced by it: namely, its entitlement to liquidated damages. However, Mr Christie submitted, by contrast, in the later adjudication, Denham bore the onus of proof on the issue advanced by it: namely, its entitlement to recoup monies that had been taken, substantially on account of liquidated damages.

Decision

71. I start by observing that, as s 17(1) of the Act makes clear, the subject matter of adjudication is “a payment claim”. By reference back to ss 13 and 14 of the Act, what an adjudicator is required to do is adjudicate and determine the dispute constituted by the payment claim and the payment schedule. Performance of that task requires, among other things, that the adjudicator satisfy himself or herself of the claimant’s entitlement to part or all of the claimed amount, and the validity of the respondent’s reasons for withholding payment specified in its payment schedule.

72. Section 22(1)(a) of the Act makes it clear that what is to be determined is the amount of any progress payment to be paid by the respondent to the claimant. Section 22(2)(c),(d) make it clear that the determination is to based on, and to resolve, the claim advanced by the payment claim and the reasons for withholding payment advanced by the payment schedule.

73. Applying those general observations to payment claim 26, the task of the adjudicator required him to consider, and come to a decision on, the elements of Denham’s claim (to the extent that they were not conceded), and the reasons for withholding payment advanced by IRT in its payment schedule. The reasons for withholding payment included both disputes as to the entitlement to or quantification of various aspects of Denham’s monetary claims, and an assertion that IRT was entitled to retain, on account of liquidated damages and other matters, the sum of $876,080.00 that represented the proceeds of the securities given by Denham.

74. In short, the adjudicator in this case could not perform his statutory function unless he considered all elements of the payment claim and all aspects of the reasons for withholding payments advanced by the payment schedule.

75. It is no doubt correct to say, at a level of some generality, that Denham bore (as any claimant bears) the burden of proving its claim, and that IRT bore (as any respondent bears) the burden of making good its reasons for withholding payment. But the statement of that truism takes the matter no further. Identifying the onus of proof says nothing about its discharge. The question of discharge of the onus of proof is dealt with by looking at all relevant material. In the adjudication context, it is, in my view, entirely artificial to contend that an adjudicator, in deciding whether a claimant has satisfied the burden of proof borne by it, must look only at the claimant’s evidence, and must disregard evidence provided by the respondent.

76. It follows that Mr Christie’s approach to the onus of proof is unduly restrictive. I am prepared to accept that the fundamental question for decision in respect of the repayment sought was, stated broadly, whether Denham had made good its claim to be repaid the sum of $876,080.00. But for the reasons I have given, that question had to be considered on the whole of the relevant material before the adjudicator. Its resolution depended very substantially on whether IRT had an entitlement to liquidated damages.

77. To my mind, it is not particularly useful to approach that fundamental question by inquiring only whether Denham had proved an entitlement to EOTs that would take the date for practical completion out to 29 May 2015 or beyond. Certainly, that was one way that Denham could have approached this issue, and it was one way that the adjudicator could have decided it. But in my view, it was not the only way.

78. IRT asserted a positive defence to this aspect of Denham’s claim. That positive defence was that it was entitled to liquidated damages for the full number of 228 days of delay claimed by it. It put on evidence in support of that defence. The adjudicator found, based on his review of the TBH report, that IRT had not established that it was entitled to any amount of liquidated damages. That necessarily encompasses, or is based on, a finding that IRT had not demonstrated that the date for practical completion was any date prior to 29 May 2015. Thus, IRT, having chosen to seek to justify its calling on the deposit and retention of the proceeds, had failed to do so.

79. In those circumstances, the adjudicator, having concluded positively that IRT had failed to prove any entitlement to liquidated damages, was entitled to assess them at $0.00. That is in effect a finding that no liquidated damages were payable. It followed, and the adjudicator was entitled to conclude, that IRT should repay to Denham the value of the securities.

80. It is when the July determination is considered in this way that the “sensitivity test” approach becomes relevant. The adjudicator found, either correctly or in a way that is immune to challenge in this Court, that TBH’s analysis demonstrated an entitlement to at least 77 days’ EOT. Thus, on his analysis of the TBH reports, the date for practical completion had been extended to some date well beyond the date asserted by IRT (23 October 2014). The adjudicator then turned his attention to the unresolved claims for EOTs. He noted that if they were resolved in favour of Denham, the result would be that the date for practical completion would become 30 May 2015. On that basis, the adjudicator appears to have reasoned (and I accept, by silence rather than expressly) that Denham’s claim for repayment was not inherently bad, on the basis that even if every EOT that it claimed were granted in full, it must, nonetheless, be liable for some amount of liquidated damages.

81. Accordingly, in my view, the adjudicator did grapple with the problem put before him in a reasoned way, and did express his conclusions with sufficient detail to enable them to be understood. He did so by ignoring legal technicalities such as “onus of proof”, and by looking instead at the substance of the dispute and the evidence advanced for each side. He concluded, in effect, that since IRT had failed to prove that it was entitled to any amount by way of liquidated damages (so that they should be valued “as $0.00”), and since Denham’s claim was not inherently incapable of supporting the conclusion for which it argued, Denham was entitled to be repaid.

82. In the proceedings before me, the parties proceeded on the implicit basis that the first issue was to be decided by reference to their submissions in respect of the claimed liquidated damages in the sum of $828,400.00. It is necessary to make this implicit basis clear, because that sum is approximately $48,000.00 less than the total of the two securities, the full value of which was paid to IRT. The difference appears to have related to disputes in relation to electrical work or PC items. Having regard to the way in which the parties approached this issue, it is not necessary to go into further detail.

83. Returning for a moment to the approach taken by the adjudicator: he appears to have proceeded on the implicit basis just stated. Thus, from the adjudicator’s perspective, the two ways in which Mr Christie framed the question before me were really, if I may be permitted an original simile, two sides of the one coin. Mr Christie said that the true question was Denham’s entitlement to recover the money, not IRT’s entitlement to retain it. But on the way the question appears to have been argued (before the adjudicator and before me), a decision, on the evidence, that IRT was not entitled to the money necessarily meant that Denham was. There was no intermediate or alternative position.

84. The adjudicator’s conclusion on the real question (as he saw it and as I see it) may have been right, or it may have been wrong. His reasoning may have been correct, or it may have been fallacious. Nonetheless, in my view, the July determination reveals that the adjudicator did apply his mind to resolution of this aspect of the dispute that the parties put before him, and that he did resolve it in a reasoned way, taking into account (as he was required to do) all relevant matters to which the parties had referred him.

85. At one point during argument, it seemed to me that cl 34.7 – in particular, the second (unnumbered) paragraph dealing with repayment of liquidated damages in some circumstances – might be relevant to this issue. That paragraph, extracted at [20] above, could be read as suggesting, in the circumstances of this case, that Denham was required to make good its entitlement to an EOT before IRT could be compelled to repay the money taken on account of liquidated damages. However, on reflection, I do not think that this is the correct approach. As I have said, the adjudicator’s task was to resolve all the issues raised by the payment claim and the payment schedule, on the basis of all the relevant material before him. In circumstances where, as I have also said, the entitlement to an extension of time and the entitlement to retain an amount on account of liquidated damages were, for the purposes of this aspect of Denham’s case, two sides of the one coin, I do not think that cl 34.7 dictates any different analysis to that set out above.

86. I conclude that the attack on the adjudicator’s determination, alleging failure to undertake the task that the Act required him to undertake, fails.

87. In those circumstances, it is not necessary to deal with the question of estoppel. However, were it necessary to do so, I would conclude that IRT was estopped from reagitating the adjudicator’s conclusions, in the April determination, on so much of its claim for liquidated damages as encompassed the period 23 October 2014 to 24 February 2015. In my view, it is clear from what Macfarlan JA said in Dualcorp at [68] and (in particular) [69], that the principles of issue estoppel:

1. are relevant to the determinations of adjudicators; and

2. prevent parties from reagitating, in a later adjudication, an issue that has been determined in the earlier adjudication.

88. I accept, of course, that this would not mean that IRT was estopped from agitating, in respect of payment claim 26, its asserted entitlement to liquidated damages for the period beginning on 25 February 2015.

89. At one stage, Mr Macfarlane submitted that if what I might call reviewable error on the part of the adjudicator were demonstrated, only that part of the determination which was infected by the error should be quashed. I suggested that this submission was inconsistent with established authority (including the judgment of Hodgson JA in John Holland Pty Limited v Roads and Traffic Authority of New South Wales (2007) 23 BCL 205 at [55] and my own decision in Watpac Constructions v Austin Group [2010] NSWSC 347 at [28]). I allowed Mr Macfarlane an opportunity to put on written submissions on this issue. The response was that the submission was not pressed.

Second issue: error of law

90. Mr Christie submitted that there was an error of law apparent in the adjudicator’s reasons (those reasons being, as he submitted correctly, part of the “record”). The asserted error was the adjudicator’s conclusion that Denham was entitled to recover the “cash held” component of its claim even though the adjudicator had not found in terms that Denham was entitled to an EOT of at least 204 days. That was said to be an error of law because, in Mr Christie’s submission, the entitlement to that EOT was the basis of Denham’s claim to recover the cash held.

91. I am not sure that there is an error of law in this aspect of the adjudicator’s reasons. As I have sought to explain, it is my view that, on the whole of the material before the adjudicator, he was entitled to reach the conclusion that Denham could recover the “cash held” amount. However, for the reasons that follow, it is not necessary to express a final view on this because, as I concluded in Musico v Davenport [2003] NSWSC 977 at [52], the determinations of adjudicators are not reviewable in this Court for non-jurisdictional error of law.

92. In BrodynPty Ltd v Davenport (2004) 61 NSWLR 421, Hodgson JA (with whom Mason P and Giles JA agreed) at [51] appeared to agree with what I had said on this point in Musico. It is clear from what his Honour said a little later, at [55], that he did in fact accept that the Act displayed an intention to exclude jurisdictional review on the basis of non-jurisdictional error of law.

93. Mr Christie submitted that the point had been reopened by the decision of the Court of Appeal in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393. He relied on what Basten JA said at [90], [91] (in discussing the effect of s 25(4) of the Act). Basten JA said:

[90]    In Brodyn, Hodgson JA found in the language and purpose of the statute an intention to exclude the availability of this Court's supervisory jurisdiction, by way of relief in the nature of prerogative writs, not only in relation to error of law on the face of the record, but more generally in relation to jurisdictional error (at [54] and [58]). With respect to the adjudicator's determination, there is no sufficient basis to warrant exclusion of relief in the nature of certiorari for jurisdictional error.

[91] Further, the matters set out above give no express indication or any clear implication for excluding judicial review for error on the face of the record. (Given the terms of s 69 of the Supreme Court Act 1970 and s 22(3) of the Security of Payment Act, the record will include both the determination and the reasons of the adjudicator.)

94. I do not regard anything in those paragraphs as inconsistent with the view expressed in Brodyn (and earlier in Musico), to the effect that judicial review was not available for non-jurisdictional error of law. That was not one of the questions argued in Chase Oyster Bar. I do not think that Basten JA’s observations should be taken as indicating a conclusion that a well understood principle, in this area of the law, should be overturned. The other judges in the case did not suggest that this was so.

Third issue: the effect of cl 40A.2

The Superintendent’s determination

95. The document relied on as the Superintendent’s determination is dated 27 July 2015 – a few days after the adjudicator made (and made available to the parties) his July determination.

96. Relevantly, the Superintendent’s determination stated:

Given the Contract was terminated by the Principal for convenience under clause 40A.1 on 29/5/2015 for the purposes of clause 40A.2 Entitlements following termination for convenience, as Superintendent, I hereby determine that the entitlement of the Contractor under that clause is NIL.

The determination is based on the following:

1.   The amount scheduled for payment under payment schedule PS26 dated 15/6/2015 was negative ($2,188,907.50) plus GST.

2.   Since the issue of Payment Schedule 26 further defects were identified (refer to attachment 1) the value of which has been assessed as $199,385 plus GST. This amount is set off against monies due to the Contractor from the Principal in accordance with clause 37.6.

In the circumstances the total amount due to the Principal by the Contractor

is $2,388,292.50 plus GST.

The parties’ submissions

97. Mr Christie submitted that cl 40A.2 provided for a final reconciliation between the parties of the amounts owing by one to the other, or a final working out of the contractual mechanism provided for adjustment of liabilities once the contract had come to an end. He relied on the analysis given by Darke J (I have set out the relevant paragraphs at [62] above). He relied, further, on the analysis of Giles JA (with whom Tobias and McColl JJA agreed) in John Holland Pty Ltd v Roads and Traffic Authority of New South Wales (2007) 23 BCL 434 at [45].

98. Mr Christie relied on s 32 of the Act. He submitted that nothing in the Act was destructive of, or inconsistent with, the enforcement of final rights, either pursuant to some contractual mechanism for their determination, or by determination by a court or some other competent tribunal.

99. It followed, Mr Christie submitted, that the working out of a contractual mechanism which provided for a final resolution of rights and liabilities would supersede any determination of interim liabilities made by an adjudicator, to the extent that there was inconsistency. He relied on what Giles JA said in John Holland at [62], [63], and on what Keane JA (with whom de Jersey CJ and Holmes JA agreed) said in Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd [2009] QCA 329 at [15].

100. Mr Christie’s submissions did not explain how, if his construction of cl 40A.2 were correct, it would follow that IRT would be entitled to the injunctive relief sought (which was to restrain Denham from obtaining judgment in respect of the July determination, and to restrain the authorised nominating authority from issuing an adjudication certificate in respect of it).

101. Mr Macfarlane submitted that the effect of cl 40A.2 was limited. Specifically, he submitted, it was more limited than (for example) the clause considered by the Court of Appeal in John Holland. Mr Macfarlane submitted, specifically, that the release or discharge effected by cl 40A.2 was limited to “liability… arising out of, or in connection with, the termination of the Contract”, and what was prohibited was the making of “any claim against the Principal arising out of, or in connection with, the termination of the Contract…”.

102. It followed, Mr Macfarlane submitted, that it was not the case that cl 40A.2 could “trump the rights” that his client enjoyed under the Act.

97. For the same reason, Mr Macfarlane submitted, the facts in Martinek were readily distinguishable, and the holding in that case did not govern the outcome of this case.

98. In those circumstances, Mr Macfarlane submitted, a certificate under cl 40A.2 could not affect his client’s rights under the July determination. He submitted, further, that if on its proper construction cl 40A.2 did have the effect for which IRT contended, it would offend s 34 of the Act and, hence, be void.

99. Mr Christie submitted, in reply, that there was no inconsistency with the Act and, hence, no room for s 34 to operate. He submitted that the Act was concerned with interim rights, whereas a final determination of rights was expressly preserved. He relied on what Giles JA said on this topic in John Holland at [63].

Decision

106. As will be apparent from the contractual provisions that I have set out above, there are, relevantly, three occasions for certification of rights and liabilities once the contract has come to an end. Clause 40A.2 (which is relevant when the contract is terminated for convenience) is one. Clause 40 (which is relevant when the contract is terminated by frustration) is another. The concluding words of cl 40 are not relevantly distinguishable from the penultimate unnumbered paragraph of cl 40A.2 (making necessary changes, the mechanisms of cls 40 and 40A are essentially the same).

107. The third contractual provision relating to certification at the expiry of the contract is cl 37.4. That clause is entirely different. It provides for a mechanism of final payment claim, final certification and consequent indebtedness, one way or the other. The releases that are given once that mechanism has been worked out are far wider than those given by cls 40 and 40A.2. They relate to “any claim in respect of any fact, matter or thing arising out of, or in connection with, the carrying out of WUC or the Contract which occurred prior to the expiry of the last defects liability period for the Works except for any claim included in the final payment claim…”.

108. The limiting and releasing effects of cl 40A.2 are, as Mr Macfarlane submitted, more limited. They are specifically limited, in substance, to claims and liabilities arising out of or in connection with the termination (for convenience) of the contract.

109. I accept, of course, that the mechanism provided by cl 40A is intended to produce a certification of all that is owing, one way or the other, under the contract in respect of performance up until the date of termination. But the function of the penultimate unnumbered paragraph is not so much to achieve an overall final and binding settlement of rights and liabilities but, rather, to ensure that IRT as Principal shall have no liability in respect of the termination other than whatever might be certified by the Superintendent.

110. Nonetheless, that analysis does not seem to me to take the matter as far as Mr Macfarlane submitted. It does not follow, simply because the effect of cl 40A.2 is more limited than the effect of traditional “final certificate” provisions (such as cl 37.4), that certification under cl 40A.2 is inconsistent with the interim determination of rights made by an adjudicator under the Act.

111. As Mr Christie submitted, s 32 of the Act expressly preserves all contractual and other rights:

32   Effect of Part on civil proceedings

(1)   Subject to section 34, 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 2 in respect of the contract, or

(c)    may have apart from this Act in respect of anything done or omitted to be done under the contract.

(2)    Nothing done under or for the purposes of this Part affects any civil proceedings arising under a construction contract, whether under this Part or otherwise, except as provided by subsection (3).

(3)    In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal:

(a)    must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order or award it makes in those proceedings, and

(b)    may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings.

112. Further, and again as submitted by Mr Christie, s 34 of the Act has nothing to say about contractual provisions that prescribe a mechanism for the determination of final rights and liabilities. Section 34 of the Act provides:

34   No contracting out

(1)   The provisions of this Act have effect despite any provision to the contrary in any contract.

(2)    A provision of any agreement (whether in writing or not):

(a)    under which the operation of this Act is, or is purported to be, excluded, modified or restricted (or that has the effect of excluding, modifying or restricting the operation of this Act), or

(b)    that may reasonably be construed as an attempt to deter a person from taking action under this Act, is void.

113. Contractual provisions such as cl 37.4 operate outside the limited ambit of s 34. The section is intended to preserve the benefits of the Act, which of course are concerned only with interim entitlements. Clause 37.4 deals only with final rights and liabilities. The two areas of discourse are disparate and distinct.

114. As Keane JA put it in Martinek at [15], “the final settling of accounts between contractor and principle established under the terms of the contract may supersede the interim determinations effected under” the Act. Giles JA made the same point in John Holland at [62]:

[62]   The contractor’s right under the Act is to receive the adjudicated amount, but subject to final determination, and if the final determination involves the superintendent determining that the contractor was entitled to $10 or $30 rather than the $20 determined by the adjudicator, the superintendent is not negating the contractor’s statutory right.

115. Giles JA explained why this was so at [63] of John Holland:

[63]   Section 34 of the Act requires that the contractual provision exclude, modify or restrict, or have the effect of excluding, modifying or restricting, “the operation of this Act”. The Act operated to require that the RTA pay the adjudicated amounts to John Holland, and it did so. (In relation to the Detonator Dump monies, it may be taken that it has done so or will do so if the challenge to the adjudicator’s determination has failed or fails). There is no effect contrary to that operation of the Act if, in the final determination of the position between the parties, one party has to pay money to the other because the final arbiter takes a different view from that of the adjudicator. Section 32 of the Act preserves the final determination, by the contractual mechanism or by proceedings. Nor is there an effect contrary to that operation of the Act if security provided under the contract is retained, the contract on its proper construction and operation so permitting, to satisfy John Holland’s obligation to pay money to the RTA if that is the outcome of the final determination.

116. Mr Macfarlane submitted that his client’s enforcement of its rights under the July determination was impeded, or its enjoyment of those rights was adversely affected, because the Superintendent’s certificate of 27 July 2015, being inconsistent, afforded IRT a reason for not paying the adjudicated amount. It may be correct to say that this was the effect, or one effect, of the certificate. But it does not follow that there is any inconsistency with the statutory right arising from the July determination. That is, simply, because the statutory right is to an interim payment, whereas the contractual right (to the extent that it can be supported) is to a final payment which takes into account all matters that have occurred, and all moneys that have flowed one way or the other, under the contract.

117. I do not know whether or not the Superintendent’s certificate took account of the interim entitlement and obligation established by the July determination. There was attached to the certificate a printout of a spreadsheet which was said to show how the certified balance was reached. That document was extremely difficult to read, and even more difficult to follow. Counsel did not address submissions to its detail. I do not think that it is appropriate for me to seek to interpret it, in circumstances where its content and effect were not the subject of submissions.

118. Accepting, as I do, that the July determination and the cl 40A.2 certificate operate in different contractual realms (one being interim and one being, or purporting to be, final), it does not follow that IRT is entitled to injunctive relief. As I have noted, cl 40A.2 does not appear to provide a final and singular mechanism for determining rights and liabilities. On the contrary, by virtue of the provisions of cls 41 and 42 of the contract, and taking into account the very wide and inclusive definition of “direction”, from which I have extracted relevant words at [25] above, it seems to me to be reasonably clear that the certificate under cl 40A.2 may be challenged, subject to and on the terms of cls 41 and, in particular, 42.

119. It might be said that the certificate is final and binding unless and until it is, in one way or another, set aside or varied. But again, as it seems to me, the extent of its finality is limited to the particular subject matter of claims arising out of or in connection with the termination of the contract for convenience.

120. Finally, on the this point, it is at least unclear whether the certificate imposes any obligation on Denham to pay the amount certified. Clause 40A.2 does not seem to contemplate in terms that a negative liability may be certified. Whether or not, on its proper construction, some such obligation could be found in the clause, or could be implied, is not a matter to which the parties addressed submissions, and is not a matter that I propose to decide.

121. In short, the position is that Denham has an adjudication determination in its favour for one amount, and IRT has what is or purports to be a contractual certificate in its favour for another amount. Denham has a statutory right (unless restrained) to enforce its determination by the means set out in s 25 of the Act. IRT has the right to enforce the certificate by suing for the amount certified. It does not seem to me that the existence of a certificate, which creates a contractual right that may (if proceedings to enforce it are commenced) be the subject of challenge, offers any, let alone any sufficient, basis for restraining Denham from seeking to enforce the statutory right that it has under the July determination.

122. As I have noted, s 32 of the Act expressly contemplates that proceedings for final relief are not to be affected by any interim payments ordered and made under the Act. As Giles JA said in John Holland at [45]:

[45]   The respondent cannot oppose a payment claim, or if there is a judgment upon filing an adjudication certificate cannot seek to impugn the judgment, in reliance on matters arising under the contract, so rights under the contract are preserved and can be otherwise asserted. The statutory liability established by an adjudicator’s determination can be challenged only on limited grounds: Brodyn Pty Ltd v Davenport (2004). So it is open to the respondent (or the claimant — an adjudicator’s determination may be adverse to a claimant) to contend in a final working out of the contractual mechanisms or in other proceedings for a result different from that determined by the adjudicator. Statutory liability otherwise than that established by an adjudicator’s determination is also not final, and either party may in the course of a final determination contend for a different result, see s 32(1) and (2). Section 32(3)(a) then states the obvious, that there must be allowance in any other proceedings for an amount which has been paid. Section 32(3)(b) may be unnecessary, because an order in the other proceedings that the claimant pay money to the respondent will have the effect of restitution; however, it does enable an order for restitutionary interest and, if there has been a judgment upon filing an adjudication certificate, an order contrary to the judgment: as was said by Handley JA in Falgat Construction Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385 at [21] —

Finally, s 3(b) makes a judgment entered under s 25 on an adjudication certificate provisional only, both in what it grants and in what it refuses. A builder can pursue a claim in the courts although it was rejected by the adjudicator and the proprietor may challenge the builder's right to the amount awarded by the adjudicator and obtain restitution of any amount it has overpaid.

123. There was no evidence to the effect that any judgment recovered by IRT, in proceedings that it might commence in reliance on the cl 40A.2 certificate, might be unenforceable. Nor, specifically, was there any evidence that, if IRT were to pay Denham the amount certified (and interest), and later succeeded in proceedings that it might commence (either in reliance on the certificate or otherwise), it might not be able to recover the amount paid.

124. In those circumstances, IRT has not made good a case for injunctive relief.

Orders

125. I make the following orders:

1. Order that the summons be dismissed.

2. Order the plaintiff to pay the first defendant’s costs.

3. Otherwise make no order as to costs.

4. Direct that the exhibits be handed out.

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Decision last updated: 20 August 2015