Kuredale Pty Ltd v John Holland Pty Ltd
[2015] WADC 61
•21 MAY 2015
KUREDALE PTY LTD -v- JOHN HOLLAND PTY LTD [2015] WADC 61
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WADC 61 | |
| Case No: | CIVO:200/2014 | 13 MAY 2015 | |
| Coram: | KEEN DCJ | 21/05/15 | |
| PERTH | |||
| 30 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed | ||
| PDF Version |
| Parties: | KUREDALE PTY LTD JOHN HOLLAND PTY LTD |
Catchwords: | Building and construction Application for leave to enforce determination under Construction Contracts Act 2004 as a judgment Exercise of discretion Dispute as to whether amount found under determination paid Whether abuse of process |
Legislation: | Construction Contracts Act 2004 |
Case References: | Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 Diploma Construction Pty Ltd v Windslow Corporation Ltd [2005] WASC 74 Hamersley Iron Pty Ltd v James [2015] WASC 10 House v The King (1936) 55 CLR 499 O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2008] WASC 58; (2008) 36 WAR 479 Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4 Thiess Pty Ltd v MCC Mining (WA) Pty Ltd [2011] WASC 80 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Applicant
AND
JOHN HOLLAND PTY LTD
Respondent
Catchwords:
Building and construction - Application for leave to enforce determination under Construction Contracts Act 2004 as a judgment - Exercise of discretion - Dispute as to whether amount found under determination paid - Whether abuse of process
Legislation:
Construction Contracts Act 2004
Result:
Application allowed
Representation:
Counsel:
Applicant : Mr G E Nairn
Respondent : Mr J Healy
Solicitors:
Applicant : Lavan Legal
Respondent : Corrs Chambers Westgarth
Case(s) referred to in judgment(s):
Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91
Diploma Construction Pty Ltd v Windslow Corporation Ltd [2005] WASC 74
Hamersley Iron Pty Ltd v James [2015] WASC 10
House v The King (1936) 55 CLR 499
O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2008] WASC 58; (2008) 36 WAR 479
Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4
Thiess Pty Ltd v MCC Mining (WA) Pty Ltd [2011] WASC 80
1 KEEN DCJ: The applicant in this matter seeks leave to enforce the determination (the determination) of an adjudicator, Michael Charteris, dated 24 September 2014 pursuant to s 43 Construction Contracts Act 2004 (CC Act) and for judgment for the sum of $413,499.60 and interest thereon being the balance said to be due under the determination. The proceedings were commenced by way of originating summons on 15 December 2014. The summons is supported and opposed by various affidavits to which I will come shortly. One of those affidavits in opposition to the application is that sworn by Anthony Nahn Gale on 2 February 2015. That affidavit contains a number of attachments, being AG-1 to AG-22. During the course of these reasons, for the sake of convenience, I will refer to various documents annexed to that affidavit by reference to the attachment number without, on each occasion, identifying the affidavit.
Background
2 By a contract dated 3 August 2011 the applicant trading as Metro Lintels contracted with the respondent to supply steel in respect of works on the Gorgon NPI, Barrow Island Western Australia project. It is not necessary for me to go into further details of that project. The contract is attachment AG-1.
3 During the course of the performance of that contract the applicant lodged payment claims with the respondent for work carried out. One of those payment claims, number 34, included an item for 'Workshop Building' in the sum of $497,783. Additional sums were claimed by way of variations to the contract making a total claim of $698,661. This payment claim and ancillary documents can be found as attachment AG-7.
4 On 29 July 2014 the respondent certified payment in respect of that payment claim number 34 in the sum of $11,958. The payment certification is AG-8. The payment is said to be in respect of some variations that appeared in payment claim 34 but all other claims were rejected.
5 A full copy of the payment certificate can be found as AG-23 to a supplemental affidavit of Anthony Nahn Gale sworn on 18 March 2015. That certificate annexes a schedule setting out the various contract details by reference numbers and, in respect of each, columns comprising original contract value, SC (subcontractor) claim to date, cert amount to date, certified previously, cert amount this claim, claim variance, reason for claim variance.
6 Reference OW001 in that schedule relates to the Operations Workshop Steelwork which is the subject of this dispute. Under the various columns it shows an original contract value of $905,060, a subcontractor's claim to date of $769,301, a certified amount to date of $217,214.40, certified previously $217,214.40 and the amount allowed for this claim as $0.
7 On 5 August 2014 the applicant submitted a further payment claim, number 35 (AG-9).
8 On 21 August 2014 the applicant lodged an application for a determination under the CC Act in respect of payment claim 34. In other words, the applicant challenged the assessment of the respondent in respect of claim number 34. Pursuant to that application Michael Charteris was appointed adjudicator. He delivered his determination on 24 September 2014, a copy of which appears as annexure BMW1 to an affidavit of Benn Simon Mark Wallace, affirmed on 15 December 2014 on behalf of the applicant. I will come to the relevant terms of the determination later.
9 Before the determination was made, and on 27 August 2014, the respondent provided payment certificate number 35 in respect of claim number 35 (AG-10). The amount certified for payment was $516,721.58. The schedule annexed to the certification identified the various claims and again identified under reference OW001 the Operations Workshop Steelwork item. It certified the claim at that stage as $334,872.20. That sum was included in the payment that was made on 15 September 2014.
10 I return to the determination.
11 The determination was one whereby the adjudicator determined that the respondent should pay to the applicant the sum of $525,428.46 including GST within three business days.
12 The adjudicator's decision and determination sets out in detail the nature of the application, a summary of the applicant's position and the response of the respondent. Various documents were provided to the adjudicator as part of that response. Such documents included a copy of the payment certificate number 35 (see item 17, par 32 of determination).
13 It is against that background that the applicant seeks to register the determination pursuant to the CC Act.
Legal principles
14 The CC Act is described as one, inter alia, to provide a means for adjudicating payment disputes arising under construction contracts.
15 Part 3 of the CC Act deals with the adjudication of disputes.
16 Section 26 provides the procedure for an application for adjudication and s 27 provides for a response to that application as follows:
Responding to an application for adjudication
(1) Within 14 days after the date on which a party to a construction contract is served with an application for adjudication, the party must prepare a written response to the application and serve it on —
(a) the applicant and on any other party that has been served with the application; and
(b) the appointed adjudicator or, if there is no appointed adjudicator, on the prescribed appointor on which the application was served under section 26(1)(c).
(2) The response —
(a) must be prepared in accordance with, and contain the information prescribed by, the regulations;
(b) must set out the details of, or have attached to it, any rejection or dispute of the payment claim that has given rise to the dispute; and
(c) must set out or have attached to it all the information, documentation and submissions on which the party making it relies in the adjudication.
Object of the adjudication process
The object of an adjudication of a payment dispute is to determine the dispute fairly and as quickly, informally and inexpensively as possible.
18 Section 32 provides for the adjudication procedure and by s 32(1) it is provided:
Adjudication procedure
(1) For the purposes of making a determination, an appointed adjudicator —
(a) must act informally and if possible make the determination on the basis of —
(i) the application and its attachments; and
(ii) if a response has been prepared and served in accordance with section 27, the response and its attachments;
and
(b) is not bound by the rules of evidence and may inform himself or herself in any way he or she thinks fit.
20 Division 4 prescribes the effect of the determination and specifically:
38. Determinations have effect despite other proceedings
An appointed adjudicator's determination is binding on the parties to the construction contract under which the payment dispute concerned arose even though other proceedings relating to the payment dispute have been commenced before an arbitrator or other person or a court or other body.
39. Payment of amount determined and interest
(1) A party that is liable to pay an amount under a determination must do so on or before the date specified in the determination.
(2) Unless the determination provides otherwise, interest at the rate prescribed under the Civil Judgments Enforcement Act 2004 section 8(1)(a) is to be paid on such of the amount as is unpaid after the date specified in the determination.
(3) The interest to be paid under subsection (2) forms part of the determination.
(4) If under section 43(2) a judgment is entered in the terms of a determination, interest under subsection (2) ceases to accrue.
21 Section 40 provides for the effect of payments under determinations in the following terms:
Progress payments under determinations to be on account
If —
(a) an appointed adjudicator —
(i) determines a payment dispute concerning a claim by a contractor for payment for part performance of its obligations but not for a final payment by the principal; and
(ii) determines that the principal is to pay the contractor an amount in respect of the claim;
and
(b) the principal, in accordance with the determination, pays the amount,
the payment is to be taken to be an advance towards the total amount payable under the contract by the principal to the contractor.
22 Division 5 of the CC Act deals with the enforcement of determinations. Specifically, s 43 provides:
Determinations may be enforced as judgments
(1) In this section —
court of competent jurisdiction, in relation to a determination, means a court with jurisdiction to deal with a claim for the recovery of a debt of the same amount as the amount that is payable under the determination.
(2) A determination may, with the leave of a court of competent jurisdiction, be enforced in the same manner as a judgment or order of the court to the same effect, and if such leave is given, judgment may be entered in terms of the determination.
(3) For the purposes of subsection (2), a determination signed by an adjudicator and certified by the Building Commissioner as having been made by a registered adjudicator under this Part is to be taken as having been made under this Part.
23 It is under this section that the present application is made.
24 Section 45 relates to the effect on civil proceedings in the following terms:
Effect of this Part on civil proceedings
(1) This Part does not prevent a party to a construction contract from instituting proceedings before an arbitrator or other person or a court or other body in relation to a dispute or other matter arising under the contract.
(2) If other such proceedings are instituted in relation to a payment dispute that is being adjudicated under this Part, the adjudication is to proceed despite those proceedings unless all of the parties, in writing, require the appointed adjudicator to discontinue the adjudication.
(3) Evidence of anything said or done in an adjudication is not admissible before an arbitrator or other person or a court or other body, except for the purposes of an application made under section 29(3) or an appeal made under section 46.
(4) An arbitrator or other person or a court or other body dealing with a matter arising under a construction contract —
(a) must, in making any award, judgment or order, allow for any amount that has been or is to be paid to a party under a determination of a payment dispute arising under the contract; and
(b) may make orders for the restitution of any amount so paid, and any other appropriate orders as to such a determination.
26 In Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91, the CC Act came under consideration by Pullin JA (Newnes & Murphy JJ concurring).
27 Having considered the similarities to other legislation in other states and territories and cases under that legislation his Honour said [55]:
The broad purpose of the Act, insofar as it relates to payment disputes, is to ensure that, in construction contracts, progress claims are paid on time and that principals obliged to pay do not act as their own judge and jury and hold up payment on their own assertion that they have a defence warranting refusal to pay. It is a 'pay now, argue later' system; with the primary aim of keeping the money flowing by enforcing timely payment. If a payment dispute arises then the Act provides for a system of rapid and summary adjudication which is concluded without any oral hearing. If the adjudicator, having received written submissions, makes a determination that the payment has to be made, then that determination gives rise to a debt 'presently due' and payable by the principal. (citations omitted)
28 After dealing with means of enforcement of the determination and judgment arising therefrom, his Honour gave consideration to the interaction between s 43 and s 45 of the CC Act. His Honour noted that a determination or judgment entered pursuant to s 43(2) may be enforced notwithstanding that the CC Act provides that the provisions in pt 3 of the CC Act do not prevent a party from instituting proceedings before an arbitrator or another person or a court or other body in relation to a dispute or other matter arising under the contract (s 45(1)). His Honour noted that the relevant tribunal may make orders for restitution of any amount which has been paid pursuant to the determination and, if there are claims and cross-claims, there must be an allowance made for any amount that has been, or is to be, paid by a party under the determination.
29 His Honour at [59] went on to opine:
The effect of a determination has been described as providing for an 'interim' determination and it does not give rise to any res judicata in later civil proceedings. However, that does not mean that the determination (or a judgment based on it) does not give rise to a debt which is due and payable and which is enforceable. On the contrary, the determination and the judgment do give rise to a debt due and payable. (citations omitted)
30 In Thiess Pty Ltd v MCC Mining (WA) Pty Ltd [2011] WASC 80, Corboy J also dealt with the principles relevant to an application under s 43 of the CC Act.
31 His Honour noted that s 43 does not expressly identify matters relevant to whether leave should be granted. He was of the view that it was necessary to consider the context, objects, purpose and policy of the legislation in exercising the power conferred by the section ([25]). His Honour adopted what was said by Beech J in O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2008] WASC 58; (2008) 36 WAR 479. In that case Beech J at [39] – [40] said:
The following features of the statutory scheme seem to be of particular relevance:
(a) The procedure for determination by an adjudicator is intended to be quick, informal and inexpensive: s 30, s 31, s 32.
(b) A determination is binding on the parties even though other proceedings relating to the substantive disputes between the parties are on foot: s 38.
(c) A party liable to pay under a determination must do so: s 39.
(d) A determination is, with very limited exceptions, final: s 41, s 46.
(e) The substantive dispute (if any) will be determined by other means (such as arbitration or litigation) involving a comprehensive process, and payments made pursuant to a determination are to be taken into account and dealt with in the resolution of the substantive dispute: s 38, s 40, s 45.
The object of the scheme is, as described in the explanatory memorandum and Second Reading Speech, to 'keep the money flowing in the contracting chain by enforcing timely payments and sidelining protracted or complex disputes'.
32 In Hamersley Iron Pty Ltd v James [2015] WASC 10, Beech J summarised the legal principles relevant to s 43 at [116] in the following way:
(1) Given that the Act does not expressly identify the matters to which regard should be had on the question of leave, consideration must be given to the context, objects, purpose and policy of the Act. The object of the Act is to keep the money flowing in the contracting chain by enforcing timely payment and sidelining protracted or complex disputes.
(2) It is for a party resisting enforcement to demonstrate a reason why enforcement should not occur. There is a pre-disposition in favour of the grant of leave.
(3) Generally speaking, the fact that a party resisting enforcement alleges that it has other pending claims which could be set off against the determination amount will not justify the refusal of leave.
(4) There are no closed categories of circumstances that may be relevant to the question of whether leave should be granted. All the circumstances must be considered. (citations omitted)
33 It is also clear, and there appeared to be little dispute about this, that the requirement for leave confers a discretion on the court: Diploma Construction Pty Ltd v Windslow Corporation Ltd [2005] WASC 74 [5] – [6], adopted by Corboy J in Thiess Pty Ltd [27].
34 His Honour also noted decisions under s 33 of the Commercial Arbitration Act 1985 and to the effect that the principles there determined in relation to that section assisted in considering an application under s 43 of the CC Act: [27] and [28].
35 Those principles to which he referred arising under the Commercial Arbitration Act include that the requirement for leave confers a discretion on the court: the section is not a dispute resolution provision. Under that Act the subject matter of the award is not referred to the court, and there is no power conferred on the court, to reconsider whether the award ought to have been made; prima facie the party who has the benefit of an award is entitled to enforce it pursuant to s 33 of that Act and it is necessary for the party resisting leave being granted to establish a reason why the award should not be enforced; and, reasons why leave might not be granted include that the award is arguably vitiated by appellable error or by circumstances making it susceptible of being set aside according to the provisions of that Act.
36 His Honour, Corboy J, at [29] opined that, at a general level:
(a) With limited exception, the determination is final on the question of liability of a party to immediately pay the amount that is subject of the payment dispute and a party will seek leave under s 43 where the party liable under the determination has failed to discharge the statutory obligation imposed by s 39. Consequently, the scheme of the Act reinforces the proposition derived from Cockatoo Dockyard (Cockatoo Dockyard Pty Ltd v Commonwealth of Australia (No 3) (1994) 35 NSWLR 689) that prima facie a party who has the benefit of a determination is entitled to enforce it. That is particularly so under the CC Act given its policy of maintaining cash flow to the parties during the performance of a construction contract.
(b) Nevertheless, the Act requires the court to oversee the entry of judgment by imposing the requirement for leave. The grant of leave gives the plaintiff access to the court's processes for enforcing its orders. Further, judgment may have significant effects on the commercial interests of the defendant within the construction industry and in many instances, the reason advanced by the defendant as to why leave should not be granted will be directed to the validity of the determination.
(c) Consequently, there must be a sufficient reason for declining to grant leave under s 43 having regard to the scheme and policy of the CC Act. What will be a sufficient reason will, of course, depend on a consideration of all of the relevant circumstances.
37 Having regard to those principles it can safely be accepted that, consistent with the policy and purpose of the CC Act, there is a pre-disposition in favour of the grant of leave and that the burden of resisting such enforcement lies upon the respondent to such an application to show why enforcement should not occur. In that context it is not the position where there is to be a re-litigating of the issues that were before the adjudicator. Those matters can and should be reserved for argument at some other time (see s 45) and, as noted by Pullin JA in Diploma Construction v KPA, it is a pay now, argue later system.
Evidence
38 The evidence comprised:
1. The affidavit of Benn Simon Mark Wallace affirmed 15 December 2014 in support.
2. Affidavit of Anthony Nahn Gale sworn 2 February 2015 in opposition.
3. Affidavit of Bradley Graham Miles sworn 16 February 2015 in support.
4. Supplementary affidavit of Anthony Nahn Gale sworn 18 March 2015 in opposition.
5. Further supplementary affidavit of Anthony Nahn Gale sworn 15 April 2015 in opposition.
6. Affidavit of Benn Simon Mark Wallace affirmed 12 May 2015 in support.
39 I will come to deal with the issues in more detail later but at the core of the respondent's argument against the application for leave to enforce the determination as a judgment of this court is an argument that payment claim 35 duplicates work that was the subject of payment claim 34. It is said that payment on certificate 35 has been made and ergo the claim on claim 34 has been paid. That, together with the balance of the determination paid of $111,928.86, would represent a total payment of the determination sum.
40 For the applicant it is argued that the works which were subject to payment claim 35 are different works to those comprised in payment claim 34. As to this see par 21, affidavit of Bradley Graham Miles sworn 16 February 2105.
41 At the commencement of the hearing of the originating summons I queried with counsel whether, having regard to that dispute of fact, it was going to be possible for the court to determine the issues on affidavit evidence or whether that dispute about the works under claim 34 and claim 35 should be determined in another forum, for example, arbitration, or by the introduction of oral evidence in the hearing of the originating summons.
42 I was informed by both counsel that the court would be able to determine those issues on the papers before the court and it was not necessary for oral evidence to be called or the matter determined in some other fashion.
43 On that assurance the hearing proceeded. Towards the end of the hearing I canvassed with counsel for the respondent where the burden might lie on the exercise of the discretion as to whether leave to enforce the determination should be granted. Given that there is a predisposition towards granting leave, counsel for the respondent accepted that the burden fell upon the respondent to satisfy the court that it ought not exercise its discretion in that way.
44 Counsel accepted that if I was unable to find, on the documents filed in court, that its arguments as to the works carried out under claims 34 and 35 had been made out then it might fail on the exercise of the discretion.
45 At that point of the proceedings, towards the end of the hearing of argument, counsel applied for leave to call oral evidence in support of opposition.
46 This application was opposed by counsel for the applicant and after hearing argument I refused the application.
47 These are my short reasons for doing so.
48 As I have noted, at the commencement of the hearing I voiced my concerns about the ability of the court to determine factual disputes on affidavit evidence. I was advised that on a proper reading of all the documents that had been filed I would be able to determine that matter.
49 The respondent was given the opportunity at that time to reconsider its position in relation to the manner in which it would seek to oppose the application but elected to proceed on the papers.
50 As I have noted, it was only towards the end of argument that the application was made and opposed.
51 That application was made in the face of argument from the respondent that it was still possible for me to determine the matter on the papers.
52 It seemed to me, having regard to the way in which counsel elected to deal with this matter, that it would inappropriate to further delay the hearing of the matter so that oral evidence could be called. As has been noted, the scheme of this legislation is for speedy resolution of disputes and to enable the flow of money to continue in construction contracts by the adoption of this summary procedure for determination.
53 Any further delay in the matter by the calling of evidence would have the capacity to undermine the purposes of the CC Act in that regard. Further, given the assurances by counsel, I was not satisfied that any worthwhile purpose would be served by an adjournment so that evidence could be called.
54 It is only after thorough consideration of the papers that it would be possible to determine whether the issue of fact was capable of resolution on the papers. It may be that it is and no worthwhile purpose would be served by calling further evidence.
55 Given that the parties elect to proceed in the manner in which they did, it seemed to me that it was not appropriate to delay the matter further by granting the application and it was refused.
56 I now return to the content of the affidavits and the evidence disclosed by them.
57 The affidavit of Mr Wallace, affirmed 15 December 2014, merely annexes a certified copy of the determination dated 24 September 2014. The relevant content of that document will be considered later.
58 The affidavit of Mr Gale sworn 2 February 2015 in opposition sets out his position within the respondent company and the nature of the work carried out by him in the past and with that company. One of his roles on the project was to administer the respondent's supply contract with the applicant for the supply of steel under the contract.
59 In his affidavit he details the procedure for making claims and the way in which those claims are processed by the respondent having regard to its electronic books and records and database. He deposes to logistic information being maintained from the LNR (logistics notification request) to track the shipment of steel and the checking of the same to obtain necessary feedback on payment claims.
60 Once this has been completed a payment certificate stating the amount of the claim that has been authorised for payment by the respondent is completed. That is then sent to the applicant with a request for any comments thereon and if there are none payment is authorised.
61 Having dealt with the general procedures Mr Gale then went on to deal with the specifics of the claims under the contract. At par 13 he deposed to having received payment claim number 34 dated 25 June 2014. In his affidavit he confirms that this is the payment claim which was the subject of the adjudication determination. In authorising payment for that certificate he followed the processes that he set out in his affidavit and for each of the following payment claims from numbers 35 through to 41.
62 For the purposes of preparing his affidavit he accessed the database and the relevant recorded payments made to the applicant. Annexure AG-2 is a printout of those payments. It sets out the invoice numbers from 34 through to 41, the dates of the invoices, the dates they were due, the relevant account month, the account number and location and the invoice amount inclusive of GST. The cheque number is given and the cheque date is also provided.
63 He goes on to describe each of those columns and at par 16 confirms that the column 'Invoice Amt' is the amount that was actually paid to the applicant based upon his authorisation for payment certificates.
64 The exhibit demonstrates that in respect of payment claim 34 a sum of $13,153.81 was authorised and comprised in a cheque dated 11 August 2014.
65 Mr Gale deposes that the table in AG-2 demonstrates total payments in an amount of $791,893.91 (inclusive of GST) being made in respect of the claims number 34 to 40. Claim number 41 in the sum of $25,773.28 (inclusive of GST) was scheduled for payment in early February 2015.
66 Mr Gale deposes that at the time of swearing his affidavit there were no outstanding payment claims that had been provided by the applicant that have not been paid by the respondent as was confirmed by AG-2. He therefore disputes that the applicant has not been paid the amount described in the determination.
67 In his affidavit he goes on to describe the adjudication application and deals with the determination. He deposes that the application for adjudication pursuant to the CC Act was in respect of the applicant's payment claim number 34 which is AG-7. That claim shows a claim in respect of Workshop Building in the sum of $497,783 and in respect of variations, $200,878, making a total of $698,661. The determination by the adjudicator was for $525,428.46 (inclusive of GST).
68 In his affidavit at par 22 Mr Gale sets out a breakdown of the adjudicator's determination. According to that breakdown item number OW001 for Operations Workshop Steelwork was adjudicated in the sum of $431,338.33. Two variations, being in the sum of $34,749.58 and $8,066.88, were also included in the determination as was an item of interest of $3,507.45. The total before GST was $477,662.24 and with the inclusion of GST $525,428.46.
69 In his affidavit Mr Gale, at par 22, listed the payment certificate number 35 as corresponding, according to him, to the applicant's payment claims 34 and 35.
70 Mr Gale went on to depose (par 23) that between the time of the adjudication application and the adjudication determination the applicant submitted payment claim number 35 (AG-9). Mr Gale deposes that on reviewing that claim he approved it for payment on 15 September 2014 in the amount of $516,721.58 (inclusive of GST). He deposed at par 24:
An amount of $377,688.66 for that payment related to the works described in payment claim 34 which was the subject of the adjudication determination.
71 Mr Gale deposed at par 25 that the claims in claim 34 and 35 were in relation to the same item of the scope of work, that is to say Operations Workshop Steelwork – ref OW001.
72 AG-9, being the payment claim number 35 (page 260), was in the sum of $90,506 for Workshop Building and $33,436 for variations. The payment certification (AG-10) (page 335) certified $334,872.20 for Workshop Building. Mr Gale then deposes that once he had received the adjudication determination and having regard to the payment made in claim 35 on 15 September 2014 he calculated that $111,928.86 (inclusive of GST) of the adjudicated amount was unpaid. He sets out a table showing how that sum is arrived at. He deposes (par 27) that he did not authorise payment for the full amount of the adjudication because it would have resulted in double payment for the works described in payment claim 34.
73 Mr Gale then went on to set out his reasons for that conclusion (par 28). His analysis was that the sum of $111,928.86 taken with the payment on claim 35 of $516,721.58 (see AG-2) resulted in a complete payment of the amount of the determination.
74 He then proceeds (par 29) to analyse the payments further on the basis that the payment made on 15 September 2014 of $377,688.66 (exclusive of GST) is part of the total sum of $474,154.79 (exclusive of GST) payable under the determination. To have paid the full amount of the determination would have resulted in a double payment to the applicant. He describes this calculation in a table at par 29 of his affidavit. Again this is done by reference to the payment certificates and claims in numbers 34 and 35 of the adjudicator's determination and what is said to be the 'value of John Holland's certification in payment certificate number 35 that wholly relates to determination'. Against the determination of $474,154.79 it is said that that value of the certification that relates to number 35 is $377,688.66 (both sums being exclusive of GST).
75 The affidavit then has annexed various correspondence between the parties and their legal advisers concerning the claims made and payments made.
76 He also annexes to his affidavit all of the payment claims and certificates, number 34 through to 41.
77 It is said (par 39) that the claimant made its last claim with respect to 'Operations Workshop Steelwork' in payment claim 38 in an amount of $9,050.60 and in payment certificate 38 the respondent approved payment for 'Operations Workshop Steel – ref OW001' in the amount of $99,556.60.
78 It is further said (par 40) that the applicant in claim number 39 made no further claim for 'Operations Workshop Steelwork' and in its claim template stated that the total amount claimed was $868,857.60 and the total amount paid by the respondent was the same amount. Further, no additional claim was made for payment for 'Operations Workshop Steelwork' in payment claim number 41 (par 41).
79 In response to that affidavit there is the affidavit of Bradley Graham Miles sworn 16 February 2015. In that affidavit he described (par 13) the content of the determination which included the sum of $431,338.33 in respect of the workshop steelworks.
80 He deposed (par 16) that the works claimed under payment claim 35 was for $90,506 for steelwork in respect of the Operations Workshop. In addition on that claim there was a claim for variations of $33,436.
81 Mr Miles then went on to depose (par 18) that the respondent assessed payment claim 35 as $469,746.89 and paid that amount on or about 15 September 2014. The total claim in claim number 35 inclusive of variations was $123,942. Mr Miles does not give any explanation in his affidavit as to why, when assessing that payment claim, the respondent assessed it and paid it at $469,746.89.
82 Mr Miles then proceeded to set out the method by which he determined the amounts claimable for each payment claim. In a nutshell, the items of steelwork were progressively fabricated and laid out in the applicant's yard and recorded on a spreadsheet. The representative of the respondent would then inspect the items, identifying individual items of steelwork that had been fabricated by reference to the spreadsheet. The applicant would then transport the items to a quarantine control yard where they would stay until they were ready to be loaded and transported to the site. At that stage they were galvanised and placed on racks for transportation. At the end of each month the applicant then worked out the value of each of the items of steel work fabricated and transported to the quarantine control yard by reference to the spreadsheet and made its claim accordingly on the progress payment claim. It is said that the respondent would then approve payment for those items by reference to the items noted on the spreadsheet and issue the certificate accordingly.
83 With regard to the works the subject of claims 34 and 35 Mr Miles said at par 21:
The applicant's claims 34 and 35 were for different works and were not repeated or recycled claims.
84 Mr Gale in his affidavit sworn 2 February 2015 at par 25 said that:
Payment claim 35 was in relation to exactly the same item of the scope of work.
85 By that I understand him to mean the same works carried out as are the subject of claim 34. However, it may be the same scope of work but is it the same work carried out under that scope of work? Mr Miles gives no further explanation to his claim that claims 34 and 35 were for different works and were not repeated or recycled claims.
86 AG-10 is said to be the certification for payment claim number 35.
87 Amongst the papers in AG-10 is a payment certificate for July 2014 (pages 333 – 334). On subsequent pages of the affidavit there are the contract details with the various items of work including OW001 Operations Workshop Steelwork. That certificate appears to accompany an email from Mr Gale to Mr Miles dated 10 September 2014. Prior to that within the same section of the annexure there is further correspondence by way of email between Mr Gale and Mr Miles. In an email of 28 August 2014 Mr Gale purports to send a certification, July 2014, to Mr Miles for review and information and provides the description of the documentation upon which the assessment was made.
88 The response from Mr Miles on the following day is to the effect
I have reviewed your July certification and don't agree with it. You have assessed it on the wrong basis. Metro Lintels is entitled to payment upon the steel being delivered to the quarantine control yard, not when JHC decides to deliver it to site.
The new IRC's are not relevant to your assessment.
As I don't claim off the LNRs there is no doubling up. I only provide the LNRs for your reference.
JHG should assess the claim on the correct basis. Otherwise we will again be forced to pursue a rapid adjudication on this claim.
89 The chain of emails continues with an email from a Wai Ming Choy to Mr Miles to the following effect:
JH has provided a detailed calculation based on the information you submitted with your July 2014 progress claim submission.
Could Metro please provide a detailed calculation showing how the 95% completion claimed to demonstrate the discrepancy in our assessment, if the supporting information provided are not applicable for assessment?
Please advise how you track the material delivery to the quarantine yard and confirm the steel are fully fabricated completed with finished treatment.
Your clarification will be much appreciated.
90 That appears to have brought about a response on the same day from Mr Miles in the following terms:
I've already provided the same information I've provided for the last 2.5 years to substantiate our claim, the same information JHG have always approved our claims from.
JHG are well aware of how we have claimed on the information provided. It's in numerous email correspondences as well as being minuted in the commercial meeting.
Our position on this stands.
91 Apart from the foregoing I cannot discern any other explanations within the affidavits, up to that point, which touch upon this issue of the duplication of claims for the same work.
92 The supplementary affidavit of Mr Gale sworn on 18 March 2015 merely attaches (AG-23) being a further copy of payment certificate 34, the original in his first affidavit having been incomplete.
93 In his further supplementary affidavit sworn 15 April 2015 Mr Gale deposes (par 6) to receipt on 2 April 2015 of a letter from the applicant headed 'Gorgon – Final Account Claim' in which it detailed claims for payment with respect to contract works and variations with attached documentation in support. It is said that attached to the letter is a schedule headed 'Metro Lintels Claim Template'. It is said that OW001 Operations Workshop Steelwork claims an amount of $36,202.40 being the remaining amount due for that item of the scope of work and the applicant records that it has claimed 100% of the total amount for that item of work. Mr Gale noted that the original contract value was $905,060, that amounts claimed to date were $868,857.60 which gives rise to the claim for the balance of $36,202.40.
94 Mr Gale deposes (par 8) that there is no claim made in that letter for payment of the amount of the adjudication determination. He goes on to say that the amount in that determination had been paid by the respondent in the payment certificates 35 and 36.
95 The affidavit included (AG-25) a letter dated 7 April 2015 from the respondent to the applicant disputing the validity of the final payment claim on the basis of the requirements of the contract for such claims.
96 In a final affidavit affirmed by Mr Simon Wallace on 12 May 2015 he annexes a letter from the applicant to the respondent dated 22 April 2015 in which the applicant accepts the final account claim was issued, in effect, prematurely and withdrew the final account claim dated 2 April 2015.
Submissions
Applicant
97 The applicant to a very large extent relies upon the provisions of the CC Act and the case law to which I have referred. It is the applicant's case that having regard to the purpose and object of the CC Act for leave to be refused under s 43 there must be a sufficient reason to do so. The position claimed is that, prima facie, a party with the benefit of a determination is entitled to enforce it given the policy of the CC Act being one to maintain cash flow to the parties during the performance of a construction contract.
98 The applicant also relies upon s 39(1) of the CC Act that:
A party that is liable to pay an amount under a determination must do so before the date specified in the determination.
99 The applicant relies upon the decision of Pritchard J in Cape Range Electrical Contractors Pty Ltd v Austral Construction Pty Ltd [2012] WASC 304. In that case her Honour at [153] – [155] considered the meaning of the word 'pay' in the section and determined that it contemplated the payment of money. At [154] she said:
… These references suggest that the Parliament contemplated that a party required, pursuant to a determination, to 'pay' an amount would give that amount of money to the other party in compliance with the determination.
100 In that case the argument was that the respondent had satisfied the debt to the applicant. It was suggested in that case that the determination had been paid by virtue of the existence of a set-off which exceeded the amount of the determination. Her Honour considered that that was not consistent with the obligation to pay under the section.
101 However it is to be noted that in the present case it is not said by the respondent that it is entitled to a set off or counterclaim, merely that it has made payment of the sum by virtue of its payment pursuant to payment certificate number 35.
102 In oral argument the applicant argued that the payment made on the assessment of claim 35 was made of the respondent's own volition and was a voluntary additional assessment on top of what had been assessed in payment certificate 34 and was subsequently paid.
103 It was further argued that if payment in accordance with the determination is made and that results in an overpayment, that issue can be determined in subsequent proceedings between the parties.
104 Returning to the voluntary payment made before the adjudication determination, the applicant says that there are three reasons why the voluntary payment is not a ground for refusal of leave to enforce the determination in court. Firstly, the applicant relies upon the scheme of the CC Act, namely 'pay now and argue later'. It is said that the determination is only an interim measure such that the final liability for the parties in respect of an adjudicated sum is not prejudiced by the adjudication process and can be dealt with in subsequent proceedings or dealings between the parties. Secondly, the respondent is, in effect, attacking the correctness of the adjudication determination without actually attacking the correctness of the dollar figure in the determination. Thirdly, the respondent will not have any counterclaim which might otherwise in some circumstances give rise to a refusal of leave, because the right to the counterclaim will not crystallise until the payment in respect of the adjudication determination is made. Even then it would only be an arguable counterclaim.
105 Counsel also noted that claim 35 was before the adjudicator. Indeed, it is submitted that the claim payment was made before the application for adjudication but not much turns upon this save that the adjudicator had before him the certification on claim 35 and it is said referred to it in his reasons for his determination.
106 The payment under certification number 35 was made before the determination. Counsel argued that a payment made prior to the determination could not be a payment made in partial satisfaction of it.
107 As has been noted, the adjudicator had before him claim and certification number 35 and that is referred to in his decision at par 32, item 17. That being the case reliance is also placed upon the decision at 87.5 where the adjudicator remarked:
The contract is not complete and the parties have time and payments remaining to debate and agree upon the final cost. As the second reading of the Construction Contracts Bill 2004 (now the Act) by Ms A J MacTiernan states:
The rapid adjudication process is a trade off between speed and efficiency on the one hand and contractual and legal precision on the other. It's primary aim is to keep the money flowing in the contracting chain by enforcing timely payment and sidelining protracted or complex disputes.
109 It is the applicant's case that the scheme of the Act is to provide mechanisms to sort out the final position between the parties as to whether an amount required to be paid under an adjudication is to stand. That scheme involves a binding determination on the parties and it is not open to the parties to re-agitate the issues determined by the arbitrator. It is argued that the respondent is liable to pay on the adjudication and will receive full contractual credit for its payment so that there will be no prejudice to it from an accounting perspective.
110 It is also argued that it is not necessary for me to determine the issue raised by the respondent, that is to say whether or not the payment certified under number 35 is in respect of work also described in payment claim 34.
111 It is said that the payment made under number 35 could not be a payment pursuant to the determination. It is argued that the respondent is attempting to apply a payment, voluntarily made before a statutory obligation which arises under the determination arose, in credit of that obligation to pay. It is described as an illegitimate back door attempt to re-litigate the payment dispute before the adjudicator. It is said that this is in circumstances where the adjudicator had regard to payment certificate 35 when making his determination.
112 Finally, it is argued that even if that payment were to give rise to a counterclaim or some claim for restitution in the future that is no reason to refuse a grant of leave at this stage when one has regard to the authorities to which I have referred.
113 Before leaving the applicant's oral submissions Mr Nairn, for the applicant, in dealing with the respondent's submissions, to which I will come next, submitted that the court should not proceed upon the assumption that if this determination is enforced that there is some necessary unfairness in the result. It is pointed out that the CC Act contemplates that the contractor may be paid an adjudication amount which is wrong but it is an interim determination and those sort of problems can be sorted out later on a final accounting.
Respondent's submissions
114 The respondent in its written submissions argued that notwithstanding the adjudicator's determination the respondent had already paid $334,872.20 (exclusive of GST) in relation to 'Operations Workshop Steelwork' prior to the determination and that it therefore only needed to pay the difference between that amount and the determination which it has done.
115 The respondent also relied upon the fact that the applicant in its payment claim number 39 made no further claim for Operations Workshop Steelwork and in its claim template it claimed that the total amount claimed had been paid by the respondent and no additional claims had been made.
116 In those written submissions the respondent argued that the CC Act does not give a contractor a right for payment of more than its contractual entitlement or to be paid twice for the same works. It was suggested that the CC Act accords with the common law considerations for quantification of damages, that is to say an award of damages is not to place a party in a better position than they would have been in had the contract been performed.
117 In the submissions the principles applying to the grant of leave do not appear to be other than those already set out. In particular the respondent noted that there must be sufficient reason for declining to grant leave under the section having regard to the scheme and policy of the CC Act and what will be sufficient reason will depend upon the consideration of all the relevant circumstances.
118 It is also argued that this application needs to be considered in the context of whether it is an abuse of process, given the amount of the subject of the determination has already been paid.
119 The respondent relied upon Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4, for the relevant principles particularly at [6].
120 Given the claims by the respondent that it has paid and that the CC Act should not be allowed to result in duplication of payments so a contractor obtains a windfall and be compensated twice for performance of works described in payment claim 34, it is argued that the applicant is bringing the court's processes into disrepute and invoking its processes for an illegitimate or collateral purpose. It is not an application that is being used for the purposes of keeping the money flowing which is one of the relevant purposes of the CC Act within the context of a construction contract.
121 In response to those submissions the applicant merely re-stated that the claims 34 and 35 were for different supplies and not repeated or recycled claims and relied upon the affidavit of Mr Miles dated 16 February 2015. It argued that whether the amount payable under the contract as varied and performed has or has not been exceeded is a substantive matter which will be required to be determined in any ultimate proceedings between the parties and the applicant relied upon O'Donnell Griffin Pty Ltd at [61].
122 In oral argument Mr Healy for the respondent relied upon the broad discretion of the court as to the grant of leave and it would be necessary, when exercising that discretion, to have regard to the way in which payments have been made on the way through the contract to see how that relates to payment claim 34 and the determination.
123 It is argued that the applicant has been paid for the steelworks the subject of the contract.
124 In order to get to that position Mr Healy went through a number of payment claims and certifications in this contract and which were annexed to the affidavit of Mr Gale sworn 2 February 2015 and elsewhere comprising both numbers 34 and 35 and beyond.
125 I do not propose to go through each and every one of those to show the claims made, the certifications and the flow of money. It is probably sufficient for me to go to the end position which is that when one goes through that exercise one finally comes to claim number 39 (AG-17).
126 The material annexed to that (page 542 of the affidavit) has the reference 'OW001 Operations Workshop Steelwork'. It can then be seen that the original contract value is expressed as $905,060, the 'SC Claim To Date' is expressed as $868,857.60. A similar amount has been certified to date under that row. That would leave a difference between the two amounts of $36,202.40.
127 In his affidavit sworn 15 April 2015 Mr Gale annexes (AG-24) being a claim from the applicant in respect of (inter alia) Operations Workshop Steelwork. The amount claimed is the contract sum of $905,060 and it expresses the amount certified as $868,857.60 and the amount due, as noted previously, $36,202.40. It is argued that brings the sum up to 100% of any possible claim. There is no claim to an additional amount which would represent any part remaining due and owing under the determination. Save for that $36,202, all of the cost of the Operations Workshop Steelwork has been paid and satisfied. That being the case there is no additional amount to be paid.
128 It is argued that, having regard to the dicta of Pullin JA in Diploma Constructions v KPA at [55], namely the primary aim is the keeping of money flowing by enforcing timely payments, that aim has been achieved. The contractor has been paid on the way through.
129 Mr Healy for the respondent argued that the respondent considered the determination and the amount adjudicated to be paid and then worked out what it had paid in relation to that item of steelwork and then calculated the balance due which is the $111,928.86 which it subsequently paid.
130 Mr Healy did not accept the argument that payment prior to the determination should not be taken into account. It should be offset. The reason for that is that during the adjudication process the respondent needed to assess the claims as they came in. It is not suggested that the adjudicator made a mistake in the adjudication. It is argued in the circumstances of this unusual case it would be unfair to the respondent and against the objects of the CC Act to grant leave for enforcement of the determination through this court. It is said that the obligation to pay under the CC Act has been satisfied by the combination of the earlier payment and the payment subsequent to the determination. The CC Act does not authorise a double payment in those circumstances and that is not its objective.
131 It is also argued that the discretion has to be exercised in the context of the purpose of the CC Act, that is to say to allow for payment rather than the parties being put through a complicated procedure at that stage. However it is not a case of mere 'tough luck' if a party has paid the money on the way through. It is argued that 'tough luck' should inform the discretion under s 43 as to whether or not leave should be granted.
132 In all the circumstances the respondent argues that I should exercise the discretion in favour of not granting leave to enforce under s 43.
Disposition
133 I start from the position that there is a predisposition towards granting leave to enforce the determination and entry of judgment. So much accords with authority and is not in dispute.
134 As noted by Corboy J in Thiess Pty Ltd at [29](c) there must be a sufficient reason for declining to grant leave having regard to the scheme and policy of the CC Act.
135 The discretion to grant leave or not must be exercised judicially – there must be sufficient grounds. The discretion must be exercised having regard to established principles and not be affected by irrelevant or extraneous matters but exercised upon facts correctly found to exist: House v The King (1936) 55 CLR 499.
136 In House it was noted (505):
It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.
137 The hearing of the application is not an opportunity to re-litigate the matters before the adjudicator: Diploma Constructions [55]. The CC Act by s 45 makes it clear that the determination is an interim measure in the contract and does not exclude but provides for final resolution elsewhere and by other means. In the meantime there is an obligation to pay the adjudicated amount (s 39) and it is taken to be an advance against the total amount payable under the contract (s 40).
138 In a nutshell the respondent's case is that it has paid – by the payment before the determination and thereafter - the whole of the claim made by the applicant for this item of work under the contract and which was the subject of the adjudication. It claims to have made this payment by reason of claim and certification number 35 being in respect of a duplication of the work in claim 34. It is the respondent's case it would be unjust and unfair to grant leave in those circumstances.
139 The applicant's case is that it is not the same work. In any event a payment before determination cannot be a payment of or in reduction of that determination. The respondent should pay and deal with the issues in accordance with the statutory scheme.
140 I am unable to find, as contended for by the respondent, that the work in claim 35 was a duplication of the work in claim 34. Conversely, I am not able to find it was different work. The affidavit of Mr Miles sworn 16 February 2015 at par 21 where he asserts it was different work and not repeated or recycled claims is a mere bald assertion without any other explanation in order to assist in determining that issue.
141 That being the case, if the matter stopped there, I would exercise my discretion having regard to the predisposition I have referred to and grant leave. So much appears to have been conceded by the respondent.
142 At the hearing counsel for the respondent argued (ts 38) that the respondent looked at the determination and worked out what it had paid in relation to the item for steelwork on site and then worked out what else it needed to pay. That would appear to be just the point that Pullin JA was seeking to make in Diploma Constructions at [55] when he remarked:
… Principals obliged to pay do not act as their own judge and jury and hold up payment on their own assertion that they have a defence warranting refusal to pay.
143 However the matter does not end there. There is credible evidence demonstrated by the affidavits and by Mr Healy's analysis of them that the applicant has completed its claims to payment for item 'OW001 - Operations Workshop – Steelwork'.
144 The final claim was made on or about 2 April 2015 in the sum of $36,202.40 – see AG-24, affidavit of Mr Gale sworn 15 April 2015.
145 That led to a dispute as to the validity of the timing of that claim (AG-25) but it did not demonstrate a dispute as to the amount.
146 That position appears to be confirmed when the applicant withdrew the claim by letter dated 22 April 2015 and being annexure BMW2 to the affidavit of Mr Wallace sworn 12 May 2015.
147 Save for that final claim to bring claims and payments up to the contract sum in respect of this item of work it would appear that the applicant has received payment in full for this item of work.
148 If that is the position then payment of the balance of the determination may result in overpayment under the contract. However is that sufficient for me to exercise my discretion against leave?
149 The answer to that is no.
150 It may appear on its face to lead to a position where to enforce the determination is unjust or unfair. That would be the case if the outcome was final and the applicant would be unjustly enriched by the process.
151 I have noted, the scheme of the CC Act is to make such payments interim and an advance towards the total amount payable under the contract (s 40). It is not the close of the matter (s 45).
152 That being the case, and having regard to the scheme and purpose of the CC Act, and the predisposition towards leave, I am not persuaded that there are good grounds to go against the statutory intent and requirement (s 39) of the CC Act that the respondent should pay the determination.
153 In Diploma Constructions at [60] and [61] Pullin JA had regard to whether an argument gave rise to a 'fictional state of affairs'. He held that if there is a debt which is due and payable by reason of State legislation, then there is no 'fictional state of affairs'.
154 In the present case it might be thought that if the respondent has paid in full the determination may create a 'fictional state of affairs', i.e. perpetuating a debt when in reality there is none. However, the question is whether there is a debt. There is by reason of the legislation (s 61) and in my view full force and effect should be given to it.
155 I now turn to the submissions made by the respondent that the application for leave is an abuse of process because the amount the subject of the adjudication determination has already been paid by the respondent.
156 In my view none of the usual characteristics as described and adopted by Buss JA in Sheraz Pty Ltd v Vegas Enterprises Pty Ltd have been made out.
157 I am not satisfied that the court's process is being invoked for some illegitimate or collateral purpose. In this case there is the statutory debt which is capable of being mollified by other processes but until that occurs it can hardly be said that to enforce it is illegitimate or for a collateral purpose.
158 I am also not satisfied that to use the court's procedures would be unjustifiably oppressive to the respondent. As I have noted, there are other avenues open to the respondent to bring about a resolution of these disputes.
159 Finally, I am not satisfied that using the court's procedures in this way brings the administration of justice into disrepute. Indeed, in my opinion, the converse is the case. Not to grant leave pursuant to the CC Act would be to fly in the face of the intent and purpose of the statute and that would or could bring the administration of justice into disrepute.
Conclusion
160 For the reasons that I have expressed I will allow the application and I will hear counsel as to the form of orders to be made.
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