Lahey Constructions Pty Ltd v Department of Education

[2020] NSWSC 1158

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Lahey Constructions Pty Ltd v Department of Education [2020] NSWSC 1158

Hearing dates:

23 July 2020

Date of orders:

28 August 2020

Decision date:

28 August 2020

Jurisdiction:

Equity - Technology and Construction List

Before:

Henry J

Decision:

Expert determination final and binding. Proceedings dismissed. See paragraph [116].

Catchwords:

CONTRACTS – Construction – Interpretation – expert determination clause – NSW General Conditions of Contract (GC21), cl 71.8 – whether expert determination is final and binding – whether determination requires a party to pay to the other an amount that exceeds contractual threshold, without having regard to amounts paid under the Building and Construction Industry Security of Payment Act 1999 (NSW) – meaning of “the determination” and “requires one party to pay the other an amount” – expert determination final and binding

CIVIL PROCEDURE — Summary disposal — whether defendant should obtain summary judgment – whether claims should be dismissed or struck out – where defendant did not file a list response or cross claim – proceedings dismissed

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 3, 56

Practice Note SC Eq 3, [62].

Uniform Civil Procedure Rules 2005 (NSW), r 13.1

Cases Cited:

Bellevarde Constructions Pty Ltd v Cosmas Pty Ltd [2016] NSWSC 406

Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640; [2014] HCA 7

Empire Glass and Aluminium Pty Ltd v Lipman Pty Ltd [2017] NSWSC 253

Firedam Civil Engineering Pty Ltd v Shoalhaven City Council [2010] NSWCA 59

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69

Jireh International Pty Limited t/as Gloria Jean’s Coffee v Western Export Services Inc [2011] NSWCA 137

Lawrence v Ciantar [2020] NSWCA 89

Lepcanfin Pty Ltd v Lepfin Pty Ltd [2019] NSWSC 1328

Lepcanfin Pty Ltd v Lepfin Pty Ltd [2020] NSWCA 155

Lipman Pty Limited v Emergency Services Superannuation Board [2010] NSWSC 710

Lipman Pty Limited v Emergency Services Superannuation Board [2011] NSWCA 163

Miwa Pty Limited v Siantan Properties Pte Limited [2011] NSWCA 297

Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104; [2015] HCA 37

Shoalhaven City Council v Firedam Civil Engineering Pty Ltd (2011) 244 CLR 305; [2011] HCA 38

Simmons v Protective Commissioner of New South Wales [2012] NSWSC 455

Spencer v Commonwealth (2010) 241 CLR 118; [2010] HCA 28

Sweetpea Petroluem Pty Ltd v Palter Petroleum [2018] NSWSC 1649

The Illawarra Community Housing Trust Limited v MP Park Lane Pty Ltd [2020] NSWSC 751

Texts Cited:

Nil

Category:

Procedural and other rulings

Parties:

Lahey Constructions Pty Ltd (Plaintiff)
Department of Education (Defendant)

Representation:

Counsel:
Mr M Ashurst SC and Mr A Vincent (Plaintiff)
Ms J Wright (Defendant)

Solicitors:
Salim Rutherford Construction and Property Lawyers (Plaintiff)
HWL Ebsworth Lawyers (Defendant)

File Number(s):

2020/123334

Publication restriction:

Nil

Judgment

1. These reasons deal with a notice of motion filed by the defendant (the DoE) seeking summary judgment and an order that the list statement filed by the plaintiff (Lahey) be dismissed or, alternatively, struck out.

2. The DoE seeks the orders on the basis that the issues raised in the proceedings are subject to an expert determination that the DoE contends is final and binding. As a consequence, the DoE claims that Lahey is not entitled to maintain these proceedings and it is entitled to judgment for $3,924,748.05, being the amount that Lahey is required to pay to the DoE pursuant to the expert determination.

3. Lahey resists the orders sought by the DoE’s motion. It contends the expert determination is not final and binding.

4. The central issue in dispute is whether, on the proper construction and operation of the issue resolution clauses in the parties’ building contracts, the expert determination requires a party to pay to the other an amount that exceeds the contractual threshold of $500,000, calculated without regard to amounts paid under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SoP Act).

5. The other issues in dispute are whether the DoE is estopped from denying that the expert determination is not final and binding and whether the DoE is entitled to summary judgment for the amount determined by the expert is payable by Lahey to the DoE.

Background

The contracts

6. On or about 26 July 2017, Lahey, as contractor, and the DoE, as principal, entered into a contract for upgrade works to Manly Vale Public School (MV Contract).

7. On or about 10 October 2017, Lahey, as contractor, and the DoE, as principal, entered into a contract for upgrade works to Bardia Public School (Bardia Contract).

8. The general conditions of the MV and Bardia Contracts are identical and in the form of the New South Wales Government GC21 (Edition 2) (General Conditions).

9. Clause 48 of the General Conditions deals with variations to the contract works. The DoE could instruct Lahey to undertake variations or they could be proposed by Lahey. Disputes about variations can be raised as issues and dealt with under the issue resolution process set out in cls 69 to 72 of the General Conditions.

10. Under the issue resolution process, a party can provide notice to the other of an issue about any matter connected with the MV and Bardia Contracts: cl 69. Nominated senior executives are required to confer to try and resolve notified issues: cl 70. If the issue is not resolved within 28 days after giving notice, the issue can then be referred for “Expert Determination”: cl 70.2. The procedures set out in cls 69 to 71 have to be followed before either party can commence litigation or take similar action unless a party seeks urgent declaratory or injunctive relief: cl 69.3 and cl 69.6.

11. Clause 71 deals with Expert Determination. Clauses 71.1 – 71.2 set out certain matters concerning how the expert is to be selected and engaged. Clause 71.4 deals with the costs of the expert.

12. Clauses 71.3, 71.5 – 71.8 provide:

71    Expert Determination

.3    When the person to be the Expert has been agreed or nominated, the Principal, on behalf of both parties, must engage the Expert by a letter of engagement (with a copy to the Contractor) that sets out:

.1   the Issues referred to the Expert for determination;

.2   the Expert’s fees;

.3   the procedure for Expert Determination in Schedule 5 (Expert Determination Procedure); and

.4   any other matters which are relevant to the engagement.

…

.5   The procedure for Expert Determination is set out in Schedule 5 (Expert Determination Procedure).

.6   In response to any Issue referred to the Expert by a party, the other party may raise any defence, set-off or cross-claim.

.7   Subject to clauses 71.8 and 71.9, the parties must treat each determination of an Expert as final and binding and a party that owes money to the other pursuant to the determination must pay that amount to the other party within 28 days after receiving the determination.

.8   Neither party may commence litigation in respect of the matters determined by the Expert unless the determination:

.1   does not involve paying a sum of money; or

.2   requires one party to pay the other an amount in excess of the amount stated in Contract Information item 54, calculated without having regard to:

.1   any interest that may be payable; an

.2 any amount that has been paid pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW).

13. The amount stated in “Contract Information item 54” in the MV and Bardia Contracts is $500,000.

14. Schedule 5 sets out the procedure for the Expert Determination, and includes the following:

Schedule 5 Expert Determination Procedure

1   Questions to be determined by the Expert

.1    For each Issue, the Expert must determine the following questions, to the extent that they are applicable to the Issue and unless otherwise agreed by the parties:

.1    Is there an event, act or omission which gives the claimant a right to compensation, or assists in otherwise resolving the Issue if no compensation is claimed:

.1    under the Contract,

.2    for damages for breach of the Contract, or

.3    otherwise in law?

.2    If so:

.1    what is the event, act or omission?

.2    on what date did the event, act or omission occur?

.3    what is the legal right which gives rise to the liability to compensation or resolution otherwise of the Issue?

.4    is that right extinguished, barred or reduced by any provision of the Contract, estoppel, waiver, accord and satisfaction, set-off, cross-claim or other legal right?

.3    In light of the answers to the questions in clauses 1.1.1 and 1.1.2 of this Expert Determination Procedure:

.1    what compensation, if any, is payable by one party to the other and when did it become payable?

.2    applying the rate of interest specified in the Contract, what interest, if any, is payable when the Expert determines that compensation?

.3    if compensation is not claimed, what otherwise is the resolution of the Issue?

.2    The Expert must determine, for each Issue, any other questions identified or required by the parties, having regard to the nature of the Issue.

….

4 Role of Expert

.1    The Expert:

.1    acts as an Expert and not as an arbitrator;

.2    must make its determination on the basis of the submissions of the parties, including documents and witness statements, and the Expert’s own expertise; and

.3    must issue a certificate in a form the Expert considers appropriate, stating the Expert’s determination and giving reasons, within 16 weeks, or as otherwise agreed by the parties, after the date of the letter of engagement of the Expert referred to in clause 71.3 of the GC21 General Conditions of Contract.

15. Words and phrases with initial capital letters are defined in cl 79 and provide that:

1. Contract is the agreement between the Contractor and the Principal constituted by the Contract Documents;

2. Expert is a person engaged to determine Issues under cl 71;

3. Expert Determination is the process of determination of an Issue by an Expert, under cl 71 and the procedure in Schedule 5 (Expert Determination Procedure); and

4. Issue is any issue, dispute or difference raised by either party under cl 69.

16. I note that “the determination” in both cl 71.7 and cl 71.8 and references to “determine” and some references to “determination” in Schedule 5 are not capitalised. This is of some significance as there is a dispute between the parties as to what “the determination” is for the purposes of cl 71.8, an issue which I deal with later in these reasons.

17. Pursuant to cl 63, the DoE may set-off a sum claimed in connection with the Contract(s) against any amount to which Lahey is entitled under the Contract(s).

Appointment of Expert, SoP Act adjudications and Expert Determination process

18. During the course of the MV and Bardia Contracts, disputes arose between the parties in relation to claims made by Lahey for variations to the contract works.

19. Between November 2018 and February 2019, Lahey provided the DoE with notices of issue in relation to variations under each of the MV and Bardia Contracts. As the issues were not resolved by the senior executives, they were referred to an expert for determination.

20. By letter dated 28 May 2019, the DoE (on behalf of both parties) appointed Mr Donald Charrett as the expert (Expert) to determine the issues notified by Lahey under the MV and Bardia Contracts in relation to claims for payment for six variations. The parties agreed and advised the expert that the notified issues under both Contracts should be determined together.

21. The issues referred to the Expert for determination are set out in an annexure to the Expert’s letter of appointment and relevantly relate to:

1. four variations under the MV Contract, referred to as V006-Design Changes, V021-Block N, COLA Slab, V022-OSD Tank and V029-Air Conditioning; and

2. two variations under the Bardia Contract, referred to as V047-New Air Conditioning System and V004-Suspension/EOT.

22. During the course of the Expert determination process, Lahey served payment claims under the MV and Bardia Contracts which were then the subject of various adjudication applications and determinations under the provisions of the SoP Act (Adjudications). The Adjudications dealt with a number of Lahey’s claims for payments for variations, including the six variations that had been referred as issues to the Expert for determination. As a result of the Adjudications, the DoE made payment to Lahey in relation to the six variations referred to the Expert and other variations under the MV and Bardia Contracts.

23. In the Expert determination process, the DoE served submissions in defence of Lahey’s claims for payment for the six variations, contending that it had already paid amounts pursuant to the Adjudications which were in excess of Lahey’s entitlements under the MV and Bardia Contracts and that it was entitled to repayment of some or all of the amounts it had paid.

24. In addition to its defences to Lahey’s six variation claims, the DoE also raised its own set-offs and cross-claims for determination by the Expert.

25. Under the MV Contract, the DoE claimed:

1. repayment of amounts paid pursuant to Adjudications that the DoE claimed were in excess of Lahey’s contractual entitlements for eight variations, described as V068B-Northern Rd Pump Out tank, V109-Stormwater & Sediment Control, V020-Aconnex extension, V035A-Lift extension, V041B-Rainwater tank adjustment, V067-Mobile crane costs for steel works & other, V080-Concrete seating around retained landscape and V086-OSD & RWT tanks between blocks K&L (and referred to by the Expert as DM1, DM2 and DM6 - DM11); and

2. payment (or set off) of amounts for “Deduction for design changes”, “ICT Defects” and “Non-Compliant Tender Option” in respect of which no amounts had been paid under the Adjudications (and referred to by the Expert as DM3, DM4 and DM5).

26. Under the Bardia Contract, the DoE claimed repayment of amounts paid pursuant to the Adjudications that the DoE contended were in excess of Lahey’s contractual entitlements for ten variations, described as V015-Acceleration, V146-Asbestos removal Playspace CW1 Wall Stockpile, V128-Asbestos removal block A & B Asbestos Piles, V011-Asbestos soil 500t, V013-Hire of concrete barriers, V051-Existing school sewer diversion, V056-Sports field changes, V062-Structural steel changes, V073-New fire hydrant pump room and V090-Car park design changes (and referred to by the Expert as DB1 - DB11).

27. The Expert concluded that he had jurisdiction to determine the set-offs and cross-claims raised by the DoE under the MV and Bardia Contracts in addition to DoE’s defences to the six variations, but did not have jurisdiction to determine claims made by the DoE in relation to works at another school. The Expert referred to the six variations which had been referred to him as the “Lahey Claims” and the twenty-one cross-claims and set-offs raised by the DoE as the “DoE Claims”.

The Expert Determination

28. The Expert gave his written determination on 28 February 2020 (Determination). The Determination is 280 pages long and contains five annexures.

29. In the Determination, the Expert notes that the amounts originally claimed changed as a result of payments made by the DoE to Lahey pursuant to the Adjudications, that Lahey now sought to substantiate its right to retain those payments and that the DoE sought restitution of amounts paid to Lahey in excess of its contractual entitlements.

30. The Expert had no regard to the reasoning behind the decisions of the Adjudicator and made his own assessment of the parties’ contractual rights to payment and obligations and determined the amounts that Lahey was entitled to be paid under the MV and Bardia Contracts for the variations the subject of the Lahey and DoE Claims. The Expert referred to the Adjudications to confirm amounts that had been paid by the DoE in order to assess the DoE’s claims for restitution and to determine the liability of either party to make a payment to the other party.

31. The Determination records that the Expert considered the submissions by the parties and, in relation to each of the six Lahey Claims and twenty-one DoE Claims, answered the questions to be determined by him, in accordance with paragraph 1 of the Expert Determination Procedure, Schedule 5.

32. In relation to the Lahey CIaims under the MV Contract, the Expert determined the questions as follows:

1. In relation to variation V006-Design Changes (LM1), Lahey, as claimant, had a right to compensation for the variation but the right was extinguished, barred or reduced as Lahey had been paid $915,659.21 by the DoE pursuant to the Adjudication, which exceeded Lahey’s contractual entitlement to payment of $362,240.59. The DoE was entitled to set-off the amount it had paid to Lahey in excess of its entitlements.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $553,418.62, plus the interest paid by the DoE on that amount pursuant to the Adjudication.

2. In relation to variation V012-Block N, COLA Slab (LM2), Lahey, as claimant, had a right to compensation for the variation but the right was extinguished, barred or reduced as Lahey had been paid $322,228.71 by the DoE pursuant to the Adjudication, which exceeded Lahey’s contractual entitlement to payment of $72,837.46. The DoE was entitled to set-off the amount it had paid to Lahey in excess of its entitlements.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $249,391.25, plus the interest paid by the DoE on that amount pursuant to the Adjudication.

3. In relation to variation V022-OSD Tank (LM3), Lahey, as claimant, had a right to compensation for the variation but the right was extinguished, barred or reduced as Lahey had been paid $417,540.85 by the DoE pursuant to the Adjudication, which exceeded Lahey’s contractual entitlement to payment of $346,615.85. The DoE was entitled to set-off the amount it had paid to Lahey in excess of its entitlements.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $70,925, plus the interest paid by the DoE on that amount pursuant to the Adjudication.

4. In relation to variation V029-Air Conditioning (LM4), Lahey, as claimant, had a right to compensation for the variation but the right was extinguished, barred or reduced as Lahey had been paid $2,598,039.40 by the DoE pursuant to the Adjudication, which exceeded Lahey’s contractual entitlement to payment of $2,125,062.32. The DoE was entitled to set-off the amount it had paid to Lahey in excess of its entitlements.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $472,977.08, plus the interest paid by the DoE on that amount pursuant to the Adjudication.

33. As to the Lahey CIaims under the Bardia Contract, the Expert determined the questions as follows:

1. In relation to variation V004-Suspension/EOT (LB1), Lahey, as claimant, had a right to compensation for the variation but the right was extinguished, barred or reduced as Lahey had been paid $434,027.90 by the DoE pursuant to the Adjudication, which exceeded Lahey’s contractual entitlement to payment of $49,655.67. The DoE was entitled to set-off the amount it had paid to Lahey in excess of its entitlements.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $384,372.23, plus the interest paid by the DoE on that amount pursuant to the Adjudication.

2. In relation to variation V047-New Air Conditioning System (LB2), Lahey, as claimant, had a right to compensation for the variation but the right was extinguished, barred or reduced as Lahey had been paid $1,340,542.99 by the DoE pursuant to the Adjudication, which exceeded Lahey’s contractual entitlement to payment of $1,333,022.83. The DoE was entitled to set-off the amount it had paid to Lahey in excess of its entitlements.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $7,520.16, plus the interest paid by the DoE on that amount pursuant to the Adjudication.

34. In relation to the DoE CIaims under the MV Contract, the Expert determined the questions as follows:

1. In relation to variation V068B-Northern Rd Pump Out tank (DM1), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $44,027.99 ($225,665.71 (the amount paid by the DoE under Adjudication) less $181,637.72 (the amount Lahey was contractually entitled to be paid for V068B)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

2. In relation to variation V109-Stormwater & Sediment Control (DM2), the DoE, as claimant, had no right to compensation under the Contract. The Expert had found that Lahey had a contractual entitlement to $171,186.35 for V109 which had already been paid by the DoE pursuant to the Adjudication.

3. In relation to “Deduction for Design Changes” (DM3), the DoE, as claimant, had no right to compensation.

4. In relation to “ICT Defects” (DM4), the DoE, as claimant, had a right to compensation as Lahey failed to rectify the ICT Defects within the time specified but the right to compensation was reduced by certain defects that Lahey was not advised of.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $119,042.04.

5. In relation to “Non-Compliant Tender Option” (DM5), the DoE, as claimant, had no right to compensation.

6. In relation to variation V020-Aconnex extension (DM6), the DoE, as claimant, had no right to compensation under the Contract. The Expert concluded that Lahey had a contractual entitlement to $26,455.00 for V020 which had already been paid by the DoE pursuant to the Adjudication.

7. In relation to variation V035A-Lift extension (DM7), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $14,981.49 ($120,520.44 (the amount paid by the DoE under the Adjudication) less $105,538.95 (the amount Lahey was contractually entitled to be paid for V035A)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

8. In relation to variation V041B-Rainwater tank adjustment (DM8), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $19,719.74 ($161,362.49 (the amount paid by the DoE under the Adjudication) less $141,642.75 (the amount Lahey was contractually entitled to be paid for V041B)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

9. In relation to variation V067-Mobile crane costs for steel works & other (DM9), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $41,011.20 ($89,765.40 (the amount paid by the DoE under the Adjudication) less $48,754.20 (the amount Lahey was contractually entitled to be paid for V067)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

10. In relation to variation V080-Concrete seating around retained landscape (DM10), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $27,045.23 ($64,439.27 (the amount paid by the DoE under the Adjudication) less $37,394.04 (the amount Lahey was contractually entitled to be paid for V080)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

11. In relation to variation V086-OSD & RWT tanks between blocks K&L (DM11), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $22,190.91 ($175,753.24 (the amount paid by the DoE under the Adjudication) less $153,632.33 (the amount Lahey was contractually entitled to be paid for V086)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

35. As to the DoE CIaims under the Bardia Contract, the Expert determined the questions as follows:

1. In relation to variation V015-Acceleration (DB1), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $1,749,244.80 ($2,843,888.00 (the amount paid by the DoE under the Adjudication) less $1,094,643.20 (the amount Lahey was contractually entitled to be paid for V015)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

2. In relation to variation V0146-Asbestos removal Playspace CW1 Wall Stockpile (DB2), “the DoE, as claimant, had a right to compensation under the Contract” [1] as the DoE instructed Lahey to carry out the variation but did not value or pay the claim in accordance with the Contract. Lahey had been paid $634,761.69 by the DoE pursuant to the Adjudication which amount must be allowed for in any order or award.

   1. This is the answer the Expert gave to the first question as required under Schedule 5 to V0146, although the Expert determined that Lahey (not DoE) has an entitlement to payment.

As to the amount of compensation that is payable by one party to the other, Lahey is entitled to payment of $65,224.62 ($699,986.31 (the amount Lahey was contractually entitled to be paid for V146) less $634,761.69 (the amount paid by the DoE pursuant to the Adjudication)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

3. In relation to variation V128-Asbestos removal block A & B Asbestos Piles (DB3/DB4), the DoE, as claimant, had no right to compensation as it had not proved any loss as a consequence of Lahey’s breach of Contract. The Expert found that Lahey had an entitlement to $840,320.67 for V128 which had already been paid by the DoE pursuant to the Adjudication.

4. In relation to variation V011-Asbestos soil 500t (DB5), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $3,722.55 ($168,648.15 (the amount paid by the DoE under the Adjudication) less $164,925.60 (the amount Lahey was contractually entitled to be paid for V011)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

5. In relation to variation V013-Hire of concrete barriers (DB6), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $22,724.79 ($353,890.54 (the amount paid by the DoE under the Adjudication) less $331,165.75 (the amount Lahey was contractually entitled to be paid for V013)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

6. In relation to variation V051-Existing school sewer diversion (DB7), the DoE, as claimant, had no right to compensation under the Contract. The Expert had found that Lahey had a contractual entitlement to $36,122.22 for V051 which had already been paid by the DoE pursuant to the Adjudication.

7. In relation to variation V056-Sports field changes (DB8), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $3,036 ($167,469.06 (the amount paid by the DoE under the Adjudication) less $164,433.06 (the amount Lahey was contractually entitled to be paid for V056)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

8. In relation to variation V062-Structural steel changes (DB9), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $111,809.41 ($269,769.61 (the amount paid by the DoE under the Adjudication) less $157,960.20 (the amount Lahey was contractually entitled to be paid for V062)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

9. In relation to variation V073-New fire hydrant pump room (DB10), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $29,090.55, ($224,036.15 (the amount paid by the DoE under the Adjudication) less $194,945.60 (the amount Lahey was contractually entitled to be paid for V073)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

10. In relation to variation V090-Car park design changes (DB11), the DoE, as claimant, had a right to compensation under the Contract as, pursuant to the Adjudication, the DoE had paid to Lahey an amount in excess of its contractual entitlement, which right to compensation was not extinguished, barred or reduced.

As to the amount of compensation that is payable by one party to the other, the DoE is entitled to payment by Lahey of $7,139.36 ($92,031.66 (the amount paid by the DoE under the Adjudication) less $84,892.30 (the amount Lahey was contractually entitled to be paid for V090)) plus the interest paid by the DoE on that amount pursuant to the Adjudication.

36. The Expert’s determination of the parties’ entitlements to compensation are set out in a eight page table in section 35 of the Determination (at pages 273-280 and also included as part of the Executive Summary) (Summary Table).

37. The Summary Table records the amount paid by the DoE under the Adjudications in respect of the variations the subject of the Lahey and DoE Claims. It also records the amounts the Expert determined that Lahey was contractually entitled to be paid for each of the variations and the amounts Lahey has to pay to the DoE, which the DoE had paid in excess of Lahey’s entitlements pursuant to the Adjudications. The final column of the Summary Table records the amounts that are payable by one party to the other in relation to each of the Lahey and DoE Claims and states [2] that:

1. a total of $1,738,604.34 is payable by Lahey to the DoE in relation to the six Lahey Claims; and

2. a total of $2,149,561.45 is payable by Lahey to the DoE in relation to the twenty-one DoE Claims.

   2. There appear to be five calculation errors contained in the Summary Table relating to V022 (LM3), V047 (LB2), V086 (DM11), V051 (DB7) and V062 (DB9). Those calculation errors total around $2,072.11 and are not material to these reasons.

38. The Determination requires Lahey to pay the amounts determined as payable within 15 business days. There is no dispute that the amounts have not been paid.

39. Based on the Expert’s determinations of the parties’ entitlements to compensation under the MV and Bardia contracts:

1. a total of $1,634,730.55 is payable by Lahey to the DoE under the MV Contract (in relation to the four Lahey Claims and eleven DoE Claims); and

2. a total of $2,253,435.24 is payable by Lahey to the DoE under the Bardia Contract (in relation to the two Lahey Claims and ten DoE Claims).

These proceedings and the DoE’s motion

40. On 6 March 2020, the DoE’s solicitor sent a letter to Lahey’s then solicitor requesting Lahey pay to the DoE the amounts required by the Determination plus interest, by 20 March 2020.

41. On 18 March 2020, Lahey’s solicitor sent a letter to the DoE’s solicitor noting that the amount the Determination required one of the parties to pay to the other exceeded the threshold amount for litigation under Item 54 of the Contract Information. The letter also stated that cl 71.7 provided that any amount determined to be owing was payable within 28 days after receiving the Determination (not payable within 15 business days), and requested the DoE to confirm in writing that it would take no further action regarding the Determination prior to the expiry of that period.

42. On 20 March 2020, the DoE’s solicitor responded by letter in which he disagreed that the period for payment was 28 days as contended by Lahey. Relevantly, the letter from DoE’s solicitor contains the following:

We acknowledge that given the amount of the determination and the terms of the contract that the determination is not binding upon either party.

43. On 27 April 2020, Lahey’s solicitor informed the DoE that it had commenced proceedings on 24 April 2020 in respect of eleven matters determined by the Expert under the MV Contract and eight matters determined by the Expert under the Bardia Contract. Lahey’s solicitor asserted it had the right to commence litigation as the Determination required Lahey to pay an amount to the DoE in excess of $500,000 in respect of each of the MV and Bardia Contracts with the consequence that the Determination was not final and binding.

44. By letter dated 27 April 2020, the DoE’s solicitor confirmed he acted on behalf of the DoE and had instructions to accept service of the proceedings. The letter also stated:

We have previously indicated to you that we agree that given the terms of clause 71.8 of GC-21, as that clause applied to the subject dispute, your client is not prevented from commencing litigation in respect of the matters determined by the Expert.

45. On 1 May 2020, the DoE’s solicitor sent a further letter to the solicitor for Lahey noting that they had not yet been served with any proceeding. In the letter, the DoE’s solicitor resiled from his previously stated position that the Determination was not final and binding. The letter notes that, with the exception of the ICT defects claim under the MV Contract, all of the items with respect to which Lahey is said to have commenced litigation relate to findings and orders made by the Expert pursuant to s 32(3)(b) of the SoP Act with respect to restitution of amounts paid by the DoE following the Adjudications. The letter goes on to state that:

[The DoE] have however now had occasion to revisit the terms of clause 71.8 of the Contract and clause 71.8.2.2 in particular… it appears that the only amount to be taken into account when calculating the value of the claim for the purposes of the consideration of Item 54 of the Contract Information, is the amount of the ICT defects. We note the amount ordered to be paid with respect to this item is $119,000, being well below the figure of $500,000 referred to in Item 54 of the Contract Information… We are now of the view that [Lahey] is, and always has been since the date of [the Determination] on 28 February 2020, precluded from commencing litigation pursuant to the terms of clause 71.8 of the Contract, as the only amounts ordered to be paid in that determination which can be taken into account when calculating the amount for the purposes of Item 54, total an amount less than the threshold amount of $500,000… If it is indeed the case that [Lahey] has commenced proceedings… we have instructions to move the Court for a permanent stay of those proceedings.

46. The parties then exchanged further correspondence in which Lahey contended that the Determination was not final and binding and the DoE contended that it was.

47. On 8 June 2020, Lahey served the summons and list statement which had been filed on 24 April 2020.

48. In its list statement, Lahey claims to be entitled to retain amounts that the DoE has paid pursuant to the Adjudications and to payment of $730,828.97 for what it contends is the balance of the amounts owing to Lahey in respect of certain MV and Bardia variations. By way of relief, Lahey seeks a declaration that the Determination is not final and binding, an order that the DoE be permanently restrained from enforcing any rights or obligations arising from the Determination and damages.

49. On 9 June 2020, the DoE filed the notice of motion which was the subject of the hearing before me on 23 July 2020. The motion seeks the following orders:

1   Summary judgment for the Defendant in the sum of $3,924,748.05 pursuant to rule 13.1 of the Uniform Civil Procedure Rules 2005 (UCPR).

2   That the List Statement filed by the Plaintiff on 24 April 2020 be:

a. dismissed pursuant to rule 13.4 of the UCPR; or

b. struck out pursuant to rule 14.28 of the UCPR.

3   If orders 1 and 2 are not granted, the Defendant be given 28 days from the date of the judgment of this motion to file a defence and any cross-claim.

4   Such other orders as the Court thinks appropriate.

5   Costs.

50. It is common ground that the claims advanced by Lahey in the proceedings are the subject of the Determination. There is also no dispute as to the process of the Determination or as to its form or content.

Threshold issue – summary approach

51. Lahey submits that it is not appropriate for the Court to strike out or dismiss its list statement on a summary basis as there is a real question to be tried as to the proper interpretation of cl 71.8.2 and because the modern trend is not to deal with these type of applications on an interlocutory basis. It relies on paragraph [62] of the Commercial List and Technology and Construction List Practice Note SC Eq 3 (SC Eq 3), which provides that, as a general rule, applications to strike out or for summary judgment will not be entertained, and the comments of Stevenson J in Bellevarde Constructions Pty Ltd v Cosmas Pty Ltd [2016] NSWSC 406.

52. While acknowledging the strictness with which SC Eq 3 should be applied, in my view, this is an appropriate case to depart from the general rule and deal with the DoE’s application to strike out or dismiss. The application does not involve a particular pleading point or take issue with only some of the claims advanced. The application did not take long to argue, was made at an early stage and, if determined in favour of the DoE, will dispose of the proceedings entirely.

51. As Senior Counsel for Lahey accepted at the hearing, the issue raised on this application is essentially a question of construction and does not involve any factual disputes between the parties. He also appropriately conceded that it was open to the Court to deal with a question of law and construction on a summary basis, having regard to the principles in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69.

52. In my view, such an approach is also not contrary to “the modern trend”. In Lepcanfin Pty Ltd v Lepfin Pty Ltd [2019] NSWSC 1328, Rein J considered and dealt with an application to dismiss commercial list proceedings as the issues were the subject of an expert determination process under the contract. His Honour’s approach was upheld on appeal in Lepcanfin Pty Ltd v Lepfin Pty Ltd [2020] NSWCA 155. Bell P, with whom Payne JA and McCallum JA agreed, recognised the need for due caution in disposing of matters involving legal questions in a summary fashion but concluded that it had been open and appropriate for Rein J to do so as the issue raised involved legal questions of construction of a dispute resolution clause in a commercial contract: [96] – [98]. See also Sweetpea Petroluem Pty Ltd v Palter Petroleum [2018] NSWSC 1649; Empire Glass and Aluminium Pty Ltd v Lipman Pty Ltd [2017] NSWSC 253; Lipman Pty Limited v Emergency Services Superannuation Board [2010] NSWSC 710 upheld on appeal in Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163.

53. Having regard to the above and the overriding purpose and obligation to facilitate the just, quick and cheap resolution of the real issues in proceedings, I am satisfied that it is appropriate to deal with the legal issues of construction raised by this application: Civil Procedure Act2005 (NSW), s 56.

Is the Determination final and binding based on the proper construction of cl 71.8.2?

56. The dispute between the parties relates to the proper construction and application of cl 71.8.2 of the General Conditions to the amount(s) determined by the Expert as payable, and whether the $500,000 contractual threshold (Threshold) has been exceeded. There is no dispute that, if the Threshold has been exceeded in the circumstances provided for by cl 71.8.2, the Determination is not final and binding.

57. The parties accept that cl 71.8.2 should be interpreted according to the principles which apply to the construction of a commercial contract.

58. The clause is to be construed objectively by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and commercial purpose, asking what a reasonable person would have understood it to mean. This requires an examination of the language used, the surrounding circumstances known to the parties and the commercial purpose or objects to be secured by the contract: Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104; [2015] HCA 37 at [46]–[49]; Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640; [2014] HCA 7 (Electricity Generation v Woodside Energy) at [35]; Lawrence v Ciantar [2020] NSWCA 89 at [98] – [99].

59. Unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a business-like interpretation on the assumption that the parties intended to produce a commercial result and construe it so as to avoid it making a commercial nonsense or working commercial inconvenience: Electricity Generation v Woodside Energy at [35].

60. As noted by Hammerschlag J, an example of construing to avoid working commercial inconvenience is the settled technique that the construction of a dispute resolution clause is approached liberally and not narrowly: The Illawarra Community Housing Trust Limited v MP Park Lane Pty Ltd [2020] NSWSC 751 at [45] and the cases cited there. This is not to depart from the meaning of the words chosen by the parties but to give a coherent business purpose through an assumption that parties are unlikely to have intended multiple venues or occasions for the resolution of their disputes unless they say so: Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163 at [8].

61. The DoE submits that, for the purposes of calculating whether the amount payable under the Determination exceeds the Threshold, cl 71.8.2.2 requires a “calculation” of the amount payable from one party to another, to be undertaken “without having regard to” amounts paid under the SoP Act. The DoE submits that the calculation is undertaken by deducting from the total amount payable under the Determination all of the amounts that have been paid pursuant to the SoP Act (because regard is not to be had to that amount), and then comparing that amount to the Threshold.

62. Applying this approach, the DoE submits that, in this case, the amount that the Determination requires Lahey to pay to the DoE, calculated without regard to payments under the SoP Act, is only $119,042.04. As this is an amount that is less than the Threshold, the determination is final and binding.

63. Lahey accepts that, under cl 71.8.2.2, amounts paid under the SoP Act are to be disregarded for the purposes of calculating whether the amount required by the Determination to be paid by one party to the other exceeds the Threshold. But it submits that the amounts payable under the Determination exceed the Threshold as, on the proper construction of cl 71.8.2.2, there were two determinations made by the Expert under each of the MV and Bardia Contracts and only the first of those determinations is relevant for the purposes of assessing whether the Determination is final and binding.

64. Pausing here, I agree with Lahey that the Expert made two determinations that need to be considered in this case; one is the Expert’s determination of the Lahey Claims and DoE Claims under the MV Contract (LM1-4; DM1-11) (MV determination); the other is the Expert’s determination of the Lahey Claims and DoE Claims under the Bardia Contract (LB1-2; DB1-11) (Bardia determination).

65. Although the parties agreed that the issues referred under the MV and Bardia Contracts should be determined together, the Expert was appointed pursuant to the General Conditions of each Contract. He was engaged to determine the “Issues” referred to him about matters connected with, and to answer questions in respect of, the “Contract”: cls 69.2, 71.3; Schedule 5, questions 1.1.1, 1.1.2, 1.1.3.

66. In my view, the existence of the Threshold also supports the Expert having made two determinations, one under each of the MV and Bardia Contracts. The Threshold is an amount identified in item 54 of each of the MV and Bardia Contracts and is to be compared against the amount “the determination requires one party to pay to the other” for the purposes of assessing whether “the determination” is final and binding. It would make no sense to compare the Threshold for one contract with an amount the Expert determined was to be paid by one party to the other in relation to matters arising under two contracts.

67. Although the DoE’s written submissions referred to one determination and one “Determined Amount”, at the hearing the DoE’s counsel did not take issue with, and made submissions based on, the Expert having made determinations under each of the MV and Bardia Contracts (T3:26 – 29, T5:6-13).

68. The key difference between the parties is the identification of “the determination” under each of the MV and Bardia Contracts and the calculation of the amounts to be compared to the Threshold for the purposes of cl 71.8.2.

69. The DoE contends that what is relevant is the Expert’s determination of the final amounts that are payable by Lahey to the DoE, as referred to in the last column of the Summary Table referred to at [37] above. The DoE initially contended that this amount was $3,888,165.79 (excl GST), being the sum of all of the amounts referred to in the last column of the Summary Table. The DoE contended that, from $3,888,165.79, the amount of $3,769,123.75 has to be deducted as that amount had already been paid by the DoE to Lahey pursuant to the Adjudications and is the amount that the Expert determined is to be repaid to the DoE by way of restitution under the SoP Act. This leaves the amount of $119,042.04 in relation to the ICT defects claim.

70. At the hearing, the DoE undertook a similar calculation based on the MV determination which the DoE says requires Lahey to pay to it the amount of $1,634,730.55. The DoE submits that when the MV determination amount is calculated without regard to payments under the SoP Act, the amount to be compared to the Threshold as also $119,042.04, in respect of the ICT defects claim. This is because all of the other amounts subject to the MV determination were paid by the DoE pursuant to the Adjudications. The DoE did not address the calculation of the amount to be compared to the Threshold based on the Bardia determination.

71. Lahey contends that the determinations that are relevant for the purposes of cl 71.8.2 are those made by the Expert under each of the MV and Bardia Contracts as to the amounts the DoE was contractually required to pay to Lahey for the claims or works the subject of the variations in dispute. On this basis, Lahey contends that the relevant determinations are:

1. in respect of the subject matter of the MV determination, the Expert’s determination that the amount of $3,772,997.56 [3] was payable by the DoE to Lahey; and

2. in respect of the subject matter of the Bardia determination, the Expert’s determination that the amount of $5,152,071.41 [4] was payable by the DoE to Lahey.

   3. The total of the amounts referred to in the Summary Table as the amounts that Lahey is entitled to payment under the MV Contract.

   4. The total of the amounts referred to in the Summary Table as the amounts that Lahey is entitled to payment under the Bardia Contract.

72. Lahey contends that these are the relevant determinations as they are the only amounts the Expert determined were to be paid by one party to the other that ignore amounts paid by the DoE under the SoP Act. As each exceeds $500,000 (and the aggregate exceeds $500,000), Lahey says the Determination is not final and binding.

73. Lahey argues that, in this case, the practical effect of cl 71.8.2 is that it puts focus on the value of the claim or the works actually performed under the MV and Bardia Contracts as determined by the Expert in comparison with, and in precedence to, that which may have been determined by an adjudicator under the SoP Act. Lahey submits that, by determining the value of the claim or works under the Contracts, the Expert is requiring payment to be made for that value, which is a payment that does not have regard to any amount paid under the SoP Act and is the amount that is to be compared with the Threshold. Lahey submits that the Expert may then finally determine that amounts are to be paid as a set-off or on account of any difference between what has been paid under the SoP Act and the value of the works determined by the Expert, although Lahey says that this “second and final determination” is not the amount to which cl 71.8.2 is directed as it has regard to amounts paid under the SoP Act.

74. Lahey also submits that the DoE’s approach is incorrect because its calculations are based on the finally determined amounts that have regard to payments made under the SoP Act, as they include amounts that the DoE had already paid under the Adjudications and are to be repaid by way of restitution under the SoP Act. Lahey says that all the SoP Act payments made by the DoE should be ignored or “removed from the Determination” in order to calculate the amount left to be compared to the Threshold, which is the value of the underlying claims for payment made by Lahey.

75. I am not persuaded by Lahey’s submissions and consider that its construction and application of cl 71.8.2 to the MV and Bardia determinations have no reasonable prospects of success: Spencer v Commonwealth (2010) 241 CLR 118; [2010] HCA 28; Simmons v Protective Commissioner of New South Wales [2012] NSWSC 455 at [62] and [64].

76. The application of cl 71.8.2 turns, in large part, on construing what is meant by “the determination” that “requires one party to pay the other an amount”. It is then necessary to identify the relevant amounts by reference to each of the MV and Bardia Determinations, and assess whether those amounts are in excess of $500,000, calculated without having regard to any amount that has been paid pursuant to the SoP Act.

77. Both Lahey and the DoE seek to identify what they say is “the determination”, by reference to an overall determination of the total or aggregate amount that the Expert has determined is to be paid by one party to the other. In my opinion, that is the correct starting point as a reasonable businessperson reading cl 71.8.2 in the context of the other General Conditions and Schedule 5 would consider “the determination” to be the outcome of the comprehensive expert determination process that required the expert to determine all of the referred issues, as well as the defences, set-offs and cross-claims, and determine, in light of the answers to other questions, what compensation is payable by one party to the other: cl 71.3, 71.6 and Schedule 5.

78. The relevant determination is the “aggregate liability” of one party to the other, rather than the determination of an individual issue or assessment by the expert of any amount that was or is required to be paid: Shoalhaven City Council v FiredamCivil Engineering Pty Ltd (2011) 244 CLR 305; [2011] HCA 38 at [10] (French CJ, Crennan and Kiefel JJ): Firedam Civil Engineering Pty Ltd v Shoalhaven City Council [2010] NSWCA 59 at [29] (Macfarlan JA).

79. This leads to the next question of construction and application in this case; which is the meaning to be attributed to the expression “requires one party to pay to the other an amount”.

80. In my view, the word “requires” means that “the determination” for the purposes of cl 71.8.2 is one that calls for or obliges one party to do something; namely to pay the other an amount of money. In other words, the relevant determination for the purposes of cl 71.8.2 is the determination that imposes a liability on one party to pay to the other an amount.

81. In my view, it also means that the determination that is relevant is one that requires a payment to be made in the future; the determination which gives rise to a liability to pay the amount which, according to cl 71.7, must be paid to the other party within 28 days of receipt of “the determination”. Such an interpretation is also consistent with the other text of cl 71.7, which refers to a party that “owes money to the other pursuant to the determination”.

82. It follows that I do not accept Lahey’s submission that the relevant determinations for the purposes of cl 71.8.2 are the aggregate amounts that the Expert determined Lahey was entitled to be paid under the MV and Bardia Contracts in respect of the variations the subject of dispute. The MV and Bardia determinations do not, and could not, call for or oblige the DoE to pay to Lahey those amounts because they had already been paid. Indeed, and as noted by the Expert in the determination, Lahey’s claims changed during the course of the determination process to a claim to a right to retain payment, rather than a claim to be paid. In those circumstances, in my view, a reasonable businessperson would not read cl 71.8.2 as meaning that the MV and Bardia determinations required the DoE to pay any of the amounts which the Expert found Lahey was contractually entitled to be paid under the MV and Bardia Contracts.

83. The amounts contended by Lahey as being the subject of the relevant “determinations” have also been paid by the DoE to Lahey pursuant to the Adjudications. Accordingly, even if I was to accept that the Expert determined that those amounts were required to be paid by the DoE to Lahey (which I do not), as they are amounts that have been paid by the DoE pursuant to the SoP Act they would have to be ignored or “removed” for the purposes of calculating the amount to be compared with the Threshold under cl 71.8.2.2.

84. If it was intended that “the determination” under cl 71.8.2 is to be assessed as final and binding by reference to the aggregate value of claims made by Lahey or an amount to which it was entitled to have been paid under the contracts, it is to be expected that cl 71.8.2 would include words referring to the value of claims or to similar effect. There is no statement in the clause that the amounts contemplated to be payable by the determination are of such a character. There is no reason to restrict the plain meaning of the words used in cl 71.8.2 by reading in words that are not found in that clause: Miwa Pty Limited v Siantan Properties Pte Limited [2011] NSWCA 297 at [14]-[18].

85. In my view, the words “requires one party to pay to the other” are unambiguous and they must be given effect. A court is not justified in disregarding unambiguous language simply because a party asserts that the contract would have a more commercial and business-like operation if an interpretation different to that dictated by the language were adopted: Jireh International Pty Limited t/as Gloria Jean’s Coffee v Western Export Services Inc [2011] NSWCA 137 at [55]. In any event, and for the reasons referred to at [94] below, I do not consider that the contract has an uncommercial operation based on my interpretation.

86. To my mind, the Expert’s “determinations” of the amounts that Lahey was entitled to be paid under the MV and Bardia Contracts in respect of the variations the subject of disputes are better characterised as determinations or findings made as part of the expert determination process that required the Expert to determine the issues referred by Lahey, the set-offs and cross-claims raised by the DoE and the questions in accordance with Schedule 5, rather than the final outcome of the process which resulted in “the determination” for the purposes of cl 71.8.2 and cl 71.7. This is particularly in the context where the Expert was not required by Schedule 5 to determine any question as to whether Lahey, as claimant, had a right to compensation in respect of the subject matter of the twenty-one DoE claims.

87. As to the amounts that the MV and Bardia determinations require one party to pay the other, in my view, they are the amounts referred to at [39] above, namely the total amounts payable by Lahey to the DoE pursuant to the MV and Bardia determinations. Those amounts represent the aggregate liability of one party to the other under each determination.

88. The DoE submits, and I accept, that the words "calculated without having regard to any amount that has been paid pursuant to the [SoP Act]" in cl 71.8.2 operate on the amounts each of the MV and Bardia determinations requires one party to pay to the other. In my view, that calculation can be undertaken by deducting from the amounts required to be paid, the amounts that have been paid by the DoE pursuant to the SoP Act (because regard is not to be had to those amounts). The outcome of that calculation is then compared with the Threshold to assess whether the determinations are final and binding.

89. Undertaking those calculations leads me to conclude that the MV determination and the Bardia determination are both final and binding.

90. This is because the MV determination requires Lahey to pay to the DoE the amount of $1,634,730.55, of which $119,042.04 is the only amount that has not been paid by the DoE pursuant to the SoP Act.

91. As for the Bardia determination, while the overall determination requires Lahey to pay to the DoE a total $2,253,435.24, when that amount is calculated without regard to amounts paid by the DoE under the SoP Act, the DoE is required to pay Lahey the amount of $65,224.62 in respect of V0146 (DB2); see [35(b)] above. This is because the Bardia determination requires Lahey to repay the DoE $2,318,659.86 by way of restitution for amounts the DoE had paid under the Adjudications in excess of Lahey’s contractual entitlements: see at [33],[35(a)], [35(d)], [35(e)], [35(g)]-[35(j)] above.

72. Another way of applying cl 71.8.2 would be to not have regard to all of the payments made by the DoE to Lahey under the SoP Act, which Lahey’s submissions identify as $5,286,616.07 under the MV Contract Adjudications and $7,405,506.54 under the Bardia Contract Adjudications. As those amounts include the amounts that the Expert found Lahey was entitled to be paid (and had been paid) under the MV and Bardia Contracts, the result remains as set out at [90] and [91] above. Without regard to any amount that has been paid by the DoE to Lahey, the MV determination requires Lahey to pay to the DoE the amount of $119,042.04, and the Bardia determination requires the DoE to pay to Lahey the amount of $65,224.62.

73. Neither of the above calculations seek to divide the separate variation claims and other claims made by Lahey and the DoE, as Lahey’s submissions suggest. Rather, they focus on the amounts the MV and Bardia determinations require one party to pay to the other, and calculate those amounts without regard to what has been paid by the DoE under the SoP Act.

74. Lahey contended that that it would make no commercial sense for the very same claims advanced in this case to be justiciable if no payments had been made by the DoE under the SoP Act, but for the Determination to be final and binding in circumstances where payments had been made and to which regard should not be had for the purposes of cl 71.8.2. It was contended that this was some type of uncommercial or absurd result and a triumph of semantics. I disagree. I see nothing uncommercial about an outcome which renders the claims made by Lahey and the DoE in this case not being justiciable in circumstances where all of them had been the subject of previous Adjudication processes pursuant to which Lahey received, and since that time has had the benefit of, significant funds which it sought to retain as part of another extensive expert determination process. The key difference to the situation where the claims are justiciable (as no payments had been made) is that, in this case, the claims were, in essence, claims made by the DoE to recover money already paid to Lahey, rather than claims by Lahey to be paid compensation for variations by the DoE.

75. I also do not accept Lahey’s argument that its interpretation reflects the commercial purpose to be served by cl 71.8.2, which is to enable parties to litigate large contractual claims, rather than claims which are valued at less than $500,000. The focus of cl 71.8.2 is not on the value of claims per se, but on the value of the outcome of the determination of claims and any defences, cross-claims and set-offs. The clause clearly provides for the determination of very large contractual claims (of say $2.6 million) to be final and binding in circumstances where the principal’s cross-claims or contractual set-offs are of a similarly large value (of between $2.1 and $3.1 million).

76. To my mind, the commercial intent of cl 71.8.2 is clear. For the purpose of assessing whether the Threshold has been exceeded and parties can litigate matters the subject of the determination, payments made by a principal under the SoP Act are to be disregarded.

77. Lahey also submits that the acknowledgements by the DoE’s solicitor in the letters dated 20 March 2020 and 27 April 2020 that the determination was not final and binding and the arguments advanced at the hearing indicate that the proper construction of cl 71.8.2 and its application to the Determination is not clear and open to another construction, as it advances.

78. The stance taken by the DoE’s solicitor in his early letters is not, to my mind, of significance on the question of the proper interpretation of cl 71.8.2 on this application. The affidavit that was relied on at the hearing, to which there was no challenge, indicates that he came to a different conclusion as a consequence of revisiting the terms of the MV and Bardia Contracts and cl 71 in particular. I have also already explained why I do not accept that Lahey’s construction is the correct one, how cl 71.8.2 should be interpreted to the MV and Bardia determinations and why I consider it appropriate to determine this application even though the DoE seeks summary dismissal.

79. Clause 71.8 provides that neither party may commence litigation in respect of the matters determined “unless” the determination requires one party to pay the other more than $500,000, calculated without regard to SoP Act payments. As I have concluded that, on a proper construction and application of cl 71.8.2 to the MV and Bardia determinations, amounts of less than $500,000 are required to be paid, the Expert Determination is final and binding and Lahey is precluded by contract from commencing these proceedings. It follows that the claims made should be dismissed.

Alternative argument - Estoppel

100. In its written submissions, Lahey advanced an alternative argument that the proceedings should not be dismissed as it would plead, by way of reply to a defence that the Determination is final and binding, that the DoE is estopped from denying that the Determination is not final and binding.

101. In support of the estoppel claim, Lahey says that:

1. in the period following the Determination until 1 May 2020, Lahey and the DoE had assumed as the conventional basis for their relationship that the Determination was not final and binding;

2. Lahey suffered detriment on the basis of this common assumption including legal costs in preparing the summons and list statement in these proceedings as well as all filing fees and incidental costs;

3. these proceedings were commenced on 24 April 2020 on the common assumption that the Determination was not final and binding; and

4. the DoE only informed Lahey that it sought to resile from the common assumption that the Determination was not final and binding on 1 May 2020 – after the commencement of the proceedings.

102. The estoppel argument was not the subject of any substantive debate at the hearing and Lahey’s Senior Counsel did not press it with any force. For this reason, I have dealt with the argument in a less detailed way than I have with the other issues raised at the hearing.

103. The DoE submits, and I accept, that the estoppel claim does not provide a sound basis to dismiss the DoE’s motion if the Court concludes, as I have, that the Determination is final and binding.

104. As the DoE’s counsel submits, by its summons, Lahey seeks a declaration that the Determination is not final and binding. In my view, this raises significant doubt as to the basis on which Lahey could substantiate its assertion that the parties had assumed a common assumption that the Determination was not final and binding as the conventional basis for their relationship as at 24 April 2020, the date the proceedings were filed.

105. Even if there was such a common assumption, the position changed on 1 May 2020 when the DoE’s solicitor informed Lahey’s solicitor he had a different view, and from that time contended that the Determination is final and binding. Relevantly, that was prior to service of the summons and list statement on the DoE.

106. In any event, and as Lahey’s Senior Counsel accepted at the hearing, the only detriment that Lahey may have suffered as a result of the DoE’s solicitor indicating that he considered the Determination to be final and binding are the costs Lahey incurred in preparing and commencing these proceedings. Any such detriment can be dealt with by an appropriate costs order.

Should the DoE be granted summary judgment?

107. By its motion, the DoE also seeks an order for summary judgment pursuant to r 13.1 of the UCPR.

108. The DoE submits that such an order is appropriate as it follows that it would be entitled to judgment in respect of the amounts the subject of the Expert’s Determination, together with interest, which it calculates to be $3,924,748.05. In support of the order, the DoE relies on an affidavit of David Michael Vaughan, sworn 10 July 2020. Mr Vaughan’s evidence is that, as at 10 July 2020, Lahey had not made payment of the amount determined by the Expert as payable to the DoE or any amount pursuant to cl 62 of the Bardia Contract, which provides for interest on unpaid amounts at a rate of 6%.

109. Lahey contests the DoE’s application for summary judgment. Although not disputing that the amounts claimed by the DoE are unpaid, it submits that the DoE has no standing to obtain a monetary judgment under r 13.1 as there is no cross-claim or other relevant claim filed by the DoE. On this issue, I agree with Lahey.

110. Under r 13.1 of the UCPR, the Court may give judgment on a summary basis on application by a plaintiff. It may also make such order on the plaintiff’s claim for relief or any part of the plaintiff’s claim for relief, as the case requires. Plaintiff includes a cross-claimant: Civil Procedure Act 2005 (NSW), s 3.

111. The difficulty I have with the DoE’s application is that the DoE has made no claim for relief in these proceedings in the capacity of a plaintiff. No commercial list response or cross-claim has been filed. Nor did the DoE’s counsel suggest that one would be filed in order to obtain judgment under r 13.1 of the UCPR. Rather, the submission advanced at the hearing was that summary judgment should be granted notwithstanding a cross-claim has not been filed because it should not be necessary to retry issues and the DoE considers it has a binding expert determination, rendering a cross-claim unnecessary.

112. I accept that the DoE may not want to take steps in proceedings it considers should not have been commenced. But I am not persuaded that the Court has power to give judgment to the DoE under r 13.1 of the UCPR in the absence of such a claim. Nor was I referred to any authority by the DoE that suggests otherwise.

113. Accordingly, I decline to make an order for summary judgment as sought by order 1 of the DoE’s motion.

Costs and orders

114. As to costs, the DoE has succeeded obtaining the primary relief it seeks and the motion was contested by Lahey. Accordingly, I see no reason why costs should not follow the event in relation to the DoE’s motion and will make an order accordingly.

115. I have deferred making any order as to the costs of the proceedings as the parties did not address me on that issue and there may be some dispute about that having regard to the matters relied on in support of Lahey’s estoppel claim. Unless the parties notify my chambers that they have reached agreement on the costs of the proceedings, they are to file and serve written submissions on that issue of no more than two pages by 7 September 2020 which are to be provided by email to my chambers and will be determined on the papers.

116. For these reasons, I make the following orders:

1. The summons and list statement filed by the plaintiff on 24 April 2020 be dismissed pursuant to r 13.4 of the UCPR.

2. The plaintiff to pay the defendant’s costs of the defendant’s notice of motion filed on 9 June 2020.

3. In relation to the costs of the proceedings, unless the parties reach prior agreement, they are to file and serve written submissions on the issue of costs of no more than two pages by 7 September 2020, which are to be provided by email to the Associate to Henry J at the same time as filing.

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Endnotes

Amendments

01 September 2020 - Paragraph [34](j) Insert round bracket before the amount $64,439.27.

Paragraph [35](b) Second paragraph, second line - insert the words "by the DoE" .

Paragraph [37]((b) Insert the amount "$2,149,561.45".

Paragraph [39] "contracts" should be capitalized "Contracts".

Paragraph [70] at line 6 insert the word "other" before "amounts".

Paragraph [73] change "SOP Act" to "SoP Act".

Paragraph [86] the last word "claims" should be capitalized "Claims".

01 September 2020 - Paragraph [35](b) second paragraph, second line delete the words "by the DoE".

Paragraph [39] the word "Contracts" should be "contracts".

Paragraph [86] the last word "Claims" should be "claims".

Decision last updated: 01 September 2020