Metier3 Pty Ltd v Enwerd Pty Ltd (No 2)
[2014] VSC 138
•26 MARCH 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
TECHNOLOGY, ENGINEERING AND CONSTRUCTION
No. 06058 of 2013
| METIER3 PTY LTD (ABN 31 499 541 615) | Plaintiff |
| v | |
| ENWERD PTY LTD | First Defendant |
| and | |
| S.H.L NOMINEES (1965) PTY LTD | Second Defendant |
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JUDGE: | VICKERY J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 26 MARCH 2014 | |
DATE OF JUDGMENT: | 26 MARCH 2014 | |
CASE MAY BE CITED AS: | METIER3 PTY LTD v ENWERD PTY LTD & ANOR (No 2) | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 138 | |
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PRACTICE AND PROCEDURE – Supreme Court (General Civil Procedure) Rules 2005 - Rule 45.05 - Application for summary judgment – Court’s discretion to make orders pursuant to Rule 45.05(8) - Proceeding commenced by originating motion – No pleadings - Summary judgment sought in circumstances where there are substantial issues in dispute – Full hearing on merits appropriate – Defendants entitled to a defence and counterclaim – Application for summary judgment dismissed - Pleadings ordered.
BUILDING CONTRACTS – Entitlement to final payment following issue of certificate of Practical Completion - Validity of certificate of Practical Completion issued under Deed of Settlement - Whether it is open to defendants to challenge validity – Doctrine of election or waiver – Challenge to validity not raised before expiration of 12-month defects period under Deed of Settlement – Obligations under Deed of Settlement – Whether Plaintiff has complied with obligations.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Golvan QC | Carrick Gill Smyth |
| For the Defendants | Mr M Whitten of Counsel | Arnold Bloch Liebler |
HIS HONOUR:
The Plaintiff, Metier3 Pty Ltd, by originating motion and summons on originating motion seeks relief in the form of declarations intended to substantiate its entitlement to relief and final judgment against the Defendants in the amount of $300,000 plus GST.
At a directions hearing conducted on Friday, 21 February 2014, I directed pursuant to the case management provisions of the Civil Procedure Act 2010 (Vic), that a preliminary trial of a contract construction issue be conducted on 26 February 2014, pursuant to Rule 47.04 of the Supreme Court (General Civil Procedure) Rules 2006 (‘the Rules’).
On 26 February 2014, this proceeding was listed for preliminary determination of the following question pursuant to Rule 47.04:
Subject to clause 2E of the Deed of Settlement, whether the relevant provisions of the Deed give rise to an entitlement for the Plaintiff to be paid the final instalment of $300,000 plus GST upon the issue of a certificate of practical completion by the Superintendent.
I held in Metier 3 Pty Ltd v. Enwerd Pty Ltd & SHL Nominees1965 Pty Ltd[1] that the construction of clause 2E means that the entitlement of the Plaintiff to payment of the last instalment under the Deed of Settlement arises where a certificate of practical completion, duly issued in accordance with the terms of the Deed of Settlement, has been issued by the Superintendent.
[1][2014] VSC 80.
At paragraphs [50]-[51] of that decision, I noted the following matters in respect of the potential invalidity of a certificate of practical completion for the purposes of triggering the Plaintiff's entitlement to the final instalment under the Deed of Settlement:
Conversely, a Certificate of Practical Completion will be invalid for the purposes of triggering the entitlement of the Plaintiff to payment of the last instalment, if it has not been duly issued in accordance with the terms of the Deed of Settlement by the Superintendent.
This may arise if the Defendants, who bear the evidentiary onus on the issue, are able to establish the invalidity of the Certificate of Practical Completion because it has not been issued in accordance with the terms of the Deed of Settlement by the Superintendent in reliance on one or a number of general grounds, namely:
(a)If the technical requirements of Clause 2(e) and the Clause 1.1 definition have not been satisfied, for example, if the document relied upon as the Certificate of Practical Completion, is in fact not a document of that character; or if the person who purported to issue the Certificate of Practical Completion was not in fact the Superintendent at the relevant time;[2]
(b)If the Superintendent did not bona fide exercise his contractual power[3] – for example, if it is established that the Superintendent was not genuinely of the opinion that Practical Completion had been reached when he purported to issue the Certificate of Practical Completion;
(c)If the decision of the Superintendent to issue the Certificate of Practical Completion was so unreasonable that no reasonable Superintendent in his or her position would ever consider issuing it,[4] or if the decision lacks an evident and intelligible justification or is shown to be arbitrary or capricious or to abandon common sense;[5]
(d)Or, if the issue of the Certificate of Practical Completion is otherwise shown to be beyond the contractual power conferred on the Superintendent,[6] or if the exercise of the power is otherwise liable set aside,[7] for example through the application of the principles of unconscionable conduct pursuant to sections 20-22 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)).
[2]See eg where an error going to the heart of the basis for a decision can render that decision open to challenge. Such an error can occur contrary to the obligation to act fairly, honestly and reasonably, as explained in the context of an erroneous valuation by an independent arbiter in Federal Cmr of Taxation v St Helens Farm (ACT) Pty Ltd (1981) 146 CLR 336, 381 (Mason J).
[3]Aleyn v Belchier (1758) 28 ER 634, 637 by Lord Northington: ‘No point is better established than that, a person having a power, must execute it bona fide for the end designed otherwise it is corrupt and void’. Ngurli v McCann (1953) 90 CLR 425, 440 (Williams ACJ, Fullagar J and Kitto J).
[4]This may be compared to the standard of reasonableness applied to the construction of a ‘best endeavours’ clause, for example, as in Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83. A valid issue of a certificate may be measured objectively by what is reasonable in the circumstances having regard to the nature, capacity qualifications and responsibilities brought to bear by the Superintendent, viewed in light of the particular contract.
[5]That is, it does not fall within a range of reasonable decisions determined in accordance with the discretion afforded by the contract: Yarraman Pine Pty Ltd v Forestry Plantations Queensland [2009] QCA 102 [42]-[44].
[6]A superintendent must form opinions and exercise discretions according to the contractual context, having regard to the facts and circumstances of the project. See eg WMC Resources Ltd v Leighton Contractors Pty Ltd (2000) 16 BCL 53.
[7]For example in the case of fraud or obvious conflict.
By its submission dated 19 March 2014, and related correspondence the Plaintiff seeks an order for summary judgment in its favour. This is its third application for such judgment.
The Plaintiff does not seek summary judgment pursuant to Rule 22 of the Rules, nor does it seek summary judgment pursuant to s 63 of the Civil Procedure Act 2010 (Vic) on the basis that the defence has no real prospect of success.
Rather, the Plaintiff, having commenced its proceeding by originating motion, founds its application on Rule 45.05 of the Rules which relevantly provides a special procedure to the following effect:
(1)In this Rule "plaintiff" includes a person who proposes to commence a proceeding by originating motion.
(6)Judgment shall not be given for the plaintiff, or an order made, for the relief or remedy sought in the originating motion or otherwise except on application made to an Associate Judge or, if the Associate Judge does not have authority to give the judgment or make the order sought by the Plaintiff, to a Judge of the Court, on notice to the defendant in Form 45B.
(7)Where an application is made to an Associate Judge under paragraph (6) the Associate Judge may, as appropriate—
(a)hear and determine the application or refer it to another Associate Judge or a Judge of the Court for hearing and determination;
(b) by consent of the defendant, give judgment;
(c)place the proceeding in the list of cases for trial and give directions for the filing and service of affidavits or otherwise.
(8)Where an application is made to a Judge of the Court under paragraph (6), the Judge may give judgment or make any order he or she considers appropriate.
It is to be noted that the court constituted by a judge in such an application is conferred with a wide discretion under Rule 45.05(8) by the words:
The judge may give judgment or make any order he or she considers appropriate.
The Defendants have consistently contended that the Plaintiff is not entitled to payment of the final instalment under the Deed of Settlement because:
a) the Certificate of Practical Completion (CPC) is invalid for the purposes of the Deed of Settlement; and
b) the Plaintiff has not fulfilled the second requirement for payment, that is, provision of all documents and drawings required under the architect agreement.
The Defendants’ opposition to the Plaintiff's claim, both in terms of a challenge to the validity of the CPC in line with this Court's decision on the preliminary question and the documents issue, has been formally communicated and embodied in the delivery of the proposed defence and counterclaim. At paragraph 9 thereof, the Defendants seek to plead as follows:
… the Defendants deny that the purported CPC was issued ‘in accordance with the contractual arrangements for the performance of the Works’ or in accordance with the relevant provisions of the D&C Contract, and is therefore invalid and of no effect for the purposes of clause 2(e) of the Deed of Settlement by reason of the following:
(a)the purported CPC is not in fact a Certificate of Practical Completion within the provisions of general condition 42.3 and the definition of ‘Practical Completion’ within the D&C Contract;
(b)the Superintendent did not bona fide exercise his contractual power in purportedly certifying that Practical Completion of the works had been achieved; alternatively, he was not or could not have genuinely been of the opinion that Practical Completion had been reached when he purported to issue the purported CPC;
(c) the decision of the Superintendent to issue the purported CPC:
(i)was so unreasonable that no reasonable superintendent in his position would ever consider issuing it;
(ii) lacked an evident and intelligible justification; and/or
(iii) was arbitrary or capricious or abandoned common sense;
(d)the issuing of the purported CPC was otherwise beyond the contractual power conferred on the Superintendent; and/or
(e)the purported CPC is otherwise liable to be set aside on the grounds that the issuing of it constituted unconscionable conduct pursuant to sections 20-22 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)).
In this case I am satisfied that the Plaintiff seeks summary judgment in circumstances where:
(a) there are substantial factual and legal issues in dispute;
(b)the Defendants have not been afforded an opportunity to plead a defence or counterclaim;
(c) there has been no discovery;
(d) not all of the evidence to be adduced is before the Court; and
(e)any evidence that is before the Court has not been and cannot be tested in the course of the Plaintiff's present application.
I am also satisfied that only a full hearing on the merits is appropriate to properly determine the issues.
The Plaintiff alleges, in summary, that the Defendants are precluded from challenging the validity of the CPC in this proceeding because they have elected not to challenge the validity of the CPC under the D&C contract.
The Plaintiff also relies on the doctrine of approbation and reprobation, submitting that the Defendants cannot conduct themselves on the basis that the CPC is valid and binding as between the parties to the D&C contract, and not take any steps to set aside the CPC, but then make an inconsistent assertion that the CPC is invalid as between themselves and the Plaintiff for the purposes of the Deed of Settlement.
It was submitted that the Defendants have accepted the benefit of the CPC in the sense that they have taken no steps to challenge the CPC when its issue triggered the commencement of the defects liability period, which continued for 12 months. In these circumstances it was submitted for the Plaintiff that the Defendants cannot now purport to exercise an inconsistent right.
In its submissions the Plaintiff points to evidence contained in the Third Affidavit of Shlomo Werdiger,[8] which it says demonstrates that the Defendants made a conscious decision not to challenge the CPC. Rather, they allowed the defects liability period, which was triggered by the issue of the CPC, to continue. The Plaintiff says that this was an election made both under the D&C contract and under the Deed of Settlement which operates to bind the Defendants.
[8]Third Affidavit of Shlomo Werdiger, affirmed 26 March 2014, paras 10–12 (‘Third Werdiger Affidavit’).
During the hearing on 20 March 2014, senior counsel for the Plaintiff made submissions on the point. I said, as to those submissions, that the real question sought to be articulated is this:
Whether it is open to the Defendants in the present proceeding... to maintain that, for the purposes of clause 2E of the Deed of Settlement, the certificate of practical completion, which was in fact issued on 1 March 2013, was invalid ...
In reply, senior counsel for the Plaintiff submitted that it was unarguable that the Defendants could not so maintain.
The Plaintiff says that the relevant question here is whether in the circumstances of the case, where a CPC has been issued which has not been set aside, it is now open to the Defendants to assert invalidity of that document or whether they remain uncontrovertibly bound by it for the purposes of clause 2E of the Deed of Settlement.
I do not agree that it is unarguable that the Defendants have no standing to advance the contention as to the alleged invalidity of the CPC.
In the present case, the issue of the purported CPC under the D&C contract arguably did not give rise to inconsistent rights which could form the basis of an election on the part of the Defendants in relation to a different contract, namely, the Deed of Settlement.
The issuing of the CPC arguably has very different consequences and rights for each contract. For example, under the D&C contract, the issue of valid CPC has consequences for the Defendants and the Contractor, including the return of part of the security and the commencement of the defects liability period. Under the Deed of Settlement, the issue of a valid CPC is one of the requirements for the payment of the final instalment of the Plaintiff's fees.
It is also arguable that in any event, as a matter of fact, at no stage have the Defendants by any word or conduct conceded that the works have reached practical completion as that term is defined in the D&C contract, or that the CPC was validly issued. In relation to the contract comprised in the Deed of Settlement, the Defendants appear to have consistently maintained that the CPC was invalid for the purposes of that agreement.
Further and importantly, there appear to have been no unequivocal words or conduct on the part of the Defendants, so as to waive any right to challenge the validity of the purported certificate of practical completion for the purposes of payment under clause 2E of the Deed of Settlement.
The application of the doctrine of election or waiver is a triable issue in this proceeding.
Further, the application of the doctrine of approbation and reprobation and whether that doctrine exists as a separate operating principle under Australian law, is alive.
Further and in any event, there remains a significant dispute as to whether the other requirement for payment under clause 2E of the Deed of Settlement has been satisfied.
The Plaintiff referred to what it says is clear evidence that all of the documents, as required by clause 2E, were provided. It referred to the provisions of the D&C contract, which rendered the Superintendent, Case Meallin & Associates, the agent of the Defendants, as Principal for certain purposes.
It is submitted further that the Defendants delegated management of the issue as to what documents were to be provided, pursuant to clause 2E of the Deed of Settlement, to Case Meallin as their agent at the time.
The Plaintiff also referred to a chain of nine emails, commencing on 8 March 2013 and extending to 20 March 2013, culminating in the following email sent at 3.01 pm on 20 March 2013 by the superintendent, Anthony Millicer, from Case Meallin as the Defendant’s delegate:
[B]ased on my review I can confirm that the register of drawings represents the full set of construction documentation as required to be provided by Metier 3.[9]
[9]Transcript of proceedings 26/03/2014 p 78.
On the other hand, the Defendants contend, as pleaded in their proposed Defence and Counterclaim, that
[t]he Plaintiff has not provided all construction drawings and any other documents required under the agreement to be provided by [the Plaintiff] in respect of the project.
The Defendants also rely upon the evidence contained in the Third Werdiger Affidavit to this effect.[10] Mr Werdiger deposed at paragraph 58, as set out in the table enclosed with Arnold Bloch Leibler's letter dated 22 November 2013, that there are substantive works still to be completed by Metier, so that the St James Building is reasonably capable of being used for its standard purpose.
[10]Third Werdiger Affidavit, paras 58-59.
Mr Werdiger then set out what looked to be extensive outstanding works. Mr Werdiger deposed, in paragraph 59, as follows:
Further, there remain a number of drawings and other documents required under the architect agreement that have not been provided by Metier, which relate to the outstanding matters referred to in paragraph 58. The provision of these documents is a condition of payment under clause 2E of the Deed of Settlement. They include ...
Mr Werdiger then set out what looks to be an extensive list of drawings and other documents said to be outstanding.
In the light of this evidence, whether the Plaintiff has in fact provided all construction drawings and other documents required pursuant to the architect agreement, is a question of fact and legal construction, requiring analysis at a trial of what documents have been provided and whether the Plaintiff has in fact complied with the requirements of clause 2E of the Deed of Settlement and the requirements of the Architect Agreement.
I am satisfied that the question of whether the Plaintiff has complied with the obligations in Part E of the annexure to the Architect Agreement and clause 2E of the Deed of Settlement, cannot be determined summarily.
Accordingly, I determine that the Plaintiff's application for summary judgment should be dismissed, and pursuant to Rule 45.05(8), it is appropriate to place the proceeding in the list of cases for trial and give directions for the further conduct of the proceeding.
Included in the directions to be made will also be an order for the delivery of pleadings, which will include a statement of claim, a defence and any counterclaim and any reply and defence to counterclaim. If discovery is shown to be necessary, discovery will be limited to defined categories and undertaken in accordance with TEC SOP 3.
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