Monadelphous KT Pty Ltd v Transalta Energy (Australia) Pty Ltd
[2017] WASCA 176
•29 SEPTEMBER 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: MONADELPHOUS KT PTY LTD -v- TRANSALTA ENERGY (AUSTRALIA) PTY LTD [2017] WASCA 176
CORAM: MARTIN CJ
MURPHY JA
MITCHELL JA
HEARD: 14 AUGUST 2017
DELIVERED : 29 SEPTEMBER 2017
FILE NO/S: CACV 82 of 2016
BETWEEN: MONADELPHOUS KT PTY LTD
Appellant
AND
TRANSALTA ENERGY (AUSTRALIA) PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :KENNETH MARTIN J
Citation :MONADELPHOUS KT PTY LTD -v- DDG FORTESCUE RIVER PTY LTD [2016] WASC 224
File No :CIV 1387 of 2016
Catchwords:
Appeal against summary judgment in favour of defendant - Summary dismissal of plaintiff's action under a guarantee - Guarantee for work done under a building contract - Building contract a lengthy and complex document - Enforcement of guarantee - Duration of guarantee - Whether plaintiff's arguments in relation to the enforcement of guarantee untenable - Complex issues of law raised and issues of fact - Whether even if no triable issues of fact, this court should proceed to determine finally all points of law in favour of defendant and thereby uphold summary disposition of plaintiff's claim
Legislation:
Nil
Result:
Appeal allowed
Category: B
Representation:
Counsel:
Appellant: Mr S K Dharmananda SC & Mr B Millar
Respondent: Mr J Thomson SC & Mr J Maclaurin
Solicitors:
Appellant: Jones Day
Respondent: Squire Patton Boggs
Case(s) referred to in judgment(s):
Beaufort Developments (NI) Ltd v Gilbert‑Ash (NI) Ltd [1999] 1 AC 266
Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693
Dante De Grazia trading as All Sydney Building Services v Nicholas Solomon [2010] NSWSC 322
Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62
Hawker Noyes Pty Ltd v New South Wales Egg Corp (Unreported, NSWSC, Library No 14077, 11 November 1988)
Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] BLR 437
Monadelphous KT Pty Ltd v DDG Fortescue River Pty Ltd [2016] WASC 224
National Australia Bank Ltd v Carideo [2000] FCA 688
National House‑Building Council v Fraser [1983] 1 All ER 1090
Sutton Investments Pty Ltd v Realistic Investments Pty Ltd [2017] WASCA 14
Theseus Exploration NL v Foyster [1972] HCA 41; (1972) 126 CLR 507
WMC Resources Ltd v Leighton Contractors Pty Ltd [1999] WASCA 10; (1999) 20 WAR 489
JUDGMENT OF THE COURT: This is an appeal from the decision of Kenneth Martin J in Monadelphous KT Pty Ltd v DDG Fortescue River Pty Ltd (primary decision).[1] The appellant (Monadelphous) commenced the primary proceedings against DDG Fortescue River Pty Ltd (DDG) and TEC Pilbara Pty Ltd (TEC), seeking, amongst other things, the recovery of liquidated sums under a contract for the construction of a pipeline. The pipeline project is a joint venture between DDG and TEC. DDG had a 57% interest in the venture, and TEC's interest was 43%. Monadelphous also sued the respondent, TransAlta Energy (Australia) Pty Ltd (TransAlta), as guarantor of TEC's liability to Monadelphous. TransAlta is the parent company of TEC.
[1] Monadelphous KT Pty Ltd v DDG Fortescue River Pty Ltd[2016] WASC 224.
TransAlta applied for defendant's summary judgment against Monadelphous. The primary judge granted summary judgment in favour of TransAlta. Monadelphous appeals against that decision.
Background
By a written contract dated 16 January 2014 (Contract) between Monadelphous on the one hand, and DDG on its own behalf and as agent for TEC on the other, Monadelphous agreed to construct the Fortescue River Gas Pipeline. DDG agreed to pay the 'contract sum as adjusted in accordance with the Contract', and the parties agreed that the 'contract sum is a lump sum price of $96,195,891'.[2]
[2] Formal instrument of agreement, cl 4 and cl 5, GB 9.
DDG and TEC are severally (but not jointly) liable for payment to Monadelphous under the Contract to the extent of their participating interests under the joint venture.
Under the Contract, the 'Owner's Representative' has various certification and other functions. By the General Conditions of the Contract, the 'date for practical completion' is defined to include the date resulting from any extension of time for practical completion as directed by the Owner's Representative or allowed in any litigation.[3]
[3] GB 23.
On 16 January 2014, Monadelphous and TransAlta entered into a deed of guarantee (guarantee) under which, on the terms specified in the guarantee, TransAlta guaranteed the performance of TEC's liability under the Contract.[4]
[4] GB 413 - 420.
In the primary proceedings, Monadelphous alleges that it has completed all of the work under the Contract. It is not in dispute that it had been paid, on or by 20 May 2015, the sum of $96,195,891. Nevertheless, Monadelphous alleges in the primary proceedings that it is entitled to amounts in respect of delay costs which have not been assessed properly or at all by the Owner's Representative,[5] and variations arising from its performance of work under the Contract for which it has not been paid.[6]
[5] Amended statement of claim, pars 60 - 66, 72; BB 69 - 70.
[6] Amended statement of claim, pars 73 - 80; BB 74 - 77.
The orders sought by Monadelphous in the prayer for relief in the primary proceedings include:[7]
(a)as against DDG and TEC, a declaration that it is entitled to an extension of time to the date for practical completion of 88 days, pursuant to General Condition 34.3;
(b)as against DDG, payment of the liquidated amount of $16,713,100.81, plus interest;
(c)as against TEC, payment of the liquidated amount of $12,608,128.68, plus interest;[8] and
(d)a declaration as to its entitlement to indemnification by TransAlta under the guarantee, and orders for payment of the liquidated sum of $12,608,128.68, plus interest.[9]
[7] BB 80 - 81.
[8] cf Primary decision [1], where reference is made to the original statement of claim dated 10 March 2016, and the higher sums claimed therein.
[9] BB 80 - 81; cf primary decision [9].
The guarantee
The guarantee included the following provisions (emphases added):
RECITALS
A.[TEC] and [DDG] are Participants (Participants) in the Fortescue River Gas Pipeline Joint Venture, established by the Fortescue River Gas Pipeline Joint Venture Joint Venture Agreement dated on or about the date of this deed (FRGP JV).
B.As at the date of this deed, the Participating Interests of the Participants are as follows:
[DDG]57%
[TEC]43%
C.Pursuant to a Management Agreement dated on or about the date of this deed, the Participants have severally appointed [DDG] (Agent) to act as their agent in regards to the FRGP JV.
D.On or about the date of this deed, [Monadelphous] and Agent (in its capacity as agent on behalf of the Participants severally) entered into the Fortescue River Gas Pipeline Construction Contract (Agreement).
E.Any:
(i)action, payment or other thing made or done by Agent under the Agreement is deemed to be made or done by Agent as agent for and on behalf of the Participants (severally and not jointly or joint and severally); and
(ii)payment of monies or other thing done in favour of Agent is deemed to have been done in favour of Agent as agent for and on behalf of the Participants (severally and not jointly or joint and severally).
F.The rights, benefits, interests, obligations and liabilities of the Participants under the Agreement are held by the Participants severally (and not jointly or jointly and severally) in proportion to their Participating Interests, save that no change to the Participating Interests shall affect any party's rights, benefits, obligations or liabilities under the Agreement until Agent has delivered to [Monadelphous] a Notice of Change of Participating Interest.
G.[TransAlta] is the parent company of [TEC].
H.[Monadelphous] has requested that [TransAlta] guarantees the performance by the Agent of [TEC's] Participating Interest share of the Agent's payment obligations under the Agreement on the terms set out in this deed, and [TransAlta] has agreed to this request.
THE PARTIES AGREE
1DEFINED TERMS & INTERPRETATION
1.1Defined terms
Subject to clause 1.2, words and expressions defined in the Agreement have the same meaning when used in this deed, unless the context requires otherwise, except that:
Guaranteed Party means [TEC].
1.2Interpretation
In this deed, except where the context otherwise requires:
(a)the singular includes the plural and vice versa and another grammatical form of a defined word or expression has a corresponding meaning;
(b)a reference to an agreement, document or instrument includes the agreement, document or instrument as novated, altered, supplemented or replaced from time to time;
(c)a reference to time is to Perth, Western Australia time;
(d)a reference to a party is to a party to this deed, and a reference to a party to a document includes the party's executors, administrators, successors and permitted assigns and substitutes;
(e)the meaning of general words is not limited by specific examples introduced by including, for example or similar expressions; and
(f)a rule of construction does not apply to the disadvantage of a party because the party was responsible for the preparation of this deed or any part of it.
…
2GUARANTEE
2.1Guarantee and indemnity
Subject to clause 2.3, [TransAlta]:
(a)unconditionally and irrevocably guarantees to [Monadelphous] the due and punctual payment by the Agent on behalf of [TEC] of [TEC's] Participating Interest share of any monies which may become due and payable to [Monadelphous] by the Agent, up to [TEC's] proportionate Participating Interest share of the Contract Sum (as reduced by milestone payments made under Part 4 Payment Schedule); and
(b)Indemnifies [Monadelphous] and agrees to keep it indemnified from and against all loss, damage, cost and expenses suffered or incurred by [Monadelphous] by reason of any breach or delay or non-performance by the Agent on behalf of [TEC] of any of [TEC's] Participating Interest share of obligations under the Agreement, including if any amount in clause 2.1(a) is not recoverable from the Agent for any reason.
2.2Matters not to affect Guarantor's liability
(a)The guarantee and indemnity in clause 2.1 shall be a continuing guarantee and indemnity and shall not be considered as wholly or partially discharged by the payment of any sums of money due and payable by the Agent or [TEC].
(b)[Monadelphous] may proceed against [TransAlta] without first having proceeded against [TEC] without affecting [TransAlta's] liability under this deed or that of [TEC] under the Agreement, provided, however, that [Monadelphous] must first provide 30 days' notice to [TEC] prior to enforcing its rights under this deed..
(c)[TransAlta's] liability under this deed shall not be abrogated, prejudiced or affected by the granting to any person of time, credit or any other indulgence or concession or by any compounding, compromise, release, abandonment, waiver, variation, invalidity, relinquishment or renewal of any contractual rights, duties, guarantees or indemnities or by any omission or neglect or by any other dealing, matter or thing which, but for this provision, could or might operate to abrogate, prejudice or affect the guarantee and indemnity, it being the intention of the parties that the guarantee and indemnity obligations of [TransAlta] under clause 2.1 shall be absolute and unconditional in all circumstances.
(d)If [TEC] becomes bankrupt or enters into any scheme of arrangement or enters into liquidation either voluntarily or involuntarily or any order is made by any court of competent jurisdiction affecting or postponing the rights of its creditors or any class thereof, [TransAlta] shall not be entitled to prove or claim against the official receiver or liquidator or administrator in competition with [Monadelphous] so as to diminish any dividend or any payment which [Monadelphous] may receive.
(e)[TransAlta's] liability shall not be affected by any collateral rights or obligations which may exist between [TransAlta] and [Monadelphous] or be affected by any variation or avoidance of any such collateral rights or obligations.
(f)The guarantee and indemnity in clause 2.1 shall continue and be binding upon [TransAlta] notwithstanding:
(i)[TEC] or [TransAlta] suffering an Insolvency Event;
(ii)any change or alteration in the constitution of [TEC], [TransAlta] or [Monadelphous] or any of them;
(iii)any transaction or arrangement between [Monadelphous] and any person;
(iv)the taking or perfection of any document or agreement or failure to take or perfect any document or agreement;
(v)[Monadelphous] obtaining a judgment against any person for the payment of any guaranteed amount; or
(vi)the happening of any other matter or thing which under the Law relating to sureties would, but for this provision, have the effect of releasing [TransAlta] from this deed or discharging this deed.
(g)The Beneficiary is not obliged to marshal or appropriate in favour of the Guarantor or to exercise, apply or recover:
(i)any security, guarantee or document or agreement held by the Beneficiary at any time; or
(ii)any of the funds or assets that the Beneficiary is entitled to receiver or has a Claim on.
2.3Consequential Loss excluded and limitation of liability
(a)[TransAlta] will not be liable to indemnify [Monadelphous] for any Consequential Loss.
(b)[TransAlta's] maximum liability under this deed at any time is limited to [TEC's] proportionate Participating Interest share of the Contract Sum minus all milestone payments already paid by the Agent to [Monadelphous] under Part 4 Payment Schedule at that time.
(c)Any claims for recovery against [TransAlta] under this deed shall be brought within 1 year of the event giving rise to the underlying liability.
2.4Principal and Independent obligation
The guarantee is a principal and independent obligation. Except for stamp duty purposes, it is not ancillary or collateral to another document, agreement, right or obligation.
2.5No withholdings
[TransAlta] must make all payments that become due under this deed, free and clear and without deduction of all present and future withholdings (including taxes of any jurisdiction).
…
2.7Term of guarantee
(a)Subject to the provisions of this clause 2.7, the obligations of [TransAlta] under this deed is a continuing security and remains in full force until the final milestone payment is made by the FRGP JV in accordance with Part 4 - Payment Schedule.
(b)In the event that [Monadelphous] has notified [TransAlta] of a Claim under the Agreement prior to the applicable date in clause 2.7(a), then the obligations of [TransAlta] will not terminate until that Claim:
(I)has been finally agreed or determined; or
(II)if agreed or determined to be payable by [TEC], has been paid in full by [TEC] or [TransAlta].
(c)The obligations of [TransAlta] under this deed shall be reinstated in full force and effect if at any time any payment guaranteed or made under this deed, in whole or in part, is rescinded, invalidated, declared to be fraudulent or preferential, set aside or must otherwise be returned by [Monadelphous] upon the insolvency, bankruptcy or reorganisation of [TransAlta] or [TEC], all as though such payment had not been made.
3MISCELLANEOUS
3.1 Notices
Clause 7 of the Agreement will apply to any notice, demand, consent, approval or other communication required or given by any party to another party pursuant to or in connection with this deed.
The references to 'Agreement' in the guarantee are references to the Contract (as defined in these reasons).
The term 'Consequential Loss' is defined in the Contract.[10]
[10] GC 1, GC 15.4; GB 22, 47.
TransAlta's application before the primary judge
Before the primary judge, TransAlta advanced four bases upon which it said that Monadelphous had no arguable claim under the guarantee. Only two are relevant for present purposes.
The first concerns the proper construction and application of cl 2.7 of the guarantee. TransAlta alleged that the claims the subject of the proceedings were not caught by the guarantee, as the guarantee had expired prior to any liability under the guarantee arising in respect of such claims. In substance that was because, TransAlta alleged, cl 2.7(b) of the guarantee obliged Monadelphous to notify TransAlta of such claims prior to the applicable date in cl 2.7(a), that Monadelphous had not done so, and the guarantee had thereby expired.
The second was that, in any event, TransAlta had no liability under the guarantee in that its liability under the guarantee is limited to the 'contract sum' under the Contract, as adjusted for provisional sums, and it was not in dispute that Monadelphous had been paid this amount by 20 May 2015. This argument proceeded on the basis that references to the phrase 'Contract Sum' in cl 2.1(a) and cl 2.3(a) of the guarantee pick up and apply the term 'contract sum' as that term is defined in the Contract.
The evidence on the summary judgment application
The evidence on the summary judgment application included the following. TransAlta relied on an affidavit of Mr A Willis sworn 18 April 2016, which included statements to the following effect:
(a)on 14 March 2015, a certificate of practical completion was issued by the Owner's Representative;
(b)on 2 April 2015, Monadelphous submitted progress claim no 11 for an amount of (approximately) $12.45 million comprising the amount of $9,619,589.10, plus variations totalling approximately $3 million;
(c)on 23 April 2015, Monadelphous submitted a further progress claim, no 12, 'in respect of the remaining items under milestone number four';
(d)DDG paid progress claim no 11 in full on 6 May 2015; and
(e)progress claim no 12 was paid in full on 20 May 2015.
Monadelphous relied on an affidavit sworn by Mr M Kemball on 4 May 2016. His affidavit included evidence to the effect that:
(a)Monadelphous submitted 13 progress claims to DDG, the last of which was made on 20 May 2015 for the sum of $51,428.51;
(b)progress claims nos 3 ‑ 13 included claims for amounts required to be added to the contract sum;
(c)DDG paid some but not all of these additional amounts;
(d)progress claims nos 11, 12 and 13 included amounts in relation to the claims the subject of the proceedings (referred to by Mr Kemball as 'Outstanding Amounts'); and
(e)DDG has not paid all the amounts claimed in progress claims nos 11 and 12 (or, it appears, no 13).
Mr Kemball also deposed that Monadelphous had not received payment of the 'Outstanding Amounts', and that Monadelphous had only been paid $100,213,011.34 comprising:
(a)the sum of $96,195,891;
(b)$3,661,066 in respect of work for which provisional sums had been allowed;
(c)$349,705.41 for approved variations; and
(d)$6,348.92 by way of overpayment in relation to thrustbores.
Mr Kemball also annexed correspondence and minutes of meetings upon which Monadelphous relied in the summary judgment application to contend that it had an arguable case that, in the event that cl 2.7(b) of the guarantee required the provision of notice, it had given the requisite notice in any event. Mr Kemball's affidavit indicates that there were 'FRGPP‑Weekly Pipeline Construction Meeting[s]' in 2014 and early 2015, which, on their face, refer to the attendees as including 'Mark Bastick TransAlta'. Minutes of meetings were, it appears, circulated by email by DBP Development Group.[11] A number of the documents refer, on their face, to variations and claims,[12] including an 'EOT' claim.[13] There was also evidence of a 'Variation Register' to which some of the minutes referred. The Variation Register included columns described as 'Description of Works (Non Approval Delay)' and 'Description of Works (Approval Delays)'.[14]
[11] Mr Kemball's affidavit pars 33 - 38; GB 433 - 434.
[12] See, eg, GB 545, 566, 574 - 576, 584, 591.
[13] GB 575.
[14] GB 576 - 577.
In response, TransAlta relied on a further affidavit of Mr Willis sworn 11 May 2016, in which Mr Willis stated (amongst other things) that:[15]
Mr Bastick was in fact employed by RQZ Solutions Pty Ltd, an independent contractor engaged by Tec Pipe Pty Ltd, another TransAlta subsidiary … I am informed by Tec Pipe Pty Ltd that Mr Bastick's attendance at the meeting was [in his capacity as project manager on a separate project] and his attendance was by reason that the project he was managing required an understanding of the status of the pipeline being constructed under the [Contract].
…
At all material times Mr Bastick was not employed by TransAlta nor engaged as its agent.
[15] GB 801.
The primary decision
The judge rejected TransAlta's second argument to the effect that the references to 'Contract Sum' in the guarantee were unarguably references to the 'contract sum' as defined in the Contract. His Honour, however, accepted TransAlta's first argument. His Honour accepted TransAlta's construction of cl 2.7(a) and cl 2.7(b), and also accepted that, on the facts, no notice had been given in compliance with his Honour's construction of cl 2.7(a) of the guarantee. His Honour allowed summary judgment in favour of TransAlta on that basis.
His Honour's findings on the question of the proper construction and application of cl 2.7 of the guarantee included the following:[16]
I would assess the 'final milestone payment' for the purposes of cl 2.7(a) as the fifth and practical completion payment which was, as per the Part 4 - Payment Schedule, the last listed payment on 6 May 2015, at which time the residual 10% of Contract Value is payable, making up then a full payment cross five steps of 100% of Contract Value. In this process, I need of course to interpret the meaning of the Deed of Guarantee harmoniously and in conjunction with what is the contemporaneously dated Construction Agreement, to which interlinking references are made.
…
On the face of it, a correct interpretation of cl 2.7(a) as regards the phrase 'final milestone payment is made' ought, on my assessment, to be the time at which the practical completion payment is made. That time is established uncontroversially, as a matter of evidence, to be 6 May 2015.
That there might be further moneys claimed by Monadelphous not yet received after being sought as progress payments under milestone event 4, does not effect that interpretation. Variation and extension of time claims which are submitted and pending resolution, would not, on my assessment, affect the identification within cl 2.7(a) of the objectively assessed chosen temporal cut-off point - made applicable for the duration of the obligations of the Guarantor under the Deed of Guarantee as a continuing security - at a point that is identified in the instrument as its temporal end of life (efficacy).
As regards the duration of the obligations of TransAlta as Guarantor, the existence of unresolved claims for more money claimed as additions, variations or extensions in respect of extra moneys sought as due at the fourth milestone along the progressive percentage completion (for 50% of the Contract Value at the fourth milestone), is seen to be catered for - by what is a cl 2.7(b) extension and saving provision in the Deed of Guarantee. This is achieved, first, by the introductory precursor to par 2.7(a) (by the phrase 'Subject to the provisions of this clause 2.7'), and then, by express terms in the following and obviously interconnected cl 2.7(b).
The text of cl 2.7(b) objectively assessed, sets down what is an agreed mechanism to be followed for inhibiting what will otherwise be an automatic temporal expiry of the force of the guarantee obligations of TransAlta, upon the making of the final milestone payment. But an extension in the duration of those obligations will be obtained where the Guarantor has received from Monadelphous a notification. This must be a written communication by which TransAlta is 'notified' of a 'Claim' - namely a claim under the Agreement against DDG.
But, the terms of cl 2.7(b) clearly require that TransAlta be notified, 'prior to' what is the 'applicable date' under cl 2.7(a). On the facts put before me that notification did not happen, within the allowed timeframe, as is required under the contractual mechanisms these parties agreed upon. There is nothing in writing meeting that required description. I can see no sensible level of controversy arising about the giving of written notice. There was nothing of that ilk that issued.
I must in the end, accept as demonstrably correct TransAlta's ground 1 submission that, in order for it to be properly 'notified' under cl 2.7(b), TransAlta would need to receive something written from Monadelphous to meet cl 2.7(b). TransAlta should get something 'in writing' from Monadelphous and that must happen prior to 6 May 2015. (original emphasis)
[16] Primary decision [80], [82] - [87].
The primary judge concluded that summary judgment should be given in favour of TransAlta because Monadelphous's claim under the guarantee was 'hopelessly unarguable' and thereby 'untenable'.[17]
[17] Primary decision [10], [106].
One further aspect of the judge's reasons should be noted at this point. It relates to the nature of Monadelphous's claims against DDG and TEC in the primary proceedings. In substance, as noted earlier, Monadelphous alleged that, under the terms of the Contract and in the events which had happened, it was entitled to an extension of time for practical completion. It claims liquidated amounts in respect of delay costs associated with its (alleged) entitlement to an extension of time, and liquidated amounts in respect of (alleged) variations.
Although Monadelphous in the primary proceedings sought orders extending the date for practical completion and for the payment of liquidated sums, the judge treated Monadelphous's claims under the Contract as founding only an entitlement to unliquidated damages for breach of the Contract.[18]
[18] Primary decision [100] - [102].
On 5 September 2016, orders were made for summary judgment to be granted in favour of TransAlta, and for Monadelphous's action against TransAlta to be dismissed.[19]
[19] BB 2.
Grounds of appeal and notice of contention
Grounds of appeal
There are two grounds of appeal, to the following effect:
1.(a) The judge erred in law and in fact in holding that TransAlta's obligations under the guarantee terminated pursuant to cl 2.7(a) of the guarantee when DDG made a payment to Monadelphous on 6 May 2015; and
(b)The judge ought to have held that there was a serious question to be tried as to whether TransAlta' obligations under the guarantee covered obligations to guarantee or indemnify Monadelphous in respect of claims for payment of its contractual entitlements under the contract between Monadelphous and DDG/TEC (Contract), the subject of Monadelphous's claims in the proceedings against DDG and TEC.
2.Further or alternatively, the primary judge erred in law and in fact by determining that there was no serious question to be tried as to whether Monadelphous had notified TransAlta pursuant to cl 2.7(b) of the guarantee as:
(a)the judge misconstrued the guarantee and the Contract and held that notification pursuant to cl 2.7(b) required compliance with cl 3.1 of the guarantee (importing the requirements of cl 7 of the Contract), such that any notification that did not strictly comply with those requirements did not operate to extend the duration of TransAlta's obligations under the guarantee; and
(b)further or alternatively, the judge failed to consider or give sufficient weight to the evidence (including the written minutes of meetings), which raised for determination whether Monadelphous had in fact notified TransAlta of its claims pursuant to cl 2.7(b) of the guarantee.
Notice of contention
By its notice of contention, TransAlta seeks to uphold the judge's decision on the ground that the judge ought to have found that the expression 'Contract Sum' in the guarantee bears the same meaning as the term 'contract sum' in the Contract.
The Contract
It is convenient at this point to outline aspects of the Contract before referring to the parties' arguments in the appeal.
For present purposes, and in general terms, the following preliminary observations may be made.[20] They are preliminary in the sense that they identify the arguable terms and effect of a number of the relevant provisions without intending to be exhaustive of the topic, or purporting to amount to a concluded view as to their proper construction.
The Contract documents
[20] In what follows, subheadings are used for ease of reference for a better understanding of these reasons, and do not purport to be headings or subheadings used by the parties in the Contract. Further, unless otherwise stated, italicised words reflect the original emphasis in quoted passages from the Contract.
The Contract comprises 14 'Parts',[21] or documents, including:
(a)Part 1 - the Formal Instrument of Agreement (FIA);
(b)Part 2 - the General Conditions of the Contract (GC) and the Annexures to the GC;
(c)Part 3 - Schedule of Rates;
(d)Part 4 - Payment Schedule;
(e)Part 5 - the Construction Scope of Work;
(f)Part 6 - the Construction Program; and
(g)Part 11 - Practical Completion.
[21] GB 30 ‑ 31.
Under the FIA, DDG is the 'Owner' in its capacity as agent and on behalf of the joint venturers severally, and Monadelphous is the 'Contractor'.
Contract
GC 1 defines the word 'Contract' to mean, in effect, the FIA and other contractual documents.
Work under the Contract - WUC
The provisions of the FIA, and GC, refer to 'WUC', which is defined in GC 1 as, relevantly:
the work which the Contractor is or may be required to carry out and complete under the Contract and includes variations, remedial work, construction plant and temporary works, and like words have a corresponding meaning.
Payment obligation
The FIA's provisions include:
4.The Owner hereby covenants to pay the Contractor in consideration of the execution of the WUC the contract sum as adjusted in accordance with the Contract as at the times and in the manner prescribed by the Contract.
5.The contract sum is a lump sum price of $96,195,891.
GC 2.2 provides, amongst other things:
The Owner shall pay the Contractor:
(a)for work for which the Owner accepted a lump sum, the lump sum; and
(b)for work for which the Owner accepted rates, the sum of the products ascertained by multiplying the measured quantity of each section or item of work actually carried out under the Contract by the rate accepted by the Owner for the section or item,
adjusted by any additions or deductions made pursuant to the Contract.
Lump sum
GC 1 defines 'lump sum' as the amount set out in Item 6A. As noted later, Item 6A identifies that amount as $96,195,891.
The 'contract sum'
GC 1 defines the 'contract sum' as, in effect, where the Owner accepted a lump sum, the lump sum, where the Owner accepted rates, the product of applying the schedule of rates,[22] and where the Owner accepted a lump sum and rates, the aggregate of the lump sum and the product of applying the schedule of rates, 'including provisional sums but excluding any additions or deductions which may be required to be made under the Contract'.
[22] Specifically, 'the sum of the products ascertained by multiplying the rates by the corresponding quantities in the schedule of rates'.
As noted earlier, the term 'contract sum' is used in FIA cl 4 and cl 5. It is also used in a number of provisions of the GC. As noted below, GC 3.2(d) and GC 3.3(d), which are concerned with provisional sums, refer to the contract sum being 'increased or decreased'.
A number of clauses of the GC refer to costs incurred by the Contractor, or the price for variations, which 'shall be added to or deducted from the contract sum' (GC 8.1(e), GC 32.1, GC 33.4, GC 36.4), or 'added to the contract sum' (GC 26.2, GC 26.3, GC 32.3(e)).
Other provisions of the GC indicate that the Contractor is not entitled to any 'addition to the contract sum' in respect of certain matters (GC 11.1(d), GC 23.3, GC 24.3, GC 25.2(c), GC 28.2(f)).
GC 15.5(a) limits the liability of the Contractor 'arising out of or in connection with the Contract' to 50% of the contract sum. Under GC 34.7, the maximum amount of liquidated damages payable by the Contractor for late completion is limited to '10% of the contract sum'.
Provisional sums
GC 3.1 provides, in effect, that two provisional sums have been included in the contract sum, referred to in Item 12. The two sums total approximately $9 million. By GC 3.1, the provisional sums 'shall not themselves be payable by the Owner but are included as an estimate of the costs of those items based upon the information provided by the Owner' in specified reports.
Each of GC 3.2 and GC 3.3 provides for a mechanism for the parties to agree an adjustment of each of the provisional sums to a 'firm price'. In the event of such agreement, the 'contract sum will be increased or decreased' accordingly (GC 3.2(d) and GC 3.3(d)).
GC 3 does not state a price for work done in respect of the provisional sums in the absence of such agreement. As noted later, GC 41 provides for a notification to and assessment of 'claims' by the Owner's Representative, and the word 'claim' includes any claim for any adjustment to the contract sum,[23] although the proper construction and application of GC 41 is a matter of controversy between Monadelphous and TransAlta.
Notices
[23] GB 29.
GC 7 is headed 'Service of notices'. It provides:
7.1Notices
A notice (and other documents including notices that are stated in this Contract to be in writing) shall be in writing signed by or on behalf of the person and shall be deemed to have been given and received:
(a)if delivered by hand, on the day of delivery provided the delivery is acknowledged in writing;
(b)if sent by facsimile, on the day of transmission; or
(c)in the case of notices relating to day to day operational matters, by email or other electronic means agreed by the parties with transmission and receipt of such communications deemed to take place as set out in section 13 of the Electronic Transactions Act 2011 (WA).
…
7.2Notices to and by the Participants
For the avoidance of doubt, notices given or received by the Owner in accordance with this clause 7 shall be taken to have been given or received by each of the Participants.
Contractual precedence
By GC 8, any discrepancy or inconsistency between any of the documents forming part of the Contract is to be resolved by reference to the order of precedence of the Contract Parts, with the highest precedence attributed to Part 1 and descending from that.
Owner's Representative
By GC 20, the Owner is to ensure that there is an 'Owner's Representative', and that that person fulfils all aspects of the role and functions of the Owner's Representative 'reasonably and honestly'.
The Owner's Representative is a member of the 'Owner's Personnel' as that term is defined in GC 1.
Practical completion
GC 1 provides, in effect, that 'practical completion' means the stage in the carrying out and completion of the WUC:[24]
(a)when the Works are complete except for minor defects which do not prevent the Works from being reasonably capable of being used for their stated purpose, the rectification of which will not prejudice the convenient use of the Works, and which the Owner's Representative determines that the Contractor has reasonable grounds for not promptly rectifying; and
(b)when the tests and matters set out in Part 11 have been carried out and passed to the satisfaction of the Owner's Representative.
[24] Which as noted earlier includes variations.
Part 11 refers to the completion of hydrostatic testing, and the provision of Manufacturer Data Report Documentation.
The date for and date of practical completion
The Contract differentiates between the 'date for practical completion' and the 'date of practical completion'.
By GC 1, the 'date for practical completion' means, relevantly, the date in Item 7(a), 'but if any [extension of time] for practical completion is directed by the Owner's Representative or allowed in any litigation, it means the date resulting therefrom'.
The 'date of practical completion' means, in effect, the date of practical completion on a certificate of practical completion, or any other date as determined in litigation as the date of practical completion.
Also, GC 34.6 deals with practical completion and the issue of a certificate of practical completion.
By GC 34.6, the Contractor is to notify the Owner's Representative in writing of the date that the Contractor believes that the WUC will achieve practical completion, and must do so within 14 days prior to that date. When the Contractor believes that the WUC has achieved practical completion, the Contractor is to apply to the Owner's Representative for a certificate of practical completion. The Owner's Representative is to, within 28 days thereafter, either issue a certificate of practical completion or reject the application, giving reasons and specifying the work required to be done to enable the certificate to be issued.
'qualifying cause of delay'
GC 1 defines 'qualifying cause of delay' to include:
(a)any act (other than an act under and in accordance with the Contract), default or omission of the Owner or the Owner's Personnel (which includes the Owner's Representative);
(b)suspension of the WUC pursuant to GC 33.1(a)(i), other than where the suspension is due to an act, default or omission of the Contractor or the Contractor's Personnel;
(c)a variation in accordance with GC 34.3;
(d)Force Majeure; and
(e)delays due to matters referred to in GC 25.2(c) (which relates to certain qualified site working conditions).
Delays and extensions of time
By GC 34.1, the Contractor is to ensure that the WUC reaches practical completion by the date for practical completion.
By GC 34.2, where a party becomes aware of anything which will probably cause delay to the WUC, including a 'qualifying cause of delay', the party shall give the Owner's Representative and the other party written notice of that cause and the estimated delay in compliance with GC 34.11(a).
GC 34.3 provides that the Contractor shall be entitled to such extension of time for carrying out the WUC (including reaching practical completion) as the Owner's Representative assesses (being an extension of time or 'EOT'), where:
(a)the Contractor is or will be delayed or prevented from reaching practical completion by the date for practical completion due to a 'qualifying cause of delay'; and
(b)the Contractor gives the Owner's Representative, within 14 days of when the Contractor should reasonably have become aware of that causation, a written claim for an extension of time.
Also by GC 34.3, the Contractor is not entitled to an extension of time for any delay that cannot be demonstrated to the reasonable satisfaction of the Owner's Representative that the delay has affected the critical path for the WUC. The 'LDs Date' (six months from the date for practical completion) shall only be extended by the period by which the date for practical completion is extended pursuant to GC 34.3. It is a condition precedent to the Contractor being entitled to claim an extension of time that it complies strictly with GC 34.3, GC 34.11 and GC 41.
By GC 34.5, within 28 days of receiving a compliant claim for an extension of time, the Owner's Representative shall give the Contractor and the Owner a written direction evidencing the extension of time so assessed.
GC 34.6 deals with practical completion, and has been referred to earlier.
GC 34.7 deals with liquidated damages.
GC 34.9 deals with delay and disruption costs where the Owner has granted the Contractor an extension of time for a qualifying cause of delay. GC 34.10 deals with force majeure.
GC 34.11 provides:
If the Contractor seeks relief from any obligations to perform under this Contract in respect of any event or circumstance that does or is likely to cause delay including a qualifying cause of delay [Event], the Contractor must:
(a)for events other than events of Force Majeure, as soon as practicable, but in any event no more than 7 days after it becomes aware, or ought to have become aware, of the occurrence of the relevant Event, notify the Owner …;
(b)make all reasonable endeavours to remedy the consequences without delay;
(c)if the Event continues, give reasonably periodic reports …; and
(d)give the Owner notice of conclusion of the Event and resume full performance of its obligations under the Contract as soon as reasonably practicable. (original emphasis)
Variations
GC 36 deals with variations. GC 36.1 deals with the circumstance where the Owner's Representative directs the Contractor to vary the WUC.
GC 36.1A deals with the circumstance where the Contractor considers that it has received a direction or approval which constitutes or involves a variation. It provides, in effect, as follows. The Contractor shall, within seven working days of receipt of the direction or approval, notify the Owner's Representative that it considers the direction or approval to be a variation. Unless the Owner's Representative requires otherwise, the Contractor shall not give effect to the direction or approval within seven working days thereafter. Finally, as soon as possible but not later than seven working days after receiving the direction or approval, the Contractor shall advise the Owner's Representative in writing of the matters in GC 36.2(a) and (b) in sufficient detail to enable the Owner's Representative to assess the estimate.
GC 36.2 provides, in effect, that the Owner's Representative may give the Contractor written notice of a proposed variation, and as soon as practicable after receiving such notice, and in any event within seven days, the Contractor must notify the Owner's Representative whether the proposed variation can be effected, together with, if it can be effected, the Contractor's estimate of:
(a)the effect on the construction program (including the date for practical completion); and
(b)the cost (including time‑related costs, if any) of the proposed variation.
By GC 36.3, if the Contractor requests the Owner's Representative to direct a variation for the convenience of the Contractor, the Owner's Representative may do so.
GC 36.4 deals with pricing, and provides, in effect, that the Owner's Representative shall price each variation using the following order of precedence:
(a)prior agreement;
(b)applicable schedule of rates or prices in the Contract;
(c)rates or prices in a schedule of rates or schedule of prices, even though not Contract documents, to the extent that it is reasonable to use them; and
(d)reasonable rates or prices, including a reasonable amount for profit and overheads.
GC 36.4 also provides that the price so determined 'shall be added to or deducted from the contract sum'.
GC 36.5 provides that the Owner's Representative may direct that work the subject of a variation be carried out as 'daywork'.
Progress claims and progress certificates
GC 37 is headed 'Payment'.
GC 37.1 provides that the Contractor shall claim payment progressively in accordance with Item 28, and sets out the details required for a progress claim.
GC 37.2 provides that the Owner's Representative shall, within 14 days after receiving a progress claim, issue to the Owner and the Contractor:
(a)a 'progress certificate' evidencing the Owner's Representative's opinion of the moneys due from the Owner to the Contractor pursuant to the progress claim and reasons for any difference; and
(b)a certificate evidencing the Owner's Representative's assessment of retention moneys and moneys due from the Contractor to the Owner pursuant to the Contract.
GC 37.2 also provides for payment in relation to progress certificates and provides that a progress certificate does not constitute a rejection or dispute of the Contractor's claim for payment, and that payment shall be payment on account only.
By GC 37.2A, the Owner's Representative may correct errors in progress certificates.
Final payment claim and final certificate
GC 37.4 provides, in effect, as follows. Within 28 days of the expiry of the last 'defects liability period' (in general terms 12 months after practical completion) the Contractor shall give the Owner's Representative a final payment claim endorsed 'Final Payment Claim', being a progress claim together with all other claims whatsoever in connection with the subject matter of the Contract.
Within 42 days after the expiry of the last 'defects liability period', the Owner's Representative shall issue to the Contractor and the Owner a 'final certificate' evidencing the moneys finally due and payable between the Contractor and the Owner. Those moneys certified as due and payable shall be paid by the Owner or the Contractor, as the case may be, within seven days of receipt of the final certificate.
As a condition of submitting the final payment claim, the Contractor shall also submit a duly executed written release and discharge, which confirms that the total of the amounts paid to the Contractor pursuant to GC 37 represents the full and final settlement of all moneys due to the Contractor, and releases, to the extent permitted by law, the Owner from all claims in respect of any matter or thing under the Contract, except solely in respect of the payment claimed in the final payment claim.
Defects liability
GC 35 refers to defects liability. It provides that the 'defects liability period' stated in Item 27 is to commence on the 'date of practical completion' at 4.00 pm.
By GC 35, the Contractor must remedy any defects that are apparent as at the date of practical completion, and any defects that become apparent during the defects liability period. As soon as possible after the date of practical completion, the Contractor must complete any outstanding WUC and rectify all defects existing at the date of practical completion.
Notification of claims
GC 41 deals with notification of claims. GC 41.1 refers to claims in terms of a 'prescribed notice'. GC 41 applies to any claim arising out of or in connection with the Contract, except for a claim 'for the contract sum under clause 37.1'.
GC 41.2 provides, in effect, that the Contractor's failure to comply with the provisions of GC 41 or GC 34.11, or to communicate the substance of a claim in accordance with the relevant provisions of the Contract, shall bar and invalidate the claim.
GC 41.3 deals with the Owner's Representative's decision. It includes:
Within 28 days of receipt of the full written particulars by notice the Owner's Representative shall assess the claim and value it in accordance with the provisions of the Contract (such valuation may mean that no amount is due to the Contractor). Any amount that the Owner's Representative certifies is due to a party from the other party will be included in the next certification process under sub‑clause 37.2, 37.2A or 37.4 (as is relevant).
By GC 41.4, the Owner is not liable upon any claim by the Contractor, unless:
(a)the Contractor has strictly complied with the notice requirements under the Contract; and
(b)written notice of intention to make the claim specifying its nature is lodged with the Owner within that time, and the claim, with full particulars, is lodged in writing before the issue of the 'final certificate' under GC 37.4.
'claim'
In the GC,[25] the word 'claim' means 'any claim, notice, demand, suit, account, action … of any nature, absolute or contingent, liquidated or unliquidated, whether known or unknown, whether directly or indirectly, or whether in law, contract, tort, negligence, statute … or in equity, including any claim for any adjustment to the date for practical completion or the contract sum'.
Security
[25] GB 28 - 29.
By GC 5.1, the Contractor is to lodge security in accordance with Item 13 as a condition precedent to making any claim for payment or receiving any payment under the Contract. Item 13 provides that security is to be in a certain form (in effect a performance bond) and be 10% of the contract sum.
GC 5.2 provides that the Owner may have recourse to the security if, in the Owner's opinion, the Contractor is in default. Further, by GC 5.8, if the amount received by the Owner under a call on the security exceeds the amount later established as due by the Contractor to the Owner at the time the call was made, interest on the excess will be payable at the rate specified in Item 30 for the period from when the excess was paid to (but excluding) the date of repayment.
Disputes and litigation
GC 42 deals with dispute resolution. By GC 42.1, in the event of a dispute between the parties in connection with the subject matter of the Contract, either party is to provide written notice of the dispute and identify details of it.
GC 42.3 and 42.4 refer to the parties' senior executives meeting in conference and then, if necessary, the parties proceeding to mediation. By GC 42.5, if, in effect, the dispute is not resolved in accordance with that process, then either party may commence court proceedings relating to the dispute.
GC Annexure Part A (list of Items)
Item 6A defines 'lump sum' as $96,195,891.
Item 7(a) refers to 'Date for practical completion' as 16 December 2014 as adjusted according to the contract.
Item 12 provides for two provisional sums, one for 'Trenching' and the other for 'Special crossings', totalling approximately $9 million.
Item 14 refers to 'Owner's security' and provides that TEC is to provide a Parent Company Guarantee in accordance with GC Annexure Part E.
In Item 27, the 'Defects liability period' means '12 months after practical completion'.
Item 28 refers to 'Progress Claims' and GC 37.1. It provides that 'Progress claims shall be submitted in accordance with Part 4 - Payment Schedule and based upon agreed progress of the WUC for each construction milestone in Part 4'.
GC Annexure Part E
GC Annexure Part E contains a form of deed of guarantee in the same terms as that which was executed by Monadelphous and TransAlta on the same date as the Contract, 16 January 2014.
Part 4 - Payment Schedule
Part 4 - Payment Schedule to the Contract provides:
| MILESTONES | PERCENTAGE COMPLETE | PAYMENT MILESTONE | AMOUNT | |||||||||||||||||||||||||||||||||||||||||||
| 1. | Completion of Condition Precedent in Contract and Project Kick‑off | 0% | 10% of Contract Value | $9,619,589 | ||||||||||||||||||||||||||||||||||||||||||
| 2. | Submission of Weld Procedure Qualification Procedures and Construction Plan | 10% | 10% of Contract Value | $9,619,589 | ||||||||||||||||||||||||||||||||||||||||||
| 3. | Commencement of Survey | 40% | 20% of Contract Value | $19,239,178 | ||||||||||||||||||||||||||||||||||||||||||
| 4. | Progress Completion of Construction On‑Site prior to Hydrostatic Testing | 90% | 50% of Contract Value reimbursed monthly based on % completion of the following tasks:
| $48,097,946 | ||||||||||||||||||||||||||||||||||||||||||
| 5. | Practical Completion Certificate issued by OWNER's REPRESENTATIVE | 100% | 10% of Contract Value | $9,619,589 | ||||||||||||||||||||||||||||||||||||||||||
| TOTAL CONTRACT PAYMENT | $96,195,891 | |||||||||||||||||||||||||||||||||||||||||||||
The parties' arguments in the appeal
In relation to ground 1 of the appeal and the notice of contention, Monadelphous's contentions concerning the proper construction of the guarantee included arguments to the following effect.
Under cl 2.7(a) of the guarantee, the reference to the 'final milestone' of 'Part 4 - Payment Schedule' in the Contract is a reference to the date of practical completion.[26] Monadelphous is entitled, according to that Part of the Contract, to be paid the final '10% of Contract Value' on reaching the date of practical completion. That figure is not simply $9,619,589, because that is only 10% of the unadjusted 'contract sum' of $96,195,891, and Monadelphous is entitled under the Contract to be paid adjustments to the 'contract sum' in accordance with the operation of its provisions. Adjustments to the 'contract sum' under the Contract include adjustments in respect of provisional sum items, costs associated with extensions of time to which it is properly entitled, and variations within the meaning of the Contract.
[26] Appeal ts 6, 8.
Monadelphous alleges, in effect, that until its claims against the joint venturers have been resolved in the primary proceedings, it cannot be concluded that the joint venturers have, for the purposes of cl 2.7(a) of the guarantee, paid Monadelphous 'the final milestone payment … in accordance with Part 4 - Payment Schedule'. Monadelphous contends that the final milestone payment in accordance with Part 4 - Payment Schedule is not made until the joint venturers have made payment to Monadelphous for all of the amounts to which it is entitled under the Contract for the WUC it has performed, including the amounts claimed by Monadelphous in the proceedings, if successful.[27]
[27] Monadelphous's written submissions, par 46.
Monadelphous contends, in this connection, that progress certificates nos 11, 12 and 13 are not 'conclusive' certificates under the Contract, and that it is entitled to the specific relief claimed in the primary proceedings against the joint venturers.[28] It refers to and relies on authorities such as WMC Resources Ltd v Leighton Contractors Pty Ltd;[29] Beaufort Developments (NI) Ltd v Gilbert‑Ash (NI) Ltd;[30] Hawker Noyes Pty Ltd v New South Wales Egg Corp;[31] Dante De Grazia trading as All Sydney Building Services v Nicholas Solomon[32] and Henry Boot Construction Ltd v Alstom Combined Cycles Ltd.[33] Monadelphous contends that the judge erred in treating its claim against the joint venturers as merely claims for damages for breach of contract.[34]
[28] Appeal ts 10 - 11.
[29] WMC Resources Ltd v Leighton Contractors Pty Ltd [1999] WASCA 10; (1999) 20 WAR 489 [15] - [19].
[30] Beaufort Developments (NI) Ltd v Gilbert‑Ash (NI) Ltd [1999] 1 AC 266, 270, 273, 274, 276, 278, 280 ‑ 281, 288 ‑ 292.
[31] Hawker Noyes Pty Ltd v New South Wales Egg Corp (Unreported, NSWSC, Library No 14077, 11 November 1988) (Brownie J).
[32] Dante De Grazia trading as All Sydney Building Services v Nicholas Solomon [2010] NSWSC 322 [26] ‑ [28], [211].
[33] Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] BLR 437 [23].
[34] Monadelphous's written submissions, pars 31 - 35.
Monadelphous also relies by analogy on authorities the effect of which, it contends, is that a 'continuing' guarantee for a fixed term would ordinarily not be construed so as not to apply to entitlements accruing before the expiration of the term, albeit that the entitlements would only be quantified in litigation after the expiration of the fixed term.[35] Reference was made to National House‑Building Council v Fraser[36] and National Australia Bank Ltd v Carideo.[37]
[35] Appeal ts 12 - 13.
[36] National House‑Building Council v Fraser [1983] 1 All ER 1090, 1092 ‑ 1093.
[37] National Australia Bank Ltd v Carideo [2000] FCA 688 [10].
Monadelphous also contends that even if the final milestone payment had been made for the purposes of cl 2.7(a) of the guarantee, cl 2.7(a) does not state that the expiry of the term of the guarantee operates to extinguish existing rights, and that clear words would be needed to achieve such a result.[38]
[38] Monadelphous's written submissions, pars 61 - 67. Reference is made to Gilbert‑Ash (717), cited with approval in Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693 [23].
On the question of whether the 'Contract Sum' in the guarantee is a reference to the defined 'contract sum' in the Contract, Monadelphous supports the judge's rejection of TransAlta's arguments in that regard, and makes submissions to the following effect.[39]
[39] Monadelphous's written submissions in response to the notice of contention, pars 4, 6; WB 49. See primary decision [62] ‑ [63].
Clause 1.1 of the guarantee provides that words and expressions 'defined' in the Contract have the same meaning in the guarantee, unless the context otherwise requires. That provision, Monadelphous contends, in effect, has no application to words and expressions not 'defined' in the Contract, and the expression 'Contract Sum' is not defined in the Contract. Monadelphous contends that the words 'Contract Sum' in their ordinary denotation, and in this particular context, refer to all sums payable for the execution of the WUC. On Monadelphous's construction, 'Contract Sum' in the guarantee refers in effect to 'Contract sum'. Monadelphous also contends, in any event, that the context otherwise requires the meaning for which it contends in cl 2.1(a) and cl 2.1(b) of the guarantee.
In relation to cl 2.7(b) of the guarantee, Monadelphous contends that cl 2.7(b) is a saving or beneficial provision.[40] It contends that it applies to what it refers to as 'embryonic claims … (for which its entitlements have yet to accrue)'.[41] On Monadelphous's construction, cl 2.7(b) of the guarantee is intended, on its ordinary meaning and in context, to apply or at least to include claims which mature into a liability on the part of the joint venturers as agreed or determined in the defects liability period.[42] It gives an example of a claim for interest under GC 5.8, where the Owner, prior to practical completion, has recourse to security provided for under GC 5.1 in reliance on the formation of an opinion under GC 5.2. Under GC 5.8, if the amount called exceeds the amount later established as due by the Contractor (for example, in the defects liability period), interest is payable on the excess from the date the excess is paid to the Owner, to the date of repayment of the excess by the Owner.[43] On Monadelphous's construction, such a claim for interest for that period would only be a contingent or prospective claim as at the date of practical completion, and one to which cl 2.7(b) would properly apply upon Monadelphous giving notice to TransAlta.
[40] Appeal ts 14.
[41] Monadelphous's written submissions, par 57.
[42] ts 14 - 16.
[43] Monadelphous's written submissions, pars 57; Attachment A.
Monadelphous also contends that the construction favoured by the primary judge, and propounded by TransAlta, is uncommercial.
In relation to ground 2, Monadelphous submits that even if its suggested construction of the guarantee referred to above is wrong, its claim under the guarantee should still not have been dismissed without trial. Monadelphous submits that notification in fact is sufficient for the purposes of cl 2.7(b), properly construed, and written notice is not required in accordance with GC 7. Alternatively, it contends that if written notice is required, the judge failed to have regard to the evidence on the question of whether there was a triable issue that Monadelphous had provided written notice to TransAlta of the relevant claims.[44]
[44] Monadelphous's written submissions, pars 74 - 87.
In relation to the former submission, Monadelphous's arguments include the following. It submits, in effect, that the conditional language of 'notified' in cl 2.7(b) ('[i]n the event that [Monadelphous] has notified [TransAlta] of a (Claim)' is not apt to engage GC 7 through the operation of cl 3.1 of the guarantee. It contends that cl 3.1 applies GC 7 to any 'notice' as such, or other communications which are required to be in writing, and the notification contemplated by cl 2.7(b) is not of that character. Monadelphous submits that GC 7 would, via cl 3.1 of the guarantee, apply, for example, to the 'notice' required in cl 2.2(b) of the guarantee.[45]
[45] Monadelphous's written submissions, 74 - 78.
As to the latter submission, Monadelphous referred to Mr Kemball's evidence and the attached minutes of meetings.
TransAlta's arguments
TransAlta contends that the 'Contract Sum' in the guarantee is 'the lump sum of approximately $96 million including provisional sums, but specifically excluding any additions or deductions which may be required to be made under the Contract'.[46] In that regard, it argues that the substantive words ('contract sum' in the Contract and 'Contract Sum' in the guarantee) are the same, that cl 1 of the guarantee provides that words and expressions defined in the Contract have the same meaning when used in the guarantee, unless the context otherwise requires, and that 'the concept of a "Contract Sum" is central to any building contract'.[47] TransAlta further contends that this construction gives a 'precise alignment between the amount guaranteed, and the expiration of the guarantee when the final payment in the contractual payment schedule is made'.[48] It contends that it is also consistent with the limitation of liability contained in cl 2.3(b). TransAlta contends that, in other words, its construction gives a consistent meaning and operation to all parts of the guarantee, when read in conjunction with the Contract as a related contractual instrument.[49]
[46] TransAlta's written submissions, par 18.
[47] TransAlta's written submissions, par 19.
[48] TransAlta's written submissions, par 20.
[49] TransAlta's written submissions, pars 21 - 22.
TransAlta, in its written submissions, continued:
23.On the other hand, the primary judge took a different approach, which was equally open to him. The primary judge did not consider that it was necessary for him to finally determine whether 'Contract Sum' in the Guarantee had the same meaning as in the Contract. He did not conclude that the meaning of the words 'Contract Sum' had a meaning inconsistent with the construction of clause 2.7(a) and (b) which he adopted. Instead, the primary judge simply relied upon the express wording of clause 2.7(a) and (b) concerning the expiration of the Guarantee.
24.In effect, the primary judge's approach amounts to a position that, whether the terms 'Contract Sum' in the Guarantee and 'contract sum' in the Contract have a corresponding meaning, the express words of clause 2.7(a) and (b) by themselves require the conclusion that the Guarantee had expired. In Arnold v Britton [2015] UKSC 36; [2015] AC 1619 at [19] ‑ [20], Lord Neuberger recently emphasised that there is a need to give primary effect to the express words used by parties.
25.In other words, the primary judge considered that even if payment of the additional claims made by [Monadelphous] were guaranteed by TransAlta (which he did not decide), the parties intended that the Guarantee expired at the time when the final milestone payment was made in accordance with the contractual payment schedule - unless, prior to the final milestone payment, TransAlta had received written notice from [Monadelphous] that it sought to enforce the Guarantee in relation to those additional claims.
26.That approach gives effect to the strength of the words about expiry adopted by the parties in clause 2.7(a) of the Guarantee, and does not give rise to any difficulty in terms of commercial purpose. Assuming that TransAlta has guaranteed payment of the additional claims by TEC (if the term 'Contract Sum' in the Guarantee has a different meaning from 'contract sum['] in the Contract), [Monadelphous] is not shut out from seeking to enforce payment of a guaranteed amount in respect of the additional claims by TransAlta provided that it gives written notice of the claims prior to the final milestone payment. (footnote omitted)
TransAlta also draws a distinction between an 'increase or decrease' of the 'contract sum' in GC 3.2(d) and GC 3.3(d) in relation to provisional sums, and other provisions which refer to additions to, or deductions from, the contract sum. TransAlta contends that under the Contract the term 'contract sum' is 'always [used] by reference to it being a defined amount of $96 million, or thereabouts, and then you can have additions or subtractions from it'.[50]
[50] Appeal ts 21.
TransAlta contends that the effect of GC 37.1, read with Item 28 and Part 4 - Payment Schedule, is that a claim under Part 4 - Payment Schedule is simply a claim for the contract sum.[51]
[51] Appeal ts 22.
In relation to cl 2.7(b) of the guarantee, TransAlta contends that the implication, without expressly saying so, is that if there has been no notification under cl 2.7(b), then the obligations under the guarantee will terminate. It contends, in effect, that this is not a remarkable feature of the guarantee in that the giving of notice is wholly within the control of Monadelphous, and there is no automatic termination of the guarantee.[52] TransAlta also contends, in effect, that cl 2.7(b), insofar as it refers to 'Claim', is evidently referring to that part of the definition of 'claim' in GC 1 of the Contract, which refers to 'any claim for any adjustment to the date for practical completion or the contract sum' (original emphasis).[53] TransAlta also advanced arguments based on commercial convenience.
[52] Appeal ts 23.
[53] Appeal ts 20.
In relation to ground 2, TransAlta contends, in effect, that cl 3.1 of the guarantee picks up GC 7 in relation to a notification under cl 2.7(b) of the guarantee. TransAlta contends that as GC 7 applies, the notice must be in writing and signed, and that an email with a name printed at the end of it would not be sufficient.[54]
[54] Appeal ts 35 - 36.
TransAlta also contends that, in any event, the communications relied on by Monadelphous were from 'DBP', although it effectively accepted, in the course of oral argument, that it was arguable that the minutes were sent on behalf of all the attendees at the meetings (which arguably would include Monadelphous).[55] Nevertheless, TransAlta contends, in effect, that there was no notification 'in the capacity of a guarantor', and that on the proper construction of cl 2.7(b), notification must be given to TransAlta in its capacity as a guarantor.[56] TransAlta relied on Mr Willis' evidence to the effect that Mr Bastick was not an agent of TransAlta when attending the weekly meetings.[57]
[55] Appeal ts 36 - 37.
[56] Appeal ts 37.
[57] Appeal ts 39 - 40.
Disposition
The relevant principles were recently stated by this court in Sutton Investments Pty Ltd v Realistic Investments Pty Ltd:[58]
Summary judgment will be granted only when there is no real question to be tried. The power to order summary judgment is one that should be exercised with great care: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99. It is only in the clearest of cases, when there is a high degree of certainty about the ultimate outcome of the proceedings if it went to trial, that summary judgment ought properly be granted: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46]; Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 [24], [53] - [55].
[58] Sutton Investments Pty Ltd v Realistic Investments Pty Ltd [2017] WASCA 14 [24].
The judge, with respect, erred in finding, in effect, that Monadelphous's claim under the guarantee was 'hopelessly unarguable', and thereby 'untenable'.[59]
[59] Primary decision [10], [106].
It was common ground that the guarantee is to be construed in the context of the Contract. The relevant construction issues raised under the guarantee would, prima facie, require a proper understanding of the joint venturers' payment obligations under the Contract. That would require a proper understanding of the Contract read as a whole. Monadelphous's arguments concerning the proper construction of cl 2.7 of the guarantee, with reference to a consideration of the operation of the payment obligations under the Contract on its proper construction, are, with respect, not properly characterised as 'untenable'. Similarly, the questions of construction and the factual issues raised by ground 2 of the appeal are not appropriately characterised as 'untenable'. In relation to the second aspect of ground 2, a proper understanding of the minutes would arguably be assisted by oral evidence.
Insofar as the judge's overall conclusion that Monadelphous's claim was 'untenable' was supported by his Honour's view that Monadelphous's claim in the primary proceedings against the joint venturers was for damages for breach of contract, rather than for declaratory relief in respect of extensions of time and claims for liquidated sums, his Honour was also, with respect, in error.
Accordingly, error has been established. That raises the question of what orders this court should make. TransAlta contends, in effect, that, based on its arguments as to the proper construction of the guarantee, including in relation to the notice of contention, this court should conclude that, even though Monadelphous's case might, at one level, be arguable, it nevertheless, on analysis, has no prospects of success, and this court should not disturb the entry of summary judgment against Monadelphous.[60]
[60] Appeal ts 32 - 33.
Although the fact that a transaction is intricate does not necessarily disentitle a party from obtaining summary judgment in a 'very clear' case,[61] this is not such a case. Even without regard to the factual issues raised in ground 2, the nature, extent and complexity of the range of legal questions raised in the parties' competing arguments are such that the ordinary processes of the court should be followed, and the parties' rights should be determined in a trial of the issues by a judge of the General Division. In particular, the legal questions involve, in the context of construing the guarantee, a proper understanding of the ramifications and interrelatedness of the provisions of a lengthy and complex building contract. That task does not lend itself, on the arguments presented to this court, to a ready acceptance of either parties' series of propositions. This is not a case where, after hearing the arguments in the appeal, including in relation to the notice of contention, it is clear that TransAlta's resistance to the claims under the guarantee must inevitably succeed, and that it would be absurd, on that account, for this court to put the parties to the trouble and expense of a trial.[62]
[61] Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, 91.
[62] cf Theseus Exploration NL v Foyster [1972] HCA 41; (1972) 126 CLR 507, 514 ‑ 515.
That is not to suggest, of course, that TransAlta may not succeed at trial. It may, and nothing in these reasons is to be taken as suggesting to the contrary. It is merely to observe that the interests of justice are better served in all the circumstances by Monadelphous's claims being determined at trial in the ordinary course, leaving intact the parties' rights to appeal following a determination of the issues at trial, without summary disposition at this point.
Conclusion
The appeal should be allowed. The notice of contention should be dismissed. The order for summary judgment against Monadelphous, and the order dismissing Monadelphous's action against TransAlta, should be set aside.
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