Mossop Group Pty Ltd v 1KW Adelaide Pty Ltd - [2018] SASC 186

Supreme Court of South Australia
(Appeal from a Master: Civil)
MOSSOP GROUP PTY LTD v 1KW ADELAIDE PTY LTD
[2018] SASC 186
Judgment of The Honourable Justice Doyle (ex tempore)
11 December 2018
PROCEDURE - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE - ACTIONS TO REVIEW OR SET ASIDE JUDGMENT - IN GENERAL
Appeal from a decision of a Master refusing the plaintiff’s application for summary judgment in respect of the amount claimed under a progress certificate.
The Superintendent issued a progress certificate under the Contract in response to a progress claim made by the plaintiff construction company. A subsequent replacement progress certificate was issued for a lesser amount. There was evidence that the replacement progress certificate was issued as a result of the Superintendent identifying an error in the initial progress certificate. While the Contract provided for the issuing of a replacement progress certificate in such circumstances, the Contract required that this be done by the Supervisor. The replacement progress certificate in this case was not issued in the name of the Superintendent, but rather a colleague of his. While the Contract provided for the Superintendent to delegate his functions, it required that there be written notification of any such delegation. There was no such written notification in this case.
The plaintiff claimed that in circumstances where there had not been compliance with the contractual mechanism for issuing a replacement progress certificate, the replacement progress certificate issued in this case was of no contractual force. Accordingly, it was entitled to the sum in the initial progress certificate, and sought summary judgment to give effect to this.
The defendant contended that in circumstances where the plaintiff had acquiesced in the Superintendent’s colleague exercising various of the functions of the Superintendent under the Contract, it had a reasonable basis for defending the proceedings on the ground that the plaintiff was not entitled to insist upon strict compliance with the contractual requirement that there be written notification of any delegation of these functions.
The Master upheld the defendant’s contention and dismissed the application for summary judgment.
Held, per Doyle (dismissing the appeal):
1. The evidence established a reasonable basis for a contention that by reason of the colleague’s conduct in carrying out various of the Superintendent’s functions, and the plaintiff’s acquiescence in this occurring without any written notice of a delegation of those functions, the plaintiff was estopped from insisting upon, or waived its entitlement to insist upon, compliance with the contractual obligation to give notification of the delegation of that function in respect of the replacement certificate.
2. Appeal dismissed.
Supreme Court (Civil) Rules 2006 (SA) r 232, referred to.
Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1; Ke Qin Ren v Hong Jiang; Jiang v Wan Ze Property Development (Aust) Pty Ltd (in liq) (2014) 104 ACSR 149, considered.

MOSSOP GROUP PTY LTD v 1KW ADELAIDE PTY LTD
[2018] SASC 186
DOYLE J (ex tempore):

This is an appeal from a decision of a Master refusing the plaintiff’s application for summary judgment in respect of a progress payment claim under a building contract.
Background
The plaintiff is a construction company, and the defendant is the registered proprietor of multi-storey premises at 1 King William Street, Adelaide. In February 2015 they entered into a contract (the Contract) to carry out building works on those premises. The Contract comprised a number of documents, but relevantly included the AS4902-2000 general conditions of contract.
A dispute arose between the parties in respect of a particular claim for a progress payment. As at the date of argument before the Master, there had been 12 progress payment claims made by the plaintiff. All of them had been paid other than the disputed one, being progress payment claim number 10 for an amount of $595,069.56.
Before coming to the circumstances of the dispute in relation to progress payment claim number 10, it is appropriate to mention the provisions of the Contract in relation to progress claims, and the superintendent’s role.
The Contract, under clause 37.1, provided for progress claims to be made by the plaintiff (as the Contractor) to the Superintendent. Clause 37.2 governed the process by which the Superintendent certified those claims. Relevantly for the purposes of this appeal, clause 37.2.1 provided that the Superintendent shall, within 10 business days after receiving a progress claim issue a progress certificate evidencing the Superintendent’s opinion of the moneys due from the Principal to the Contractor pursuant to the progress claim and the reasons for any difference. Clause 37.2.5 provided that the Principal shall pay to the Contractor the amount shown in the progress certificate within 10 business days of the later of the date the progress certificate is issued, and the date the payment preconditions[1] are satisfied. Under clause 37.2.7 neither a progress certificate nor payment of moneys shall be evidence that the subject building work has been carried out satisfactorily; rather, payment other than final payment shall be payment on account only. Finally, clause 37.2.8 provided that “the Superintendent may (by issuing a further certificate) correct any error which has been discovered in any previous Progress Certificate”.
[1] Which includes the issuing of a tax invoice.
Moto Projects Pty Ltd was engaged to provide superintendent services in relation to the building works under the Contract. The Contract defined the Superintendent as “Lorne McClurg for and on behalf of Moto Projects Pty Ltd”. There is no dispute that Mr McClurg was the Superintendent under the Contract. However, the evidence of Mr McClurg was to the effect that he and Ms Rachael Oliver-Dearman (a project manager employed by Moto Projects) had shared the responsibility for undertaking the tasks of the Superintendent in relation to the building works on the premises at 1 King William Street.
Clause 21 of the Contract provided for the Superintendent to appoint a delegate to exercise his functions. But it required that the Contractor be provided with notice of the appointment in writing, and an opportunity to object.
In relation to the disputed progress payment claim number 10, the Superintendent issued a progress certificate dated 1 July 2016 in the amount of $595,069.56.[2] The progress certificate was on the letterhead of Moto Projects. It had the name of Ms Oliver-Dearman printed on it, but was signed by Mr McClurg. Later on the same day, the plaintiff proceeded to issue a tax invoice in the same amount pursuant to clause 37.2.5. Under that clause, it was due for payment within ten business days, but was not paid.
[2] The plaintiff Contractor did not make a claim under the Building and Construction Security of Payment Act 2009 (SA).
Mr McClurg’s evidence was that he and Ms Oliver-Dearman subsequently identified that there were errors in the 1 July 2016 progress certificate. In particular, some of the variations claimed by the plaintiff as part of progress payment claim number 10 had not yet been referred to an external quantity surveyor for valuation as required by clause 36.5 of the Contract, and contained claims for works that in his view were not properly characterised as variations.
On 8 September 2016, a replacement progress certificate was issued in the amount of $349,104.70. Mr McClurg’s evidence was that the replacement progress certificate was prepared and issued by Ms Oliver-Dearman, but at his request, and with his authority. He understood that the Contract (under clause 37.2.8) permitted the issue of a replacement certificate to correct any error discovered in a previous progress certificate. The replacement progress certificate had the name of Ms Oliver-Dearman printed on it, and was signed by her.
The plaintiff did not accept the validity of the replacement progress certificate and did not issue a tax invoice for the reduced amount in that certificate. The defendant contended that, in the absence of a tax invoice, no obligation to make payment of even the reduced amount arose. However, the sum in the replacement progress certificate has since been paid with the result that the amount in dispute is confined to the difference between the amount in the 1 July 2016 progress certificate and the amount in the replacement progress certificate, being $245,964.86.
These proceedings
The plaintiff filed its statement of claim in these proceedings on 12 October 2016. The claim relied upon the 1 July 2016 progress certificate, and alleged an obligation under clause 37.2.5 of the Contract to pay the amount in that certificate within 10 business days of 1 July 2016. On the same day it filed its statement of claim, the plaintiff also filed an interlocutory application seeking summary judgment in its favour under r 232 of the Supreme Court (Civil) Rules 2006 (SA).
In its defence filed on 11 November 2016, the defendant denied any liability to pay the amount claimed. Central to its defence of the plaintiff’s claim, and to the defendant’s opposition to the application for summary judgment, was its reliance upon the replacement progress certificate. In particular, the defence included a plea that during the course of the building works Mr McClurg, as Superintendent, had from time to time appointed Ms Oliver-Dearman as his delegate to exercise the functions of the Superintendent. It also pleaded that Mr McClurg had identified error in the 1 July 2016 progress certificate, and had (through his delegate, Ms Oliver-Dearman) exercised the right pursuant to clause 37.2.8 of the Contract to withdraw the 1 July 2016 progress certificate and issue the replacement progress certificate.
In its reply, the plaintiff pleaded that there had not been any competent delegation of the Superintendent’s functions under the Contract in respect of the replacement progress certificate.
The evidence filed by the defendant in opposition to the application included affidavits from Mr McClurg and Ms Oliver-Dearman. Neither suggested that there was ever any formal or written notice of the appointment of Ms Oliver-Dearman as Mr McClurg’s delegate under clause 21 of the Contract, either generally or in respect of the replacement progress certificate. However, both gave evidence of Ms Oliver-Dearman having significant dealings with the plaintiff’s representatives in relation to the project at 1 King William Street.
According to Ms Oliver-Dearman, since commencing her employment as a project manager for Moto Projects in January 2016 she had assisted in sending and receiving correspondence, coordinating construction activities, assessing and certifying payment claims and variations submitted by the plaintiff, and issuing site instructions and directions to the plaintiff. Ms Oliver-Dearman explained that during her time on the project, the plaintiff had never questioned her authority to issue directions, instructions or certifications on the Project. To the contrary, the plaintiff had always acted in accordance with the directions, instructions and certifications she had issued. She attached various examples to her affidavit, including the progress certificate in respect of progress payment claim number 8 which was signed by her in May 2016.
Mr McClurg gave evidence to similar effect. He said that since commencing with Moto Projects in January 2016, Ms Oliver-Dearman had shared with him the responsibility for undertaking the Superintendent’s tasks for the project, including coordination of the building activities, assessing payment claims and variations, issuing payment certificates, issuing site instructions and directions to the plaintiff, and sending and receiving correspondence. He said that no representative from the plaintiff had raised any issue regarding Ms Oliver-Dearman’s authority to carry out any aspect of the Superintendent’s role on the project.
The application for summary judgment
The principles governing an application for summary judgment are not in dispute. The application was brought under r 232, which provides the Court with power to give summary judgment for a party; but in the case of an application by the plaintiff, only if the Court is satisfied that “there is no reasonable basis for defending the applicant’s claim”. There is no dispute about the applicable test and principles. They are those articulated by the Court in Ceneavenue Pty Ltd v Martin.[3] A court will not lightly grant summary judgment. The nature of the test is such that it will not ordinarily be appropriate to determine a matter summarily where the outcome is likely to turn upon contested issues of fact.
[3] Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1 at [80]-[82].
The application for summary judgment was initially heard by the Master in December 2016. However, a significant period of time elapsed before judgment was delivered on account of the parties attending two mediations. Those mediations were apparently successful in resolving some of the other broader commercial issues between the parties, but not the issues the subject of these proceedings.
Further, when the parties informed the Master that the mediations had not resolved all of the issues between them, and that it would still be necessary to determine the application for summary judgment, the Master’s reasons record that the parties agreed that the application should be determined “on the basis of the pleadings as at the date of the argument and the material before the Court at that time.”
In reality the defence had been amended twice before the matter came to be decided, and indeed the defendant had included a counterclaim. Those subsequent documents had raised various issues, including a plea of estoppel. The essence of the plea of an estoppel was that by reason of the plaintiff’s conduct in accepting, or acquiescing in, Ms Oliver-Dearman exercising the powers of the Superintendent it was now estopped from relying upon its strict contractual entitlement to insist upon any delegation of the Superintendent’s functions being subject to notification in writing, or from otherwise challenging Ms Oliver-Dearman’s authority in connection with the replacement progress certificate.
Finally, I mention also that when the matter came to be argued before me, the defendant sought to adduce fresh evidence of the fact that the Superintendent had since issued a final payment certificate, and indeed that the plaintiff had recently issued a tax invoice seeking payment of the amount in that certificate. Subject potentially to one minor qualification in respect of a particular variation, the defendant’s evidence was that the final payment certificate included, or took account of, the amounts in progress payment claim number 10, and that the defendant acknowledged an obligation to, and intended to, pay the amount in that invoice. In the absence of opposition, I received evidence of the above as fresh evidence on the appeal, and gave the defendant permission to rely upon a notice of contention to the effect that these subsequent events superseded the 1 July 2016 progress certificate, and hence removed the basis for summary judgment in the amount claimed in that certificate.
The Master’s reasons
The operative paragraphs of the Master’s reasons in dismissing the application for summary judgment were as follows:
A case for summary judgment must be clear and obvious. The power to order summary judgment is to be exercised with caution and only in clear cases. I regard this matter as finely balanced. There is a beguiling simplicity to the case put by the plaintiff. In the end, however, there are two questions which, in my view, require determination at trial. The first is whether the position is as Mr McClurg states, that there was an error in the first version of progress certificate number 10 because the variations claimed by the plaintiff were not appropriate. If the variations are claimable, then there was no error justifying the replacement certificate. However, if the variations were not claimable, there was an error which required progress certificate number 10 to be corrected. That is a trial issue.
The second issue to be determined is whether, in the circumstances where all parties seem to have dealt with Ms Oliver-Dearman as the appropriate Superintendent’s representative, she was authorised to sign on behalf of the Superintendent the replacement progress certificate. Put another way, the issue is whether the plaintiff, having dealt with Ms Oliver-Dearman regularly during the project, can now insist on strict compliance with the terms of the contract. That arises on the evidence before the Court and is a trial issue.
In my opinion, at the moment I am not able to confidently say the neither of those issues provides a reasonable basis to defend the claim of the plaintiff. For that reason, the application for summary judgment must be dismissed. I will hear the parties as to the form of the orders.
The appeal
The plaintiff’s notice of appeal raises various grounds of appeal, but in essence they come down to a contention that the Master erred in accepting that there was a reasonable basis for giving the replacement progress certificate contractual force, and hence replacing the 1 July 2016 progress certificate.
In the operative paragraphs of the Master’s reasons, set about above, his Honour referred to two separate “trial issues”. I take the reference to these being “trial issues” to involve a conclusion that they were issues that provided a reasonable basis for defending the claim, and were issues that were appropriately dealt with at trial rather than on a summary basis.
The first trial issue identified by the Master was the existence of error in the 1 July 2016 progress certificate. It is not entirely clear to me whether the Master was intending to suggest that this, of itself, provided a reasonable basis for defending the plaintiff’s claim. I accept the plaintiff’s submission that it did not. While the defendant’s evidence was to the effect that there was an error in the amount claimed and thus also in the amount included in the 1 July 2016 progress certificate, the existence of such error would have done no more than enliven the entitlement of the Superintendent to issue a replacement certificate under the mechanism provided for in clause 37.2.8. In order to establish a reasonable basis for defending the plaintiff’s claim, it would also be necessary for the defendant to identify a reasonable basis for establishing that this mechanism was utilised and complied with, or alternatively was not required to be complied with for some reason. This was the second issue identified by the Master, and is the issue to which I now turn.
The Master’s conclusion in respect of this second issue was that it was a trial issue whether the nature of Ms Oliver-Dearman’s dealings with the plaintiff were such that it could not now insist on strict compliance with the terms of the Contract.
It emerged during the course of the appeal that the parties had different understandings as to the precise legal significance that the Master intended to attribute to Ms Oliver-Dearman’s dealings with the plaintiff in this aspect of his reasons, and relatedly, the footing upon which the summary judgment application was conducted. The plaintiff was proceeding on the basis that the Master’s reference to it being agreed that the matter be determined on the basis of “the pleadings as at the date of the argument” meant that there was no basis for the defendant to rely upon any form of estoppel or waiver arising out of Ms Oliver-Dearman’s conduct – given that this legal characterisation of Ms Oliver-Dearman’s conduct only appeared in a later version of the defence. The plaintiff contended that the reasons of the Master should be understood accordingly, and hence understood as suggesting some contractual basis for the replacement progress certificate taking effect. It contended, and I agree, that there was no such contractual basis for the replacement progress certificate to take effect.

The defendant, on the other hand, was proceeding on the basis that by including reference to the matter being dealt on the basis of not only the existing pleadings but also “the material before the Court”, the Master intended to permit the defendant to rely upon its contention that the circumstances gave rise to some form of estoppel or waiver. The defendant contended that the reasons of the Master, and in particular his reference to the plaintiff not being entitled to insist on strict compliance with the Contract, should thus be understood as referring to its submissions based upon an estoppel or waiver.
It is not entirely clear to me which of these views was the correct or better view of what was agreed, let alone what the Master understood had been agreed. While I suspect the Master approached the matter on the latter basis, it is not necessary for me to form a final view about this. In circumstances where this is an appeal by way of rehearing, I consider it appropriate to address the matter afresh as a matter of principle. In that regard, I am not satisfied that it is appropriate to confine the defendant in any strict way to the matters in the version of his defence that was extant at the time of the argument. While the terms of the pleaded defence are an important aspect of the consideration of an application for summary judgment by a plaintiff, I do not think the inquiry as to whether there is a reasonable basis for defending the proceedings is necessarily confined to matters included within the existing version of the defence. If the evidence adduced by the defendant establishes a reasonable basis for defending the proceedings, then this would ordinarily be sufficient to avoid summary judgment in favour of the plaintiff, even if it is yet to be incorporated within the pleadings. Support for this approach is found in Ke Qin Ren v Hong Jiang.[4]
[4] Ke Qin Ren v Hong Jiang; Jiang v Wan Ze Property Development (Aust) Pty Ltd (in liq) (2014) 104 ACSR 149 at [55].
Having regard to the evidence of Mr McClurg and Ms Oliver-Dearman in relation to the latter’s dealings with the plaintiff, as summarised earlier, I am satisfied that there is a reasonable basis for defending the proceedings. The evidence establishes a reasonable basis for a contention that by reason of Ms Oliver-Dearman’s conduct in carrying out various of the Superintendent’s functions, and the plaintiff’s acquiescence in this occurring without any written notice of a delegation of those functions, the plaintiff was estopped from insisting upon, or waived its entitlement to insist upon, compliance with the contractual obligation to give notification of the delegation of that function in respect of the replacement certificate.
The plaintiff seeks to resist this conclusion by contending that the plaintiff’s acquiescence in Ms Oliver-Dearman’s role was confined to matters of an uncontroversial nature, or which were not otherwise of a nature sufficient to give rise to any basis for an estoppel or waiver in respect of a matter of such crucial significance – and such specific contractual specification – as the issuing of a replacement progress certificate under clause 37.2.8. I accept that there is some force in the plaintiff’s contention. However, in circumstances where I consider that the matter will ultimately be a matter of fact and degree, and turn upon a close consideration of the evidence as to the detail, nature and extent of Ms Oliver-Dearman’s conduct and dealings with the plaintiff, I am satisfied that the issue is not one appropriate for determination on a summary basis. I consider that the evidence advanced by the defendant in this respect is sufficient to establish a reasonable basis for the contention, and hence that the matter must properly be determined at trial.
For these reasons I would dismiss the appeal.
Notice of contention
Given my conclusion that the appeal should be dismissed on the basis of the matters considered above, it is not strictly necessary for me to address the fresh evidence and notice of contention. However, I make the following brief observations.
On my understanding of the Contract, and in particular clause 37.4.5 (in relation to the status and effect of a final payment certificate) and clause 37.2.7 (in relation to the interim nature of progress payments), the issuing of a tax invoice in respect of the final payment claim has the effect of overtaking or replacing any outstanding progress certificate. In this way, it is my view that the issue of the final payment certificate has the effect of replacing the progress certificate that is the subject of the application for summary judgment, and hence also has the effect of removing the basis for any order for payment of the amount claimed under that certificate as such. At the very least, I am satisfied that there is a reasonable basis for so contending. I consider this to be a second reason to refuse summary judgment in the amount claimed, and hence to dismiss the appeal.
If the plaintiff is ultimately proved right in its contention that the 1 July 2016 progress certificate was not validly replaced by the replacement progress certificate, then it may well be that the plaintiff remains entitled to a payment of interest for the period that this amount remained outstanding, despite it ultimately becoming overtaken by the final payment certificate. However, in circumstances where I am not prepared to order summary judgment in respect of the amount claimed in that certificate, I do not consider it appropriate to consider on this application the issue of whether any interest is payable.
Conclusion
For the reasons set out, I dismiss the appeal.