MSP Engineering Pty Ltd v Tianqi Lithium Kwinana Pty Ltd
[2020] WASC 251
•3 JULY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: MSP ENGINEERING PTY LTD -v- TIANQI LITHIUM KWINANA PTY LTD [2020] WASC 251
CORAM: MASTER SANDERSON
HEARD: 28 MAY 2020
DELIVERED : 3 JULY 2020
PUBLISHED : 3 JULY 2020
FILE NO/S: CIV 1318 of 2020
CIV 1319 of 2020
BETWEEN: MSP ENGINEERING PTY LTD
Plaintiff
AND
TIANQI LITHIUM KWINANA PTY LTD
Defendant
Catchwords:
Construction contract - Whether stay ought be ordered when interim payment certified and then dispute arises
Legislation:
Commercial Arbitration Act 2012 (WA)
Result:
Defendant's application dismissed
Category: A
Representation:
Counsel:
| Plaintiff | : | G R Donaldson SC |
| Defendant | : | J K Taylor SC |
Solicitors:
| Plaintiff | : | Squire Patton Boggs |
| Defendant | : | Clayton Utz |
Case(s) referred to in decision(s):
Algons Engineering Pty Limited v Abigroup Contractors Pty Limited (1998) 14 BCL 215
Blue Chip Pty Ltd v Concrete Constructions Group Pty Ltd (1997) 13 BCL 31
Daysea Pty Ltd v Watpac Australia Pty Ltd [2001] QCA 49
Eriez Magnetics Pty Ltd v Duro Felguera Australia Pty Ltd [2017] WASC 304
Gilbert‑Ash (Northern) Ltd v Modem Engineering (Bristol) Ltd [1974] AC 689
GR Engineering Services Ltd v Eastern Goldfields Ltd [2018] WASC 19
Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [No 3] [2013] VSC 435
Sabemo Pty Ltd v de Groot (1992) 8 BCL 132
Triden Contractors Pty Ltd v Belvista Pty Ltd (1987) 3 BCL 203
MASTER SANDERSON:
By separate chamber summons dated 30 March 2020 the defendant has sought a stay of both proceedings and that such proceedings be referred to arbitration pursuant to s 8(1) of the Commercial Arbitration Act 2012 (WA). In the alternative, the defendant seeks a stay in the court's inherent jurisdiction. The disputes arise out of two separate contracts which has led to these two separate proceedings. First, there is a contract between the parties for the lithium hydroxide processing plant stage 1 project (LHPP1).[1] Second, there is a contract between the parties for the lithium hydroxide processing plant stage 2 project (LHPP2).[2] Both contracts are identical. The same material is relied upon by each party both actions. In these reasons I will not draw a distinction between the two actions but the reasoning applies to both chamber summons.
[1] Action CIV 1318 of 2020.
[2] Action CIV 1319 of 2020.
It is convenient at this point to refer to the relevant terms of the contracts. The starting point is cl 37. Relevantly that clause reads as follows:
Payment
37.1Progress claims
The Contractor shall claim payment progressively in accordance with Item 33.
An early progress claim shall be deemed to have been made on the date for making that claim.
If the time for any progress claim falls due on a day which is Saturday, Sunday, statutory or public holiday the Contractor shall submit the claim either on the day before or next following that date which itself is not a Saturday, Sunday, statutory or public holiday.
Each progress claim shall be given in writing to the Superintendent and shall include details of the following, calculated in accordance with Annexure Part J:
(1)the value of WUC carried out to the end of the previous month and the amount forecast in accordance with Annexure Part P together with all amounts then otherwise due to the Contractor arising out of or in connection with the Contract;
(ii)the total amount previously certified pursuant to this subclause 37.1;
(iii)the amount being claimed by the Contractor;
(iv)separately identify work attracting GST and work which does not attract GST; and
(v)a written report on the progress made in carrying out the Works during the preceding period since the last progress report in a form approved by the Principal and containing as much detail as the Principal reasonably requires.
37.2Certificates
The Superintendent shall, within 10 business days after receiving such a progress claim, issue to the Principal and the Contractor, assessed in accordance with Annexure Part J:
(a)a progress certificate identifying the progress claim to which it relates and evidencing the Superintendent's opinion of the moneys due from the Principal to the Contractor pursuant to the progress claim and reasons for any difference ('progress certificate'); and
(b)a certificate identifying the progress claim to which it relates and evidencing the Superintendent's assessment of retention moneys and moneys due from the Contractor to the Principal pursuant to the Contract.
If the Contractor does not make a progress claim in accordance with subclause 37.1, the Superintendent may issue the progress certificate with details of the calculations and shall issue the certificate in paragraph (b) of this subclause 37.2
If the Superintendent does not issue the progress certificate within 10 business days of receiving a progress claim in accordance with subclause 37.1, that progress claim shall be deemed to be the relevant progress certificate.
The Principal shall on the first day of the following month after the Superintendent receives the progress claim, pay to the Contractor the balance of the progress certificate after setting off such of the certificate in paragraph (b) of this subclause 37.2 as the Principal elects to set off. If that setting off produces a negative balance, the Contractor shall pay that balance to the Principal within 7 days of receiving written notice thereof.
Neither a progress certificate nor a payment of moneys shall be evidence that the subject WUC has been carried out satisfactorily. Payment other than final payment shall be payment on account only.
At any time and from time to time, the Superintendent may by a further certificate correct any error which has been discovered in any previous certificate, other than a certificate of practical completion or final certificate.
Later in these reasons I will have more to say about the payment regime found in cl 37. For the present it is sufficient to say the plaintiff's claim in each of these proceedings is for an amount which has been certified under the payment regime. That was not in issue between the parties.
Clause 42 is headed 'Dispute Resolution'. It is in the following terms:
Dispute resolution
42.1Notice of Dispute
If a difference or dispute (together called a 'dispute') between the parties arises in connection with the subject matter of the Contract, including a dispute concerning:
(a)a Superintendent's direction; or
(b)a claim:
(i)in tort;
(ii)under statute;
(iii)for restitution based or unjust enrichment or other quantum meruit; or
(iv)for rectification or frustration,
or like claim available under the law governing the Contract,
then either party shall, by hand or by registered post, give the other and the Superintendent a written notice of dispute adequately identifying and providing details of the dispute.
Notwithstanding the existence of a dispute, the parties shall, subject to clauses 39 and 40 and subclause 42.4, continue to perform the Contract.
42.2Conference
Within 14 days after receiving a notice of dispute, the parties shall confer at least once to resolve the dispute or to agree on methods of doing so. At every such conference each party shall be represented by a person having authority to agree to such resolution or methods. All aspects of every such conference except the fact of occurrence shall be privileged.
If the dispute has not been resolved within 28 days of service of the notice of dispute, that dispute shall be and is hereby referred to arbitration.
42.3Arbitration
If within a further 14 days the parties have not agreed upon an arbitrator, the arbitrator shall be nominated by the person in Item 37(a). The arbitration shall be conducted in accordance with the rules in Item 37(b).
42.4Summary relief
Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under the Contract or to seek injunctive or urgent declaratory relief.
In opposition to this application the defendant relied upon the affidavit of Andrew Rowe sworn 1 May 2020. At par 34 and par 40 of his affidavit Mr Rowe says that according to his review of the plaintiff's records there is a certified amount outstanding under LHPP1 of $26,969,407.88. The amount outstanding under LHPP2 is $5,643,951.49. There is no argument between the parties on this issue. It is important to note that under cl 37.2(b) the superintendent is entitled to set off against any amount claimed by the contractor any moneys due from the contractor to the principal pursuant to the contract. When payment is made the principal is then liable to pay only the amount of the claim less the set off amount. In the case of the certificates the subject of these actions, there has been no set off authorised by the superintendent. In other words, the superintendent, who is independent of, but paid by the defendant, has not allowed any amount by way of set off. There is no evidence he was ever asked to do so by the defendant.
Clauses such as cl 37 are common in construction contracts. Indeed, the contract here is a modified form of AS4902‑2000 (General Conditions of Contract for Design and Construct as Amended). There can be no doubt what the clause anticipates is that when a certificate is issued by a superintendent the contractor will make payment on that certificate. The payment does not come with any admission of liability the amount claimed is due and owing. That is made clear by the terms of cl 37.2. The clause is drafted in terms which reflect the importance to a contractor of a flow of funds. This case illustrates that point. The plaintiff has made payments to subcontractors and the progress certificates represent reimbursement for those payments plus a margin. But the plaintiff is actually out of pocket and is seeking to recover amounts already paid.
The proper interpretation of a clause such as cl 37 was considered by Rolfe J in Algons Engineering Pty Limited v Abigroup Contractors Pty Limited (1998) 14 BCL 215. His Honour was there considering a clause which, in all material respects is the same as the clause in this case. His Honour considered a number of decisions beginning with Gilbert‑Ash (Northern) Ltd v Modem Engineering (Bristol) Ltd [1974] AC 689, Triden Contractors Pty Ltd v Belvista Pty Ltd (1987) 3 BCL 203, Sabemo Pty Ltd v de Groot (1992) 8 BCL 132 and Blue Chip Pty Ltd v Concrete Constructions Group Pty Ltd (1997) 13 BCL 31. This last decision was a decision of the Queensland Court of Appeal. His Honour examined the decision in some detail. His Honour quoted from the decision of Fitzgerald P to the following effect:
At its simplest, the principal claims that its obligation to make payment under that paragraph is subject to any amount which it is entitled to be paid by the contractor. However, in my opinion, that misses the point, at least where liquidated damages for late completion are the basis upon which the principal seeks to withhold payment.
The fourth paragraph of General Condition 42.1 must be taken with the remainder of that clause. What is certified is intended to be paid. While the third paragraph is unlikely to have extensive practical operation, the first paragraph provides for claims by the contractor, with supporting information, while the second paragraph requires the superintendent not only to assess the contractor's entitlement from the principal for the work done, but a variety of other amounts due from either principal to contractor and/or due from contract to the principal. The payment certificate accounts for all these amounts, including any claim by the principal for liquidated damages for delay in practical completion if such a claim is made, and then certifies the amount to be paid whether by principal to contractor or contractor to principal. That is the payment for which the fourth paragraph of General Condition 42.1 provides, and the introductory words to that paragraph relied on by the principal lack the strength for the task to which it seeks to assign them. Their concern, primarily at least, is with matters of little, if any, direct relevance to the payment of certificates, either by whom, to whom or in what amount payment is to be made. Indeed, it is a curious effect to give to a phrase such as 'subject to the provisions of the Contract' that it renders the material clause subject to a provision which the contract does not contain.
Having considered all these authorities his Honour concluded:
It was next submitted by the defendant that the point of construction 'is at the very least arguable' and that in the absence of any binding authority it should be determined at a final hearing. In my view the construction of the clause, viewed against the authorities to which I have referred, does not give rise to any real issue or question to be tried. The subcontract, on its proper construction, requires the defendant to pay the amount of the progress claim, in the circumstances of this case, without any deduction for amounts claimed by way of set-off or cross‑claim. Accordingly, conformably with the test laid by in General Steel and the other authorities on the point, I think that I should give effect to that view.'
The Algons Engineering decision has never been seriously questioned and has been followed on numerous occasions. With respect, it is clearly correct. In fact, I did not understand counsel for the defendant to suggest otherwise. I will detail below how counsel's argument was framed. But the starting point is to say this. Once a certificate is issued the principal is obliged to make payment of the amount certified to the contractor. There can be no doubt about that. The parties have agreed the amount certified is due and payable in the timeframe specified in cl 37.
These proceedings were issued on 4 March 2020. On 6 March 2020 the defendant issued show cause notices. On the same day the defendant issued notices of dispute. In support of this application the defendant relies upon an affidavit of Robert Francis van Erp sworn 30 March 2020. Appearing as attachments RFVE 15 and RFVE 16 are copies of the notice of dispute in both matters. By cl 11 of the notice of dispute the defendant refers to the certified claim under both LHPP1 and LHPP2. The notice of dispute then goes into some detail as to the nature of the claims made by the defendant against the plaintiff. By way of example, cl 16 through to cl 24 appear under the heading 'Misleading and Deceptive Conduct'. Clauses 25 to cl 30 appear under the heading 'Breaches of Contract'. It is now accepted by the plaintiff that the dispute resolution procedure under cl 42 of the contract has been activated and in fact an arbitrator has been appointed to deal with the issues raised in the notice of dispute.
The defendant says the arbitration process having been initiated by the notice of dispute, the question of whether payment on the certificates ought be made is a matter which should be referred to arbitration and the present proceedings ought be stayed. The plaintiff says the present proceedings are covered by cl 42.4. The certified amounts are due under the contract and this court can order payment. Effectively what is said is that cl 42.4 represents a carve out from the arbitration clause of those amounts which are due under cl 37.
The defendant relies on two cases to support its submission. The first of these cases is Eriez Magnetics Pty Ltd v Duro Felguera Australia Pty Ltd [2017] WASC 304. Martin CJ was dealing with a contract which was in all material respects identical to the contract between the plaintiff and the defendant. In particular, cl 42.5 of the contract in Eriez was exactly the same wording as cl 42.4 in this case. His Honour dealt with the proper interpretation of cl 42.5 as follows:
58Turning to Eriez's alternative submission premised on cl 42.5, it does seem to me that the breadth of the disputes referable to arbitration is relevant to the proper construction of this clause. As I mentioned earlier, the breadth of disputes the subject of the dispute resolution clause is very wide, as it concerns any dispute arising in connection with, amongst other things, a claim. As I noted earlier, the expression 'claim' is defined to include any claim for payment of money under the subcontract. Consequently, any claim for payment of money under the subcontract is a dispute.
59In that context, it seems to me to be clear that when cl 42.5 preserves the right of a party to institute proceedings to enforce payment due under the subcontract, it cannot be referring to the payment of amounts which are disputed. Rather, the provision is directed to the enforcement by the court of payment of moneys due and owing and no longer disputed under the subcontract.
60That approach is consistent with, and supported by the other provisions of cl 42.5 which exempt from the operation of cl 42 proceedings seeking injunctive or urgent declaratory relief. A common characteristic, of course, of injunctive or urgent declaratory relief is that it is relief of a kind not easily or readily given by an arbitrator. Similarly, arbitrators are incapable of making orders enforcing payment of awards made by an arbitrator. So, cl 42.5 is directed to preserving the rights of parties to invoke the jurisdiction of the courts in circumstances in which an arbitrator could either not provide the relief sought, in terms of enforcement, or would have difficulty providing the relief sought, as is the case with urgent or injunctive declaratory relief. The clause has no application where there is a dispute, because otherwise its operation would entirely undermine all the provisions of cl 42 which precede it. As Eriez's claims for payment are disputed, it seems to me that cl 42.5 does not apply, and it cannot be seriously contended that the relief sought by Eriez in these proceedings is either injunctive or declaratory relief which is urgent.
The way in which counsel for the defendant framed her client's case was as follows. She accepted the defendant was liable to make payments of the amount certified by the superintendent. But because the defendant had raised a dispute which was referred to arbitration the action to enforce payment of the certified amounts ought be stayed and referred to the arbitrator. That was because the arbitrator might well find the plaintiff was in fact indebted to the defendant so that, although the amount certified might be payable, the eventual award might require a payment by the plaintiff to the defendant. In part, that submission relied upon the definition of 'claim' which is found in cl 1 of the contract. It was counsel's submission the definition was wide and all‑encompassing and picked up claims for payment said to be due on a certificate as well as other matters in dispute between the parties.
Counsel's submission also referred to s 8(1) of the Commercial Arbitration Act. That section reads as follows:
(1)A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party's first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
Counsel noted the section was in mandatory terms – it was said that here there was a 'matter' which was the subject of an arbitration agreement and as the agreement was not null and void, inoperative or incapable of being performed the question of payment on the certificate had to be referred to arbitration.
The plaintiff's response was quite straightforward. Clause 42.4 provided a carve out from arbitration proceedings which allowed enforcement of a payment 'due' under the contract. Payment on the certificate was due and the plaintiff was entitled to prosecute these proceedings.
The second case relied upon by the defendant is the decision of Tottle J in GR Engineering Services Ltd v Eastern Goldfields Ltd [2018] WASC 19. Once again the dispute resolution clause was in terms which are virtually identical to cl 42 in this case. In fact, cl 41.4 in the GR Engineering case was worded exactly as cl 42.4 is worded in this case.
His Honour resolved the issues relating to cl 41.4 in this way:
52The issue on which the stay application turns is whether GR Engineering's claims against Eastern Goldfields fall within the ambit of the arbitration agreement. There was no argument that absent cl 41.4 the claims would constitute a 'Dispute' for the purposes of cl 41.1. The critical question is whether the proceedings are 'proceedings to enforce payment due under the Contract' for the purpose of cl 41.4 and are thus 'carved out' from the operation of the arbitration agreement. When addressing this constructional issue the authorities provide that the Court should generally adopt a 'broad, liberal and flexible approach … and should favour a construction which provides a single forum for the adjudication of all disputes arising from, or in connection with, that agreement'. This approach does not mean, though, that the Court may usurp or ignore the language used in the particular provisions of the arbitration agreement. Otherwise, the general principles applying to the construction of commercial contracts apply. That is, the words used by the parties must be construed objectively by ascertaining what a reasonable businessperson would have understood the clause to mean 'by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose'.
53Before turning to cl 41.4 reference must be made to cl 41.1. The words 'arises in connection with the subject matter of the Contract' are words of wide import. A reasonable business person would understand those words to mean that all disputes having some degree of connection with the Contract should be resolved by the process set out in cl 41.
54Clause 41.4 is headed 'Summary relief'. The Contract does not provide that headings are for convenience only and the heading may thus be used as an aid to construction. The heading suggests that the clause is only concerned with those proceedings that are capable of summary determination, that is, 'proceedings to enforce payment due under the Contract' about which there is no dispute. More fundamentally, however, to give the words 'proceedings to enforce payment due under the Contract' a construction that embraced a payment about which there is a dispute would suggest that the parties intended some disputes to be resolved by arbitral proceedings and some by curial proceedings. This is not a construction that would be favoured by a reasonable business person. I would add that a reasonable business person would readily understand the distinction between determining whether a claimed payment is due under the Contract (an issue to be resolved by arbitration) and enforcing a payment due under the Contract (a matter for the courts).
55Clause 41.4 must be construed harmoniously with cl 41 as a whole paying attention to the intention of the parties evinced by the clause, which is that all disputes about whether payments are due under the Contract should be determined in arbitral proceedings. The construction of cl 41.4 for which GR Engineering contends would create uncertainty as to which disputes must be resolved by arbitration and which disputes could be the subject of proceedings. This is not a result that the parties to a commercial agreement can be taken to have intended.
56I am fortified in the view I have taken of the preferred construction of cl 41.4 by the decision of Martin CJ in Eriez Magentics Pty Ltd v Duro Felguera Australia Pty Ltd. In that case the Chief Justice was called upon to consider a sub-clause in identical terms to cl 41.4 albeit that the sub-clause in Eriez was found in a dispute resolution provision that was in different terms to cl 41 of the Contract. His Honour noted the breadth of the disputes that were the subject of the reference to arbitration and that they included a claim for payment of money under the contract. His Honour concluded that the preservation of the right of a party to institute proceedings to enforce payment due under that contract could not refer to the payment of amounts which were disputed. Instead, his Honour considered that the provision was directed to the enforcement by the Court of payment of moneys due and owing and no longer disputed under the relevant contract. That approach, his Honour said, was consistent with the exemption from referral to arbitration of proceedings seeking injunctive or urgent declaratory relief. That was because, like injunctive or declaratory relief, an order for the enforcement of payment is not relief of a kind easily or readily given by an arbitrator (or given at all).
It is clear then that the decision in Eriez and the decision in GR Engineering Services squarely support the defendant's position. Counsel for the plaintiff did not suggest otherwise. His bold submission was both decisions were wrongly decided. He did so by reference to a number of decisions beginning with the decision of Vickery J in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [No 3] [2013] VSC 435. His Honour was there dealing with a dispute resolution clause which is identical to cl 42, but was in that contract cl 47. In relation to cl 47.4 his Honour said:
146However, in my opinion, the payment claimed by Blanalko under the January Certificate is covered by the 'carve out' provided by clause 47.4 which provides that nothing in the Contract shall prejudice the right of a party to institute proceedings to enforce payment due under the Contract. As such, even though the parties did invoke the provisions of clause 47.2 in an attempt to resolve the issue as to whether any and what sum is payable pursuant to the January Certificate, the parties specifically addressed the issue as to the forum to determine the dispute, in the event that it remained outstanding. They agreed not to preclude a party to the dispute to institute proceedings before a court to enforce the payment claimed to be due under the Contract. This is precisely what paragraph 56A of the defence and paragraph 67 of the counterclaim seek to do.
The Lysaght decision was drawn to Tottle J's attention in the GR Engineering case. His Honour dealt with it in this way:
57.GR Engineering relied on the decision in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [No 3], in which Vickery J considered a 'carve out' clause expressed in almost identical terms to cl 41.4. His Honour held the parties 'agreed not to preclude a party to the dispute to institute proceedings before a court to enforce the payment claimed to be due under the [c]ontract'. (emphasis supplied). With respect I consider that the construction of the carve out provision favoured by Vickery J is likely to have the consequence of fragmenting the dispute resolution process in a manner which cannot have been intended by the parties. For that reason (in addition to the reasons already given) I prefer the construction of the carve out provision in cl 41.4 of the Contract which I have set out above.
Martin CJ did not deal with Lysaght in Eriez. Perhaps it was not cited to him. It is not mentioned in the list of cases at the beginning of the judgment. Counsel for the plaintiff submitted that as the decision in Eriez was given extempore with the reasons edited before publication, the decision ought be treated with caution and not be seen as a full consideration of the relevant issues. It is certainly the case that the decision does not discuss any of the relevant authorities in this area, including Lysaght, and on that basis it is difficult to draw deep insights from his Honour's judgment.
It was the plaintiff's submission the Lysaght decision is consistent with the authorities in other States. But counsel was not able to refer to any decision subsequent to Lysaght and certainly no decision which considered Lysaght in the light of Eriez and GR Engineering. The way in which counsel put his position can be illustrated by reference to the decision of the Queensland Court of Appeal in Daysea Pty Ltd v Watpac Australia Pty Ltd [2001] QCA 49. Williams JA referred to the decision of Rolfe J in Algons Engineering and said:
21.That reasoning is in my view compelling. As all of the cases I have just referred to establish, the consequences of issuing a certificate are serious. The proprietor is bound to pay the amount of the certificate notwithstanding that the amount is provisional only and subsequently may be found to be incorrect. Notwithstanding such considerations the proprietor must pay the amount specified in the certificate and take the chance that any excess can be recovered subsequently. Similarly, the contractor is not entitled to payment of anything more than the amount specified in the certificate though it may well be less than the progress claim made. Even though it may ultimately be found that the contractor was entitled to more, the recovery of any such amount must await the determination of disputes at the end of the contract.
22.Because of the consequences which flow from the issuing of the certificate strict compliance with the provisions of Clause 42.1 is required. That, in any event, is the natural consequence of the use of the word 'shall' in paragraphs [4] and [6] in particular. It is not necessary to imply any terms in order to arrive at that result. Interestingly all parties agree that the provision in relation to payment by the Principal consequent upon the issuing of a valid certificate is mandatory; in my view it would be odd if the provisions relating to the issuing of the certificate, though mandatory in terms, were held not to be so.
23.An attempt was made by counsel for the respondent to support a construction that 'shall' in paragraph [4] was not mandatory by referring to other provisions of the contract where, arguably, that term could not sensibly be construed as being mandatory. However, on closer examination, the provisions to which reference was made are distinguishable. In my view Clause 42 provides a code with respect to payments and its clear meaning ought not be affected by the consideration that the term 'shall' in some other clause in the contract did not denote a mandatory requirement.
As it is not possible to reconcile the decision in Lysaght with the decisions in Eriez and GR Engineering, the question I have to determine is which line of authority I should follow. In resolving that issue I am mindful there are two decisions of this court which support the defendant's view against the submissions made by the plaintiff. All of the relevant decisions are first instance decisions. I take as the starting point that I should only follow the Lysaght, if I am clearly of the view that Eriez and GR Engineering are wrongly decided.
That said, I am satisfied that I should follow the decision of Vickery J in Lysaght. The starting point is cl 37. It mandates a procedure for the certification of amounts payable. Once those amounts are payable then contractually they are not in dispute. A principal is given an opportunity to raise off setting claims for consideration by the superintendent. But if that is not done and an amount is certified then it must be paid. That is the point of Rolfe J's decision in Algons Engineering and it is a point which has been emphasised again and again in any number of cases.
It is important to remember why such a provision is included and how important it is in the building context. I have dealt with this issue above but it is worth repeating. Money must be kept flowing in a construction contract – the head contractor has to pay its subcontractors who in turn have to meet their expenses. A colloquial expression is sometimes used – the principal's foot must be lifted from the hosepipe. This principle perhaps finds its clearest expression in the Construction Contracts Act 2004 (WA). I am not suggesting that Act is relevant in this case. But the Act is legislative acknowledgement of the importance of keeping money flowing in construction contracts.
Properly viewed, cl 42.4 is a recognition of that principle. A reasonable businessman involved in the construction industry would appreciate that was the case. Such a reasonable person would also appreciate that if an amount which was required to be paid – which the parties had agreed would be paid – was not paid, then a resort to the courts for prompt enforcement was both reasonable and necessary. That interpretation does not affect the integrity of the arbitration process. That process can follow through to completion and it may well be the award will favour the principal so that the contractor will be forced to disgorge some of the money they have received as progress payments. But that is precisely what cl 37 anticipates.
In the circumstances, I am not satisfied that a stay ought be granted based upon the interpretation of cl 37 and cl 42 and the Commercial Arbitration Act. That then leaves the question of whether, in the exercise of discretion, a stay ought be granted.
Given I have concluded it is important for the integrity of the construction contract process that a contractor be entitled to claim payment of a certified amount, it follows I am not satisfied it would be a proper exercise of discretion to refer a claim such as the present to arbitration. It may be that an arbitrator could make an interim award which would effectively enforce the certified amount. That question was not the subject of detailed submissions – counsel for the plaintiff suggested there was doubt about that issue. But even if an arbitrator was able to make an interim award which required payment of the certified amount, it is a clumsy process. It offers no real benefit to any of the parties. There is no warrant for issuing a stay on that basis.
The defendant also raised the issue of a multiplicity of proceedings. The plaintiff in this case has applied for summary judgment. Such applications are determined on affidavit evidence. Both counsels seemed to accept the defendant would not be able to raise, in answer to the summary judgment application, a claim of equitable set off. By referring matters to arbitration the defendant has foreclosed that possibility. That may or may not be correct – this is the hearing of a stay application and not a hearing on the summary judgment application. In any event, it seems unlikely any of the defendant's witnesses who might file affidavit evidence on the summary judgment application would need to appear in person to give evidence. In other words, I am not satisfied that duplication of proceedings – insofar as there is any duplication – would favour the exercise of discretion and warrant the grant of a stay.
For these reasons I would dismiss the defendant's application. On publication of these reasons the parties ought confer in an attempt to agree orders. If no agreement can be reached, parties ought file competing minutes of orders within seven (7) days.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
3 JULY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: MSP ENGINEERING PTY LTD -v- TIANQI LITHIUM KWINANA PTY LTD [2020] WASC 251 (S)
CORAM: MASTER SANDERSON
HEARD: ON THE PAPERS
DELIVERED : 20 AUGUST 2020
PUBLISHED : 20 AUGUST 2020
FILE NO/S: CIV 1318 of 2020
BETWEEN: MSP ENGINEERING PTY LTD
Plaintiff
AND
TIANQI LITHIUM KWINANA PTY LTD
Defendant
FILE NO/S: CIV 1319 of 2020
BETWEEN: MSP ENGINEERING PTY LTD
Plaintiff
AND
TIANQI LITHIUM KWINANA PTY LTD
Defendant
Catchwords:
Costs - Special costs order
Legislation:
Nil
Result:
Plaintiff's application granted
Category: B
Representation:
CIV 1318 of 2020
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Squire Patton Boggs |
| Defendant | : | Clayton Utz |
CIV 1319 of 2020
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Squire Patton Boggs |
| Defendant | : | Clayton Utz |
Case(s) referred to in decision(s):
Atwell v Roberts [2013] WASCA 37(S)
Sino Iron Pty Ltd v Minerology Pty Ltd [No 2] [2017] WASCA 76(S)
MASTER SANDERSON:
These reasons deal with the plaintiff's application for a special costs order. Pursuant to s 280(2) of the Legal Profession Act 2008 (WA) the plaintiff seeks the following orders:
(a)The respondent pay the plaintiff's costs of and incidental to the respondent's applications for a stay of the proceedings to be assessed:
(i)without regard to the limits on the daily and hourly rates in Table A of cl 12 of the Legal Profession (Supreme Court) (Contentious Business) Determination 2018 (WA) (2018 Scale) for (A) senior practitioners; (B) restricted practitioner; and (C) counsel;
(ii)without regard to the limits (whether as to maximum allowances for time, number of and experience of legal practitioners or total costs) imposed by Table B of the 2018 Scale for proceedings in chambers (Scale Item 10(a)).
In written submissions filed on behalf of the plaintiff on 23 July 2020 the plaintiff sets out the principles applicable to an application such as this. The submissions read as follows:
2 Section 280(1) of the Legal Profession Act 2008 (WA) provides that legal costs are regulated by an applicable costs determination, being in this case the 2018 Scale as defined in the orders sought in the application. This application is brought pursuant to section 280(2) of the Legal Profession Act 2008 (WA) which permits this Court to make a special costs order where it considers that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter: see Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 11] [2011] WASC 74 [89] to [92]; Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 11] [2016] WASC 235 (S) at [14] (Mineralogy).
3 Section 280(2) permits a court to:
(a) order the payment of costs above those fixed by the determination;
(b) fix higher limits of costs than those fixed in the determination;
(c) remove limits on costs fixed in the determination; and
(d)make any order or give any direction for the purpose of enabling costs above those in the determination to be ordered or assessed.
4 The principles applicable when considering making such orders are well established. There are two questions: first, whether it is fairly arguable that the taxing officer might properly allow costs at an amount greater than the amount allowable under the relevant legal costs determination; and secondly, whether the inadequacy of the amount allowable under the relevant legal costs determination arises because of the unusual difficulty, complexity or importance of the matter: see Le Brun v Joseph (No 2) [2010] WASCA 52 (S) [6]; Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in 017-8417-7502/1/AUSTRALIA liq) [2007] WASC 254 (S) [16] (Heartlink); Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 11] [2016] WASC 235 (S) at [15].
5 These two questions are inter-related: the difficulty or complexity or importance of the issues at stake to the parties is relevant to the degree of work that may be properly and reasonably done in preparing for and presenting the case: CMA Contracting Pty Ltd (formerly known as Moltoni Adams Group Pty Ltd) v John Holland Pty Ltd [2011] WASC 249 [2].
6 The word 'importance' in s 280(2) encompasses importance to the parties; it does not require broader importance to the public or a sector of the public: Red Hill Iron Pty Ltd v API Management Pty Ltd [2012] WASC 323.
7 In Heartlink, Martin CJ at [13] stated:
The policy considerations that should guide a court when addressing an issue under [s 280(2) (formerly s 215(2) of the Legal Practice Act 2003 (WA)] are, firstly, that the court should not usurp the role of the taxing officer and, secondly, that at least where party and party costs are concerned, the court should make an order that would give effect to the general principle of allowing the successful party to be compensated for their costs by the unsuccessful party, where appropriate.
8 Further, the question of whether an order should be made is a matter of 'impression rather than ... a matter of detailed evaluation' since the determination is ordinarily made before a taxation had been undertaken: Heartlink at [20].
9 The requirement of inadequacy will be demonstrated where an applicant shows that there is a fairly arguable case that the bill to be presented to the taxing officer may tax an amount which is greater than the limit that will be imposed by the relevant costs determination: Mineralogy at [15].
By par 7 of its written submissions, the defendant accepts the plaintiff's statements of principle. The defendant draws attention to what was said by the Court of Appeal in Sino Iron Pty Ltd v Minerology Pty Ltd [No 2] [2017] WASCA 76(S) [12]. The defendant also observes that an application for a special costs order should be supported by an affidavit annexing a draft bill of costs that specifies the amounts proposed to be claimed under each discrete sub‑item and the total amount proposed to be claimed: Atwell v Roberts [2013] WASCA 37(S) [23].
In its written submissions, the plaintiff acknowledges that as a general rule a draft bill of costs ought be provided in an application such as this. However, it says it has not taken that step because essentially this is an interlocutory matter which is procedurally straightforward. There are not multiple steps in the process, as there would be if the matter had gone to trial. Moreover it is the plaintiff's position that having heard the matter and being aware of what was necessary in preparation for the hearing, I am well placed to determine whether or not a special costs order is appropriate. What has been filed is an affidavit of Robert Crean O'Brien dated 23 July 2020 which sets out the rates charged by the plaintiff's legal representatives engaged in the matter.
With respect, I would accept in the circumstances of this case the plaintiff's approach is appropriate. Clearly the Court of Appeal has set out a general principle that a draft bill of costs ought be provided. But that is not a firm rule of practice. Despite the fact this case was of singular importance - not only to the parties, but more broadly to the construction industry - the way in which it came before the court was quite straightforward. An application was made to stay proceedings. It was an interlocutory application. The parties filed affidavits and submissions and the matter was heard. A draft bill of costs was not necessary to understand how the proceedings developed.
As I have indicated, this case raised matters of real importance. They were not matters confined to these parties. What was involved was an interpretation of an Australian Standard Form Construction Contract AS4902‑2000. There were two decisions of this court which were squarely against the plaintiff. So in the wider context, this was a case of difficulty, complexity and real importance.
Moreover, the sums involved for the parties were not insignificant. The plaintiff was claiming payment of around $35 million. The whole dispute between the parties involves amounts up to $200 million. It is only to be expected when such amounts are in issue the parties will use their best endeavours to present their case as fully and completely as possible. Added to that there was the difficulty and complexity of the action. In my view, the plaintiff has made out its case for a special costs order.
Accordingly, there will be an order pursuant to s 280(2) in terms sought by the plaintiff.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
20 AUGUST 2020
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