Northcliffe Constructions Pty Ltd v Rothrewel James Stein

[2000] NSWSC 1216

CITATION:	NORTHCLIFFE CONSTRUCTIONS PTY LTD v ROTHREWEL JAMES STEIN & ORS [2000] NSWSC 1216
FILE NUMBER(S):	SC 55041/00
HEARING DATE(S):	1/12/00, 8/12/00
JUDGMENT DATE:	8 December 2000
PARTIES :	Northcliffe Constructions Pty Ltd (Plaintiff) Rothrewel James Stein (Defendant)
JUDGMENT OF:	Einstein J

COUNSEL :	I H Bailey (Plaintiff) J Doyle (Solicitor) (Defendant)
SOLICITORS:	Brophy Bridge & Mirow (Plaintiff) Doyles Construction Lawyers (Defendant)
CATCHWORDS:	Practice and Procedure - costs - building contracts - arbitration - giving of notice of dispute or difference - condition precedent to commencement of proceedings - whether dispute or difference has arisen is a question of fact - requirement that bona fide dispute or difference be shown to have arisen as opposed to a sham or a specious pretext - defendant pays whole of claim within days of summons being issued but claims costs alleging that a dispute/difference had arisen and that plaintiff failed to give notice - defendant ordered to pay costs of the proceedings.
LEGISLATION CITED:	Commercial Arbitration Act, 1984
CASES CITED:	Attorney General v Barker Bros Ltd [1976] 2 NZLR 495 Ellerine Brothers (Pty Ltd) v Klinger [1992] 1 WLR 1375 J and H Mantkelow Pty Ltd v Alloway Grazing Pty Ltd (1975) 1 NSWLR 385 Reservoir Hotel Pty Ltd v ES Clementson (Victoria) Pty Ltd [1961] VR 721 Sandhurst Engineering Ltd v Citra Constructions (1987) 3 BCL 198 Tradax Internacional SA v Cerrahogullari TAS (The M Eregli) [1981] 3 All ER 344
DECISION:	Defendant ordered to pay costs of the proceedings.

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION - CONSTRUCTION LIST

EINSTEIN J

Friday 8 December 2000 ex tempore
Revised 18 December

55041/00 NORTHCLIFFE CONSTRUCTIONS v ROTHREWEL JAMES STEIN

JUDGMENT 1    These proceedings commenced on 13 November 2000 by the filing of a summons by the plaintiff against the defendants who jointly carried on business as a property developer under a joint venture. 2    By Agreement entered into on 23 July 1999 ("the building contract") the plaintiff agreed to construct an industrial development on land at Castle Hill and the defendants agreed to pay the plaintiff in accordance with the terms of the building contract. 3    The plaintiff claimed in the summons:

(a) that in accordance with the terms of the building contract and during the course of its performance, deductions were made from progress payments to the plaintiff of amounts which were held by the defendants as a retention fund.
(b) that it was a term of the building contract that the plaintiff may at any time provide in lieu of, or in substitution for, the whole of the retention fund, security in the form of a bank guarantee or bank guarantees and that once they were provided, the defendants would promptly release or pay the retention fund to the plaintiff. [See clause 10.12 of the building contract]
(c) that in or about August or September 2000 the plaintiff advised the defendants that it wished to substitute bank guarantees for the retention held as security under the building contract.
(d) that on 19 September 2000 the plaintiff provided to the architect under the building contract, two bank guarantees from the ANZ Banking Group Ltd, each in the amount of half the retention fund, that is $124, 950.50 for each.

(e) that on 19 September 2000, the architect under the building contract issued Security Substitution Certificate PC 14 (R) in the amount of $249, 901.00 to the defendants and the plaintiff.

(f) that on 21 September 2000, the plaintiffs served the certificate upon the defendants

(g) that the defendants had failed and/or refuse to pay the amount of the certificate.

4    The summons sought a declaration that the plaintiff was entitled to be paid the above described sum by the defendants as set out in the architect’s certificate issued under the terms of the building contract, an order for judgment in that sum and costs. 5    The summons was returnable on 1 December 2000. 6    At the same time as the summons was issued a notice of motion returnable on 17 November 2000 was issued seeking summary judgment. 7    On the very same day as the summons was issued a representative of the defendants attended at the office of the defendants’ solicitors and during that conference Ms Lenehan, the defendants’ solicitor having the conduct of the matter under the supervision of Mr Doyle, sent a facsimile to the ING Bank authorising the release of the subject funds to the plaintiff. The drawing was effected on 14 November 2000. There is no issue but that the plaintiffs received the funds on 15 November 2000 and prior to that time had no notice that the funds would be received then. 8    In the result the only remaining issue in the proceedings concerns the plaintiffs claim to its costs. The defendants deny any liability to pay the plaintiffs costs and to the contrary submit that they are entitled to an order for their costs. 9    Both parties have relied upon detailed affidavit evidence in order to place before the court the position which obtained at material times up to and following the issue of the summons. In approaching that material it seems that at least one central issue which the parties seek to litigate is as to whether or not there was a “dispute or difference concerning [the building contract]” within the meaning of section 13 of that contract. That section which is part of the Section 15 ‘Special Conditions’ provides:

“13.1 NOTICE OF DISPUTE

If any dispute or difference concerning this agreement shall arise between the Proprietor, or the Architect on the Proprietor's behalf, and the Builder, then either party may give to the other written notice sent by certified mail adequately identifying the matters, the subject of the dispute, or difference and the giving of such notice shall be a condition precedent to the commencement by either party of proceedings (whether by way of litigation or arbitration) with regard to the matters, the subject of that dispute, or difference as identified in that notice.

13.2 REFERENCE OF DISPUTES
At the expiration of one week after the service of notice under clause 13.1, unless it shall have been otherwise settled, such dispute or difference shall at the option of the party who first serves the notice, be submitted:


13.2.1 to litigation, or

13.2.2 to arbitration


3.3 FURTHER NOTICE BEFORE ARBITRATION

If the dispute or difference is submitted to arbitration, then it shall be submitted in accordance with, and subject to, The Institute of Arbitrators Australia Rules for the Conduct of Commercial Arbitrations and a further Notice of Dispute shall be served in accordance with these Rules"

10    The evidence discloses the following:

The building contract provided in clause 10.12 for the provision of security which at the option of the builder was to take the form either

(a) of an unconditional undertaking or certificate in a form approved by the proprietor and given by a licenced bank or other financial institution ("Bank Guarantee") or
(b) an amount to be retained progressively by the proprietor in accordance with subclause 10.14.1 and paid by the proprietor to the credit of an account in the joint names of the proprietor and the builder ("Retention Fund") or
(c) if a bank guarantee required pursuant to clause 10.12.1 was not provided by the builder before or with the first progress claim, then for security in the form of moneys retained at the rate of 10 percent of the certified payment which amount would be held by the proprietor on trust without interest accruing until the Bank Guarantee was provided.

11    The same clause 10.12 provided:

"The Builder may, at any time, provide in lieu of or in substitution for the whole of a Retention Fund security in the form of a Bank Guarantee or Bank Guarantees in the amount required pursuant to clause 10.13. The proprietor shall promptly release the Retention Fund once the bank guarantee or Bank Guarantees are provided " [emphasis added]

12    There is no issue but that the plaintiff substituted the whole of the retention fund with the two Bank guarantees of the ANZ Banking Group nor that the architect in the architect's facsimile to the defendants of 19 September 2000, provided them with copies of the Bank guarantees and confirmed that they would retain the originals for safekeeping.. 13    To make entirely certain the plaintiff's entitlement to payment of all moneys held in the retention fund then provided for in the contract, the architect on 18 September 2000 issued an architect's certificate certifying that on presentation of the bank guarantee or bank guarantees in accordance with the terms of the agreement, the builder was entitled to “a substitution of the current Retention Fund security of $249, 901.00”. The certificate identified the total amount as due under the certificate in that sum. 14    On 21 September 2000 the plaintiff forwarded to the defendants under cover of a letter of the same date, a retention release together with the subject architect's certificate, asserting in the letter that the architect’s certificate was submitted in accordance with clause 10.12 of the contract. 15    On 10 October 2000 Mr Levy a director of the plaintiff attended a meeting at the defendants’ offices at which were present representatives of the defendants including Mr Mitchell. At this meeting Mr Levy said:

"We would like immediate release of the retention moneys".

Mr Mitchell said words to the effect:

"that is not a problem, a cheque will be available in a few days. We just need to check the wording of the Bank Guarantees"

16    At a further meeting on 31 October 2000 Mr Levy again attended at the defendants’ offices, the purpose of the meeting being to discuss outstanding issues to complete the project especially those relating to tenancy fit outs and outstanding certificates from Council. There was no discussion of any issue in dispute at that meeting and at the conclusion of the meeting Mr Levy said:

"When will the outstanding retention moneys be paid".

Mr Mitchell said words to the effect:

"payment will be made on Friday but subject to [the plaintiff] providing a letter allowing the tenant to occupy the premises prior to practical completion".

Mr Levy replied:

"We can't do that. The contract does not allow that and we are nearly at practical completion"

17    During the period 25 September 2000 up to 6 November 2000 Mr Peet, a director of the plaintiff made contact with Mr Stein of the defendants several times by telephone and met with him several times at meetings at the development site. On each occasion Mr Peet said words to the effect:

"we still haven't received the retention moneys".

On each occasion Mr Stein responded by saying words to the effect:

"I understand the moneys have been paid and cannot explain why it hasn't. I will follow it up with Kevin"

18    On 6 November 2000 a particular conversation took place between Mr Peet and Mr Stein in which Mr Peet said words to the effect:

"the retention moneys have still not been paid. I will have to see my solicitors.”

Mr Stein responded

"leave it with me, I will ring Kevin and Grant and will call you later."

19    Later on the same morning Mr Stein telephoned Mr Peet and said words to the effect:

"Grant is being difficult and refuses to pay the retention moneys unless [the plaintiff] gives a letter authorising the tenant to occupy, so as not to affect practical completion"

20    Mr Stein responded:

"we can't do that, the job is nearly completed. You have no right under the Contract to refuse the retention moneys when we have given you Bank guarantees"

21    On 7 November 2000 the solicitors for the plaintiff's wrote to the defendants stating that as the defendants knew, the plaintiff had substituted the whole of the retention fund with the two bank guarantees and that the architect in their facsimile to the defendants of 19 September 2000 had provided the defendants with copies of the Bank guarantees. The letter advised that the defendants had been given the architect certificate but the plaintiff had not received payment. The letter made demand for the immediate payment to the plaintiff of all moneys held in the retention fund and stated "if payment is not made forthwith, we reserve our clients rights to take formal proceedings and to seek indemnity costs against you" 22    Three days later on 10 November 2000 a flurry of activity appears to have taken place. The plaintiff's solicitors sent a facsimile at 1.30 pm to the defendants again advising that on their instructions there was currently an amount outstanding under the architect’s certificate for the subject amount and referring additionally to the certificate having been issued as a result of the provision by the plaintiff of Bank guarantees as permitted under clause 10.12 of the contract. The letter advised that the amount due was to be paid promptly and that there was clearly a debt due and payable by the defendants. The letter advised that the contract provided for a charge over any interest which the defendants had in the land on which the works were being constructed and that the plaintiff's solicitors had instructions to exercise all such rights as were provided to the plaintiff by that provision. 23    Also on the same day and at the same time the plaintiff's solicitors sent a second facsimile to the defendants advising that they had not received a reply to their letter of 7 November, again referring to the 19 September 2000 architect certificate, to the fact that there had been the provision by the plaintiff of the subject Bank guarantees and the fact that the amount of the certificate was to be paid promptly. 24    In this letter the plaintiff's solicitors pointed out that the certificate had not yet been paid and that they were instructed that notwithstanding numerous requests that the defendants do so, they had refused to pay. Reference was also made to the plaintiff's instruction that the defendants had asserted a right to withhold payment of the money due under the certificate unless or until the plaintiff agreed to permit occupation of the premises and to abandon its rights under the contract as a result of that occupation. The letter advised that the plaintiff regarded that conduct as a clear repudiation of the contract which the plaintiff may accept and terminate the contract. The letter advised that the plaintiff reserved its rights in that regard and that if payment of the certified amount was not received by 4 pm on that day, the plaintiff's solicitors had instructions to commence proceedings for declaratory relief and summary judgment for the amount outstanding along with the costs of such proceedings. 25    On the afternoon of 10 November Mr Kwan, the plaintiff's solicitor spoke with Ms Lenehan . On the evidence of Mr Kwan the following conversation took place

Ms Lenehan said:

"We would like a meeting to discuss the issues in dispute".

Mr Kwan said:

"What are the issues in dispute?. As far as our client is concerned there are no issues in dispute. Our client has substituted Bank guarantees for moneys held in the retention fund. See clause 10.2 of the Contract. Unless you specify the issues in dispute, I cannot recommend a meeting. I am obliged to put your request to my client, however, unless you specify the issues in dispute, I can't see the purpose. It is a delaying tactic"

Ms Lenehan said that she would send a letter to Mr Kwan.

26    On the evidence of Ms Lenehan the following conversation took place:

Ms Lenehan said:

"We have arranged a conference with our client on Monday at 3 pm and would like to arrange for the parties to meet on Wednesday to discuss the issues in dispute"

Mr Kwan said:

"There are no issues from our side except the Bank guarantees being substituted. I draw your attention to 10.1.2-Form of Security in the contract. I think that this is just a delay tactic and I can't recommend that my client attend the meeting"

Ms Lenehan said:

"You are obliged to put it to him to attend"

Mr Kwan said:

"There are no issues in dispute as far as we are concerned except exchange of security"


Ms Lenehan said that she would send him a letter that day.

Mr Kwan said:

"Fine. I will get instructions from my client, but won’t recommend the meeting as it is just a delay tactic"

27    Again on the same day namely 10 November 2000 the defendants’ solicitors wrote to the plaintiff's solicitors referring to that conversation and advising:

"We are instructed to advise as follows with respect to the facsimile letter sent to our client by your firm on even date. Any proceedings commenced against our client will be defended vigorously on its merits and we will seek appropriate orders and the costs of such proceedings…"

28    Finally on the same day the defendants’ solicitors wrote again to the plaintiff's solicitors referring to the same telephone conversation and confirming their request "that the parties arrange a conference on Wednesday 15 November 2000 to discuss the resolution of the issues in dispute…" 29    On 13 November 2000 the plaintiff's solicitors wrote to the defendants’ solicitors enclosing copies of the summons, the notice of motion and the affidavit of Mr Peet. The letter was delivered at 11 am and requested advice by 1 pm if instructions to accept service had been received. 30    Later on the same day Mr Kwan telephoned Ms Lenehan asking whether she had instructions to accept service. She said that she was seeing her clients at 3 pm that afternoon and when asked whether she could contact them by telephone said ‘yes’. 31    The summons was filed at 1.30 pm and formally served on the same afternoon on Turella Holdings and Starconia (between 2 pm and 3 pm). 32    The plaintiff’s solicitors letter was responded to on 15 November 2000 when the defendants’ solicitors referred the plaintiff's solicitors to the dispute resolution clause in section 15 of the special conditions of the contract (13.1) whereunder the builder had agreed to give written notice sent by certified mail "of any dispute or difference concerning this agreement". They further stated that the contract provided that:

"The giving of such notice shall be a condition precedent to the commencement by either party of proceedings (whether by way of litigation or arbitration)".

33    The defendants’ solicitors further referred to the contract provision that:

"At the expiration of one week after the service of notice under clause 13.1, unless it should have been otherwise settled, such dispute or difference shall… be submitted to litigation".

34    The defendants’ solicitors confirmed the telephone conversation and facsimile letters between the two firms of 10 November 2000 "in which we recommended a conference be held between the parties to resolve the issues in dispute". They also confirmed that Mr Kwan had replied in words to the effect that he would not recommend to his client that he attend such a meeting. 35    The defendants’ solicitors then advised:

"Accordingly, the contract between the parties in relation to the settling of disputes or differences has not been complied with by your client. As such the proceedings against our client should be dismissed.."

36    On 15 November 2000 the defendants’ solicitors wrote to the plaintiff's solicitors in a letter entitled "Without prejudice save as to costs". They referred to the plaintiff's solicitors facsimile of 13 November and enclosed "copy of consent orders for your approval". They invited the plaintiff's solicitors to indicate their approval by signing and returning the enclosed orders to them by facsimile. 37    The proposed orders provided for the plaintiff's notice of motion returnable on 17 November 2000 and the summons returnable on 1 December 2000 to be dismissed with each party to pay their own costs 38    On 15 November 2000 the plaintiff's solicitors responded to the defendants’ solicitors letter of the same day advising that the defendants had refused to pay the moneys held on retention since September notwithstanding that the Bank guarantees were provided in substitution as security. With respect to the defendants’ solicitors facsimile and telephone conversations of 10 November 2000 the plaintiff's solicitors stated that they had asked the defendants’ solicitors to specify the alleged issues in dispute. They added:

"In the absence of your clients doing so, we recall stating that it was our obligation to put your request to our client, but in the absence of your clients specifying the alleged issues in dispute, we could not recommend that you do so".

The letter concluded by advising that taking into account the circumstances, the plaintiff would be pressing for payment of its costs

39    Subsequent events essentially involve the making of orders on 17 November 2000 for the filing and service of affidavit evidence in relation to costs of the notice of motion and with the affidavits being filed. 40    Against that background the plaintiff asserts that there was never a "dispute or difference concerning [the building contract]" within the meaning of section 13.1 of the contract. The defendants contend that there was such a dispute or difference at the time when the proceedings were commenced and rely upon section 15 of the contract in support of the proposition that the giving of a notice of dispute under section 13.1 is a condition precedent to the commencement by either party of proceedings. 41    Both parties have sought to cite authority in support of their respective contentions. 42    In my view it is quite arguable that the parties have thrown up a misconceived issue. From the perspective of the court proceedings it is plain that the plaintiff commenced proceedings and by notice of motion sought summary judgment and that, clearly in order to avoid such judgment being entered, the defendants acted by paying across the moneys claimed. Hence the proceedings having been commenced, no defence having been filed and the defendants never during the course of the proceedings and prior to making the payment having suggested that there was any bona fide defence, it seems to me arguable that the usual position which obtains, namely that the defendants pay the plaintiff’s costs of the proceedings, should obtain. The defendants could have sought a stay of the proceedings if they genuinely asserted that there was a proper ground for seeking such a stay. They applied for no such stay. Section 53 of the Commercial Arbitration Act, 1984 provides for the court’s power in that regard. They now wish to assert belatedly and after the proceedings have commenced and after they when faced with the summary judgment motion, made the payment pursued in the proceedings, that as I understand the position, they would have been entitled to and could have sought such a stay but elected not to. To my mind it is now too late to take this stance. It seems to me arguable that the above line of reasoning ought be sufficient to permit the plaintiffs to have their costs. 43    However treating with the matter in the primary way that the parties have tendered the matter for consideration, to my mind the position is equally as clear and as clear on the plaintiffs entitlement to its costs. There is clear authority in support of the proposition that if a party to a contract seeks to assert that there is a "dispute or difference" in order to invoke a dispute clause in the contract, then the dispute must be a bona fide contention and not merely a sham or a "specious pretext". In Reservoir Hotel Pty Ltd v ES Clementson (Victoria) Pty Ltd [1961] VR 721 at 725, Adam J. said :

"… I have concluded that where a difference has arisen in fact between the parties to a contract, by reason of one of them contending for a construction thereof which does not find favour with the court, a dispute within the meaning of an arbitration clause should nevertheless be considered to have arisen unless it is found that the contention is merely a specious pretext -a sham and not a bona fide contention. A dispute must, I would think, be a real one, but its reality should depend, I would think, not on the use which the court might hold as to the merits of the dispute, but on whether the divergent views of the parties are in reality entertained by them"

I further accept that where a party to a contract wishes to invoke the dispute clause then the onus lies on that party to establish that, as in this case, a "dispute or difference concerning this agreement shall" have arisen.:

"It seems to me that, since it was the proprietor who was seeking to invoke the arbitration provisions, it was for it to establish that such a dispute existed. It may be that once the proprietor made out a prima facie case there was then an evidentiary onus upon the builder to show that what appeared to be a dispute was no more than a sham or device concocted by the proprietor to enable it to have the benefit of arbitration. But at the end of the day it was for the proprietor to establish such facts as were necessary to attract the clause. It may also be accepted that a dispute, to have this effect must be genuine, in the sense that the party seeking to arbitrate must honestly contest the liability with which he is charged. As Adam J. said [citing Reservoir Hotel] the contention must be bona fide and not a sham or 'a specious pretext’”.
[ J and H Mantkelow Pty Ltd v Alloway Grazing Pty Ltd (1975) 1 NSWLR 385 at 396

44    The defendants referred the court to a series of overseas authorities in support of their contention that for the purposes of clause 13, a ‘dispute or difference’ existed. The first of these was Attorney General v Barker Bros Ltd [1976] 2 NZLR 495 where the Court of Appeal of New Zealand considered whether an enforceable option existed between the Crown and the respondent. The Crown and the respondent entered into a five year lease with a further option for five years in terms to be agreed. The lease also contained an arbitration clause that provided, in effect, that any ‘dispute or difference’ in connection with the lease be referred to arbitration. The Crown attempted to exercise the option, but no rent was agreed on. The Crown sought arbitration, but the respondent claimed there was no binding option. 45 Here, the defendant points out that Richmond P (with whom Woodhouse and Cooke JJ agree) proceeded on the basis that a failure to agree was a dispute within the meaning of the clause. However, to my mind this case in no way assists the defendant for it was self-evident in that case that there was a dispute or difference. The Crown objected to the new rent proposed by the defendant as excessive. That was the core of the ‘dispute or difference’. 46 Next, the defendant refers to the decision of Kerr J in Tradax Internacional SA v Cerrahogullari TAS (The M Eregli) [1981] 3 All ER 344 where the plaintiff as charterer and the defendant as owner entered a charter party which contained a Centrocon arbitration clause, the effect of which was that ‘all disputes’ were referred to an arbitrator and ‘any claim’ not referred to arbitration within nine months of the final discharge of the ship was barred. The plaintiffs made a claim in connection with the charter party which the defendants simply ignored. The time within which an arbitrator could be appointed expired. The plaintiffs then sought summary judgment in connection with a claim for a liquidated amount from the defendant. The defendants admitted at the hearing of the application for summary judgment that they had no defence but argued that the Centrocon clause created a time bar against the claim. The plaintiffs argued that there was no time bar because the Centrocon clause only applied where there was a ‘dispute’ and there was no dispute here because the defendant did not contest liability or quantum. 47 Kerr J held that there could only be said to be an absence of a ‘dispute’ within the meaning of the clause if there was an express admission of the claim. However, where there was no such admission, but mere silence on the part of the defendant, a dispute did exist within the meaning of the subject clause that required the dispute to be sent to an arbitrator within nine months and subjected it to a time bar if it was not. 48 To my mind the defendants derive no assistance from this case. Kerr J’s decision stands only for the proposition that silence is not an admission, as Templeman LJ later pointed out: Ellerine Brothers (Pty Ltd) v Klinger [1992] 1 WLR 1375 at 1383. It does not decide that any excuse for not meeting a claim, no matter how disingenuously made, is sufficient to establish a dispute. 49 The defendants then relied on the decision of the Court of Appeal in Ellerine Brothers (Pty Ltd) v Klinger [1982] 1 WLR 1375 where the defendant agreed to become distributor of a film financed by the plaintiffs. The defendant undertook to account to the plaintiff for the net receipts of the film. The agreement also required all disputes to be put to arbitration. The plaintiffs received from the defendant no statements of account or payment under the agreement. After issuing a writ the defendant supplied some accounts, showing no money to be due. The plaintiff disputed the accuracy of the accounts. They applied to the Court for an order for the taking of accounts and payment of monies found to be due on those accounts. The defendant sought a stay of the proceedings on the ground that the plaintiffs were obliged to take them to arbitration. 50 The plaintiff argued that there was no dispute because what the summons they issued sought was a statement of accounts and the payments thereunder found to be due - something which there could be no dispute about. Thus there was no dispute and no call to send the matter to arbitration. The Court of Appeal rejected this argument. Templeman LJ rejected this saying (at 1382)

‘It is quite clear that the rights claims are an account and payment of the sum found due on the account and to have the account vouched. It is also quite clear that the defendant never accepted, never agreed that he was under an obligation to send an account or to vouch to pay anything : he simply did nothing. In those circumstances it seems to me that, even when the writ was issued there was a dispute between the parties and that is illustrated by the relief sought in the writ , which claims not only an account but payment of the amount found due on the taking of the account.’

51    This case, to my mind, does not assist the defendants either. The decision of the Court of Appeal does not stand for the proposition that any dispute, whether it is bona fide or not, is sufficient dispute. It merely stands for the proposition that in some circumstances a mere refusal to comply can be a disputation as to the validity of the claim. Thus Templeman LJ (at 1382) said ‘[a]lthough the defendant did not write back and say so, he was disputing the plaintiffs’ claim by refusing to comply with the requests which were made on him by the plaintiffs.’ 52    Next the defendants referred to the decision of Tadgell J in Sandhurst Engineering Ltd v Citra Constructions (1987) 3 BCL 198 where a subcontractor claims from a contractor certain amounts under a contract which contained an arbitration clause. Tadgell J’s citation of Adam J and Sandhurst Engineering is in no way inconsistent with the above reasoning. The defendant admitted liability to the plaintiff but claimed that after setting off that liability the plaintiff owed it a further amount of money under a different contract. 53    The defendants have failed to establish on the evidence that there was any material dispute or difference concerning the agreement. The whole of the detailed set of communications between the parties suggests and I infer, that the defendants from beginning to end have sought to delay the plaintiffs from receiving the moneys to which they were clearly entitled. In truth the suggestion of a bona fide dispute or difference is not supported by sufficient evidence to give that suggestion any substance at all. 54    The plaintiff was forced to commence the proceedings in order to be paid. The court proceedings cannot be utilised in a cat and mouse game played by defendants who then seek to evade a costs order without the Court being satisfied on the evidence of the bona fides of the defendants’ contention that a dispute or difference had arisen under the agreement. 55    The court is not obliged accept that the mere statement by a representative of the defendants to a representative of the plaintiff to the effect that there was a refusal to pay the retention moneys unless the plaintiff would furnish a letter authorising the tenant to occupy so as not to affect practical completion, constitutes a genuine belief by the proprietor that there was merit in any such claim. And whilst the parties have gone to particular lengths in the affidavit evidence to support their respective submissions it is necessary to my mind, that the court in a common sense fashion examine the evidence before it carefully when treating with the proven substance or lack of substance in the genuineness of any claim that a dispute or difference had arisen. The court is not searching to determine the prospects of success of a contention sought to be pursued by a party to a contract who asserts that a dispute or difference concerning the agreement has arisen. But the court is searching for evidence that the party propounding that contention had a genuine belief in its merit and is entitled to closely examine the evidence before it in that regard. Having closely examined that evidence I am far from satisfied that the evidence supports this proposition. To the contrary the evidence rather suggests no such genuine belief in the merit of any of the contentions of the defendants. 56    It is of course a common place occurrence that defendants obtain advice to settle once the proceedings are commenced Whilst it is not impossible that one could have a situation where it was in fact shown that at the very moment when the summons was filed, one of the parties to a contract had a genuine belief in the merit of its contention that a genuine dispute or difference concerning the agreement had arisen, and yet, for example, on receiving advice to the contrary, that party elected later on the same day or on the following day to simply pay the whole of the amount claimed in the summons, the very circumstances in which this occurred may well create suspicion as to the bona fides of the defendants’ contention that a dispute existed in the mind of the court. In short the position of the party seeking in those circumstances to show that there was in truth a bona fide and genuine belief in the merit of the parties contention that there was a dispute or difference concerning the agreement, may not be a particularly easy one. On the interlocutory application seeking costs, a party wishing to rely on the provisions in section 13.1, must satisfy the court that it had a genuine belief in the merit of its suggested contention. The question is simply one of fact to be determined on the balance of probabilities on the evidence before the court. 57    There is no substance in my view in the defendants’ submissions relying upon the without prejudice save as to costs letter. The letter was sent after the commencement of the proceedings and on the day following the day when the moneys had been paid as sought in the summons. That was too late in the circumstances.

I certify that paragraphs 1 - 57
are a true copy of the reasons
for judgment herein of the
Hon. Justice Einstein
given on 8 December 2000 ex tempore
revised 18 December 2000

___________________
Susan Piggott
Associate

18 December 2000

Last Modified: 12/20/2000