Perkins (WA) Pty Ltd v Weston - [2021] WASCA 108

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   PERKINS (WA) PTY LTD -v- WESTON [2021] WASCA 108
CORAM:   MURPHY JA
HEARD:   21 JUNE 2021
DELIVERED          :   21 JUNE 2021
PUBLISHED           :   22 JUNE 2021
FILE NO/S:   CACV 27 of 2021
BETWEEN:   PERKINS (WA) PTY LTD
Appellant
AND
MAXWELL DAVID WESTON
First Respondent
AUSTPRO MANAGEMENT SERVICES GROUP PTY LTD
Second Respondent
MANDA CAPITAL HOLDINGS PTY LTD AS TRUSTEE OF THE HOLMAN STREET BUNBURY UNIT TRUST
Third Respondent

ON APPEAL FROM:
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   ALLANSON J
Citation: WESTON -v- PERKINS (WA) PTY LTD [2021] WASC 84
File Number            :   CIV 2083 of 2020

Catchwords:

Practice and procedure - Application for stay - Building contract - Where contractor and principal/lender both sought return of bond issued as Post Completion Security Bond - Bond held by superintendent - Where adjudication between contractor and principal for return of Bond to contractor - Where superintendent applied for relief by way of interpleader - Where primary judge found principal's lender entitled to Bond - Application by contractor to stay primary court's orders in favour of principal's lender pending appeal - Whether balance of convenience favoured grant of stay conditional upon payment of amount equivalent to Bond amount being paid into court

Legislation:

Nil

Result:

Application for stay granted upon terms of payment into court

Category: B

Representation:

Counsel:

Appellant	:	D J Pratt
First Respondent	:	No appearance
Second Respondent	:	No appearance
Third Respondent	:	R J S French

Solicitors:

Appellant	:	Jackson McDonald
First Respondent	:	No appearance
Second Respondent	:	No appearance
Third Respondent	:	Hopgoodganim Lawyers (Perth)

Case(s) referred to in decision(s):

Barclay Mowlem Construction Ltd v Simon Engineering (Australia) Pty Ltd (1991) 23 NSWLR 451
Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd [2008] FCAFC 136; (2008) 249 ALR 458
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Saipem Australia Pty Ltd v GLNG Operations Pty Ltd (No 2) [2015] QSC 173; (2015) 1 Qd R 254
Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168
Weston v Perkins (WA) Pty Ltd [2021] WASC 84

MURPHY JA:

Introduction

This matter came to a hearing on 21 June 2021 to consider the appellant's application filed 2 June 2021 for a stay of the primary court's orders.
The dispute concerns a building contract (Contract) between the appellant (Perkins) as the Builder/Contractor, and the second respondent (Austpro) as Principal. Under the Contract, the first respondent, who was the Superintendent of the Contract (Superintendent), took custody of a bond (Bond) issued as a 'Post Completion Security'. Perkins obtained an adjudication under the Construction Contracts Act 2004 (WA) (CC Act) that Austpro was liable to return the Bond to Perkins. The adjudicator's determination under the CC Act was registered in the Supreme Court, and Perkins obtained an order for…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2021] WASCA 108
Decision Date

CaseChat Overview and Summary

Perkins (WA) Pty Ltd v Weston [2021] WASC 168 involved a dispute between Perkins (WA) Pty Ltd and Weston concerning a performance bond. The primary issue was whether Manda, the respondent, could call upon the bond prior to the determination of an appeal without rendering the appeal nugatory. Manda argued that the bond was a risk allocation device, allowing it to ensure due performance of the contract, and its calling upon the bond would not negate the appeal. Perkins contended that the bond should not be called upon until the appeal was resolved and that their proposed undertaking would address Manda's needs.

The court had to decide whether the bond was intended as a risk allocation device or as security for a finally determined breach. Manda argued that the bond was meant to allocate risk, allowing it to enforce the bond for an alleged breach as long as the allegation was made in good faith. Perkins argued that the bond should only be called upon if there was a finally determined breach. The court examined the contract terms, the bond terms, and the transaction agreement to determine the purpose of the bond. The court found that the bond was intended to allocate risk rather than provide security for a finally determined breach, as evidenced by the contract terms and the parties' agreement on the bond's form.

The court held that Manda was entitled to call upon the bond for an alleged breach in good faith, and doing so would not render the appeal nugatory. The court found that Perkins' proposed undertaking did not address Manda's immediate needs and did not replicate the contractual rights to the bond's proceeds. The court also noted that Manda was being significantly prejudiced by the ongoing stays and its inability to enforce the judgment. The appeal was dismissed with costs.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Manda' submissions filed 16 June 2021 contended, in effect, the following:1.If the Bond is called upon by Manda prior to the determination of the appeal, the appeal will not be rendered nugatory. 2.To grant another stay would subvert the purpose for which the Bond was granted: a risk allocation device to enable Austpro and Manda to ensure the due performance of the Contract. The appeal would be nugatory, adversely to Manda, if the stay is extended.3.Perkins' proposed undertaking does not address Manda's immediate needs and is no more than an undertaking to pay damages assessed by the Court. The proposed undertaking does not replicate Manda's contractual rights to the proceeds of the Bond.4.Perkins' financial statements contradict their evidence that it has a favourable arrangement with the Bond issuer whereby it is provided with bonds without being required to provide assets as security. The note to the statements headed 'Contingent liabilities' states the performance guarantees ($29.4 million) are secured over the assets of the company and related parties, suggesting that the Bond issuer's bonds are secured by the assets of the company and related entities.[50][50] Citing Affidavit of P Taccagni affirmed 9 June 2021, PT-06, page 36. 5.Perkins uses 'speculative evidence' to allege the possibility that the Bond issuer will alter the terms upon which bonds are issued in the future. This 'speculation' that the Bond issuer will reconsider Perkins' risk profile if a 'comparatively small' bond is called upon is not supported by any other evidence.6.Even if there was a risk that the Bond issuer might reconsider Perkins' risk profile, Perkins can inform the Bond issuer of the appeal and provide it with a copy of the appeal judgment if successful.7.There is compelling evidence that Manda is being significantly prejudiced by the ongoing stays and its inability to enforce judgment. The rectification costs already incurred by Manda are impacting its inability to meet current and future costs and expenses associated with holding, maintaining, completing and realising the apartments.[51]8.Manda continues to incur costs for rectification works and has had to draw upon sale proceeds of realised apartments to meet these costs. There are currently no anticipated settlements which would enable Manda to meet future rectification costs and therefore it must have recourse to the Bond. The rectification works must be completed for the relevant apartments before those apartments can be sold. The proposed undertaking proffered by Perkins will not meet this immediate need. 9.The Bond issuer has cancelled the Bond in the past without any consultation or notice to Austpro or Manda. If that were to happen again prior to the determination of the appeal Manda's redress may have to be against the Bond issuer in separate proceedings.10.Manda's submissions are made on the basis that, properly construed, the Bond is a risk allocation device granted in favour of Manda and does not require a finally determined breach in order to be called upon. Perkins cannot succeed with the appeal as it is manifestly clear that Manda is entitled to the Bond for an alleged breach as long as the allegation of breach is made in good faith (ie, the absence of fraud).[52]11.There are generally two commercial reasons why a beneficiary of a performance guarantee may have stipulated for the provision of a bond, one is to provide security for a valid claim against the contractor, and the second is to allocate risk between the parties as to who shall be out of pocket pending resolution of a dispute between them.[53] From the relevant terms of the Contract, the terms of the Bond itself and the terms of the TA (to which Manda and Perkins were parties), the purpose of the Bond was the latter (to allocate risk).12.The purpose of the Bond is stated in the cl 5.1 of the Contract, stating it is for 'the purpose of ensuring the due and proper performance of the Contract', connoting the prospective performance of the Contract secured by the Bond as and when it is needed. It does not suggest that its purpose is to provide retrospective redress to provide security only for finally determined breaches.13.The parties agreed under the Contract, under cl 5.3, that the security shall be 'an approved unconditional undertaking given by an approved financial institution or insurance company or other form approved by the party having the benefit of the security'.[54] Further, cl 5.3 states 'the party having the benefit of the security shall have a discretion to approve or disapprove of the form of an unconditional undertaking' and 'the unconditional undertaking attached to these General Conditions is approved'. That attachment is, in all relevant respects, identical to the Bond in dispute. The Bond is also described as an unconditional undertaking and contains an express term that the Bond issuer is to make payments to Austpro without reference to Perkins and notwithstanding any notice given by Perkins not to pay same.14.Clause 8.1 of the TA expressly provided the Bond must be in the form of an unconditional and irrevocable undertaking to pay and be capable of being called upon without notice to, or the consent of, Perkins. Pursuant to cl 2(b) of the TA, read with cl 1.1, Perkins expressly acknowledges that it consent to the exercise of any rights, remedies or powers by Manda under the relevant transaction documents, including, without limitation, making a claim under or drawing upon the Bond. 15.Thus Perkins does not have a reasonably arguable case on appeal as the Bond was clearly intended to be a risk allocation device. [51] Citing Affidavit of M Czarny affirmed 4 June 2021, par 18.[52] Citing Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd [2008] FCAFC 136; (2008) 249 ALR 458 [79] ‑ [81].[53] Citing Clough Engineering Ltd [79] ‑ [81].[54] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 36.