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 the seizure and delivery of the Bond. Austpro and the third respondent (Manda), which provided financial accommodation to Austpro for the building project, disputed the return of the Bond to Perkins. Austpro applied to set aside the seizure and delivery order. The Superintendent applied for relief by way of interpleader in respect of the Bond.
The interpleader application was heard by Allanson J on 10 February 2021. His Honour also heard an application by Austpro to set aside the property seizure and delivery order obtained by Perkins, and for orders that the Bond be delivered to and held by the District Court of Western Australia.
In the primary proceedings, Allanson J held, in effect, that Manda was entitled to the Bond. Written reasons for the decision were published: Weston v Perkins (WA) Pty Ltd.[1]
[1] Weston v Perkins (WA) Pty Ltd [2021] WASC 84 (primary decision).
Allanson J, on 7 April 2021, made orders, relevantly, as follows:
1.The security bond, more particularly described as Bond No: 201811-0198 issued by Swiss Re International SE (ABN 38 138 873 211) C/- Assetinsure Pty Ltd (ACN 066 463 803) of Level 21, 45 Clarence Street, Sydney, NSW dated 26 November 2018 in the sum of $328,471.45 (Bond) currently held by the Registry of the Supreme Court of Western Australia at Level 11 David Malcolm Justice Centre 28 Barrack Street, Perth in the State of Western Australia be delivered up to [Manda].
2.It is declared that [Manda] is entitled to the benefit of the Bond.
3.Orders 1 and 2 be stayed until 16 April 2021.
4.[Perkins] pay [Manda's] costs of and incidental to the application to be taxed if not agreed.
5.The order made in proceeding CCD 1 of 2020 on 12 October 2020 for the seizure and delivery of the Bond to [Perkins], pursuant to section 95(2) of the Civil Judgments Enforcement Act 2004 (WA), be void.
The amount of $328,471.45, referred to in order 1 of the above orders and in the Bond (see [41] below), will be referred to in these reasons as the 'Bond Amount'.
Perkins has appealed the 7 April 2021 orders. Perkins and Manda are both represented in the appeal. The Superintendent has notified the court he does not intend to take part in this appeal. Austpro has not filed a notice of intention.
Perkins sought an order staying orders 1 and 2 of Allanson J's orders of 7 April 2021. For the reasons which follow, I ordered that the primary judge's orders be stayed conditional upon the payment of the Bond Amount into court.
Background[2]
The Contract
[2] The following is taken from the judge's findings in the primary decision, unless otherwise indicated.
Perkins and Austpro were parties to the Contract made on 22 October 2018 for a construction project related to the development of the property known as 21 Holman Street, Bunbury (property).[3] The Contract takes the form of Australian Standard General Conditions of contract (AS 2124-1992), as amended by Annexure Part B to the Contract.
[3] Primary decision [10].
Clause 5.1 of the Contract provided:[4]
Security, retention moneys and performance undertakings are for the purpose of ensuring the due and proper performance of the Contract.
[4] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 36.
Clause 5.2 of the Contract provided:[5]
If it is provided in the Annexure that a party shall provide security then the party shall provide security in the amount stated in the Annexure and in accordance with this Clause.
[5] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 36.
The Annexure provided that Perkins (as the Contractor) was required to provide security in the amount of 5% of the Contract Sum.[6]
[6] Primary decision [39]; Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 78.
Clause 5.3 of the Contract provided:[7]
The security shall be in the form of an irrevocable, unconditional and perpetual undertaking given by a financial institution approved by the Principal.
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 financial institution or insurance company giving it or other form of security offered. The form of unconditional undertaking attached to these General Conditions is approved.
[7] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, pages 36 and 93.
The 'Approved Form of Unconditional Undertaking' referred to in cl 5.3 is set out in [26] below.
Clause 5.5 of the Contract provided:[8]
A party may have recourse to security where the party has become entitled to exercise a right under the Contract in respect of the security.
[8] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 93.
Clause 5.8 provided that where the Contractor has provided security, the Principal shall release it when required under cl 42.8.[9]
[9] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 37.
Clause 30.3 of the Contract provided:[10]
[10] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, pages 55 ‑ 56.
If the Superintendent discovers material or work provided by the Contractor which is not in accordance with the Contract, the Superintendent may direct the Contractor to -
(a)remove the material from the Site;
(b)demolish the work;
(c)reconstruct, replace or correct the material or work; or
(d)not to deliver the material or work to the Site.
The Superintendent may direct the times within which the Contractor must commence and complete the removal, demolition, replacement or correction.
If the Contractor fails to comply with a direction issued by the Superintendent pursuant to Clause 30.3 within the time specified by the Superintendent in the direction and provided the Superintendent has given the Contractor notice in writing that after the expiry of 7 days from the date on which the Contractor receives the notice the Principal intends to have the work carried out by other persons, the Principal may have the work of removal, demolition, replacement or correction carried out by other persons and the cost incurred by the Principal in having the work so carried out shall be a debt due from the Contractor to the Principal. (emphasis added)
Clause 30.4 and cl 30.5 provided:[11]
30.4 Variations due to Defective Materials or Work
Instead of a direction under Clause 30.3, the Superintendent may direct a variation pursuant to Clause 40. The Contractor shall not, in respect of a variation directed pursuant to Clause 40 as a result of defective materials or work for which the Contractor is responsible, be entitled to claim any extension of time or compensation whatsoever from the Principal.
30.5 Acceptance of Defective Material or Work
Instead of a direction under Clause 30.3 or 30.4, the Superintendent may notify the Contractor that the Principal elects to accept the material or work notwithstanding that it is not in accordance with the Contract. In that event any resulting decrease in the value to the Principal of the Works and any other loss suffered by the Principal shall be valued under Clause 40.5. (emphasis added)
[11] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, pages 56 and 94 - 95.
Clause 30.6 provided:[12]
The Superintendent shall give either a direction under Clause 30.3 or 30.4 or a notice under Clause 30.5 as soon as practicable after the Superintendent becomes aware that material or work is not in accordance with the Contract. The Superintendent may give the direction or notice at any time before the issue of the Final Certificate under Clause 42.8.
Except to the extent that to do so would be inconsistent with a direction under Clause 30.4 or a notice under Clause 30.5 and notwithstanding that the Superintendent has not given a direction under Clause 30.3, the Contractor shall promptly remove, demolish, replace or correct material or work that is not in accordance with the Contract.
A progress payment, or a test or a failure by the Superintendent or anyone else to disapprove any material or work shall not prejudice the power of the Superintendent to subsequently give a direction under Clause 30.3 or 30.4 or a notice under Clause 30.5.
Nothing in Clause 30 shall prejudice any other right which the Principal may have against the Contractor arising out of the failure of the Contractor to provide material or work in accordance with the Contract.
The Superintendent shall not be obliged to give a direction under Clause 30.4 or a notice under Clause 30.5 to assist the Contractor. (emphasis added)
[12] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 56.
Clause 37 of the Contract provided:[13]
The Defects Liability Period … shall commence on the Date of Practical Completion.
As soon as possible after the Date of Practical Completion, the Contractor shall rectify any defects or omissions in the work under the Contract existing at Practical Completion.
At any time prior to the 14th day after the expiration of the Defects Liability Period, the Superintendent may direct the Contractor to rectify any omission or defect in the work under the Contract existing at the Date of Practical Completion or which becomes apparent prior to the expiration of the Defects Liability Period. The direction shall identify the omission or defect and state a date by which the Contractor shall complete the work of rectification and may state a date by which the work of rectification shall commence. …
If the work of rectification is not commenced or completed by the stated dates, the Principal may have the work of rectification carried out at the Contractor's expense, but without prejudice to any other rights that the Principal may have against the Contractor with respect to such omission or defect and the cost of the work of the rectification incurred by the Principal shall be a debt due from the Contractor. (emphasis added)
[13] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, pages 63 and 96.
Clause 40.5 provided, in effect, that where the Contract provided for a valuation to be made under cl 40.5, the Principal shall pay or allow to the Contractor, or the Contractor shall pay or allow to the Principal as the case may be, an amount 'ascertained by the Superintendent' in accordance with the provisions of cl 40.5.[14]
[14] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 65.
Clause 42.5 of the Contract provided that the Superintendent may issue a Certificate of Practical Completion when the Superintendent is of the opinion that 'Practical Completion' has been reached. By cl 2, 'Practical Completion' is defined to mean (broadly speaking) where the Works are complete except for minor omissions and minor defects in specified ways.[15]
[15] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, pages 33, 68 and 90.
Clause 42.8 of the Contract provided, inter alia, that within 10 business days after receipt of the Contractor's Final Payment Claim, the Superintendent shall issue to the Contractor and Principal a 'Final Certificate' in which the Superintendent certifies the amount which, in the opinion of the Superintendent, is owed between the parties under, or arising out of, or in connection with, the Contract or any alleged breach thereof.[16]
[16] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, pages 68 - 69 and 97.
Clause 42.11 of the Contract provided:[17]
Where a party fails to pay the other party an amount due and payable under the Contract within the time provided by the Contract or a party fails to pay the other party any money due otherwise than under the Contract, the other party may have recourse to security under the Contract and any deficiency remaining may be recovered by the other party as a debt due and payable. (emphasis added)
[17] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 97.
Clause 57(c) of the Contract provided:[18]
[T]his Contract is subject to the Principal's Financier [Manda] approving the same in writing, and the entry by the Contractor into a tripartite agreement with the Principal, the Contractor and the Principal's Financier [Manda].
[18] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 105.
Annexure Part A to the Contract contained a document headed 'Approved Form of Unconditional Undertaking (Clause 5.3)', in the following terms:[19]
At the request of ……………………… ('the Contractor') and in consideration of …………………….. ('the Principal') accepting this undertaking in respect of the contract for …………………………………………………………………………...…………………………………………………………………………...……………………….. ('the Financial Institution') unconditionally undertakes to pay on demand any sum or sums which may from time to time be demanded by the Principal to a maximum aggregate sum of $………………………………………………………………………….(………………………………………………………………………….)The undertaking is to continue until notification has been received from the Principal that the sum is no longer required by the Principal or until this undertaking is returned to the Financial Institution or until payment to the Principal by the Financial Institution of the whole of the sum or such part as the Principal may require.
Should the Financial Institution be notified in writing, purporting to be signed for and on behalf of the Principal that the Principal desires payment to be made of the whole or any part or parts of the sum, it is unconditionally agreed that the Financial Institution will make the payment or payments to the Principal forthwith without reference to the Contractor and notwithstanding any notice given by the Contractor not to pay same.
Provided always that the Financial Institution may at any time without being required so to do pay to the Principal the sum of $……………………………………………………………………….....(………………………………………………………………………….)less any amount or amounts it may previously have paid under this undertaking or such lesser sum as may be required and specified by the Principal and thereupon the liability of the Financial Institution hereunder shall immediately cease.
DATED at ….……. this ……………… day of ………………… 19 …
Financing agreements with Manda
[19]Affidavit of J M R Stynes affirmed 4 June 2021, JMRS-2, page 88.
On 12 November 2018, Manda entered into three agreements with Austpro, pursuant to which it provided finance for the project: a Loan Agreement; a General Security Agreement (GSA); and a Specific Security Agreement.[20]
[20] Primary decision [36].
The GSA defined Transaction Documents to include 'any Tripartite Deed'.[21] Clause 11 and cl 13.3 of the GSA provided that a Lender had the power to preserve Collateral, to exercise any rights and discretions of the Grantor in connection with Collateral, and to 'perform, assume the benefit of and enforce the rights, powers, privileges and remedies of the Grantor in relation to the Collateral and any agreements, contracts or documents which relate to the Collateral'.[22] 'Collateral' was defined in cl 1.1 of the GSA as all personal property and all other property (defined as all present and after acquired property that is not personal property).[23]
[21] Primary decision [57].
[22] Primary decision [58].
[23] Primary decision [59].
Clause 11 of the Loan Agreement also provided that where an event of default was not remedied within seven business days after notice, the Lender may exercise its rights under any Transaction Document.[24]
[24] Primary decision [54].
On 12 November 2018, Manda, Austpro and Perkins entered into a Tripartite Agreement (TA) made by deed, as contemplated by cl 57(c) of the Contract.[25]
[25] Primary decision [37], [50].
Clause 2 of the TA provides that Perkins:[26]
(a)Consents to [Austpro] granting Security in favour of [Manda] over all of [Austpro's] right, title and interest in, to and under the [Contract] pursuant to the Transaction Documents;
(b)Acknowledges that this deed constitutes notice to it, and it has received notice, of the Transaction Documents, consents to the exercise of any rights, remedies or powers under the Transaction Documents by any Enforcing Party including, without limitation, making a claim under or drawing any Building Performance Security;
(c)Acknowledges that the Transaction Documents constitute an Encumbrance on the Secured Property in priority to any interest which the Builder may at any time have in any of the Secured Property[.]
[26] Affidavit of J M R Stynes affirmed 4 June 2021, JMRS‑2, page 150; primary decision [64].
On or around 21 January 2020, Manda caused a notice of default and demand under the Loan Agreement to be issued to Austpro, at which point the amount owing was $18,106,673.98.[27]
[27] Primary decision [13].
On or around 21 May 2020, Manda caused a notice of entry into possession, pursuant to s 111 of the Transfer of Land Act 1893 (WA), to be issued to Austpro as a consequence of Austpro's default under a mortgage granted to it by Austpro over the land on which the project was being developed.[28]
The issue of the Bond, the claim for remediation and alleged termination of the Contract
[28] Primary decision [11(2)], [17].
On or around 26 November 2018, at the request of Perkins, Assetinsure Pty Limited (as attorney for Swiss Re International SE) issued two bonds as Post Completion Security.[29]
[29] Primary decision [12].
On 30 March 2020 (Date of Practical Completion), the Superintendent sent a letter certifying that the works under the Contract had been practically completed.[30]
[30] Primary decision [15].
On or around 3 June 2020, the Superintendent issued a letter to Perkins requesting the remediation of certain works undertaken by Perkins under the Contract.[31]
[31] Primary decision [18].
On 8 June 2020, Perkins obtained an adjudication determination under the CC Act requiring Austpro to pay Perkins the sum of $579,904.83. On 16 June 2020, that adjudication was registered as a judgment in the District Court of Western Australia.[32]
[32] Primary decision [19] - [20].
On 23 June 2020, Perkins issued a notice of termination of the Contract and stated that it required Austpro to return the Bond held as Post Completion Security.[33]
[33] Primary decision [21].
On 18 August 2020, an adjudicator made a determination under the CC Act determining, inter alia, that Austpro was liable to return the Bond to Perkins on or before 25 August 2020. Manda was not a party to this adjudication. This adjudication determination was filed in the Supreme Court on 28 August 2020.[34]
[34] Primary decision [22] - [25].
On 12 October 2020, the court issued an order under the Civil Judgments Enforcement Act 2004 (WA) for seizure and delivery of the Bond.[35]
The terms of the Bond
[35] Primary decision [26].
The Bond is in the following terms:[36]
[36] Affidavit of M Czarny affirmed 4 June 2021, MC‑1, page 7.
UNCONDITIONAL UNDERTAKING
Bond No: 201811-0198
At the request of [Perkins] ('the Contractor') and in consideration of [Austpro] ('the Principal') accepting this undertaking in respect of the [Contract] [Swiss Re International SE] ('the Financial Institution') unconditionally undertakes to pay on demand any sum or sums which may from time to time be demanded by the Principal [Austpro] to a maximum aggregate sum of [$328,471.45] (the 'Sum').
This undertaking is to continue until:
•notification has been received from the Principal [Austpro] that the Sum is no longer required by the Principal [Austpro]; or
•this undertaking is returned to the Financial Institution; or
•payment to the Principal [Austpro] by the Financial Institution of the whole of the Sum or such part as the Principal [Austpro] may require.
Should the Financial Institution be notified in writing, purporting to be signed for and on behalf of the Principal [Austpro] that the Principal [Austpro] desires payment to be made of the whole or any part or parts of the Sum, it is unconditionally agreed that the Financial Institution will make the payment or payments to the Principal [Austpro] forthwith without reference to the Contractor [Perkins] and notwithstanding any notice given by the Contractor [Perkins] not to pay same.
Provided always that the Financial Institution may at any time without being required so to do pay to the Principal [Austpro]:
•the Sum less any amount or amounts it may previously have paid under this undertaking or
•such lesser sum as may be required and specified by the Principal [Austpro]
and thereupon the liability of the Financial Institution hereunder shall immediately cease.
The Principal [Austpro] may not transfer, assign or otherwise deal with the benefit of this undertaking without the Financial Institution's prior written consent, which will not be unreasonably withheld.
The hearing before the primary judge
The Superintendent commenced proceedings for relief by way of interpleader, with Perkins, Austpro and Manda named as respondents. The Superintendent did not claim an interest in the Bond.[37]
[37] Primary decision [28].
On 29 October 2020, Austpro filed an urgent application seeking orders, including that the Bond be delivered to and held by the District Court of Western Australia and released only on order of the Supreme Court, and that Perkins be restrained from enforcing the judgment.[38] The hearing of this application immediately preceded the hearing of the interpleader application, and was heard by Allanson J.[39]
[38] Primary decision [29].
[39] Primary decision [30] - [31].
Perkins submitted that it was entitled to the return of the Bond in accordance with its judgment under the CC Act, as made on the filing of the adjudication determination in the Supreme Court. Perkins submitted that Manda's entitlement to the Bond depends upon and could rise no higher than any rights held by Austpro, and that those rights ceased on 25 August 2020, the date on which Austpro was required to return the Bond.[40]
[40] Primary decision [66].
Perkins also submitted that Manda's proposed construction of the agreements would effectively guarantee the performance of Austpro's loan obligations, which was uncommercial and not supported by the words of the TA.[41] Perkins submitted that cl 2(b) of the TA was a consent only to Manda exercising a right, remedy or power that Austpro had under the Contract. Manda's right to make a claim on the Bond was conditional upon Austpro having the right to make that claim.[42]
[41] Primary decision [67].
[42] Primary decision [68].
Perkins further submitted that for Austpro to call upon the Bond under either cl 30.3 or cl 37 of the Contract, the following conditions must be met:[43]
1.The Superintendent must have directed Perkins to remedy the defective works within a specified time and Perkins must have failed to do so.
2.The Superintendent must have given Perkins the prescribed notice of Austpro's intention to have the work carried out by others.
3.Austpro must have had the work carried out by others and incurred a cost.
4.The Superintendent must have issued a payment certificate certifying a balance due from Perkins to Austpro taking into account such amounts as are due from Austpro to Perkins.
5.Perkins must have failed to pay the amount due under the payment certificate.
[43] Primary decision [69].
Perkins submitted those conditions were not met, and hence Austpro had no right to call upon the Bond under cl 5 of the Contract.[44]
[44] Primary decision [70].
Manda submitted it was entitled to call upon the Bond pursuant to the operation of cl 30.6 of the Contract.[45]
[45] Primary decision [71].
Manda submitted that Perkins' obligation under cl 37, to rectify defects or omissions in the works at Practical Completion, exists independently of any direction by the Superintendent. The right to have the work carried out at Perkins' expense is without prejudice to any other rights Austpro may have against Perkins.[46]
[46] Primary decision [72].
Further, Manda submitted that Perkins had demonstrated an intention to not perform rectification work by purporting to terminate the Contract, and by informing the Superintendent that it was not required to remedy any alleged defects and that Austpro could not call upon the Bond where it had not already had rectification work carried out.[47]
[47] Primary decision [72].
Primary decision - findings
Allanson J said:[48]
[48] Primary decision [73] - [79].
[73]The adjudication under the [CC Act] for the delivery of the Bond does not determine the underlying common law rights regarding who is entitled to the Bond. In particular, Manda not being a party to that adjudication, it does not determine rights between Perkins and Manda.
[74]The critical clause in the [Contract] is cl 42.11. There are two circumstances under that clause in which a party may have recourse to security: first, where the other party fails to pay an amount 'due and payable under the Contract within the time provided by the Contract'; and second, where a party fails to pay any money 'due otherwise than under the Contract'.
[75]The court is concerned with the language used by the parties in this suite of contracts. But the expressions 'due and payable' and 'due' are commonly used in construction contracts and have a generally accepted meaning. In CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd [No 2] the court said:
'In ordinary parlance, the meaning of the word "due" includes "immediately payable" or "owing, irrespective of whether the time for payment has arrived". The word "due" in a legal context is sometimes used in the sense of "payable", but prima facie means any sum that a person is legally liable to pay, irrespective of whether the time for payment has arrived, ie, irrespective of whether it is then "payable". A debt may be said to be "payable" if it is not only due (in the sense of owing), but is presently payable in the sense that the time for payment has arrived, and an action could be maintained in respect of it. In the expression "due and payable", the word "payable" often means required to be immediately or presently paid. Thus, the words "due and payable" may often be tautological in the sense that an amount which is "payable" will at least generally first be owing in the sense of due. In other words to say that an amount is "due and payable" will often not add anything to a statement that the amount is "payable". In ordinary parlance, a debt may be said to be "payable" prior to any admission that it is payable, or any legal adjudication in respect of it.' (citations omitted)
[76]I accept the argument of Perkins that cl 30.3 and cl 37 impose conditions to be met before an amount is 'due and payable' under those clauses, that is, before the amount must be immediately or presently paid. But both clauses preserve the parties' rights other than those specifically conferred by the Contract.
[77]When Perkins gave its notice of termination, and before it obtained the adjudication requiring the return of the Bond, the Superintendent had certified practical completion and had advised Perkins of matters requiring rectification. Austpro had a legitimate claim that Perkins was liable to rectify defects or omissions in the works at Practical Completion. That liability to pay the cost of rectifying defects is independent of the procedure in cl 30 and cl 37 for determining the amount to be paid and when it is due and payable. At the time of Practical Completion, Austpro had a claim for an amount due and the right to have recourse to the Bond. It is not necessary that the amount due had been determined, and was then payable.
[78]By cl 2 of the [TA], Perkins had consented to Manda exercising its rights under the Transaction Documents, including by making a claim under or drawing any Building Performance Security. Manda's rights under the Transaction [D]ocuments include those conferred by cl 11 and cl 13.3 of the [GSA]. By those clauses, Manda was granted, in substance, all of Austpro's rights and powers in connection with the Collateral under that agreement (defined as all Austpro's personal property and all other property). Manda could maintain Austpro's claim for amounts due for the cost of rectifying defects, and its right to have recourse to the Bond. The adjudication requiring Austpro to deliver the Bond does not affect rights held by Manda following Austpro's default in around January 2020.
[79]In summary, cl 2 of the [TA], read with the [GSA] and cl 30 and cl 37 of the [Contract], support Manda's claim to the Bond.
Allanson J did not find it necessary to decide if Perkins validly suspended work or validly terminated the Contract.[49]
[49] Primary decision [80].
The appellant's case
The appellant's case filed on 3 May 2021 contains three grounds of appeal in which Perkins alleges errors of law.
Ground 1 alleges that the judge erred in law (at primary decision [76], [77] and [79]) in finding that the existence of defects or omissions in the works at the Date of Practical Completion gave rise to a liability on the part of Perkins to pay the costs of rectification of those defects or omissions. It is alleged that the judge should have found, on a proper construction of the Contract, that the existence of 'defects or omissions' at the Date of Practical Completion did not, without more, give rise to any liability on the part of Perkins to pay the costs of rectification.
Ground 2 alleges that the judge erred in law (at primary decision [74], [76], [77] and [79]) in finding that as at the date of Perkins' notice of termination, Perkins had failed to pay an amount 'due otherwise than under the Contract' within the meaning of cl 42.11 of the Contract. It is alleged that his Honour should have found that at the date of Perkins' termination, there was no such amount 'due' and hence Perkins had not failed to pay an amount 'due otherwise than under the Contract' within the meaning of cl 42.11.
Ground 3 alleges that the judge erred in law in failing to address a necessary issue, namely whether the Contract had been validly terminated (at primary decision [80]). It is alleged that the judge should have found that the Contract had been validly terminated on 23 June 2020, and by reference to grounds 1 and 2, Austpro and Manda did not have any accrued right to call upon the security at the date of termination, hence, Perkins was entitled to the return of it.
The respondent's answer
Manda filed a respondent's answer on 3 June 2021, addressing in detail each of the grounds of appeal and Perkins' submissions.
The stay application
On 2 June 2021, Perkins filed an application for a stay of orders 1 and 2 made by Allanson J on 7 April 2021 pending the outcome of appeal or until further order.
The evidence
Perkins relied on affidavits of Mr P Taccagni, a Commercial Manager employed by Perkins, affirmed 2 June and 9 June 2021. On 4 June 2021, Perkins also filed an appellant's undertaking as to damages.
Manda relied on affidavits of Mr J M R Stynes, solicitor for Manda, and Mr M Czarny, Director of Manda, each affirmed 4 June 2021.
Perkins' evidence
In his affidavit of 2 June 2021, Mr Taccagni deposed, in effect, that:
1.On 1 June 2021, Manda's solicitors gave three business days' notice that Manda intended to call upon the Bond.
2.None of Perkins' bank guarantees or surety bonds have been called upon or otherwise converted to cash during his employment with Perkins, or to his knowledge prior to his employment.
3.The Bond was issued without a requirement to provide assets as security, and was provided based on the strength of the business' balance sheet and the past performance of Perkins; this was beneficial to Perkins as it is not required to have assets encumbered during the project.
4.The number of outstanding bonds and bank guarantees at the time of swearing the affidavit was typical for Perkins given the various construction projects it undertook over the previous five years.
5.The appeal will be rendered pointless if Manda presents and calls upon the Bond prior to the appeal being heard.
6.It is possible Assetinsure Pty Ltd, as agent for Swiss Re International SE (Bond issuer) will reconsider Perkins' risk profile and not issue bonds in the future without a requirement to provide assets as securities if the Bond is called for any amount.
7.Perkins is likely to be required to deposit the full amount of the Bond with the Bond issuer if the Bond is called for any amount.
8.If the Bond is called upon, there is a risk that Perkins would be required to disclose this when seeking new work, and as a result may be unsuccessful. This includes the majority of Perkins' clients, being State Government and local councils, which have pre‑qualification criteria including past performance and track record of reliability to complete projects in accordance with its time and quality provisions.
9.A call on the Bond would disadvantage Perkins by incurring additional costs in providing security or future projects, losing tenders and suffering a loss of revenue.
Mr Taccagni's affidavit of 9 June 2021 annexed (1) Perkins' audited annual report for the year ended 30 June 2020, and (2) an undertaking as to damages dated 4 June 2021. In this affidavit, Mr Taccagni deposed, in effect, the following:
1.The 2020 Financial Report shows that at 30 June 2020 Perkins had $32,437,022 in cash or cash equivalents, and $27,404,454 in net assets.
2.Perkins' net asset position and value of cash and equivalents is likely to be materially the same as the position disclosed in the 2020 Financial Report at the time of swearing the affidavit.
3.Mr Taccagni believes that Perkins has the financial capacity to meet any order to pay compensation to Manda as may be made by the court on the basis of the undertaking given by Perkins dated 4 June 2021.
Manda's evidence
In his affidavit of 4 June 2021, Mr Stynes annexed a copy of the Contract and a copy of the TA.
Mr Czarny, in his affidavit of 4 June 2021, annexed certain correspondence, including correspondence from the Bond issuer and its solicitors. The effect of this correspondence and this aspect of Mr Czarny's evidence was:
1.The Bond issuer had advised, on 16 October 2020, that following the adjudication under the CC Act in respect of the Bond in favour of Austpro, it had cancelled the Bond and it was 'null and void'.
2.Manda believed that the Bond issuer's purported cancellation of the Bond was not in accordance with the express terms of the Bond, and on 16 November 2020, Manda's solicitors made enquiries of Perkins in respect of the purported cancellation.
3.The Bond issuer's solicitors, in a letter dated 19 November 2020, stated, inter alia, that the cancellation of the Bond was erroneous and that the Bond issuer withdrew the letter purporting to cancel the Bond.
4.The Bond issuer's solicitors advised, by email dated 27 January 2021, that the Bond issuer would not cancel or terminate the Bond without providing the parties to the interpleader application with two business days' prior written notice.
5.By reason of the cancellation, Mr Czarny believes that there remains a potential risk that the Bond may be cancelled by the Bond issuer before the present appeal is determined.
6.Manda proposed to Perkins that Perkins pay an amount equalling the full value of the Bond into court or Manda's solicitors' trust account to be held as a form of security for Manda pending the outcome of the present appeal on terms acceptable to Manda. At the time of swearing the affidavit, Mr Czarny was informed that Perkins had not received a response regarding this proposal.
Mr Czarny also deposed that there would be serious consequences if the Bond is cancelled before the present appeal is determined, in that:
1.Manda will need to commence a separate, and potentially protracted, proceeding against Perkins to recover any money for the reimbursement of the rectification costs it has incurred that otherwise would have been available, at least in part, to Manda from the conversion of the Bond;
2.Manda needs to recover the rectification costs it has incurred, and continues to incur, as the costs are significant and will likely exceed the total value of the Bond;
3.the rectification costs incurred by Manda are putting a strain on Manda meeting other costs and expenses associated with holding, maintaining, completing and realising the apartments constructed by Perkins, and forming Manda's secured property (Property Costs);
4.if Manda is unable to recover money for the reimbursement of the rectification costs without extended delay, it may have to ask investors to invest further money to meet the Property Costs;
5.Manda has applied the sale proceeds from the realisation of certain apartments to date to pay the rectification costs and the Property Costs rather than pay its investors;
6.there are presently no further settlements of sale scheduled for the apartments which are yet to be realised and therefore Manda does not anticipate receiving any sale proceeds in the immediate future; and
7.Manda continues to incur rectification costs and the property costs in respect of the apartments.
Mr Czarny also deposed that:
1.Manda had agreed to extend the operation of the stay of orders 1 and 2 in the primary court twice, and he believed that, based on the Respondent's Answer, Manda has a stronger case than Perkins in the appeal.
2.Manda intends to pay the money obtained from the conversion of the Bond into the trust account of Manda's solicitors and only draw down on that money on account of rectification costs if the present appeal is determined in Manda's favour.
The parties' submissions
Perkins' submissions
Perkins' submissions filed 4 June 2021 contended, in effect:
1.If Manda calls upon the Bond prior to the determination of the appeal, then the question of who is entitled to possession of it will be rendered moot.
2.Perkins may suffer consequential loss and damage which would not be able to be compensated for in these proceedings even if Perkins were successful.
3.The court would not give any weight to the opinions of Mr Czarny, Director of Manda, as to who has the stronger case on appeal, as the court would not conclude on the matters before it that it does not have reasonable prospects of success.
4.The Bond issuer cancelled the Bond following the adjudication determination in favour of Perkins. When the interpleader proceedings commenced, the Bond issuer advised the purported cancellation was erroneous and was withdrawn. There is nothing to suggest that the Bond issuer will revisit the conclusion that the purported cancellation was erroneous. Manda has not adduced evidence to suggest the Bond may cease to exist for any other reason prior to the appeal, and any such concerns are met by Perkins' undertaking.
5.It would be beyond the scope of the present proceedings to determine any consequential loss or damage to Perkins if Perkins is successful in the appeal.
6.Orders should be made to the effect that (1) subject to the proffered undertaking as to damages, orders 1 and 2 of the orders made by the Allanson J on 7 April 2021 be stayed pending the outcome of this appeal or until further order, and (2) the costs of the application be in the cause of the appeal.
Manda's submissions
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.
In oral submissions, Manda submitted that despite the matters referred to in [64.6] and [66.2], the balance of convenience in any event favoured the dismissal of the stay application without payment into court or payment into the solicitor's trust account and that its preferred position was the dismissal of the application without any conditions. Manda also said, with regard to the matters in [68.8] above, that there was in fact new evidence of a sale of an apartment.
Principles
The general principles in relation to a stay pending the determination of the appeal are as follows:[55]
1.The successful litigant is ordinarily entitled to enforce a judgment pending the determination of any appeal.
2.It is for the applicant for a stay to move the court to a favourable exercise of its discretion. Under s 15(3) of the Civil Judgments Enforcement Act this court may only make a suspension order if there are 'special circumstances' that justify doing so and in an application for a stay under the Supreme Court (Court of Appeal) Rules 2005 (WA) this is also a usual requirement.
3.The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation or whether a refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. This may shortly be described as requiring the court to consider whether the right of appeal will be rendered nugatory if a stay is not granted.
4.If it can be demonstrated that the right of appeal will be rendered nugatory if a stay is not granted, the stay will generally still be refused unless it can be established that the appeal has ultimately reasonable prospects of success.
5.Finally, a stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted.
[55] Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 [9]; Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168 [22].
Disposition
I accepted that the appeal would be rendered nugatory if a stay were not granted. The orders sought by Perkins if the appeal is successful include an order for delivery up of the Bond to Perkins. Manda clearly intended to call on the Bond if a stay were not ordered. In the absence of a stay, this aspect of the relief claimed would likely not be available in the event that the appeal succeeded. The significance of the proposals referred to by Manda in correspondence (see [64.6] and [66.2] above) are better considered in the context of the balance of convenience.
In relation to prospects of success, I accepted that the appeal had reasonable prospects of success in the relevant sense for present purposes.
In relation to the balance of convenience, there was not a great deal in it but overall, I considered that the balance tilted in favour of the grant of a stay but conditional upon payment of the Bond Amount into court. The following considerations seemed to me to be most relevant:
1.There seemed to be no real risk, in the event that a stay were granted and the appeal failed, that Perkins could not meet any claim for consequential loss or damage, pursuant to its undertaking as to damages and having regard to the evidence of its financial position. The focus of the balance of convenience then turns to the status and operation of the Bond pending the determination of the appeal.
2.There is no reason to suppose that if called upon, the Bond issuer would not pay the Bond Amount.
3.If the Bond were called, the Bond issuer is likely to require Perkins to pay or to debit Perkins' account for the Bond Amount, thereby diminishing its supply of working capital pending the determination of the appeal. On the other hand, the Bond Amount is relatively small and, in the context of the strength of Perkins' balance sheet, any diminution in working capital in that amount is not likely to be seriously prejudicial to Perkins.
4.A builder's reputational damage if a bond is called is, generally speaking, a relevant consideration.[56]
5.Reputational damage to Perkins could be avoided by preserving the Bond by either (1) a payment of the Bond Amount into court, or (2) payment of the Bond Amount into Manda's solicitors' trust account, to be held there pending determination of the appeal, as proposed by Manda.
6.Either of the options in point 5 above would deprive Manda of the use of the Bond Amount pending the determination of the appeal. It may be inferred that this would likely occasion some hardship to Manda, although the evidence of Mr Czarny, referred to in [65] above, lacked particularity and its absence of particularity affects its weight.
7.On the other hand, either option in point 5 would give Manda virtually immediate access to the Bond Amount if, for any reason, the Bond were cancelled by the Bond issuer or otherwise disputed pending the determination of the appeal.
8.On the terms of the Bond, it appears doubtful that the Bond is lawfully terminable by the Bond issuer in any circumstances which would likely arise pending the determination of this appeal.[57] Nevertheless, if for any reason, the Bond issuer were to terminate the Bond or there was a dispute about its operation prior to the determination of the appeal, for purportedly good reasons or otherwise, and the appeal failed, Austpro/Manda would be left without the security for which the Contract provided.
9.The above observations do not depend upon an acceptance of Manda's arguments to the effect that, properly construed, the Bond is a risk allocation device granted in favour of Manda and does not require a final determination of breach in order to be called upon. Matters of that kind go to the question of the merits of the appeal and, as I have indicated, for present purposes, I accept that the appeal is reasonably arguable.
10.Having regard to the strength of Perkins' balance sheet, the payment into court of the Bond Amount is unlikely to cause any material or enduring hardship to Perkins.
11.It seemed to me to be preferable to pay the money into court rather than to have the money paid into the solicitors' trust account which might give rise to the potential for disputes in the future and for the requirement for ongoing supervision by the court of the moneys in trust.
12.In the context of the preceding considerations and the evidence as a whole, whilst the risk of the Bond being called or otherwise disputed pending the determination of the appeal is objectively slight, it is nevertheless a risk to which Austro/Manda ought, on balance, not be exposed. In this regard, there is some significance (despite the existence of an arguable appeal) in the fact that there has been a judicial resolution of the dispute at first instance. The current application is not to be equated merely with an application for an interlocutory injunction to restrain the calling of the Bond pending a judicial determination of the merits of the dispute.
[56] See, for example, Saipem Australia Pty Ltd v GLNG Operations Pty Ltd (No 2) [2015] QSC 173; (2015) 1 Qd R 254 [44]; Barclay Mowlem Construction Ltd v Simon Engineering (Australia) Pty Ltd (1991) 23 NSWLR 451, 461 ‑ 462.
[57] See [41] above and, in particular, the three dot points in the terms of the Bond.
Conclusion
For the above reasons, I ordered that:
1.Orders 1 and 2 of the orders of Allanson J made 7 April 2021 are stayed on the terms referred to in orders 2 and 3 below.
2.Unless the appellant pays into court the sum of $328,471.45 on or before 4.00 pm 28 June 2021 the stay in order 1 is discharged.
3.The stay in order 1, subject to order 2, continues until the determination of the appeal or earlier further order.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DM
Associate to the Honourable Justice Murphy
22 JUNE 2021
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