Perkins (WA) Pty Ltd v Weston [No 2]
[2022] WASCA 111
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: PERKINS (WA) PTY LTD -v- WESTON [No 2] [2022] WASCA 111
CORAM: QUINLAN CJ
BEECH JA
TOTTLE J
HEARD: 10 MAY 2022
DELIVERED : 25 AUGUST 2022
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: PERKINS (WA) PTY LTD v WESTON
[2021] WASC 84
File Number : CIV 2083 of 2020
Catchwords:
Building contract - Construction of provisions governing performance bond - Contractual purpose of bond - Effect of termination of contract - Validity of termination in dispute - Whether contractor entitled to release of bond - Whether principal had accrued immediate right of recourse to bond - Where principal asserted a claim for unliquidated damages - Whether a claim for unliquidated damages was an amount 'due otherwise than under the Contract' - Where no quantification of amount - Where no failure to pay an amount - Principal had no immediate right of recourse to bond - Principal's rights in respect of bond survive disputed termination of contract - Contractor not entitled to release of bond
Legislation:
Civil Judgments and Enforcement Act 2004 (WA), s 95(2)
Construction Contracts Act 2004 (WA), s 43
Result:
Appeal allowed in part
Category: B
Representation:
Counsel:
| Appellant | : | S Penglis SC & D J Pratt |
| First Respondent | : | No appearance |
| Second Respondent | : | No appearance |
| Third Respondent | : | B Dharmananda SC & 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):
Eddy Lau Construction Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273
Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (Unreported, WASCFC, Library No 940276, 30 May 1994)
Inghams Enterprises Pty Ltd v Hannigan [2020] NSWCA 82; (2020) 379 ALR 196
Mann v Paterson Constructions Pty Ltd [2019] HCA 32; (2019) 267 CLR 560
Point Bay Developments Pty Ltd v Perkins (WA) Pty Ltd [2021] QSC 272
Weston v Perkins (WA) Pty Ltd [2021] WASC 84
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
JUDGMENT OF THE COURT:
Introduction
This appeal concerns a dispute between the appellant (Perkins), a building contractor and the third respondent (Manda), a financier. Manda provided finance to the second respondent (Austpro) for the development of an apartment block. The dispute is over an unconditional undertaking or bond (the Bond) provided as security for 'the due and proper performance' by Perkins of its obligations under a contract between it and Austpro for the construction of the apartments (the Building Contract). Perkins appeals against the learned primary judge's decision that the Bond should be delivered to Manda and that Manda was entitled to the benefit of the Bond.[1] The orders giving effect to the decision were made on an interpleader summons issued by the Superintendent appointed under the Building Contract, the first respondent (Mr Weston).[2]
[1] Weston v Perkins (WA) Pty Ltd [2021] WASC 84 (primary reasons).
[2] Orders of the Honourable Justice Allanson made 7 April 2021; BAB 1.
For the reasons that follow, the appeal should be upheld in part. There is no error in the order for delivery of the Bond to Manda. However, insofar as the judge ordered that Manda was entitled to the Bond - implicitly that Manda could have recourse to it - in circumstances where Manda had not quantified a claim for an identified amount of money that Perkins had failed to pay, in our respectful view, his Honour erred.
The transaction documents
The Building Contract was made on 22 October 2018 and comprised a formal instrument of agreement and general conditions in the form of Australian Standard General Conditions of Contract (AS 2124 of 1992 - amended as set out in 'Annexure Part B').[3]
[3] GAB 80.
Manda's financing of the development was pursuant to a loan agreement made on 12 November 2018.[4] Austpro provided security for the funds advanced to it in the form of a mortgage over the development site,[5] together with a General Security Agreement[6] and a Specific Security Agreement.[7] In addition, Manda, Perkins and Austpro entered into a deed termed the 'Tripartite Agreement' which established privity of contract between Perkins and Manda and, among other matters, governed the way in which various rights under the Building Contract could be exercised.[8]
[4] GAB 127 - 187.
[5] GAB 190 - 197.
[6] GAB 198 - 274.
[7] GAB 275 - 347.
[8] GAB 348 - 384.
The Bond was an instrument issued by Swiss Re International SE on 26 November 2018.[9] By its terms Swiss Re International SE unconditionally undertook to pay on demand to 'the Principal', that is, Austpro, the sum of $328,471.45. The Bond contained the following term:[10]
The Principal may not transfer, assign, or otherwise deal with the benefit of this undertaking without [Swiss Re International SE's] prior written consent, which will not be unreasonably withheld.
[9] GAB 385.
[10] GAB 385.
The dispute
The dispute came before the primary judge in unusual circumstances.
Austpro experienced financial difficulties. By early February 2020 Manda had served Austpro with a notice of default under the loan agreement and a notice of default under the mortgage.[11]
[11] GAB 389 - 390.
On 30 March 2020, in his capacity as Superintendent, Mr Weston certified that the works under the Building Contract were practically completed.[12]
[12] GAB 429.
On 19 May 2020, a payment dispute arose between Perkins and Austpro and Perkins issued a notice of suspension under the Building Contract.[13]
[13] GAB 391 - 392.
On 21 May 2020, Manda took possession of the development following Austpro's default under the mortgage.[14]
[14] GAB 393.
On 3 June 2020, Mr Weston sent a letter to Perkins requesting remediation of certain works undertaken by Perkins under the Building Contract 'as a part of the Defects Liability Period'.[15] It is not in dispute that the Defects Liability Period was due to expire on 30 March 2021.
[15] GAB 394 - 401.
On 8 June 2020, Perkins obtained an adjudication determination under the Construction Contracts Act2004 (WA) requiring Austpro to pay Perkins $579,904.83.[16] We interpolate that leave was given to Perkins to adduce fresh evidence on the appeal in the form of an affidavit affirmed by Mr Paul Taccagni on 5 May 2022 to show that although in January 2021 Austpro paid Perkins the amount set out in the adjudication determination together with interest and costs, the amount was repaid in accordance with orders made by the Supreme Court of Queensland.[17] The reasons for ordering repayment are of no relevance to this appeal. The significance of the fact the debt remains outstanding lies only in the possibility that Perkins may have rights of set-off that may be exercisable in response to any claim against it by Austpro or Manda.
[16] GAB 430 - 436.
[17] Point Bay Developments Pty Ltd v Perkins (WA) Pty Ltd [2021] QSC 272.
On 23 June 2020, Perkins issued a notice of termination of the Building Contract.[18] Perkins required Austpro to return the Bond to it. It appears that the Bond was in fact in the custody of Mr Weston who was holding it as Austpro's agent.
[18] GAB 402 - 404.
On 18 August 2020, Perkins obtained a further determination under the Construction Contracts Act requiring Austpro to deliver the Bond to it.[19] A certified copy of the determination was filed with this court pursuant to s 43 of the Construction Contracts Act thereby entitling Perkins to enforce the determination as if it were an order of the court. Perkins obtained a seizure and delivery order pursuant to s 95(2) of the Civil Judgments and Enforcement Act 2004 (WA) in respect of the Bond and it was delivered to the Registry of the court.
[19] GAB 451 - 462.
Mr Weston commenced interpleader proceedings on 28 October 2020.
Relevant clauses of the General Conditions of the Building Contract
Clauses 5.1, 5.5, 5.7, 5.8, 42.8, 42.10 and 42.11 of the General Conditions govern security, retention moneys and performance undertakings. Under these provisions, relevantly:
(a)Security, retention moneys and performance undertakings are for the purpose of ensuring the due and proper performance of the Building Contract (cl 5.1).
(b)A party may have recourse to security where the party has become entitled to exercise a right under the Building Contract in respect of the security, and where appropriate notice has been given and the period specified in the notice has elapsed (cl 5.5).
(c)On the issue of a Certificate of Practical Completion the Principal's entitlement to security reduces by 50%. Monies in excess of the entitlement are to be released (cl 5.7).
(d)If the Contractor has provided security, then the Principal shall release it when required (cl 5.8).
(e)Within 14 days after the issue of a Final Certificate which certifies a balance owing by the Principal to the Contractor, the Principal shall release to the Contractor any retention moneys or security then held by the Principal (cl 42.8).
(f)The Principal may deduct from the moneys due to the Contractor any money due from the Contractor to the Principal otherwise than under the Building Contract and the Principal may have recourse to security under the Building Contract (cl 42.10).
(g)'Where a party fails to pay to 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' (cl 42.11).
Clause 30 of the General Conditions governs materials and work and cl 30.3 provides the Superintendent may issue directions to the Contractor in respect of the same:[20]
[20] GAB 46 - 47.
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.
Clause 30.6 of the General Conditions contains general provisions that apply in the event of defective work or materials and includes the following:[21]
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.
[21] GAB 47.
Clause 37 of the General Conditions governs liability for defects. It provides:[22]
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 rectification incurred by the Principal shall be a debt due from the Contractor.
If it is necessary for the Contractor to carry out work of rectification, the Contractor shall do so at times and in a manner which cause as little inconvenience to the occupants or users of the Works as is reasonably possible and otherwise in accordance with the directions of the Principal or the Superintendent.
[22] GAB 54, 87.
The proceedings before the primary judge
Austpro did not appear at the hearing of the interpleader summons. It had given notice that it intended to abide by the decision of the court. The contest was between Perkins and Manda.
At the beginning of the hearing, in response to an enquiry from the primary judge, counsel for both parties assured the court that there were no factual disputes and the issue between the parties was one of contractual construction.[23] This assurance was effectively repeated at a later stage of the hearing.[24]
[23] Transcript of primary court dated 10 February 2021, 4 - 5.
[24] Transcript of primary court dated 10 February 2021, 11 - 13.
The respective cases of Perkins and Manda advanced before the primary judge may be summarised as follows:
(a)Perkins argued that it was entitled to the Bond because that was the effect of the determination made under the Construction Contracts Act on 18 August 2020.[25]
(b)Manda maintained it was 'presently entitled to call on the Bond and [sought] declaratory relief to that effect'.[26] Its primary contentions were as follows:
(i)Manda contended it had a right to have recourse to the Bond pursuant to the terms of the Tripartite Agreement. It argued this right was not confined by the provisions of the Building Contract, that is, it could call on the Bond 'even if Perkins had complied with all of its obligations under the Building Contract'.[27] It was implicit in this contention that Manda maintained it was entitled to call on the full amount of the Bond even if that exceeded any amount due by Perkins to Austpro under the Building Contract.
(ii)In the alternative, Manda contended that Austpro had a right to call upon the Bond in respect of 'money for remediation works performed by third parties'.[28] Manda contended this right had accrued prior to the termination of the Building Contract and arose by reason of a failure by Perkins to remedy defects following Practical Completion in accordance with the obligation to do so imposed by cl 37 of the General Conditions. Manda contended that by reason of the rights conferred by its securities it was entitled to exercise Austpro's rights and call upon the Bond. In its submissions Manda did not quantify its claim nor did it assert that there had been a failure to pay any amount due.
(c)Manda supported its alternative claim with a contention to the effect that Perkins' termination of the Building Contract was invalid and ineffective. The basis of this contention was that cl 9(2) of the Tripartite Agreement provided Perkins could not terminate the Building Contract without Manda's prior written consent and Perkins' purported termination was ineffectual.[29]
(d)In response to Manda's argument that Austpro was entitled to call on the Bond, Perkins contended that the right to make a claim under cl 37 or cl 30(3) (cl 30(3) being the provision of the General Conditions it contended was applicable) was conditioned by various notice requirements and a requirement that the Superintendent issue a payment certificate. Perkins contended that there had been no compliance with these requirements and thus no amount was due and payable under those clauses. Consequently, so Perkins argued, Manda had no right to have recourse to the Bond.[30]
[25] Transcript of primary court dated 10 February 2021, 13 - 14.
[26] Third respondent's outline of submissions dated 23 December 2020, 2; BAB 27.
[27] Third respondent's outline of submissions dated 23 December 2020, 6; BAB 31.
[28] Third respondent's outline of submissions in response to first respondent's submissions dated 8 February 2021, 5; BAB 46.
[29] Transcript of primary court dated 10 February 2021, 24.
[30] First respondent's responsive submissions in relation to application for interpleader relief dated 29 January 2021, 6 - 7; BAB 38 - 40.
The primary judge's orders and reasons
As recorded earlier the learned primary judge decided that the Bond should be delivered to Manda and that it was entitled to the benefit of the Bond. Relevantly, the decision was carried into effect by the following orders:[31]
1The [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.
[31] Orders of the Honourable Justice Allanson made 7 April 2021; BAB 1.
The primary judge rejected Perkins' argument that it was entitled to the Bond because the adjudicator had decided the Bond should be delivered to it. His Honour held that the Construction Contracts Act decision did not determine the underlying common law rights to the Bond.[32] Perkins does not challenge that conclusion on appeal.
[32] Primary reasons [73].
The primary judge did not accept the Tripartite Agreement entitled Manda to have recourse to the Bond otherwise than in accordance with the provisions of the Building Contract and Manda's contention to that effect was not maintained on appeal.
The primary judge identified cl 42.11 of the General Conditions as the critical clause.[33]
[33] Primary reasons [74].
The primary judge's reasoning to the conclusion that Manda was entitled to the Bond was as follows:
[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 Tripartite Deed, 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 documents include those conferred by cl 11 and cl 13.3 of the General Security Agreement. 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 Tripartite Deed, read with the General Security Agreement and cl 30 and cl 37 of the Building Contract, support Manda's claim to the Bond.
The primary judge held that it was unnecessary to decide whether Perkins' suspension and subsequent termination of the Building Contract was valid.[34]
[34] Primary reasons [80].
Grounds of appeal
Perkins relies on three grounds of appeal as follows:[35]
[35] WAB 6 - 7.
1.The trial judge:
(a)erred in law (at [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;
(b)should have found that, on a proper construction of the Building Contract, 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.
2.The trial judge:
(a)erred in law (at [74], [76], [77] and [79]) in finding that as at the date of Perkins' notice of termination on 23 June 2020, Perkins had failed to pay an amount 'due otherwise than under the Contract' within the meaning of cl 42.11 of the Building Contract, being the costs of rectification of defects and omissions in the works at the date of practical completion; and
(b)should have found that, as at 23 June 2020, Perkins had not failed to pay an amount 'due otherwise than under the Contract within the meaning of' cl 42.11 as no such amount was 'due'.
3.The trial judge:
(a)erred in law in failing to address a necessary issue (at [80]), being whether the Building Contract had been validly terminated on 23 June 2020; and
(b)should have found that:
(i)the Building Contract had been validly terminated on 23 June 2020; and
(ii)by reason of the matters set out in Grounds 1 to 2 above, as at the date of termination on 23 June 2020, Austpro and Manda did not have any accrued right to call upon the Security and thus Perkins was entitled to the return of it.
Notice of contention
Manda raises three points by way of a notice of contention. First, the primary judge's reasoning is supported by the true construction of various provisions of the Building Contract, principally those referred to in [15] above. Secondly, assuming in Perkins' favour that its termination of the Building Contract was valid, Austpro could have called on the security because it had an accrued right to damages for breach of an obligation to rectify defects imposed by the second paragraph of cl 37 of the General Conditions. Thirdly, Perkins' termination of the Building Contract was not valid because it had failed to obtain Manda's consent to the termination as it was required to do under the Tripartite Agreement.
Analysis and disposition
General propositions
It is convenient to begin with some general propositions.
First, if security is to serve its contractual purpose of ensuring due and proper performance of the Building Contract it is necessary for it to be held by the Principal - to state the obvious - if the Principal does not hold the security it cannot have recourse to it. Senior counsel for Perkins accepted that this was so.[36] This is, in itself, sufficient to sustain paragraph 1 of the judge's orders, unless it were found that Manda is now obliged to return the security to Perkins.
[36] ts 54 - 55.
Secondly, cl 42.8 of the General Conditions governs when the security held by the Principal under the Building Contract is to be released and, as has been seen, it provides that any security held by the Principal must be released within 10 business days of the issue of a Final Certificate. The Building Contract does not provide for the release of security on the occurrence of any earlier event.
Thirdly, the Building Contract contains no express term to the effect that the right to have recourse to the security ceases on termination of the Building Contract and there is no basis for the implication of a term to that effect, cf Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd.[37] The Principal is not required to release the security upon termination of the Building Contract. That flows from the express purpose of the security - to secure 'the due and proper performance of' Perkins' obligations. If the security was required to be released upon termination of the Building Contract, it would deprive the Principal of the benefit of the security if a failure in the due and proper performance of the Building Contract was only discovered after termination. It is unnecessary to express a view on when security must be released if the Building Contract is terminated but there is force in the submission made by senior counsel for Manda that it is an implied term of the Building Contract that, in the event of a termination, the security will be released when its contractual purpose has been exhausted.[38]
[37] Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (Unreported, WASCFC, Library No 940276, 30 May 1994) (Franklyn J, Kennedy & Murray JJ agreeing).
[38] ts 38. See and compare Eddy Lau Construction Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 [95] - [97] (Barrett J).
Fourthly, the contractual purpose of the security is expressed in broad terms. Its purpose is to ensure 'the due and proper performance of the Contract'. Recourse to the security is not limited to a failure in due and proper performance that gives rise to a claim for a debt or other liquidated amount.[39] Rather, there may be recourse to the security whether the failure in due and proper performance gives rise to a claim for a liquidated amount or a claim for unliquidated damages. Such recourse to the security in respect of unliquidated claims is recognised by the juxtaposition of the expression used in the second limb of cl 42.11 of the General Conditions, 'any money due otherwise than under the Contract' with the expression used in the first limb of the clause, 'an amount due and payable under the Contract'. Understood in that context, the words 'due otherwise than under the Contract' comprehend the secondary obligation to pay damages for breach of the Building Contract - an obligation arising by operation of law rather than under the Building Contract, albeit that the Building Contract is the source of the obligation.[40] In oral reply submissions in this court, senior counsel for Perkins accepted that the second limb of cl 42.11 was 'capable of extending to a coherent claim to damages'. Understood in context, this was a reference to a claim for damages for breach of the Building Contract.[41]
[39] Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd, see Kennedy J's observations at p 4 rendered in respect of security provided for the 'due performance' of the agreement between the parties.
[40] Mann v Paterson Constructions Pty Ltd [2019] HCA 32; (2019) 267 CLR 560 [195] - [197] (Nettle, Gordon & Edelman JJ). See also Inghams Enterprises Pty Ltd v Hannigan [2020] NSWCA 82; (2020) 379 ALR 196, in which the majority, Meagher & Gleeson JJA, held that the phrase 'any monetary amount payable and/or owed by either party to the other under this Agreement' did not include amounts payable by way of unliquidated damages for breach of contract.
[41] ts 59 - 60.
Fifthly, once it is appreciated that the Principal may have recourse to security in the event of a claim for unliquidated damages, it follows that the right of recourse is not conditioned by a curial or arbitral determination of the quantum of damages.
Sixthly, although a curial or arbitral determination of the quantum of an unliquidated claim does not condition the right of recourse to security under cl 42.11, that right is conditioned by a party - relevantly Perkins - having failed to pay 'any money due otherwise than under the Contract'.
Seventhly, an amount of money must have been identified (and demanded) before Perkins can be said to have failed to pay it. Thus, as senior counsel for Manda put it, 'recourse has got the question of quantification loaded within it'.[42]
The issue raised by the interpleader summons
[42] ts 40.
Expressed in the language used in the Building Contract the confined issue raised by the interpleader summons was whether the Bond should be released to Perkins. Whether Manda had an immediate right of recourse to the Bond was not raised by the interpleader summons but was raised by the claim made in Manda's written submissions that it was entitled to a declaration to the effect that it had an immediate right of recourse to the Bond. Given that Manda's alternative submission was that it was entitled to call on the Bond in respect of remediation costs was not supported by a quantification of those costs, it appears that the claim for a declaration was founded on its primary argument that the Tripartite Agreement entitled it to call upon the Bond irrespective of any amount due under the Building Contract. The expansion of the issues was not necessary for the resolution of the interpleader summons. The central issue remains whether Perkins is entitled to have the Bond released to it.
Perkins is not entitled to the release of the Bond
Before this court Perkins did not press the contention that the determination of the adjudicator was the source of its right to have the Bond delivered to it. Rather its case before this court that the Bond be delivered up to it rested on the argument that there was no evidence before the primary judge to establish that Austpro was entitled to have recourse to the Bond and, on that basis, the Bond should be delivered to it.[43] This was also the argument on which the third ground of appeal was based.[44]
[43] ts 18.
[44] WAB 18 - 19.
Senior counsel for Perkins acknowledged that this argument was not raised before the primary judge and further acknowledged that if what was in effect a new case had been raised, it is possible that evidence might have been led to meet that case.[45] A party will only be permitted to advance a new case on appeal in exceptional circumstances.[46] No such circumstances exist in this case. It is difficult to see a plausible basis for Perkins' position in advancing this new argument on appeal. In circumstances where it accepts that the point was not run below and that Manda could have met it by evidence, to resolve the argument on the basis invited by Perkins, namely that Manda led no evidence, would be patently unjust. Perkins will not be permitted to argue the Bond should be released to it on the ground that there was no evidence that Austpro had a present entitlement to recourse to the Bond.
[45] ts 18 - 19.
[46] Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [65] - [66] (Buss P, Murphy & Vaughan JJA).
The Bond is still serving its contractual purpose and Perkins is not entitled to have the Bond released to it. It follows that the third ground of appeal fails.
The Bond is currently in the custody of the court. As observed in [32], the Principal is entitled to hold the Bond unless Perkins is entitled to the return of it. Under the Tripartite Agreement, Manda stands in the shoes of Austpro. In the absence of a contest between Austpro and Manda as to which of them is entitled to hold the Bond, it should be delivered up to Manda. That being so, there is no reason to disturb order 1 of the primary judge's orders in the interpleader summons.
No immediate right of recourse to the Bond
On one view, the declaration in par 2 of the orders made by the primary judge that Manda 'is entitled to the benefit of the Bond' may be construed as conveying no more than the primary judge had concluded that the Bond should not be released to Perkins. However, when considered in the context of [77] of the primary reasons, and in particular, the penultimate sentence of that paragraph, the declaration is to be construed as conveying that the primary judge had concluded that Manda had an immediate right of recourse to the Bond. Not only is this construction consistent with the reasons but it reflects Manda's alternative case before the primary judge that it was presently entitled to call upon the Bond in respect of remediation costs (albeit there was no quantification of an amount).
In our respectful view in reaching the conclusion that Manda was entitled to immediate recourse to the Bond the primary judge made an error because there was no evidence that either the condition that an amount 'due otherwise than under the Contract' had been identified or the condition that there had been a failure to pay any such amount had been satisfied. On that basis the second ground of appeal is upheld.
The construction of cl 37 of the General Conditions and other issues
As the second ground of appeal has been upheld it is unnecessary to consider the first ground of appeal (or the second and third points raised by the notice of contention) and, intending no disrespect to the detailed submissions made by the parties concerning the construction and operative effect of cl 37 of the General Conditions, it is not appropriate to do so. The parties advanced their respective cases before the primary judge on the basis there were no factual issues requiring resolution. At least with the benefit of hindsight that was an optimistic but erroneous assessment.
Both parties' primary case before the judge contended that they were presently entitled to the benefit of the security on a basis that lay outside the Building Contract itself. As already noted, Perkins claimed that it was entitled to the return of the security on the basis of the adjudicator's determination. Manda contended that it had a right of recourse pursuant to the terms of the Tripartite Agreement. Neither of these contentions required the resolution of factual issues. Had either of these primary contentions been accepted, all substantive issues between the parties regarding the Bond would have been resolved without the need to determine any other underlying factual issues.
However, both these primary contentions having failed and not being pursued on appeal, it is neither possible nor appropriate to attempt to resolve in a final way, in this appeal, all issues as to who is ultimately entitled to the Bond.
It was apparent from the way in which the arguments on appeal were developed that there are a number of issues between the parties that involve factual as well as legal issues. These include:
(a)whether there were in fact defects in the work when the Certificate of Practical Completion was issued;
(b)what time period is comprehended by the expression 'as soon as possible' in the second paragraph of cl 37 of the General Conditions;
(c)the consequences flowing from the notice of suspension given by Perkins of work under the Building Contract; and
(d)in particular whether the notice affected the obligation to remedy defects in the work if there were such defects.
In addition (although it falls outside the ambit of the first ground of appeal) there is an issue of whether the restriction contained in the Bond on transferring, assigning, or otherwise dealing with the benefit of it without Swiss Re International SE's prior written consent affects Manda's ability to call on the Bond.
These and other controversies may come before the court for determination if Austpro or Manda gives notice that it intends to have recourse to the Bond and Perkins seeks to enjoin them from doing so. The issues between the parties concerning the construction of the Building Contract and the application of its terms to the facts should not be fragmented. Nor should they be decided in a vacuum, in the absence of having been litigated and evidence led, enabling all necessary factual findings to be made. The affirmation of the primary judge's order that the Bond be delivered up to Manda is not to be taken as any indication of how those issues may be resolved. Should those issues arise for determination then they should be determined in one set of proceedings in which all relevant factual findings may be made.
Conclusion
The appeal will be allowed and the court will hear from the parties in relation to the terms of the orders and costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
OK
Associate to the Honourable Justice Tottle
25 AUGUST 2022
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