Russell Noble Constructions Pty Ltd v Sewell
[2019] WADC 148
•6 NOVEMBER 2019
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: RUSSELL NOBLE CONSTRUCTIONS PTY LTD -v- SEWELL [2019] WADC 148
CORAM: DEPUTY REGISTRAR HEWITT
HEARD: 23 OCTOBER 2019
DELIVERED : 6 NOVEMBER 2019
FILE NO/S: CIV 884 of 2019
BETWEEN: RUSSELL NOBLE CONSTRUCTIONS PTY LTD
Plaintiff
AND
STEPHEN ROBERT SEWELL
Defendant
Catchwords:
Practice and procedure - Application to strike out statement of claim - Adjudication under Construction Contracts Act 2004 (WA) - Turns on its own facts
Legislation:
Construction Contracts Act 2004 (WA)
Rules of the Supreme Court (WA)
Result:
Statement of claim struck out in part
Representation:
Counsel:
| Plaintiff | : | Mr J Healy |
| Defendant | : | Mr C Williams |
Solicitors:
| Plaintiff | : | Jackson McDonald |
| Defendant | : | Soloman Brothers |
Case(s) referred to in decision(s):
Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161
DEPUTY REGISTRAR HEWITT:
By writ filed 8 March 2019 the plaintiff in this action commenced proceedings against the defendant based upon his role as a guarantor of a contract between itself and a company named Truepalm Pty Ltd.
By chamber summons filed 17 July 2019 the defendant applied pursuant to O 20 r 19(1)(a) alternatively O 20 r 19(1)(c) of the Rules of the Supreme Court 1971 for the statement of claim to be struck out. The application also sought an order for security for costs but that part of the application was not proceeded with.
The application appears to have stimulated a number of revisions to the statement of claim both prior to and subsequent to the lodging of the application, presumably as a consequence of the consultative process undertaken prior to commencing the application. The latest version of the statement of claim was filed on 26 September 2019 and that is the pleading with which I must deal.
Order 20 r 19(1)(a) permits the court to strike out a pleading on the basis that it discloses no reasonable cause of action or defence as the case may be and O 20 r 19(1)(c) likewise provides that the court may strike out a pleading on the basis that it may prejudice or embarrass the fair trial of the action. Substantial amendments have been made to the statement of claim in the process of amendment to which I have referred but it is to be noted that the application seeks that the whole of the statement of claim be struck out on the grounds on the two rules that I have mentioned and no particular offending portion of the statement of claim has been separately identified. Before I commence an analysis of the case I refer to the decision of Chief Justice Martin in: YouldenEnterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161 in which his Honour said:
Before dealing with this specific application, I would observe that both I and the other members of this Court are firmly of the view that interlocutory disputes of this kind must be actively discouraged. In many cases, interlocutory disputes, particularly disputes relating to pleading issues, consume very substantial amounts of time and expense on the part of both the parties and the Court. In many cases, the time and expense involved in the consideration and resolution of the interlocutory dispute is entirely disproportionate to its significant to the just and effective resolution of the case as a whole by mediation or trial. For this reason, this Court will use the existing powers available under the Rules of the Supreme Court ('the Rules') and if necessary amend the Rules to actively discourage disputes of this kind. In very general terms, interlocutory disputes of this kind will only be entertained by the Court if the time and expense involved in their resolution is proportionate to the significance of the dispute to the just and effective resolution of the case. This principle is, in my view, already inherent in the provisions of the Rules when read as a whole, including in particular O 1 r 4A and r 4B, O 29 and O 29A.
Although the application has been refined by the submissions which have been filed by the applicant in support of the application, it is my view that a great many of the objections are based on technical aspects of the pleading or have identified matters which should be the subject of trial for determination. It is not therefore, my intention to deal with every matter of which the defendant complains in the submissions, which have been filed but there is however, one matter which I think is of considerable importance to both the parties and to the court and that involves a claim which is set out in par 8 – par 19 of the statement of claim as presently constituted. The guarantee upon which the plaintiff relies concerned the due performance of the building contract in which Truepalm was engaged. It is alleged that on or about 2 July 2018 the plaintiff served a payment claim on Truepalm which failed to issue a progress certificate in relation to that claim and did not pay the amount of the claim. On 14 September 2018, the plaintiff applied for an adjudication of the issue under the Construction Contracts Act2004 (WA). The parties to that adjudication were the plaintiff and the company Truepalm Pty Ltd. The matter proceeded to an adjudication and a determination was brought down that Truepalm was liable to pay the sum of $207,614.94 on or before 2 November 2018. Despite demand that determination was not satisfied. The proposition alleged by the plaintiff in the proceedings is that as a guarantor of the contract between the plaintiff and Truepalm, he is personally liable to pay the amount of the determination and the legal costs and disbursements incurred by the plaintiff in the adjudication and interest on that amount and costs at the rate of 6% per annum presumably calculated from the date of the adjudication.
There are a number of difficulties with this aspect of the claim. The first and obvious problem is that the defendant was not a party to the adjudication and it is therefore not capable of creating either an issue estoppel or a res judicata binding upon the defendant upon which the plaintiff can rely. The plaintiff argues that the terms of the guarantee are sufficiently broad to encompass the liability which it pursues in this regard. The words relied upon by the plaintiff are set out in par 7 of the statement of claim, which are as follows:
By deed of guarantee and indemnity dated 4 October 2013 (v) the defendant:
1. guaranteed to of the plaintiff's, the fulfilment of Truepalms obligations under the contract, including but limited to the due payment of all monies arising out of the subject matter of the contract (cl 1);
2. indemnified the plaintiff against any claim, loss or damage arising out of the subject matter of the contract, caused or resulting from any non-fulfilment of Truepalms obligations under the contract (cl 2);
3. it is deemed to be a principal debtor jointly and severally liable with Truepalm to discharge Truepalm's obligations under the contract (cl 3).
My concern with the aspect of the claim with which I am dealing is that the obligation, although connected to the contract, arises out of the adjudication. As I have previously mentioned, the defendant was not a party to the adjudication and cannot be bound by its findings. Furthermore, the Construction Contracts Act 2004 does not, in the circumstances of the present arbitration, constitute a final determination of liability. That is made clear by the provisions of s 45 of the act which deal with the effective and adjudication on civil proceedings. In particular, s 45(4) provides:
An arbitrator or other person or a court or other body dealing with a matter arising under a construction contract:
(a) must, in making any award, judgment or order, allow for any amount that has been or is to be paid to a party under a determination of a payment dispute arising under the contract; and
(b) may make orders for the restitution of any amount so paid and any other appropriate orders as to such a determination.
In my view, these provisions make it clear that the determination of an adjudicator in a payment dispute is not intended to finally determine the rights of the parties to the dispute and it is capable of revision at a later stage by another arbitrator or person or court or other body dealing with a matter arising under a construction contract. Were the present proceedings to be between the plaintiff and Truepalm then the provisions of s 45(4) would be applicable. Those provisions allow for the amount, the subject of the adjudication, to be varied in various ways and in particular, to order restitutional repayment to be paid to a party under a determination. The present defendant is not a party to the determination. As a consequence, if at a later stage, the amount ordered to be paid is revised there is no mechanism by which the present defendant can be reimbursed for monies which might otherwise have been repayable.
In summary therefore, it is my opinion that firstly, since he was not a party to the adjudication, its outcome is not binding upon him and does not allow the plaintiff to recover any debt from him both as a guarantor or otherwise and secondly, that the terms of the guarantee do not apply to what is essentially an interim order obtained in adjudication proceedings under the act, independently of the involvement of the defendant. For these reasons I am of the view that the portions of the statement of claim that seek to recover the amount of the adjudication and costs allegedly incurred in procuring the adjudication do not disclose a viable cause of action and should be struck out. As to the other matters raised by the defendant, those are matters which in my view are issues to be resolved at trial and they are not such as to cause embarrassment or stand in the way of a fair trial of the issues, nor are they issues which can be properly described as so fundamentally flawed that the pleading in respect discloses no reasonable cause of action.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
LF
Court Officer5 NOVEMBER 2019
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