Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd & Ors
[2016] HCATrans 239
[2016] HCATrans 239
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S199 of 2016
B e t w e e n -
SOUTHERN HAN BREAKFAST POINT PTY LTD (IN LIQUIDATION)
Appellant
and
LEWENCE CONSTRUCTION PTY LTD ACN 155 305 507
First Respondent
IAN HILLMAN
Second Respondent
AUSTRALIAN SOLUTIONS CENTRE
Third Respondent
KIEFEL J
BELL J
GAGELER J
KEANE J
GORDON J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON WEDNESDAY, 12 OCTOBER 2016, AT 10.22 AM
Copyright in the High Court of Australia
MR M. CHRISTIE, SC: May it please the Court, I appear with my learned friend, MR D.P. HUME, for the appellant. (instructed by CCS Legal Pty Ltd)
MR S. ROBERTSON: May it please the Court, I appear with my learned friend, MR P.F. SANTUCCI, for the first respondent. (instructed by Maddocks Lawyers)
MR CHRISTIE: Your Honours, I trust that your Honours have our short outline of oral submissions.
KIEFEL J: Yes.
MR CHRISTIE: May it please the Court, this appeal concerns the Building and Construction Industry Security of Payment Act (NSW). The Act provides a scheme whereby contractors in the construction industry can obtain periodic progress payments in connection with construction contracts. The amount of the progress payment is determined by a statutory adjudicator. The right to a progress payment under the Act arises on and from what the Act calls “reference dates”. The Act provides that “reference dates” are dates determined by the contract or where the contract makes no express provision to the matter by the Act itself.
Now, there are four issues in this appeal. Three arise in our notice of appeal, one in the notice of contention. The first is this, are reference dates under the Act jurisdictional facts so that there must be a reference date in order for an adjudicator to have jurisdiction? We submit that the text and structure of the Act compel a conclusion that the existence of a reference date is, indeed, a jurisdictional fact. If we are right on that, we submit that in this case there was no available reference date. As to whether there was an available reference date, the case proceeded on two alternative hypotheses or assumptions, and it is those two alternatives which are the second and third issues in the appeal.
On one hypothesis, the contract was validly terminated. We submit that as a matter of contractual construction there were no reference dates following the termination of the contract. The alternative assumption is that my client validly exercised its rights to take over all the remaining work under the contract from the first respondent contractor. All three judges below who considered this issue determined that there was no reference date available to the first respondent on that hypothesis and that is the subject of the notice of contention. The final issue in the appeal is whether the first respondent contractor breached the Act by relying on the same reference date on a second occasion.
Can I take your Honours to the structure of the Act? The Act is found behind my friend’s bundle behind tab 12. Your Honours might note that this version of the Act is not the current compilation but the more recent amendments to the Act do not affect the issues of importance raised in this appeal.
KIEFEL J: I am sorry – so what version is this?
MR CHRISTIE: This is the Act. It is behind tab 12. It is the Act which applied at the relevant time, your Honour.
KIEFEL J: I see, thank you.
MR CHRISTIE: Can I commence by saying that the Act is divided into four parts? The structure of the Act goes as follows. Part 1 concerns preliminary matters – definitions, and so forth. Part 2, which commences with section 8, concerns rights to payment. Part 3 concerns the procedure for recovering progress payments and Part 4 deals with miscellaneous matters.
It is the distinction between Part 2, rights to payments, and Part 3, governing procedure, which is important to this appeal, for reasons which I shall come to.
Now, of course, whether a matter is a jurisdictional fact is a matter of statutory interpretation and so can I take your Honours to the key provisions of the Act? The Act has as its starting point the existence of a construction contract, which is defined in section 4 ‑ your Honours will find that on the third page of the copy of the Act – and the Act applies to construction work which is defined in section 5 and to related goods and services which is defined in section 6. So your Honours will note from the definition of “related goods and services” that despite the name of this Act it applies not just to the construction industry but also to related industries and occupations.
Turning to section 8, which is the first section in Part 2, it is section 8 which creates the right to a progress payment and your Honours will note subsection (1):
On and from each reference date under a construction contract, a person –
then identified in (a) and (b):
is entitled to a progress payment.
Your Honours will note that there are three aspects of this entitlement. There needs to be a construction contract, there needs to be a reference date and there needs to be a person of the type described, a person who has undertaken to carry out construction work. We would just observe at this stage that the entitlement is not an absolute entitlement, it exists only on and from a reference date. Section 8(2) defines the concept of a “reference date” and your Honours will see in paragraph (a) that it is:
a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made . . .
(b)if the contract makes no express provision with respect to the matter‑the last day of the named month –
Now, in this case all parties are in agreement that subsection 8(2)(a) is the relevant clause but I will just ask your Honours to note that it is a feature of this Act, not just of section 2, that the Act in many instances looks to the contract and if the contract is silent on the matter there will be a default provision.
KEANE J: But that the Act is vindicating, contractual.
MR CHRISTIE: That is so, your Honour, by giving it a statutory base.
KEANE J: Yes, or a statutory effect.
MR CHRISTIE: Correct.
KIEFEL J: The Act is concerned with progress payments.
MR CHRISTIE: That is so.
KIEFEL J: As that implies, its concern is with the liquidity of contractors because if they do not receive progress payments, particularly if they are smaller businesses, their liquidity can be severely affected. I think that appears in the extrinsic material.
MR CHRISTIE: That is so.
KIEFEL J: The question – whether it is for the adjudicator or not – which arose here was really whether or not the contractor, Lewence Construction, was entitled to a payment for a period after a reference date. It originally indicated that it was seeking a quantum meruit but then proceeded under the statutory scheme claiming a payment claim. So the question here, although it has been couched in terms of jurisdictional fact, is whether the adjudicator had the power to determine whether Lewence Constructions is entitled to the payment claim. That is the question. The question is one of the power of the adjudicator.
MR CHRISTIE: I would agree with that except I would replace the last two words “is entitled to a progress payment”.
KIEFEL J: All right, yes.
MR CHRISTIE: That is the issue, your Honour. That is the issue.
KIEFEL J: The question is whether or not it was for the adjudicator to determine whether or not it fell within the rights identified - the rights to a progress payment, as you would put it, in section 8.
MR CHRISTIE: Precisely, exactly.
KIEFEL J: All right. The provision for adjudication application starts at section 17.
MR CHRISTIE: That is so, your Honour.
KIEFEL J: That takes you back to payment claims, which in turn takes you back to section 8. That is really the course that one would take if one were focusing upon the adjudicator and the question of the adjudicator’s powers.
MR CHRISTIE: That is so, your Honour, with one qualification which I am about to get to because the next section I want to take your Honour to is section 9 which is the amount of a progress payment. It says:
The amount of a progress payment to which a person is entitled in respect of a construction contract is to be:
(a)the amount calculated in accordance with the terms of the contract –
and again your Honours will see, typical of this Act, typical feature, if the contract makes no express provision then there are criteria in (b) which takes one to section 10 and your Honours will see section 10. There is reference to defects, for example, in 10(1)(iv), contract price. Now, section 9, when it says the “amount of a progress payment to which a person is entitled is to be” it does not actually state who is to determine that matter. It is couched in a sense in the passive voice and one really has to turn to section 22 and I would ask your Honours to go forward.
So the question as to who is to determine the amount of the progress payment – the answer lies in section 22(1)(a). It is the adjudicator who is to determine the amount of the progress payment. We submit that that is the essential function of the adjudicator – to determine the amount of the progress payment by reference to the criteria in sections 9 and 10.
GORDON J: Also 22(2).
MR CHRISTIE: Section 22(2) provides the outer limits of the matters that can be taken into account. So your Honour is correct – they are matters to be taken into account. But what section 22(2) says:
In determining an adjudication application, the adjudicator is to consider the following matters only –
Yes, of course, the adjudicator is to consider the provisions of the Act and the provisions of the contract. But in determining the amount of the progress payment, the way in which the Act and the contract can be taken into account are specified in 9 and 10.
If I can then take your Honours to section 11 ever so briefly, that deals with the due date for payment and interest. Again, that has a correlation in section 22 because when one goes back to section 22(1), your Honours will see that section 11 relates to 22(1)(b) and (c). Can I just say in contrast, your Honours, section 22 does not state that the adjudicator’s function is to determine the matters in section 8. It is only that it is to determine the matters set out in sections 9 and, where applicable, 10.
Can I then take your Honours to Part 3 which commences with section 13? Your Honours will note it is headed – that is Part 3 is headed “Procedure for recovering progress payments” and it commences with section 13 which contemplates a payment claim being served by the contractor upon the principal or a subcontractor upon a contractor. Section 13(1) provides that:
A person referred to in section 8(1) who is or who claims to be entitled to a progress payment . . . may serve a payment claim –
As your Honours will have seen from our written submission, the words “or who claims to be” in section 13(1) were introduced by amendment in 2002. The court below gave great emphasis to those words. The underlying premise appears to be prior to that amendment the existence of a reference date was a matter for the court, was a jurisdictional fact, but by reason of those amendments it ceased to be so.
One of the points we make about section 13(1) is that at its highest those words change the class of persons who have standing to make a payment claim and that they do not affect the fundamental limits on the adjudicator’s powers. As I said, or as I should say, the Court of Appeal did not accept our submission that section 13(1) did not expand the jurisdiction of adjudicators. In our respectful submission, the court was wrong in not accepting that submission for reasons to which I will come.
Now, there is no dispute between the parties that a person referred to in section 8(1), being the opening words of section 13, raise a jurisdictional issue. There is a dispute between the parties, however, as to what those words mean.
If I could take your Honours to the two competing views, they are conveniently set out in the judgment of her Honour Justice Ward in appeal book page 382. In paragraph 36, I would ask your Honours to note, because her Honour does accurately set out the differing views as to what those words in section 13 mean when it says a “person referred to in section 8(1)” and her Honour said:
The primary judge considered that the expression “person referred to in s 8(1)”, as used in s 13(1), was ambiguous . . . and that it could mean either any person meeting the requirements set out in s 8(1)(a) or s 8(1)(b) (as Lewence contends) or that it could mean a person who satisfies all the requirements of s 8(1), i.e., a person who has undertaken to carry out construction work, or to supply related goods and services under a construction contract in respect of which a reference date has arisen -
Then in paragraph 37, her Honour sets out the interpretation adopted by the learned primary judge, which we adopt, which the Court of Appeal did not. Can I take your Honours to 8(2)(a) again, bearing in mind 13 (1) says “a person referred to in 8 (1)”. When one goes to 8(1), your Honours will see that it says:
On and from each reference date under a construction contract –
We ask your Honours to note that word:
a person:
(a)who has undertaken to carry out construction work under the contract ‑ ‑ ‑
When it says “the contract”, it is not any contract; it is the contract referred to in the first line, we respectfully submit. So as a matter of construction, we submit that the learned primary judge was entirely correct in concluding that a person referred to in section 8(1) is a person who satisfies the first two lines of section 8 ‑ that is, there must have been an undertaking to carry out construction work, there must be a construction contract and there must be a reference date at the relevant time.
GORDON J: Is that any more than to say it has to be, on your construction, a contract on foot?
MR CHRISTIE: Yes, it has to be a contract on foot. We do say that, your Honour.
KEANE J: It has to be a construction contract on foot.
MR CHRISTIE: Yes.
KEANE J: So it has to be a contract under which the party making the claim is a person who can be described as a person who has undertaken to carry out construction work.
MR CHRISTIE: Yes.
KEANE J: So if the person says, “I’m no longer bound by this contract, I claim a quantum meruit”, he is not within the description.
MR CHRISTIE: In our in our respectful submission, that is correct, your Honour.
GAGELER J: Well, absent the amendment to section 13(1) introduced in 2002, the natural reading of “a person referred to in section 8(1)” in section 13(1) is simply to a person who, by reason of section 8(1), is entitled to a progress payment ‑ that is, a person who meets all of the qualifications in section 8(1). The difficulty you need to address is giving work to the language of the amendment.
MR CHRISTIE: Of course, and I will come to that in a moment, your Honour. Just finishing with 13(5), your Honour - at the moment I am just taking your Honours through the Act to provide the structure - when one goes to 13(5), your Honours will see that there is a prohibition:
A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
Now, as the Court of Appeal noted and both parties agree, compliance with section 13(5) goes to the jurisdiction of the adjudicator. So that if there were two payment claims made with respect to the same reference date, the second one would be invalid and the adjudicator would not have any jurisdiction to deal with that.
KIEFEL J: I think I posed the question for - one for the adjudicator – the question being whether the adjudicator could determine but, in fact, the adjudicator has to determine jurisdiction. What you are saying is it can only go one way.
MR CHRISTIE: That is exactly right, as a ‑ ‑ ‑
GORDON J: Section 13(5) is subject to 13(6), though.
MR CHRISTIE: That is true, your Honour, yes, that is so but that does not arise in this matter, your Honour. Now, can I then take your Honours to sections 14 and 15? Section 14 provides that a recipient of a payment claim, who or which challenges the payment claim, is required to serve a defence which the Act calls a payment schedule. It is required to do that in a very restricted time period, a maximum of 10 days under section 14.
So when I said that the statute provides for statutory adjudicators to determine progress payments, there is one qualification to that and that is where the recipient of the progress claim or the payment claim under section 13 does not respond within the 10‑day period or less. In those circumstances, the consequences are draconian because section 14(4) says that if:
(a)a claimant serves a payment claim on a respondent, and
(b)the respondent does not provide a payment schedule –
within the strict time limitations stated in (b) ‑
the respondent becomes liable to pay the claimed amount –
Section 15(2) says that:
In those circumstances, the claimant –
can recover the claimed amount and this normally takes place by way of summary judgment unless there is a dispute as to whether a payment schedule has been served. That has given rise to litigation. I can venture one case - Queensland Investment Corporation v Baulderstone Hornibrook which was a case which went to the Court of Appeal in New South Wales. It was a $100 million claim, the argument being there was no payment schedule provided in time.
So it is important to note that there is an alternative means of recovery. We would respectfully submit that in a case where sections 14 and 15 apply, there would still need to be a construction contract. There would still need to be a reference date and they will be matters for the court to decide.
Can I then take your Honours to Division 2 of Part 3 commencing with section 17? As your Honour the presiding Judge pointed out, section 17 really triggers the process for the adjudication of claims. Section 17(6) provides for the application to be referred to an adjudicator. Then referral gives that gives the adjudicator power – I withdraw that. That referral commences the adjudication process for the adjudicator. The adjudication determination is made pursuant to section 22 which I took your Honours to earlier. As I pointed out, section 22(1)(a) provides that:
An adjudicator is to determine:
(a) the amount of the progress payment –
and that takes one directly back to section 9. It says nothing about entitlement. We say that the words “if any”, which your Honours will see in parentheses in 22(1), is an indication that the adjudicators are given power to determine an amount only if there is a section 8 entitlement.
We respectfully submit that the distinction which we draw between entitlement and calculation is entirely logical. Calculation and valuation of construction work is a matter which raises questions as to the quality of the work, the existence of defects; it may be a matter which requires an inspection by the adjudicator, as contemplated by section 22(2)(e), but issues of entitlement are, generally speaking, matters of legal interpretation.
So, in our respectful submission, it is entirely logical that section 22(1) would limit the adjudicator’s powers to determining the amount of a progress payment and why it does not confer upon the adjudicator the power to determine whether there is an entitlement at all, for example, by reference to whether there is a construction contract or whether there is a reference date.
KIEFEL J: Essentially, what you are saying is that there has to be a claim to something which qualifies as a progress payment?
MR CHRISTIE: That is so, on a reference date, which is probably not adding anything to what your Honour just said.
KIEFEL J: Well, progress payment is in a way defined by reference to the reference date.
MR CHRISTIE: It is.
KIEFEL J: It is for the period that precedes the reference date and that is the point at which a progress payment in the course of an ongoing contract is paid.
MR CHRISTIE: Your Honour is correct. By its very nature, a progress payment is paid periodically. An entitlement to it arises periodically. It is not something which arises every day. It arises on a specific date which, if the contract is silent, is the last day of the month.
KIEFEL J: So how would you characterise the claim here? If it is not a progress payment, what is it a claim for? What type of payment is it claiming?
MR CHRISTIE: Well, it purports to be a claim for a progress payment, but in circumstances where no such entitlement is crystallised after the relevant date, either because the contract was terminated or because under the express contractual provisions concerning excluding or taking work out of the contractor’s hands payments were suspended.
KIEFEL J: But assuming for present purposes that the work was in fact carried out before the work was taken out of the contractor’s hands, how would you describe the nature of the payment claimed if it is not a progress payment?
MR CHRISTIE: Well, it purports to be a progress payment but the entitlement to payment did not crystallise. That is our response to that.
KIEFEL J: Is it something that ought to be brought by way of quantum meruit in another jurisdiction?
MR CHRISTIE: Absolutely, or by way of any other common law claim which would be available to the ‑ ‑ ‑
KIEFEL J: Under the contract?
MR CHRISTIE: Yes. Remember, your Honour, the position adopted by the respondent is that it validly terminated the contract, and that is the first of the two hypotheses. So having validly terminated the contract it would be entitled either to damages if it is correct or potentially to a quantum meruit.
BELL J: A moment ago, you referred to the entitlement to progress payments arising on a certain date as under this contract they do and as under many contracts they do. But, equally, this scheme would apply to a construction contract that makes the reference date dependent upon the achievement of milestones.
MR CHRISTIE: Yes.
BELL J: As I understand it, that if one accepts – as the primary judge did – that there is ambiguity arising in consequence of the amendment, if one looks to the harmonious operation of the scheme, an argument put against you is that there is nothing crisp about the determination of whether a milestone has been achieved and it is the very sort of matter that one might expect to be appropriately determined by the adjudicator.
MR CHRISTIE: I accept what your Honour says, that determining a milestone can be a complex matter. There is no denying that. Our simple point is to say that that would – well, two points – milestone payments do not appear to be common. There have been hundreds of cases on this Act and analogue Acts interstate. I am not aware of any case where this issue has arisen. That is the first point. So, my friend gives an extreme example which is…..interest we would say. But, I cannot escape the point your Honour is making, that there will be cases where determining a reference date will be difficult. I cannot disagree with what your Honour has said on that.
But, normally, it will require a legal analysis. When one goes to the adjudicate and determination in this case – which if I can just take your Honours through ever so briefly ‑ your Honours will find at page 301 – and if I can take your Honours to page 305 under the heading “Adjudication information”, the adjudicator states the matters he has taken into account, and turning the page to page 306, it appears – but is unclear – at point 10 that an inspection was undertaken.
Then, when one turns to page 310, your Honour will see this adjudicator dealt with the very matters which one would expect an adjudicator to deal with. On page 311, your Honours will see reference to preliminaries. On page 312 – I will just take two examples – 313, waterproofing, electricals, and so on ‑ all sorts of things which one would expect a statutory valuer to be engaged in.
But, when one turns to the preliminary aspect of the determination at page 307, there is a heading called “Jurisdiction” where the adjudicator engages in an analysis of various Supreme Court decisions on the meaning of “reference date”. Those matters are quintessentially matters of law, in our respectful submission, and we respectfully submit the Parliament did not intend to confer those jurisdictional issues of entitlement upon adjudicators.
GORDON J: So, just so I am clear, is the consequence of your submission that the parties would have to go off to the court to get a declaration about jurisdiction before you could go off to the adjudicator?
MR CHRISTIE: No, your Honour, because ‑ ‑ ‑
GORDON J: Then how do you resolve your concern about whether or not the adjudicator has this supposed jurisdiction?
MR CHRISTIE: Well, in many instances where jurisdictional matters are raised, a party will seek an injunction seeking to prevent the adjudication from proceeding. On other occasions, the challenge will be made following the determination. So either way the matter can be brought to the Court at either stage by the aggrieved party.
KIEFEL J: Why could it not be seen as part of the statutory scheme that the adjudicator determines whether or not there is a progress claim upon which he or she can adjudicate – a claim for a progress payment?
MR CHRISTIE: Because, in our submission, it does raise issues of entitlement, not valuation, and that is the distinction we draw, your Honour.
KIEFEL J: It raises a question of who determines a jurisdictional fact on your argument, does it not?
MR CHRISTIE: It does. We have set out in our written submissions nine factors which we say weigh in favour of it being a jurisdictional fact but the one I have focussed on up until now has been section 22(1) where it quite clearly expresses the role of the adjudicator in terms which limit it to determining the amount.
GORDON J: It seems to be, though, the argument runs against the whole purpose and efficacy of the scheme of the Act, which is to provide a mechanism for the resolution of progress payments, as the presiding judge put to you, in order to facilitate that builders have access to funds to keep building.
MR CHRISTIE: That is true.
KIEFEL J: If your point is right, they would have to either, as you say, be the subject of an injunction while a court determines whether or not there is a jurisdiction. It seems to run foul of that very purpose for which the Act has been put in place.
MR CHRISTIE: Can I answer that in part by taking your Honour to an observation of the learned primary judge, Justice Ball, which your Honours will find in the appeal book commencing at page 335. If your Honours turn to page 345 at point 50, the learned primary judge, referring to the concept of reference date, says this:
It is an important mechanism by which respondents to payment claims are protected against the administrative burden of dealing with multiple claims.
If my learned friend is correct, it would mean that ‑ let us take the commencement of a project which has, as the first reference date, date 60 ‑ it would mean that the principle can be the subject of payment claims at any time. At any time when the claimant thinks there is a reference date, it can make a claim and it would mean that the respondent to the claim would need to put on a payment schedule and proceed to an adjudication. If it did not, it would be at risk of summary judgment under sections 14 and 15. We say no.
We say in those circumstances there is no entitlement to a progress payment and the question as to whether there is would be a matter for the Court, otherwise the legislation becomes a vehicle for oppression. The proposition that it is merely for an adjudicator to determine whether there is an entitlement is not something which we respectfully submit is found in the statute.
KEANE J: I suppose the question, in a sense, is whether the adjudicator has the power finally to determine the scope of his power. He can proceed on a provisional basis if he makes an error of law in that regard and then his determination is of no account and a court can say so.
Otherwise, you would have a situation where an adjudicator could, on a wrong view of what is a construction contract, come to a final conclusion that amounts are owed by way of progress payments where the statute plainly intended that there should have been no adjudication at all because the contract is not, in truth, a construction contract; or alternatively, where you have got a construction contract but where the contractor repudiates it but nevertheless claims a progress payment, the adjudicator could make a binding determination that a progress payment was due, in favour of someone who does not undertake to perform construction work.
MR CHRISTIE: Exactly, and can I take your Honours to a decision of this Court? If your Honours have the ‑ ‑ ‑
KIEFEL J: Just before you do that – but your argument would deny the adjudicator the opportunity to express an opinion, not one that is conclusive, but express an opinion about whether or not there was – he or she had jurisdiction even though he could, as Justice Keane has pointed out, be subject to challenge in that decision. Your argument would deny an adjudicator even the opportunity to consider that for himself or herself.
MR CHRISTIE: No, and forgive me for being unclear; that is not our position.
KIEFEL J: Well, I have understood you because I thought you said that the only tribunal to determine that would be the court.
MR CHRISTIE: No, the fault is probably mine, your Honour.
KIEFEL J: You meant the ultimate decision?
MR CHRISTIE: That is so, and if I could answer the question really and make it clear by reference to our supplementary bundle of authorities which your Honours should have. The case I wish to take your Honours to is the case behind tab 4.
GORDON J: What is that decision please, Mr Christie?
MR CHRISTIE: It is Public Service Association of South Australia Incorporated v Industrial Relations Commission of South Australia (2012) 249 CLR 398, and it was a case which concerned whether the Industrial Relations Commission of South Australia had jurisdiction in a matter whether there was a dispute about the existence of an industrial dispute. If your Honours turn to the judgment of the Chief Justice at page 413, there is a passage here which reflects almost exactly the way we see the role of the adjudicator where there is a dispute about jurisdiction. His Honour said at paragraph 31:
Underpinning the Commission’s decision, that it lacked jurisdiction to entertain the appeal from Commissioner McMahon, was its finding that there was no industrial dispute. That finding may be characterised as a question of jurisdictional fact. It was a matter which the Commission had jurisdiction to decide as an essential preliminary to the exercise of its substantive jurisdiction. That jurisdictional question – was there an industrial dispute in existence – allowed for only one correct answer, which was either yes or no. It was not a matter of discretion. The Commission was not authorised by the Fair Work Act to decide that question wrongly. If its answer to that question was wrong, it was acting beyond the limits of its jurisdiction. That is to say, it was acting in excess of its jurisdiction.
I think that reflects some of the comments inherent in your Honour Justice Keane’s question. So, in our respectful submission, those comments would apply to whether there is a construction contract and whether there is a reference date and whether there is a person who has undertaken to carry out construction work.
Can I just finish taking your Honours through the Act by taking your Honours to section 23 which imposes the obligation to pay the adjudicated amount? There is just one other section I wanted to take your Honours to, and that was section 32, which confirms that payments may be reversed in final proceedings.
But there is an important point to be made here and it was a point made by your Honour Justice Keane in RJ Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R at paragraph [40], and that is in many cases payments under this Act will be final for the simple reason that insolvency is a common feature in this industry, as has been recognised in the cases such as by the New South Wales Court of Appeal in the Chase Oyster Bar decision. So, because insolvency is a common feature of this industry, payments under this Act can very readily be final and irrecoverable.
Now, can I then take your Honours to the contract and there is only three provisions of the contract I wish to focus upon. The contract is relevant because the reference date for the purposes of section 8 is determined in accordance with the contract and that is not in dispute in this case.
GAGELER J: Are you going to come back to the construction of section 13(1)?
MR CHRISTIE: Yes, I will, your Honour. We have referred to the key provisions in our written submissions. The first clause I wish to take your Honours to is at appeal book 64 and your Honours will see at appeal book 64 there is clause 37 at point 50 under the heading “Progress claims”, it says:
The contractor shall claim payment progressively in accordance with Item 28.
Your Honours will find item 28 on page 81and it says at item 28:
8th day of each month –
Now, just pausing there, putting the Act aside, just looking at the contract, the Court of Appeal held that under this contract once the contract terminated there was no entitlement under this contract to make progress claims, under the contract. Why? Because when one reads 37 and item 28 together, upon termination 37 has no effect and, therefore, item 28 has no work to do.
The only other provision I wish to take your Honours to is clause 39 which your Honours will find at clause 67 – at appeal book 67 I should have said. This is the clause which deals with the alternative hypothesis that my client exercises its rights to validly take all the remaining work out of the hands of the first respondent and your Honours will see on page 68 there is reference to clause 39.4 which provides that payment is suspended when that occurs. That was the one issue upon which my client was successful in that all three judges who considered the matter concluded that there were no reference dates following the exercise of my client’s rights to take all the work out of the hands of the respondent. I need to take your Honours back to those clauses when I deal with the second and third issues in a little bit more detail.
Can I just then turn very quickly to the factual background? There is no real dispute and the facts are not in any way complex. Your Honours will find them conveniently set out on page 337 and at point – I withdraw that. At page 337 of the appeal book, paragraph 6, the first event was my client:
issued a show‑cause notice under cl 39.2 ‑
Then, the next paragraph the first respondent – I withdraw that. My client then:
purported to exercise its rights –
to take all the work out of the hands of the first respondent. The first respondent, Lewence:
treated that conduct as a repudiation of the contract and purported to . . . terminate the contract.
Then, on 4 December, that is the day of the purported payment claim. Can I then now turn to the ‑ ‑ ‑
GORDON J: They served a payment schedule in response to that payment claim.
MR CHRISTIE: Yes. That is so. Can I then now turn to the three ‑ ‑ ‑
GORDON J: And that was under the Act – purportedly a step taken under the Act?
MR CHRISTIE: To protect itself.
GORDON J: Yes.
MR CHRISTIE: Yes. Indeed, it actually raises an interesting point, your Honour, because if my client had not served the payment schedule and taken the point, there is no reference date, Lewence undoubtedly would have proceeded under section 14(4) and 15 to recover the claimed amount in the summary judgment application. The question arises, would my client have been entitled to raise the point – there is no reference date? And, in our respectful submission, it would have been entitled to raise that point. That supports the proposition, in our respectful submission, that it is a jurisdictional issue.
Can I take your Honours to the first ground of appeal which your Honours will find at page 419 where we say – it is in paragraph 2 but it is the first ground:
The Court erred in concluding that the existence of a reference date to support a payment claim . . . is not a jurisdictional fact (and that hence it is for an adjudicator under the Act to determine).
This was addressed by the learned primary judge at appeal book 338 and your Honours will see at 388, paragraph 13, he refers to our proposition that there was a jurisdictional error. Then at 345, paragraph 40, first line:
on the interpretation which I prefer, the question whether a reference date has arisen under a construction contract raises a jurisdictional fact which, if there is a challenge to the adjudicator’s determination, will have to be determined by the Court.
I have already taken your Honours to the primary judge’s construction of section 13 which we adopt. Then the main judgment in the Court of Appeal was delivered by her Honour Justice Ward. The issue is probably best succinctly expressed by his Honour Justice Emmett. If one turns to appeal book page 400, we would ask your Honours to note the very last line of page 400:
First, it contended that the Adjudicator made a jurisdictional error –
et cetera. Now, turning to her Honour’s reasoning, if I can commence at appeal book page 386, her Honour refers to a number of authorities including Queensland authorities and decisions at first instance in New South Wales. Those authorities are consistent with or supported by the appellant’s position.
Just pausing there, returning to a matter raised by your Honour Justice Gordon, until the decision of the court below, the dominant position in New South Wales and the position as it still pertains in Queensland is that it is a matter for the court to determine reference dates. There has been no evidence of any flood of litigation of the type suggested by my learned friend’s submissions as a result of that interpretation. In fact, we can find no evidence that it has caused any problems in the operation of the Act whatsoever.
GAGELER J: Was the Queensland Act amended in the same way as the New South Wales Act?
MR CHRISTIE: It contains exactly the same words, “or who claims to be”. I do not think it was amended. I think it was introduced, if I am not wrong, but I stand to be corrected on that. In fact, no, it was introduced in 2004 and so it just adopted section 13(1) which in our New South Wales form was amended in 2002. So, after referring to the Queensland and New South Wales decisions which the court departed from – excuse me for just one moment ‑ your Honours will see her Honour’s reasoning process in paragraph 61 which really does go to the question as to who is section 13(1) referring to when it says:
“a person referred to in s 8(1)” –
I have already made submissions to your Honours why the approach by Justice Ball as a matter of statutory interpretation is preferable.
Now, to return to your Honour Justice Gageler’s question about 13(1), in our respectful submission, the Court of Appeal misunderstood the purpose and effect of the amendment to that section. We respectfully submit that the purpose and effect of that section was not to enlarge or change the balance of power, if I can use that term, between the court and the adjudicators. The starting point of the Court of Appeal’s discussion of this is found at page 380.
GAGELER J: Can you just give me the bottom line? What do you say the words “who is or claims to be entitled to a progress payment” signify?
MR CHRISTIE: “Who is or claims to be entitled to a progress payment”?
GAGELER J: Yes. I mean, they are the problematic words. What do they mean? Why are they there? What do they tell us?
MR CHRISTIE: Well, I need to answer that question by taking your Honours through this first, if your Honour does not mind, and that will explain what we say it ultimately does mean.
GAGELER J: Just let me into the secret. Where are we going?
MR CHRISTIE: Okay, it ‑ ‑ ‑
GAGELER J: What is the bottom line?
MR CHRISTIE: It means a person who claims to be entitled for work which they say they have carried out but it does not mean a person who – it does not mean that the claim is valid and can lead to an ultimate conclusion of an adjudication when there in fact is no entitlement under section 8. It is a gateway provision which allows the adjudicator to determine the matter in the way described by Justice French.
GAGELER J: Is another way of putting your submission that it just acknowledges that the amount ultimately determined by the adjudicator under section 22 might be zero?
MR CHRISTIE: Correct, exactly. That is exactly what we say, bearing in mind the words “if any”.
GAGELER J: Yes.
BELL J: And does your argument also draw on the circumstance that the amendment that introduced the words “or who claims to be” in sub (1) also introduced the words “a person referred to in section 8(1)”? That was the matter, as I read the primary judge’s reasons, that his Honour took into account in support of a conclusion that the claimant must identify all of the matters in sub (1). Does your argument ‑ ‑ ‑
MR CHRISTIE: That is our argument; that is the primary judge’s approach, your Honour.
KIEFEL J: Is it also your argument that section 13(1), even as it refers to someone who claims to be entitled rather than someone who is in fact or in law entitled to a progress payment, nevertheless must be making a claim to what is constituted as a progress payment?
MR CHRISTIE: Yes, exactly.
KIEFEL J: Not something else.
MR CHRISTIE: Now, can I take your Honours just back to Justice Ward’s judgment to explain why, in our respectful submission, the effect of the amendment and the meaning of the amendment was misunderstood. Your Honours will see at page 380, her Honour refers to a decision of Justice McDougall – this is page 380 at about point 28 – that:
the words “or who claims to be” were inserted into s 13(1) to overcome the contrary effect of the decision of this Court in Brewarrina Shire Council v Beckhaus Civil –
Now, that statement, we say, is correct except that the reference should have been to the judgment at first instance because the appeal in Brewarrina post‑dated the amendment. But we submit that the amendment is to be read as follows: first, it does no more than expand a class of persons who have standing to serve a payment claim ‑ ‑ ‑
GAGELER J: How? How does it expand the class of persons?
MR CHRISTIE: Well, that was the purpose of it. It probably does not achieve that end, but it was the purpose when one goes to the discussion paper which is referred to in the second reading speech. Secondly, we say really it was out of abundance of caution for reasons which I will explain in a moment. There was a real concern at this stage of the Act that there was an argument available to principals which would undermine the rights of claimants.
GAGELER J: And the argument was?
MR CHRISTIE: The argument was that in order to be entitled to make a claim under the Act, one needed to have a crystallised entitlement to a progress payment under a contract, so like having a superintendent’s certificate, for example. It is best explained, your Honour, if I take you to the Brewarrina Case itself, just one paragraph. Your Honours, will find it in the supplementary bundle of cases, I hope or trust your Honours have that.
It is the first case. If your Honours turn to paragraph 10 ‑ before I take your Honours to paragraph 10, I should point out that there have been hundreds of cases on this Act and analogue Acts – that is, Acts in all States except for Western Australia, which has its own model. On my count, I think this was the fourth case. These were very early days of the Act. An argument was put in Beckhaus v Brewarrina at paragraph 10. Your Honours will see that the learned trial judge in that case referred to it where he said this:
It was also suggested that on the proper construction of the Act the contractual claim had to be payable before the right to make a statutory claim arose.
KIEFEL J: What did that actually mean in context?
MR CHRISTIE: It meant in the context in that case that it was argued – and your Honours will see the argument in the previous paragraph. It was not a strong argument but the argument was that there could be no entitlement even to make a claim under the Security of Payment Act unless one had either a superintendent certificate or one had made a valid progress claim under the contract.
Now, such a submission the judge said was clearly untenable and he held that at paragraph – I will give your Honours the reference in a moment – but his Honour held that it was clearly untenable.
GAGELER J: The argument being, if I can just paraphrase it, that there had to be an actual objective contractual entitlement.
MR CHRISTIE: Exactly, which would mean, for example, if the contract said, you are only entitled to the progress payment that I certify as owner – which actually exists, courts like that do exist – it would mean that, well, you are not entitled to a contractual progress payment, therefore, you cannot make a claim under the Act.
This argument was given short shrift by the judge. The difficulty is that between the hearing commencing in this case ‑ and I ask your Honours to note that this was at a very early stage of the Act ‑ between the hearing commencing and the judgment being handed down, a discussion paper was handed down where they dealt with exactly the same issue.
I might take your Honours to that discussion paper because your Honours will find it in my learned friend’s bundle. This is the discussion paper referred to in the second reading speech. Your Honours will find it behind tab 6 of my learned friend’s folder.
KIEFEL J: Is this the discussion paper which led to the ‑ ‑ ‑
MR CHRISTIE: Yes, your Honour.
KIEFEL J: It was taken into account?
MR CHRISTIE: It was. It is referred to in the second reading speech, as we referred to in our reply submissions. On this issue, if your Honours turn to page 18, there is the issue and it says:
There have been arguments that the right to serve a payment claim under the Act is dependent on an entitlement to a progress payment under the contract.
Now, that is the only issue. There are no other issues. Of course, there had been an argument to that effect – the precise argument that had been made in the Beckhaus v Brewarrina proceedings. It was to address that argument that the amendment was made. So, to answer your Honour Justice Gageler’s question, what was the effect – in our respectful submission, the amendment was made out of the concern which, according to the judge in Beckhaus v Brewarrina was not a concern at all. But, of course, at that stage, the matter had not been the subject to any appeal decision so, really, the amendment was made out of abundance of caution.
GAGELER J: And, on your submission, adds nothing to the scheme of the Act.
MR CHRISTIE: Correct.
GAGELER J: It does not really expand those who are able to make a claim, in your submission.
MR CHRISTIE: That is so, your Honour. And, my learned junior has reminded me, the rejection of the submission in Beckhaus v Brewarrina is in paragraph 63.
KEANE J: So, the effect of the amendment was to make it clear that the provision the Act made for a progress payment entitlement did not require the contract to make provision for that entitlement but it did still require the construction contract.
MR CHRISTIE: It still did. But, what it did not require was for a claimant – as a condition preceding, if I can use that term – to making a payment under the Act to establish that it had a contractual entitlement which, depending on the contract, could be completely in the hands of the principal. Not all contracts provide fair provision for progress payments.
So, in our respectful submission, when one looks at the purpose of the amendment, it was not to change the balance of power between adjudicators and the court. It was to meet an argument – and it is clear the author of this knew exactly what was going on in Beckhaus v Brewarrina because the exact issue stated in the discussion paper was the argument made in Beckhaus v Brewarrina.
BELL J: Did the Court of Appeal, in that case, come to a different view on that issue?
MR CHRISTIE: Your Honour, the Court of Appeal – and, again, I emphasise this is early days of the Act ‑ the Court of Appeal acted on the assumption and premise that the argument put before the trial judge in Beckhaus v Brewarrina was correct because the appeal was allowed. The appeal was allowed solely on the basis that there was no contractual entitlement and, therefore, without any express reference to the Act, the statutory entitlement was overturned.
BELL J: So that explains her Honour Justice Ward’s reference in paragraph 29.
MR CHRISTIE: Correct. I am certainly not being critical of anybody. It is actually a reference to Justice McDougall’s reference to Beckhaus v Brewarrina.
BELL J: Yes.
GAGELER J: And, it is actually accurate. What is said in her Honour’s judgment is accurate. It does overcome the contrary effect of the decision of the Court of Appeal in that case.
MR CHRISTIE: Yes, it does. It does. But, it was not introduced to do that. That is all I am saying.
GAGELER J: Should we look at the Court of Appeal’s decision to understand that?
MR CHRISTIE: Your Honours will find no reference to the Act. I know because I was in that case. There was no reference to the Act. For some reason, the Court of Appeal’s decision relies exclusively on the contract. There was – without giving too much history – there was an attempt to relist the matter by the aggrieved contractor which was not permitted.
GAGELER J: And, there is no purple passage we should be aware of?
MR CHRISTIE: No, there is not.
KIEFEL J: But, just so I am clear about this, you are saying the Court of Appeal’s decision in that case was not the basis for the amendment.
MR CHRISTIE: No, because the Court of Appeal decision was handed down after the amendment. In fact, I think the hearing was after the amendment.
GAGELER J: But all you are saying there is that – all you are doing is making a temporal point.
MR CHRISTIE: That is all. I do not want to make anything of it to be honest. We know what the issue was in Beckhaus v Brewarrina, it is replicated in the discussion paper. It was dealt with by amendment. One cannot fault the draftsman in attempting to overcome what was perceived at the time to be a problem. In the end, in our respectful submission ‑ ‑ ‑
GAGELER J: I am sorry, it was a problem. It was a problem if you accept the outcome in the Court of Appeal’s decision in Brewarrina.
MR CHRISTIE: I will withdraw what I said. It was a problem because, as I said earlier, there was only the first instance decision to go on. Your Honour is entirely correct, entirely correct, I apologise for that. Now, the only remaining point I really wish to make about jurisdictional fact is this. Section 13(5) is a section I took your Honours to earlier and it says:
A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
Now, the parties are in agreement and the Court of Appeal proceeded on this premise in accordance with authority that whether there is a contravention of section 13(5) raises a jurisdictional issue. There is a prohibition and it is for the court to determine whether or not a payment claim, a purported payment claim contravened section 13(5).
GAGELER J: So what is the authority you are referring to there?
MR CHRISTIE: It is a decision of Justice Allsop in Dualcorp which is in our authorities, your Honour. It is at tab 2 of our list of authorities - Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190 at paragraph 14 in the judgment of the President Justice Allsop. It was noted also in the court below at paragraph 389 in the judgment of Justice Ward – if your Honours go to page 389, the very last new paragraph, the first respondent:
Lewence did not suggest that compliance with s 13(5) was not a matter going to the jurisdiction of the adjudicator.
So, there is no disputing that.
KIEFEL J: But on the other aspect of your argument, a question under section 13(5) does not arise because in fact – I am sorry, it arises because there was, as a matter of procedure, payment claims bearing the same – referring to the same reference date.
MR CHRISTIE: No, I would not say that. What we say is that the payment claim, the subject of these proceedings, if we are right in saying that there was no reference date on 8 November that is the ultimate issue.
KIEFEL J: That is really what I was coming to. It is not really a question of there being two payment claims for the same reference date. It is really your argument, is it not, that it cannot possibly refer to work prior to 8 October. It refers to work after that date.
MR CHRISTIE: I think that is my friend’s suggestion. We say that the payment claim states “for work up until 8 October”. It also includes work which we are willing to concede was after 8 October.
KIEFEL J: You say it combines both?
MR CHRISTIE: Well, the payment claim on its face does, but could I ‑ ‑ ‑
KIEFEL J: So, anyway, you say it is a section 13(5) question?
MR CHRISTIE: Yes, and I am not really addressing the 13(5) argument at the moment. What I am doing is merely to say that where section 13 applies in many cases the court will have to decide what the reference dates are. If the point is taken – and the present is such as case ‑ ‑ ‑
KIEFEL J: Yes, I see.
MR CHRISTIE: ‑ ‑ ‑ that there had been two payment claims with respect to the same reference date, the first question that has to be decided is, well, what are the reference dates? So, in our respectful submission, it is rather odd that in a section 13(5) case the court has jurisdiction to determine a reference date but in other cases, on my friend’s submission, it does not, and it gives rise to the likelihood of conflicting decisions and this is such a case.
If the Court were to accept our submissions on 13(5), the Court would be making a decision as to what the reference dates are, and that decision may be in conflict - in fact, if our submission is accepted, will be in conflict - with what the adjudicator had determined.
So, in our respectful submission, that is one of the many factors we have referred to in our written submissions as to why Parliament would not have intended such an outcome. Parliament would not have intended the possibility of conflicting decisions between adjudicators and courts. The Act does not say, well, the adjudicator can consider reference dates but so can the court where 13(5) is determined. In our respectful submission, that would give rise to a conflict and one can assume Parliament did not intend that.
KIEFEL J: Just so I am clear about this, had there been a payment claim or a progress payment made using the reference date 8 October before this one?
MR CHRISTIE: Yes, there had been.
KIEFEL J: There had been?
MR CHRISTIE: There had been, absolutely, yes.
KIEFEL J: Is that the reference at paragraph 31 of your outline? Is that the appeal book references to that claim?
MR CHRISTIE: Yes, that is correct, paragraph 31. Your Honours, just before leaving the reference date issue, there is just one case which postdated the decision of this Court which I would wish to take your Honours – which I should have said postdated the decision of the Court of Appeal. If your Honours go to the appellant’s supplementary bundle of authorities, you will see a case we have added in the sleeve, Saville v Hallmarc Construction, and that was a case where there was a dispute about the existence of a reference date.
GORDON J: What is the proposition we get out of this case, Mr Christie?
MR CHRISTIE: The proposition is that it is for the court to determine the reference date, and I would only ask your Honours to note in the headnote, paragraphs 1, 2 and 5(d). The Victorian Act contains a section exactly like our 13(1), “a person . . . who is or claims to be entitled to”, and the Court of Appeal held in this context that it is ultimately for the court to determine whether there is an available reference date. Now, could I then turn to the second issue?
KEANE J: I take it that they did not refer to this decision of the Court of Appeal of New South Wales.
MR CHRISTIE: No, they did not, your Honour. This matter was heard before the Court of Appeal’s decision but the judgment was handed down after.
GAGELER J: So does this case somewhere capture your argument?
MR CHRISTIE: It does, your Honour.
GAGELER J: Does it deal specifically with the language of section 13(1)?
MR CHRISTIE: No, it does not, it does not. I cannot say it does. That is why it is not really at the heart of our submissions, your Honour, to be frank, but it does provide some support. The Court of Appeal in Victoria considered this to be – when looking at the overall balance of power between adjudicators and courts determined that this was a matter for the court.
GORDON J: Well, that is sort of right, is it not? I have not read this and it is dangerous always to work off the headnote, but what it talks about is the supervisory jurisdiction. It does not prevent parties, in effect, permitting an adjudicator, as Justice Keane put to you, looking at and determining these questions. It may be, as I think you accepted when I put it to you earlier, subject of review at the end.
MR CHRISTIE: I accept that, your Honour. I do accept that. There is nothing your Honour has said which I disagree with on that, in the sense put by the Chief Justice in the Australian Public Service Association Case.
GAGELER J: Well, I mean, the sense is pretty straightforward. The sense is that people can do things – whether those things have any effect in law can be determined by a court.
MR CHRISTIE: Yes.
GAGELER J: That is what it amounts to.
MR CHRISTIE: Yes, your Honour. Now, could I then turn to the second and third issues? If we are right in our conclusion that it is a matter for the court to determine whether or not there is a reference date, the court below considered both hypothesises. It held on one hypothesis in my client’s favour, but on the other hypothesis held in favour of the other party and we must be successful on both hypotheses to be successful in this appeal.
Now, the first hypothesis was that the contract was terminated by the first respondent, and your Honour will find that in paragraph 3 of our notice of appeal, where we say the court erred in holding that a reference date arose after determination. Now, your Honours will remember that the reference date was the eighth of the month. The payment plan was made on 4 December. The contract was terminated, on this hypothesis, at the end of October.
KIEFEL J: Where is the Court of Appeal’s finding in that regard?
MR CHRISTIE: Your Honours will find that at – commencing on appeal book page 391. The key paragraph – on page 393, paragraph 82, and it is an important paragraph where her Honour says:
Had it been necessary to determine, I would have concluded that once the contract was terminated the contractual right to make further progressive payment claims under cl 37.1 came to an end.
The only thing your Honours know about the 8 October payment claim is that one existed and it was served. Your Honours know nothing more about it because for some reason my learned friend’s predecessors in brief did not tender it. But, in my respectful submission, in circumstances where it was agreed by the parties – and I have taken your Honours to the references in the judgments to this effect and to the payment claim itself – in circumstances where it was a claim for work up to and including 27 October, it cannot possibly sensibly be regarded as a payment claim in respect of 8 October 2014.
Unless your Honours find otherwise, unless your Honours find that it should be characterised as being such a payment claim, then your Honours would dismiss that ground of appeal in the same way that the Court of Appeal did and in circumstances where the primary judge did not address that point and did not find in favour of my friends.
What 13(5) is dealing with is the concern of the risk of what is described variously as repeat claims or repetitive payment claims, and can I briefly or very quickly take your Honours back to the discussion paper behind tab 6 of my client’s bundle which explains the mischief to which section 13(5) is directed.
Page 21 of the discussion paper deals with this very issue. Your Honours see towards the top of page 21 the concern is with repeat payment claims and the concern that under the original Act there was no limit as to how many payment claims can be made for any particular construction work.
Now, that issue does not arise here because the impugned payment claim is for a different amount of construction work to the preceding one in that the impugned payment claim makes a claim for work between 8 October and 27 October and one can reasonably assume, although it is difficult to make a finding about this, that the 8 October payment claim was for work up to probably 7 October 2014. The reason I say that is that the contract when it sets its reference dates under clause 37.1 says “make your payment claims on the eighth day for work performed up until the seventh day of that month”.
But your Honours see at about point 3 of the page that the concern that the author of the discussion paper had and which led to an amendment that the Parliament made was the concern that the same payment claim would be repeatedly served over a period of time. I have already taken your Honours to the payment claim itself and your Honours have seen that it claims for additional amounts of money and it claims for additional work on top of the preceding payment claim.
So, this payment claim on any view of the world and regardless of the views that your Honours take to the other questions in the case, the construction questions, 31(1) question, 22(1) question, is not a repeat payment claim of the kind to which the discussion paper is concerned.
What the discussion paper seemed to be concerned about is someone serving a payment claim on 8 October which is responded to by a payment schedule, serving another one on 9 October, perhaps at a different location, one on the 10th, one on the 11th, one on the 12th, that are exactly the same, hoping that one of the 15 payment claims is not responded to by a payment schedule and then saying, “Right, I’ve caught you in a trap. Section 14(4) is now enlivened and I have a right to claim a statutory debt”, even though you might have served a payment schedule in response to the first payment claim for 8 October, the second one for 8 October, the third one for 8 October and the fourth for 8 October.
Section 13(5) is dealing with a completely different issue than that which is raised by the case at Bar. In my respectful submission, my learned friend’s case will turn on the section 13(1) question or maybe the section 22(1), although noting what your Honour Justice Gageler said about that question rather than on the section 13(5) question which did not find favour any way below.
The final thing I simply need to raise in answer to something my learned friend said is my friend handed up the case of Saville v Hallmarc - I think he handed up the Building Construction Law Report version of it. It is also reported at 47 VR 177. This is really in answer to a question your Honour Justice Gageler asked my learned friend.
This case, in my submission, is of no assistance at all to the case at Bar. Can I demonstrate why? If your Honours go to paragraph [2] of the decision which in the BCL version is page 99, in the Victorian Report version is on page 180, that summarises the issue that was before the court there and in the fifth line there is a sentence starting with the words “In particular” – I am in paragraph [2] on page 99 of the Building Construction Law Reports. On the fifth line:
In particular, the adjudicator found that the first payment claim was not out of time under the Act . . . The first payment claim was thus treated by the adjudicator as having been made within the period of three months required under the Act -
the Act referred to here, being the Victorian Act. Your Honours see the footnote, being footnote 6 which is a reference to section 14(4)(b). That paragraph has no counterpart in the New South Wales Act. Can I just show your Honours it very briefly is in my client’s bundle behind tab 11. This is the Building and Construction Industry Security of Payment Act 2002 (Vic). Page 24 is section 14 which is the equivalent of section 13 in the New South Wales Act.
In answer to one of the questions your Honour Justice Gageler asked my learned friend, the case throws no light on section 14(1) which is the equivalent of section 13(1) of the New South Wales Act. Rather, the case turned on subsection (4) on page 25 which says that a payment claim may be served only within a “period of 3 months”.
It is not hard to see why the Victorian Court of Appeal regarded that to be a jurisdictional matter in light of the words “may be served only”. It,
with respect, has nothing to say about how section 14(1) should be construed in the Victorian Act or the counterpart of the New South Wales Act, namely, section 13(1). Unless I can assist the Court further, those are my submissions.
KIEFEL J: Thank you. Reply, Mr Christie.
MR CHRISTIE: May it please the Court. Just sticking to that case of Saville, I would only ask your Honours to note paragraph 11. My friend read from subsection (4)(b) and I think he omitted to use the words “after the reference date”. Having said that, I acknowledge to the Court that the case is concerned with different provisions and to answer your Honour Justice Gageler’s early question, it does not cast light on section 13 or its equivalent.
Could I take your Honours very quickly to a number of points. Firstly, can I take your Honours back to the Act. The first section I just wish to address your Honours on very briefly – I would ask your Honours to note section 23(2) which my friend relied upon. I would only ask your Honours to note that the term “an adjudicated amount” is defined in section 4 and it is defined to be an amount:
that an adjudicator determines to be payable, as referred to in section 22.
So it does take one back to section 22. The next section I wish to take your Honours to is section 8. In relation to the termination issue, my learned friend put it to your Honour that we make no submissions referable to the contract on this point – that is, on the scenario that there has been a termination. That is incorrect. When your Honours look at section 8(2), the question posed there in 8(2)(a) is:
a date . . . on which a claim for a progress payment may be made.
So one asks oneself, is there a date on which a claim for a progress payment may be made? Now, my learned friend does not take issue with the Court of Appeal’s decision in Theiss v Lane Cove Tunnel Nominee to the effect that the exercise is to ask is there a date upon which a claim under the contract for a contractual progress payment can be made?
If that is the question in this case, it is very simple. One goes to the contract and asks oneself is there a date, in this case 8 November, on which a claim for a progress payment can be made under the contract. The answer is conceded to be no. Her Honour Justice Ward held that it was no and, in our respectful submission, that provides the answer to section 8(2)(a).
One then has the discussion about the discussion paper and I am not suggesting my friend has done this but it does come close to reading that discussion paper as if it were a statute. Now, when one goes to the discussion paper, there is one issue which was referred to, and if I could just take your Honours to it very quickly, and I took your Honours I know earlier on on page 18 of the discussion paper. I will not repeat reference to the issue, but it is clear from this discussion paper that the purpose of the amendment was to overcome the Brewarrina Shire Council problem.
The problem in Brewarrina Shire Council was – or the argument was that there were contractual hoops through which the contractor had failed to go through and that, in our respectful submission, was the purpose of the amendment. Now, looking at the discussion paper on the bottom of page 18, my friend picks up these words – and again it is important not to read it as a statute. It says:
There is a second aspect. It is the question of whether, if there is no entitlement to an amount (either under the Act or the contract), a claim can be made. Is the entitlement to make a claim [dependent] upon the existence of an entitlement to a progress payment of some amount, no matter how small?
Then it provides this example:
For example, if, because work is defective, there is no amount due to the claimant, can the claimant make a valid payment claim?
That is really picking up the example which I think your Honour Justice Gageler picked up before your Honour was even taken to this discussion paper, and that is the case where the value of the work is zero because it is defective.
In our respectful submission, there is nothing in this discussion paper to support the approach adopted by the first respondent to the purpose of the amendment to section 13 and we think, with respect, the courts who have considered this were correct to say that its purpose was to overcome the Brewarrina problem.
If I could then turn to the proposition which was made for the first time and that is that both section 8(2)(a) and 8(2)(b) can apply. This has arisen for the first time in the past half an hour. To answer your Honour Justice Gageler’s question, yes, there had been decisions in New South Wales which have considered this decision and they have weighed in favour of the argument that, no, both cannot apply to one contract. One is either in 8(2)(a) country or 8(2)(b) country and that is supported by the text. It refers to the matter. If there is no express provision with respect to the matter, what is the matter? That is the provision of reference dates. Excuse me for one moment, your Honours.
BELL J: Are you checking for those authorities or do we find them in your submissions?
MR CHRISTIE: No, because the matter only arose in the past 25 minutes, your Honour.
BELL J: I am not being critical, I am just wondering where we identify those authorities?
MR CHRISTIE: I can give one off the top of my head. It is a case called Patrick Stevedores which is referred to in the decision of the Court of Appeal.
KIEFEL J: Perhaps you could provide it by way of a note, a note just listing the authorities.
MR CHRISTIE: Just the authorities, your Honour, and the references?
KIEFEL J: Yes, within seven days and perhaps if there are any additional or counter authorities the respondent could do so likewise within a further seven days.
MR CHRISTIE: So, we will provide the references without any text, just the references and paragraph numbers.
KIEFEL J: With page numbers.
MR CHRISTIE: Of course. Can I just, before leaving the discussion paper, hopefully for good, take your Honours to page 19 of the discussion paper? Your Honours will note the “Proposed Action”. My friend seemed to derive some support, again reading this as if it were some statute. He says, well, the words in parentheses identify the class of persons whom the amendments were intended to give standing to and he then observes that there is no reference to reference dates. Then it seems to follow from that that, well, that explains why section 13 ought to be read the way my learned friend has said it ought to be read. We would just note that Parliament did not use the words in parentheses on page 19 and I do not think one should be reading this as if it were a statute.
One minor point. My friend draws an analogy between a payment claim and the commencement of proceedings. It is important to note there is a material difference and that is, by force of the Act, the failure to provide a payment schedule results in the entire sum being due and payable. That really has no analogy in relation to the commencement of court proceedings under statutes governing courts that we are familiar with. One does not automatically have an automatic entitlement to an amount claimed in the statement of claim merely because there has been no payment schedule – defence, I should say.
GORDON J: Absence of appearance.
GAGELER J: Some courts provide the default judgment, do they not?
MR CHRISTIE: They do, but for example, one would be entitled if one is out of time to seek the indulgence of the court to put on a late defence, for example. I think the analogy is a weak one, we would respectfully submit, bearing in mind that the time limit for a payment schedule is maximum of 10 days.
My friend made a number of submissions about the practical effect if it were to be held that reference dates were jurisdictional, and we simply say that until the decision of the Court of Appeal, the predominant view in New South Wales and the view in Queensland as we speak is that they are jurisdictional. So, in our respectful submission, the proposition that it somehow restrains the ability of contractors to recover payment, in my respectful submission, is a theoretical submission and in practice the Acts have not operated in a way which have achieved that end.
Just excuse me, I will be very quick, your Honours. Just finally if I can just touch very quickly on the section 13(5) point, I think my learned friend has mischaracterised the parties’ agreement recorded by her Honour at AB 337, point 8. There was no acknowledgement as far as I am aware of any typo. Rather, there was an acknowledgement that the payment claim included work undertaken after 8 October. There is a difference.
KIEFEL J: It did not say “included”, it says “related to”.
MR CHRISTIE: Excuse me?
KIEFEL J: It is agreed that the payment claim related to work done up to 27 ‑ ‑ ‑
MR CHRISTIE: Up to 27 October. Now, the payment claim itself refers to a specific part of the claim as having been performed up to 7 October. It does not refer to the time when the balance of the work was performed but we are happy to acknowledge, even though it does not appear on the face necessarily, that it was performed after that date.
GAGELER J: So, is there a typo or not?
MR ROBERTSON: Yes, there is.
MR CHRISTIE: Well, can I just ‑ because I was not at the trial, might I just obtain quick instructions? I am not aware of any acknowledgment of a typo, your Honour.
GAGELER J: Well, this is the High Court.
MR CHRISTIE: I appreciate that. I am not saying there was no typo. The question is whether it was acknowledged that ‑ ‑ ‑
KIEFEL J: If there was a concession and there is some dispute about it, it should be resolved. This Court should not be in the position of receiving evidence to resolve this. I expect counsel should resolve this.
MR CHRISTIE: Yes, I mean, regrettably, we took the point that this ‑ ‑ ‑
KIEFEL J: No, no, you do not need to talk further about it. Counsel must resolve whether or not there was a concession.
MR CHRISTIE: Does your Honour mean right now?
KIEFEL J: Yes.
MR CHRISTIE: Or in the form of a note?
KIEFEL J: No, I think we should adjourn briefly while counsel discuss the matter.
MR CHRISTIE: Certainly, your Honour.
AT 4.07 PM SHORT ADJOURNMENT
UPON RESUMING AT 4.15 PM:
KIEFEL J: Yes, Mr Robertson.
MR ROBERTSON: I thank the Court for that indulgence. Can I take the Court to appeal book page 127 and can I read out the agreed position
between myself and my learned friend, Mr Christie? Although the payment claim commencing at appeal book 127 states that that document is a progress claim for WUC – that is to say, work under contract – carried out to 7 October 2014, it was in fact a claim for work carried out to 27 October 2014, including work performed before 7 October 2014.
Can I just explain that? So it is agreed consistent with what Justice Ball recorded and Justice Ward recorded that despite the payment claim indicating 7 October it was for work up to and including 27 October but it was cumulative in the sense that I have already identified, that is to say ‑ ‑ ‑
KIEFEL J: And does it follow that the number there should be 27 and not 7?
MR ROBERTSON: Yes, in my submission. If it was done correctly, then yes.
KIEFEL J: Well, we will not enter into this any further. The agreement in terms that you have read out will be taken into account by the Court and not my comments.
MR ROBERTSON: If it please the Court.
MR CHRISTIE: Your Honours, I just have one final matter to put in reply and it concerns section 13. The submission put against us was that section 13(1) only picks up characteristics of a person and that a reference date is not a characteristic of a person. Now, in our respectful submission, the answer to that is that one of the characteristics of a person which 13(1) picks up is that they are a party to a particular kind of contract. It must be a construction contract, there must be relevant undertakings having been given under the contract and, we would respectfully submit, there must be a reference date. Each of those matters goes to the contours of the rights and obligations of the person or, to put it another way, to the characterisation or the characteristics of that person. May it please the Court.
KIEFEL J: Thank you. The Court will reserve its decision in this matter and adjourn until 9.45 am tomorrow for the pronouncement of orders and otherwise until 10.00 am.
AT 4.18 PM THE MATTER WAS ADOURNED
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