State of Tasmania v Leighton Contractors Pty Ltd (No 4)
[2004] TASSC 138
•25 November 2004
[2004] TASSC 138
CITATION: State of Tasmania v Leighton Contractors Pty Ltd (No 4) [2004] TASSC 138
PARTIES: STATE OF TASMANIA
v
LEIGHTON CONTRACTORS PTY LTD
(ACN 008 893 667)
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 458/2002
DELIVERED ON: 25 November 2004
DELIVERED AT: Hobart
HEARING DATES: 16 November 2004
JUDGMENT OF: Cox CJ
CATCHWORDS:
REPRESENTATION:
Counsel:
Plaintiff: P Vickery QC, G L Sealy
Defendant: G J Digby QC, R J Manly SC
Solicitors:
Plaintiff: Director of Public Prosecutions
Defendant: Dobson Mitchell & Allport
Judgment Number: [2004] TASSC 138
Number of paragraphs: 11
Serial No 138/2004
File No 458/2002
STATE OF TASMANIA v
LEIGHTON CONTRACTORS PTY LTD (ACN 008 893 667) (NO 4)
RULING COX CJ
25 November 2004
The defendant ("Leighton") seeks orders for the payment of interest on sums of $1,832,000 and $76,977 which were deducted by the plaintiff ("the State") from moneys otherwise payable to Leighton. The first sum was deducted by way of purported liquidated damages for delay in completion and the second represents three items in respect of outstanding documentation, certain outstanding defects and some legal costs incurred by the State in respect of a Release demanded by it from Tasrail on whose leased Railway Reserve Leighton had encroached.
The provision of Vol 1 of the Project Deed which governs the payment of interest is cl 12.9[1], which provides:
[1] [CB 1/81]
"12.9 Interest
(a)The Principal will pay simple interest at the Commonwealth bank rate for overdrafts over $100,000 on any:
(i)amount which has been set out as due in a progress certificate under clause 12.3(c), but which is not paid by the Principal within the time required by this Deed; and
(ii)damages (excluding agreed damages payable under clause 9.6).
(b)This will be the Contractor's sole entitlement to interest including damages for loss of use of, or the cost of borrowing, money."
None of the amounts of money on which interest is sought by Leighton to be paid by the State, it is submitted by counsel for the State, can be said to be "an amount which has been set out as due in a progress certificate under clause 12.3(c), but which is not paid by the Principal within the time required by this Deed". While it is true that no such individual amount is set out as due in a specific progress certificate, each amount formed portion of a greater amount which was set out as due in such a certificate. In my view, the unpaid balance of such greater amount falls within the category described in cl 12.9(a)(i). Were a sum of $100,000 set out as due in a progress certificate and not paid, it would undoubtedly fall within the subclause. Had all but $1 been withheld, so that $999,000 was left unpaid, it would be absurd to suggest that the subclause did not apply because that precise figure was not "an amount which has been set out as due in a progress certificate …". There would, in any event, be no occasion for an unpaid balance to be set out in a progress certificate under cl 12.3(c), for that is a certificate issued by the Principal's Representative within 21 days of receipt of a claim under cl 12.3(a) certifying "in the case of a claim with respect to the Design and Construction Contract Sum, the progress amount due to the Contractor on account of the Design and Construction Contract Sum". If the Principal's Representative takes the view that the balance should not be paid because of a right of set off, he cannot be expected to issue a certificate that it is due.
That is what happened in this case. In respect of each of the sums deducted (including the penalty deductions progressively made and totalling $1,832,000) a progress certificate had previously been issued and the amount set out therein had been reduced by one or more of the deductions in question, leaving the latter as amounts not paid by the Principal within the time required by the Deed. They fall squarely, in my view, within cl 12.9(a)(i).
Counsel for the State argues further that the Contract, being an entire contract (see cl 1.16 of Vol 1 of the Project Deed[2]), Leighton has no right to payment of any sum under the Contract until all work required to be done pursuant to the Project Deed has been completed and that there remain significant amounts of work which had to be completed. This ignores the express revision of cl 12.3(d)[3] that:
"(d)Within 14 days of the issue of a progress certificate in accordance with clause 12.3(c) with respect to the Design and Construction Contract Sum, subject to clauses 11.8, 12.3(e) and 12.5 to 12.8 and the Design and Construction Payment Schedule, the Principal must pay the Contractor the progress payment due to the Contractor as certified in the progress certificate."
In addition, as it is common ground that payments can fall due under an entire contract provided the contract has been substantially performed, the argument ignores the fact that in December 2001 a certificate issued that the works had achieved Construction Completion[4]. I find that the works required by the Contract were substantially performed so as not to justify non-payment on the basis that the Contract had not been performed in its entirety.
[2] [CB 1/26]
[3] [CB 1/78]
[4] [CB 47/251]
It being my view that the deductions are covered by cl 12.9(a)(i), it is unnecessary to consider whether or not, in any event, they can be said to be covered by the term "damages".
An alternative claim is made for statutory interest under the Supreme Court Civil Procedure Act 1932, s34. This provides:
"34 (1) Upon all debts or sums certain recovered in any action, or on the trial of and issue of fact, the jury, or (in cases where there is no jury) the judge, or (in the case of an assessment of damages) the jury, judge, officer of the court, judge of an inferior court of civil jurisdiction, or referee making the assessment, may allow interest to the party recovering such debt or sum at the prescribed rate –
(a) from the time when such debt or sum was payable if payable by virtue of some written instrument and at a date or time certain; or
(b) if payable otherwise, then from the time when demand of payment was made in writing, giving notice to the debtor that interest would be claimed from the date of such demand or any later date.
(2) For the purposes of subsection (1), the prescribed rate is the rate per centum per annum that is from time to time specified in the Rules of Court."
This section is designed to give creditors the opportunity of recovering up to the statutory rate of interest on all debts or sums certain where the parties have made no provision in respect of interest. Where the parties have made such a provision, it would be anomalous to allow a higher rate of interest than that provided for by the parties themselves. In the present case, the parties provided a formula which can be applied to the instant circumstances and said in cl 12.9(b) that it would constitute the contractor's sole entitlement to interest. It appears that the statutory rate may be slightly more favourable to Leighton than the rate set out in cl 12.9. If that be the case, and if there is a statutory entitlement, I would, in the present circumstances, restrict its recovery of interest in the exercise of my discretion to the rate it accepted as appropriate in the contract.
Mr Vickery QC on behalf of the State submitted that, in the exercise of my discretion, I should not award interest on the sum deducted in respect of so-called liquidated damages because the penalty challenge was the subject of a relatively late amendment. I accept the submission on behalf of Leighton that the material which demonstrated the strength of that challenge emerged in the course of discovery and earlier reliance on it could not have been expected. In any event, the amount wrongly deducted was a large sum and it would be unjust not to compensate Leighton for having been wrongfully deprived of access to it. But in any event, Leighton is entitled under the express terms of the Contract to interest and, unlike the situation where reliance is placed on the statutory entitlement, I have no discretion to deny it.
Subject to confirmation of the figures handed up by Mr Digby QC for Leighton, I award interest of $503,676.06 in respect of the money withheld as liquidated damages and $18,846.72 in respect of the remaining three items, making a total sum of $522,422.78 for interest.
An application was made by counsel on behalf of Leighton after judgment was delivered that a Special Referee be appointed pursuant to the Supreme Court Rules 2000, r574, to report to the Court dealing with the issue of quantum on questions such as:
"(a)the calculation of the number of days of extension of time due to Leighton pursuant to the Change component of the Plaintiff's Direction dated 15 November 2000;
(b)the calculation of the delay costs due to Leighton pursuant to the Change component of the Plaintiff's Direction dated 15 November 2000;
(c)the determination of whether, and if so, to what extent, Leighton is entitled to recover for its claim for 'upgrade seal' more particularly set out in paragraph (ii) of the particulars subjoined to paragraph 85 of the Further Amended Defence and Counterclaim;
(d)the calculation of Leighton's entitlement pursuant to the Change component of the Plaintiff's Direction dated 15 November 2000;
(e)the calculation of Leighton's entitlement for financing costs more particularly set out in Annexure B5 to the Defendant's Further Amended Defence and Counterclaim; and
(f)the calculation of Leighton's entitlement to interest."
In my view, the suggestion has a great deal of merit to it, but it is submitted by counsel for the State that such an order is premature and that the question whether or not it should be made should be left to the judge assigned to the task of determining quantum for, it is submitted, that judge will be in a better position to control the appointment and to give appropriate directions. It was further submitted that some questions may be best left for report by a specialist accountant rather than by an engineer and that two such referees may well prove to be desirable.
There is no pressing urgency in this matter and an application can be made to the judge assigned the conduct of the quantum trial or indeed to any judge of the Court or the Master. In these circumstances, I will adjourn the application sine die. This course was agreed to by counsel for both parties[5].
[5] [Transcript 6136]
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