Total Eden Pty Ltd v Charteris

Case [2018] WASC 60

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   TOTAL EDEN PTY LTD -v- CHARTERIS [2018] WASC 60

CORAM:   PRITCHARD J

HEARD:   6 APRIL 2017

DELIVERED          :   22 FEBRUARY 2018

FILE NO/S:   CIV 3206 of 2016

BETWEEN:   TOTAL EDEN PTY LTD

Applicant

AND

MICHAEL CHARTERIS
Respondent

ECA SYSTEMS PTY LTD ATF THE L WOODHOUSE FAMILY TRUST
Other Party

Catchwords:

Administrative law - Judicial review - Jurisdictional error - Construction Contracts Act 2004 (WA) - Determination of payment claim - Implication of terms into construction contracts

Legislation:

Construction Contracts Act 2004 (WA)

Result:

Grounds of review upheld in part
Decision quashed

Category:    B

Representation:

Counsel:

Applicant:     Mr D S Ellis

Respondent:     No appearance

Other Party  :     Mr R A Blow

Solicitors:

Applicant:     Gandhi and Shaw

Respondent:     No appearance

Other Party  :     Lateral Legal

Case(s) referred to in judgment(s):

A v Corruption and Crime Commissioner [2013] WASCA 288; (2013) 306 ALR 491

Concutt Pty Ltd v Worrell (2000) 176 ALR 693

Cooper and Oxley Builders Pty Ltd v Steensma [2016] WASC 386

Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163

Devaugh Pty Ltd v Lamac Development Pty Ltd [1999] WASCA 280

Electricity Generation Corporation t/a Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640

Federal Commerce and Navigation Co Ltd v Molena Alpha Inc [1978] QB 927

Grant v NZMC Ltd [1989] 1 NZLR 8

Hamersley Iron Pty Ltd v James [2015] WASC 10

Hanak v Green [1958] 2 QB 9

Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62

James v Commonwealth Bank of Australia (1992) 37 FCR 445

Kirk v Industrial Court of New South Wales [2010] HCA 1; (2010) 239 CLR 531

Laing O'Rourke Australia Construction Pty Ltd v Samsung C and T Corporation [2015] WASC 237

Minister for Immigration and Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104

O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71

Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217

Re State Administrative Tribunal; Ex Parte McCourt [2007] WASCA 125; (2007) 34 WAR 342

Total Eden Pty Ltd v ECA Systems Pty Ltd [2017] WASC 58

  1. PRITCHARD J:  This is an application for judicial review of a decision of the respondent (Adjudicator) made under the Construction Contracts Act 2004 (WA) (Act) (Decision).[1]

    [1] The Decision was made on 1 November 2016.  The Decision was made pursuant to the Act as at 12 August 2016.  The Act has since been amended.  References to the Act herein refer to the Act (as at 12 August 2016).

  2. Total Eden is an irrigation, agriculture and landscaping contractor.  It was a contractor on an agriculture project known as the Woodie Woodie Agriculture Project (Project).  Total Eden's role was to supply and install irrigation equipment for the project.  ECA Systems was subcontracted by Total Eden to supply and…

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AGLC
Total Eden Pty Ltd v Charteris [2018] WASC 60
Case
[2018] WASC 60
Decision Date

CaseChat Overview and Summary

Total Eden Pty Ltd brought a judicial review application against Charteris, an adjudicator, challenging the decision to order Total Eden to pay ECA Systems a sum of money. The underlying dispute concerned the interpretation of a construction contract and the implied terms under the Construction Contracts Act 2004 (WA). The primary issue before the court was whether the adjudicator committed a jurisdictional error in his determination that Total Eden was liable to pay ECA Systems. The court examined the adjudicator's reasoning and whether he correctly applied the law to the contract terms and the facts presented.

The court held that the adjudicator's function under the Act was to determine, on the balance of probabilities, whether any party to the payment dispute was legally liable to make a payment. This required the adjudicator to apply the relevant law to the contract terms before him or her and the facts concerning the performance of the obligations. The court found that the adjudicator correctly identified the legal issue and applied the relevant law to the contract terms. However, the court found that the adjudicator failed to consider one of the key contract terms in his determination, which was a jurisdictional error. Consequently, the court quashed the adjudicator's decision and remitted the matter for reconsideration.

The court ordered that the decision of the adjudicator be quashed and the matter be remitted for reconsideration in accordance with the court's reasons. Total Eden was to pay ECA Systems' costs of the application for judicial review.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The factual background The Adjudicator advised the Court that he did not intend to take part in the proceedings, but would abide by any order of the Court, other than as to costs. The solicitors for ECA Systems also advised the Court that ECA Systems did not intend to take any further part in the proceedings and would abide by any order of the Court, save as to costs (as to which it wishes to be heard, if necessary). Consequently, the Court was without a contradictor on the application for judicial review. The factual background to the application for judicial review was set out in documents annexed to an affidavit of Mr Gandhi, on which Total Eden relied. The agreement pursuant to which ECA Systems agreed to carry out electrical contracting work for Total Eden was described as a contractor supply agreement (Agreement), which the parties entered into in January 2014.[2] The Agreement provided that the Purchaser (that is, Total Eden) wished to obtain the Services from the Supplier (that is, ECA Systems) 'in accordance with the terms and conditions of this agreement'. The Agreement contemplated that the Supplier would be engaged to provide specified services from time to time, as set out in a sub‑contract order. [2] Annexure G1 to the affidavit of Mr Gandhi dated 19 December 2016, 16 ‑ 23. The particular works which resulted in the claim for payment, which was the subject of the Decision, were the subject of an initial quotation issued by ECA Systems in May 2014 (quotation).[3] There were then some negotiations between the parties in relation to the scope of works to be performed, and the price for those works. [3] Annexure G1 to the Affidavit of Mr Gandhi dated 19 December 2016, 24 ‑ 27. By November 2014, the parties had reached agreement on the works to be provided, and the cost. On 3 November 2014, Total Eden issued a document headed 'Sub Contract Agreement' (to which the parties referred as a Purchase Order) in relation to the Project, and indicated a price of $153,352 for the works, plus GST.[4] However, it appears that there was a subsequent variation to the works, and the agreed cost, so that, on 21 November 2014, Total Eden issued a Sub Contract Agreement (again referred to as a Purchase Order) in relation to the original contract price of $153,352, plus variations of $16,500, so that the final value of the contract price was $169,852, plus GST.[5] [4] Annexure G2 to the Affidavit of Mr Gandhi dated 19 December 2016, 51, 91 ‑ 92.[5] Annexure G1 to the Affidavit of Mr Gandhi dated 19 December 2016, 28 ‑ 29. The parties, and the Adjudicator, proceeded on the basis that the contract between the parties encompassed the terms set out in the Agreement and in the variations made to it up to 21 November 2014 (Contract).[6] [6] Decision [22]. ECA Systems commenced performing the works on site in March 2015, and they were commissioned in March 2016.[7][7] Annexure G2 to the Affidavit of Mr Gandhi dated 19 December 2016, 52. ECA Systems submitted an invoice to Total Eden, dated 11 August 2016, for what appears to have been part of the works, totalling $80,640, exclusive of GST (Invoice).[8] The Invoice stated that the payment terms were '14 days'. Total Eden did not pay the Invoice within that time. However, ECA Systems accepted, in the course of the adjudication, that the Agreement required payment within 14 days of the end of the month, in which a tax invoice was issued.[9] On that basis, payment of the Invoice was required by 14 September 2016. In the alternative, ECA Systems claimed that the implied terms in div 5 of sch 1 to the Act applied, which required payment of the payment claim within 28 days of its receipt (that is, by 8 September 2016).[10] [8] Annexure G1 to the Affidavit of Mr Gandhi dated 19 December 2016, 15.[9] Decision [14(G)].[10] Construction Contracts Act 2004 (WA) sch 1 div 5 cl 7(3).

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The Decision In the Decision, the Adjudicator concluded, pursuant to s 31(2)(b) of the Act, that 'on the balance of probabilities ... [Total Eden] is required to pay $92,853.74 including interest, costs and GST to [ECA Systems] within 5 working days of this determination in respect of the payment dispute within the application'.[13][13] Decision [3]. The figure of $92,853.74 represented the total of the sum of $80,640 in respect of the Invoice (the 'payment claim' for the purposes of the adjudication under the Act), together with interest on that amount to the date of the determination, plus GST, and an award of costs. Those costs comprised the sum of $1,681.82 for ECA Systems' preparation costs for the adjudication, and $1,500, which represented ECA Systems' share of the Adjudicator's fee. The Adjudicator accepted the parties' agreed position, namely that the Agreement and the Purchase Order (as varied) constituted the Contract between them, and that that Contract was a 'construction contract' for the purposes of the Act.[14] [14] No reliance appears to have been placed on the terms and conditions set out in the quotation, and for present purposes I have assumed that those terms did not form part of the Contract. The Adjudicator accepted that the Invoice constituted a 'payment claim' for the purposes of the Act.[15] He held that there was a 'payment dispute' under the Act, because it was clear that the amount claimed in the payment claim had not been paid.[16] He also held that that payment dispute had arisen under the Act on 14 September 2016, or, alternatively, on 8 September 2016 (if the implied terms in div 5 of sch 1 to the Act applied).[17] On either basis, the application for adjudication had been served within the 28 days after the payment dispute arose, as required by s 26(1) of the Act.[18][15] Decision [38].[16] Decision [34].[17] Decision [36].[18] Decision [14(I)]. The Adjudicator's reasons which are relevant to the grounds of review are set out at [45] ‑ [54] and [58] ‑ [60] of the Decision. It is convenient to set those paragraphs out here (original emphasis):[45]Having now determined that pursuant to s 31(2)(a) I do not need to dismiss the application, I can now proceed pursuant to s 31(2)(b) to otherwise determine on the balance of probabilities whether any party to the payment dispute is liable to make a payment, or to return any security to the other party.[46]In the following I shall provide the reasons for my determination of the payment claim along with my calculation of interest and costs to be awarded, if any.Determination of the Payment Claims[47]Whilst the 'Sub Contract Agreement General Terms' include provisions for the payment of a payment claim, it does not include any written provisions as to how and when [Total Eden] is to respond to [ECA's] payment claim. Therefore, the terms under Schedule 1 Division 5 of the Act must be implied.[48]Whilst the response includes [Total Eden's] reasons as to why it rejects [ECA's] payment claim and why it has not made payment, these are reasons that were required by the Act to have been communicated to [ECA] within 14 days from the submission of the payment claim by [ECA] to [Total Eden]; ie by 25 August 2016.[49][Total Eden's] letter 18 October 2016 stating that it ' … denies that there are any amount(s) due to ECA in respect of the project or otherwise' was issued too late in accordance with the implied provisions of the Act.[50]Since [Total Eden] did not respond to the payment claim within the required time, pursuant to Schedule 1 Division 5 s 7(3)(b) of the implied provisions of the Act 'Within 28 days after a party receives a payment claim, the party must … pay the whole amount of the claim … unless the claim has been rejected or wholly disputed in accordance with subclause (1) …' ... .[51]In the instance where a payment claim has not been rejected or disputed within the required time, the payment claim effectively becomes what is often referred to as a 'deemed certificate' and the respondent is required by the Act to pay the payment claim in full even if it later contends that it has valid reasons for not doing so.[52]Despite [Total Eden's] persuasive arguments against 'deemed certification', the Act and the tribunal/courts are quite clear on this matter. I also believe this to be a 'commercially sensible' position and in no way an 'abdication' of an adjudicator's responsibility to make a determination.[53]I find it entirely reasonable for a party to a construction contract to expect payment in full for a payment claim when it has not received any notice of dispute or rejection of the payment claim prior to the date for payment under the contract. In my opinion, adherence to basic contract administration procedures such as this is fundamental, common‑place, fair and reasonable etiquette, and not in any way difficult for parties to a construction contract to comply with.[54]For the preceding reasons, I determine that [Total Eden] is required to pay the payment claim in full. … In the following sections, I decide if interest and costs are to be awarded.…Costs[58][ECA] has requested the award of the adjudicator's costs as well as its own application preparation costs of $1,850.00 including GST for on account of the frivolous and vexatious conduct on the part of [Total Eden].[59]In respect of costs, the Act states ... ;A.Pursuant to s 44(6) '… the parties involved in a dispute are liable to pay the costs of an adjudication of the dispute in equal shares.'B.Pursuant to s 44(10) 'If a party involved in a dispute has paid more than the party's share of the costs of an adjudication of the dispute, having regard to subsection (6), the appointed adjudicator may decide that another party must pay to the first‑mentioned party such amount of the costs as would result in all the parties paying an equal amount of the costs.' But;C.Pursuant to s 34(2) 'If an appointed adjudicator is satisfied that a party to a payment dispute incurred costs of the adjudication because of frivolous or vexatious conduct on the part of, or unfounded submissions by, another party, the adjudicator may decide that the other party must pay some or all of those costs.'[60][Total Eden's] late defence for not making payment was always bound to fail since it did not comply with the implied provisions of the Act. I determine this to constitute frivolous and vexatious behaviour causing [ECA] to incur costs it would otherwise not have had to. Therefore I determine that pursuant to s 34(2) [Total Eden] should pay all of the costs incurred by [ECA] in this adjudication.

Ratio Decidendi

Legal Principle Established

The function required to be performed by an adjudicator under s 31(2)(b) is to 'determine on the balance of probabilities whether any party to the payment dispute is liable to make a payment'. The 'determination' that the adjudicator is required to make is, having regard to the definition of that term in the Act, a determination of the 'merits of a payment dispute'.[19] In Laing O'Rourke Australia Construction Pty Ltd v Samsung C and T Corporation,[20] Mitchell J summarised the function of an adjudicator under s 31(2)(b) of the Act in the following paragraphs, with which I respectfully agree:The language of s 31(2)(b) and associated definitions indicates that the question the adjudicator is required to address is a legal question. The provision refers to a legal standard of proof. The subject of the payment dispute is a claim made under a construction contract for payment of an amount in relation to the performance of the contractor's obligations under the contract. In that context the 'liability' referred to in s 31(2)(b) of the Act must be a legal liability. The question which the adjudicator is required to address is whether a party is legally liable to pay a claim made under a construction contract.Further, as Beech J observed in the passage from Alliance Contracting ... the adjudicator's power is confined to accepting, wholly or in part, or rejecting that the recipient of a payment claim must pay that claim to the party which made it.Determining the merits of a payment dispute will require the adjudicator to apply the relevant law to the terms of the contract which are before him or her and the facts concerning the performance of relevant obligations as he or she finds them to be.…... the liability to make the relevant payment must be ascertained by reference to the terms of the construction contract which are before the adjudicator. The adjudicator will fail to perform that task, and will misapprehend his or her statutory function, if the adjudicator determines the merits of the payment dispute otherwise than by reference to the terms of the construction contract which are before him or her. To act in that manner is to exceed the authority conferred by s 31(2)(b) of the Act.[19] Laing O'Rourke Australia Construction Pty Ltd v Samsung C and T Corporation [2015] WASC 237 [209] (Mitchell J).[20] Laing O'Rourke Australia Construction Pty Ltd v Samsung C and T Corporation [2015] WASC 237 [210] ‑ [212], [219] (Mitchell J). An adjudicator's determination under s 31(2)(b) of the Act is amenable to judicial review on the basis of jurisdictional error.[21] (However, if an adjudicator makes an error in construing, and then applying, a construction contract in order to determine the liability of a party under s 31(2)(b) of the Act, that error will not constitute a jurisdictional error.[22])[21] See, for example, Hamersley Iron Pty Ltd v James [2015] WASC 10 (Beech J).[22] Cf Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217 [118] (Murphy JA, Martin CJ agreeing); Laing O'Rourke Australia Construction Pty Ltd v Samsung C and T Corporation [2015] WASC 237 [245] (Mitchell J).