Warrandyte High School Council v Ian Delbridge Pty Ltd

[1991] HCATrans 146

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M49 of 1990

B e t w e e n -

WARRANDYTE HIGH SCHOOL COUNCIL

Applicant

and

IAN DELBRIDGE PTY LTD

Respondent

Application for special leave

to appeal

MASON CJ

DAWSON J

McHUGH J

Warrandyte 1 7/6/91

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 7 JUNE 1991, AT 3.57 PM

Copyright in the High Court of Australia

MR G.H. GOLVAN: If the Court pleases, I appear with my

learned friend, MR J. NAYAR, on behalf of the

applicant. (instructed by Wainwright Ryan)

MR B.J. SHAW, QC: If the Court pleases, I appear with my

learned friend, MR G.J. DIGBY, for the respondent.

(instructed by Sly & Weigall).

MASON CJ:	Mr Golvan.
MR GOLVAN:	If the Court pleases, would it be of assistance

if I provided the Court with a brief outline of the

argument?

MASON CJ: Yes.

MR GOLVAN:  I have also provided the Court with a chronology

of events.

There is an extract from the contract on the

application, if the Court pleases. I also have

copies of the entire contract, if that is of any

assistance. The extract - the appropriate clause

appears in, of course, the judgment of the Full

Court and also the affidavit material, but it may

be of some assistance - - -

MASON CJ: Yes, you can hand them in, but it is a special

leave application.

MR GOLVAN:  Yes. If the Court pleases, the appeal relates

to the construction of clause 31 of the edition Sb

contract, which is a construction contract which is

widely used throughout Victoria and in other States
of Australia, and has been in use since 1971.

It relates to the construction of clause 31, which is the final certificate clause, and it is

submitted that the appeal raises three issues of

significance. The first is whether the final

certificate issued by the architect which is

valid certificate on its face, and whether the	referred to on page 66 of the appeal book is a	finality of that certificate can be impugned by
reference to documents delivered with it.

In essence, clause 3l(b) of the contract

provides for the architect issuing a final
certificate to the builder, a copy to the

proprietor and a statement to the builder showing

the difference between the amount of the final

claim by the builder and the amount of the final

certificate. What is submitted is that if the

final certificate is a valid certificate on its

face and complies with clause 3l(e) of the

conditions of the contract, then the finality of

that certificate cannot be impugned by reference to

Warrandyte 7/6/91

the contract summary, which is delivered with the

final certificate, but does not form part of the

final certificate.

That point raises a matter of general

significance because if a certificate is valid on

its face, has been issued at the appropriate time,
namely after the final claim of the builder,

contains all the requirements of a final

certificate under clause 3l(e), it is submitted

that the certificate cannot be impugned.

The decision of the Full Court was, in

essence, that the finality of the certificate could

be impugned after the delivery of the certificate

by referring to other documents served with the

certificate.

It creates, in relation to a major

construction contract, a great deal of uncertainty
because it raises the significant possibility in

this contract that a contract which is intended to

be final and certain can be impugned - or a

certificate which is intended to be final and

certain can be impugned - some considerable time

after the certificate has been presented, by

reference to documents which are contained with the

certificate, showing that in some cases the

architect did not give final consideration to every

single item of the builder's claim.

It is submitted that both parties in this case

treated the final certificate as a valid

certificate.

DAWSON J:  What was the status of the document that went

with the final certificate saying that adjustments

had to be made?

MR GOLVAN:  The status of those documents are that they do

not form part of the final certificate. In other

words, after the architect has issued a .final

certificate then he is functus officio, and whether

he wants to make adjustments or does not want to

make adjustments, he cannot make adjustments.

What he is entitled to do is to gratuitously

recommend to the proprietor that if the builder is

able to establish that the builder is entitled to

adjustments made after the certificate has been

issued, then he will be paid extra by the

proprietor. But he has no ability to amend the

certificate, or indeed present a new certificate.

This is a case where the architect issued the

certificate after there had been requests by the

architect upon the builder to provide.all relevant

Warrandyte 3 7/6/91

and necessary information. At page 7 of the appeal

book the judge at first instance concluded that:

the architect over a period of time

endeavoured to obtain information from the

builder, and ultimately in the absence of that

information made a proper determination of the

amount due.

It is submitted on behalf of the applicant

that the Full Court, in so far as it sought to

impugn the certificate by reference to other

documents, was not entitled to do so.

MASON CJ: But was not the document, by reference to which

it was impugned, the contract summary, referred to

in the final certificate itself?

MR GOLVAN:  The final certificate appears at page 66 of the

appeal book, and the only reference to the contract
summary is adjacent to the total of the amount

previously certified by the builder. It merely

says "(REFER CONTRACT SUMMARY)", so that it is not

indicated by the certificate that the contract

summary was intended to form part of the

certificate, and indeed the contract summary is a

document that is required to be provided with the

certificate under clause 3l(b).

DAWSON J: But that cannot be so because the final

certificate, or what purported to be a final
certificate, was accompanied by a letter saying,

"Adjustment to the final balance will be made when

you have submitted the information requested."

MR GOLVAN:  Yes, but the letter, it is submitted,

Your Honour, does not form part of the certificate.

DAWSON J: But when you have the letter, the reference in

the final certificate to the contract summary, the

letter referring to both the contract summary and

the final certificate, it would be very hard to say	that the documents should be considered separately,
would it not, the contention being that what was
said to be a final certificate was not in fact a final certificate.

MR GOLVAN:  That is what the position was of the Full Court,

but the applicant's position is that it clearly was

intended to be a final certificate under the

contract. It complied with all the requirements of

the final certificate - - -

DAWSON J: Can I just ask you this. If in fact it was not

final, it was not a final certificate, was it, no

matter what it was headed? Is that right?

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MR GOLVAN: If the certificate, on its face, was not a final

certificate - - -

DAWSON J: No, no, just forget how it comes about. If in

fact the final certificate was not certifying a

final sum, it was not a final certificate.	Do you
agree with that?

MR GOLVAN:  If it was not certifying a final sum it was not

a final certificate, subject to the provisions of

clause 3l(i), which entitle amendments to be made,

or alterations to be made, by reason of any

accidental or erroneous conclusion or inclusion of

any work, materials, goods or figures, or any other

arithmetical error in any computation.

The actual contract summary is included as

part of the application book and it indicates that

the nature of the kinds of things that the

architect had to deal with and the complaints are

made about, for example, at page 87. We are

dealing with something like 187 variations. In one

variation the architect states in the contract

summary	"DETAILS REQUESTED HAVE NOT BEEN
RECEIVED";	126 on page 88 "PROVISIONAL INFORMATION

REQUESTED OF EDUC. HAS NOT BEEN RECEIVED". It is

the same in relation to several other items.

So what the judge at first instance concluded

was that the architect had sought that information,

the information had not been provided and therefore

he had provided a final certificate as best as he

could and that the letter that was contained with

the final certificate and the contract summary that

was included with the contract certificate

constituted an offer made by the architect to the

builder to make adjustments to the final balance -

not to issue a new certificate, in my respectful

submission, but to make adjustments to the final

balance, if the builder could satisfy the architect

that he in fact was entitled to additional sums by

reason of providing information that he should have

provided some time earlier at the frequent request

of the architect.

So what is submitted the effect of that letter

and the contract summary is, is that it contains a

gratuitous offer on behalf of the architect, and

not an unfair offer, to the builder to give him an

additional benefit if he could show that in fact he

was entitled to more, by reason of the information

being provided to the architect. It did not

contain an indication that it was going to be a

fresh final certificate - - -

DAWSON J: But it did indicate that the sum certified as

final was not final.

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MR GOLVAN:	In my respectful submission, that is not the case, Your Honour. The sum certified as final was
final. In other words, there was no provision, or the sum was not of a provisional nature. It was clearly expressed to be a final balance due by the
builder to the proprietor.

DAWSON J: But the architect said the adjustment to the

final balance will be made when you have submitted

the information requested.

MR GOLVAN:  Yes, and that is consistent not with the amount

certified not being final, but it is consistent

with the architect giving the builder an

opportunity to provide additional information on

the basis that adjustments - that he would

recommend to the proprietor the making of credits

to the proprietor in the event that information

supplied by the proprietor indicated he was

entitled to adjustments.

But the force of that offer depended upon the

proposal made in the letter. It did not depend
upon the certificate itself being anything other

than a final certificate. The certificate in the

form provided was a final certificate. It showed a

clear unequivocal balance that was due one way or

the other; it complied with clause 3l(e) in

relation to what ought to be part of a final

certificate, and that is the point for argument as

to whether or not one is entitled to look at

surrounding correspondence, such as letters or
surrounding documentation, to ascertain whether in

fact the architect may have intended to have made

alterations to the final figure. In my respectful

submission, he is not entitled to do so.

For example, if the architect, having issued

that final certificate, then subsequently said to

the builder, "I think that we have not given the

proprietor enough; I think that we ought to give

the proprietor a bit more money, and I am going to

some additional money because I now realize there	issue a fresh certificate and give the proprietor
are additional errors in my final certificate".
The builder could said, and would have said, in my respectful submission, "Well, you can't do
that because you have issued a final certificate.
Having issued that final certificate you are
functus officio, you can't do any more about the
amount that forms part of the final certificate".

MASON CJ: But clearly enough the architect did not see it

that way because if you look at the letter, the

Warrandyte 6 7/6/91

last sentence in the second paragraph of the letter

says:

The adjustment to the final balance will

be made when you have submitted the

information requested.

So that it seems that the architect was issuing the

certificate, if one can use the description, as a

provisional final certificate, which would be

replaced or supplemented by an actual final

certificate in the event that the builder submitted

the information requested resulting in the

adjustment contemplated.

MR GOLVAN:  The other interpretation, in my respectful

submission, the interpretation that is properly

open from the construction of the letter, is that

he is making an offer to the builder that

"Notwithstanding that you have not provided all the

necessary information that enables me to deal

finally with every - - -

MASON CJ: But it is not really susceptible of that

interpretation because that sentence indicates that

an adjustment to the final balance in the

certificate will be made when the information

requested is submitted.

MR GOLVAN: It raises two possibilities: firstly, that

whether he says that he is going to make an

adjustment to the final balance or does not say it,

he is not entitled to make an adjustment to the

final balance, because having issued a final

certificate he cannot make an adjustment to it. It

is a bit like - - -

MASON CJ: But that is the point, is it not? Is it a final

certificate, in the circumstances?	You are
assuming it is a final certificate.

MR GOLVAN: Well, it is a final certificate because it

clearly was intended to be the final certificate.

MASON CJ: But I am suggesting to you that is not the

interpretation that you put upon it when you read

it in the light of the accompanying letter.

MR GOLVAN: With respect, Your Honour, the other two

arguments that are available are that that merely

establishes the architect's right under clause

3l(i) to adjust erroneous inclusions or exclusions

from the certificate. In other words - and the

evidence in the case was, indeed, that was the way

he was treating that particular comment, that he

saw that as his entitlement, that if it could be

shown that what he placed in the certificate was

Warrandyte 7/6/91

erroneous, that he was entitled to adjust the
figure by reference to clause 3l(i)(iii), which

gives him that possibility - - -

MASON CJ:	I must say, at this stage, that the tenor of the discussion that has taken place so far between you
and the Bench does not indicate that this is a
special leave point.
MR GOLVAN:	It is one of the three points that arise in this

MASON CJ: Perhaps we might move on to the next point.

McHUGH J: Grounds 2 and 3 do not really arise unless you

make good this point.

MR GOLVAN:  I have to succeed on an arguable or a special

leave point that it is a valid final certificate.

McHUGH J: Well, if the foundation is shaky, that is the end

of the case, from the point of view of special

leave, is it not?

MR GOLVAN:  It is submitted that the point raised by the

validity of the certificate is arguable.

DAWSON J: Apart from anything else, Mr Golvan, the purpose

of your wanting to say that this was in fact a

final certificate is to establish that time runs so

that the builder was no longer able to give notice

of a dispute.

MR GOLVAN: That is so.

DAWSON J: But of course the very nature of the document

shows that there were disputes outstanding. The

document that purports to be a final certificate

refers to the contract summary and the contract

summary refers to amounts which, if not in dispute,

have not been settled.

MR GOLVAN:  Yes, and the position is that the builder was

entitled to refer those disputes to arbitration if

he believed that there were disputes. It is

admitted that there were disputes. The situation

was that the architect had sought information that

the builder was obliged to provide and that

information had not been provided.

But if there were disputes, the builder was

entitled to refer those disputes to arbitration

within the time limit stipulated.

MCHUGH J:  By clause 3l(i).

Warrandyte	8	7/6/91
MR GOLVAN:	By clause 3l(i).	Namely, within 14 days after

receipt of the certificate.

McHUGH J: But what he did was not intended to trigger that

clause, was it? There had been no notice of

dispute given under clause 32, had there?

MR GOLVAN: That is the argument in the case, Your Honour,

because in fact the builder then gave, some two and

a half months after receiving the certificate, a

notice of dispute, not challenging the validity of

the final certificate but in fact challenging the

amount that was certified under the terms.

McHUGH J:  No, what I was putting to you was that nothing

that the architect did, either in the certificate

or the accompanying material, was intended to do

anything under 31(i), was it?

MR GOLVAN:  No, it was not. But His Honour Justice Dawson

said the position was that there were disputes at

the time that the certificate was issued.

DAWSON J: What I was getting at was that 32(i) is

predicated upon there being a final certificate
because that having been given and it being final,

that is the end of the matter unless a notice of dispute is given within the specified time. One

can understand that.

But here you have the builder getting these

documents showing that there are matters

outstanding. He would not dream that time was

going to run against him in the circumstances.

MR GOLVAN: Well, he did, because the notice of dispute that

was issued in the case treated the final

certificate as being a valid final certificate.

The notice of dispute is on page 67 of the

application book - it runs from page 68 to

page 70/71. In fact the schedule is on page 70/71

and it does not challenge the validity of the final

certificate. What it seeks to do is challenge the

amount that the architect certified as the balance

outstanding on the final certificate.

Indeed, as is apparent from the judgment of

the judge at first instance, the issue in the case
was not that the builder ever thought that it was
not a valid final certificate but that the builder

said that he entered into an arrangement with the

architect prior to the expiration of the 14-day

period, that time would not run under the contract

to allow negotiations to occur and that was a major

issue of credit between the parties, and the judge

at first instance did not accept the builder's

evidence on that aspect.

Warrandyte 9 7/6/91

That is consistent with, in fact, the opposite conclusion, namely that the builder did treat that

as being a valid and binding final certificate and

the builder says he then entered into an

arrangement with the architect that time would not run under that certificate while negotiations were

taking place.

So that it is a case where certainly both

parties treated the final certificate as a valid
final certificate and it is our respectful

submission that they were perfectly justified in

doing so because the quality of the final

certificate is essentially set out in clause 3l(e),

that is that it has to contain the contract sum

adjusted as necessary, according to the terms and conditions of the contract and the total value of all previous certificates issued and stipulate the

difference between the two sums, the balance due

one way or the other. That is exactly what the

certificate does.

Once the certificate has been issued in those

sorts of terms it is a valid and binding final

certificate and cannot be impugned, because it

raises the spectre that instead of being a

conclusive document and a final document, as it is

intended to be, that well after the document is
issued parties can go behind the certificate, look

at other documents that the architect might use in

the preparation of the certificate, and say, "Look,
that certificate cannot be final because not every

single claim that you have assessed in that

certificate were you able to assess with the

appropriate degree of finality".	And that
would - - -

McHUGH J: But that does not follow at all, does it, from

what happened in this case, or what the Full Court

decided. They had a document which was headed

"Final certificate" together with a contract

summary to which the certificate itself referred,

together with a letter, and when you look at those
three documents they indicate that there was no

final certificate within the meaning of 3l(e).

MR GOLVAN:  The very first sentence of the letter says:

Enclosed find contract summary and final

certificate.

Which shows a final balance of $28,000 et cetera payable to the proprietor.

McHUGH J: If I purport to give you a licence to my house

and I in fact give you exclusive possession, it does not mean that you have a licence, that you

Warrandyte 10 7/6/91

have a lease. So the fact that you called it final

certificate means nothing if in fact it is not a

final certificate.

MR GOLVAN:  That is the issue for argument, as to whether it

is or is not a final certificate, and what the

applicant says is that it is a final certificate

because a final certificate is a creature of the

contract and so long as it has the characteristics

required under clause 3l(e) it is a final

certificate; that you cannot go behind the

certificate to ascertain whether there may be some

matters that the architect had in mind that he

could not deal with finally.

Once the final certificate is issued the

architect is functus officio, so that the

deficiency in the letter is the architect is saying

that he is going to make adjustment to the final

balance; he is not entitled to make adjustment to

the final balance. It is not a deficiency in the

final certificate, it is a deficiency in the

architect's assessment of what he can do after the

final certificate has been issued and received by

the builder.

The other two matters, if I can - - -

DAWSON J: Well, you have got the difficulties of that very

badly drafted clause, have you not?

MR GOLVAN:  It is a badly drafted clause, but it is, as the

High Court said, a vital clause in the contract and

it is submitted that some meaning should be

appropriated to the clause. In other words, it

ought not to be, if at all possible, regarded as

being an uncertain clause. If one looks at

clause 3l(i), together with clause 3l(e), one can

get a reasonable - - -

DAWSON J: It is just a question of construction, is it not?

There is no general principle involved and one

clause, be confident one had given it the right	could not, having regard to the wording of the
construction, in terms of special leave, I am
speaking.

MR GOLVAN: Well, were it is just a contract between the

parties, I would say yes.

DAWSON J: But I know it is a standard form of contract, but

it is a standard form of contract which has been

varied from time to time, there is no great

difficulty about that. This is Mark No something

or other, is it not?

Warrandyte 11 7/6/91

MR GOLVAN: Well, it is edition Sb; there have been five

previous editions. But it is a contract that has

been in existence since 1971, it is a major

construction contract, and clause 3l(i), which is

the clause that gives the conclusive evidence

attribute to the final certificate, is a critical

clause in that contract, and the parties are

entitled to know how that clause ought to be

interpreted.

There is a decision by Mr Justice Legoe, of the Supreme Court of South Australia -

MASON CJ: Before you get to that, the position has been

established that you have got to succeed on this

first point before the second and third points

arise.

In the course of debate the Court has taken up with you the arguments that you presented in favour of challenging the correctness of the decision of

the Full Court on the first point. If you cannot

satisfy us on that point that your case is

sufficiently arguable, then of course special leave

will be refused because of your inability to mount

a sufficient challenge on that point.

Can we come back to it, and can I ask you, is

there anything else you want to say to us with a

view to persuading us that you do have a

sufficiently arguable case on that question?

MR GOLVAN:  Can I just ask the Court whether the principal

concern is whether it is a point of adequate

significance or whether the decision of the Full

Court is attended with sufficient doubt?

MASON CJ: The latter. In other words, prima facie it looks

as if the Full Court is correct in concluding that

this was not a final certificate.

MR GOLVAN: All I can really add to what I have already

appears to have not concerned itself with the	submitted to the Court is that the Full Court
nature of a final certificate as defined by clause 3l(e) of the contract.
In the course of the judgment the Full Court has said there is nothing that indicates what
constitutes a final certificate, and in fact
clause 3l(e) does stipulate specifically what a
final certificate must contain, and the certificate
in this case contains all the attributes of a final
certificate in accordance with the contract.

It is a creature of the contract, and once a

conclusion is formed that it is intended to be a

Warrandyte 12 7/6/91

final certificate for the purpose of the contract,

in our respectful submission it constitutes a final

certificate, and that an approach by the architect

whereby he had in mind making adjustments to the

final balance in the future does not derogate from

the fact that the final certificate is an

appropriate final certificate. It merely indicates

an incorrect approach in law so far as the

architect is concerned.

In my respectful submission, he has either

taken an approach that he can make changes to the

final balance, which he is not entitled to make

because he is functus officio, which seems to be

what actually did occur. He has taken the approach

that notwithstanding that a final certificate has

been issued he is entitled to recommend to the

proprietor, if the builder could satisfy him that
the builder has been badly done by as a result of information that had not previously been provided but subsequently provided, that the builder is

entitled to more, and recommend to the proprietor

that the builder be paid more.

Nothing prevents a proprietor from paying a

builder an additional amount of money,

notwithstanding that the architect may have

certified a lesser amount in the final certificate.

The final point is that the architect, in any

event, is entitled to exercise his right under

clause 3l(i)(iii) to adjust erroneous exclusions

from evaluation of the work that he has given.

But the principal point is that all those

matters are outside the face of the final

certificate, which is a valid and, in accordance

with what the Full Court said, an unambiguous final

certificate in the sense that it shows a final

balance due one way or the other, and can form the

subject of being a debt from the builder to the

proprietor, and is conclusive.

Other than that, I really do not feel I have

anything more to add to that. If the Court

pleases.

MASON CJ:  Thank you. The Court need not trouble you,

Mr Shaw.

The primary and fundamental question sought to

be raised by the applicant in this application is

whether the Full Court of the Supreme Court was

correct in concluding that a certificate issued by

an architect under a building contract purporting

to be a Final Certificate was in truth a Final

Certificate or a provisional certificate of some

Warrandyte - 13 7/6/91

kind. Unless the applicant succeeds in obtaining a

favourable answer to this question, the proposed

appeal will fail.

In our opinion the conclusion reached by the Full Court upon this question was not attended with

sufficient doubt to justify the grant of special

leave to appeal.	The application is therefore
refused.

MR SHAW:	I ask for costs, if the Court pleases.
MASON CJ:	You cannot oppose an application for costs. The

application for special leave is refused with

costs.

AT 4.32 PM THE MATTER WAS ADJOURNED SINE DIE

Warrandyte 14 7/6/91