Weston v Perkins (WA) Pty Ltd
[2021] WASC 84
•22 SEPTEMBER 2021
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WESTON -v- PERKINS (WA) PTY LTD [2021] WASC 84
CORAM: ALLANSON J
HEARD: 10 FEBRUARY 2021
DELIVERED : 7 APRIL 2021
FILE NO/S: CIV 2083 of 2020
BETWEEN: MAXWELL DAVID WESTON
Applicant
AND
PERKINS (WA) PTY LTD
First Respondent
AUSTPRO MANAGEMENT SERVICES GROUP PTY LTD
Second Respondent
MANDA CAPITAL HOLDINGS PTY LTD AS TRUSTEE OF THE HOLMAN STREET BUNBURY UNIT TRUST
Third Respondent
Catchwords:
Practice and procedure - Application by interpleader - Where contractor and lender both seek return of post completion - Where adjudication between contractor and principal for return of security to contractor
Legislation:
Construction Contracts Act 2004 (WA)
Result:
Third respondent entitled to the Bond
Category: B
Representation:
Counsel:
| Applicant | : | No appearance |
| First Respondent | : | DJ Pratt |
| Second Respondent | : | No appearance |
| Third Respondent | : | RJS French |
Solicitors:
| Applicant | : | No appearance |
| First Respondent | : | Jackson McDonald |
| Second Respondent | : | No appearance |
| Third Respondent | : | Hopgoodganim Lawyers (Perth) |
Case(s) referred to in decision(s):
CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd [No 2] [2017] WASCA 123
Easy Stay Mining Accommodation Pty Ltd v Grounded Construction Group Pty Ltd [2018] FCA 519
ALLANSON J:
Introduction
Maxwell David Weston was appointed the supervisor under a Building Contract between Austpro Management Services Group Pty Ltd (as principal) and Perkins (WA) Pty Ltd (as contractor). In that capacity, Mr Weston took custody of a Bond issued as Post Completion Security under the Building Contract.
In August 2020, Perkins obtained an adjudication under the Construction Contracts Act 2004 (WA), by which Austpro was liable to return the Bond to Perkins on or before 25 August 2020. Perkins called on Mr Weston to return the Bond. Austpro and Manda Capital Holdings Pty Ltd, which provided financial accommodation to Austpro for the building project, requested that Mr Weston not return it.
On 28 October 2020, Mr Weston applied for relief by way of interpleader in respect of the Bond.
The evidence
Mr Weston filed an affidavit, sworn 28 October 2020.
The primary affidavits relied on were sworn by the parties' legal representatives.
Perkins relied on two affidavits of Matthew John Lang, sworn 28 August 2020[1] and 29 January 2021.
[1] Filed in CCD 1 of 2020, proceedings for the enforcement of a determination under the Construction Contracts Act 2004 (WA).
Manda relied on affidavits of Callan Leslie Doran, sworn 23 December 2020, and Leith David Ayres, sworn 4 February 2021.[2]
[2] Michael Czarny, a director of Manda, made an affidavit on 10 February 2021 in which he affirms that he gave instructions referred to by Mr Doran and Mr Ayres in their affidavits.
Austpro filed no evidence.
The background facts
The facts were not disputed.
Perkins and Austpro are the parties to a building contract, made 22 October 2018, for a construction project related to the development of a property known as 21 Holman Street, Bunbury.
On 12 November 2018:
(1)Austpro, Manda and others entered into a written Loan Agreement;
(2)Manda registered with Landgate a Mortgage granted to it by Austpro over the land on which the project was being developed;
(3)Austpro and Manda entered into a written General Security Agreement and a written Specific Security Agreement; and
(4)Perkins, Austpro and Manda entered into a written Tripartite Agreement.
On or around 26 November 2018, at the request of Perkins, Assetinsure Pty Limited, as attorney for Swiss Re International SE, issued two Bonds as Post Completion Security.
On or around 21 January 2020, Manda caused a notice of default and demand under the Loan Agreement to be issued to Austpro. The amount then owing, as set out in the notice, was $18,106,673.98.[3]
[3] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-9'.
On or around 7 February 2020, Manda caused a notice of default under the Mortgage to be issued to Austpro.
By letter dated 30 March 2020, Mr Weston, as Superintendent, certified that the works under the Building Contract had been practically completed.
On 19 May 2020, a payment dispute arose between Perkins and Austpro, and Perkins issued a notice of suspension under the Building Contract.
On or around 21 May 2020, Manda caused a notice of entry into possession, pursuant to s 111 of the Transfer of Land Act 1893 (WA), to be issued to Austpro as a consequence of Austpro's default under the Mortgage.
On or around 3 June 2020, Mr Weston, as Superintendent under the Building Contract, issued a letter to Perkins requesting the remediation of certain works undertaken by Perkins under the Building Contract.
On 8 June 2020 Perkins also obtained an adjudication determination under the Construction Contracts Act which required Austpro to pay to Perkins the sum of $579,904.83.[4]
[4] Affidavit of Matthew John Lang sworn 29 January 2021, 'MJL-8'.
On 16 June 2020, the adjudication was registered as a judgment in the District Court of Western Australia.
On 23 June 2020, Perkins issued a notice of termination of the Building Contract and stated that it required Austpro to return the Bond held as Post Completion Security.
On 26 June 2020, Perkins applied for the adjudication of a payment dispute under the Construction Contracts Act. The payment dispute related both to a progress payment and the return of the security.
On 18 August 2020, an adjudicator made a determination under the Construction Contracts Act and determined that Austpro was liable to return the Bond to Perkins on or before 25 August 2020.
Manda was not a party to the adjudication.
On 28 August 2020, Perkins filed a certified copy of the determination in this court.
On 12 October 2020, the court issued an order under s 95(2) of the Civil Judgments Enforcement Act 2004, for the seizure and delivery of the Bond.
On 15 October 2020, Mr Weston provided a schedule of estimated costs of remediation work required to be completed as at that date.
On 28 October 2020, Mr Weston filed the originating summons for relief by way of interpleader under O 17 of the Rules of the Supreme Court 1971 (WA), naming Perkins (WA), Austpro, and Manda Capital Holdings Pty Ltd as respondents. Mr Weston claims no interest in the Bond.
On 29 October 2020, Austpro filed an urgent application seeking orders to set aside a property seizure and delivery order obtained by Perkins, and for orders that the Bond be delivered to and held by the District Court of Western Australia and released only on order of this court, and restraining Perkins from enforcing the judgment.
On 10 November 2020, the Master referred proceedings, including Austpro's application to set aside the property seizure and delivery order and an application to stay enforcement proceedings, and Mr Weston's interpleader application, to a judge to be managed together.
On 4 December 2020, I made orders programming the filing of evidence and submissions for the hearing of Austpro's application (as judgment debtor) for suspension or setting aside of the property seizure and delivery order, together with the interpleader. The hearing of the interpleader was programmed to follow immediately on the hearing of the application by Austpro.
Construction Contracts Act
By s 31(2)(b) of the Construction Contracts Act, an adjudicator has the power to determine whether any party to a payment dispute is liable to make a payment, or to return any security and the date on or before which the payment is to be made or the security is to be returned. By s 38, the determination is binding on the parties to the construction contract, and by s 43 may be enforced as an order of the court.
Except for a limited right of review in the State Administrative Tribunal under s 46(1) of the Construction Contracts Act, a decision or determination of an adjudicator on an adjudication cannot be appealed or reviewed. Section 46 does not exclude the supervisory jurisdiction of the Supreme Court to grant relief for jurisdictional error. Austpro has not applied for judicial review of the determination.
The Construction Contracts Act does not prevent a party to a construction contract from pursuing civil proceedings in relation to a dispute or other matter arising under the contract. A court dealing with a matter arising under a construction contract must allow for any amount paid, or to be paid, under a determination, and may make orders for the restitution of amounts paid, 'and any other appropriate orders as to such a determination': s 45. As Colvin J said in Easy Stay Mining Accommodation Pty Ltd v Grounded Construction Group Pty Ltd,[5] 'the adjudicator determines an amount that must be paid by operation of statutory provisions without affecting the underlying common law rights of the parties'. Where civil proceedings are brought, it is the court that determines the underlying rights.
[5] Easy Stay Mining Accommodation Pty Ltd v Grounded Construction Group Pty Ltd [2018] FCA 519 [32].
The relevant agreements
Perkins and Austpro are parties to a Building Contract dated 22 October 2018.[6]
[6] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-1'.
Manda entered into three agreements with Austpro, all dated 12 November 2018, pursuant to which it provided finance for the project: a Loan Agreement; a General Security Agreement; and a Specific Security Agreement.
Manda, Austpro and Perkins are also parties to a Tripartite Agreement made by deed and also dated 12 November 2018.
The Building Contract
The Building Contract comprises a formal instrument of agreement and a contract in the form of the Australian Standard General conditions of contract (AS 2124 ‑ 1992), subject to amendments set out in an attachment.
Clause 5 deals with security, retention moneys and performance undertakings. By cl 5.2, a party is required to provide security in the amount stated in the Annexure to the Contract. Clause 5.3 provides for the form of security.[7]
[7] The Annexure required the Contractor to provide security and the amount of 5% of the Contract.
By cl 5.5 (as amended):
A party may have recourse to security where the party has become entitled to exercise rights under the Contract in respect of the security.[8]
[8] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-1', page 81.
By cl 5.8, where the contractor has provided security, the principal shall release it when required by cl 42.8.
Clause 30 provides for materials and work, and in cl 30.3 for defective materials or work. By cl 30.3, the Superintendent may issue directions, including to reconstruct, replace or correct material or work and may direct the times within which the Contractor must commence and complete the removal, demolition, replacement or correction:
If the Contractor fails to comply with a direction issued by the Superintendent pursuant to Clause 30.3 within the time specified by the Superintendent in the direction and provided the Superintendent has given the Contractor notice in writing that after the expiry of 7 days from the date on which the Contractor receives the notice the Principal intends to have the work carried out by other persons, the Principal may have the work of removal, demolition, replacement or correction carried out by other persons and the cost incurred by the Principal in having the work so carried out shall be a debt due from the Contractor to the Principal.
By cl 30.6, 'notwithstanding that the Superintendent has not given a direction under cl 30.3, the Contractor shall promptly remove, demolish, replace or correct material work that is not in accordance with the Contract'. Further,
Nothing in Clause 30 shall prejudice any other right which the Principal may have against the Contractor arising out of the failure of the Contractor to provide material or work in accordance with the Contract.
Clause 35 provides for Commencement and Practical Completion.
By cl 37:
The Defects Liability Period … shall commence on the Date of Practical Completion.
As soon as possible after the Date of Practical Completion, the Contractor shall rectify any defects or omissions in the work under the Contract existing at Practical Completion.
At any time prior to the 14th day after the expiration of the Defects Liability Period, the Superintendent may direct the Contractor to rectify any omission or defect in the work under the Contract existing at the Date of Practical Completion or which becomes apparent prior to the expiration of the Defects Liability Period. The direction shall identify the omission or defect and state a date by which the Contractor shall complete the work of rectification and may state a date by which the work of rectification shall commence. …
If the work of rectification is not commenced or completed by the stated dates, the Principal may have the work of rectification carried out at the Contractor's expense, but without prejudice to any other rights that the Principal may have against the Contractor with respect to such omission or defect in the cost of the work of rectification incurred by the Principal shall be a debt due from the Contract.
Clause 42 provides for certificates and payment. Clause 42.5 provides for the Superintendent to issue a Certificate of Practical Completion. After the expiration of the Defects Liability Period, the contractor is to lodge a Final Payment Claim with the Superintendent: cl 42.7.
Clause 42.8 (as amended) provides for the Final Certificate by the Superintendent as to amounts finally due between the Contractor and the Principal, including amounts due from the Contractor to the Principal under or arising out of or in connection with the Contract or any alleged breach. It requires the Principal to release security then held by the Principal within 10 business days after the issue of a Final Certificate on the Contractor's Final Payment Claim.
By cl 42.10 (as amended), the Principal may deduct from the money due to the Contractor any money due from the Contractor to the Principal otherwise than under the Contract and the Principal may have recourse to Security under the Contract.
By cl 42.11 (as amended):
Where a party fails to pay to the other party an amount due and payable under the Contract within the time provided by the Contract or a party fails to pay the other party any money due otherwise than under the Contract, the other party may have recourse to security under the Contract and any deficiency remaining may be recovered by the other party as a debt due and payable.[9]
[9] See affidavit of Callan Leslie Doran affirmed 24 December 2020, page 85.
Clause 57 provides for the requirements of the financier. The contract is made subject to the Financier approving it in writing, and the entry by the Contractor into a tripartite deed with the Principal and the Financier.
The Loan Agreement and General and Specific Security Agreements
Under the Loan Agreement,[10] Manda is the lender and Austpro the borrower. There are two guarantors.
[10] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-2'.
The Loan Agreement provides, in cl 1, for the term Transaction Document to include 'any tripartite deed relating to the Works'.[11] The person who is party to a Transaction Document is a Transaction Party.[12]
[11] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-2', 135.
[12] Clause 1.1.
Secured Money is defined to include money for which a Transaction Party is or at any time may become liable under or in connection with a Transaction Document.
If an event of default occurs, in addition to the Lender's rights under cl 11, 'and any rights, powers and remedies conferred on it by any Transaction Document', the lender may do the thing specified in cl 10.9, including 'spend the balance of any monies intended to form part of the Secured Money then in the hands of the Lender towards the completion of the Works'.[13] By cl 11, where an event of default is not remedied within seven business days after notice, the lender may exercise its rights under any Transaction Document.
The General Security Agreement
[13] Clause 10.9(f).
The General Security Agreement[14] is between Austpro as grantor and Manda as lender.
[14] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-4'.
By cl 2.1, Austpro granted to Manda a security interest over all Personal Property and a fixed charge over all Other Property, 'to secure the payment of the Secured Money and the punctual performance of all the Grantor's Obligations to the Lender at any time'.[15]
[15] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-4', 211. While the agreement provided for 'Excluded Property', there was no Excluded Property.
The General Security Agreement defined Transaction Documents as including any agreement which constitutes a Transaction Document under the Loan Agreement, and therefore includes any Tripartite Deed. The party to any transaction document is a Transaction Party.
By cl 11, following default, the lender could exercise all of the rights, powers and remedies conferred on a receiver pursuant to cl 13.3, including the power to preserve Collateral, to exercise any rights and discretions of the Grantor in connection with Collateral, and to 'perform, assume the benefit of and enforce the rights, powers, privileges and remedies of the Grantor in relation to the Collateral and any agreements, contracts or documents which relate to the Collateral'.
'Collateral' was defined in cl 1.1 as all personal property and all other property (defined as all present and after acquired property that is not personal property).
The Specific Security Agreement
Austpro as Grantor and Manda as Lender also entered into a Specific Security Agreement[16].
[16] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-5'.
By cl 2, Austpro granted to Manda a security interest over Collateral, defined in sch 2 as, 'All documentation related to the development of the property known as 21 Holman Street Bunbury and the State of Western Australia including but not limited to presale contracts, engineering and geotechnical reports, environmental reports, site assessments and architectural plans'.[17]
The Tripartite Agreement
[17] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-5', 343.
The Tripartite Agreement was executed as a deed on 12 November 2018 between Perkins (Builder), Austpro (Borrower), and Manda (Lender). [18]
[18] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-6'.
The Background to the Tripartite Agreement included the statement:
At the request of the Borrower, the Builder has agreed to enter into this deed for the mutual benefit of the Lender and the Builder.
By cl 2, Perkins consented to Austpro granting security in favour of Manda over all of Austpro's right, title and interest in, to and under the Building Contract pursuant to the Transaction Documents. Further, Perkins:
Acknowledges that this deed constitutes notice to it, and it has received notice, of the Transaction Documents, consents to the exercise of any rights, remedies or powers under the Transaction Documents by any Enforcing Party including, without limitation, making a claim under or drawing any Building Performance Security.
Acknowledges that the Transaction Documents constitute an Encumbrance on the Secured Property in priority to any interest which the Builder may at any time have in any of the Secured Property.[19]
[19] Affidavit of Callan Leslie Doran affirmed 24 December 2020, 'CLD-6', cl 2(b) and (c). Building Performance Security is defined as 'any Guarantee, bond, undertaking or security required to be granted by the Builder to, or at the direction of, the Borrower under the Building Contract'.
Secured Property is defined to mean the property the subject of the Transaction Documents.
The parties' positions
In its first submissions, Perkins claimed it was entitled to the return of the Bond in accordance with its judgment, made on filing the determination under the Construction Contracts Act. It submitted that Manda's entitlement to the Bond depends upon and can rise no higher than any rights held by Austpro, and that those rights ceased on 25 August 2020, the date on which Austpro was required to return the Bond.
In responsive submissions, Perkins further submitted that on Manda's proposed construction of the agreements, Perkins, as builder, would effectively guarantee the performance by Austpro of its loan obligations. Perkins submitted that such a construction was both uncommercial and not supported by the words of the Tripartite Agreement.
Perkins submitted that cl 2(b) of the Tripartite Agreement, by which it consented to Manda exercising any rights, remedies or powers under the Transaction Documents, including making a claim under or drawing any Building Performance Security, was a consent only to Manda exercising a right, remedy or power that Austpro had under the Building Contract. Manda's right to make a claim on the Bond was conditional upon Austpro having the right to make that claim.
Perkins submitted that for Austpro to become entitled to call upon the Bond, whether under cl 30.3 or cl 37 of the Building Contract, there were conditions which must be met:
(1)the Superintendent must have directed Perkins to remedy the defective works within a specified time and Perkins must have failed to do so;
(2)the Superintendent must have given Perkins the prescribed notice of Austpro's intention to have the work carried out by others;
(3)Austpro must have had the work carried out by others and incurred a cost;
(4)the Superintendent must have issued a payment certificate certifying a balance due from Perkins to Austpro taking into account such amounts as are due from Austpro to Perkins; and
(5)Perkins must have failed to pay the amount due under the payment certificate.
Perkins submitted that those conditions had not been met and Austpro had no right to call upon the Bond under cl 5 of the Building Contract.
Manda submits that it is presently entitled to call on the Bond. Clause 30.6 provides that nothing in cl 30 shall prejudice any other right which the Principal may have against the Contractor.
Manda submitted that Perkin's obligation under cl 37, to rectify defects or omissions in the works at Practical Completion, exists independently of any direction by the Superintendent. The right to have the work carried out at the Contractor's expense is without prejudice to any other rights the Principal may have against the Contractor. Further, Perkins had demonstrated an intention to not perform rectification work by purporting to terminate the Building Contract, and by informing the Superintendent that it was not required to remedy any alleged defects and that Austpro could not call upon the Bond where it had not already had rectification work carried out.
Consideration
The adjudication under the Construction Contracts Act for the delivery of the Bond does not determine the underlying common law rights regarding who is entitled to the Bond. In particular, Manda not being a party to that adjudication, it does not determine rights between Perkins and Manda.
The critical clause in the Building Contract is cl 42.11. There are two circumstances under that clause in which a party may have recourse to security: first, where the other party fails to pay an amount 'due and payable under the Contract within the time provided by the Contract'; and second, where a party fails to pay any money 'due otherwise than under the Contract'.
The court is concerned with the language used by the parties in this suite of contracts. But the expressions 'due and payable' and 'due' are commonly used in construction contracts and have a generally accepted meaning. In CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd [No 2] the court said:[20]
In ordinary parlance, the meaning of the word 'due' includes 'immediately payable' or 'owing, irrespective of whether the time for payment has arrived'. The word 'due' in a legal context is sometimes used in the sense of 'payable', but prima facie means any sum that a person is legally liable to pay, irrespective of whether the time for payment has arrived, ie, irrespective of whether it is then 'payable'. A debt may be said to be 'payable' if it is not only due (in the sense of owing), but is presently payable in the sense that the time for payment has arrived, and an action could be maintained in respect of it. In the expression 'due and payable', the word 'payable' often means required to be immediately or presently paid. Thus, the words 'due and payable' may often be tautological in the sense that an amount which is 'payable' will at least generally first be owing in the sense of due. In other words to say that an amount is 'due and payable' will often not add anything to a statement that the amount is 'payable'. In ordinary parlance, a debt may be said to be 'payable' prior to any admission that it is payable, or any legal adjudication in respect of it. (citations omitted)
[20] CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd [No 2] [2017] WASCA 123 [122].
I accept the argument of Perkins that cl 30.3 and cl 37 impose conditions to be met before an amount is 'due and payable' under those clauses, that is, before the amount must be immediately or presently paid. But both clauses preserve the parties' rights other than those specifically conferred by the Contract.
When Perkins gave its notice of termination, and before it obtained the adjudication requiring the return of the Bond, the Superintendent had certified practical completion and had advised Perkins of matters requiring rectification. Austpro had a legitimate claim that Perkins was liable to rectify defects or omissions in the works at Practical Completion. That liability to pay the cost of rectifying defects is independent of the procedure in cl 30 and cl 37 for determining the amount to be paid and when it is due and payable. At the time of Practical Completion, Austpro had a claim for an amount due and the right to have recourse to the Bond. It is not necessary that the amount due had been determined, and was then payable.
By cl 2 of the Tripartite Deed, Perkins had consented to Manda exercising its rights under the Transaction Documents, including by making a claim under or drawing any Building Performance Security. Manda's rights under the Transaction documents include those conferred by cl 11 and cl 13.3 of the General Security Agreement. By those clauses, Manda was granted, in substance, all of Austpro's rights and powers in connection with the Collateral under that agreement (defined as all Austpro's personal property and all other property). Manda could maintain Austpro's claim for amounts due for the cost of rectifying defects, and its right to have recourse to the Bond. The adjudication requiring Austpro to deliver the Bond does not affect rights held by Manda following Austpro's default in around January 2020.
In summary, cl 2 of the Tripartite Deed, read with the General Security Agreement and cl 30 and cl 37 of the Building Contract, support Manda's claim to the Bond.
I have not found it necessary to decide whether Perkins validly suspended work under the Building Contract and validly terminated the contract.
I will hear from the parties as to the orders necessary to give effect to these reasons, including whether it is necessary to make any order pursuant to s 45 of the Construction Contracts Act.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MG
Associate to the Honourable Justice Allanson
7 APRIL 2021
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WESTON -v- PERKINS (WA) PTY LTD [2021] WASC 84 (S)
CORAM: ALLANSON J
HEARD: 7 APRIL 2021
DELIVERED : 23 SEPTEMBER 2021
PUBLISHED : 22 SEPTEMBER 2021
FILE NO/S: CIV 2083 of 2020
BETWEEN: MAXWELL DAVID WESTON
Applicant
AND
PERKINS (WA) PTY LTD
First Respondent
AUSTPRO MANAGEMENT SERVICES GROUP PTY LTD
Second Respondent
MANDA CAPITAL HOLDINGS PTY LTD AS TRUSTEE OF THE HOLMAN STREET BUNBURY UNIT TRUST
Third Respondent
Catchwords:
Costs - Where applicant brought application for interpleader - Where application brought after applicant aware that first respondent had obtained Property (Seizure and Delivery) Order - Whether reason for court to depart from usual order as to costs
Legislation:
Nil
Result:
No order as to costs of applicant on interpleader
Category: B
Representation:
Counsel:
| Applicant | : | No appearance |
| First Respondent | : | No appearance |
| Second Respondent | : | No appearance |
| Third Respondent | : | No appearance |
Solicitors:
| Applicant | : | MGD Law |
| First Respondent | : | Jackson McDonald |
| Second Respondent | : | Alexander Law |
| Third Respondent | : | Hopgoodganim Lawyers (Perth) |
Cases referred to in decision:
Guerinoni v Castino [2008] NSWSC 175
Watson v Park Royal (Caterers) Ltd [1961] 2 All ER 346
ALLANSON J:
Introduction
On 28 October 2020, the applicant, Maxwell David Weston, applied by originating summons for interpleader relief in respect of a Bond which had been provided by Perkins (WA) Pty Ltd as security in relation to a construction contract.
These reasons concern whether Mr Weston is entitled to his costs of the application on an indemnity basis.
The hearing of the application was contested by Perkins as the first respondent, and Manda Capital Holdings Pty Ltd as the third respondent. The second respondent, Austpro Management Services Group Pty Ltd, did not take part in the hearing.
Following the hearing, I held that the Bond should be delivered up to Manda, and that Perkins should pay the costs of Manda.
I further made orders for Perkins, Mr Maxwell and Austpro to file submissions on the question of costs of the interpleader.
Perkins and Mr Maxwell filed submissions.
Austpro has not filed submissions.
It is necessary in these reasons to refer to the various law firms representing the parties: Perkins was represented by the firm of Jackson McDonald; Manda was represented by Hopgood Ganim Lawyers; and Mr Weston was represented by MDG Law. The solicitors for Austpro, Alexander Law, have since applied to be removed from the record.
The evidence
Mr Maxwell gave evidence on the interpleader application, by affidavit sworn 28 October 2020.
Perkins relied on affidavits filed in this action and in related proceedings:
(1)Affidavit of Callan Leslie Doran affirmed 24 December 2020 filed in CIV 2083 of 2020;
(2)Affidavit of Chelsea Lee Quirk affirmed 27 October 2020 filed in CCD 1 of 2020.
The affidavits show this sequence of events:
(1)Austpro appointed Mr Weston as Superintendent under its building contract with Perkins (Contract), and, in that capacity, Mr Weston took custody of the Bond from Perkins on or about 25 November 2018.
(2)On 30 March 2020, Mr Weston issued a Certificate of Practical Completion, following which he notified Perkins of defects in the Project.
(3)On or about 20 May 2020, Manda took possession of the Project as mortgagee in possession.
(4)On 23 June 2020, Perkins issued a Notice of Termination of the Contract.
(5)On 7 July 2020, Perkins applied for adjudication of a payment dispute with Austpro under the Contract, pursuant to the Construction Contracts Act 2004 (WA). In that adjudication, Perkins sought the return of the Bond.
(6)On 18 August 2020, the adjudicator issued a determination which included that Austpro return the Bond on or before 25 August 2020.
(7)On 28 August 2020, Perkins filed the determination of the adjudicator in the Supreme Court to enforce it as an order of the court under s 43 of the Construction Contracts Act.
(8)On 8 September 2020, Hopgood Ganim wrote to Mr Weston and Perkins asserting that Manda was entitled to call on the Bond and disputing that it should be returned to Perkins.
(9)On 18 September 2020, Austpro commenced action CIV 1964 of 2020 in the Court, by writ with an indorsement of claim. Perkins was named as the second of three defendants to that action.
(10)On 12 October 2020, Perkins obtained a Property (Seizure and Delivery) Order from the Supreme Court in respect of the Bond, pursuant to s 95 of the Civil Judgments Enforcement Act 2004 (WA). The order named Austpro as the 'obligated person'.[21]
[21] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 6.
(11)On 20 October 2020, MGD Law, on behalf of Mr Weston, spoke by telephone to Jackson McDonald, and requested copies of the relevant court order, the property seizure and delivery order, and the writ of summons filed in proceedings between Perkins and Austpro. MDG Law followed up the telephone conversation with an email dated 21 October 2020.[22]
[22] See affidavit of Maxwell David Weston sworn 28 October 2020, MDW 7.
(12)On 21 October 2020, Jackson McDonald forwarded the requested documents by email. Later the same day, by a further email, Jackson McDonald advised they had instructions to hold off efforts to recover the Bond 'for today only'. They continued:
In the absence of delivery up, or adequate arrangements for delivery up, of the Post Completion Security today, on and from tomorrow, we are instructed to take all necessary action to recover the Post Completion Security including, if necessary, referring the matter back to the Supreme Court for consideration.[23]
[23] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 7, 142 (emphasis in original).
(13)On 21 October 2020, MDG Law replied that they had instructions to brief counsel and expected to be able to advise of their client's position 'by no later than Friday, 23 October 2020 Monday, 26 October 2020 at the latest'. The email continued:
For the avoidance of any doubt, and I note as a matter of record that, my client has at no time sought, and does not intend, to be obstructive towards your clients attempt to enforce the Property Seizure and Delivery Order. Given the invidious position in which my client finds himself is entitled to be afforded reasonable time to ascertain, as a matter of law, what would be the most appropriate way for him to proceed.[24]
[24] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 7, 141 - 142.
(14)Jackson McDonald responded that they did not undertake to refrain from taking steps.
(15)On 26 October 2020, MDG Law wrote to Hopgood Ganim and Alexander Law. Relevantly, the letter advised that the deputy sheriff had sought to execute the property seizure and delivery order by telephoning and attending at Mr Weston's premises on several occasions. The letter referred to the correspondence with Jackson McDonald and said,
… my client should no longer be involved in the dispute between Perkins and your respective clients. As noted above, his role as Superintendent ended several months ago, and there is no longer any basis on which the Post Completion Security should remain in his custody (indeed, under the Contract it should have been lodged with Austpro in the first place).
Ms Fayad [a solicitor with Alexander Law] advised me earlier today that Austpro has commenced an action to stay Perkins' enforcement of the PSDO and that, in the circumstances, Austpro will take delivery of the Proposed Completion Security.
My client will, therefore, return the Proposed Completion Security to Austpro.[25]
[25] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 8.
(16)On 26 October 2020, MDG Law also wrote to Jackson McDonald, advising, among other things, that Mr Weston was not named in either the determination or the PSDO. The letter also questioned whether the determination could be enforced by the property seizure order. MDG Law stated they had been advised by the solicitors for Austpro that it had commenced an action to stay enforcement and that Austpro would take delivery of the Bond.[26]
[26] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 9.
(17)On 27 October 2020, MDG Law wrote to Hopgood Ganim and Alexander Law stating that Austpro had now advised they were not prepared to take delivery of the Bond in Western Australia, and that they had been provided with a copy of an application to stay enforcement proceedings, dated 23 October 2020, which had been filed in the District Court of Western Australia on 26 October 2020. MDG Law noted that the application was not supported by an affidavit and appeared to have been filed in the wrong jurisdiction. In light of what had happened, MDG Law advised that Mr Weston now believed the Bond should be returned to Perkins.[27]
(18)On 27 October 2020, Hopgood Ganim responded, on behalf of Manda, and demanded that Mr Weston place the Bond into the Supreme Court by way of an interpleader application without delay. The letter advised that Manda reserved its rights including to recover any loss or damage it may suffer from or in connection with Mr Weston delivering up the Bond.[28]
(19)On 27 October 2020, Alexander Law also responded. They advised their intention to file in the Supreme Court. Alexander Law, on behalf of Austpro, stated:
… should your client deliver up the Security Document to Perkins and/or their solicitors, they will have deprived our client of the opportunity to have the document delivered up, as foreshadowed, to the relevant Court for safe custody until such time as determination is made in the Supreme Court proceedings our client has now been required to instigate.
Should our client lose constructive possession of the security instrument, we have been instructed that our client may be required to seek compensation and/or damages from your client as a result of his role in permitting Perkins to proceed to obtaining judgment in respect to the [property deliver and seizure order] and PPSO.[29]
(20)On 27 October 2020, Jackson McDonald advised MDG Law that they were instructed to apply to the Court orders under s 95(3) of the Civil Judgments Enforcement Act against Mr Weston personally, and would apply for those orders if the Bond were not delivered up to Jackson McDonald that day.[30]
(21)On 27 October 2020, Jackson McDonald wrote to the court, in action CCD 1 of 2020, seeking ancillary orders pursuant to s 95(3) of the Civil Judgments Enforcement Act, including that Mr Weston deliver up the Bond to Perkins, and be restrained from otherwise removing it from his possession. On 29 October 2020, the court advised that the application had been listed in the Master's List on 3 November 2020.
(22)MDG Law then advised the solicitors for all interested parties that it intended without delay to apply for interpleader relief.[31]
(23)On 28 October 2020, MDG Law filed the originating summons and supporting affidavit for interpleader relief.
(24)On 29 October 2020, Alexander Law filed a summons in CCD 1 of 2020 seeking relief, including that the Property Seizure and Delivery Order be set aside pending the determination of the proceedings in CIV 1964 of 2020.
[27] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 11.
[28] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 12.
[29] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 13. Earlier in the letter there is a reference to a 'PSSO' - that is a property seizure and sale order. I infer that is what the letter intended to refer to.
[30] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 14.
[31] Affidavit of Maxwell David Weston sworn 28 October 2020, MDW 15.
On 13 November 2020, Austpro filed a statement of claim in CIV 1964 of 2020, in which they sought relief including an order to deliver the Bond to Austpro, and orders setting aside the adjudications under the Construction Contracts Act.
On 18 November 2020, three actions - CIV 1964 of 2020, CCD 1 of 2020 and CIV 2083 of 2020 - were admitted to the Commercial and Managed Cases List.
On 25 November 2020, Austpro filed an amended writ of summons in CIV 1964 of 2020 which included claims for delivery of the Bond to Austpro, orders setting aside the adjudications and an order setting aside the Property Seizure and Delivery Order.[32]
[32] It is unnecessary to set out the progress of this action in any detail. On 10 July 2021, judgment was entered for the defendants under a self-executing order, on the failure of Austpro to pay security for costs within the time ordered.
On 4 December 2020, I made orders programming the hearing of Austpro's application to suspend or set aside the Property Seizure and Delivery Order and for the hearing of that application together with the interpleader application (CIV 2083 of 2020). Austpro did not participate in the hearing of the interpleader.
Consideration
By O 17 r 15 of the Rules of the Supreme Court 1971 (WA), the court may in and for the purposes of any interpleader proceedings make such order as to costs as it thinks just.
It is not in doubt that the usual order for costs on an interpleader application is that an applicant who comes promptly to court when faced with conflicting claims, and has been guilty of no conduct which has increased costs, should prima facie have complete indemnity for his costs.
Perkins, however, submitted that Mr Weston is not entitled to his costs and contended:
(a) there was no reasonable basis for an expectation that Mr Weston would be sued;
(b) Mr Weston could not reasonably satisfy the Court that he did not collude with any of the claimants to the subject-matter of the application; and
(c) in any event, Mr Weston was legally required to hand the Bond over to the Sheriff (when the Sheriff attended at his premises to enforce a court order) and, if any interpleader was required, it would have been brought by the Sheriff and Mr Weston would not have incurred any costs at all.
In written submissions, Mr Weston described Perkins' submissions as 'belated speculation about alternative procedures that could have been undertaken'. Mr Weston pointed to the steps he took to obtain legal advice and identify the competing claims to the Bond. Mr Weston submitted there was no evidentiary basis for a finding of collusion. He further submitted that the submission that the Bond should have been handed to the Sheriff under the property seizure order is contrary to the decision made in the interpleader application.
I make the following findings.
First, from 8 September 2020, Mr Weston was on notice that Manda disputed the entitlement of Perkins to have the Bond returned.
From 27 October 2020, Mr Weston was advised that Manda reserved its rights including to recover any loss or damage it may suffer from or in connection with Mr Weston delivering up the Bond, and that Austpro threatened action should he deliver up possession other than to the court.
It is settled that an interpleader may be appropriate even if one of the competing claims has not matured to the point of being advanced by way of initiation of court proceedings. It is sufficient for the person who wishes to interplead to show 'a real foundation for an expectation that they would be sued'.[33]
[33] Watson v Park Royal (Caterers) Ltd [1961] 2 All ER 346, 352; Guerinoni v Castino [2008] NSWSC 175 [6] - [7].
By 27 October 2020 at the latest, following the letters from Hopgood Ganim and Alexander Law, and subject to what I say below about the issue of the Property (Seizure and Delivery) Order, Mr Weston had a reasonable basis for expecting that he would be sued by one or both of Manda and Austpro should he deliver up the Bond.
Second, I accept the submission of Mr Weston that the evidence does not support a finding that he colluded in any improper way with any of the claimants.
Third, I would, however, uphold the argument advanced by Perkins. On 12 October 2020, Perkins obtained a Property (Seizure and Delivery) Order, pursuant to s 95 of the Civil Judgments Enforcement Act, based on the adjudication it had obtained under the Construction Contracts Act being registered as a judgment of the court. By 20 October 2020, at the latest, Mr Weston was aware of the judgment, and the issue of the Property (Seizure and Delivery) Order.
Mr Weston applied to the court on 28 October 2020, after being informed that Perkins had made an urgent application for ancillary orders under the Civil Judgments Enforcement Act. There may be arguments about whether Perkins could enforce the judgment for delivery of the Bond under the Construction Contracts Act. But at the time Mr Weston applied for interpleader relief, he was aware that the order had been made by the court. It had not been stayed and remained in effect.
Mr Weston cannot claim to have acted reasonably by failing to comply with an order of the court. Orders of the court should not be ignored.
From the perspective of Perkins, it acted reasonably in seeking to enforce its judgment by applying for the appropriate orders under the Civil Judgments Enforcement Act.
Finally, I do not accept the argument put on behalf of Mr Weston that this result is inconsistent with my decision on the interpleader application. The present question was not raised in that application. By the time the matter had been brought before me, the Bond had been delivered to the registry of the court pursuant to the orders of the Master made on 10 November 2020. The Master, consistently with the orders then proposed by Perkins, reserved costs.
I will make no order for the costs of Mr Weston on the interpleader.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MG
Associate to the Honourable Justice Allanson
22 SEPTEMBER 2021
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