Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69 (15 April 2009)

Last Updated: 21 April 2009

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69


FILE NUMBER(S):
40264/08

HEARING DATE(S):
10 March 2009

JUDGMENT DATE:
15 April 2009

PARTIES:
Dualcorp Pty Ltd (Appellant)
Remo Constructions Pty Ltd (Respondent)

JUDGMENT OF:
Allsop P Macfarlan JA Handley AJA

LOWER COURT JURISDICTION:
District Court

LOWER COURT FILE NUMBER(S):
DC 1685/08

LOWER COURT JUDICIAL OFFICER:
Quirk DCJ

LOWER COURT DATE OF DECISION:
10 March 2009


COUNSEL:
F Corsaro SC/S Tzouganatos (Appellant)
G Inatey SC/F Hicks/P Coady (Respondent)

SOLICITORS:
Turner Freeman (Appellant)
Blackstone Waterhouse (Respondent)

CATCHWORDS:
CONTRACTS - Building and Construction Industry Security of Payment Act 1999 - progress claim for amounts the subject of a previous claim - adjudicator's determination that most of previous claim not maintainable - whether further claim precluded by provisions of the Act or principles of estoppel
ESTOPPEL - issue estoppel - adjudication under Building and Construction Industry Security of Payment Act 1999

LEGISLATION CITED:
Building and Construction Industry Security of Payment Act 1999
Workers' Compensation and Rehabilitation Act 1981 (WA)

CATEGORY:
Principal judgment

CASES CITED:
Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9
Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256
D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1
John Goss Projects v Leighton Contractors & Anor [2006] NSWSC 798
Kuligowski v Metrobus [2004] HCA 34; (2004-2005) 220 CLR 363
Rothnere v Quasar & Ors [2004] NSWSC 1151
Walton v Gardiner [1993] HCA 77; (1992-3) 177 CLR 393

TEXTS CITED:
Spencer Bower, Turner and Handley, Res Judicata, 3rd ed (1996) Butterworths

DECISION:
(a) Leave to appeal granted.
(b) Appeal dismissed.
(c) The applicant/appellant to pay the respondent's costs of the leave application and of the appeal.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 50264/08

DC 1685/08

ALLSOP P

MACFARLAN JA

HANDLEY AJA

WEDNESDAY 15 APRIL 2009

DUALCORP PTY LTD v REMO CONSTRUCTIONS PTY LTD

Judgment

1 ALLSOP P: I have had the advantage of reading in draft the reasons of Macfarlan JA. I agree with the orders proposed by his Honour. His Honour’s reasons relieve me of the need to set out much of the background to and context of the appeal, as well as many of the provisions of the Building and Construction Industry Security of Payment Act 1999 (the “Act”).

2 I agree with Macfarlan JA that the Act was not intended to permit the repetitious use of the adjudication process to require an adjudicator or successive adjudicators to execute the same statutory task in respect of the same claim on successive occasions. A party in the position of the applicant (Dualcorp), here, should not be able to re-ignite the adjudication process at will in order to have a second or third or fourth go at the process provided by the Act merely because it is dissatisfied with the result of the first adjudication.

3 The principal provisions of the Act that are directed to this question of repetition are ss 13(5) and (6) and 22(4). Macfarlan JA has dealt with s 22(4). I will return to that provision.

4 Subsections 13(5) and (6) should be read with s 8 and the definition of the phrase “progress payment” in s 4. Section 8 is in the following terms:

“(1) On and from each reference date under a construction contract, a person:

(a) who has undertaken to carry out construction work under the contract, or

(b) who has undertaken to supply related goods and services under the contract,

is entitled to a progress payment.

(2) In this section, reference date, in relation to a construction contract, means:

(a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or

(b) if the contract makes no express provision with respect to the matter—the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month.”

The definition of “progress payment” in s 4 is as follows:

“In this Act:

progress payment means a payment to which a person is entitled under section 8, and includes (without affecting any such entitlement):

(a) the final payment for construction work carried out (or for related goods and services supplied) under a construction contract, or

(b) a single or one-off payment for carrying out construction work (or for supplying related goods and services) under a construction contract, or

(c) a payment that is based on an event or date (known in the building and construction industry as a ‘milestone payment’).

5 In the relevant design and construction contract between Dualcorp Pty Ltd (as subcontractor) and Remo Construction Pty Ltd (as contractor), clause 8 dealt with contracting sum, payment and security. Clause 8.3 dealt with payment claims and certificates and, relevantly, stated:

“(a) At the times stated in Annexure A, item 11, and upon the times set out in Clauses 8.9 and 8.13, the Subcontractor may submit a Payment Claim to the Contractor. Save for the formalities of Clauses 8.9 and 8.13, a Payment Claim must include the value and description of work carried out by the Subcontractor in the performance of the Agreement to the permissible reference date (‘Payment Claim’).

(b) Within 10 days after receipt of a Payment Claim, the Contractor must issue to the Subcontractor a Payment Certificate (‘Payment Certificate’) stating the amount of payment, which in the opinion of the Contractor, is to be made by the Contractor to the Subcontractor or by the Subcontractor to the Contractor (‘Certified Amount’). The Contractor shall set out in the Payment Certificate the calculations employed to arrive at the Certified Amount and, if the Certified Amount is more than or less than the amount claimed in the Payment Claim, the reasons for the difference.

(c) A Payment Claim must be submitted and received by the Contractor on each permissible reference date as provided within Annexure A, item 11, and upon the times set out in Clauses 8.9 and 8.13.

(d) In the event that the reference date falls on a day other than a defined business day, then the Subcontractor must submit a Payment Claim on the subsequent business day.”

6 Annexure A, Item 11 was in the following form:

“Date for submission of

payment claims: 15th of each month

(reference date)”

7 Clause 8.9 dealt with retention moneys. Clause 8.13 dealt with final payment claim in the following terms:

“Within 10 days after ground floor slab is formed up, the Subcontractor must submit to the Contractor a final Payment Claim endorsed as (‘Final Payment Claim’) being a Payment Claim subject to the terms of this Agreement under Clause 8, together with all claims showing all claimed adjustments to the Contract Sum and all amounts received by the Subcontractor up to the date of the expiration of the Defects Liability Period.”

8 As can be seen from the Act, s 13(5) a claimant is limited to one payment claim in respect of each reference date. Section 13(6) permits, however, inclusion in another payment claim (necessarily by reference to another reference date) of an amount that has been the subject of a previous claim. Amongst other usual and uncontroversial examples, this permits the submission of cumulative payment claims by reference to later reference dates, which include an amount the subject of a previous claim. In such circumstances, if there has been an adjudication, s 22(4) will apply to require the same value to be given to such work, subject to the qualification in that subsection.

9 Here, Dualcorp, after undertaking the works, left the site in November 2007. It claimed to have substantially completed the works under the contract in November 2007.

10 A payment claim was made on 29 January 2008 attaching six invoices, four of which were dated 24 January 2008 and two of which were dated 29 January 2008. The relevant reference date was not identified on the claim or invoices.

11 On 3 March 2008, Dualcorp purported to serve a second payment claim annexing the same invoices and claiming the same amount. Again, no reference date was identified on the documentation.

12 Whether or not this was a final claim or a progress claim does not matter. The claim represented by the six invoices must have been in respect of only one reference date – either 15 December 2007 or 15 January 2008, if pursuant to Annexure A, Item 11 or the reference date pursuant to the operation of cl 8.13, if a final payment claim. In either case, there must have been one reference date under the contract or the last day of the month as provided for by the Act, s 8(2)(b).

13 I see no warrant under either the contract or the Act, s 8 for permitting a party in Dualcorp’s position to create fresh reference dates by lodging the same claim for the same completed works in successive payment claims. That is not the intended operation of the last phrase of s 8(2)(b) (“and the last day of each subsequent named month”).

14 Here, the work had been done; Dualcorp, the subcontractor, had left the site; it claimed payment by six invoices; six weeks later it repeated that claim by reference to the same invoices and, in my view, in respect of the same reference date. Dualcorp was prevented from serving the second payment claim. The terms of s 13(5) are a prohibition. The words “cannot serve more than one payment claim” are a sufficiently clear statutory indication that a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment claim under the Act and does not attract the statutory regime of the Act.

15 For these reasons, Dualcorp was not entitled to proceed to judgment on a claim founded on the operation of the Act premised on the second payment claim of 3 March 2008 being a payment claim under the Act.

16 As to s 22(4) I agree with Macfarlan JA’s approval of the approach of McDougall J to this section. I also agree that the Act as a whole generally manifests an intention to prevent repetitious reagitation of the same issues. The primary mechanism for the effectuation of that intention would appear to be ss 13(5) and 22(4). The former is sufficient to deal with the present controversy. I would leave to another occasion, should it be necessary, the consideration of principles of estoppel to prevent any apparently abusive operation of the Act not specifically covered by ss 13(5) and 22(4).

17 MACFARLAN JA: This is an application for leave to appeal from a decision of Quirk DCJ declining to enter summary judgment in favour of the applicant in the full amount claimed by it. The arguments of the parties have extended to those which would be put if leave were granted. Accordingly, it is open to the Court to determine now the appeal which would follow if the Court decided to grant leave.

Nature of Case and Conclusion

18 The application for leave to appeal raised the question of whether a person making a progress claim under the Building and Construction Industry Security of Payment Act 1999 (“the Act”) who is dissatisfied with the determination of an adjudicator appointed to resolve disputes in relation to the claim may serve another claim and seek a redetermination of the same issues before the same, or another, adjudicator. My conclusion is that this would be contrary to the intent of the Act and that it is precluded by the principles of issue estoppel.

Factual Circumstances

19 The proceedings relate to a subcontract between the respondent (“Remo”) as contractor and the applicant (“Dualcorp”) as sub-contractor for excavation and piling work at a building site at 97 Queens Road, Five Dock, Sydney. The parties agree that the subcontract was a “construction contract” within the meaning of that term as defined in s 4 of the Act.

20 Evidence called by Remo indicated that Dualcorp undertook the works and left the site in or about November 2007, with no further work having been completed by Dualcorp on site after that time. The proceedings were conducted at first instance on the basis that Dualcorp had substantially completed the work required under the subcontract.

21 On or about 29 January 2008, Dualcorp served a payment claim under the Act (the “January Claim”). The claim attached six invoices (numbered 2129, 2130, 2131, 2132, 2136 and 2137) totalling $743,612.50.

22 On 11 February 2008, Remo served a Payment Schedule pursuant to s 14 of the Act (a “Payment Schedule”) which disputed the bulk of the claim in respect of the first four invoices but, save for an immaterial amount, conceded the claims in respect of invoices 2136 and 2137.

23 Pursuant to the provisions of the Act, Dualcorp applied for adjudication of its claim in respect of the first four invoices. Mr Anthony Makin was appointed as adjudicator.

24 On 11 March 2008, Mr Makin determined that Dualcorp was entitled to an amount of $75,509.43 (which included an amount of $36,834.88 which had been accepted by Remo in its Payment Schedule). This was considerably less than the total of $659,619.65 of the four invoices the subject of the adjudication.

25 Pursuant to the provisions of the Act, Dualcorp sought and obtained judgment in the District Court for $75,509.43 based upon a certificate of the adjudicator. It was agreed between the parties that judgment was entered on 3 April 2008.

26 Being dissatisfied with the amount to which Mr Makin determined it was entitled, Dualcorp, on or about 3 March 2008, made a further claim under the Act (“the March Claim”). The claim was based upon, and attached, the same six invoices the subject of the January Claim. The total of the March Claim was accordingly the same as that of the January Claim although for an unexplained reason there was a one cent difference. Neither party sought to attribute significance to that difference.

27 As a result of Remo not serving a Payment Schedule in relation to this claim, Dualcorp commenced proceedings in the District Court for the amount of the March Claim pursuant to the provisions of s 15 of the Act. The present application for leave to appeal is brought from the decision of Quirk DCJ declining to enter summary judgment in favour of Dualcorp in the full amount claimed by it.

The Statutory Provisions

28 The Act provides a mechanism by which a person who undertakes construction work is able to obtain progress payments, even if the construction contract does not provide for them to be made. The procedure for obtaining a progress payment involves the making of a payment claim, the provision of a Payment Schedule by the person on whom the claim is made, the referral of any disputed claim to an adjudicator for determination and the payment of the progress payment determined to be payable.

29 The procedure is plainly one designed to facilitate the speedy making and payment of progress claims and, where necessary, the speedy resolution of any disputes.

30 The provisions of the Act of particular relevance to these proceedings are as follows:

“3 Object of Act

(1) The object of this Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.

(2) The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.

(3) The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves:

(a) the making of a payment claim by the person claiming payment, and

(b) the provision of a payment schedule by the person by whom the payment is payable, and

(c) the referral of any disputed claim to an adjudicator for determination, and

(d) the payment of the progress payment so determined.

(4) It is intended that this Act does not limit:

(a) any other entitlement that a claimant may have under a construction contract, or

(b) any other remedy that a claimant may have for recovering any such other entitlement.

13 Payment claims

(1) A person referred to in section 8 (1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.

(2) A payment claim:

(a) must identify the construction work (or related goods and services) to which the progress payment relates, and

(b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and

(c) must state that it is made under this Act.

(3) The claimed amount may include any amount:

(a) that the respondent is liable to pay the claimant under section 27 (2A), or

(b) that is held under the construction contract by the respondent and that the claimant claims is due for release.

(4) A payment claim may be served only within:

(a) the period determined by or in accordance with the terms of the construction contract, or

(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),

whichever is the later.

(5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.

(6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.

14 Payment schedules

(1) A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.

(2) A payment schedule:

(a) must identify the payment claim to which it relates, and

(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).

(3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent’s reasons for withholding payment.

(4) If:

(a) a claimant serves a payment claim on a respondent, and

(b) the respondent does not provide a payment schedule to the claimant:

(i) within the time required by the relevant construction contract, or

(ii) within 10 business days after the payment claim is served,

whichever time expires earlier,

the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.

15 Consequences of not paying claimant where no payment schedule

(1) This section applies if the respondent:

(a) becomes liable to pay the claimed amount to the claimant under section 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and

(b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.

(2) In those circumstances, the claimant:

(a) may:

(i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or

(ii) make an adjudication application under section 17 (1) (b) in relation to the payment claim, and

(b) may serve notice on the respondent of the claimant’s intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.

(3) A notice referred to in subsection (2) (b) must state that it is made under this Act.

(4) If the claimant commences proceedings under subsection (2) (a) (i) to recover the unpaid portion of the claimed amount from the respondent as a debt:

(a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and

(b) the respondent is not, in those proceedings, entitled:

(i) to bring any cross-claim against the claimant, or

(ii) to raise any defence in relation to matters arising under the construction contract.

22 Adjudicator’s determination

...

(4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined:

(a) the value of any construction work carried out under a construction contract, or

(b) the value of any related goods and services supplied under a construction contract,

the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.”

The Judgment at First Instance

31 Having referred to the submissions of the parties, the primary judge expressed the following views:

“The situation here is that, quite clearly, a large proportion of the monies which comprises this claim for summary judgment was dealt with in accordance with the Building and Construction Industry Security of Payment Act, by the referral to adjudication of those amounts claimed in the four invoices and the subsequent entry of judgment in respect of the amount determined by the adjudicator.

Although it is clear that the judgment and the adjudication by the adjudicator itself are not final, and that the rights of the parties under the contract are still open to be litigated, the issues as between the parties in respect of those four invoices were dealt with by the adjudicator under the Act and I accept that to seek to have those same invoices in respect of the same work re-agitated is barred because of principles akin to res judicata at least or constitutes an abuse of process as submitted by Mr Hicks. In respect to that part of the amount claimed in these proceedings which was the subject of the earlier payment claim and consequent determination by the arbitrator, I am of the view that it would be an abuse of process for the Court to grant the application for summary judgment and therefore in respect of the larger proportion of the claim, the Court will not so grant.

However, in respect of the two invoices which were not referred to adjudication and which were clearly rejected by Remo, in its letter to which I earlier referred, as valid payment claims, despite the issuing of a payment schedule in respect of those two invoices as well as the four other invoices which were the subject of adjudication, in my view the service of payment claims, that is the service of the two invoices numbered 2136 and 2137 on 3 or 4 March, were valid payment claims and in response to which there is no payment schedule served.

Although the defence filed by Remo would suggest that all six invoices were dealt with initially in the same manner, I do not accept that this was the case. Nor do I accept the submission made in respect to the claim being a “substantial completion payment claim”, as that was rejected by Remo at the time of service. Therefore although the submissions and the pleadings by Remo are apposite to the four invoices numbered 2129 to 2132, they do not apply in my view to the other two invoices, 2136 and 2137.

Although it is submitted by Remo that Dualcorp could have availed itself of the remedy available under s 16 of the Act, I do not necessarily agree. Because of the position taken by Remo upon the service of the six invoices in January 2008 it could have been argued by Remo that Dualcorp was not entitled to the benefit of section 16 because it had not served a valid or proper payment claim in respect of those two invoices.

I therefore propose to enter summary judgment for the plaintiff in the amount claimed in those two invoices, which is in respect of invoice 2136, $1,642.55 and invoice 2137, $82,350.40 which amount total $83,992.95 plus interest to be agreed between the parties.”

Dualcorp’s Submissions on Appeal

32 Dualcorp contended first that the Court was precluded by s 15 of the Act from giving effect to the defence based on principles “akin to res judicata” or “abuse of process” found by the primary judge to be applicable. It was said that s 15(4)(b) disentitling a respondent from raising any defence “in relation to matters arising under the construction contract” was applicable as each of the matters referred to by her Honour was such a defence.

33 Alternatively, it was submitted that the elements of res judicata were not present. In particular, that the decision of the adjudicators was not “judicial” in the required sense, was not “final” (reliance being placed on ss 25(4) and 32), was not “on the merits” (reliance being placed on s 32) and did not determine the same question as arose in the subsequent Court proceedings (reliance being placed on ss 25(4) and 32).

34 Dualcorp also submitted that the primary judge’s decision to direct the entry of summary judgment in relation to the fifth and sixth of the invoices involved a denial of procedural fairness to Dualcorp. It was said that the possibility of her Honour taking that course was not raised with the parties and Dualcorp did not therefore have any opportunity to make submissions on the point. I do not consider that this submission should be accepted. It was open to her Honour to enter judgment for a lesser sum than that for which it was sought: the greater included the lesser. No prejudice has been suffered by Dualcorp by reason of the alleged procedural unfairness as the point was one of law and it was open to Dualcorp to put to this Court any reasons why her Honour’s approach was inappropriate. In any event, the consequence of the point succeeding would be to Dualcorp’s disadvantage as it would result in the judgment which it obtained (albeit limited) being set aside in the event that it was otherwise unsuccessful before this Court. In argument, it disclaimed any desire for this to occur.

35 Another submission made by Dualcorp was that the judgment entered below in its favour should be increased by the amounts of the items which it said the adjudicator did not determine on the merits but in effect decided on a “non-suit” basis, that is, upon the basis that he had insufficient evidence to accept the claim. It was accepted that this argument was not put at first instance. In my view, particularly bearing in mind the nature of the proceedings before this Court, that is, an application for leave to appeal in relation to a decision on a summary judgment application, the argument should not be entertained. In any event, as will be apparent from the reasons which appear below, the argument would not in my view have succeeded (see [71-72]).

Remo’s Submissions

36 Remo contended that the primary judge’s approach was correct. It joined issue with the submissions of Dualcorp, particularly Dualcorp’s contentions that the adjudicator did not constitute a relevant tribunal for the purposes of res judicata principles and that his decision was not sufficiently final to attract those principles.

37 Additionally, Remo contended that the March Claim conflicted with s 13(5) and (6) of the Act. Those subsections prohibit the making of more than one payment claim in respect of a single reference date, subject to the qualification that a claimant may include “in a payment claim an amount that has been the subject of a previous claim”. Remo contended that the relevant reference date in respect of each claim was the same and that because the claims were identical, subsection (6) did not render the prohibition in subsection (5) inapplicable. It was submitted that subsection (6) did not apply because it only dealt with a situation where the subsequent claim embraced more than the previous one: otherwise it would not be a case of the claimant “including” an amount from a previous claim in a subsequent claim.

Defences able to be raised in Court proceedings seeking Judgment

38 The Act provides two avenues for a claimant to obtain a judgment in its favour.

39 The first is to be found in s 15 which applies where, as here, the recipient of a claim has not served a Payment Schedule. The section provides that in those circumstances the claimant may sue for the unpaid portion of the claimed amount as a debt in any court of competent jurisdiction. Subsection (4) provides that judgment is not to be given in favour of the claimant unless the court is satisfied that a Payment Schedule has not been served by the recipient of the claim and that the claimed amount is still outstanding. It also disentitles the respondent to the claim from bringing any cross claim and, as mentioned earlier, from raising any defence “in relation to matters arising under the construction contract”.

40 The provision as to cross-claims and defences is mirrored in s 25 which provides the other avenue for the obtaining of judgment. This section applies where there has been an adjudication. In that circumstance, the claimant may file an adjudication certificate “as a judgment for a debt in any court of competent jurisdiction” and enforce it accordingly.

41 The restrictions in these sections as to the defences that may be raised do not in my view prevent the raising of one based upon or, to use the primary judge’s expression, “akin to” res judicata, or indeed issue estoppel if that defence is otherwise available. Such a defence could not in my view be described as a matter “arising under the construction contract”. Rather, it is a matter arising out of the proper construction of the Act in conjunction with relevant common law principles. The defence may thus be raised, as may one that service of a payment claim was not effective because it involved misleading or deceptive conduct (Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9 especially at [96] per Basten JA).

Finality: General Law Principles

42 In my view, the question of whether proceedings for judgment under s 15 can be defeated by proving that the payment claim (or part thereof) upon which the proceedings are based is inconsistent with an earlier adjudicator’s determination under s 22 of the Act is to be determined by construing the Act against the background of relevant common law principles. In particular, it is necessary to determine whether the legislative intention was to confer upon adjudicators’ determinations a sufficient degree of finality to attract the principles of res judicata, issue estoppel or of the more general concept of abuse of process. Although not expressly mentioned by the primary judge, I include reference to issue estoppel as I consider it to fall within the umbrella of her description of “principles akin to res judicata” and “abuse of process”. Indeed, her reference to the issues having earlier been dealt with by the adjudicator suggests she had this principle in mind.

43 Before turning to the provisions of the Act, it is convenient to refer to some relevant general law principles and their possible application in the present circumstances.

44 It is a principle of the law “that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances” (D’Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 at [34]. The plurality judgment in D’Orta went on to state that:

“The principal qualification to the general principle that controversies, once quelled, may not be reopened is provided by the appellate system. But even there, the importance of finality pervades the law. Restraints on the nature and availability of appeals, rules about what points may be taken on appeal and rules about when further evidence may be called in an appeal (in particular, the so-called "fresh evidence rule") are all rules based on the need for finality. As was said in the joint reasons in Coulton v Holcombe: "[i]t is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial". (Citations omitted) (at [35]).

45 As pointed out, in D’Orta, the principle of finality finds reflection in the doctrines of res judicata and issue estoppel (at [34]).

46 In Spencer Bower, Turner and Handley, Res Judicata, 3rd ed (1996) Butterworths it is said that the principle of res judicata is a substantive rule of law and is to the following effect:

“Where a final judicial decision has been pronounced on the merits by ... [a] judicial tribunal with jurisdiction over the parties and the subject matter, any party to such litigation, as against any other party ... is estopped in any subsequent litigation from disputing such decision on the merits ... “ (at [9]).

47 The requirements for issue estoppel incorporate a like requirement of finality of the earlier decision. These requirements were described by the High Court in Kuligowski v Metrobus [2004] HCA 34; (2004-2005) 220 CLR 363 at [21] in the following terms:

“21. In his speech in Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) Lord Guest, after noting that the doctrine of issue estoppel had been accepted by Australian courts for a number of years, indicated that, for the doctrine to apply in the second set of proceedings, the requirements were:

‘(1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and, (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.’” (citations omitted)

48 It is well accepted that domestic tribunals are within the ambit of the res judicata principles. As Spencer Bower, Turner and Handley say:

“Every domestic tribunal, including any arbitrator, or other person or body or persons invested with authority to hear and determine a dispute by consent of the parties, court order, or statute, is a ‘judicial tribunal’ for present purposes and its awards and decisions [are] conclusive unless set aside” (citations omitted) (at [25]).

The position is no different with issue estoppel, as Kuligowski illustrates.

49 The fact that adjudication proceedings under the Act are abbreviated in character does not mean that they are not of a sufficiently “judicial” character: the process is put in train because there is a dispute between the parties as to a monetary entitlement; an independent person is appointed to adjudicate the dispute; the issues are defined by a claim and a response to the claim; submissions including relevant documentation are put before the adjudicator (s 22(2)(c) and (d)); the adjudicator is obliged to make a determination in writing and to give reasons for the determination (s 22(3)).

50 In these circumstances I consider the critical question to be answered in deciding whether the principles of res judicata and issue estoppel are capable of applying to adjudicators’ determinations under the Act to be whether the Act, on its true construction, manifests an intention to confer a sufficient degree of finality on those determinations to attract those principles.

Finality: Construction of the Act

51 Important features of the Act relevant to the degree of finality intended to be attached by the Act to adjudicators’ determinations are as follows:

52 First, the objects of the Act are relevant (see s 3). Clearly the overall intent of these is to provide a simple and quick means of contractors obtaining progress payments, with a mechanism being provided for the speedy resolution of disputes. It would be inconsistent with this objective to allow a claimant who was dissatisfied with an adjudication of its claim to obtain a reconsideration of the claim simply by serving another which was identical to, or included, the previous claim, especially if there was no limit to the number of times that a claimant could seek to have this reconsideration occur.

53 Secondly, as earlier mentioned, under s 13(5) only one payment claim may be served in respect of each reference date under the construction contract. There is a qualification that the claimant may include in a payment claim an amount that has been the subject of a previous claim. However, taking into account the Act’s objectives and its provisions, I do not consider that that qualification can, or should, be read as authorising the inclusion in a payment claim of an amount which has been the subject of an earlier adjudication. It would in my view be inconsistent with the carefully structured procedures as to adjudication and the provisions, which I am in the course of mentioning, pointing towards finality of adjudication determinations to give it that construction.

54 Thirdly, in determining an adjudication application, an adjudicator is bound, unless he or she is satisfied that the value of the work has changed since the previous determination, to value construction work consistently with a valuation made in the course of a previous adjudication application (s 22(4)). I will refer to this provision again later.

55 Fourthly, under s 23(2) a respondent is required to pay any amount determined by the adjudicator.

56 Fifthly, under s 24, failure to pay an adjudicated amount may have the consequence that construction work is suspended.

57 Sixthly, s 25 provides that an adjudication certificate signed by the adjudicator may be filed as “a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly”. If application is made by the respondent to have the judgment set aside, the defences that may be raised are restricted in the way referred to earlier (see [38] to [41] above). As well, it is expressly stated that the respondent is not entitled to “challenge the adjudicator’s determination”. This is a strong indication of an intent to clothe the determination with a significant degree of finality.

58 Seventhly, whilst s 26 permits a new application for adjudication to be made, it narrowly defines the circumstances in which it may be made: that is, to circumstances where an adjudicator’s notice of acceptance of appointment is not received within a defined time or the appointed adjudicator fails to determine the application within a defined time. It is implicit that new applications for determination may not be made in other circumstances. It would be curious if these constraints could be circumvented by the claimant simply lodging a new claim and basing a new application for adjudication on that claim, rather than on the earlier claim.

59 Eighthly, the argument in favour of inferring that adjudication determinations were intended to be conclusive is in my view strengthened when one has regard to the fact that they determine rights in relation to progress claims only and, by reason of s 32 of the Act, do not affect contractual rights. Thus, any inability of the claimant to reagitate the issues is confined to its rights as to progress payments. Its rights to put its case as fully and completely as it wishes in pursuit of a contractual claim are preserved.

60 These various provisions in my view indicate a legislative intent to render adjudication determinations relevantly conclusive. Such determinations do not conclude contractual rights. Section 32 expressly so provides. The Act however creates special statutory rights to progress payments. When a claim is made, a dispute arises and an adjudication determination resolves that dispute. I consider that determination to be final and binding between the parties as to the issues determined, except to the extent that the Act allows the determination to be revisited. It would in my view be quite contrary to the scheme of the Act to permit claimants simply to resubmit the already adjudicated claims if they were dissatisfied with the adjudication.

61 In Kuligowski the High Court considered the concept of finality in the context of a case concerned with issue estoppel. It said:

“A single ‘final’ decision, then, is one which is not of an interlocutory character, but is completely effective unless and until rescinded, altered or amended. The fact that an appeal lies from a decision does not make it any less final. It must be ‘final and conclusive on the merits’: ‘the cause of action must be extinguished by the decision which is said to create the estoppel’” (at [25], citations omitted).

62 Thus, in that case, decisions of a review officer appointed under the Workers’ Compensation and Rehabilitation Act 1981 (WA) were held to be sufficiently “final” for the purposes of the doctrine of issue estoppel. In the course of reaching that conclusion, their Honours said that “the legislative goal of having workers’ compensation disputes heard and determined in an informal, quick and cheap manner would not be assisted by a construction of the legislation which prevented the doctrine of issue estoppel ever applying. That would increase the chance of double litigation of issues and vexation of parties” (at [32]). These comments are equally applicable to the informal procedure laid down by the Act for the quick and cheap disposal of claims for progress payments.

Section 22(4): previous valuations

63 I return now to s 22(4), as I said I would in [39] above.

64 Section 22(4) has been the subject of consideration by McDougall J in a number of judgments. In Rothnere v Quasar & Ors [2004] NSWSC 1151 his Honour said:

“41. There is one other point that needs to be mentioned. Mr Christie submitted that, where s 22(4) referred to the valuation of construction work, it meant, in substance, the value that the respondent to a payment claim was liable to pay. That was a step in his argument which was that s 22(4) was introduced by the Building and Construction Industry Security of Payment (Amendment) Act 2002, to discourage what the Minister, in the Second [Reading] Speech, had referred to as "adjudicator shopping", and that it should be construed (if ambiguous) so as to facilitate the achievement of that end.

42. I do not think that it is possible to read s 22(4) in this way. Section 8 gives an entitlement to a progress payment for construction work. Section 10 sets out how construction work is to be valued. The phrase "construction work" itself is a defined phrase: see section 5.

43. A determination under the Act may involve both questions of quantification - the section 10 issue - and questions of entitlement; or it may involve one or the other.

44. In my judgment, s 22(4) itself makes it clear that an adjudication determination need not necessarily include the valuation of construction work: the use of the introductory word "If" makes this clear. Subsection (4) therefore only applies where a component of a determination - that is to say, in terms of s 22(1)(a), of the determination of the amount of the progress payment (if any) to be paid - includes a determination of the value of construction work. Where it does, then subs (4) applies. Where it does not (either because the work has not at all been valued before or because the value of the work has changed) then s 10(1) applies. But there is nothing in these considerations that indicates that the phase "construction work" when used in s 22(4) should be construed in any way other than the way that it is used throughout the Act.”

65 In John Goss Projects v Leighton Contractors & Anor [2006] NSWSC 798; (2006) 66 NSWLR 707, his Honour said:

“37. The provisions of the relevant construction contract (s 22(2)(b)) will be relevant for a number of reasons. They may specify the reference dates on and from which a claimant has an entitlement to a progress payment (s 8). They may specify how the amount of the progress payment is to be calculated (s 9). They may specify how the construction work is to be valued (s 10). They may specify the due date for payment (s 11).

38. Although all those matters (and many others that may be taken into consideration under s 22(2)) go to the determination of the amount of the progress payment that is payable, they do not all deal with the valuation of the construction work that is the subject of the payment claim for that progress payment. The adjudicator’s task may (and usually will) comprehend more than merely the valuation of the relevant construction work. Attention to the requirements of the contract may indicate that there are to be deducted from, or offset against, that value some particular amounts (for example, retention payments or conceded back charges for defective or incomplete work). Thus, construction work may be valued at a particular sum, but the adjudicated amount of the progress payment may be less than that sum because of some such deduction or offset.

39. Further, there may be a question as to whether the claimant is entitled to be paid at all for construction work: for example, for an unauthorised variation where the contract specifies that the written authority of the respondent is required as a precondition of entitlement. (I leave aside, for present purposes, the possible impact of s 34 on such a provision.)

40. he precise issue that s 22(4) posed for Mr Davenport was not the amount determined by Mr Dutton as the progress payment payable in respect of the March payment claim. It was whether, in determining the amount of that progress payment, Mr Dutton had valued construction work that was required to be valued in the second adjudication pursuant to the May payment claim. Sections 9 and 10 make it clear that there is a distinction between the calculation of the amount of a progress payment (which is, ultimately, what the adjudicator is required to do) and the valuation of construction work. That is the distinction that I sought to point out (on reflection, in a way that was perhaps unduly brief and somewhat delphic) in para [43] of my decision in Rothnere.”

66 I agree with the approach taken by McDougall J to the construction of s 22(4). As his Honour points out, there are many issues of potential relevance to a progress claim which could not aptly be described as involving the determination of the value of the construction work. For example, s 11 of the Act provides that if the contract makes a relevant express provision, a progress payment becomes due and payable “on the date on which the payment becomes due and payable in accordance with the terms of the contract”. If a claim for a progress payment were made prior to a date stipulated by the contract and an adjudicator rejected the claim because it was premature, that determination could not in my view be said to be, or involve, one as to the value of the construction work.

67 I do not consider however that s 22(4) should be regarded as an exhaustive statement of the matters determined by an earlier adjudication which are binding on a subsequent adjudicator. For reasons I have given, I consider that the Act when read as a whole manifests an intention to preclude reagitation of the same issues. Thus, if questions of entitlement have been resolved by an adjudication determination, those findings may not in my view be reopened upon a subsequent adjudication. Likewise, if no subsequent adjudication occurs but a claimant proceeds (as here) to seek judgment following upon the failure of the other party to serve a Payment Schedule the claimant should be denied judgment to the extent that what it seeks is inconsistent with findings of the adjudicator.

Issue Estoppel and Abuse of Process

68 Thus the primary judge here was correct in considering that “principles akin to res judicata” or “abuse of process” were applicable. Consistent with that broad description, I conclude that the principles of issue estoppel were applicable. Primarily because temporal considerations are of particular significance in relation to progress claims, the analogy between an adjudicator’s determination and a completed cause of action which the principles of res judicata would require is an incomplete one. It is best that the applicable principles be recognised to be those of issue estoppel. The more general principle of abuse of process is probably also applicable but it is unnecessary to reach a final view about this. This principle involves a broad concept “insusceptible of a formulation comprising closed categories” (Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 at [9]) but certainly including within its ambit an attempt to “litigate anew a case which has formerly been disposed of by earlier proceedings” (Walton v Gardiner [1993] HCA 77; (1992-3) 177 CLR 378 at 393).

69 As pointed out in Kuligowski, for the principle of issue estoppel to apply, the same issue must have been earlier determined as is later sought to be reagitated (at [40]). Thus, if a progress claim were rejected by an adjudicator because it was premature by reason of the date stipulated for payment by the contract, a later claim made on a timely basis would not be precluded. However (to take as an example the issue which was before McDougall J in John Goss Projects) if a progress claim were rejected because it was not made in accordance with express requirements of the contract, that determination would be binding on a subsequent adjudicator before whom the same issue arose. Similarly, it would be an abuse of process for the claimant to rely upon a later progress claim in response to which no Payment Schedule was served to obtain judgment on a basis conflicting with issues resolved in the earlier determination.

70 I thus disagree with the view ultimately arrived at by McDougall J in John Goss Projects that s 22(4) defines the extent to which an adjudicator is bound by an earlier adjudication. The view that the claimant once disappointed by an adjudicator can seek a different determination from another, or indeed from a succession of others, until a favourable decision is reached would in my view conflict with the policy of the Act to render adjudicators’ determinations final on issues which they resolved, subject only to provisions of the Act conferring limited rights of correction of determinations.

71 Dualcorp asserts that this approach could produce unfair outcomes where a claim has not been the subject of adjudication on the merits but has been rejected for want of evidence. It was submitted that because of the unfairness that would flow from precluding a claimant bolstering its evidence on another adjudication, it cannot have been intended that adjudications would be conclusive.

72 I do not agree. It is not at all unusual that persons seeking remedies in courts or other forums have a once only opportunity to bring forward evidence and submissions in support of their claim. This is in fact the usual situation and is consistent with what the High Court in D’Orta referred to as the “central and pervading tenet of the judicial system ... that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances” (at [34]).

Conclusion

73 My conclusion is that the primary judge was correct to refuse summary judgment in respect of the amounts which were the subject of the four invoices referred to in the adjudicator’s determination. The issues relevant to Dualcorp’s rights to progress payments in respect of the amounts in those invoices had been determined by the adjudicator. The application for summary judgment (and judgment) was therefore inconsistent with that determination.

74 As the application for leave to appeal raised an issue of general importance in relation to the construction of the Act, I would grant leave to appeal. As I have concluded that the primary judge was correct in the course she took, the appeal should be dismissed.

75 The orders I propose are as follows:

(a) Leave to appeal granted.

(b) Appeal dismissed.

(c) The applicant/appellant to pay the respondent’s costs of the leave application and of the appeal.

76 HANDLEY AJA: I agree with Macfarlan JA.

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LAST UPDATED:
21 April 2009