Supreme Court of WA|2000-02-04|Before: Ms P

Bayside Civil & Drainage Pty Ltd v Marinestar Holdings Pty Ltd [2000] WASC 78 (4 February 2000)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : BAYSIDE CIVIL & DRAINAGE PTY LTD -v- MARINESTAR HOLDINGS PTY LTD [2000] WASC 78

BETWEEN : BAYSIDE CIVIL & DRAINAGE PTY LTD (ACN 065 070 733)

Summary judgment - Moneys due under a building contract AS 2124-92, cl 42.1, cl 42.2, cl 42.10, cl 44.6, cl 47.1 - Moneys due under a progress certificate - Effect of correction of payment certificate - Set offs by principal - Adjustment on completion of work taken out of hands of the contractor - Arbitration clause

Algons Engineering Pty Ltd v Abi Group Contractors Pty Ltd (1997) 14 BCL 215

Lewkowski v Bergalin Pty Ltd, unreported; SCt of WA; Library No 7675; 26 May 1989

Moscow Narodny Bank v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109

Whitehall Holdings Pty Ltd v Custom Credit Corp Ltd, unreported; SCt of WA; Library No 9189; 13 December 1991

1 MASTER BREDMEYER: This is an application by the plaintiff for summary judgment. The plaintiff was a contractor engaged in doing earthworks etcetera for the defendant at Busselton under a written contract AS 2124-1992. A similar contract was considered by the Full Court in Devaugh v Lamac Developments Pty Ltd [1999] WASCA 280. The plaintiff's claim was for moneys due under two progress certificates as follows:

These are progress certificates issued by the superintendent's representative under cl 42.1 and prima facie they should be paid without deduction. The Devaugh case is Full Court authority for that.

2 What are the defences raised? The first defence relates to amendment certificates. There are two certificates, both called 3A and dated 6 December 1999, which is after the action commenced and after the application for summary judgment was filed. The one for the large lots is for $53,415.31. It reduces the large lots certificate 3 of 14 September 1999 from $102,615.32 to $53,415.31. The difference is liquidated damages, 82 days at $600 per day equals $49,200. Some explanation is given in an accompanying document:

Liquidated damages 82 days x $600 per day = $49,200."

I consider that certificate is in order and the original certificate 3 (large lots) should be reduced by $49,200.

3 The second correction certificate is for the small lots and it is for a negative sum of $95,496.51. It will have the effect of reducing the plaintiff's claims by that amount. The differences between this certificate and the original one for the small lots issued on 14 September 1999 are in two items:

1. Less liquidated damages 167 days at $200 per day = $33,400

2. Less moneys owing under cl 44.6A of ASA 2124 = $61,993.50

Some further explanation of the liquidated damages is given in an accompanying document:

4 The power to issue an amending certificate or a correction certificate is found in cl 42.2 of the contract which reads:

At any time and from time to time the Superintendent may by a further certificate correct any error which has been discovered in any previous certificate, other than a Certificate of Practical Completion or Final Certificate."

5 Note the words "it is to correct an error discovered in any previous certificate". The earlier certificate needing correction was dated 14.9.99. Its error was to omit liquidated damages due between 14 May and 14 September. It could not have dealt with damages for delay after that date. Insofar as this certificate deducted liquidated damages after 14 September, it is a new certificate and outside the scope of cl 42.2.

6 The deduction for liquidated damages should be 14.5.99 to 14.9.99 ie 124 days at $200 per day = $24,800.

7 The second item of deduction is moneys due under cl 44.6 of the contract. That refers to "Adjustment on completion of work taken out of the hands of the contractor". That clause commences:

"When work taken out of the hands of the contractor under clause 44.4(a) is completed the Superintendent shall ascertain the cost incurred by the Principal in completing the work and shall issue a certificate to the Principal and the Contractor certifying the amount of that cost."

Note two things here. Firstly, the work taken out of the hands of the contractor needs to have been completed (by someone else). Secondly, the superintendent needs to certify to the contractor and the principal the cost incurred. It is the actual cost incurred and not an estimate of the likely cost. I do not accept this deduction in certificate 3A. Firstly, no certificate has been issued under 44.6 of the cost of these works. There is no evidence of that in the papers put before me. Secondly, the work was not completed by 14 September. See Cotterill's affidavit p 80, p 84, p 87 and p 109. I consider the defendant has not raised an arguable defence or a fact or issue which needs to be tried in relation to this item.

8 So the total deduction for the second new certificate 3A is liquidated damages to 14 September of $24,800.

9 The second defence offered is that the principal has a claim against the contractor under s 52 of the Trade Practices Act and that is a sum due which can be deducted under cl 42.10 from moneys due to the contractor under a progress certificate. The s 52 claim was first communicated to the contractor in a letter dated 9 September 1999. In summary, it is that at all times the contractor assured the principal that the works would be completed on time and without undue delay. Delays occurred and were apparent in the fifth week and later and on each occasion the contractor assured the superintendent that the construction programme would be met. Had the principal known that the contractor could not complete the works within the 10 week construction period, the contract would have been awarded to another tenderer. Had the principal known that later assurances from the contractor would not be met, it would have terminated the small lot part of the contract earlier than it did. The letter quantifies the loss and damage under various heads and the sums are: $114,952, $101,175, and $162,950.

"Having regard to the above, Marinestar Holdings considers that it has a claim against Bayside Civil and Drainage to recover the loss and damage it has suffered by reason of Bayside's misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act in respect of the representations and assurances it gave as to the time for completion of the works ...

In these circumstances Marinestar Holdings proposes to set off against Bayside's claims for payment the claim which Marinestar has against Bayside pursuant to s 52 of the Trade Practices Act." (Emphasis mine)

10 A s 52 claim is permissible in an arbitration if the words of the arbitration clause are wide enough to permit it. See IBM Australia Ltd v National Distribution Services (1991) ATPR 41-094 and Jacob's "Commercial Arbitration Law and Practice", par 50.192. The arbitration clause in this case, cl 47.1 is, I consider, wide enough to permit a s 52 claim. I quote from the last sentence of that clause: "A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration."

The Principal may deduct from moneys due to the Contractor any money due from the Contractor to the Principal otherwise than under the contract and if those moneys are insufficient, the Principal may, subject to clause 5.5, have recourse to retention moneys and, if they are insufficient, then to security under the contract."

12 Clause 42.10 has received some discussion in Re Concrete Constructions [1997] 1 Qd R 6. That case, which is a Queensland Court of Appeal decision, is the same case reported in another series of law reports as Blue Chip Pty Ltd v Concrete Constructions (1996) 13 BCL 31 relied on by the Full Court in Devaugh Pty Ltd v Lamac (supra). At 11 of the Queensland Report, MacPherson and Helman JJ said:

"[Clause 42.10] ... is a specific provision catering expressly for a liability arising beyond or outside the contract, about which the superintendent may fairly be assumed to know nothing, and concerning which he is given no power of determination under the contract. If cl 42.10 is properly to be regarded as conferring authority to deduct such a sum from the amount of a certified claim, then it is understandable that an express provision to that effect should have been inserted in the contract. It says nothing about the right claimed by the principal to make a deduction which the second paragraph of cl 42.1 expressly requires to be allowed for by the superintendent in calculating the amount of a progress payment."

13 By cl 42.10 the principal can deduct from moneys due to the contractor any moneys due from the contractor to the principal otherwise then under the contract. "Due" in the Oxford English Dictionary means:

"Owing, payable, as a debt or obligation, eg 'fall due' or 'become due'."

I note that the word "due" is used twice in 42.10 in each case in the phrase "moneys due" or "money due". I consider the word "due" is used each time in the same sense as moneys due and owing. The moneys due to the contractor are those legally owing to the contractor. Once the certificate is given the sum stated there has to be paid under cl 42.1 within 14 days. The damages claimed by the principal as a set off in this case are not "moneys due". They are not due and owing. They are a claim for damages. Unless admitted, in which case they become a contract debt, or determined by a court or an arbitrator, they are not due.

14 The defendant's counsel quoted to me my interpretation of the word "due" where it appears in the last sentence of cl 42.1 in Lamac Developments Pty Ltd v Devaugh Pty Ltd [1999] WASC 76. That was the judgment that went on appeal to the Full Court. I said there at par 11 that the word "claims for payment ... due" do not mean claims for payment then finally due or claims for work then properly due. Defence counsel argued that, to be consistent, I should adopt the same interpretation here.

15 The words are used in different contexts and I do not propose to adopt the same construction in 42.10. In 42.1, first paragraph, second sentence, the "due" is qualified by the opening words of the sentence "claims for payment". These are claims by the contractor for amounts due. I emphasise the word "claims for payment" or "amounts then due to the contractor arising out of or in connection with the contract or any alleged breach thereof." In 42.10 the phrase is "moneys due". I stick to the dictionary meaning given above, ie moneys due and owing. An example of moneys due under cl 42.10 would be a loan that was due, or rents that were due, or a judgment debt or an agreed debt. The s 52 claim for damages, although quantified in the letter mentioned into a dollar sum, is a claim for damages. It is not for moneys due until those damages have been admitted or established by a court or arbitrator.

16 I consider the defendant has no arguable defence to this application, nor given any other reason why this application should not be granted. In deciding this case I have relied on the law in Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87. The summary judgment jurisdiction must be exercised with great care and should never be exercised unless it is clear that there is no real question of law or fact to be tried.

17 That law may need to be revised in the present type of case. The reason for the great care that needs to be exercised, as expressed in Fancourt, is that the judgment given is a final one, whereas the judgment in this kind of case is, by cl 42.1 (third paragraph), for a provisional payment without prejudice to the rights of the parties in later litigation or arbitration to claim that the sum was not properly due and payable. It may be that the test to be satisfied by the plaintiff before getting summary judgment in this type of case, needs to be eased. This is an obiter comment.

Bayside Civil & Drainage Pty Ltd v Marinestar Holdings Pty Ltd [2000] WASC 78

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Bayside Civil & Drainage Pty Ltd v Marinestar Holdings Pty Ltd [2000] WASC 78 (4 February 2000)

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