[6] The defendant made nine progress claims by issuing invoices for work it says it completed under the construction contract including undertaking and completing variations to the original scope of work under the construction contract. The contract superintendent accepted the invoices as progress claims under the construction contract and issued progress certificates in respect of progress claims numbered 1 to 6 inclusive. However, the superintendent did not issue progress certificates for progress claim invoices numbered 7, 8 and 9. Nor did he do so for the final progress claim dated 26 September 2006. The final progress claim included claims for parts of the works that were included in earlier progress claims but had not been certified by the superintendent or paid by the plaintiff.
[7] As a result of the superintendent's failure to issue progress certificates for the progress claims referred to above and as a result of the plaintiff's failure to pay the progress claim dated 26 September 2006, the defendant by letter dated 3 November 2006 gave the plaintiff notice of a payment dispute as to the final progress claim dated 26 September 2006 and of the defendant's intention to have the payment dispute adjudicated under the Construction Contracts (Security of Payments) Act. On 10 November 2006 Mr Cameron Ford, a legal practitioner, was appointed adjudicator of the payment dispute by the Territory Construction Association. On 15 December 2006 the adjudicator determined that an amount of $328,128.40 was due and payable by the plaintiff to the defendant. He determined that the plaintiff should pay the defendant the sum of $328,128.40 plus interest of $4,674.80 being a total of $332,803.20.
[8] The plaintiff did not contest the adjudication on the merits of the payment dispute. Instead the plaintiff submitted in its response to the adjudicator that the defendant's claim for adjudication was not made in time and the dispute was too complicated a matter to be referred to adjudication. None of these arguments was pressed during this application.
[9] At the same time that the defendant gave the plaintiff notice of the payment dispute the defendant also gave the plaintiff notice of a dispute pursuant to clause 42.1 of the General Conditions of Contract. As a result various disputes are in the process of being referred to arbitration including the defendant's applications for extensions of time to complete the work under the construction contract.
The plaintiff's case
[10] The plaintiff submitted as follows. There is a genuine dispute between the plaintiff and the defendant about the existence and price of the variations to the scope of the works claimed by the defendant in the statutory demand. The Construction Contracts (Security of Payments) Act (NT) acknowledges the plaintiff's continuing right to dispute the amounts of the variations claimed by the defendant in arbitration or court proceedings. If the plaintiff is successful in reducing the amount of the variations claimed under the contract, it can then claim restitution for any over payment made under the adjudicator's determination. The plaintiff's right to seek restitution has been held to be an offsetting claim for the purposes of s 459H: see s 47 of the Construction Contracts (Security of Payments) Act (NT) and CCD Group Pty Ltd v Premier Drywall Pty Ltd [2006] NSWSC 1012 at pars [48] to [53]; Max Cooper & Sons (Builders) Pty Ltd v M & E Booth & Sons Pty Ltd [2003] NSWSC 929; (2003) 202 ALR 680; Demir Pty Ltd v Graf Plumbing Pty Ltd [2004] NSWSC 553. In addition the plaintiff has a number of offsetting claims against the defendant including a claim for liquidated damages caused by the defendant's delay in completing the construction works; the plaintiff's entitlement to retain a percentage of the contract sum as security during the defects liability period; and a claim based on proceedings in respect of certain workmen's liens.
The debt under the Construction Contracts (Security of Payments) Act
[11] The defendant argues that under the Construction Contracts (Security of Payments) Act the plaintiff must pay the amount determined by the adjudicator. The determined amount is a statutory debt which cannot be contested as payable on account. The defendant says that there is no justiciable dispute that ought to be raised against the liability of the plaintiff to pay the amount determined by the adjudicator otherwise the express objects of the Construction Contracts (Security of Payments) Act would be defeated; and, that the plaintiff's right to pursue dispute of the substantive issues as may stand behind the progress payment obligation does not give rise to a genuine dispute as contemplated by the Corporations Act to this statutory debt.
[12] I do not accept the defendant's argument. It is misconceived. The fact that it cannot genuinely be disputed that the determined amount is payable on account does not lead to the conclusion that there is no genuine dispute about the extent of the parties' respective liabilities under the construction contract for the purposes of s 459H of the Corporations Act: CCD Group Pty Ltd v Premier Drywall Pty Ltd (supra) at pars [48] to [53]; Max Cooper & Sons (Builders) Pty Ltd v M & E Booth & Sons Pty Ltd (supra); Demir Pty Ltd v Graf Plumbing Pty Ltd (supra).
[13] Before dealing with the relevant provisions of the Construction Contracts (Security of Payments) Act, it is helpful to note that the effect of clause 37 of the General Conditions of Contract is that either the progress certificate issued by the superintendent or the progress claim itself is to be the sole warrant of payment to the defendant and payment is to be made notwithstanding any argument as to the correctness of the progress certificate: Graham Allen Earthmoving Pty Ltd v Woodwark Bay Investment Corporation Ltd (unreported, (No 4304/1988) Queensland Supreme Court, Dowsett J, 15 December 1988); Wulguru Heights Pty Ltd v Merritt Cairns Constructions Pty Ltd [1995] QCA 273; [1995] 2 Qd R 521; Blue Chip Pty Ltd v Concrete Constructions Group Pty Ltd [1997] 1 Qd R 6; Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1998) 14 BCL 215. If the superintendent fails to issue a progress certificate within the period specified by clause 37 of the General Conditions of Contract following the receipt of a progress claim, the progress claim is deemed by the General Conditions of Contract to be the progress certificate.
[14] The payments of progress claims are made on account without prejudice to the subsequent entitlement of the plaintiff to challenge the amount of the progress certificate or the amount of the progress claim or the ultimate entitlement of the parties under the construction contract: Pearl Bay Corp Pty Ltd v Lodur Pty Ltd [2000] WASC 315; (2001) 19 ACLC 982 at par [12]. While such challenges as to the amount of a progress certificate or a progress claim cannot be relied on as a set-off or a bar to the defendant's entitlement to be paid the amount of a progress certificate or the amount of a progress claim, such challenges may be pursued subsequently against the defendant.
[15] There is considerable authority to support the proposition that an offsetting claim or a dispute can be raised on an application to set aside a statutory demand even though the company was contractually prevented from raising it in a proceeding for the debt claimed, provided it could have been disputed or raised in a separate proceeding: Pearl Bay Corp Pty Ltd v Lodur Pty Ltd (supra) at par [12]. While the defendant's contractual entitlements may mean that a counterclaim cannot stand in the way of a progress payment that does not mean that the plaintiff is precluded from bringing a claim in relation to the construction contract against the defendant in separate proceedings.
[16] The Construction Contracts (Security of Payments) Act establishes a summary dispute resolution process that facilitates the rapid resolution of payment disputes arising under a construction contract and a mechanism for the rapid recovery of payments under a construction contract: s 3(2). Relevantly a payment dispute arises, inter alia, when the amount claimed in a progress claim is due to be paid under the contract and the amount has not been paid: s 8. The adjudicator's determination is final in the sense that the adjudicator cannot subsequently amend or cancel the dispute and a party to the dispute cannot later apply for adjudication of the dispute: s 43. The adjudicator's determination is binding on the parties to the construction contract under which the payment dispute arose even if other proceedings relating to the payment dispute have been started before an arbitrator or another person or a court: s 40; a party that is liable to pay an amount under a determination must do so on or before the date stated in the determination: s 41(1); and the determination may be enforced as a judgment for a debt in a court of competent jurisdiction: s 45.
[17] However, payments made by a principal in accordance with the determination of an adjudicator are payments on account: s 42. Payment of the amount of the determination is taken to be an advance towards the total amount payable under the construction contract by the principal to the contractor: s 42(2). The provisions of the Construction Contracts (Security of Payments) Act do not prevent a party to a construction contract from starting proceedings before an arbitrator, another person or a court in relation to a dispute or other matter arising under the construction contract. An arbitrator or other person or a court dealing with a matter arising under a construction contract may make an order for the restitution of the amount paid or any other appropriate order relating to the determination: s 47(1) and (4). Except for a review a determination to dismiss an application without making a determination of its merits, a decision or determination of an adjudicator arguably cannot be appealed or reviewed: s 48(3).
[18] The Construction Contracts (Security of Payments) Act is primarily concerned with maintaining a contractor's cash flow, not with determining its ultimate rights: Demir Pty Ltd v Graf Plumbing Pty Ltd (supra) at par [19]. The Act does not affect the ultimate recovery of final amounts due between the parties based on their legal rights: CCD Group Pty Ltd v Premier Drywall Pty Ltd (supra) at par [48].
[19] As against the above, the provisions of Div 3 of Pt 5.4 of the Corporations Act establishes a regime whereby a statutory demand is set aside whenever there is a genuine dispute or offsetting claim as defined. Even if it cannot be disputed that the amount of an adjudicator's determination is to be paid on account, the provisions of the Corporations Act cannot be construed so that they do not relate to a genuine dispute about the ultimate amount to be paid to the defendant under the construction contract or to a claim alleged to offset the adjudicator's determination: CCD Group Pty Ltd v Premier Drywall Pty Ltd (supra) at pars [48] to [53]; Max Cooper & Sons (Builders) Pty Ltd v M & E Booth & Sons Pty Ltd (supra); Demir Pty Ltd v Graf Plumbing Pty Ltd (supra).
The test for "genuine dispute" under Div 3 of Pt 5.4 of the Corporations Act (Cth).
[20] The test for determining whether a "genuine dispute" has arisen for the purposes of s 459H of the Act is stated in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785: per McLelland CJ at 787: