Brambles Australia Limited v Philip Davenport & Ors - [2004] NSWSC 120 - NSWSC 2004 case summary — Zoe

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Brambles Australia Limited v Philip Davenport & Ors

[2004] NSWSC 120

Supreme Court of NSW|2004-03-12|Before: Einstein J

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Court

Supreme Court of NSW

Decision date

2004-03-12

Before

Einstein J

Source

Original judgment source is linked above.

Judgment (75 paragraphs)

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CITATION : Brambles Australia Limited v Philip Davenport & Ors [2004] NSWSC 120 HEARING DATE(S) : 01/03/04 JUDGMENT DATE : 12 March 2004

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JURISDICTION: Equity Division Technology and Construction List JUDGMENT OF : Einstein J DECISION : Proceedings to be dismissed.

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CATCHWORDS : Building and construction - progress payments claimed under the Building and Construction Industry Security of Payment Act 1999 (NSW) - determination made by adjudicator - Administrative law - whether, and if so to what extent, judicial review of adjudications made pursuant to the Act is available - scope of relief available in the nature of a writ of certiorari - grounds upon which judicial review is available - Natural justice in relation to costs - Proper construction of section 7(2)(c) of the Act - Whether the consideration payable for construction work carried out under the contract or for related goods and services supplied under the contract was to be calculated by reference to the value of the work carried out or the value of the goods and services supplied Building and Construction Industry Security of Payment Act 1999 (NSW) Evidence Act 1995 (NSW) LEGISLATION CITED : Interpretation Act 1987 (NSW) Magistrates (Summary Proceedings) Act 1975 (Vic) Supreme Court Act 1970 (NSW) Abacus Funds Management Ltd v Davenport [2003] NSWSC 935 ADI Limited v Environmental Protection Authority; Environmental Protection Authority v ADI Limited (2000) 118 ACrimR 335 Brodyn Pty Limited t/as Time Cost and Quality (ACN 001 998 830) v Philip Davenport & Ors [2003] NSWSC 1019 Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249 Darling Island Stevedoring & Lighterage Co Ltd v Jacobsen (1945) 70 CLR 635 Dowling v Bowie (1952) 86 CLR 136 Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSWSC 903 Kioa v West (1985) 159 CLR 550 Leighton Contractors Pty Limited v Campbelltown Catholic Club Limited, Campbelltown Catholic Club Limited v Leighton Contractors Pty Limited [2003] NSWSC 1103 Monier Ltd (t/as Reliance Roof Tiles) v Szabo (1992) 28 NSWLR 53 Multiplex Constructions Pty Ltd v Luikens and Anor [2003] NSWSC 1140 CASES CITED : Musico & Ors v Davenport & Ors [2003] NSWSC 977 Paynter Dixon Constructions Pty Limited v JF & CG Tilston Pty Limited [2003] NSWSC 869 R v Maclay (1990) 19 NSWLR 112 Re Bolton ex parte Bean (1987) 162 CLR 514 Reg v Edwards [1975] QB 27 Reg v Hunt [1987] AC 352 Rose and Another v Bridges (1997) 79 FCR 378 Roxborough & Ors v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516 Russell v Duke of Norfolk [1949] 1 All ER 109 Transgrid v Walter Construction Group Ltd [2004] NSWSC 21 Vines v Djordjevitch (1955) 91 CLR 512 Walter Construction Group Ltd v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266 Brambles Australia Limited (Plaintiff) PARTIES : Philip Davenport (First Defendant) Demtech Pty Ltd (Second Defendant) Adjudicate Today (Third Defendant) FILE NUMBER(S) : SC 55061/03 Mr G Inatey SC, Mr D Miller (Plaintiff) COUNSEL : Mr M Rudge SC, Mr D Robertson (Second Defendant) No appearance First and Third Defendants SOLICITORS : Allens Arthur Robinson (Plaintiff) Dutton Lawyers (Second Defendant)

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55061/03 Brambles Australia Limited v Philip Davenport & Ors JUDGMENT The proceedings 1 These proceedings relate to an adjudication determination dated 24 November 2003 ["the determination"] by the first defendant, Mr Philip Davenport ["the adjudicator"], under the Building and Construction Industry Security of Payment Act 1999 (NSW) ["the Act"]. 2 By the determination, the adjudicator determined that the plaintiff, Brambles Australia Limited ["Brambles"], should pay the second defendant, Demtech Pty Ltd ["Demtech"], the sum of $274,153.52 and that Brambles should pay 100% of the adjudication fees. The adjudicator was appointed by the third defendant, 'Adjudicate Today', an authorised nominating authority pursuant to the Act. 3 Brambles seeks: · a declaration that the contract between the plaintiff and the second defendant, to which the first defendant's adjudication relates, is not a contract to which the Act applies; · a declaration that the first defendant did not have jurisdiction under the Act to consider and determine the adjudication before him; · in the alternative, a declaration that to the extent the first defendant did have jurisdiction to consider and determine the adjudication under the Act, he breached the Act in failing to give reasons therefore; · an order restraining the second defendant from taking any steps to enforce the determination against the plaintiff under the Act; · an order restraining the second defendant from applying for an adjudication certificate pursuant to section 24 of the Act; · an order restraining the third defendant from issuing an adjudication certificate pursuant to section 24 of the Act; · an order in the nature of certiorari to quash the determination of the first defendant for jurisdictional error in that: · by reason of section 7(2) of the Act, the subcontract between the plaintiff and the second defendant was not amenable to adjudication under the Act since the consideration payable for construction work carried out under the contract, or for related goods and services supplied under the sub-contract, was to be calculated by reference otherwise than to the value of the work carried out or the value of the goods and services supplied; · in determining that the Act applied to the contract, the first defendant failed to give reasons therefore as he was required to do; · in breach of section 22(2)(b) of the Act, the first defendant failed to deal with, entirely ignored or misunderstood the payment terms and conditions in the sub-contract; · the first defendant otherwise entirely ignored, misunderstood or misconceived the terms and conditions in the sub-contract relating to progress payments; · the first defendant failed to deal with or misunderstood the terms and conditions in the sub-contract relating to set-offs and deductions; · the first defendant denied the plaintiff natural justice by: - determining costs of the adjudication adverse to the plaintiff when such had not been claimed by the second defendant; and

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(c) Brambles had not made out an entitlement to set off any specific debt against the progress payment; and · Brambles was liable to pay 100% of the adjudication fees, on the basis that Brambles had allegedly unnecessarily increase the costs of the purported adjudication by submitting "a mass of irrelevant materials"." 5 Brambles further contends as follows: · "pursuant to General Conditions Clause 14.1 of the Subcontract, Brambles took the remaining part of the Works (the Remaining Works) out of the control of Demtech; · Demtech vacated the Demtech Site on 4 November 2002, although some of its equipment and materials were removed at a later time; · in November 2002, Brambles entered into a subcontract with Moltoni Adams Pty Ltd (Moltoni) for the performance of the Remaining Works which had been taken out of Demtech's control (the Moltoni Subcontract); · shortly after the Moltoni Subcontract was executed, Moltoni had started removing scrap from the Site but within a few days, it encountered asbestos still present at the Site; · the asbestos encountered by Moltoni was present at the Site due to Demtech's failure to safely collect, remove and dispose of hazardous waste materials, including contaminated soil and materials containing asbestos and synthetic mineral fibre not only from Boiler 6 but also from other demolition work on site. The site was in a highly contaminated and unsafe condition due to Demtech's actions; · in November 2002, Workcover directed that Moltoni provide an asbestos audit and management plan and carry out a proper clean-up and removal of asbestos before Moltoni could undertake further demolition work on the Site.; · on 11 December 2002, HLA produced an asbestos management plan which identified areas of the former Demtech Site where asbestos had been found; · under the Moltoni Subcontract, Brambles did not receive any proceeds from the sale of scrap. Brambles agreed on a payment of $50,000 in addition to Moltoni retaining all scrap and salvageable material. Further, under the Moltoni Subcontract, Moltoni agreed to undertake work to remove hazardous materials, including asbestos and synthetic mineral fibre, but this was charged as an extra to Brambles; · in November 2002, Brambles retained the services of Davis Langdon, Quantity Surveyors, to: (a) record the work which was to be undertaken by Moltoni; (b) identify and record the movement of all scrap; and (c) enable Brambles to confirm the quantities of asbestos and other hazardous materials to be removed during the course of the Remaining Works. · in April 2003, Davis Langdon produced a report describing and quantifying the work which was necessary to complete the Remaining Works after they were taken over by Moltoni, including the removal of scrap and hazardous materials." Dealing with the case 6 There are a number of provisions of the Act which are relevant to the issues. Without being exhaustive, these include the following:

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(4) An adjudicator is not entitled to be paid any fees or expenses in connection with the adjudication of an adjudication application if he or she fails to make a decision on the application (otherwise than because the application is withdrawn or the dispute between the claimant and respondent is resolved) within the time allowed by section 21 (3)." Judicial review of adjudications 7 There have been a number of recent decisions at first instance dealing with the Act. These include Walter Construction Group Limited v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266, a judgment of Nicholas J, 9 April 2003; Paynter Dixon Constructions Pty Limited v JF & CG Tilston Pty Limited [2003] NSWSC 869, a judgment of Bergin J, 25 September 2003; Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSWSC 903, 26 September 2003, a judgment of my own; Abacus Funds Management Ltd v Davenport [2003] NSWSC 935, 20 October 2003, an interlocutory judgment of Gzell J; the judgment of McDougall J in Musico v Davenport [2003] NSWSC 977, 31 October 2003; and my own judgments Brodyn Pty Limited t/as Time Cost and Quality (ACN 001 998 830) v Philip Davenport & Ors [2003] NSWSC 1019 and Leighton Contractors Pty Limited v Campbelltown Catholic Club Limited, Campbelltown Catholic Club Limited v Leighton Contractors Pty Limited [2003] NSWSC 1103. The jurisdictional issue 8 In approaching the jurisdictional issue it is to be noted that the definition [section 5 of the Act] of "construction work" includes "the demolition or dismantling of buildings or structures". 9 The instant jurisdictional issue lies in short compass. It concerns the proper construction of section 7(2)(c) of the Act. Clearly enough, this sub-section serves to exclude certain construction contracts from the reach of the Act. The construction contracts so excluded are identified by reference to whether or not the consideration payable for construction work carried out under the contract or for related goods and services supplied under the contract is to be calculated: · by reference to the value of the work carried out or the value of the goods and services supplied; or · otherwise than by reference to the value of the work carried out or the value of the goods and services supplied. 10 Critically, the search is for the manner of calculation of the consideration payable for the relevant construction work or for the relevant goods and services supplied. Walter Construction Group Limited v CPL (Surry Hills) Pty Ltd 11 In this regard, the proper approach to section 7(2)(c) of the Act was considered by Nicholas J in Walter Construction. His Honour approached the matter by reference to the onus of proof. The judgment includes the following:

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28 Ultimately the matter is one of impression. Has Brambles satisfied the onus of establishing that the subject contract was within the excepted class? 29 To my mind the answer to this question is in the negative. The contract was for an agreed lump sum. It contained a profit share arrangement with respect to material items being discovered during demolition activities. It also contained terms and conditions treating with scrap, the property in which immediately passed to Demtech as and when severed from the premises. The same terms and conditions essentially dealt with the resale by Demtech of all ferrous scrap and of scrap classified as 'black iron'. These terms and conditions also dealt with a charge to Demtech in respect of items not so resold. And there was a provision within the scrap terms and conditions by which there was a right reserved to offset amounts owing by Demtech to Gardner Perrot [another division of Brambles]. 30 Brambles has not discharged the onus which lay upon it of establishing that all or any part of the consideration payable for construction work carried out under the contract or for related goods and services supplied under the contract was to be calculated otherwise than by reference to the value of the work carried out or the value of the goods and services supplied. There are too many imponderables left for consideration. 31 Brambles has not established that the subject contract did not involve payment in monetary terms. The agreed lump sum price was $1,854,692.11. I do not see that the terms and conditions dealing with sale or retention of scrap can be said to establish that the contract did not involve payment in monetary terms. Nor do those terms and conditions otherwise answer the question as to whether the consideration payable for construction work was to be calculated otherwise than by reference to the value of the work carried out or the value of the goods and services supplied. In all likelihood the terms and conditions dealing with the sale or retention of scrap simply cannot, upon the proper construction of the instant contract, be said to fall within the meaning of the phrase in section 7(2)(c) "the consideration payable for construction work carried out under the contract". Arguably, this is recognised in the payment schedule [Exhibit P 5] by Brambles reference to the extent of work done by Demtech to maximise the value of the scrap and salvageable material being neither construction work nor related goods and services but rather being "asset recovery work for its own account". 32 That there was an internal offset arrangement under the scrap provisions does not carry Brambles the distance of having discharged the onus which lay upon it. 33 Whilst it is arguable that the consideration payable for the construction work is shown to have been severable, the elements of the severable consideration including: · the agreed lump sum price; · the receipt by Demtech of ownership of materials resulting from demolition; and · terms entitling Demtech to resell to Gardner Perrot particular of the salvaged material or to be charged in the event of particular of such material not being so resold, to my mind the better analysis is that earlier set out. 34 I do not see it as necessary to presently determine whether the sub-section is concerned only with contracts in which the consideration is entire and indivisible. 35 In those circumstances it seems to me that Brambles has failed on the jurisdictional issue.

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"In his determination, Mr Davenport referred to a number of the provisions of the contract, and expressed views as to their meaning and application. In my opinion, in determining whether there is error of law on the face of the record, it is open to me to have regard at least to those provisions of the contract to which Mr Davenport referred. Applying by analogy what was said in Craig at 181-2, I think that at least those clauses of the contract that are specifically referred to and analysed by Mr Davenport should be taken to be incorporated into his determination; and, as I have noted, his determination itself forms part of the record. In substance, it seems to me that the way Mr Davenport dealt with those particular contractual provisions makes them an integral part of his determination, as opposed to "a merely introductory or incidental reference"." 43 In the present case, the approach taken in the determination was for the adjudicator to state that he could not see [plainly intending to refer to the provisions of the contract] any provision to the effect that the date for payment would be postponed. This clearly, it seems to me, means that the whole of the contract should be taken to be incorporated into the determination and therefore to form part of the record. 44 Brambles submits that the adjudicator is clearly shown to have fallen into error in having failed to have regard to the critical relevant terms of the contract. The proposition put forward is that the general conditions of contract clearly provided in clause 24.1, inter alia, that unless otherwise specified in the contract, the principal would effect payment to the contractor only upon completion of the work. Reliance is also placed upon special condition 3 which provided for payment to be made for each section in each area in the relevant schedule on completion of the removal of the assets from that area or as otherwise described and that payments would be based on the work completed for each area within the time schedule set out in the pricing schedule. 45 Clearly enough the adjudicator did not, in the determination, expressly refer to general condition 24 or to special condition 3. However, Demtech contends that there is a basis upon which the determination was grounded, in that the schedule of progress payments was appropriately seen as a specific document which overrode any inconsistent provisions in other contractual documents. Whilst this may have been the reasoning process of the adjudicator it was certainly not made explicit. 46 It does not seem to me that the Court can or should presently infer from the determination that the adjudicator could not possibly have looked at general condition 24 or special condition 3. However, even if that inference was appropriate questions which would arise would include: · whether it is presently open to Brambles to make a complaint about the failure of the adjudicator to refer in his determination to general condition 24: the Demtech proposition being that general condition 24 was not referred to in the payment schedule nor in any adjudication response; · whether such relevant error is properly described as "jurisdictional error"; · discretionary grounds relevant to the grant or withholding of an order in the nature of certiorari. Whether Brambles is entitled to make the relevant complaint 47 Section 20(2B) of the Act expressly provides that the respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant. 48 A careful reading of the payment schedule discloses that there was no reference made at all to clause 24.1. However, the adjudication response did refer to clause 24.1 [Exhibit P2 at page 15]. 49 Section 22(2) of the Act provides that in determining the adjudication application the adjudicator is to consider only the particular matters thereafter set out. Those matters include [section 22(2)(d)]:

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78 Section 14(3) of the Act, in requiring a respondent to "indicate" its reasons for withholding payment, does not require that a payment schedule give full particulars of those reasons. The use of the word "indicate" rather than "state", "specify" or "set out", conveys an impression that some want of precision and particularity is permissible as long as the essence of "the reason" for withholding payment is made known sufficiently to enable the claimant to make a decision whether or not to pursue the claim and to understand the nature of the case it will have to meet in an adjudication." 51 In my own view, the proper approach, bearing in mind the time constraints built into the scheme, is to be reasonably strict where, as here for example, enforcing the injunction to be found in section 20(2B). Precision and particularity was required in the payment schedule to a degree reasonably sufficient to apprise the parties of the real issues in the dispute. If clause 24.1 was to have been relied upon it had to be expressly identified. Insofar as the adjudication response here went outside the reasons for withholding payment which were included in the payment schedule, it was appropriate for the adjudicator to disregard the adjudication response. 52 For those reasons it is not presently open to Brambles to make a complaint about the failure of the adjudicator to refer in his determination to general condition 24. 53 Special condition 3 becomes of little significance viewed separately. Jurisdictional error 54 In these circumstances it is unnecessary to go further and to examine whether or not, if the above finding be incorrect [so that Brambles is now entitled to complain about the failure of the adjudicator to refer in his determination to general condition 24 or special condition 3], such relevant error is properly described as "jurisdictional error". 55 There is no jurisdictional error established in relation to the allegation of the adjudicator misunderstanding that the second statutory declaration of Mr Merritt did not in fact involve a revision of the relevant amounts, which were in fact differently based under the contract. Natural justice in relation to costs 56 This matter is again in short compass. The Act [section 29(2), (3)] provides that: · the claimant and respondent are jointly and severally liable to pay the adjudicator's fees and expenses; and · the claimant and respondent are each liable to contribute to the payment of the adjudicator's fees and expenses in equal proportions or in such proportions as the adjudicator may determine. 57 The complaint is that the adjudicator determined that the respondent was liable to pay 100 percent of the adjudication fees without affording the parties [Brambles in particular] the opportunity to address on the issue. This is said to offend the rules of natural justice which it is said require in this context each party to be given the opportunity to present an informed case to the adjudicator to be considered. Brambles submission includes:

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An adjudication is amenable to review on the basis of a purported denial of natural justice; Musico at [107], Transgrid v Walter Construction Group Ltd [2004] NSWSC 21 at [60]ff. The Adjudicator's approach to this issue meant that Brambles was denied a reasonable (indeed, any) opportunity of presenting a case on this matter; Russell v Duke of Norfolk [1949] 1 All ER 109 at 188 per Tucker LJ. The Adjudicator failed in the circumstances to adopt and follow a reasonable and fair procedure before exercising his statutory discretion, see for example (in a trial sense) Kioa v West (1985) 159 CLR 550 at 627 per Brennan J; Rose v Bridges (1997) 79 FCR 378 at 386 per Finn J. His Honour's approach offended the notion of a contest or debate between parties before a detached and essentially passive tribunal, refer; Judicial Review of Administrative Action , Aronson & Dyer, LBC (2nd Ed) at 403." 58 The content of the obligation to afford natural justice to the parties plainly depends upon the circumstances of the particular case and here, the legislative scheme. The parties are aware as soon as an adjudication application is served that the adjudicator has the power to determine the proportions in which the claimant and respondent are to be liable to contribute to the payment of the adjudicator's fees and expenses. The legislation sets up a fast track tightly regulated set of procedures which, as earlier mentioned, have recently been the subject of extensive judicial consideration. The width of the discretion given to the adjudicator and the whole of the relevant legislative scheme, importantly, fixing a time limit within which the adjudication application is to be determined, appears to me to require that the parties, if they wish to put any particular matter to the adjudicator, do so in the course of and as part of their submission of the documents stipulated for by the Act: that is to say the payment claim, the payment schedule, the adjudication application and the adjudication response. In the absence of any submission of any type by either party in relation to the adjudicator's fees and expenses, the adjudicator may proceed to exercise, as here, his/her discretion to determine the issue. In that circumstance the adjudicator, in exercising that discretion, may take into account such matters as to the adjudicator appear relevant to the exercise. Whilst the discretion is not entirely at large, almost every matter which relates to the circumstances in which, and manner in which, the adjudication application has come forward and then been dealt with by the parties, may be taken into account. 59 There is no substance in the natural justice complaint. Reserved rulings on evidence 60 During the hearing the course adopted was in certain instances to reserve rulings on the tender by Brambles of documentary material. The rulings allowed into evidence the following materials: · the adjudication application; · the adjudication response; · the adjudication determination; · the payment claim; · the payment schedule; · the schedule of progress payments; · the letter of award; · clause 26 of the general conditions of the head contract. 61 MFI P3 compromised 7 lever-arch folders and nine loosely bound reports. Certain of this material simply duplicates the above described documents which were allowed into evidence. There is no need to include the same material twice in the record. 62 The only document forming part of MFI P3 which it is appropriate to now allow into evidence is the entirety of the contract which is to be found in volume 1. That contract may be marked as exhibit 1D. 63 Every other document forming part of MFI P3 is rejected either: · as not forming part of the record; or · pursuant to section 135 of the Evidence Act 1995 (NSW) on the basis that the probative value of the evidence is substantially outweighed by the danger that the evidence might be unfairly prejudicial to the defendant or be misleading or confusing or cause or result in undue waste of time. Short minutes of order 64 The parties are to bring in short minutes of order on which occasion costs may be argued.

Brambles Australia Limited v Philip Davenport & Ors

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