Canterbury-Bankstown Council v Payce Communities Pty Ltd

Background

1. On 12 September 2014, Council entered into an Umbrella Agreement with Payce in respect of the redevelopment of an existing Senior Citizens Centre located in Riverwood, NSW. The Umbrella Agreement enclosed a number of other agreements, including a Fit Out Agreement under which Payce was required to complete the fit out of a library and Senior Citizens Community Centre.
2. In or around early 2015, Council and Payce agreed to proceed with the development of the design of the Fit Out work. In or around October 2015, the design documents were sent to a quantity surveyor in order to price the Fit Out works.
3. On or around 4 December 2015, the conditions precedent (as set out in the Umbrella Agreement) to the formation of the Fit Out Agreement were satisfied such that the Fit Out Agreement came into effect.
4. In or around May 2016, Canterbury Council and Bankstown Council were amalgamated and Canterbury-Bankstown Council, the plaintiff in these proceedings, was formed.
5. On 24 February 2017, Payce and Council agreed that the initial Fit Out Agreement contract price, which was identified in the Umbrella Agreement as $1,520,000.00, was to increase by $651,000.00. As a result, the contract price in total was increased to $2,171,000.00.

Practical completion

1. On 24 August 2018 practical completion was certified as occurring. No WUC (Work Under the Contract, as that term is defined in the Fit Out Agreement) has been undertaken by Payce since that date.
2. A 12 months defects liability period commenced on the date of practical completion at 4:00 pm: cl 35 and Item 27 of the Fit Out Agreement.
3. At the time of practical completion, there was a dispute between Council and Payce as to the extent of the variations and the proper costing of the difference between base build and the Fit Out Work.

Entitlement to make payment claims

1. Pursuant to cl 37.1 and item 28 of the Fit Out Agreement, Payce was entitled to make a payment claim on the 25th day of the month in which practical completion was certified.
2. Under cl 37.4 of the Fit Out Agreement, Payce was also entitled to make a final payment claim within 28 days after the expiry of the last defects liability period.

First payment claim and Adjudication Application

1. On 11 October 2018 Payce served a payment claim on Council seeking the amount of $1.772 million in respect of 41 items of variation works. On 24 October 2018, Council responded with a payment schedule of nil.
2. On 31 October 2018, Payce lodged an Adjudication Application with Adjudicate Today pursuant to the SoP Act 2018, ADJT508 (the 2018 Adjudication Application) in relation to the 11 October payment claim.
3. On 9 November 2018, Council lodged an Adjudication Response, in which Council submitted that: 1. the 2018 Adjudication Application was made without jurisdiction. This was for reasons including that the payment claim was invalid and thus void; the payment claim was issued in respect of multiple contracts; there was no available reference date; and Payce was estopped from relying on the purported variations; 2. in the alternative, the amount assessed ought be nil because Payce had not satisfied a precondition for payment as it had not complied with the variation process set out in cl 36, including the requirement to have variations priced by the Superintendent; and 3. further in the alternative, the Adjudicator should adopt Council's valuations for each of the claimed 41 variations, based on the reasons put forward by Council for rejecting the variation entirely or the different value.
4. On 3 December 2018, the Adjudicator delivered its determination in relation to the 2018 Adjudication Application, concluding that Payce was entitled to an amount of $NIL (2018 Adjudication Determination). The determination of $NIL was based on a finding that there was no reference date available in respect of the 11 October payment claim. The Adjudicator did not deal with the merits of Payce's claim or Council's alternative submissions in response.
5. Payce did not challenge the 2018 Adjudication Determination.

Commencement of Court Proceedings

1. On 30 April 2019, Payce commenced Supreme Court proceedings 2019/00133490 (Supreme Court proceedings) against Council by filing a Summons and a Technology and Construction List Statement.
2. In the Supreme Court proceedings, Payce seeks payment in the amount of $1.748 million in respect of 44 items of variation works and one item for builder's margin, which Payce asserts had been priced and certified by the Superintendent and to which it is entitled to be paid according to cl 36.4 of the Fit Out Agreement: at [21], [22], [26] and [27]. The List Statement attaches Schedule A which lists and values all variations which Payce says it was directed by Council to undertake.
3. On 28 May 2019, Council filed its Technology and Construction List Response in accordance with a direction made on 9 May 2019 in the Supreme Court proceedings.
4. In the List Response, Council asserts that Payce is not entitled to any amount in respect of the variations claimed. The List Response: 1. denies that the variations referred to in Schedule A were valued in accordance with the Fit Out Agreement, asserts that a number of them were required to overcome design flaws in the base build because of the necessity for acoustic panelling and asserts that a number fail to allow for or credit the cost of items originally provided for: C17(1), C17(2) and C17(3); 2. asserts that the Superintendent was obliged to but did not price the variations in accordance with cl 36.4 of the Fit Out Agreement, and says any calculations were not made until after practical completion: C54, C55 and C56; 3. says that, having regard to the 2018 Adjudication Determination, Payce is estopped from making its claim for variations or it is an abuse of process to pursue the claim: C57-C72; and 4. asserts that Council has valued the additional works in Schedule A. Council does not provide the amounts of those valuations. It also claims there is a set-off and that Payce has already been paid for what was approved as variations: C73.
5. In accordance with directions given by the Court on 31 May 2019, Payce made a request for particulars of Council's List Response on 7 June 2019. Council answered Payce's request on 14 June 2019.
6. In relation to C17(2) and C17(3) of the List Statement, Payce sought particulars of which variations Council alleged were necessary to overcome design flaws and to which credits should apply. Council did not identify which variations and responded referring Payce to cl 36.2 of the Fit Out Agreement and that it was a matter for evidence.
7. On 24 June 2019, Payce filed a List Reply.
8. On 28 June 2019, the Court made orders for the parties to serve their lay and expert evidence; Payce by 9 August 2019 and Council by 18 October 2019.
9. Payce did not comply with the order for its evidence to be served by 9 August 2019 but served the following between 16 August and 11 September: 1. two lay affidavits of Shaza Rifi and Alex Nader on 16 August 2019: 2. two lay affidavits of Dominic Joseph Nicholas Sullivan and Richard Rigby on 30 August 2019; and 3. one lay affidavit from Iskander Alexander and an expert report of Christopher Daubney (Daubney Report) on 11 September 2019.
10. The Daubney Report is 116 pages long and contains 47 appendices. In summary, it assesses the value of 24 items of variations works disputed under the Fit Out Agreement and one item of builders margin, totalling $1.751 million (exhibit BB-1 to BMB affidavit dated 8 October 2019, at p 145).
11. As part of his brief, Mr Daubney was provided with copies of Council's List Response and particulars (Council's defence documents). Copies of Council's defence documents do not form part of the Daubney Report, nor are their contents expressly referred to. Appendix 3 identifies them as documents provided as part of the brief.

Second payment claim

1. On 24 August 2019, the 12-month defects liability period under the Fit Out Agreement ended, which meant the 28 day period in which Payce could make its final payment claim under the Fit Out agreement commenced.
2. On 19 September 2019, Payce served its final payment claim for the amount of $1.666 million (incl GST) on Council and the Superintendent pursuant to cl 37 of the Fit Out Agreement (Final Payment Claim).
3. The Final Payment Claim relates to 46 items all of which are described as variations and which total $1.514 million (excl GST). Of the 46 items, 35 appear to relate to variations works, three appear to relate to consultants and other fees, 7 appear to be credits and one item is for builder's margin. All of the 24 items of variations valued in the Daubney Report are included in the Final Payment Claim.
4. The Final Payment Claim includes a schedule listing each variation the subject of the claim and attached copies of the four lay affidavits and the Daubney Report which had previously been served by Payce in the Supreme Court proceedings.
5. On 30 September 2019, the solicitors for Council wrote to the solicitors for Payce asserting that the Final Payment Claim and any subsequent adjudication was an abuse of process. This was said to be because the Final Payment Claim raised the same issues addressed in the 2018 Adjudication Determination and because their reliance on evidence served in the Supreme Court proceedings would cause Council to have to respond earlier than required and in a manner inconsistent with its rights in the Supreme Court proceedings.
6. On 3 October 2019, Council served a payment schedule in response to the Final Payment Claim stating that Council proposed to pay "$NIL". The reasons given for not paying anything are set out in annexures to the payment schedule as follows: 1. Annexure A headed "Threshold Issues" which, amongst other reasons, asserted the Final Payment Claim was invalid, it constituted an abuse of process, and an adjudicator had no jurisdiction; and 2. Annexure B headed "Substantive Issues" which, amongst other reasons, asserted that the variations were not lodged in accordance with the procedures under cl 36 of the contract, denied the method of calculation adopted by Payce and, in the alternative, valued the variations to be $119,254.60 based on the actual value of the additions and deductions to the original contract scope and cl 36.4 of the contract.
7. On 8 October 2019, Council commenced these proceedings to restrain Payce from seeking to invoke the adjudication procedures under the SoP Act.
8. It is not in dispute that Payce must, by operation of the SoP Act, lodge any proposed adjudication application by 18 October 2019 and that this date cannot be extended by the Court.
9. It is also not in dispute that 25 October 2019 is the likely date by which Council will be required to serve a response to any adjudication application made by Payce: s 20 of the SoP Act.

The SoP Act

1. The SoP Act confers a statutory entitlement on a builder who has carried out construction work under a contract to claim progress payments "on and from each reference date" under the relevant contract.
2. The SoP Act also creates a scheme by which disputes regarding progress payments can be determined promptly through extra judicial adjudication which commences with the service of a payment claim and ends with the making of an adjudication determination. The statutory adjudication process enables rights to be enforced informally and summarily without prejudice to the common law rights of both parties which can be determined in court proceedings: Chase Oyster Bar Pty Ltd V Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190; at [2]-[8]; Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 351 ALR 225; [2018] HCA 4 citing Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385; [2005] NSWCA 49 (Falgat).
3. Reflecting the intent of the legislative scheme, the provisions of the SoP Act provide tight timeframes for responding to a payment claim and for referrals to adjudication.
4. Once a payment claim has been served, the other party must provide a payment schedule within 10 business days, failing which, it may become liable to pay the claimed amount: s 14(4) of the SoP Act.
5. A claimant is entitled to apply for adjudication of its payment claim by making an adjudication application within 10 days of receipt of a payment schedule: s 17(1)(3) of the SoP Act.
6. The other party to an adjudication application must respond within five business days after receipt of the application or within two business days after receipt of notice of the adjudicator's acceptance of the application, whichever time expires later: s 20(1) of the SoP Act. An adjudication response may contain such submissions relevant to the response as the respondent chooses to include: s 20(2)(c).
7. A respondent to an adjudication application is not entitled to include in its adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant: s 20(2B) of the SoP Act.
8. Section 21(3) of the SoP Act requires the adjudicator to determine the application within 10 business days or such further time as may be agreed. If the adjudicator determines that an amount is payable, it must be paid within five days after service of the determination, failing which, the claimant is entitled to request an adjudication certificate which may be filed as a judgment in any court of competent jurisdiction: s 25 of the SoP Act.
9. The process set out in the SoP Act in relation to the service of payment claims, payment schedules and adjudication, does not affect the rights of a party under a construction contract or any civil proceedings arising under a construction contract: s 32 of the SoP Act.

Abuse of process principles

1. The consecutive prosecution of statutory and common law claims by a builder for payment is contemplated by the SoP Act. A claimant is not required to make an election between enforcement by statutory or common law remedies: Falgat at [26] and [28].
2. The concurrent pursuit of a claim by a builder for payment in court proceedings and by adjudication under the SoP Act is not, in itself, an abuse of process: Falgat at [24]; Rubana Holdings v 3D Commercial Interiors [2008] NSWSC 1405 (Rubana), at [30]; Civil Mining & Construction Pty Ltd v Issac Regional Council [2015] 2 Qd R 374; [2014] QSC 231 (Civil Mining), at [22].
3. The right to concurrently prosecute claims under the SoP Act and in court is subject to a possible exception where the proceedings "are close to trial", that is where the statutory procedures "would interfere with the orderly preparation and presentation of the party's cases in the Court", or there is "some additional circumstance that could generate an abuse of process": Falgat at [24] and [26]; Rubana, at [30].
4. It has also been accepted that it is not an abuse of process for a claimant to desire the benefit of the expeditious nature of the SoP Act process in pursuit of a claim concurrently with a claim in Court or in arbitration, even though there will be an inevitable greater burden upon the responding party having to contest both claims: Civil Mining, at [22].
5. It is for the party seeking to restrain the use of the SoP Act to show that it is an abuse of process: Civil Mining, at [22]. That onus has been described as a "heavy one" and the power to grant a stay or injunction as being exercised in "exceptional circumstances": Williams & Ors v Spautz (1992) 174 CLR 509, at 529.
6. In this case, Council does not agree that the onus on it is a "heavy one", and relies on the absence of that description by the courts in Falgat, Rubana and Ku-Ring-Gai Council v Ichor Constructions Pty Ltd [2014] NSWSC 1534 (Ichor).
7. I do not accept that submission. Failing to refer to a well-known principle or authority is not indicative of some special meaning or lesser standard in respect of an abuse of process in cases seeking to restrain a statutory process under the SoP Act.
8. While it is a broad concept and may be "insusceptible of a formulation comprising closed categories", an abuse of process involves notions of proceedings being brought for some "improper or illegitimate purpose" or the use of a process which makes proceedings "seriously or unfairly burdensome, prejudicial or damaging, or productive of serious and unjustified trouble and harassment", or "unjustifiably oppressive": Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27, at [9]; Ridgeway v the Queen (1995) 184 CLR 19; Ashby v Commonwealth (No 4) [2012] FCA 1411; UBS AG v Scott Francis Tyne as trustee of the Argot Trust (2018) 92 ALJR 968; [2018] HCA 45.

Would invoking an adjudication process under the SoP Act be an abuse of process?

1. Council submits that the Court should conclude that it would be an abuse of process for Payce to exercise its statutory right and seek adjudication of the Final Payment Claim because Payce's conduct in the Supreme Court proceedings and the SoP Act process involves "something more" or "some additional circumstance", which makes this case distinguishable from each of Falgat, Rubana and Civil Mining.
2. The "something more" is, Council submits, the cumulative effect of the following: 1. the Supreme Court proceedings being commenced at a time when Payce knew they would not be heard and determined before the expiry of the period in which Payce could serve its Final Payment Claim, being 23 September 2019; 2. Payce preparing its evidence in the Supreme Court proceedings with the benefit of Council's defence documents; 3. Payce using the Council defence documents in aid of its SoP Act process by deploying the Daubney Report as part of the Final Payment Claim, and thereby obtaining a forensic advantage in any adjudication process. Council also claims that this use was in beach of Payce's implied undertaking as enshrined in Hearne v Street (2008) 235 CLR 125; [2008] HCA 36) (Hearne v Street) (Implied Undertaking), which I deal with below; and 4. Payce serving its evidence in the Supreme Court proceedings in breach of the Court timetable and then serving its Final Payment Claim towards the end of the period in which it was entitled to do so, with the result that Council will be unable to complete its evidence until 14 November 2019 after the time for it to respond to any adjudication application, which is expected to be 25 October 2019.
3. As Council states in its reply submissions, at the "heart of the abuse of process" is that Payce has prepared its evidence in the Supreme Court proceedings with the benefit of Council's defence documents and then deployed that same evidence as part of the Final Payment Claim so as to require, either unintentionally or by design, Council to "jam on" and reply to evidence within the five business day period available under the SoP Act.
4. Council submits that having to respond within five business days creates an insurmountable prejudice to it in both an adjudication process and in the Supreme Court proceedings, that cannot be cured by an extension of time to provide its evidence in the Supreme Court proceedings.
5. The prejudice claimed to arise is the risk of inconsistent statements being made by witnesses in the adjudication process and the Supreme Court proceedings. It is also the prejudice from having to continue to prepare for Supreme Court proceedings that will likely be rendered inutile by an adjudication determination and in respect of which Council has already incurred over $45,000 of legal costs.
6. Council argues that Falgat, Rubana and Civil Mining can be distinguished as the parties in those cases were in very different positions to that of Council and Payce. Unlike in Falgat, Rubana and Civil Mining, Council says that in this case, the pleadings are closed, the Supreme Court proceedings are at a stage close to taking a trial date and Payce has deployed its lay and expert evidence from those proceedings in aid of its Final Payment Claim.
7. I accept that the position of the parties in those cases may have been different to the position in this case, although it is difficult to know precisely what they were given the lack of details in some of the reasons. For example, in Rubana, "the parties were working their way through compliance with the directions of the Court to bring the matter to a state of readiness for hearing and concluded" (at [29]), which may have meant the pleadings were closed and the issues known.
8. In any event, it is the principles from those and other cases that are relevant. Those principles are to be applied to the facts of this case in order to determine whether the invocation of an adjudication process under the SoP Act in reliance on the Final Payment Claim by Payce would be an abuse of process.
9. Applying the relevant principles to the facts in this case, I do not consider that Council has demonstrated that allowing Payce to invoke the adjudication procedure would constitute an abuse of process.
10. As noted above, at the heart of Council's abuse of process case is the argument that Payce's conduct, in deploying the Supreme Court proceedings evidence in the SoP Act process, has resulted in Council having only five business days to respond to all of that evidence.
11. Council has been on notice of most (if not all) of the variations claimed by Payce in the Supreme Court proceedings and their value since at least May when the case commenced and, on one view, since the 2018 Adjudication Application when detailed submissions were exchanged in relation to the basis for a valuation of the variations claimed.
12. Payce's evidence in the Supreme Court proceedings was served on Council in tranches over the period from 16 August 2019 to 11 September 2019, giving it up to ten weeks to prepare responsive evidence, not five business days. Presumably, Council would have started preparing its evidence in response as soon as Payce's evidence was received, if it had not already begun to do so knowing the scope and bases of the claimed variations from Schedule A to the List Statement.
13. Even if I were to accept that Council waited to start preparing its evidence in response until receipt of the Final Payment Claim on 19 September 2019, it would still have just over five weeks to prepare its response, not five business days.
14. In those circumstances, the submission that Payce's conduct has led to Council being "jammed" with only five business days to reply to evidence is, in my view, not made out.
15. In any event, the five business day period to respond relates to an adjudication application, which is due to be served today. It is a time frame imposed by the SoP Act not one determined by the parties or dependent on the status of the Supreme Court proceedings.
16. As Payce submits, irrespective of the status of the Supreme Court proceedings, it would have been open to it to prepare the exact same evidence and to lodge it with an adjudication application today, giving Council only five business days to prepare. Instead of doing so, Payce chose to serve its evidence with its Final Payment Claim, giving Council at least five weeks to prepare its evidence in response. Such conduct does not, in my opinion, point to an abuse of process.
17. Council's adjudication response is also, by operation of s 20(2B) of the SoP Act, limited to the reasons raised in its payment schedule dated 3 October 2019. Those reasons did not assess the value of the variations as anything other than Nil, or a very small amount.
18. I accept Payce's submission that there is, therefore, real doubt as to whether it is now open to Council to seek to file detailed evidence valuing those variations as part of its adjudication response in circumstances where it chose not to put on detailed reasons in its payment schedule rejecting the variations claimed or to provide alternate calculations as it did in 2018.
19. I am also not satisfied that Council has shown that allowing Payce to invoke the adjudication process would interfere with the orderly preparation and presentation of its case in a way that suggests some abuse of process, such as that it will suffer some seriously or unfair burden or prejudice in the Supreme Court proceedings.
20. An assertion from a solicitor that there is a risk of inconsistent statements or that it would interfere with the orderly preparation of obtaining evidence of witnesses to be ultimately relied on, is not, in my view sufficient to discharge the onus on Council, nor does it sufficiently explain how such prejudice arises.
21. The risk of inconsistent statements being made in an adjudication response and in evidence in Court proceedings is a likely risk from any concurrent process. It is also a risk that is to be expected to be within the power of Council to manage. For example, it may choose not to adduce sworn evidence in response to the adjudication application and simply make submissions.
22. What Council faces is the "undoubtedly greater burden" from having to contest the SoP Act claim concurrently with preparing for the Supreme Court proceedings: Civil Mining, at [22]. In my view, that is not prejudice of the nature that gives rise to an abuse of process in this case.
23. It is also relevant that Council stated (T12:21-26): "I can't promise it, but we probably would not be here if they had complied with the orders of 28 June. If they had complied with that, they had got their evidence on in time, we would have had our evidence on in time, we wouldn't be facing, we say, this insurmountable prejudice to put our case on in five days"
24. Failure to comply with a timetable to serve evidence in concurrent court proceedings does not, to my mind, render an SoP Act adjudication process an abuse.
25. I accept that the Supreme Court proceedings may be at a stage closer to trial than was the case in Falgat. But a hearing date is yet to be listed. Based on Council's estimate that its evidence will not being ready until 14 November and Payce having four weeks to reply (in accordance with the original timetable), it seems to me that the Supreme Court proceedings will not get on for hearing until early 2020. An adjudication determination should be completed by 8 November 2019.
26. To the extent there is any disruption to the Supreme Court proceedings caused by the SoP Act process, I accept Payce's submission that it could be remedied by an extension to Council's time to provide its evidence.
27. As to the risk that the Supreme Court proceedings may be rendered inutile by an adjudication determination which may result in Council incurring increased or wasted costs, to my mind, that risk is inevitable where there are concurrent SoP Act and court proceedings. It is also a risk for which Council seems to be protected, given it has obtained security for its costs.
28. Council also relies on the decision of Ku-Ring-Gai Council v Ichor Constructions Pty Ltd [2014] NSWSC 1534 (Ichor). It submits that Payce's use of Council's defence documents in aid of the Daubney Report and then relied on in both the Supreme Court proceedings and the SoP Act process, is akin to re-opening and re-agitating an issue and making good identified shortcomings in evidence which could amount to an abuse of process.
29. I do not accept that submission. In contrast to Ichor, there has been no previous decision on the merits of Payce's variation claims. The 2018 Adjudication Determination found that nothing was owing because there was no relevant reference date.
30. I am also not satisfied that Council has demonstrated that Council's defence documents have enabled Payce to make good any shortcomings with its evidence or provided Payce with some significant advantage in the way Council suggests.
31. As noted in [27], Council's defence documents do not respond in any detailed way to the variations referred to in Payce's List Statement. Rather, they raise high level arguments, such as asserting that Payce did not comply with variations procedure under cl 36 of the Fit Out Agreement, in terms consistent with the arguments made previously in Council's 2018 Adjudication Application response and in its recent payment schedule.
32. The paragraphs of the List Response and the particulars to which I was referred by Council support that view. C17(2) raises a general assertion regarding the need for variations due to design flaws in the base build particularly the necessity for acoustic panelling . It is not at all clear how the identification of the need for acoustic panelling was used to Payce's advantage in the Daubney Report in respect of any particular variation valuation.
33. C17(2) also makes a general assertion that Council was not given credits in respect of unspecified variations. Assuming that statement was taken into account by Mr Daubney, it is to Council's advantage, not Payce's.
34. C54, C55 and C56 raise matters relating to cl 36.4 of the Fit Out Agreement, which had been raised by Payce in its List Statement, and had also been in issue in the 2018 Adjudication Application process.
35. In circumstances where Payce has been on notice since 2018 that Council asserts that Payce did not comply with the variations procedure under cl 36 of the Fit Out Agreement and of Council's alternative valuations for the claimed variations, it is very difficult to see how Payce has received some significant advantage from Council's defence documents in the SoP Act process in the way Council submits, or any forensic advantage at all.
36. Council also submits that the Court should draw an inference that Payce commenced the Supreme Court proceedings for a collateral purpose being to use the Court's processes to obtain Council's defence and thereby gain a forensic advantage in the SoP Act process.
37. This inference, Council submits, can be drawn because Payce commenced the Supreme Court proceedings knowing that they would not be completed before the start of the SoP Act process, it delayed the service of its Final Payment Claim having previously obtained Council's defence documents, and then used the defence to prepare evidence which it served in aid of both the Supreme Court proceedings and the SoP Act process in a way that was prejudicial to Council, being served late and in breach of Court orders.
38. Payce submits, and I accept, that the evidence does not support the inference sought to be drawn by Council. Nor does the evidence suggest a desire by Payce to, by design, oppress or prejudice Council in a way that was improper.
39. Payce commenced a statutory process within a time frame created by the Fit Out Agreement concurrent with Supreme Court proceedings commenced some months earlier, which it was entitled to do. I would infer that Payce's purpose in invoking that statutory process was to obtain the benefit of the expeditious nature of an informal adjudication which might provide it with some interim cash but would be without impact on the claims of Payce or Council in the Supreme Court proceedings.
40. I accept the facts show that as part of the Supreme Court proceedings, Payce obtained Council's defence documents, they were provided to Mr Daubney, Payce served its evidence late and that the Daubney Report (and Payce's lay evidence) is relied on as part of the SoP Act process as well as in the Supreme Court proceedings.
41. Those facts are not, in my view, ones that have been left "unexplained" and need further explanation, or indicative of some improper purpose on the part of Payce.
42. As Payce submits, non-compliance with a Court timetable for service of evidence, while not acceptable, occurs with some regularity. Mr Coady's evidence, which I accept and was not challenged, is that there was no intentional breach of the timetable and he took the orders seriously: at, [14] Coady 10 October 2019.
43. There is also nothing improper in seeking to rely on the same evidence in concurrent processes. Mr Coady's evidence is also that it is usual for there to be an overlap between evidence in a SoP Act process and in court proceedings: at [18], Coady 10 October 2019.
44. As to the use of Council's defence documents as part of the Daubney Report in aid of the Final payment Claim, I accept that a breach of the Implied Undertaking may constitute an abuse of process: Perazzoli v BankSA, a division of Westpac Banking Corporation Limited [2017] FCAFC 204; Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283 at [20]; Forty Two International Pty Ltd v Barnes [2010] FCA 397 at [94].
45. I have explained below why I do not consider there was a breach of the Implied Undertaking in this case. If I am wrong about that, I would not conclude that the use in this case amounts to an abuse of process.
46. The evidence suggests that any breach was inadvertent given Payce's lawyer, Mr Coady, was not on notice of the issue until receiving Council's written submission in reply: at [4], Coady 16 October 2019.
47. It is also a situation where the use of Council's defence documents was indirect. By that I mean, Council's defence documents were not themselves used as part of the SoP Act process, rather they were referred to in an appendix in the Daubney Report deployed in that process. It is unclear what use was made of them by Mr Daubney.
48. As noted above, I have also found that Council has not demonstrated that Council's defence documents provided a forensic advantage to Payce in the SoP Act process in the way suggested by counsel.
49. Finally, having not accepted that Council has, as a matter of fact, only five business days to respond to all of Payce's evidence, it follows that I do not accept that an inference should be drawn that Payce's conduct was designed to do so, or to prevent Council from being able to properly protect its position in the adjudication proceedings.

Does service of the Daubney Report as part of the Final Payment Claim breach the Implied Undertaking?

1. At the outset, I note that Council's allegation that Payce may have acted in breach of the Implied Undertaking was raised for the first time in Council's written reply submissions, which were provided to Payce and the Court shortly before the start of the hearing. In those circumstances, I provided the parties time to provide the Court with further written submissions on the issue, which they did on 16 October 2019 and which I have taken into account in these reasons.
2. Payce submits that there has been no breach of the Implied Undertaking as there was nothing improper by providing Council's defence documents to Mr Daubney for the purpose of preparing his expert report in the Supreme Court Proceeding. I agree, as does Council. But the allegation raised by Council is not about the use of Council's defence documents by Mr Daubney in the Supreme Court proceedings.
3. The issue is whether the deployment of the Daubney Report (which was prepared with the benefit of Council's defence documents) as part of Payce's Final Payment Claim was a use of Council's defence documents which gives rise to a past breach of the Implied Undertaking, and whether reliance on the Daubney Report going forward as part of any adjudication process under the SoP Act would also be in breach.
4. The primary position of Payce is that the Implied Undertaking does not apply as it does not extend to pleadings which Payce submits, in this case, includes Council's defence documents. I note that there was no dispute at the hearing that Council's List Response is a pleading for the purposes of determining this issue. Council accepted that its particulars were part of its "pleading": T22:30-43.
5. Payce accepts the law on the question of whether the Implied Undertaking applies to pleadings is not settled and there are conflicting authorities: See eisa Limited v Damien Brady and 2 Ors [2000] NSWSC 929 where, at [21], Santow J says that the Implied Undertaking "may be taken to include pleadings". In contrast, Brereton J in Helicopter Aerial Surveys Pty Ltd v Garry Robertson [2015] NSWSC 2104 (Helicopter Aerial Surveys Pty Ltd), at [35], says that "it has never been the case that pleadings have been regarded as subject to the implied undertaking, nor other evidence served in support of the pleadings, such as the claim book".
6. Out of an abundance of caution, Payce also applies to the Court for a release from the Implied Undertaking for the purposes of using the Daubney Report as part of its SoP Act process.
7. Council contends that the Implied Undertaking applies to Council's defence documents. It relies on the principles from Hearne v Street, arguing that Council was compelled to put on its List Response and particulars by reason of Court orders made in the Supreme Court proceedings on 9 and 31 May 2019. It argues that Payce has used Council's defence documents for a purpose other than for which it was given, being by deploying the Daubney Report in aid of the Final Payment Claim.
8. Council accepts that the Court will need to determine the Implied Undertaking issue if it does not accept its primary submission that an adjudication application would be an abuse of process, but says it need not occur on the present application. Council also submits that the Court should refuse Payce leave to rely on the Daubney Report for the purpose of the SoP Act process as there are no special circumstances which warrant any release from the Implied Undertaking.
9. I accept there have been differing views on the applicability of the Implied Undertaking to pleadings, but I am not persuaded by Council's submissions that Payce has acted in breach of the Implied Undertaking by serving the Final Payment Claim with a copy of the Daubney Report, even accepting that the Daubney Report was prepared having regard to the Council's defence documents.
10. On the question of whether the Implied Undertaking applies to the Council's defence documents, I prefer the view of Brereton J in Helicopter Aerial Surveys Pty Ltd. I also consider it to be more in line with the rationale and approach of the plurality in Hearne v Street, which stated at [96]: "Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits."
11. This is for the following reasons.
12. First, pleadings are, in my view, of a different nature to the species of other documents to which the Implied Undertaking applies. A pleading is a document which a party voluntarily files with the Court and serves on another party to set out the scope of the issues to be determined by the Court. In that sense, pleadings are not produced on compulsion as part of a Court process.
13. Accepting that Council's defence documents were served in accordance with orders made by this Court is not, in my opinion, enough to bring them within the "Harman" principle and subject to the Implied Undertaking. A defendant is not compelled by Court to put forward a defence by filing a list response, or to disclose evidence by way of documents and information at that time. The rules of the Court require a defendant, if it chooses to defend the claim by lodging a list response, to admit or deny the allegations and provide particulars in support.
14. Second, the purpose of the Implied Undertaking is to protect the privacy of the person disclosing (under compulsion) the relevant document and thereby encourage full and frank disclosure during litigation: Gavan v FSS Trustee Corporation [2019] NSWSC 667, British and American Tobacco Services Ltd v Cowell (No 2) (2003) 8 VR 571, at [20]. It is focused on the protection of a party's private documents and the information contained within them, which are obtained during the Court process.
15. Third, pleadings are not, in the words of the High Court, "received into evidence". They are not read onto the record and are not evidence. They communicate the nature of the parties claim and defence, and are the basis on which proceedings are conducted in open court from the start of the court process.
16. Fourth, and as Council seems to accept in its written submissions, the Implied Undertaking would not apply to a list statement as it is not a document which a party to litigation is compelled to produce. I query why, in those circumstances, the Implied Undertaking, which if breached is punishable by conviction for contempt of court, would extend to the pleading filed in response by a defendant.
17. Fifth, extending the Implied Undertaking to pleadings seems to me to be incompatible with the new practice of this Court, which is that access will normally be granted to non-parties in respect of pleadings in proceedings that have not been concluded with leave of a judge or a registrar: Practice Note SC Gen 2 dated 4 October 2019. Accepting that leave is required for access, why should a plaintiff to proceedings by bound by the Implied Undertaking in respect of a defence when it will be normal for non-parties to obtain access with leave and not be bound?
18. Sixth, in eisa Limited v Damien Brady and 2 Ors, Santow J had to consider and determine an application by a media organisation for access to the pleadings on the court file at a time when the practice notice was in different terms. His Honour's references at [21] and [22] to the Implied Undertaking were by analogy, in the context where the media organisation seeking access to the court file had to demonstrate there were exceptional circumstances, akin to the need to show special circumstances if a party is to be released from the Implied Undertaking.
19. With respect to His Honour, the statement (at [21]) that "there is a further principle which applies to documents brought into existence or produced for the purposes of litigation" appears to go beyond the scope of the Harman principle, as accepted by the High Court in Hearne v Street. The Implied Undertaking does not apply to all documents brought into existence for the purposes of litigation. Rather, it applies to documents or information which a party to litigation is compelled to disclose to another party.
20. Other cases referred to by Council in its written submission (Tuquiri v Australian Rugby Union Ltd [2009] NSWSC 781, McLachlan v Brown & Australian Broadcasting Corporation (No 5) [2018] NSWSC 1976) are also less instructive as, like in eisa, they dealt with the question of whether a non-party (the media) could get access to pleadings on the court file under the previous practice note, and not whether the parties to proceedings were bound by an Implied Undertaking.
21. Seventh, and while not determinative, it is, to my mind, relevant that neither the High Court in Hearne v Street nor the commentary in JD Heydon, Cross on Evidence (11th ed, 2017, LexisNexis Australia) (at 913-914) refer to pleadings in the list of documents said to be caught by the Implied Undertaking, although I accept that neither list is exhaustive.
22. In conclusion, although there were orders of the Court for Council to file a List Response and to provide particulars, I am not satisfied that, as "quasi-pleadings", the Council defence documents were documents produced under compulsion or of the type that are subject to the Implied Undertaking. It follows that I have concluded Payce has not breached the Implied Undertaking by serving a copy of the Daubney Report on Council and the Superintendent as part of the Final Payment Claim, and would not be in breach if it were to rely on it as part of the SoP Act process.

Leave to use the Daubney Report in the SoP Act process

1. For these reasons, I do not consider that Payce needs to be released from the Implied Undertaking and granted leave to use Council's defence documents as part of the SoP Act process. If, however, I am wrong to conclude that those documents are not subject to the Implied Undertaking and there has been a breach, I would grant Payce leave to rely on the Daubney Report as part of the adjudication process nunc pro tunc.
2. I accept Payce's submission that the facts demonstrate special circumstances that warrant the Court exercising its discretion to give a release from the Implied Undertaking.
3. The Daubney Report is to be used in a private adjudication involving the parties and an adjudicator. There seems to be no risk the documents will be published more broadly. As noted above, the use is "indirect", as the Daubney Report does not expressly refer to information contained in Council's defence documents but confirms that they were part of the expert brief to him. As noted above, the breach also appears to have been inadvertent. Not granting leave would result in expense and inconvenience to Payce.
4. I do not accept that for Payce to have maintained the position that it has not breached the Implied Undertaking militates against the grant of a release, as Council submits in its written reply submissions. It was open to Payce to have maintained that legal argument.
5. Council also submits that leave to be released from the Implied Undertaking cannot be granted nunc pro tunc, or retrospectively, in respect of the use to date. It did not provide any authority in support of that submission.
6. The Court has the power to make any order in these proceedings, including the grant of leave, on terms as it sees fit and as the nature of the case requires, whether or not a claim for relief extending to that judgment or order is included in any originating process or notice of motion: s 86 Civil Procedure Act 2005 (NSW); r 36.1 Uniform Civil Procedure Rules 2005 (NSW).
7. Other courts have made orders on a nunc pro tunc basis releasing a party from the Implied Undertaking in respect of past breaches: Forty Two International Pty Ltd v Barnes [2010] FCA 397, per Yates J, citing Miller v Scorey [1996] 1 WLR 1122 at 1133-1134; Eckert v National Australia Bank Ltd (unreported, Supreme Court of South Australia, Doyle CJ, 17 April 1997) (at [94]); Polyaire Pty Ltd v K-Aire Pty Ltd and Ors [2011] SASC 176; Corbiere v QPCU Limited [2018] QSC 32.
8. Yates J's decision was upheld on an application for leave to appeal: Barnes v Fortytwo International Pty Ltd [2010] FCAFC 87. The Full Court held that "we are satisfied that his Honour had power to grant leave nunc pro tunc by virtue of s 23 of the Federal Court of Australia Act 1976 (Cth)" (at [12]). The Court further held that it was open to Yates J to exercise this power based on the facts before the Court. Section 23 of the Federal Court of Australia Act 1976 (Cth) is similar in terms to s 86 of the Civil Procedure Act.

Costs

1. The general rule is that costs follow the event unless it appears to the Court that some other order should be made: r 42.1 Uniform Civil Procedure Rules 2005 (NSW).
2. I see no reason other than to apply the general rule and will order that Council pay Payce's costs of the proceedings and will make an order accordingly.
3. If either party considers that some other costs orders should be made, they are to confer with the other parties and, within seven days, notify my Associate that some other costs order is sought, specifying briefly the grounds on which it is sought. They should also provide an agreed timetable so that any remaining issues can be determined on the papers.

Orders

1. For these reasons, I make the following orders: 1. Dismiss the plaintiff's summons filed on 8 October 2019. 2. The plaintiff to pay the defendant's costs of the summons.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 October 2019