Ceerose Pty Ltd v Building Products Australia Pty Ltd

The appeal

It follows from the above that the presiding magistrate construed s 32 in a manner consistent with what I consider to be the correct analysis based on John Holland. The presiding magistrate dismissed the proceedings because his Honour considered that Ceerose's claim of "unjust enrichment" or restitution could not succeed because it was ultimately based on Cemac having received the alleged double payment via a "legitimate contract" with a third party, namely ZVI.
Neither before the Presiding Magistrate nor in this Court was it contended that the Local Court did not have jurisdiction to determine a claim for restitution of the kind made by Ceerose, or that such a claim was not a "matter arising under a construction contract" as referred to in s 32(3). In relation to the latter, in John Holland McDougall J appeared to have accepted a claim for moneys had and received in respect of an alleged total failure of consideration under a construction contract was a matter arising under a construction contract (see John Holland at [32]). In relation to the former, I addressed the jurisdiction of the Local Court to hear and determine restitution claims in Albanis v Eleftheriou [2014] NSWSC 416 ("Albanis").
I am content to proceed on the basis that Ceerose's claim constitutes a "money claim" as defined in s 29A of the Local Court Act 2007 (Albanis at [23]) and is otherwise a "matter arising under a construction contract", namely the contract between Ceerose and Cemac. It follows that, if that claim can be established, the Local Court had power under s 32(3)(b) of the Security of Payment Act to order the repayment of the moneys paid in respect of progress payments 3 to 5 pursuant to the two judgment debts.
Grounds 1 to 6 of the appeal all concern Ceerose's claim for restitution. It is not necessary to recite those grounds as they resolve to the single contention that, as a matter of law, the presiding magistrate's findings of fact required his Honour to uphold Ceerose's restitutionary claim and then compelled the making of an order under s 32(3)(b). Ground 7 of the appeal concerned an alleged failure on the part of the presiding magistrate to set aside the judgments based on the adjudication certificates on the basis that they were an abuse of process. Given that no such contention was expressly raised before the presiding magistrate it is not necessary to consider that contention further.
Counsel for Ceerose on the appeal, Mr Vincent, contended that the presiding magistrate's findings demonstrated that what occurred in this case was an example of so called "double satisfaction" as explained by the following passage from the judgment of Gummow and Hayne JJ, in Baxter v Obacelo Pty Ltd [2001] HCA 66; 205 CLR 635 at [57]-[58] "[57] In Haines v Bendall [(1991) 172 CLR 60 at 63], in the joint judgment of four members of this Court, reference was made to what was identified as the 'universal' rule that a plaintiff cannot recover more than he or she has lost. Their Honours referred to a statement to that effect by Lord Reid in Parry v Cleaver [[1970] AC 1 at [13]]. The principles respecting 'double satisfaction' may be seen as a particular application of that rule. That particular application involves the unconscientious exercise of legal rights. [58] The subject is best illustrated with reference to the treatment by Viscount Simon LC in United Australia Ltd v Barclays Bank Ltd [[1941] AC 1] of the decision of the Court of King's Bench in Morris v Robinson [(1824) 3 B&C 196; [107] ER 706]]. The Lord Chancellor said of that case [United Australia, Limited v Barclays Bank, Limited [1941] AC 1 at 20]: 'There, cargo belonging to the plaintiffs had been improperly sold during the course of a voyage. There were thus two lines of remedy which the plaintiffs could pursue. They first brought an action against the shipowners for breach of their duty as carriers, with a count in trover. They recovered a verdict, but they did not enter up judgment and there had been no actual satisfaction of their claim. Instead, they brought another action against different defendants - namely, an action for conversion against the purchasers who had bought the cargo. It was held by the Court of King's Bench that the former action was no bar, and that the defendants in the second action were liable for their act in purchasing the plaintiff's goods. Bayley J, in giving judgment, observed [Morris v Robinson (1824) 3 B&C 196 at 205-206 [107 ER 706 at 710]]: 'If concurrent actions had been brought, that against the owners could not have barred the other; why then should it have that effect because they have been brought at different times? If indeed the plaintiffs were to recover the full value of the goods in each action, a Court of Equity would interfere to prevent them from having a double satisfaction, but there is nothing in the former action which can, in a Court of Law, prevent the recovery in this.'"
Three matters should be noted about this passage. First, in the passages of Baxter that immediately follow the above their Honours discussed the judgments in Castellan v Electric Power Transmission Pty Ltd (1967) 69 SR (NSW) 159 ("Castellan") which alluded to the differences between common law and equity so far as giving effect to the rule against "double satisfaction" is concerned (see Baxter at [60] to [62]). This distinction is of no real significance to this Court's original jurisdiction since the passage of the Supreme Court Act 1970, but it is of potential significance to proceedings in the Local Court given the limits on that court's jurisdiction. However, it is of no present relevance. The discussion of equity's role by Walsh JA in Castellan at 176 (cited in Baxter at [61]) concerned the power to restrain further enforcement action seeking double satisfaction or double compensation. However in this case, according to the plaintiff, double compensation had in fact been paid, so that an action for moneys had and received being a common law count is available (see Albanis at [26]ff).
Second, the above passage from Baxter, including the reference to Morris v Robinson, concerns the circumstances in which the party seeking recovery from one party has already recovered "damages" or compensation from another party who it also asserts is legally liable for that loss. That is not the circumstance here. As emphasised by the presiding magistrate, the relevant payments made by ZVI were paid under a "legitimate contract" because no doubt ZVI wanted the work completed. Nevertheless, the distinction in this circumstance between the payment from a party who is asserted to be legally liable and one who does so under a "legitimate contract" is irrelevant for present purposes. In Law Society of New South Wales v Glenorcy Pty Ltd [2006] NSWCA 250; 67 NSWLR 169 at [75] Mason P stated as follows: "The rule against double compensation does not involve being captive to the payer's intent or the juridical reason for the payment. Thus, money recoverable under one cause of action from one defendant may be reduced because a third party owing a different legal duty (or none at all) has paid money that is viewed by the law as covering the loss for which compensation is claimed."
Third, given that Ceerose was pursuing a moneys had and received count it seems that the various defences available to a defendant in respect of that count would have been available to Cemac, e.g. change of position. However it is unnecessary to consider this further as no such defence was sought to be relied on.
Ultimately the argument on the appeal resolved to considering whether his Honour's findings were sufficient to support Ceerose's restitutionary claim. Mr Vincent pointed to the finding by his Honour that Cemac and ZVI "intended to provide a price to Cemac which would pick up the amounts still owed by Ceerose" and contended that this amounted to a finding that the payments made to Cemac by ZVI under their contract had that effect. Counsel for Cemac, Ms Wright, submitted that this was only a finding of intention and not as to effect. Mr Vincent also pointed to the finding concerning the scope of the work and in particular that Cemac and ZVI's contract was "expressed in identical language to the scope of the works in the original contract". Ms Wright took the Court to the actual contracts which clarified that the scope of the works in the Cemac and ZVI contract were restricted to only finalising the work that was originally contemplated by the Cemac and Ceerose contract. However, this only makes Ceerose's position that much stronger in that it suggests that the consideration being paid under the Cemac and ZVI contract was not for the work done under that contract but also for the work done previously. In that regard his Honour found that the payments "related in the larger part to work which had already been done before ZVI entered into the contract with Cemac".
It is not necessary to take that further because, regardless of whether the scope of the work under the ZVI and Cemac contract was exactly the same as the Cemac and Ceerose contract or simply involved the finalisation of the work under the latter, the finding that Cemac was to be paid "an amount that would put it in the same position it would have been in if Ceerose had itself paid" progress payments 3, 4 and 5 was sufficient to engage the principles of double satisfaction or double compensation. In the end result Cemac received sums from ZVI that placed it in the same position as it would have been had its contract with Ceerose been performed. Ultimately, by recovering from Ceerose, Cemac was being paid for the same work twice.
Ms Wright pointed to the findings of the presiding magistrate that "ZVI was agreeing to pay for work already done" but not "agreeing to pay on the invoices issued by Cemac to Ceerose for that work", and that the payments "were not payments for the existing work but rather were payments due under the fresh contract with ZVI". Ms Wright contended these findings took the matter outside the principles apposite to double compensation.
However, with respect to the presiding magistrate, all of the passages relied on by Ms Wright were affected by two related legal errors on the part of the presiding magistrate.
The first error was to assume that it was necessary for Ceerose to demonstrate that the payments made by ZVI either were intended to or had the effect of discharging its indebtedness to Cemac. The second error was to assume that there was some necessary inconsistency between Ceerose being able to recover for double satisfaction or double compensation on the one hand and the fact that one limb of the alleged double compensation was payable under a bona fide contract with a third party on the other. It follows from the above passage in Law Society v Glenorcy that it was not necessary for Ceerose to demonstrate either matter. Provided that the payments covered "the loss for which compensation is claimed" that was sufficient. The presiding magistrate's findings of fact meant that the payments made by ZVI to Cemac had that character.
It follows that Ceerose's appeal must succeed and there will be a verdict in its favour. The findings of fact are sufficient to support the claim it sought to make and there was no basis upon which the Local Court could decline to order restitution. I will now hear the parties on the form of the order. [Discussion between the parties about form of orders.]
Having heard the parties, the orders that will be made and which follow from my judgment are as follows: 1. The appeal be allowed. 2. Set aside the judgment entered in the Local Court in proceedings 267990 of 2014 on 20 July 2015 in favour of the defendant. 3. In lieu thereof order: 1. that there be judgment for the plaintiff against the defendant in the sum of $99,981.71 together with interest; 2. the defendant pay the plaintiff's costs of proceedings 267990 of 2014. 1. The defendant to pay the plaintiff's costs of the proceedings in this court.

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