DELMERE HOLDINGS PTY LTD -v- GREEN [2015] WASC 148 (24 April 2015)

1. GC Clause 34(a) of the Contract provides power to the Engineer [Respondent] to alter, amend, omit, reduce, add to or otherwise vary any of the works, and that, the Contractor [Applicant] shall comply with such notice.
2. In considering the applicability of GC Clause 34 of the Contract in this instance, I am required to consider whether the Applicant has been prevented from performing its obligations under the Contract.
3. It is evidently clear from the [refer Schedule M] Contract that the Applicant's Construction Methodology formed the baseline against which, any changes in methodology imposed by the Respondent are to be measured. I note that the full Construction Methodology has failed to be incorporated, however, I consider this to be a clerical error which has inadvertently taken place during copying/binding of the Contract.
4. I refer to correspondence issued by the Applicant on 2 May 2014 [refer file division 10 of the Application] in which, the Applicant offers its tender assumption that the Applicant's pricing was based on clear access to string out the pipes along the pipe line as they arrived on site. The Applicant also notes that additional handling has been required due to limited right of width and lack of track in which to access the work front.
5. Restricted working does not appear to be a consideration in the Contract Specifications nor is there any express requirement for the Applicant to bear the risk of this type of working, and on that basis, I do not consider that the Applicant could have reasonably foreseen the delay events and provided for the inevitable risk of production losses and inefficiencies within its tender submission. This is evidenced by the relatively short [planned] duration of 15 days for HDPE pipeline works under Separable Portion 5 [refer file division 7].
6. Based on the above, and notwithstanding the Applicant's compliance with GC clause 34 of the Contract, I am satisfied that the Respondent required the works to be done differently, and that, the Applicant should be entitled to reasonable remuneration for the change in methodology imposed upon the Applicant.

116 As seen, Mr Green made reference at several points in his reasons to ASIC v Edwards, a first instance decision of Barrett J in the Supreme Court of New South Wales. With respect, that decision appears to have been deployed out of context. As I read ASIC v Edwards, it displays nothing more than a completely orthodox application of well accepted principle, concerning a claim for a quantum meruit payment - a claim pursued outside the parties' contract under the law of quasi contract in that scenario of the absence of a formal (building) contract: see [66] - [68]. The decision says nothing about an implication of a term into that party's contract. The claim in ASIC v Edwards was for a 'reasonable sum', or allowance. That case does not present any scenario of a claim for payment of an amount due under a (construction) contract: see [87] - [88].

117 A quantum meruit claim is clearly not a claim for a liquidated amount falling due under a contract. In law, it is a creature of a very different character. And, of course, as the High Court determined in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, the underlying rationale for such a claim is not 'implied contract' as once thought, but rather lies in the concept of 'unjust enrichment'. That is not this case.

118 Delmere submits Mr Green fell into serious jurisdictional error by proceeding, in effect, on the basis that a 'payment claim' under the parties' construction contract, would include a claim by Alliance seeking unjust enrichment, or a 'right in equity'.

119 There are numerous problems apparent with the lay observations as expressed by Mr Green at this point.

120 First, the concept of unjust enrichment (see Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 (Deane J)) does not provide any stand-alone cause of action capable of being independently sued upon under Australian law. As most recently restated by the High Court in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 307 ALR 512 [74] (Hayne, Crennan, Kiefel, Bell and Keane JJ), by reference to Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498 [30] (French CJ, Crennan and Kiefel JJ) the position is:

More recently, Equuscorp Pty Ltd v Haxton confirmed that unjust enrichment does not found or reflect any 'all-embracing theory of restitutionary rights and remedies' ... As this Court acknowledged in Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 at 673 per Mason CJ, Wilson, Deane, Toohey and Gaudron JJ], 'contemporary legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience'.

121 Authority in support of that proposition under Australian law is overwhelming and extensive: see Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 [70] - [75] (Gummow J); David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 [46] (Mason CJ, Deane, Toohey, Gaudron, and McHugh JJ) and [89] (Dawson J); Pavey & Matthews Pty Ltd v Paul [54] (Deane J); Muschinski v Dodds [49] (Deane J); Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635 [85] (Gummow, Hayne, Crennan and Kiefel JJ); Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269 [85] - [98] (Gummow, Hayne, Heydon, Kiefel and Bell JJ); and in Western Australia specifically, see Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 [45] - [55] (Edelman J); Ideas Plus Investments Ltd v National Australia Bank Ltd [2006] WASCA 215; (2006) 32 WAR 467 [62] - [67] (Steytler P); Saraceni v Mentha [2011] WASC 94 [45] (Corboy J); and ABB Power Generation Ltd v Chapple [2001] WASCA 412; (2001) 25 WAR 158 at [9] - [18] (Murray J).

122 Second, a quantum meruit claim by Alliance for a reasonable amount would only arise, if it did, outside of these parties' construction contract, and not under it, as is required under part 3 of the CC Act, as we have now seen.

123 Third, a claim in quasi contract seeking a quantum meruit is also not a claim to a 'right in equity' - such causes of action are wholly common law claims. Again, some (unspecified) type of equitable claim would not seem to be for an 'amount', arising under the parties' contract.

124 In an attempted rationalisation of what are prima facie highly problematic reasons in this realm by Mr Green, Alliance submits by written submissions at par 28, that Mr Green's reasons in this regard were 'no more than an infelicitous use of language by a nonlegally qualified adjudicator'.

125 To that end, it is argued that his statements, properly construed, are to be understood to mean that Alliance's entitlement to payment actually does arise under the parties' construction contract - that is, Mr Green, it is argued, actually meant to say, better expressed, that Alliance's entitlement to payment arose from an 'implied term' found in the parties' construction contract, pertaining to Alliance's entitlement to reasonable remuneration for any changes to the contract 'methodology' (to be distinguished from the contract 'works') (see Alliance's written submissions at [33] - [35]).

126 It is, in my view, more than extremely difficult to determine what Mr Green actually meant in the passages I have quoted above. Even allowing for the fact that Mr Green is not legally qualified, the incoherent conclusions he expresses with respect to 'unjust enrichment' and a 'right in equity', with regard to the peculiar circumstances of this application, are simply not possible, I conclude, to reconcile with the current state of Australian law. Ground 1 must be upheld on that basis alone.

127 I turn to Alliance's submission that Mr Green somehow concluded that a term ought be implied ad hoc, into this elaborate construction contract, as to some estimated level of reasonable remuneration for Alliance - arising from its exposure to an altered work schedule and then claimed in VC17 - which, as we have seen, was originally labelled as the document under which Alliance's variation claim began, under GC 34(d).

128 It would be in my view exceedingly difficult, in these parties' elaborately crafted contractual context, to find such an ad hoc implied term, as it is contended by rationalisation, that the adjudicator found. Any such implied term would need to meet all the wellknown criteria, as set out by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337, 347 (Mason J):

(1) [the term] must be reasonable and equitable;

(2) [the term] must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(3) [the term] must be so obvious that 'it goes without saying';

(4) [the term] must be capable of clear expression; and

(5) [the term] must not contradict any express terms of the contract.

129 As now seen, there are, of course, elaborate express contractual provisions with respect to the making of payment claims (GC 39), a provision providing for variations to the works (GC 34), a sole remedy EOT clause (GC 37(e)) with respect to breach or delay on the part of Delmere, and an entire agreement clause (GC 3(c)).

130 Given all that, how could any such term for a 'reasonable remuneration' for extra expense suffered by Alliance by having its methodology of performing works under the Contract inhibited be found? Mr Green did not say. The contended implied term for a 'reasonable remuneration', would seem at minimum to contradict express payment terms of the Contract - violating the fifth of the Codelfa requirements.

131 Of course, Mr Green never attempted any level of analysis in his reasons to find in the parties' Contract such an ad hoc implied term - other than referring to ASIC v Edwards.

132 Even taking the kindest possible approach to Mr Green's reasons above, he would have inexplicably, and therefore unreasonably, reached a conclusion (on Alliance's attempted rationalisation of his reasons), that an ad hoc implied term existed in the parties' Contract to allow a 'reasonable remuneration' payment to Alliance.

133 It also presents to me as fundamentally wrong that an implied term solution (if that is what happened) could be derived, as some sort of estimated figure - rather than determining a precise 'amount' due under the contract. Any notion of, in effect, a quick 'stab' at something as an amount roughly reasonable to Alliance, to be sorted out later if there is any issue, is conceptually incompatible with the concept of a 'payment claim' for an amount (of money) due and payable under a construction contract. The CC Act may seek as a matter of policy to deliver a swift and simple remedy to parties under construction contracts who are wrongly kept out of funds due to them. But the CC Act only provides relief for amounts arising under the parties' contract - not for the allowing of idiosyncratic, general fairness claims rendered at large. The CC Act is not an unfair contract terms statute designed to strike down perceived unfair bargains or to deliver 'palm tree' justice.

135 I would quash Mr Green's Determination on that basis as well, if necessary.

136 Ground 5(a) of the application contends that there was a failure to have regard to the contents not only of the application, but of Delmere's response (see s 31(1)(a)) where the response complies with the requirements of s 27(1)(c) of the CC Act.

137 The same issues concerning error, by Mr Green wholly ignoring the force of Inv 024, arise under this alternative formulation. If Inv 024 had been looked at, the application ought to have been dismissed, without proceeding to a consideration of its merits. Given what I have already said about the significance of Inv 024 in its conjoined context with grounds 2 to 4, I do not address its stand-alone significance any further, other than to say that there would be a significant denial to Delmere of procedural fairness by Mr Green's peremptory refusal to even consider it as a clearly relevant document properly put before him by Delmere.

138 There were further merits arguments advanced under ground 5(b) concerning the nature of the delay to the progress of the works being due to Alliance's own conduct, and not the fault of Delmere, by reason of Alliance failing to mobilise sufficient resources to site (Affidavit page 25) and to retain labour at site (Affidavit pages 25 - 26). Also asserted was Alliance failing to supply a polyweld machine (Affidavit page 25) and that limitations on access to site were not attributable to Delmere by reason of the force of cl 2.2.1 of the specification and GC 2 (a), (b), (c), (d) and (e) (Affidavit pages 26 - 27). These arguments, it is put, were not dealt with by Mr Green. Consequently, it is said that there was jurisdictional error in not even addressing them when they were properly advanced.

139 It is not necessary to finally determine those ground 5(b) issues given my findings above concerning ground 5(a) and the failure to consider Inv 024. Accordingly, I do not propose to deal any further with ground 5(b).

140 Ground 6 raised an alternative natural justice related challenge. It contends for the general failure to afford procedural fairness. There is no challenge to the existence of that duty: see the criteria in Hamersley Iron. The essence of the grievance is Mr Green's expressed conclusion that GC 37(e) was unenforceable (Determination at [87]). This led Mr Green to decline to proceed on the basis that the clause 'could be seen' to be 'an act of prevention'. The grievance of Delmere is that Mr Green's conclusion as to unenforceability was not then live, in order to fairly allow Delmere to put a response to it to Mr Green. If it had been, Delmere argues it would have contended that the prevention principle as explained by the Court of Appeal in Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd [No 2] [2012] WASCA 53; (2012) 287 ALR 360 [48] - [63] (McLure P) did not apply in the present case. This was because there was a sole remedy clause; alternatively, there was an EOT clause which permitted an extension of time in respect of default by the principal, referring to Hudson's Building and Engineering Contracts (12th ed, 2010) 6-030. The contention of Delmere is that a sole remedy clause or a 'no damage for delay' clause such as that identified under GC 37(e) is enforceable albeit strictly construed, referring again to Hudson at 6-084 and the text Pickavance: Delay and Disruption in Construction Contracts (3rd ed, 2005) [18.234] - [18.250]. It is contended that there was no justification in law for the approach of the adjudicator and, more fundamentally, that Delmere was not afforded proper procedural fairness, by being denied any opportunity to address such arguments - as they were never suggested as being live in the materials put to Mr Green as such argument could not have been reasonably anticipated by Delmere as a basis for Mr Green ultimately to decline to enforce GC 37(e) since that issue had not been raised by Alliance.

141 The argument raises a somewhat complex underlying factual analysis of the underlying materials and arguments put to Mr Green. Alliance says that the issue was raised and should have been predicted by Delmere. I am not sufficiently persuaded that Delmere has made out a clear enough instance of a denial to it of procedural fairness, given the underlying clash of perspectives.

142 Given my findings with regard to Grounds 1, 2, 3, and 4 above it is not necessary to resolve Ground 5 or Ground 6.

143 Accordingly, upon Grounds 1 to 4 being established, with fundamental jurisdictional errors having been demonstrated, I would issue orders absolute for certiorari quashing Mr Green's Determination in adjudication application 80751.

144 Correlatively, the application by Alliance in CIV 2758 of 2014 to register for the purposes of enforcement Mr Green's Determination must be dismissed. Moreover, even had I found myself, upon Alliance's review submission, inhibited from quashing the adjudicator's Determination, the various problematic considerations emerging out of my consideration of Grounds 1 to 4, would almost certainly have led me to stay Alliance's application for leave to enforce. I would have granted a stay on a basis of my satisfaction to a standard of an almost certainty that Delmere would have later overturned the Determination of Mr Green under a substantive litigation, or arbitration of those issues.

145 Delmere, as the successful party on the application, both in quashing Mr Green's Determination and in resisting the correlative application to register and enforce that Determination as a judgment of this court, should, prima facie, receive its taxed costs upon both applications.

146 The parties should now confer with a view to the applicant's solicitors filing a minute of proposed orders to give effect to these reasons within 14 days. To the extent that orders cannot be agreed, I will determine any residual disputation on the papers.