Grounds 1 and 2: Was PC 36 supported by an available reference date?
45 Ground 1 in the Amended Statement of Claim is that PC 36 was invalid as, contrary to the Determination, there was no reference date of 28 July 2023. Ground 2 is that PC 36 was invalid because of s 15(5) of the Act, in that the only available reference date was 2 May 2023, which had already been used for PC 35.
46 The existence of a reference date under a construction contract within the meaning of s 10(1) is a precondition to the making of a valid payment claim under s 15(1): Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52; (2016) 260 CLR 340 at [61] (Kiefel, Bell, Gageler, Keane and Gordon JJ), a decision on the New South Wales (NSW) counterpart to the Act which was in substantially similar terms. The High Court said that it was not inappropriate to describe the existence of a reference date to support a payment claim as a "jurisdictional fact", treating "jurisdictional fact" as a label for a criterion, satisfaction of which enlivens the power of a decision-maker: [47]. The High Court added that the terminology serves to emphasise that the existence or non-existence of a reference date is not within the jurisdiction of the adjudicator to determine: [47].
47 The Determination was in relation to the payment claim by way of PC 36, there having been no adjudication application by Core in relation to PC 35. The Adjudicator determined that a valid and available reference date arose on 28 July 2023, being a date "during the course of the Works", and PC 36 was referable to that reference date: Determination at [23], [40], [44]-[46], and [51]. In the Kashmir Judgment at [32], I noted that on a literal construction of para (a) of Schedule 2, read in isolation, the monthly Progress Claims would continue during the course of the Works, and "Works" are defined expansively in a way which includes the rectification of Defects, including those of a minor nature or which do not prevent the Works from being used for their intended purpose, even though Defects of that kind would not have prevented Practical Completion from occurring. However, in the context of Schedule 2 as a whole (noting that although Schedule 2 of the Kashmir Contract referred to "Completion" while Schedule 2 to the Mulberry Contract refers to "Practical Completion", those terms are defined to have the same meaning in each contract), I expressed the view that para (a) of Schedule 2 should be construed harmoniously with para (b), such that the monthly Progress Claims under para (a) can no longer be submitted after the Date of Practical Completion of the Works has triggered the Practical Completion Progress Claim under para (b). In the present proceedings, neither party submitted that the harmonious construction which I preferred was wrong, and I remain of the view that it is the proper construction of Schedule 2. It follows that the monthly Progress Claims under Schedule 2(a) could not be submitted after 2 May 2022, being the Date of Practical Completion when the Certificate of Practical Completion was issued for the Works. I consider separately below, and reject, the arguments by Core that: (1) there was a Separable Part of the Works which qualifies that conclusion; or (2) Dickson is estopped from denying that Schedule 2(a) continued to operate after the Date of Practical Completion. The upshot is that the Adjudicator erred in finding that 28 July 2023 was a valid and available reference date for the purpose of seeking to support PC 36 as a monthly Progress Claim under Schedule 2(a). Dickson submits that even if a reference date other than 28 July 2023 was valid and available, it was sufficient to render the adjudicator's determination void for jurisdictional error that the adjudicator addressed PC-36 on the basis of a reference date which was not available, relying on Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 at [46] and [48] (Gleeson JA, with whom Meagher and Payne JJA agreed). It is not necessary for me to decide that issue, as I am also satisfied, for the reasons which follow, that there was no available reference date at all which could support the claim in PC 36.
48 After the Date of Practical Completion of the Works, Schedule 2 refers to two available reference dates. Schedule 2(b) permits the Builder to submit a Progress Claim within 10 Business Days after the Date of Practical Completion of the Works, or as otherwise agreed between the parties. Schedule 2(c) then permits a Final Payment Claim (if any) to be made within 10 Business Days after the expiry of the last Defects Liability Period, which I have explained above expired 12 months after the issue of the Certificate of Practical Completion of the Works, namely on 2 May 2023.
49 Section 10(1) of the Act entitles a builder to a payment "On and from each reference date under a construction contract". Section 15(4) then provides that a payment claim may be given only before the later of (a) the end of the period worked out under the construction contract; and (b) the end of the period of 12 months after the construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied. Section 15(4) thus permitted Core to give Dickson a payment claim within 12 months of 2 May 2023, the date of 2 May 2023 being the expiry of the last Defects Liability Period and thus the last date on which "the construction work to which the claim relates" could have been carried out for the purposes of s 15(4)(b). Both PC 35 (issued on 26 July 2023) and PC 36 (issued on 23 August 2023) fell comfortably within that 12-month period commencing 2 May 2023.
50 Dickson submits that the reference date referred to in Schedule 2(c) was used when Core gave Dickson PC 35. Dickson refers to s 15(5), which provides that a claimant must not give more than one payment claim for each reference date under the construction contract, and submits that PC 36 was invalid because the reference date in Schedule 2(c) had already been used in giving PC 35.
51 Core submits that PC 36 was supported by a valid reference date on at least one of the following three bases. First, Core submits that the Mulberry Project had a Separable Part which continued after Practical Completion of the main works, such that Schedule 2(a) continued to provide reference dates on the 28th day of each month (and, in the event that it did not, the default date provided under s 10(3)(b) of the Act was available). Second, in the alternative to the Schedule 2(a) date, Core submits that the date of 2 May 2023 remained available for PC 36, despite PC 35. Third, Core submits that Dickson is estopped by way of conventional estoppel from contending that Schedule 2(a) ceased providing reference dates after Practical Completion. I will deal with each of those three arguments in turn.
52 As to the submission based on the existence of a "Separable Part" of the Works, Core accepts as a general proposition that Schedule 2(a) of the Contract applies only up to the Date of Practical Completion of the Works. However, Core relies on cl 47.3(b) of the Contract, which provides that where a part of the Works is to be a "Separable Part", then "for all purposes the provisions of this Agreement apply to that Separable Part as if it were the only work included in the Works". Core submits that, if cl 47.3(b) is engaged, the effect is that Schedule 2(a) continues to apply until the Date of Practical Completion of all of the Separable Parts (or alternatively, until the Date of Practical Completion of all the Works).
53 Core then submits that cl 47.3(b) was engaged under the Contract, as the Works under the Contract included not only the design and construction of the Mulberry apartments, but also the EDP Works, involving the relocation or installation of various services such as stormwater, water mains and sewerage. Core refers to its claim made on 10 August 2021 for an extension of time due to a redesign of stormwater services that were part of the EDP Works, and the response by the Superintendent on 12 August 2021 whereby he instructed Core that those parts of the EDP Works were not required to achieve Practical Completion. Core submits that the 12 August 2021 email created a Separable Part comprising the stormwater installation part of the EDP Works and a Separable Part comprising the balance of the Works. Alternatively, Core submits that the email of 12 August 2021 at least created a Separable Part comprising the balance of the Works. Core submits that the Superintendent confirmed that to be the case by an email of 14 February 2022 which stated that the relevant stormwater services "will not be an issue due to the works been [sic] a separate stage". Alternatively, Core submits that the email of 12 August 2021 and the conduct of Core in carrying out the Works on that basis and not pursuing its extension of time claim gives rise to the inference of a variation to the Contract to create such Separable Parts (or Dickson is estopped from denying the creation of such Separable Parts). Core submits that the Certificate of Practical Completion of 2 May 2022 should be construed as having been issued in respect of the balance of the Works, and not the EDP Works nor the whole of the Works, in that the EDP Works were not complete at that stage and the list of incomplete or defective works on the certificate did not refer to the EDP Works. The consequence, Core submits, is that the Date for Practical Completion of all of the Separable Parts has not occurred (or alternatively the Date for Practical Completion of all the Works has not occurred), such that Schedule 2(a) continues to apply. Therefore, Core submits, 28 July 2023 was an available reference date to support PC 36.
54 Alternatively, Core submits that if Schedule 2(a) no longer provides reference dates after 2 May 2022, and the time for the Progress Claims in Schedule 2(b) and (c) has passed, then the Contract no longer provides reference dates for the separate works under the contract. In those circumstances, Core relies upon the default date contemplated by s 10(3)(b) of the Act, namely the last day of the calendar month in which construction work was first carried out under the Contract and the last day of each subsequent named month. On that basis, Core submits that, from at least 31 May 2023, and each subsequent calendar month, there were available reference dates to which PC 36 can attach.
55 There are several fundamental flaws in Core's argument. First, the Certificate of Practical Completion must state "the date on which the Works or a Separable Part achieved Practical Completion": cl 46.4(a). Similarly, cl 47.4(a) requires that Dickson may not occupy a Separable Part before Practical Completion of the Part of the Works without, relevantly, the issue of a Certificate of Practical Completion for the Separable Part by Dickson. In the present case, the Certificate of Practical Completion issued on 2 May 2022 was clearly for the whole of the Works. It expressly stated that it was for "the whole of the works" in the second paragraph under the heading "Practical Completion", having already referred to the terms of cl 46.4 requiring the Certificate to state the date on which "the Works or a Separable Part achieved Practical Completion". And as Core itself submits, the Certificate of Practical Completion did not make any separate reference to the EDP Works or any part of them in the list of incomplete or defective work. In those circumstances, the Certificate of Practical Completion cannot be construed as relating to a Separable Part of the Works.
56 Second, Dickson submits, and I accept, that in order for there to be a Separable Part of the Works, there are a number of preconditions which must be satisfied:
(a) the works must be capable of occupation prior to Practical Completion as a separate part: see the definition of "Separable Part" in cl 1.1, and the terms of cl 47.1;
(b) before the Developer has a right to occupy any Separable Part, the parties must confer to identify and agree precisely the part of the Works to be treated as a Separable Part: cl 47.3(a);
(c) the Developer may not occupy a Separable Part before Practical Completion of that part of the Works without the prior written consent of the Builder and a Certificate of Practical Completion being issued for that Separable Part: cl 47.4(a) (and the grant of a Certificate of Practical Completion of a Separable Part is subject to the same requirements as the grant of a Certificate of Practical Completion for the whole of the Works: cll 46.1, 46.2(b), 46.3(a) and (b), 46.4, and 46.6);
(d) the Developer must provide the Builder with evidence of insurance for the Separable Part and must indemnify the Builder arising out of its occupation of the Separable Part: cl 47.5.
As Dickson submits, these clauses make it plain that the existence of a Separable Part under the Contract is not a matter which is to be inferred or implied, or which can arise informally. Rather, there is a prescribed set of contractual preconditions which needed to be followed before part of the Works could become a Separable Part. In particular, the evidence in the present case does not reveal the kind of precise identification of and agreement on the part of the Works to be treated as a Separable Part required by cl 47.3(a). Further, the parties could not have contemplated that any aspect of the EDP Works which was not complete as at 2 May 2022 would be such a Separable Part, as those incomplete works could not have been used prior to the issue of the Certificate of Practical Completion on 2 May 2022, and could only have been used at a subsequent time. That is confirmed by Core's claim for an extension of time, which on Core's own case was antecedent to the creation of any Separable Part. Any argument as to the existence of a Separable Part could therefore only relate to the balance of the Works, but there was no identification and agreement as to what that would comprise. On the contrary, the Certificate of Practical Completion, as I have said above, was issued in respect of the whole of the Works.
57 Third, Dickson submits, and I accept, that the proper characterisation of the facts is that on 12 August 2021, the Superintendent waived the requirement as to the relevant part of the Works comprised in the EDP Works having to be completed in order to achieve Practical Completion. The use in correspondence on 14 February 2022 of the colloquial expression "separate stage" was a convenient description of the operation of that waiver, as too was the expression "Separate Works" (rather than "Separable Part") as used by Core in PC 35 and PC 36.
58 Core submitted that it was put at a significant disadvantage by reason of Dickson adopting that position, in that Core would not be entitled to make Progress Claims under Schedule 2(a) in relation to the incomplete aspects of the EDP Works unless there were a Separable Part of the Works. However, there was a substantial advantage to Core in the arrangement recorded on 12 August 2021, in that the issue of the Certificate of Practical Completion on 2 May 2022, despite the EDP Works being incomplete, confirmed that Practical Completion had been achieved under the Contract. The period for Dickson's liquidated damages claim was thereby limited to 175 days, that being the number of days between the extended Date for Practical Completion of 9 November 2021 and the actual Date of Practical Completion of 2 May 2022, rather than extending to the date when the EDP Works were all completed.
59 For the same reasons, I do not regard the email of 12 August 2021 and the conduct of Core in carrying out the Works on that basis and not pursuing its extension of time claim as giving rise to any inference of a variation to the Contract to create such Separable Parts. In addition, the communications between the parties do not evince any intention to enter into any varied or new contract. Even as late as 5 September 2023, Core was requesting a new contract relating to the incomplete Works, which the Superintendent refused on 11 September 2023, saying that the existing contract would be utilised until Final Completion was achieved. Further, in the absence of any express discussion between the parties of Separable Parts as such, I cannot see how Dickson could be estopped from denying the creation of such Separable Parts.
60 There was some debate before me as to the meaning of the word "capable" in the definition of "Separable Part"; that is, "any part of the Works capable of occupation and use prior to Practical Completion of the whole of the Works". Core submitted that, because the EDP Works were off-site, they were inherently capable of use prior to Practical Completion of the Mulberry building itself. In my view, however, the use of the word "capable" in that definition is not a reference merely to what may be theoretically possible at the outset of the Contract by reason of the nature of the Works, but requires focus on what is actually feasible given the facts which have arisen as at the time when the parties are to confer in order to identify and agree precisely the part of the Works to be treated as a Separable Part. The fundamental purpose of cl 47, dealing with a Separable Part, is to enable the Developer to occupy (and thereby use) any Separable Part before Practical Completion of the Works as a whole. That purpose makes practical sense only in a context where it is actually feasible in the particular circumstances for such a Separable Part to be occupied and used, not merely where that may have been conceptually possible at the outset of the Contract.
61 Further, in my view there is no room for the operation of the default date contemplated by s 10(3)(b) of the Act. As I have said above, Schedule 2(a) did not provide reference dates after 2 May 2022, but Schedule 2(c) allowed for a claim for a Progress Claim to be made within 10 Business Days of 2 May 2023, and s 15(4) of the Act allowed for a further period of 12 months from 2 May 2023. The claims made in PC 35 and PC 36 fell within that period. There was no lacuna which called for the operation of the default date under s 10(3)(b) of the Act.
62 Turning then to Core's second line of argument, that the date of 2 May 2023 remained available for PC 36, despite PC 35, Core submits that PC 35 was not a valid payment claim that used 2 May 2023 as the reference date, and thus 2 May 2023 remained available as the reference date for PC 36. Core points out that, in the covering letter that accompanied PC 35, it was stated that PC 35 was a progress claim for work undertaken up to 26 July 2023, whereas in the covering letter for PC 36, it was stated that PC 36 was a progress claim for work undertaken up to 28 July 2023. Core refers to the statements in PC 35 to Final Completion having been achieved on 2 May 2023, and that there were Separate Works continuing, and submits that it should be inferred that the claim was made on the basis that Schedule 2(a) still applied because of the ongoing Separate Works (the reference to 26 July 2023 being said to be an obvious mistake which should have been 28 July 2023). Core submits that there is nothing in the letter or accompanying documents to suggest that PC 35 was the Final Payment Claim contemplated by Schedule 2(c). Core further submits that Dickson's payment schedule served in response to PC 35 indicated that Dickson did not understand PC 35 to be the Final Payment Claim, but rather understood that PC 35 was premised upon a Schedule 2(a) reference date because the point was taken that the payment claim was based on 26 July 2023 and not the 28th day of the month and was therefore invalid. Core submits that there was no entitlement under Schedule 2(a), nor under s 10(3)(b) of the Act, to have 26 July 2023 as a reference date, and therefore PC 35 was not a valid payment claim and could not have used up what Dickson submits was the last reference date under the contract, being 2 May 2023. Core submits that that left the last reference date available for PC 36.
63 The fundamental flaw in that line of argument is that the existence of a valid reference date for a payment claim is an objective matter, not one which depends on the subjective understanding, belief or intention of either of the parties. There is not even a requirement in s 15 of the Act that the payment claim must nominate the reference date to which it refers. The reference date is simply a date stated in, or worked out under, the contract as the date when a claim for a progress payment is to be made within the meaning of s 10(3)(a), unless the default provision in s 10(3)(b) applies (which it does not in the present case). The reference date is a date set by contractual force as a date for making a contractual claim to be paid the whole or part of the contracted amount: Southern Han at [70]. The existence of a reference date under a construction contract is a precondition to the making of a valid payment claim: Southern Han at [61]. In other words, the existence of a valid reference date is an objective fact to be found by the Court where necessary: Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 at [43] (Gleeson JA, with whom Meagher and Payne JJA agreed).
64 As a matter of objective legal entitlement, Core was entitled to submit a payment claim "on and from" (to use the language of s 10(1) of the Act) the expiry of the last Defects Liability Period under Schedule 2(c)). That claim had to be made within the 12-month period imposed by s 15(4). The fact that the claim was submitted on 26 July 2023, rather than 28 July 2023, was irrelevant. Similarly, the fact that PC 35 (and for that matter PC 36) was not described as a Final Payment Claim under cl 17.13 is irrelevant to a determination of the jurisdictional fact of the existence of the Schedule 2(c) reference date for the purposes of the Act.
65 It follows that PC 35 was validly supported by the reference date in Schedule 2(c), being 2 May 2023, and was made within the 12-month period imposed by s 15(4) of the Act. The reference date in Schedule 2(c) was therefore used by PC 35. The important consequence is that s 15(5) of the Act precluded Core from making the claim in PC 36, since the only available reference date under the construction contract for PC 36 had already been used by PC 35. The effect of s 15(5), being the counterpart to s 13(5) in the corresponding NSW legislation, is that a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment claim under the Act and does not attract the recovery regime under the Act: Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; (2009) 74 NSWLR 190 at [14] (Allsop P), cited with approval in Southern Han at [62].
66 As to the claim based on conventional estoppel, Core relies on the statement of principle of Brereton J in Moratic Pty Ltd v Gordon [2007] NSWSC 5 at [32]:
In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff …
See to the same effect Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300 at [83] (Brereton J).
67 Core submits that Core and Dickson conducted themselves, at least up until the response filed in the adjudication concerning PC 36, on the basis that Schedule 2(a) continued to operate such that, despite Practical Completion, Core had a right to ongoing monthly progress payments for the separate works relating to the EDP Works, in that, according to Core's submission:
(a) PC 34 was served in relation to a reference date of 28 March 2023 and did not purport to be a Final Payment Claim. Core submits that, although Dickson did not issue a payment schedule in response, it has not contended that PC 34 was invalid by reason of it being submitted in relation to that reference date, and has instead expressly agreed to make payment pursuant to it;
(b) PC 35 was served, albeit with the mistake in the date, on the basis that Schedule 2(a) continued to operate;
(c) Dickson's payment schedule in response to PC 35 took the point that the claim had to be made on the 28th day of the month (and did not deny that Schedule 2(a) continued to apply); and
(d) PC 36 adopted the Schedule 2(a) date.
Core submits that, if Dickson were allowed to resile from that position and contend now that Schedule 2(a) no longer operates, Core would suffer the detriment of not having progressed the extension of time claim, or the completion of the incomplete aspects of the EDP Works, so as to be able to claim progress payments for them before the issue of a Certificate of Practical Completion (Mr Staniland's affidavit at [28]), and of having foregone the opportunity to negotiate for such a right after the issue of that certificate (Mr Staniland's affidavit at [56]). Accordingly, Core submits that Dickson should be estopped from denying that 28 July 2023 was a valid reference date in these proceedings.
68 In my view, no such conventional estoppel arose. While I accept that Core adopted the assumption that it was entitled to make progress claims pursuant to Schedule 2(a) even after the Certificate of Practical Completion had been issued, it has failed to establish that Dickson adopted the same assumption. As to PC 34, Dickson did not make any response to that claim for more than six months, and even then Dickson did not accept the legal validity of the claim but decided (for whatever reason) to pay the claim in any event, and in doing so reserved the right to claim repayment. As to PC 35, Dickson expressly stated that it was not a valid claim pursuant to the Act because it was not made in relation to a valid reference date (para 3.1 of the Superintendent's letter of 4 August 2023). That letter did not engage in any detailed analysis as to why Dickson advanced that proposition, but the generality with which the proposition was expressed was wide enough to include the contention that Schedule 2(a) was not available after the issue of the Certificate of Practical Completion. The Superintendent's letter of 4 August 2023 did refer to the Progress Claim Date being the 28th of each month, whereas PC 35 was issued on 26 July 2023 and not on the Progress Claim Date, but that proposition was only advanced in support of the different contention that PC 35 was not delivered as required by cl 17.3. The letter did not state or indicate that that was the basis on which the separate argument was made that PC 35 was not a valid claim at law pursuant to the Act because it was not made in relation to a valid reference date. Dickson's reasoning on cl 17.3, including its reference to the 28th of each month, may well have been in the alternative to its position on whether there was a valid reference date. Hence, no relevant assumption can be inferred from Dickson's response to PC 35. The same reasoning applies to the response on behalf of Dickson to PC 36, and in that context the conclusion is fortified by the fact that the adjudication response by Dickson expressly contended that the reference dates provided for Practical Completion and Final Completion were intended to be exhaustive reference dates following completion of the Works, and reference dates no longer accrued on the 28th day of each month after the date of Practical Completion or after the end of the Defects Liability Period (at [40]). There is no evidence that Core contended that such an argument would contravene s 22(4) of the Act, which prevents the respondent from including in the adjudication response any reasons for withholding payment which have not already been included in the payment schedule provided to the claimant. The lack of any such contention reinforces the conclusion as to the width of para 3.1 of the Superintendent's letter of 5 September 2023, responding to PC 36, and saying (in the same way as had been done on 4 August 2023 in relation to PC 35) that PC 36 was not made in relation to a valid reference date.