Gambaro Pty Ltd as Trustee for the Gambaro Holdings Trust v Rohrig
[2015] QCA 288
Court of Appeal (Qld)|2015-12-18|Before: Fraser and Morrison JJA and Boddice J, Separate reasons for judgment of, each member of the Court, each concurring as to the orders made
Fraser and Morrison JJA and Boddice J, Separate reasons for judgment of, each member of the Court, each concurring as to the orders made
Catchwords
CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS –
REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO
AND RECOVERY OF
PROGRESS PAYMENTS – OTHER MATTERS – where the contractor served a
Source
Original judgment source is linked above.
Catchwords
CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS –REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TOAND RECOVERY OFPROGRESS PAYMENTS – OTHER MATTERS – where the contractor served apayment claim pursuant to the Building and Construction Industry PaymentsAct 2004 (Qld) – where the principal only paid a portion of the claim– where an adjudicator appointed under BCIPA subsequentlymade anadjudication decision that the amount to be paid by the principal to thecontractor was greater than what had been paid –where the principal paidthis amount – where the principal commenced proceedings for a declarationthat it was not liable forthis amount and an order for restitution of thedifference – where the principal argued that because the adjudicatedamountexceeded the total of the amounts assessed by the superintendent in priorprogress certificates it was unjust for the contractorto retain the excess
– where the object of BCIPA is to ensure that building contractors are
entitled to receive and recover
progress payments – where ss 99 and 100 of
BCIPA prohibit the contracting out of the provisions of BCIPA – where
BCIPA
contemplates that a statutory payment might differ from the contractual
payment – whether the object of BCIPA was exhausted
upon the payment of
the adjudicated amount by the principal – whether the contractor was
liable to repay the adjudicated amount
Building and Construction Industry Payments Act 2004 (Qld), s 7, s
8, ss 12-16, ss 17-35, s 99, s 100
Beckhaus Civil Pty Ltd v Brewarrina Council [2002] NSWSC 960,
& Or v Allstate Access (Australia) Pty Ltd & Ors [2014] QSC 223,
considered
Eco Steel Homes Pty Ltd v Hippo’s Concreting Pty
Ltd & Ors [2014] QSC 135, cited
Fabtech Australia Pty Ltd v Laing
O’Rourke Australia Construction Pty Ltd [2015] FCA 1371,
cited
Falgat Constructions Pty Ltd v Equity Australia Corporation
Pty Ltd (2005) 62 NSWLR 385
[2005] NSWCA 49, considered
Gambaro Pty
Ltd v Rohrig (Qld) Pty Ltd [2015] QSC 170, related
Hervey Bay (JV) Pty
Ltd v Civil Mining and Construction Pty Ltd & Ors [2008] QSC 58,
considered
John Goss Projects Pty Ltd v Leighton Contractors Pty Ltd
(2006) 66 NSWLR 707
[2006] NSWSC 798, cited
John Holland Pty Ltd v
Roads and Traffic Authority of NSW [2007] NSWCA 19,
followed
Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty
Ltd [2009] QCA
329, cited
Patterson Building Group Pty Ltd v Holroyd City
Council [2013] NSWSC 1484, cited
Paynter Dickson Constructions Pty Ltd
v JF & CJ Tilston Pty Ltd [2003] NSWSC 869, cited
R J Neller
Building Pty Ltd v Ainsworth [2009] 1 Qd R 390
[2008] QCA
397, cited
Roseville Bridge Mariner Pty Ltd v Bellingham Marine
Australia Pty Ltd [2009] NSWSC 320, considered
Judgment (86 paragraphs)
[1]
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - OTHER MATTERS - where the contractor served a payment claim pursuant to the Building and Construction Industry Payments Act 2004 (Qld) - where the principal only paid a portion of the claim - where an adjudicator appointed under BCIPA subsequently made an adjudication decision that the amount to be paid by the principal to the contractor was greater than what had been paid - where the principal paid this amount - where the principal commenced proceedings for a declaration that it was not liable for this amount and an order for restitution of the difference - where the principal argued that because the adjudicated amount exceeded the total of the amounts assessed by the superintendent in prior progress certificates it was unjust for the contractor to retain the excess - where the object of BCIPA is to ensure that building contractors are entitled to receive and recover progress payments - where ss 99 and 100 of BCIPA prohibit the contracting out of the provisions of BCIPA - where BCIPA contemplates that a statutory payment might differ from the contractual payment - whether the object of BCIPA was exhausted upon the payment of the adjudicated amount by the principal - whether the contractor was liable to repay the adjudicated amount
[2]
Building and Construction Industry Payments Act 2004 (Qld), s 7, s 8, ss 12-16, ss 17-35, s 99, s 100
[3]
Beckhaus Civil Pty Ltd v Brewarrina Council[2002] NSWSC 960, cited
Roseville Bridge Mariner Pty Ltd v Bellingham Marine Australia Pty Ltd[2009] NSWSC 320, considered
[18]
T Matthews QC, with D D Keane, for the appellant in Appeal No 6414 of 2015 and for the respondent in Appeal No 6996 of 2015
[19]
P Dunning QC, with T Pincus, for the respondent in Appeal No 6414 of 2015 and for the appellant in Appeal No 6996 of 2015
[20]
N R Barbi Solicitors for the appellant in Appeal No 6414 of 2015 and the for the respondent in Appeal No 6996 of 2015
[21]
McCullough Robertson Lawyers for the respondent in Appeal No 6414 of 2015 and for the appellant in Appeal No 6996 of 2015
[22]
[1] FRASER JA: In September 2012 Gambaro Pty Ltd ("Gambaro") engaged Rohrig (Qld) Pty Ltd ("Rohrig") to construct a hotel and refurbish parts of a building in Caxton Street, Brisbane for a "guaranteed maximum price". Between November 2012 and April 2014 Rohrig made claims for progress payments under cl 37 of the general conditions of the construction contract, the last such claim being made on 24 April 2014 for work done up to that date. It appears to be common ground that practical completion of the contract works occurred on 29 April 2014.
[2] Clause 37 is a standard form provision for progress payments on account of the total remuneration which will become payable to the contractor upon the issue of a final certificate after completion of the contract work. Rohrig is to make monthly progress claims to the superintendent appointed by Gambaro under the contract for work done up to the 25th day of the month. The superintendent is to issue a progress certificate which evidences its assessment of the amount due from Gambaro to Rohrig under the contract and of retention moneys and moneys due from Rohrig to Gambaro under the contract. Gambaro is to pay to Rohrig the balance of the progress certificate after deduction of the retention moneys and such other amount certified that Gambaro elects to set off. Progress payments are made "on account only". Rohrig's final payment claim is to be delivered within 28 days after expiry of the defects liability period (a period of twelve months after the date of practical completion of the contract work). The final certificate thereafter issued by the superintendent shall evidence the monies finally due and payable between Rohrig and Gambaro on any account whatsoever in connection with the subject matter of the contract. The money so certified is due and payable within seven days of receipt by Gambaro of the final certificate. The final certificate "shall be conclusive evidence of accord and satisfaction, and in discharge of each party's obligations in connection with the subject matter of the Contract". Under cl 37.4 those effects of a final certificate are subject to exceptions, including for unresolved disputes where a notice of dispute issued pursuant to cl 42 is served before the 7th day after the issue of the final certificate.
[3] On 27 May 2014 Rohrig served upon Gambaro a payment claim under the 2004 (Qld) ("BCIPA"). The payment claim sought in excess of $2 million. When Gambaro responded to that claim it acknowledged liability for $57,593.08 and paid that amount. Gambaro denied that Rohrig was entitled to any further payment. On 31 July 2014 an adjudicator appointed under BCIPA made an adjudication decision that the amount of the progress payment to be paid by Gambaro to Rohrig (inclusive of GST) was $956,788.25 and that it had become payable on 24 June 2014. On 7 August 2014 Gambaro paid to Rohrig $913,014.23 of the adjudicated amount.
[23]
[5] The main issue in the appeals is whether, in the absence of any determination of the contractual remuneration to which Rohrig will be entitled upon final completion of the contract, Gambaro is arguably entitled to restitution of the amount by which the adjudicated amount in respect of variations exceeds the total amount in respect of variations in progress payments assessed under the contract, on the ground that it is unjust for Rohrig to retain the excess because that was not payable as a progress payment under the contract.
[24]
[6] The substance of Gambaro's claim is pleaded in paragraphs 21 to 160 of its statement of claim, in nearly all of which Gambaro alleges that the claim for payment for a variation exceeded the amount (or, in the case of an omission from the contract work, was less than the amount) "assessed and priced" by the superintendent under cls 2.1A and 36.4 of the general conditions. The following are typical examples:
[25]
(a) On or about 11 March 2014 the Defendant issued VQ86 pursuant to clause 2.1A of the Conditions;
(b) VQ48 was assessed as CSA 206 and priced by the Superintendent pursuant to clauses 2.1A and 36.4 of the Conditions and was accepted by the Defendant in the sum of $4,070;
(c) In the Payment Claim the Defendant claimed the sum of $169,909.87 from the Plaintiff for the variation.
[26]
(a) The Defendant issued VQ36 pursuant to clause 2.1A of the Conditions;
(b) VQ36 was assessed and priced by the Superintendent pursuant to clauses 2.1A and 36.4 of the Conditions as a nil value;
(c) In the Payment Claim the Defendant claimed the sum of $891.00 from the Plaintiff for the variation."
[7] The allegation in the first example that the superintendent's assessment and pricing of some variations "was accepted by the Defendant" is ambiguous. Does it mean merely that Rohrig acquiesced in the superintendent's assessment of the amount of a progress payment which comprehended the variation, or does it mean that Rohrig and the superintendent agreed upon the amount at which the variation should be valued under the contract? Gambaro informed the primary judge that the quoted words accorded with an affidavit by Mr Burgess.[3] Mr Burgess relevantly deposed only to agreements about "the percentages of each trade against actual progress on site" to be assessed by the superintendent in progress certificates.[4] That being so, Gambaro's case should be assessed on the footing that it does not include an allegation that Rohrig made any binding agreement upon the amount which it was entitled to be paid for variations in a final account under the contract.
[8] There are some allegations which, if understood in isolation, might suggest a claim for a final determination that Rohrig is not entitled to contractual remuneration for some of its claimed variations. In respect of some, relatively few, variations there are allegations that claimed work "was not undertaken" or that there "had been no direction to carry out the work". Near the end of the statement of claim there is a heading "Invalidity of the Variations". Under that heading, paragraph 174 alleges that Rohrig "had no entitlement under the Contract to be paid the Adjudicated Payments for the claimed Variations".
[9] However paragraph 174 relies upon cls 37.1 and 37.2, which concern only progress claims and progress certificates. Furthermore, the statement of claim relies throughout upon the superintendent's assessments of the prices of variations. The statement of claim does not include any allegation that the price of a variation (or the total price of all variations) assessed in accordance with the contractual criteria in cl 36.4 was less than the adjudicated amount in respect of the same variation (or the whole of the adjudicated amount attributable to all variations). Nor does Gambaro allege that the superintendent's assessments are contractually binding upon or preclude either party from claiming different prices in the final account under cl 37, in the dispute resolution process, or in litigation.
[27]
Relevant provisions of BCIPA and the factual background
[28]
[13] The object of BCIPA, as expressed in s 7, is to ensure that a person who undertakes to carry out construction work or to supply related goods and services under a construction contract "is entitled to receive, and is able to recover, progress payments". Section 8 states that the object in s 7 is to be achieved by granting an entitlement to progress payments whether or not that is provided for in the contract, and by establishing a procedure that involves the making of a payment claim, response by way of a payment schedule, referral of a disputed or unpaid claim to an adjudicator, and payment of the progress payment decided by the adjudicator.
[14] The first means by which the statutory object is to be achieved (the grant of an entitlement to progress payments) is secured by Pt 2 of BCIPA (ss 12 - 16). Section 12 is the pivotal provision:
[29]
"From each reference date under a construction contract, a person is entitled to a progress payment if the person has undertaken to carry out construction work, or supply related goods and services, under the contract."
[30]
[15] The term "progress payment" is defined in Sch 2 to mean "a payment to which a person is entitled under s 12", and it "includes, without affecting any entitlement under the section" the final payment, a single or one-off payment and a payment based on an event or date (known as a "milestone payment"). Where, as in this case, the contract provides for the matter, the "reference date" defined in BCIPA is "a date stated in, or worked out under, the contract as the date on which a claim for a progress payment may be made for construction work carried out or undertaken to be carried out, or related goods and service supplied or undertaken to be supplied under the contract." Sections 13 and 14 concern the amount of a progress payment. Section 13 provides that the amount is either "(a) the amount calculated under the contract" or, "(b) if the contract does not provide for the matter, the amount calculated on the basis of the value of construction work carried out or undertaken to be carried out, or related goods and services supplied or undertaken to be supplied". In this case s 13(a) is the relevant provision.
[16] The second means by which the statutory object is to be achieved (establishing a procedure that involves the making of a payment claim, response by way of a payment schedule, referral of a disputed or unpaid claim to an adjudicator, and payment of the progress payment decided by the adjudicator) is secured by Pt 3 of BCIPA (ss 17 - 35).
[17] Rohrig made its payment claim on 27 May 2014 under s 17, which entitles a person who is, or claims to be, entitled to a progress payment to serve a payment claim upon the person who, under the contract, is or may be liable under the construction contract to make the payment. In accordance with s 18, Gambaro replied to the payment claim by serving a payment schedule which stated that Gambaro proposed to pay the scheduled amount of $57,593.08 and explained why that amount was less than the claimed amount. Gambaro paid that scheduled amount. (If it had not made that payment, Rohrig would have been entitled to recover it "as a debt" pursuant to s 20(2).)
[18] Thereafter, pursuant to s 21(1)(a), Rohrig applied for adjudication of its payment claim. Section 26 provides that an adjudicator "is to decide the amount of the progress payment, if any, to be paid by the respondent to the claimant (the adjudicated amount); and the date on which any amount became or becomes payable;" and interest. On 31 July 2014, the adjudicator, to whom Gambaro's adjudication application had been referred under s 21(6), made an adjudication decision under s 26 that the amount of the progress payment to be paid by Gambaro to Rohrig (inclusive of GST) was $956,788.25 and that it had become payable on 24 June 2014.
[31]
(1) The provisions of this Act have effect despite any provision to the contrary in any contract, agreement or arrangement.
(2) A provision of any contract, agreement or arrangement (whether in writing or not) is void to the extent to which it -
[32]
(b) purports to annul, exclude, modify, restrict or otherwise change the effect of a provision of this Act, or would otherwise have the effect of excluding, modifying, restricting or otherwise changing the effect of a provision of this Act; or
[33]
(c) may reasonably be construed as an attempt to deter a person from taking action under this Act.
[34]
Effect of pt 3 on civil proceedings
(1) Subject to section 99, nothing in part 3 affects any right that a party to a construction contract -
[35]
(b) may have under part 2 in relation to the contract; or
[36]
(c) may have apart from this Act in relation to anything done or omitted to be done under the contract.
[37]
(2) Nothing done under or for part 3 affects any civil proceedings arising under a construction contract, whether under part 3 or otherwise, except as provided by subsection (3).
[38]
(3) In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal -
[39]
(a) must allow for any amount paid to a party to the contract under or for part 3 in any order or award it makes in those proceedings; and
[40]
(b) may make the orders it considers appropriate for the restitution of any amount so paid, and any other orders it considers appropriate, having regard to its decision in the proceedings."
[41]
The primary judge's reasons for refusing the strike out application
[42]
[21] The primary judge summarised Rohrig's submissions upon its strike out application as follows:
[43]
"Counsel for Rohrig submitted that BCIPA creates a statutory entitlement to interim, or on account, payments during the life of a building contract, which run concurrently with any contractual mechanism providing for interim, or on account, payments. To that extent, BCIPA gives rise to a dual contractual and statutory regime in respect of interim payments during the life of a building contract. However, where those concurrent regimes come into conflict, by necessary statutory intendment, the contractual regime for interim payments yields to the statutory regime for such payments. To the extent that a contractual regime may purport to have a contrary effect, it will offend s 99 of BCIPA. However, the consequence is not that the rights so created under the contract are forever lost. Rather, they are suspended, but preserved by s 100 of BCIPA, so that at the completion of the building contract, all contractual entitlements may be taken into account in arriving at a final, as opposed to an interim or on account, figure payable under the contract, with appropriate allowance being made for whatever assessments and payments were made in accordance with the statutory interim payment regime during the life of the completed contract."[6]
[44]
[22] The primary judge concluded that Rohrig's argument attempted to put a gloss upon s 100. In her Honour's view, the provisions of s 99 which preclude contracting out of BCIPA, had applied according to their terms because Rohrig had exercised its statutory rights to make a payment claim and to refer the unsatisfied part of that claim to adjudication and Gambaro had complied with its statutory duty to pay the adjudicated amount. The primary judge considered that in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd[7] the New South Wales Court of Appeal recognised that, once the rights under Pts 2 and 3 of BCIPA had been exercised in that way, BCIPA did not exclude the parties from enforcing their contractual rights by civil litigation. The purpose of Pt 3 of BCIPA in providing for the prompt determination and payment of a disputed payment claim, thereby ensuring cash flow to the builder, was met by that literal construction of s 100. The primary judge considered that nothing in s 100 or in the objects of BCIPA mandated that the parties to a construction contract could litigate in a court to determine their rights only after completion of the construction contract.
[45]
[23] Gambaro argued that the primary judge's reasons for rejecting Rohrig's application were correct. It argued that the object of BCIPA, being to ensure that the building contractor under a construction contract is entitled to receive and is able to recover progress payments, is "exhausted" upon payment of the adjudicated amount, so that the principal (Gambaro) is thereafter entitled to recover that amount immediately if there was no contractual entitlement to it as a progress payment. The absence of any final determination of the contractor's entitlement to the contractual remuneration is irrelevant. The only curial determination required "is a final determination in respect of the [adjudicator's] assessment of the particular progress claim, not a final determination of all the merits and contractual disputes".[8] Gambaro argued that its right to seek recovery of the amount of the payment claim which exceeded Rohrig's contractual entitlement to a progress claim was expressly preserved by s 100 and that the statutory adjudication and resulting adjudication certificate did not affect the party's contractual rights even provisionally. Gambaro cited statements in Birdon Pty Ltd v Houben Marine Pty Ltd & Ors[9] and other cases for its argument that BCIPA does not exclude the operation of a construction contract but that the contractual rights and the statutory rights under BCIPA "co-exist in a dual system which is expressly contemplated by the legislation".[10] Gambaro argued that its analysis was consistent with decisions which established that the parties to an adjudication decision were not precluded from subsequently pursuing their contractual remedies, including Caltex Refineries (Qld) Pty Ltd & Or v Allstate Access (Australia) Pty Ltd & Ors,[11] the decision in Patterson Building Group Pty Ltd v Holroyd City Council[12] that an adjudication decision did not prevent a party from relying upon its contractual entitlement to claim on a bank guarantee as security for amounts it claimed were due under the contract, and the statement by Brereton J in Roseville Bridge Mariner Pty Ltd v Bellingham Marine Australia Pty Ltd that:
[46]
"...the purpose of s 34 [of the Building and Construction Industry Security of Payment Act1999 (NSW) ("BCIPA (NSW"), which is largely reflected in s 99 of BCIPA] is to prohibit the exclusion or modification of the right to receive the contractual remuneration by progress payments; it does not prohibit the exclusion or modification of the contractual remuneration simpliciter. An agreement between the parties to a construction contract that some "extras" or "variations" will not entitle the builder to additional remuneration, or that a specified sum will be accepted for such works, forms part of the contractual regime according to which their rights under the Act as well as at law regulated, and is not inconsistent with the rights given by the Act to claim a progress payment."[13]
[47]
[24] Gambaro argued that BCIPA preserved its contractual remedies, including a remedy to recover moneys paid on account pursuant to a payment claim before any final contractual claim; BCIPA did not preclude reliance upon provisions of a contract to determine the allocation of risk on account pending a final determination, and s 100(3) allowed Gambaro to recover an overpayment in the adjudication amount as "restitution of any amounts overpaid". Gambaro argued that an adjudication under BCIPA did not establish any rights, even provisionally, under the contract.
[25] Rohrig accepted that a statutory entitlement to a progress payment under BCIPA may not prevail over a finally determined contractual entitlement on account of which the progress payment was made, but it argued that, upon the proper construction of BCIPA, pending a final determination about the relevant contractual entitlement a party to the contract cannot prosecute its contractual rights in respect of a progress payment on account of that contractual entitlement in a way which would override the statutory entitlement to a progress payment.[14] Rohrig argued that this construction of BCIPA arose from four propositions. Firstly, the preservation of contractual rights in s 100 must be understood in the context that progress payments under this contract are made on account only and do not involve any final determination of the parties' rights, and the payments provided for in BCIPA are of the same character. Secondly, when BCIPA is construed purposively and with regard to the pre-existing law, the legislative intention cannot have been that progress payments under BCIPA would be required to be repaid immediately by operation of contractual provisions for progress payments so that the interim position of the contractual mechanism would always trump that under BCIPA. Thirdly, Rohrig's construction is consistent with the absence of any right to appeal an adjudicator's decision, the statutory entitlement under s 31 to recover an adjudicated amount as a judgment debt, and the circumstance that in proceedings to set aside such a judgment the principal is precluded from counter-claiming, relying upon defences under the contract, or challenging the adjudicator's decision. Fourthly, since an adjudicator is not bound by a superintendent's calculations of the contractor's entitlement or by contractual stipulations as to the manner and form of progress claims, the legislative purpose cannot have been that an adjudicator's decision about a progress payment could be supplanted in subsequent litigation by reliance upon the superintendent's calculations.
[48]
[28] Clause 37 of the general conditions provides that progress payments are "on account", meaning on account of the remuneration to which the contractor will become entitled under the contract. That the adjudicated amount of a progress payment to which the contractor is entitled under BCIPA wears the same character is suggested by the term "progress payment" itself. That is also consistent with the purpose of BCIPA, as revealed by its provisions, which seek "to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash" and "might not be able to refund moneys ultimately found to be due a risk which, as a matter of policy in the commercial context in which [BCIPA] applies, the legislature has, prima facie at least, assigned to the owner."[15] It therefore may readily be accepted that it would be unjust for the contractor to retain, and it could be ordered to make restitution of, so much of the adjudication amount as exceeds the amount which, upon a final determination, is found to be the contractual remuneration on account of which the adjudicated amount was paid. In effect, as the Court had held, the final determination would supersede the statutory adjudication of the amount of a progress payment.[16]
[29] In the ordinary course, the amount of contractual remuneration to which Rohrig is entitled under the contract would be finally determined upon the issue of a final certificate under cl 37 of the contract or, in the event of a dispute, by litigation. The way in which Rohrig put its argument on appeal, but not in the Trial Division, appeared to acknowledge the possibility that there may be cases in which, before completion of a contract, a court might order restitution of the adjudicated amount of a progress payment upon the basis of a final determination that an adjudicated amount must exceed the contractual remuneration on account of which the adjudicated amount was paid. Whether or not such a claim could succeed, and in what circumstances it might succeed, are not in issue in these appeals.
[30] That is so because Gambaro's pleaded claim for restitution and its arguments in support of that claim do not involve any contention that the claimed part of the adjudicated amount exceeds the contractual remuneration on account of which the adjudicated amount was paid. The amount of the contractual remuneration to which Rohrig is entitled has not been determined and Gambaro's statement of claim does not seek to have it determined in its proceedings. Instead, the effect of Gambaro's statement of claim and its argument is that it is unjust for Rohrig to retain so much of the adjudicated amount of a progress payment as exceeds, and simply because it does exceed, the amount payable under the contract pursuant to the superintendent's progress certificates.
[49]
"The Act does not create a right to remuneration for construction work - that right is created by the construction contract. What the Act does is to create and regulate a right to obtain a progress payment. It is inherent in the concept of a progress payment that it be a payment on account of the amount ultimately due. The contract provides the starting point for the determination of rights under the Act. ... The purpose of s 34 is to prohibit the exclusion or modification of the right to receive the contractual remuneration by progress payments; it does not prohibit the exclusion or modification of the contractual remuneration simpliciter. An agreement between the parties to a construction contract that some "extras" or "variations" will not entitle the builder to additional remuneration, or that a specified sum will be accepted for such works, forms part of the contractual regime according to which their rights under the Act as well as at law are regulated, and is not inconsistent with the rights given by the Act to claim a progress payment."[24]
[50]
[42] I would adopt that analysis, save that, whilst emphasising that no summary can be a substitute for the statutory text, I would summarise the purpose of s 99 of BCIPA in somewhat different terms. In my opinion, the purpose of s 99 is both to put it beyond doubt that the statutory entitlement to progress payments created by Pts 2 and 3 has effect despite any difference between that statutory entitlement and the contractual entitlement to progress payments and to prohibit the exclusion or modification of the statutory right to the adjudicated amount of a progress payment on account of the contractual remuneration.
[43] The distinction between (contractual or adjudicated) progress payments and the contractual remuneration on account of which such progress payments are made is also reflected in the decision of Philip McMurdo J (as Philip McMurdo JA then was) in Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd:[25]
[51]
"The effect of s 32 (and s 100 of the Queensland Act) has been described as making an adjudication decision "provisional only", as Handley JA said in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd. Similarly, in Martinek Holdings Pty Ltd v Reid Construction (Qld) Pty Ltd Keane JA said that s 100 of the Queensland Act:
[52]
"... ensures that the adjudication of progress claims does not prevent the parties from finally resolving their entitlements inter se under the contract in a court or otherwise in accordance with law."
[53]
Recognising this effect of s 32, Macfarlan JA [with whom Handley AJ agreed, in Dualcorp Pty Ltd v Remo Constructions Pty Ltd[26]] confined the inability of a claimant to reagitate issues determined by a previous adjudication to a context of a further claim for a progress payment."
[54]
[44] The primary judge observed that in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd[27] the New South Wales Court of Appeal recognised that, once the rights under Pts 2 and 3 of BCIPA (NSW) had been exercised, that Act did not exclude the parties from enforcing their contractual rights by civil litigation. That case did not decide, however, that a difference between the amount of a progress payment assessed in accordance with the contractual provisions for progress payments and the adjudicated amount of a progress payment under BCIPA of itself renders a party's retention of the difference unjust such as to justify an order for restitution. None of the decisions cited to the Court was to that effect.
[45] Gambaro relied upon White J's decision in Patterson Building Group Pty Ltd v Holroyd City Council that an adjudication decision did not prevent a party from relying upon its contractual entitlement to claim on a bank guarantee as security for amounts that party claimed to be due under the contract. White J held that the statutory right to a progress payment is not necessarily inconsistent with a principal's right to convert a security to cash before a final determination of the parties' contractual entitlements, although there might be such an inconsistency if a principal's recourse to a security in the form of cash resulted in the contractor being required to replenish the cash security.[28] Similarly, in Fabtech Australia Pty Ltd v Laing O'Rourke AustraliaConstruction Pty Ltd,[29] Besenko J refused a subcontractor's application for an interlocutory injunction to restrain a contractor from exercising a contractual right to have recourse to bank guarantees supplied by the subcontractor which secured the repayment of moneys, including moneys overpaid by the contractor in satisfying an obligation to pay the adjudicated amount of a payment claim. Besenko J concluded that the contractual right of recourse to the bank guarantees did not have any of the effects described in s 99(2)(b) of BCIPA and that BCIPA did not have an effect on events after the contractor had made the payment pursuant to the adjudicator's decision.[30]
[46] Those decisions did not require a reconciliation of the statutory entitlement to progress payments with the contractual entitlement to progress payments. The many other judicial statements, upon which Gambaro relied, to the effect that Pt 2 and Pt 3 of BCIPA do not exclude either party from enforcing contractual rights by civil litigation, do not imply that, prior to any final determination of the contractual entitlement on account of which an adjudicated amount of a progress payment was paid, a party is liable to make restitution of so much of an adjudicated amount of a progress payment as differs from, and simply because it does differ from, the amount payable under the contract by way of progress payment.
[55]
[47] Gambaro's statement of claim should be struck out on the ground that it is untenable. It should have leave to file an amended statement of claim, against the possibility that it might be able to formulate a viable base for its claim: see [29] of these reasons. Gambaro's appeal against the primary judge's order dismissing Gambaro's application for summary judgment should be dismissed because that application was premised upon Gambaro's incorrect construction of BCIPA.
[56]
[48] In Appeal No 6414 of 2015 I would make the following orders:
(a) Dismiss the appeal against the order dismissing the plaintiff's application for summary judgment filed on 2 December 2014, with costs.
(b) Set aside the order made on 26 June 2015 that the costs of and incidental to the application filed on 2 December 2014 be costs in the proceeding, and instead order that the plaintiff pay the defendant's costs of that application.
[49] In Appeal No 6996 of 2015 I would make the following orders:
(a) Allow the appeal against the order made on 26 June 2015 dismissing the defendant's application filed on 6 November 2014, with costs.
(b) Set aside that order, and the order that the defendant pay the plaintiff's costs of and incidental to the application filed on 6 November 2014 to be assessed.
(c) Instead of those orders, order that:
(i) The plaintiff's statement of claim filed 11 September 2014 be struck out, with leave to file an amended statement of claim within 28 days of the date of this order.
(ii) The plaintiff is to pay the defendant's costs of the application filed on 6 November 2014 and the defendant's costs thrown away as a result of the striking out of the statement of claim.
[50] MORRISON JA: I agree with the orders proposed by Fraser JA and with the reasons given by his Honour.
[51] BODDICE J: I have had the considerable advantage of reading the reasons for judgment of Fraser JA. I agree with those reasons and with the proposed orders.
[57]
[1] The parties agreed that the relevant reprint of BCIPA was the reprint which contained the provisions in force as at 1 December 2013.
[58]
[2] Gambaro alleges, and Rohrig denies, that the payment claim did not also constitute a progress claim under the contract. It is not necessary to resolve that dispute in these appeals.
[10]Eco Steel Homes Pty Ltd v Hippo's Concreting Pty Ltd & Ors[2014] QSC 135 at [17] (Daubney J), referring to Paynter Dickson Constructions Pty Ltd v JF & CJ Tilston Pty Ltd[2003] NSWSC 869 at [26] (Bergen J), Beckhaus Civil Pty Ltd v Brewarrina Council[2002] NSWSC 960 at [60] (Macready AJ) which was not challenged in Brewarrina Shire Council v Beckhaus Civil Pty Ltd[2003] NSWCA 4; (2003) 56 NSWLR 576.
[16]Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd[2009] QCA 329, at [15] (Keane JA with whom de Jersey CJ and Holmes JA agreed). See also Roseville Bridge Marina Pty Ltd v Bellingham Marine Australia Pty Ltd[2009] NSWSC 320, at [18], [35], [43] - [44], [63], [66] (last sentence) [67] (Brereton J).
[73]
[17]John Holland Pty Ltd v Roads & Traffic Authority of New South Wales[2007] NSWCA 19.
[20]Hervey Bay (JV) Pty Ltd v Civil Mining and Construction Pty Ltd[2008] QSC 58, at [24] - [32] (Philip McMurdo J).
[77]
[21]John Goss Projects Pty Ltd v Leighton Contractors Pty Ltd (2006) 66 NSWLR 707, per McDougall J at [78] quoting Bryson JA in Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd[2005] NSWCA 142, at [58].
[78]
[22] See Roseville Bridge Marina Pty Ltd v Bellingham Marine Australia Pty Ltd[2009] NSWSC 320 at [44] - [50] (Brereton J).
[79]
[23][2009] QCA 329, at [20] (Keane JA, de Jersey CJ and Holmes JA agreeing).
[4] On 11 September 2014 Gambaro commenced proceedings against Rohrig for a declaration that Gambaro was not liable to Rohrig for $913,014.23 of the amount of monies claimed by Rohrig under its payment claim, an order that Rohrig make restitution to Gambaro of that amount, and consequential orders. Rohrig applied in the Trial Division to strike out Gambaro's claim and its statement of claim or, in the alternative, specified paragraphs of the statement of claim. Gambaro applied for summary judgment upon its claim. The primary judge refused both applications. Each party has appealed.
[10] The absence of any allegation of that kind seems consistent with the relevant contractual terms. Clause 2.1A of the general conditions of the contract allows for the "guaranteed maximum price" specified in the contract to be "adjusted due to any costs or savings incurred as a result of the following events as assessed by the Superintendent". The specified events include variations directed under cl 36. Clause 36.4 provides that the superintendent must "price each variation using the following order of precedence: (a) prior agreement; (b) applicable rates or prices in the Contract; (c) rates or prices in a priced bill of quantities [or other described documents]; (d) reasonable rates or prices, which shall include an amount for profit and overheads of 10%". Clause 42.1 provides for the notification and resolution of disputes concerning, amongst other things, "a superintendent's direction". The term "direction" is defined very widely; it includes "approval, assessment ... certificate, decision ... [or] determination". The effect of cl 42.2 is that if the parties are unable to resolve a notified dispute it may be resolved by litigation.
[11] Gambaro's statement of claim makes conclusory allegations to the following effect:
(a) Rohrig has no entitlement to be paid by Gambaro for work done under the contract otherwise than pursuant to cl 37.
(b) Because Rohrig's payment claim served upon Gambaro was not a Progress Claim under cl 37 and there is no outstanding Progress Claim, Rohrig had no contractual entitlement to a progress payment in the amount claimed in Rohrig's Payment Claim.
(c) Rohrig nevertheless asserted an entitlement to be paid that amount in its Payment Claim and received payment of that amount from Gambaro.
(d) In those circumstances it is unjust for Rohrig to retain the adjudicated amount and it is liable to make restitution of it to Gambaro, together with interest on a compound basis from the date of payment until it was repaid.
[12] Thus Gambaro's pleaded case is that, because the adjudicated amount for variations claimed by Rohrig exceeds the total of the amounts assessed by the superintendent in progress certificates as the prices of the variations, it is unjust for Rohrig to retain the excess and it is therefore liable to repay that excess to Gambaro by way of restitution. Consistently with that case, Gambaro sought to defend its claim on the basis that it was sufficient for it to seek "a final determination in respect of the [adjudicator's] assessment of the particular progress claim, not a final determination of all the merits and contractual disputes".[5]
[19] Section 29 provides that "the respondent must pay the [adjudicated] amount to the claimant on or before" a specified date. Gambaro fulfilled that obligation; on 7 August 2014 Gambaro paid to Rohrig $913,014.23 inclusive of GST together with the required amount for adjudicator's fees, comprising the adjudicated amount of $956,788.25 less the amount of $57,593.08 already paid by Gambaro, plus interest. (If Gambaro had not made that payment, under s 30 Rohrig would have been entitled to seek an "adjudication certificate" and, under s 31, to file that certificate "as a judgment for a debt" which "may be enforced, in a court of competent jurisdiction".) Section 31(4) provides that a respondent who commences proceedings to set aside a judgment upon an adjudication certificate is not, in those proceedings, entitled to counter-claim against the claimant, "raise any defence in relation to matters arising under the construction contract", or challenge the adjudicator's decision.
[20] Sections 99 and 100 of BCIPA provide:
[26] Rohrig argued that, contrary to Gambaro's argument, there was no temporal limit upon the operation of s 99 such that it ceased to apply upon payment of an adjudicated amount; rather, the effect of s 99 was that contractual provisions prescribing a mechanism for quantification of an interim payment were void to the extent that a statutory entitlement to an interim payment for the same work was quantified by adjudication. Rohrig argued that this operation of s 99 was preserved by the introductory words of s 100(1). Section 100 should also be understood in the context that provisions of Pt 3, particularly s 31(4), plainly affect contractual rights.
[27] Rohrig sought support for its construction of BCIPA in statements in the explanatory notes to the Bill for BCIPA that "the failure of any one party in the contractual chain to honour its obligations can cause a domino effect on other parties resulting in restrictive cash flow" and the "system of rapid adjudication for the interim resolution of payment on account disputes does not extinguish a party's ordinary contractual rights to obtain a final resolution of a payment dispute by a court or tribunal of competent jurisdiction". Rohrig also relied upon statements in the second reading speech upon the introduction of the Bill on 18 March 2004 that BCIPA would establish "a statutory based system of rapid adjudication for the quick resolution of payment disputes on an interim basis" which "will allow for payments to flow quickly down the contractual chain", that "rapid adjudication does not extinguish a party's ordinary contractual rights to obtain a final determination of a payment dispute by a court or tribunal", and that "the significance of an adjudicator's decision is that pending final determination of the payment dispute, the party with the most commendable case, as determined by the adjudicator retains the money in dispute". Rohrig also referred to the second reading speech in the New South Wales Legislative Assembly on 29 June 1999 for that State's Building and Construction Industry Security of Payment Bill 1999 (NSW) that "if the dispute is not resolved to both parties' satisfaction by the adjudication process, it will result in an independently determined amount being securely set aside until final resolution is achieved" and that "the adjudicator's decision is only an interim decision until the amount due in respect of the payment claim is finally decided in legal proceedings or in a binding dispute resolution process". Gambaro's construction would run counter to the object of BCIPA.
[31] BCIPA contemplates, however, that the statutory payment might differ from the contractual payment. For example, whilst both a superintendent and an adjudicator are obliged to apply the contractual criteria in assessing the amount of a progress payment, their assessments might differ and the adjudicator is not bound by a superintendent's assessment. In John Holland Pty Ltd v Roads & Traffic Authority of New South Wales the New South Wales Court of Appeal held that the phrase "calculated in accordance with the terms of the contract" in the analogue of s 13(a) of BCIPA in BCIPA (NSW) means "calculated on the criteria established by the contract" rather than "reached according to mechanisms provided by the contract".[17] Hodgson JA, with whose reasons Beazley JA agreed, considered that this construction accorded with the use of the word "calculated".[18] As Basten JA put it, "the statutory right to payment is unaffected by calculations undertaken by a superintendent or other authority appointed to value work under the contract" so that "the statutory regime is, partly, though not of course wholly, independent of the terms of the construction contract and is intended to operate according to its own statutory terms".[19] That decision has been followed in the Trial Division, including in relation to the pricing of a variation in an amount which differs from a superintendent's assessment.[20]
[32] That being so, the mere fact that Rohrig was not contractually entitled to a progress payment on account of the contractual remuneration cannot make it unjust for it to retain the adjudicated amount of a progress payment for the same work which Gambaro had a statutory liability to pay and Rohrig had a statutory entitlement to receive on account of the contractual remuneration.
[33] Adopting the approach that s 99 and 100 of BCIPA should be construed "according to their terms and no more widely",[21] those provisions supply further support for the conclusion that the pleaded basis of Gambaro's claim is untenable. Section 99(1) is consistent with the possibility that the adjudicated amount of a progress payment might differ from the amount of a progress payment for the same work payable under the contract. That provision puts it beyond doubt that, whether or not there is such a difference, legal effect must be given to the statutory entitlement under ss 12(1) and 13(1)(a) to a progress payment and the corresponding liability under s 29 to make that payment in the amount determined by the adjudicator under s 26. Thus, in so far as Gambaro's claim is based upon contractual provisions which define its contractual liability to pay and Rohrig's contractual entitlement to receive progress payments on account of the contractual remuneration which is yet to be determined, those contractual provisions do not affect Rohrig's statutory entitlement to receive and Gambaro's statutory liability to pay progress payments of the same character in a different amount.
[34] Furthermore, if the effect of the contract were that upon payment by Gambaro to Rohrig of the adjudicated amount of a progress payment assessed in accordance with s 13(a) Rohrig became liable to repay that amount to Gambaro, the contract would, in terms of s 99(2)(b), "have the effect of excluding, modifying, restricting or otherwise changing the effect of" s 12.[22] Similarly, in terms of s 99(2)(c), a contractual provision which had such an effect might "reasonably be construed as an attempt to deter" Rohrig from taking action under Pt 3 to obtain such an adjudication and require payment of the adjudicated amount by Gambaro. Contractual provisions which had such an effect would be void to that extent. However, as is typically the case, the contract in this case does not purport to have and it does not have any such effect. It concerns only Gambaro's contractual liability to make and Rohrig's contractual entitlement to receive a progress payment. It does not qualify or purport to qualify Gambaro's statutory liability to pay or Rohrig's statutory entitlement to receive the adjudicated amount of a progress payment. No contractual provision purports to oblige or has the effect of obliging Rohrig to repay, or purports to entitle or has the effect of entitling Gambaro to recover, any part of an adjudicated amount which Gambaro has paid. Thus s 99(2) has no apparent operation in this case. Its terms nevertheless evidence a statutory policy which is wholly inconsistent with the basis of Gambaro's claim.
[35] Gambaro relied upon s 100, but the introductory words of s 100(1) make its operative provisions "subject to s 99", thereby preserving both the confirmation in s 99(1) of the statutory entitlement to a progress payment under Pt 2 in an amount fixed in an adjudication under Pt 3 notwithstanding any different effect of the contract in relation to contractual progress payments, and the invalidating effect of s 99(2) upon any contractual provision to the extent to which it would impinge upon the statutory right to progress payments.
[36] Section 100(2) does not assist Gambaro. It concerns only proceedings "arising under a construction contract, whether under part 3 or otherwise". Since no provision of the contract in this case has or purports to have the effect of entitling Gambaro to recover an adjudication amount from Rohrig and Gambaro does not contend that anything in Pt 3 of BCIPA confers such an entitlement, s 100(2) does not appear to have any potential for application in Gambaro's proceedings.
[37] In terms of s 100(3), Gambaro's proceedings are proceedings "in relation to any matter arising under a construction contract", but neither paragraph of that subsection obliges a court or tribunal to order the repayment of an adjudication amount in the present circumstances. Paragraph (a) leaves it to the Court to decide how any necessary allowance for such an amount should be made. That paragraph cannot apply upon Gambaro's pleaded case, if only because Gambaro does not seek any order or award in respect of which any allowance for the adjudication amount could be made.
[38] Gambaro relied particularly upon s 100(3)(b), but it does not confer a right to restitution in all cases. Instead the court or tribunal must decide whether or not it is appropriate to order restitution in the circumstances of the case. For the reasons already given, Gambaro's statement of claim does not identify any arguable ground for its restitutionary claim.
[39] No provision of BCIPA supplies a foothold for Gambaro's rather startling proposition that the operation of Pts 2 and 3 of BCIPA were exhausted upon its payment of the adjudicated amount, in the sense that Rohrig thereupon, and without more, became liable to repay the adjudicated amount. That proposition is also practically irreconcilable with the decision in Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd, in which the contract included cl 37 in the same form as in this case. In that case the Court held that a superintendent's final certificate which had not settled the contractual account because a notice of dispute had been duly given "can give rise to no right in [the principal] under the contract which is apt to trump the effect of the adjudication decision."[23] Similarly, a progress certificate under the same clause for payment of an amount assessed by the superintendent on account of a contractual entitlement to variations could not of itself have such an effect where, as here, the time for giving a notice of dispute about the amount payable under the contract for variations had not expired.
[40] In summary, Gambaro's pleaded claim must fail because it relies only upon contractual provisions concerning the amount of progress payments to be paid on account of the contractual remuneration which do not detract from the statutory rights and liabilities created by Pt 2 and Pt 3 of BCIPA, rather than upon contractual provisions which determine Gambaro's liability for and Rohrig's entitlement to the contractual remuneration on account of which the adjudicated amount of a progress payment was paid.
[41] A similar distinction was made by Brereton J in Roseville Bridge Marina Pty Ltd v Bellingham Marine Australia Pty Ltd: