Ku-Ring-Gai Council v Ichor Constructions Pty Ltd

Supreme Court of NSW|2014-10-30|Before: Stevenson J, McDougall J

Introduction 1These proceedings relate to a dispute under the Building and Construction Industry Security of Payment Act 1999 ("the Act"). 2The plaintiff, Ku-Ring-Gai Council, entered into a contract ("the Contract") with the first defendant, Ichor Constructions Pty Ltd, on 23 December 2011 to construct West Pymble Pool. 3The second defendant, Adjudicate Today Pty Ltd is an Authorised Nominating Authority under the Act. The third defendant, Mr O'Brien, is an adjudicator (who, for reasons which will emerge below, I will call "the Second Adjudicator") appointed under the Act following an adjudication application under s 17 of the Act (which, for reasons which will also emerge below, I will call "the Second Adjudication Application") made by Ichor on 27 August 2014. 4Adjudicate Today and Mr O'Brien have filed submitting appearances. 5In these proceedings, commenced on 2 September 2014, the Council seeks a declaration that the Second Adjudication Application is "an abuse of process and is void" and an order restraining Mr O'Brien from proceeding with the adjudication. 6The basis of the Council's application is that the matter that Ichor now seeks to have determined by Mr O'Brien was the subject of an earlier adjudication application made by Ichor on 28 February 2014 ("the First Adjudication Application") and an adjudication determination made by Mr Thomas Uher ("the First Adjudicator") on 19 March 2014 pursuant to s 22 of the Act. 7The Council contends that the claim that Ichor now seeks to agitate in the Second Adjudication Application is the subject of an issue estoppel or, alternatively, constitutes an abuse of process of the Act of the kind discussed by McDougall J in Urban Traders Pty Ltd v Paul Michael Pty Ltd [2009] NSWSC 1072, to which I will return. 8I have been greatly assisted by the succinct and helpful submissions I have received from Mr DeBuse, who appeared for the Council, and Mr Ashhurst SC who appeared with Mr Neggo for Ichor. Much of what follows, especially as to background and uncontentious matters, is drawn, with gratitude, from counsels' submissions. 9At the outset of the hearing, the Council also sought to agitate a question concerning the proper construction of the Contract. Ultimately Mr DeBuse did not press that point before me.

Decision 10I do not accept that there is an issue estoppel. I do, however, consider the Second Adjudication Application to be an abuse of the process of the Act, and propose to restrain it.

Background 11By the Contract, Ichor agreed to construct the West Pymble Pool for the Council for a lump sum of $12,734,230. 12On 31 January 2014, Ichor served on the Council a payment claim pursuant to s 13 of the Act which included, amongst other claims, a claim for delay damages of $480,900. On 14 February 2014, the Council served on Ichor a payment schedule pursuant to s 14 of the Act which made no allowance for delay damages.

The First Adjudication Application 13On 28 February 2014, Ichor made the First Adjudication Application claiming $528,990 for delay damages. In support of its delay damages claim, Ichor relied on a report by an organisation known as "iSet" ("the iSet Report"). 14The iSet Report (which was not before me) has no contractual status and had not previously been provided to the Council. I was informed that it relied on "logic, calculations and programming" performed by iSet, the results of which were identified in the Report. The iSet Report was evidently provided to the First Adjudicator to explain the manner in which Ichor propounded its delay damages claim. 15On 5 March 2014, the Council served on Ichor its adjudication response pursuant to s 20 of the Act which, amongst many other things, contained a critique of the iSet Report including that the Report made no allowance for any response time for what the parties described as "RFIs" (Requests For Information).

The First Adjudicator's determination 16On 19 March 2014, The First Adjudicator issued his adjudication determination. 17Although the First Adjudication Application claimed significant amounts for "contract works" and "variations" the bulk of the First Adjudicator's determination was directed to the question of delay damages. 18The First Adjudicator found that the Council had caused delay in the works, and was liable to compensate Ichor for such delay at the rate of $4,200 per day. 19The First Adjudicator then proceeded to what he described as an "Assessment of the EOT [Extension of Time] quantum". 20He noted that the iSet Report "found" that Ichor was entitled to damages for 115 (or 116) days delay. He then considered whether the iSet Report was "accurate". He concluded it was not, and that it had "serious shortcomings", for the following reasons. 21First, the First Adjudicator found that although the iSet Report stated that in order to assess extension of time claims it was necessary to consider "what prevention and mitigation of the delay was not affected [sic] by Ichor", so far as the First Adjudicator could tell "apart from a reference to 'acceleration', the Report does not say what, if any, delay mitigation strategies [Ichor] has employed". 22Second, the First Adjudicator concluded that the allowance made in the iSet Report for "inclement weather" (20 days) could not, for the reasons he stated, be correct and that accordingly, "it does not seem to me that [Ichor's] entitlement to an EOT, as assessed in the iSet Report, is 115 days". 23Third, the First Adjudicator concluded that the iSet Report made an incorrect assessment of the time permitted by the Contract for the superintendent named in the Contract to provide a response to RFIs made by Ichor. The First Adjudicator stated that although he was satisfied that Ichor's "progress under the Contract has been delayed by the Superintendent's late response to the RFI's [sic]" in a number of claims he was "not satisfied that [Ichor's] entitlements to an EOT, as assessed in the iSet Report is 115 days". 24The First Adjudicator concluded: "From the information before me and given that the analysis employed in the iSet Report is computer driven, I am unable to replicate the assessment process in order to assess the true extent of [Ichor's] entitlement to an EOT. This should not be interpreted to mean that I have assessed it as Nil. I have simply been unable to assess it. It follows, that I am unable to assess the quantum of the delay costs claims." (emphasis added) 25Accordingly, the First Adjudicator reached the following conclusions under the heading "Adjudicated Amount": Claimed Amount Correct Scheduled Amount Adjudicated Amount Contract Works 395,490.18 317,245.03 317,245.03 Variations 72,397.50 31,295.00 31,295.00 Delay damages 480,900.00 0.00 Not assessed Subtotal 948,787.68 348,540.03 348,540.03 GST 10% 94,878.76 34,854.00 34,854.00 Total (incl. GST) $1,043,666.44 $383,394.03 $383,394.03

Ichor's further payment claim 26On 30 July 2014, Ichor made a further payment claim which included the claim for delay costs that the First Adjudicator had been "unable to assess". 27On 13 August 2014, the Council served a responding payment schedule in which it contended, amongst other things, that it was not open to Ichor to further agitate the question of the delay costs that had been the subject of the First Adjudication Application. 28On 27 August 2014, Ichor served the Second Adjudication Application seeking the delay costs which had been the subject of the First Adjudication Application. 29In support of the Second Adjudication Application, Ichor served the iSet Report together with a "Supplementary iSet Report" in respect of which Ichor stated that: "...for the purposes of this adjudication application, the Supplementary iSet Report has been prepared to address the shortcomings raised by Mr Uher in the March Adjudication Determination...". (at [3.3.16])

Issue estoppel 30The Council's first contention was that, in the circumstances I have described, there arose an issue estoppel preventing Ichor from making in the Second Adjudication Application the same claim for delay damages it made in the First Adjudication Application. 31I do not accept this submission. 32Although it is clear that an issue estoppel can arise in the context of the Act even where "a claim has not been the subject of adjudication on the merits but has been rejected for want of evidence" (per Macfarlan JA, with whom Handley AJA agreed in Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; 74 NSWLR 190 at [71] and [72]), an issue estoppel can only arise where an issue has already been decided (for example, Blair & Perpetual Trustee Co Ltd v Curran (Adams' Will) (1939) 62 CLR 464 at 532 per Dixon J; Ramsay v Pilgram (1968) 118 CLR 271 at 276 per Barwick CJ). 33Whether an adjudicator has "decided" (or, to use the language of s 22(1) of the Act, "determined") a matter must be assessed as a matter of substance, and not of form. Thus if an adjudicator simply states that "I will not value this claim" but has in substance rejected it, the conclusion may well be open that the adjudicator has "decided" or "determined" the issue such as to give rise to an issue estoppel: see for example, AE & E Australia Pty Ltd Stowe Australia Pty Ltd [2010] QSC 135 per Applegarth J at [46]. 34The First Adjudicator "determined" Ichor's First Adjudication Application for the purpose of s 22(1) of the Act in that he determined that the total amount due by the Council to Ichor was $383,394.03, which amount did not include any amount for delay damages. 35But the First Adjudicator did not decide or determine Ichor's delay damages claim. Indeed he, in terms, eschewed coming to a decision or determination and stated, as I have set out above at [24]: "This should not be interpreted to mean that I have assessed [the delay damages claim] as Nil. I have simply been unable to assess it." 36There has been no issue determined adversely to Ichor such as would give rise to an issue estoppel and thus, this aspect of the Council's claim fails.

Abuse of process 37It appears to me that the real issue in this case is whether, notwithstanding that there is no issue estoppel, it is nonetheless an abuse of process of the Act for Ichor to make the Second Adjudication Application in the circumstances I have outlined. 38The question of what amounts to an abuse of process in the context of the Act has been considered in a number of decisions of the Court and, in particular, in a number of decisions of McDougall J. 39McDougall J reviewed the authorities in Urban Traders and drew attention to the observations of the High Court in Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; 226 CLR 256 at [9] per Gleeson CJ, Gummow, Hayne and Crennan JJ: "What amounts to abuse of court process is insusceptible of a formulation comprising closed categories. Development continues." 40In the context of the Act, Allsop P said in Dualcorp that the essence of abuse of process was: (a)the "repetitious use of the adjudication process to require an adjudicator or successive adjudicators to execute the same statutory task in respect of the same claim on successive occasions" (at [2]); (b)the use of the Act "to re-ignite the adjudication process at will in order to have a second or third or fourth go at the process provided by the Act merely because [the claimant] is dissatisfied with the result of the first adjudication" (again, at [2]); or (c)"repetitious re-agitation of the same issues" (at [16]). 41In Urban Traders McDougall J reviewed the authorities and said: "41 It does not follow from the decisions to which I have referred that every repetition, in a subsequent payment claim, of a claim made in an earlier payment must amount to an abuse of process. That is so even if that earlier payment claim has been the subject of an adjudicator's determination. The relevant concept is not abuse of process at large. It is abuse of the processes of the Act: specifically, the processes of the Act designed to ensure that builders and subcontractors (and of course others) received prompt and progressive payment for construction work performed or related goods and services provided. The question of whether there has been an abuse the processes of the Act must take into account relevant provisions of the Act. Specifically: (1) s 13(6) of the Act recognises that a claimant may include in a payment claim an amount that has been the subject of a previous payment claim; and (2) s 22(4) of the Act deals, to an extent, with a repeated claim by providing that if particular construction work or related goods and services have been valued by an adjudicator, an adjudicator in a subsequent adjudication application is to give them the same value unless satisfied that the value has changed since that previous determination. 42 Further, whether or not the repetition of a claim amounts to an abuse of process requires consideration of all relevant contextual facts. In addition, it requires consideration of the reasons why the courts intervene to prevent abuse of process. Those reasons include intervention to prevent a person from being vexed by having to reargue an issue already authoritatively decided. Thus, in deciding whether a repetition of a claim amounts to abuse of process, it may be relevant to take into consideration whether, because of fresh claims that are advanced, the respondent will be required to defend itself in any event. 43 I do not think that it is possible to state in some exhaustive fashion what combination of factors, including repetition, will lead to the conclusion that there is an abuse of process. (See, as to this, French CJ, Gummow, Hayne and Crennan JJ in Jeffery & Katauskas Pty Limited v SST Consulting Pty Limited [2009] HCA 43 at [27].) My concern is simply to make it clear that, in my opinion, it would be inconsistent with the provisions of the Act to which I have referred above to hold that repetition, by itself and without more, always amounts to abuse of process."

Has there been an abuse of process? 42In this case there is no issue "already authoritatively decided". The opposite is true; the First Adjudicator refused to make a decision or determination concerning Ichor's delay damages claim. 43Having concluded that the iSet Report was not accurate, and that its stated conclusion that Ichor had been delayed for 115 days could not be correct, the First Adjudicator came to the conclusion that "given that the analysis employed in the iSet Report is computer driven" he was not able to "replicate" iSet's "assessment process". He was thus unable to reach any conclusion as to the number of days by which Ichor had been delayed nor any amount for delay damages. 44Mr Ashhurst submitted that the First Adjudicator could have sought further submissions from the parties to ascertain whether, in view of his findings as to the shortcomings of the iSet Report, agreement could be reached as to the relevant number of days, or arguments put from which the First Adjudicator could come to a conclusion about that subject (see s 21(4)(a) of the Act). 45However, the First Adjudicator had only 10 business days to complete the complex task of adjudicating the issues in question. As it turns out, his determination was published on the last of those 10 business days. In those circumstances I cannot conclude that the First Adjudicator can be criticised for failing to seek further information from the parties than that already placed before him. As has been emphasised in many decisions of this Court, the object of the Act is to provide a speedy resolution of progress claims, on what may often be a "rough and ready" approach: per McDougall J in Watpac Construction (NSW) Pty Limited v Austin Corp Pty Limited [2010] NSWSC 168 at [127]. As his Honour observed in the same paragraph, "the Act does not decide, but on the contrary preserves for later resolution, final rights (see s 32)". 46The problem with which the First Adjudicator was confronted was entirely of Ichor's making. It chose to make out its damages delay claim using the iSet Report. The First Adjudicator concluded that the iSet Report was not adequate for that task. Ichor did not place sufficient material before the First Adjudicator to enable him to make a determination on a critical element of Ichor's damages delay case; the actual number of days by which it had been delayed. 47The First Adjudicator could have, and indeed arguably should have rejected the delay damages claims. Section 22(1) of the Act requires an adjudicator to "determine...the amount of the progress payment". The First Adjudicator could have determined that Ichor had failed to make out its case so far as concerns delay damages and determined that the amount of the claim was nil. 48Mr Ashhurst accepted that had the First Adjudicator taken that course, it would have been an abuse of process for Ichor to make the Second Adjudication Application (see The University of Sydney v Cadence Australia Pty Ltd [2009] NSWSC 635 per Hammerschlag J at [51] to [60]). 49Instead, the First Adjudicator declined to make any assessment. 50Now, Ichor has, by the Second Adjudication Application, made the same claim and seeks to have it determined by the Second Adjudicator. It now seeks to deploy, in addition to the iSet Report placed before the First Adjudicator, a second report which Ichor acknowledges has been prepared to overcome the "shortcomings" identified by the First Adjudicator. 51Unless Ichor is restrained from so proceeding, the Council will for the second time have to meet a claim that had it been better, or at least differently prepared could have been disposed of by the First Adjudicator. 52Sections 13(6) and 22(4) of the Act do contemplate that, in some circumstances, a payment might include an amount that has been the subject of a previous payment claim and work the subject of one adjudication application might be further considered in a later adjudication application. Further, as McDougall J has observed, mere repetition of a claim does not necessarily bespeak an abuse of process. 53However, this case involves more than a mere repetition of a claim earlier made. The reason Ichor is repeating its claim before the Second Adjudicator is that it failed to establish the same claim before the First Adjudicator because it deployed evidence inadequate to the task. The Council resisted the First Adjudication Application on the basis of the material then deployed by Ichor in support of it. The First Adjudicator drew attention to the shortcomings in that evidence. Ichor is now making a second attempt to prove its case by supplementing that material with further evidence that, according to its description in the Second Adjudication Application, seeks to overcome the particular problems identified by the First Adjudicator. In effect, Ichor has used the First Adjudicator's observations as an advice on evidence and is now making a second attempt to prove the same case and requiring the Council, for the second time, to meet it. This is in my opinion an abuse of process. It is akin to a party, having read a judge's reasons for rejecting its claim for want of evidence, seeking to re-open to re-agitate the issue and to make good the identified shortcomings in the evidence. 54Ichor's entitlement to pursue its claim for delay damages in other proceedings in due course is, of course, preserved (see [45] above).

Conclusion 55For those reasons I propose to make orders to the effect sought by the Council. 56I invite the parties to bring in short minutes to give effect to these reasons.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 November 2014

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