The CCD Group Pty Limited v Seduce Group Australia Pty Limited; The CCD Group Pty Limited v Katherine Pty Limited

The CCD Group Pty Limited PARTIES: Seduce Group Australia Pty Limited Katherine Pty Limited

COUNSEL: Mr Murphy (for the plaintiff) Mr Zipser (for both defendants)

The CCD Group Pty Limited was a company that performed shop fit-outs. Seduce Group Australia Pty Ltd and Katherine Pty Ltd were companies which needed such shop fit-outs for some properties they were developing in New South Wales and interstate. The CCD Group entered into contracts with Seduce Group and with Katherine for this work to be done by CCD for Seduce and Katherine. Disputes arose over what CCD was owed. They could not be completely resolved. CCD decided to take the matter to court and commenced two sets of proceedings in this court to recover what it said was owing by Seduce Group and by Katherine. CCD now proposes to discontinue both those proceedings.

Part 42.19(2) of the Uniform Civil Procedural Rules makes provision for a plaintiff discontinuing proceedings. It provides that unless the court otherwise orders, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued. CCD seeks to be relieved of that provision and asks me to order that instead each party pay their own costs of the proceedings. I have decided not to relieve them of the consequences of filing a notice of discontinuance and these are my reasons.

CCD commenced both sets of proceedings on 3 April 2007. There was available to CCD, at all relevant times, an additional procedure to recover the moneys it said it was owed. That was a statutory procedure under the Building and Construction Industry Security of Payment Act 1999 (NSW) and corresponding statutes in the relevant other jurisdictions. Those procedures applied in this case.

Briefly, the procedures set out under that Act made provision for a person who had undertaken construction work under a construction contract to make a payment claim in respect of what it said was a progress payment owing to it. The recipient of such a payment claim, called the respondent, can reply by providing what is called a payment schedule. If such a schedule is not filed by the respondent, then the respondent becomes liable to pay the claimed amount. Remedies for that liability are provided for in s 15 of the Act. A claimant may "recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction" or the claimant may "make an adjudication application" under the Act in relation to the payment of the claim.

What follows from the serving of a payment claim and a payment schedule? If those documents are exchanged, generally the Act provides for a procedure whereby the issue in dispute between the parties can be adjudicated by a qualified adjudicator. The Act provides by s21(3) that: "(3) Subject to subsections (1) and (2), an adjudicator is to determine an adjudication application as expeditiously as possible and, in any case: (a) within 10 business days after the date on which the adjudicator notified the claimant and the respondent as to his or her acceptance of the application, or (b) within such further time as the claimant and the respondent may agree."

Section 22 provides that the adjudicator is to determine the amount of the progress claim, if any, to be paid by the respondent, as well as the rate of any interest payable. Section 23 provides that if an adjudicator determines that a respondent is required to pay an adjudicated amount "the respondent must pay that amount to the claimant on or before the relevant dates." If a respondent does not make such a payment, a claimant may obtain an adjudication certificate. Significantly, s25 of the Act then provides that an "adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly." 6. It is evident from reading the Act, in my opinion, that one of its objects is to secure an expeditious resolution of issues between parties to a construction contract. The Act does not limit any other entitlement or remedy which a claimant may have for recovering any amount which it says is owing to it. My observation about the statute is borne out by similar observations made by judges of the Supreme Court. In Shell Refining (Australia) Pty Limited v AJ Mayr Engineering Pty Limited [2006] NSWSC 94 at [14,], Bergin J referred to remarks made in another case by Palmer J wherein, according to Bergin J, "Palmer J described the scheme of the Act as requiring the respondent to 'pay now argue later'." Her Honour went on to observe that it "also appears that the motivation for the introduction of the scheme of the Act stemmed in part from an understanding that cash flow is considered the 'life blood of the construction industry'". 7. In this case CCD, before it issued the proceedings in this court on 3 April 2007, used some of the procedures under the Act. Indeed the causes of action pleaded against both Seduce Group and Katherine were based upon the stage it had reached in using those procedures. But as a result of advice which the CCD Group received from its then legal representatives, it determined not to follow through the statutory procedure at that stage to an adjudication but instead to pursue the path of litigation. Hence it filed its statements of claim, as I said, on 3 April 2007.

By the end of 2007 CCD Group was obviously becoming frustrated by the proceedings and at that stage resorted again to the statutory procedure under the Act. That procedure was commenced by CCD on 3 December 2007 by the lodgement of a fresh payment claim and was resolved, about six weeks later on 14 January 2008, by a determination. The determination was in favour of CCD Group. That determination was followed by proceedings in the Supreme Court of New South Wales concerning some issues to do with the determination. The proceedings were between CCD Group and Seduce Group and Katherine and all parties had some success.

Given that background, I have formed the opinion that the CCD Group should not be relieved of its obligation to pay costs under Part 42.19. The CCD Group chose to litigate its claim on 3 April 2007 instead of pursuing its entitlements and remedies which might have been available under the Act. It could even have undertaken both litigation and the statutory remedies.

Litigation of its nature is based upon allegations which need to be particularised and responded to. This procedure, once again by its nature, is likely to be lengthier than the statutory procedure provided for under the Act. The CCD Group complains that in the course of the litigation in this court they were met by "obfuscation and delay" by the defendants who were employing what were described as delaying tactics. I do not find that there has been on the part of the defendants anything which could amount to obfuscation or delaying tactics. It is obvious that they made use of the normal procedures which are part of litigation but, as I say, the use of those procedures was a consequence of the CCD Group electing to pursue relief against Seduce Group and Katherine by means of litigation instead, of at that stage, the statutory procedures. It chose the path of litigation which brings with it a certain degree of delay and issues to be resolved.

Mr Murphy, who appears for the CCD Group and who has said everything that can be said on behalf of his client, argues that his client has now received, in essence, everything that it originally sought from the defendants in these proceedings. That is true to the extent that his client has been successful but what is also true is that its ultimate success was the result of the re-instigation of the statutory procedure rather than the litigation. By deciding to pursue litigation between 3 April 2007 when the statement of claim was filed and 3 December 2007 when a fresh payment claim was submitted, the CCD Group elected to expose both Seduce Group and Katherine to the procedures which normally accompany litigation. Having, I infer, determined by December that those procedures were not satisfactory, CCD undertook the alternative with significant success. CCD could have prosecuted its claim for payment under the Act in April 2007 but instead determined to litigate its claim.

In my opinion CCD has not provided any good reason why it should not, as a result of the choices which it has made, bear the usual costs consequences which follow from discontinuing the proceedings which it has elected to commence.

I should add just one further observation, one of the issues in this matter was a question raised by Mr Zipser for both defendants as to whether his clients were vexed by the two sets of statutory procedures or by the statutory procedures and the litigation. The authorities to which he referred, including Moore v Inglis (1976) 9 ALR 509 and Garwolin Nominees Pty Limited v Statewide Building Society [1984] VR 469 were, Mr Murphy argued, distinguishable because there were, in this case, no two sets of curial proceedings. I do not find it necessary to resolve the issue as to whether the two sets of statutory procedures or the statutory procedures and the litigation, fell within the circumstances referred to in those authorities. For the reason I have already given, I am not satisfied that CCD Group should be relieved of the consequences of Part 42.19 and I reject its application. Gentlemen, is there anything follows from that?

ZIPSER: Your Honour in relation to the question of costs on the application, the position is that my friend's client has applied for an indulgence from the court and the court has declined to grant that indulgence. In those circumstances I would submit the normal costs rule should apply that costs would follow the event and I can say they're fairly limited.

HIS HONOUR: Is there any reason why it shouldn't Mr Murphy?

HIS HONOUR: The plaintiff applicant to this application should pay the defendants respondents' costs of the application. Nothing else? No. Thank you both gentlemen for your written and oral submissions, I found them both very helpful.

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.