Transgrid v. Siemens Ltd. & Anor. [2004] NSWCA 395 - NSWCA 2004 case summary — Zoe

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Transgrid v. Siemens Ltd. & Anor. [2004] NSWCA 395

[2004] NSWCA 395

Court of Appeal (NSW)|2004-11-03|Before: Mason P, Giles JA, Hodgson JA

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Source facts

Court

Court of Appeal (NSW)

Decision date

2004-11-03

Before

Mason P, Giles JA, Hodgson JA

Source

Original judgment source is linked above.

Judgment (66 paragraphs)

[1]

CITATION : Transgrid v. Siemens Ltd. & Anor. [2004] NSWCA 395 HEARING DATE(S) : 14 Septermber 2004 JUDGMENT DATE : 3 November 2004

[2]

JUDGMENT OF : Mason P at 1; Giles JA at 2; Hodgson JA at 3 DECISION : Appeal dismissed with costs.

[3]

CATCHWORDS : BUILDING AND CONSTRUCTION - Progress payments - Building & Construction Industry Security of Payment Act - Progress claim - Adjudicator's determination - Grounds for judicial intervention - Calculation of progress payment - Meaning of "amount calculated in accordance with the terms of the contract" where contract provides for certification by superintendent - Discretion. LEGISLATION CITED : Building & Construction Industry Security of Payment Act 1999 Abacus Funds Management v. Davenport [2003] NSWSC 1027 Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 AC 147 Banks v. Transport Regulation Board (Vic) (1968) 119 CLR 222 Brodyn Pty. Limited v. Davenport [2003] NSWSC 1019 Brodyn Pty. Limited v. Davenport [2004] NSWCA 394 Calvin v. Carr [1080] AC 574 Craig v. South Australia (1995) 184 CLR 163 Durayappah v. Fernando [1967] 2 AC 337 CASES CITED : Emag Constructions Pty. Limited v. Highrise Concrete Contractors (Aust) Pty. Limited [2003] NSWSC 903 Holdmark Developers Pty. Limited v. G.J. Formwork Pty. Limited [2004] NSWSC 905 Leighton Contractors Pty. Ltd. v. Campbelltown Catholic Club [2003] NSWSC 1103 Minister for Immigration v. Bhardwaj (2002) 209 CLR 597 Multiplex Constructions Pty. Limited v. Luikens [2003] NSWSC 1140 Musico v. Davenport [2003] NSWSC 977 Project Blue Sky Inc. v. Australian Broadcasting Authority (1998) 194 CLR 355 R v. Hickman; Ex Parte Fox and Clinton (1945) 70 CLR 598 Ridge v. Baldwin [1964] AC 40 Transgrid v. Walter Construction Group [2004] NSWSC 21 Transgrid (A Statutory State Owned Corporation) - appellant PARTIES : Siemens Limited - 1st appellant Timothy Sullivan - 2nd appellant FILE NUMBER(S) : CA 40207/04 COUNSEL : Mr. F. Corsaro SC for appellant Mr. B. Walker SC with Mr. M. Christie for 1st respondent Doyles, Sydney for appellant SOLICITORS : Baker & McKenzie, Sydney for 1st appellant Colin Biggers & Paisley, Sydney for 2nd respondent

[17]

progress payment means a payment to which a person is entitled under section 8, and includes (without affecting any such entitlement): (a) the final payment for construction work carried out (or for related goods and services supplied) under a construction contract, or (b) a single or one-off payment for carrying out construction work (or for supplying related goods and services) under a construction contract, or (c) a payment that is based on an event or date (known in the building and construction industry as a "milestone payment"). 10 It is common ground that the contract in this case is a construction contract. 11 Section 7(1) of the Act is in the following terms: 7 Application of Act (1) Subject to this section, this Act applies to any construction contract, whether written or oral, or partly written and partly oral, and so applies even if the contract is expressed to be governed by the law of a jurisdiction other than New South Wales. 12 Section 7(2) excludes the application of the Act to certain contracts, including those referred to in s.7(2)(c), as follows: 7(2) This Act does not apply to: … (c) a construction contract under which it is agreed that the consideration payable for construction work carried out under the contract, or for related goods and services supplied under the contract, is to be calculated otherwise than by reference to the value of the work carried out or the value of the goods and services supplied. 13 Part 2 of the Act deals with rights to progress payments, and relevantly contains ss.8, 9, 10(1), 11(1) and 12. Those provisions are as follows: 8 Rights to progress payments (1) On and from each reference date under a construction contract, a person: (a) who has undertaken to carry out construction work under the contract, or (b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment. (2) In this section, reference date , in relation to a construction contract, means: (a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or (b) if the contract makes no express provision with respect to the matter - the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month.

[21]

12 Effect of "pay when paid" provisions (1) A pay when paid provision of a construction contract has no effect in relation to any payment for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) under the contract. (2) In this section: money owing , in relation to a construction contract, means money owing for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) under the contract. pay when paid provision of a construction contract means a provision of the contract: (a) that makes the liability of one party (the first party ) to pay money owing to another party (the second party ) contingent on payment to the first party by a further party (the third party ) of the whole or any part of that money, or (b) that makes the due date for payment of money owing by the first party to the second party dependent on the date on which payment of the whole or any part of that money is made to the first party by the third party, or (c) that otherwise makes the liability to pay money owing, or the due date for payment of money owing, contingent or dependent on the operation of another contract. 14 Part 3 of the Act deals with the procedure for recovering progress payments, and relevantly includes ss.13, 14, 17-22, 24(1), 25, 27, 28(1) and 32. Those provisions are as follows: 13 Payment claims (1) A person referred to in section 8 (1) who is or who claims to be entitled to a progress payment (the claimant ) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (2) A payment claim: (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount ), and (c) must state that it is made under this Act. (3) The claimed amount may include any amount: (a) that the respondent is liable to pay the claimant under section 27 (2A), or (b) that is held under the construction contract by the respondent and that the claimant claims is due for release. (4) A payment claim may be served only within: (a) the period determined by or in accordance with the terms of the construction contract, or (b) 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), whichever is the later. (5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. (6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.

[23]

17 Adjudication applications (1) A claimant may apply for adjudication of a payment claim (an adjudication application ) if: (a) the respondent provides a payment schedule under Division 1 but: (i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or (ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount, or (b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount. (2) An adjudication application to which subsection (1)(b) applies cannot be made unless: (a) the claimant has notified the respondent, within the period of 20 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim, and (b) the respondent has been given an opportunity to provide a payment schedule to the claimant within 5 business days after receiving the claimant's notice. (3) An adjudication application: (a) must be in writing, and (b) must be made to an authorised nominating authority chosen by the claimant, and (c) in the case of an application under subsection (1)(a)(i) - must be made within 10 business days after the claimant receives the payment schedule, and (d) in the case of an application under subsection (1)(a)(ii) - must be made within 20 business days after the due date for payment, and (e) in the case of an application under subsection (1)(b) - must be made within 10 business days after the end of the 5-day period referred to in subsection (2) (b), and (f) must identify the payment claim and the payment schedule (if any) to which it relates, and (g) must be accompanied by such application fee (if any) as may be determined by the authorised nominating authority, and (h) may contain such submissions relevant to the application as the claimant chooses to include. (4) The amount of any such application fee must not exceed the amount (if any) determined by the Minister. (5) A copy of an adjudication application must be served on the respondent concerned. (6) It is the duty of the authorised nominating authority to which an adjudication application is made to refer the application to an adjudicator (being a person who is eligible to be an adjudicator as referred to in section 18) as soon as practicable.

[28]

22 Adjudicator's determination (1) An adjudicator is to determine: (a) the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount ), and (b) the date on which any such amount became or becomes payable, and (c) the rate of interest payable on any such amount. (2) In determining an adjudication application, the adjudicator is to consider the following matters only: (a) the provisions of this Act, (b) the provisions of the construction contract from which the application arose, (c) the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim, (d) the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule, (e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates. (3) The adjudicator's determination must: (a) be in writing, and (b) include the reasons for the determination (unless the claimant and the respondent have both requested the adjudicator not to include those reasons in the determination). (4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined: (a) the value of any construction work carried out under a construction contract, or (b) the value of any related goods and services supplied under a construction contract, the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination. (5) If the adjudicator's determination contains: (a) a clerical mistake, or (b) an error arising from an accidental slip or omission, or (c) a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or (d) a defect of form, the adjudicator may, on the adjudicator's own initiative or on the application of the claimant or the respondent, correct the determination.

[52]

MASTER'S DECISION 20 The Master noted that the parties agreed that the adjudicator's determination was reviewable for jurisdictional error; and he discussed a number of cases in which this had been accepted: Musico v. Davenport [2003] NSWSC 977, Brodyn Pty. Ltd. v. Davenport [2003] NSWSC 1019, Abacus v. Davenport [2003] NSWSC 1027, Leighton Contractors Pty. Ltd. v. Campbelltown Catholic Club [2003] NSWSC 1103, Multiplex Constructions Pty. Ltd. v. Luikens [2003] NSWSC 1140, and Transgrid v. Walter Construction Group [2004] NSWSC 21. 21 The Master considered a submission by Transgrid that there was jurisdictional error in this case, on the basis that the adjudicator did not determine the progress payment by considering what was the amount calculated in accordance with the contract, as required by s.9(a), because that amount was what was certified by the Superintendent pursuant to cl.42.2 of the contract. Despite contrary views expressed in Abacus and Leighton, the Master said he preferred a construction of the Act such that "the adjudicator does not step into the shoes of the Superintendent". 22 The Master then considered other submissions advanced by Transgrid, including a submission that the adjudicator also failed to apply s.9(a) in that he included in the progress payment amounts not calculated in accordance with the contract, namely amounts in respect of alleged variations not approved in writing or valued as required by cl.42.1. The Master held that any such error was not a jurisdictional error. 23 Having rejected those further submissions, the Master held that, even if he decided that, because of his preferred view of the Act, there was jurisdictional error by reason of the first submission, he would not grant relief on discretionary grounds, in particular the ground that practical completion of the contract would be achieved on 25 March 2004, so that final entitlements of the parties could then be worked out. On that basis, he dismissed the summons without forming a final view as to whether he should follow Abacus.

[57]

Alternatively, having found, or as he should have found, that Section 9(a) of the Act required the adjudicator to follow the valuation of the Superintendent under the Contract, the learned Master's discretion to refuse the relief claimed miscarried: 5.1. in that the learned Master acted upon a wrong principle that the discretion to refuse certiorari for jurisdictional error entitled the learned Master to refuse relief if there was an alternative remedy otherwise available. 5.2. in that the learned Master should have exercised his discretion by finding jurisdictional error on the part of the adjudicator and that it was not open to refuse certiorari even if "other effective and convenient" remedies were available. 5.3. in that the learned Master should have found that the discretionary aspects of the grant of certiorari are limited so as to only permit the refusal of relief claimed by the Appellant to circumstances where there were appropriate appeal procedures and that there were no appropriate appeal procedures in this case. 5.4. in that the learned Master incorrectly found the existence of an alternative remedy which disentitled the granting of relief as a matter of discretion when there was no true alternative remedy available to the Appellant. 5.5. in that the Learned Master incorrectly rejected the approach by McDougall J in connection with the exercise of discretion as a matter of principle in Musico v Davenport and should have approached the exercise of discretion by considering that there was no alternative effective and convenient remedy available to the Appellant and which was also in the public interest, which disentitled the Appellant to the relief claimed. 5.6. in that the learned Master gave excessive and unjustified weight and regard to: 5.6.1. the availability of a dispute resolution mechanism in the Contract which would result in a final adjudication of the parties rights, 5.6.2. the irrelevant consideration of, or alternatively had excessive and unjustified regard to, the public interest in avoiding multiple suits between the parties in these circumstances. 5.7. in that the exercise of his discretion was guided by an incorrect finding that a review process commencing in March 2004 under the Contract provided an adequate "effective" or alternatively an alternate remedy when that was not the case and that no true effective or convenient alternative remedy existed having regard to the adjudicator's jurisdictional errors. 5.8. in that he failed to consider or to give sufficient weight to the public interest in ensuring that the uncertainty about the limits of an adjudicator's jurisdiction arising from the recent judgments- of the Court was resolved for the better administration of the Act and for the certainty thereby provided to other claimants and respondents under the Act. 5.9. in that he failed to consider or to give sufficient weight to the very substantial amount of money awarded by the adjudicator and the fact that the jurisdictional error would create rights outside the Contract that would affect the Appellants rights and were not subject to the dispute resolution mechanism or an alternative effective and convenient remedy. 5.l0. in that the learned Master incorrectly took into account the possibility of the commencement of civil proceedings which might be taken to finally determine rights between the parties as though the proceedings before the Master appealed from were considered a collateral process to those civil proceedings thereby wrongly following a principle which would deprive all aggrieved parties to an adjudication of an order in the nature of certiorari. 25 Siemens relies on the following ground in its Notice of Contention: 1. The Second Respondent did not commit a jurisdictional error by not concluding that he was not bound by the certification of the superintendent under the contract in respect of contractual progress payments. 26 In my opinion, it is appropriate to consider first the Notice of Contention: if this is correct, the Court would otherwise be considering the question of discretion on a false basis. 27 I will address in turn the following issues. First, what kinds of errors vitiate the determination of an adjudicator under the Act? Second, were any such errors shown here? Third, should relief have been refused on discretionary grounds?

[58]

WHAT ERRORS VITIATE AN ADJUDICATOR'S DETERMINATION? 28 As stated above, the parties agreed before the Master that the adjudicator's determination was reviewable for jurisdictional error, and they maintained that position on appeal. 29 However, for reasons I have given in Brodyn Pty. Limited v. Davenport [2004] NSWCA 394, and as submitted by Mr. Walker SC for Siemens in this case, in my opinion this review is available only where the determination is not a determination within the meaning of the Act, because of non-satisfaction of some pre-condition which the Act makes essential for the existence of such a determination. If an adjudicator has erroneously decided that such an essential pre-condition has been satisfied when in truth it has not, then that can be considered a jurisdictional error making the determination "reviewable". However, for reasons given in Brodyn, such an error would in fact make the determination void; and in my opinion, relief in the nature of certiorari is not available to quash a determination under the Act that is not void. Where a determination is void, relief is available by way of declaration and injunction; so in my opinion there is no occasion where relief in the nature of certiorari would be available and required. 30 I adopt the following paragraphs from my judgment in Brodyn concerning the essential pre-conditions for the existence of an adjudicator's determination: 53. What then are the conditions laid down for the existence of an adjudicator's determination? The basic and essential requirements appear to include the following: 1. The existence of a construction contract between the claimant and the respondent, to which the Act applies (ss.7 and 8). 2. The service by the claimant on the respondent of a payment claim (s.13). 3. The making of an adjudication application by the claimant to an authorised nominating authority (s.17). 4. The reference of the application to an eligible adjudicator, who accepts the application (ss.18 and 19). 5. The determination by the adjudicator of this application (ss.19(2) and 21(5)), by determining the amount of the progress payment, the date on which it becomes or became due and the rate of interest payable (ss.22(1)) and the issue of a determination in writing (ss.22(3)(a)).

[63]

WERE SUCH ERRORS SHOWN IN THIS CASE? 31 In this case, there is no doubt that the purported determination answered the statutory words, at least unless vitiated by one of the other matters to which I have referred. Plainly, there was a construction contract between Siemens and Transgrid to which the Act applied (ss.7 and 8). Siemens served the payment claim on Transgrid identifying the construction work to which the progress payment related and indicating the amount claimed (s.13). Transgrid provided a payment schedule identifying the payment claim and indicating the amount of the payment it was prepared to make. Siemens made an adjudication application in writing to an authorised nominating authority, identifying the payment claimed (s.17). The authorised nominating authority referred the adjudication application to an adjudicator, who accepted the adjudication application (s.19). The adjudicator determined the amount of the progress payment, the date on which it became due, and the rate of interest payable, and did so in writing and with reasons (s.22). 32 There was no suggestion of denial of natural justice or fraud. 33 What was alleged was "jurisdictional error". The jurisdiction of the adjudicator is to determine the adjudication application referred to him or her (see ss.17(6), 19(2), 21(5) and 22) by determining the amount of the progress payment, the date on which it becomes or became due and the rate of interest payable (s.22(1)). Section 22(2) requires the adjudicator to consider specified matters only. However, for reasons given earlier, in my opinion an adjudicator's determination will not be rendered invalid by this provision so long as the adjudicator either does consider only the matters specified, or else bona fide addresses the requirements of s.22(2) as to what is to be considered. 34 In this case, there is no suggestion that the adjudicator did not consider the provisions of the Act and the provisions of the contract. However, the Master found that he made a jurisdictional error, because he did not determine the amount calculated in accordance with the terms of the contract, as required by s.9(a). In my opinion, even if "amount calculated in accordance with the terms of the contract" were, on the true construction of s.9(a) and of the contract, the amount certified by the Superintendent, a decision to the contrary by the adjudicator would be a mere error of law, and not such as to render the determination invalid. To that extent, I disagree with the views expressed by McDougall J in Musico v. Davenport [2003] NSWSC 977. Similarly, if it be the case that, on the true construction of the contract, there could be no entitlement to a progress payment in respect of a variation not approved in writing by the Superintendent, the inclusion of such a progress payment would likewise be an error of law, and not a matter which would render the determination invalid. 35 Accordingly, it is not necessary to decide whether, on the true construction of s.9(a) and the contract, the amount "calculated in accordance with the terms of the contract" is the amount certified (cl.42.2 of the contract) or the value of the work less deductions (cl.42.3 of the contract). However I would express the view that the latter follows from what I think is a preferable interpretation of s.9(a) and the contract, consistent with the use of the word "calculation" and consistent with the provisions against contracting out (s.34); that is, on this matter, I prefer the view of McDougall J in Abacus v. Davenport [2003] NSWSC 1027 to that tentatively expressed by the Master in the present case.