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[2008] WADC 173
General information, not legal advice.
District Court of WA
2008-11-28
Original judgment source is linked above.
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
CITATION : WORMALL PTY LTD -v- MARCHESE INVESTMENTS PTY LTD [2008] WADC 173
Building and construction - Determination made under Construction Contracts Act 2004 (WA) - Application to suspend enforcement
Applicant/Judgment Creditor : Chris Martin & Associates
1 PRINCIPAL REGISTRAR GETHING: This is an application for a suspension order pursuant to Civil Judgments Enforcement Act 2004 (WA) ("CJEA") s 15. The judgment debt is an amount of $152,967.16 which arises pursuant to a determination ("Determination") made under the Construction Contracts Act 2004 (WA) ("CCA"). By order made on 19 September 2008 his Honour Judge Fenbury granted the applicant/judgment creditor leave to enforce the Determination against the respondent/judgment debtor: Wormall Pty Ltd v Marchese Investments Pty Ltd [2008] WADC 140.
2 The judgment debtor's application for a suspension order came on for hearing on the same time as an application by the judgment creditor for a means enquiry. By agreement with counsel, the application for the suspension order was dealt with first and the means inquiry adjourned.
3 The Determination arose out of a contract between the judgment creditor and the judgment debtor for the construction of a subdivision in Secret Harbour. The contract provided for the appointment of a supervisor who had certain obligations. The supervisor appointed was a David Wills, a consulting engineer. The relevant contract between the judgment creditor and the judgment debtor was annexed to an affidavit sworn by Mr Wills on 17 June 2008 and filed with the court in relation to the application heard by Judge Fenbury. The judgment debtor relied on this affidavit for the purposes of the present application for a suspension order. The contract relevantly included Australian Standard General Conditions of Contract AS 2124-1992.
4 The earlier decision in this matter by Judge Fenbury, reported as Wormall, required consideration of three issues: whether the order to grant leave to enforce the Determination ought to be made; whether, if made, a sum should be set off against it; and, whether the effect of the order should be suspended pursuant to CJEA s 15. As noted, his Honour granted leave to enforce. His Honour declined to allow the set off contended for. In relation to the making of a suspension order, the relevant portions of his Honour's decisions are as follows:
"13. The more vigorously pressed argument on behalf of the respondent related to the making of a suspension order.
5 Counsel for the judgment creditor argued that there was in effect an issue estoppel on whether or not a suspension order ought to issue. The relevant change in circumstances relied on by the judgment debtor was that on 17 September 2008 Mr Wills, as superintendant, issued a "Final Certificate" pursuant to the contract between the two parties.
6 Clause 42.8 of the AS 2124-1992 deals with the issue of a Final Certificate. As the effect of the Final Certificate was the subject of much argument before me, it is convenient to quote cl 42.8 in detail:
Within 14 days after receipt of the Contractor's Final Payment Claim or, where the Contractor fails to lodge such claim, the expiration of the period specified in Clause 42.7 for the lodgement of the Final Payment Claim by the Contractor, the Superintendent shall issue to the Contractor and to the Principal a final payment certificate endorsed 'Final Certificate'. In the certificate the Superintendent shall certify the amount which in the Superintendent's opinion is finally due from the Principal to the Contractor or from the Contractor to the Principal under or arising out of the Contract or any alleged breach thereof."
7 In my view, the issue of the Final Certificate constitutes a sufficient change in circumstances for the question of issue of estoppel not to arise. Further, in Snook v Miller & Ors [2007] WADC 76, his Honour Judge Keen observed that there is nothing in the CJEA which appears to prevent subsequent applications being made. This conclusion is reinforced by the nature of the enquiry under CJEA s 15 which, as discussed below, involves the balancing of the risks of doing an injustice.
8 The power to make an order "suspending the enforcement of all or part of [a] judgment" is found in CJEA s 15. By CJEA s 15(3), when hearing an application for a suspension order "the court may only make such an order if there are special circumstances that justify doing so". By CJEA s 15(4), a "suspension order may be made for any period (including an indefinite period) and may be made on terms as to costs or otherwise."
9 In my view, CJEA s 15 contemplates a two stage process. The first stage is to determine whether the applicant has cleared the hurdle of establishing that there are "special circumstances". If this is established, then the power, and thus the discretion, of the court is enlivened. This is the second stage. This two stage approach mirrors the position in relation to stays of execution both under inherent jurisdiction of the court and the former O 47 r 13 of the Rules of the Supreme Court 1971: See generally Hamersley Iron Pty Ltd v Lovell (No 2) [1998] WASCA 304; (1998) 20 WAR 79. By parity of reasoning to stay of execution cases, in this second stage, the court will consider issues like the prospect of success of an appeal where this is relied on as a basis for a suspension order. The court will also consider hardship and the balance of convenience, encompassing the same sorts of considerations as will arise where the court considers the grant of an interlocutory injunction: Hamersley Iron Pty Ltd v Lovell (No 2) (supra) 20 WAR, at 91, 94.
10 The explanatory memorandum to the Bill which became the CJEA contains the following general comment about the power in s 15 (at p 5 - 6):
"Circumstances may arise when enforcement action has been commenced and it is just that the enforcement be suspended. An example is where judgment was obtained by default in that the defendant did not respond to a summons but there is an explanation for the default such as hospitalisation. Another example could be where the debtor was in impecunious".
11 The comment about the suspension order being made where it is "just" echoes the references cited above that the discretionary considerations in the context of a stay of execution are similar to those considered by a court on an interlocutory injunction application. In the injunction context, the key discretionary consideration is sometimes expressed as the balance of the risk of doing an injustice: Cayne v Global Natural Resources plc [1984] 1 All ER 225, at 237; Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, at 536.
12 The requirement that there be "special circumstances" is one way in which the test is expressed for a stay of execution under either the inherent jurisdiction of a court or under the rules relating to stays of execution: see The Commissioner of Taxation for the Commonwealth of Australia v The Myer Emporium Limited [1986] HCA 13; (1986) 160 CLR 220, at 220 - 223; Eastland Technology Australia Pty Ltd v Whisson and Ors [2003] WASCA 307; (2003) 28 WAR 308 at 311. In Snook v Miller & Ors (supra), Judge Keen relied on and accepted that the authorities relating to special circumstances in the context of the former law relating to stays of execution, whilst not to be entirely apposite, contained principles which were relevant to the application of CJEA s 15: Snook v Miller & Ors at par [27] - [32], citing Eastland Technology and State Bank of Victoria v Parry [1989] WAR 240. Judge Keen's comments that a suspension order is an "unusual order" and that the requirement that there be special circumstances "is one that is strictly insisted upon".
Relevance of the Construction Contracts Act 2004
13 It is important to place present application in the context of the statutory scheme contained in the CCA. The CCA was the subject of detailed consideration by his Honour Justice Beech in O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2008] WASC 58 ("O'Donnell Griffin").. His Honour referred to the explanatory memorandum for the Bill which later became the CCA, and the second reading speech for the same piece of legislation, which both describe the Bill as providing "a rapid adjudication process that operates in parallel to any other legal or contractual remedy": [37], [38]. His Honour then identified five features of the statutory scheme that were of particular relevance.
"(a) The procedure for determination by an adjudicator is intended to be quick, informal and inexpensive: s 30, s 31, s 32.
(b) A determination is binding on the parties even though other proceedings relating to the substantive dispute between the parties are on foot: s 38.
(c) A party liable to pay under a determination must do so: s 39.
(d) A determination is, with very limited exceptions, final: s 41, s 46.
(e) The substantive dispute (if any) will be determined by other means (such as arbitration or litigation) involving a comprehensive process, and payments made pursuant to a determination are to be taken into account and dealt with in the resolution of the substantive dispute: s 38, s 40, s 45.
The object of the scheme is, as described in the explanatory memorandum and the Second Reading Speech, to 'keep the money flowing in the contracting chain by enforcing timely payment and side lining protracted or complex disputes'."
14 The essence of the judgment debtor's submission in support of the application for a suspension order was that the issue of the Final Certificate had fundamentally changed the context in which the Determination is to be enforced. The net result of the Final Certificate was that the judgment creditor became liable to pay the judgment debtor a sum of $23,870.25. The judgment debtor further submitted that the issues in relation to the judgment creditor's Claim No. 9, which became the subject of the Determination, had been considered by the superintendent in preparing the Final Certificate. In effect, the submission was that it would be unjust to require the judgment debtor to pay the judgment creditor a sum of $152,967.16, in effect as an advance payment on the account (see CCA s 40), in circumstances where the final balance under the contract had been determined, not as an amount owing by the judgment debtor to the judgment creditor, but as an amount owing by the judgment creditor to the judgment debtor.
15 However, the Final Certificate, as set out in cl 42.8 quoted above, provides that it is the amount which "in the superintendent's opinion is finally due from the principal to the contractor or from the contractor to the principal". It only becomes evidence as to the final position between the parties unless either party serves a notice of dispute under cl 47. Clause 47 of AS 2124 - 1992 provides a comprehensive dispute resolution clause incorporating attempts to resolve the dispute between the parties and, ultimately, arbitration. Both the judgment creditor and the judgment debtor have objected to the Final Certificate: see the affidavit of Rosa Marchese sworn 12 November 2008, par 11, 12. Ms Marchese goes on to despose that "the two disputes will be determined according clause 47 of the contract".
16 The position which the parties are in following the issue of the Final Certificate is thus not relevantly different to the situation which they are when the matter was before Judge Fenbury. A determination had been made which constitutes "an advance towards the total amount payable" (CCA s 40), in circumstances where the substantive dispute will be determined by other means (probably arbitration). This will involve a comprehensive process, and payments made pursuant to the Determination will be taken into account and dealt with in the resolution of that substantive dispute [to paraphrase the words of his Honour Justice Beech quoted above].
17 In submissions, counsel for the judgment debtor relied on the decision of the New South Wales Court of Appeal in John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 140 (18 June 2007) ("John Holland"). In that case, John Holland contracted with the RTA for the construction of a roadway and associated bridgeworks. Pursuant to the terms of the contract, John Holland provided security for its performance and satisfaction of its obligations. In the course of the works, determinations were made under the New South Wales equivalent to the Construction Contract Act 2004 (WA), the Building and Construction Industry Security of Payment Act 1999 (NSW). The determinations adjudicated amounts well in excess of the amount of the security to be paid by the RTA to John Holland. These amounts were paid. After the works reached practical completion, John Holland asked the RTA to return half the security. The RTA declined. Both at first instance and on appeal, John Holland's application for return of half the security was dismissed.
18 The key paragraph relied on by counsel for the judgment debtor par 62, which provides as follows:
"It is not correct that retention of security 'undoes' an adjudicator's determination, or that a superintendent who in performing his contractual function comes to a determination negates a statutory right to retain an adjudicated amount. The adjudicator's determination remains, and brings payment of the adjudicated amount, but that is interim and subject to a different position being established in relation to payment for the relevant work or related goods or services, contractually or in proceedings. If in civil proceedings it is decided that the contractor was entitled to $10 or $30, rather than the $20 determined by the adjudicator, that does not undo the adjudicator's determination. It has done its work in ensuring 'prompt interim progress payment on account, pending final determination of all disputes'. ... So also if, in the manner earlier described, the contractual mechanisms result in a contractual obligation on the principal to pay the contractor or the contractor to pay the principal. The contractor's right under the Act is to receive the adjudicated amount, but subject to final determination, and if the final determination involves the superintendent determining that the contractor was entitled to $10 or $30, rather than the $20 determined by the adjudicator, the superintendent is not negating the contractor's statutory right."
19 Counsel for the judgment debtor submitted that the issue of the Final Certificate amounted to a "different position being established in relation to payment for the relevant work or related goods or services contractually". This then overrode the interim nature of the Determination, which was, in effect, subsumed into the consideration which led to the issue of the Final Certificate. In essence, the argument was, that it would be unjust to require an interim payment in the amount of $152,967.16 from the judgment debtor to the judgment creditor, in circumstances where the final amount owing between the two was an amount of $23,870.25 owing from the judgment creditor to the judgment debtor.
20 In my view, the decision in John Holland supports the position of the judgment creditor. The Final Certificate is not yet conclusive as to the final position between the judgment creditor and the judgment debtor, as it is being challenged by both of them, as is their contractual right. That being so, the Determination still stands as an interim payment, which the judgment creditor has a statutory right to receive.
21 As I read the contract, what will ultimately happen if the judgment creditor and judgment debtor cannot agree is that an arbitrator will make a decision. That decision would constitute the "different position" referred to in the John Holland case or the determination of the "substantive dispute" referred to in O'Donnell Griffin. At the end of that process, if it transpires that by insisting on payment of the Determination as an advance the judgment creditor has been overpaid, then it will need to refund that overpayment to the judgment debtor. That is the nature of an advance payment. In my view, no injustice would result from this process being allowed to progress to its final conclusion as contemplated in the contract.
22 For this reason, I am not satisfied that special circumstances exist. The circumstance of a judgment creditor seeking to enforce a determination under the CCA prior to the final determination of matters in dispute under the relevant contract is properly characterised as a normal, and indeed intended, application of that Act.
23 I will hear counsel as to the question of costs and the future conduct of the means inquiry.
(1998) 20 WAR 79
(1987) 8 NSWLR 533
(1986) 160 CLR 220
(2003) 28 WAR 308