Coordinated Construction Co Pty Ltd v J.M. Hargreaves (NSW) Pty Ltd & Ors [2006] HCATrans 9 (3 February 2006)

--

Coordinated Construction Co Pty Ltd v J.M. Hargreaves (NSW) Pty Ltd & Ors [2006] HCATrans 9 (3 February 2006)

Last Updated: 15 February 2006

[2006] HCATrans 009

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S371 of 2005

B e t w e e n -

COORDINATED CONSTRUCTION CO PTY LIMITED

Applicant

and

J.M. HARGREAVES (NSW) PTY LIMITED

First Respondent

JOHN PARNELL

Second Respondent

PETER SARLOS

Third Respondent

LEADR

Fourth Respondent

Office of the Registry
Sydney No S372 of 2005

B e t w e e n -

COORDINATED CONSTRUCTION CO PTY LIMITED

Applicant

and

CLIMATECH (CANBERRA) PTY LIMITED

First Respondent

GERALD RAFTESATH

Second Respondent

LEADR

Third Respondent

Applications for special leave to appeal

GLEESON CJ
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 3 FEBRUARY 2006, AT 10.01 AM

Copyright in the High Court of Australia

MR B.W. WALKER, SC: May it please the Court, in those applications I appear with my learned friend, MR M. CHRISTIE, for the applicant. (instructed by Speed and Stracey)

MR D.D. FELLER, SC: If the Court pleases, I appear with my learned friend, MR D.M. LOEWENSTEIN, for the respondent. (instructed by James R. Knowles Lawyers Pty Limited)

GLEESON CJ: I understand there are submitting appearances for the second to fourth respondents. Yes, Mr Walker.

MR WALKER: Your Honours, these applications raise points in two categories which are, of course, related. In the first category there is the interpretation of an important New South Wales statute, important because of the effect it has on large contracts as well as small contracts and important because of the fact that those contracts operate in what is itself an important industry. Your Honours have seen the affidavit upon which we rely for what we would submit are the extra-judicial, that is, not just doctrinal commercial importance of the issues before the Court. In that first category of points what is raised for the Court is, of course, just a matter of statutory interpretation.

GLEESON CJ: We are dealing with matters 3 and 4 together, are we not, at this stage?

MR WALKER: Yes, may it please your Honour. They were not both called because I think of what your Honour said to the associate, but I have swept in as if that were true.

GLEESON CJ: Yes, we will deal together with matters 3 and 4. It is also the case, is it not, Mr Walker, that if the decision of the Court of Appeal on the question of interpretation of the legislation is correct, the other issues do not arise?

MR WALKER: Yes, that is why they are related. So that the point which may sound more general in the second category, namely, the availability of relief in the nature of the prerogative relief for jurisdictional error, that clearly does not arise and should not be considered if there is not merit in the first point, should not be.

It is for those reasons that I am going to turn to the first category to begin with. Your Honours, this is a statute which, as you have seen, is intended to create a regime which has been sloganised as “pay now, fight later” and, as your Honours have seen from the regime of the statute, the salient features of which we have collected in our paragraph 12 on page 214 of our application book, there is no doubt that this is intended to be a quick process, this adjudication.

It is meant to be a quick process by which money will change hands in favour of those who have done work, or who have undertaken to do work, pending not only the completion of the work, but also pending the processes of law, be they arbitration or litigation or any other method by which an overall entitlement, including netting off of complaints to and fro between parties, can be determined.

GLEESON CJ: Why is it of particular concern to the Master Builders Association, this question?

MR WALKER: Master Builders Association include, of course, head contractors.

GLEESON CJ: So it is the way in which subcontractors use this legislation that is of concern?

MR WALKER: That is of concern, yes. Yes, depending upon where one stands in the chain, the food chain it might be thought, depends upon whether members of the Master Builders Association would be delighted or appalled by the outcome of particular cases. But a position has been taken, no doubt political in nature, which leads to the support that your Honour perceives.

Your Honours, therefore we have to confront that this is a matter of statutory interpretation and at the outset, as you will have gathered from what is not said in our written submission, we do not put forward any test or approach to statutory interpretation different from anything orthodox. I am not able to say this is a case for which special leave should be granted so that something novel in the well-trodden field of statutory interpretation should be attempted.

However, in our submission, where a statute is expressed in terms which do not obviously lend themselves to a simple redraw, and where there has been an interpretation which has attracted differences of opinion amongst the judiciary, then, in our submission, one of the traditional roles for this Court, pursuant to a grant of special leave, is to consider for itself whether the interpretation which so far prevails is the preferable one.

GLEESON CJ: By reference to the statute, Mr Walker, which is the particular provision or which are the particular provisions?

MR WALKER: The collection of provisions in order starts with section 8, moves, because of the definition required, to section 3(1), the definition of progress payment, and then goes to section 9 and, as part of our argument, involves consideration of section 10. Can we try briefly to put the point without, as it were, putting the whole of the appellate argument. I stress, this is a statute which imposes upon contracts, intrudes upon negotiated contracts, a set of statutory rights and they are what is called, in the heading of section 8, a right to a progress payment.

A progress payment is not to be confused with what parties may provide by way of progress payments simpliciter. I will come back to that in section 9. They are progress payments for people who have undertaken to carry out construction work or have undertaken to supply related goods and services. Section 8 is otherwise uninformative as to what the content of that entitlement may be. Section 3(1) tells the reader and, thus, the adjudicator what a progress payment means and it starts promisingly enough with that word “means”, but then declines into that form of words “and includes”. So:

progress payment means a payment to which a person is entitled under section 8 –

which is uninformative, of course –

and includes (without affecting any such entitlement): –

words which presumably encompass the notion of not detracting from generality – and includes three things, none of which, in our submission, easily fits the notion of unliquidated damages for delay or money necessary to compensate for not being able to undertake building work, which is at the heart of this case because if the decision stands which is against us, it is quite clear that these progress payments, described as they are in this statute, including the objects of the Act that one sees in the statute, it is quite clear that they will be available for people who complain that they have not been allowed even to start work, or that they have started but have not been able to do work for the last six months and they seek a progress payment for those last six months, leading to a result which is, at least intuitively and, in our submission, is certainly arguably linguistically impossible and absurd and ought not stand, namely, that a progress payment where you have the three particular examples offered by Parliament in (a), (b) and (c) of the definition is obtained, notwithstanding there is no construction work in question.

GLEESON CJ: This would have to be a payment under the contract. Delay in access to the site, for example, would not be something in the nature of general damages?

MR WALKER: No, it is quite clear, as we would see the issues joined in this case, that that is not being put forward either by the court or by those against us. That does not mean it might not be carried as an implication of some of the reasoning of Justice Hodgson, to which we have referred in our written submission, but it was not so decided.

GLEESON CJ: By hypothesis you have a case where, if you look at the contract, you will find that an amount of money is payable in these circumstances?

MR WALKER: Unquestionably, and can be included in the claim to be paid periodically during the currency of the contract. Now, that is why, of course, the argument against us, and that which found favour in the alternative method we have described in our written submission with Justice Hodgson, emerges from the terms of paragraph 9(a) of the Act, namely, that:

the amount [is to be] calculated in accordance with the terms of the contract.

The whole of the statutory point is that it is, nonetheless, section 9 is not the tail that wags the dog. Section 9 is nonetheless the calculation of an amount of a payment defined in section 3 and that that is relevantly and could only relevantly here be payment for carrying out construction work, for construction work carried out.

GLEESON CJ: Well:

progress payment means a payment to which a person is entitled under section 8, and includes –

so that takes you to section 8 in the first place, I suppose.

MR WALKER: That has only two possibilities, only one of which relevantly matters, namely, someone:

who has undertaken to carry out construction work –

Section 10, however, is informative because that then proceeds in a further ancillary or subsidiary way to stipulate how the adjudicator is to proceed. Section 9 is about calculation which involves this notion of valuation. Section 10 is about valuation. Now, true it is valuation comes where, under paragraph 9(b):

the contract makes no express provision with respect to the matter –

but it is nonetheless the linguistic context in which one approaches the question of interpretation. What is it that Parliament has said can be the subject of this extremely rapid, quick, one is tempted to say dirty process intended and by statute provisional in relation to the legal rights between the parties, but under which, on the argument against us, very large sums of money indeed, can pass hands, money which is calculated or valued in accordance with exactly the same kind of approach as one would take under Hadley v Baxendale to consequential loss for not being able to get on with the job as quickly as one liked, or not even being able to get on with the job at all.

Under section 10, when one looks at all those items, it is impossible, in our submission, to descry an intention of Parliament that the valuation under 9(b) would include anything in the nature of unliquidated damages for delay and, in our submission, the valuation of work does not, either as a matter of language or juristically in relation to a damages analysis, easily lend itself to include inconsequential losses. The very word “consequential” would rather suggest that, of course, they are the consequences of, amongst other things, not being able to do work.

It is for those reasons, in our submission, that when one looks at section 10, reflects upon the evident equivalence in terms of interference with contractual rights, that 9(a) and (b) ought to be seen as bestowing, that is, there is going to be as little interference with contract as possible, simply to ensure that work is paid for.

But one sees that in light of the mischief identified during the parliamentary work producing the Act, the interpretation produced by the Court of Appeal has led to two anomalies: one, disputes of a kind that it is easily imaginable simply cannot be dealt with in the time and with the resources permitted by the statute for an adjudication are now squarely placed by the Court of Appeal in just that kind of Tribunal; two, there has been now money passing hands for activity going well beyond that which the Minister identified. We have quoted the relevant passage in our paragraph 13 at page 214, line 37 or so where there is the reference to the:

intention to stamp out the un-Australian practice of not paying contractors –

and then we emphasise the words –

for work they undertake on construction. It is all too frequently the case that small subcontractors, such as bricklayers, carpenters, electricians and plumbers, do not get paid for their work -

Now, in our submission, quarrels about who is responsible for delay with the notorious complexity of causation, particularly in projects sufficiently complex to have one or more subcontractor on it, are not disputes which either easily fit that description of a mischief, nor do they easily fit the procedures we have summarised in paragraph 12 of our written submission as being those which must be carried out in order to serve the purpose of having a quick adjudication. It is for those reasons that the approach taken by Justice Barrett at first instance - the statement from Quasar Constructions v Demtech has been extracted in our paragraph 11 at the top of page 214 of the application book - is, with great respect, greatly to be preferred to that which has resulted from the Court of Appeal’s approach in this case.

Now, of course we are confronted with the fact that this is a statute and obscurities in statute have an obvious remedy apart from recourse to this Court, but, in our submission, they also do have recourse to this Court for a point which, in our submission, is a neat, easily presented argument in this case. There are very few factual matters to be attended to at all. The statutory interpretation issue does not require recourse to material beyond, really, that to which I have already referred. There has been a difference of judicial approach, true it is, resolved by the judicial hierarchy in New South Wales by these decisions.

GLEESON CJ: What was Justice McDougall’s approach?

MR WALKER: Justice McDougall’s - - -

HEYDON J: Quoted on page 223.

MR WALKER: Yes, your Honour:

claim for delay . . . true juristic nature of delay costs [as] a claim for ‘damages’ is not changed because ‘the contract in the present case expressly provides –

That was the argument he was considering based upon a contractual term that provided for delay cost. He rejected that and then said that because it was not damages for breach, but rather provided by the contract, it was that which was provided by the contract in terms of 9(a).

Now, in our submission, and for the reasons we have put in writing, the statutory interpretation question should not or could not be expected to turn upon the drafting of a contract as to whether, included in contractual entitlements are matters of compensation or make good for circumstances which arise from breach of contract and breach of contract will be certainly the position which obtains when there has been delay, for example, wrongfully caused by an owner or head contractor. True it is, it may also arise for neutral reasons.

GLEESON CJ: Well, it might just be a question of where the contract puts the risk, in the case of rain, for example.

MR WALKER: Quite. There may be a neutral reason and the parties may agree who will bear the cost of that. It will not necessarily, I should say, be a subcontractor who either bears the risk or obtains a full measure of compensation for it. There may be, for example, tariffs in order to both reduce argument and to reduce exposure of those who have to pay for the delay. But, in our submission, this case is a good vehicle in order to raise these issues precisely because it is one of these contracts that does provide for an entitlement in certain circumstances and it provides for an entitlement in circumstances which might also be considered to be a breach of contract.

Of course, a contractual entitlement to be paid for delay would in a final wash-up in litigation necessarily fall to be scrutinised as to its availability if, for example, a subcontractor were himself responsible for the events which caused delay, leading to the question of interpreting the contract as to taking advantage of one’s own wrong if in fact there had been a breach of contract which caused disruption or delay.

That is the kind of argument which the adjudicator simply cannot entertain, by Justice McDougall’s reasoning, could not entertain the answering argument, namely, you are not entitled because you have breached contract and there are damages payable by you. Under the Court of Appeal’s decision that question is left obscure. Those are the reasons why, in our submission, on the primary and indispensable matter of statutory interpretation of this contract, this Court’s intervention is appropriate.

As to the issue to which the first is essential of judicial review, can we simply add this to what we have already put in our written submission. The decision in Brodyn, to which reference is made in our written submission and against which we unsuccessfully sought leave to put argument as to its correctness in the Court of Appeal, is one which, for the reasons identified by Justice Basten, is clearly to be regarded as attended by some real doubt. I have in mind particularly what his Honour said about whether or not the adjudicator should be seen as having been engaged in governmental work. In our submission, what is said as to the doubts concerning that matter in Brodyn are well raised by Justice Basten as matters that are extremely dubious, to put it mildly. If the adjudicator is not involved in a quasi-governmental matter, it is difficult to understand what he is doing.

This is statutory incursion upon contractual rights and obligations. It is administered by the determination of somebody called an adjudicator whose role and name depends entirely upon statute and the efficacy of whose determinations arise entirely from the statute for the public interest of stamping out an un-Australian practice. In our submission, that alone suggests that one of the principal matters raised to doubt the correctness of Brodyn’s approach is fit for determination by this Court.

As we have put in our written submissions, the importance, if we get to the point in light of the statutory interpretation question, the importance of a judicial review matter is that the Court of Appeal in the combination of Brodyn and this case following Brodyn appears to be taking the approach that there are jurisdictional errors which, in the absence of a combination of a privative clause and some Blue Sky reasoning, may nonetheless not be subject to judicial review, that is,.....by the only place a person can go, namely, a court to enforce the limits of law upon the actions of persons appointed and purporting to act under a statute.

In our submission, that is a startling proposition and one which, as a matter of this Court’s role at the apex of the judicature, ought to be considered notwithstanding this is a New South Wales statute. First, New South Wales statutes, of course, cover at least a third of the population;
second, the matter is one transcendent of any particular State. May it please the Court.

GLEESON CJ: Thank you, Mr Walker. Yes, Mr Feller.

MR FELLER: May it please the Court. Your Honours, there are five essential propositions that arise in these appeals and I will deal with them sequentially. The first two relate to the question of interpretation of the Act and the classification of the nature of the damages claimed and the last three relate to the question as to whether Brodyn is correctly decided.

The first proposition that my friends rely on is that the Act is not properly construed by the Court of Appeal. We say that the Act properly construed is not confined to payment claims that are for construction work carried out, as defined in section 3.

GLEESON CJ: Now, can you just make that good by reference to the terms of the Act.

MR FELLER: Yes, your Honour. Your Honour, as my friend has indicated, the rights to progress payments arise under section 8 in relation to a person:

who has undertaken to carry out construction work under the contract . . .

is entitled to a progress payment.

The words “undertaken to carry out” are not temporally confined to work carried out in the past, but generically describe the relationship of the contract and the contractor. Then section 9 has already been dealt with in each case. Section 13 that my friend paid scant regard to relates to the contents of the payment claims and we say, and as the Court of Appeal has also said, are significant provisions. Section 13 provides that:

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 . . .

(2) A payment claim:

(a) Must identify the construction work . . . to which the progress payment relates –

So that the words “progress payment relates” are far wider in ambit than the more confined construction that my friends contend for, namely, the definition of “progress payment” in section 4 which is in the context of construction work carried out or, indeed, the definition of “claimed amount” in section 4 which is in relation to:

a progress payment claimed to be due for construction work carried out –

In addition, regard must be had to section 3(1) which refers to the object of the Act which is in relation to progress payments in relation to the carrying out of that work. So we say that on a proper construction of the statute the claim for progress payment is not simply confined to physical work that has already been carried out, but relates to the cost of carrying out that work, whether it is the cost of the physical work, the cost of materials or labour provided - - -

GLEESON CJ: May I interrupt you to ask, by hypothesis, is it the case that any payment, any progress payment to which a person is entitled under this Act is a payment to which the person is entitled under the contract?

MR FELLER: No, not necessarily. It depends on whether the contract provides for a payment or not. If it provides for a payment, then the amount of the progress payment is that which is prescribed under the contract pursuant to section 9(a) and 10.

GLEESON CJ: Where a progress payment is prescribed under the contract, presumably the object of this Act is related to recoverability rather than entitlement?

MR FELLER: Yes, yes, and there is a clear distinction between contracts where there is no entitlement and where the Act then provides for a statutory entitlement and those matters where the contract does provide for an entitlement. There is no discordance between in the former case where there is no contractual entitlement, there not being an entitlement to delay damages or damages for breach of contract, whereas in the second case where there is a contractual entitlement there being a recoverable amount in a progress claim in respect of such delay damages.

GLEESON CJ: We are here concerned with a 9(a) case, are we not?

MR FELLER: Yes.

GLEESON CJ: So we are concerned with a case where the purpose of the legislation relates to enforceability rather than entitlement?

MR FELLER: Yes.

GLEESON CJ: How does your argument in relation to delay costs, for example, apply to a 9(b) case?

MR FELLER: Well, on that assumption a 9(b) case makes – the contract in a 9(b) case makes no provision for delay costs. So that the only way - - -

GLEESON CJ: Or no provision for payment of delay costs during the progress of the work?

MR FELLER: Well, it would have to make provision first, with respect, for an entitlement to delay costs under a contractual provision and then, secondly, for payment. If the contract makes no such provision, is silent about an entitlement to any form of recompense for delay, then one would have thought that any entitlement would be for breach of contract if such breach could be established. That would be clearly outside the ambit of the power of an adjudicator to award under 10(b). If the contract does provide for it, then it is a claim under the contract and pursuant to the contract and the adjudicator is simply then concerned with awarding that amount if, in fact, there is an entitlement.

GLEESON CJ: Where do we find most conveniently the contractual provision under which these delay costs - - -

MR FELLER: Yes, your Honour, they are collective in the judgment of Justice Bergin commencing at page 101 and could I take your Honour to page 103 at line 27. Clause 34.9 sets out the entitlement to delay damages. It is dependent upon there being a compensable cause. “Compensable cause” is defined at page 106, line 40. It is also dependent upon there being a grant of EOT or extension of time for a qualifying cause of delay, that term being defined at page 107.

GLEESON CJ: But what is it that makes it clear that these delay damages are payable, as it were, during the progress of the contract?

MR FELLER: Yes, because pursuant to clause 41.4 the subcontract superintendent is required to assess the claim and notify the parties of his decision. The claim is a progress claim made under 37.1 on page 105 setting out the details of moneys due pursuant to the provisions of the subcontract. One of those amounts is the amount in 34.9, namely, delay damages.

GLEESON CJ: What would happen if you had a contract that left the subject of delays to be washed up at the end of the work and did not contain an entitlement such as this contract contains to payment of these delay damages as the work goes along? How would the Act then operate in relation to that?

MR FELLER: Well, clearly then we would say that in respect of progress payments up to but excluding the final payment, there would be no contractual entitlement to such a progress payment including an amount for delay damages.

GLEESON CJ: How would the Act operate then?

MR FELLER: Well, the Act would operate in that fashion, that there would be no entitlement to a progress payment under the Act - - -

GLEESON CJ: So the case would be under 9(b)?

MR FELLER: No, it would still be under 9(a) because the contract in those terms, in the instance that your Honour has put forward, there is still an entitlement, but at the last – in respect of the final payment.

GLEESON CJ: Then how does the Act operate in such a case?

MR FELLER: Well, the final payment is, in fact, regarded as a progress payment under the Act and so the adjudicator would be entitled then under that hypothesis to award the delay damages in respect of the final payment, but not before that time.

GLEESON CJ: Thank you.

MR FELLER: Now, your Honour, we say that the first proposition that our friends cannot succeed on is that the definition of “for construction work” controls the Act. We say that it is a wider definition for the reasons exposed in the Court of Appeal reasoning. Secondly, we say that even if the words “for construction work carried out” are controlling, in this case they have no bearing because delay damages fit within that classification of “for construction work”.

GLEESON CJ: Mr Walker says what about delay in getting access to the site in the first place.

MR FELLER: Yes, well, we say, your Honour - - -

GLEESON CJ: When no work is being done.

MR FELLER: Yes, your Honour, we say there is, in effect, an equation that one has to have regard to in any building contract which is constituted by the ultimate cost of the project. Now, the cost is not simply the contract sum if it is a lump sum contract plus variations plus adjustments, but also involves any contractually determined amounts payable in respect of delay or disruption or such other matters provided for in the contract. That is ultimately what it costs the contractor to carry out the work and, on the other side of the equation, is ultimately what the principal or head contractor must pay for the privilege of having that work carried out. That is the cost of construction.

GLEESON CJ: Now, rightly or wrongly, Mr Walker says delay damages of this kind raise or potentially raise issues of a kind unsuitable to the quick method of adjudication provided by this Act.

MR FELLER: Well, your Honour, the answer to that is twofold. First, the result obtained by the Act following an adjudication determination is not of a permanent nature. It is temporary. It is one which does not affect the rights of the parties and is one which is subject to review ultimately when the real merits of the case, if I can use that expression, are determined in proceedings if such proceedings take place. Section 32 of the Act provides for the effect on civil proceedings and, in particular, 32(1) says that the Act does not affect:

any right that a party to a construction contract:

(a) may have under the contract, or

(b) may have under Part 2 in respect of the contract, or

(c) may have apart from this Act in respect of anything done or omitted to be done under the contract.

Subsection (3) allows for restitutionary remedies in respect of any amounts found to have been wrongly paid pursuant to an adjudication determination.

Secondly, your Honour, there is precedent for arbitrators in similar circumstances being entitled to ascertain what are delay damages or damage or entitlements in the nature of damages where they are awarded under a contract and that is in the decision of Justice Bray in the South Australian case of In re an Arbitration Between Taylor Woodrow International Limited and the Minister of Health, which is tab 10 in the bundle of documents that we have provided to your Honours.

That is referred to by Justice Bergin in her decision in Climatech and, effectively, it says that – or the gravamen of what is said by Justice Bray is that, notwithstanding the contractual description, if the amount of the entitlement is in the nature of damages, then the obligation is on the arbitrator in that case to arrive at a determination as to what those damages were, and it is still a matter of an onus of proof resting on the claimant to show that there are losses of that kind that had been incurred and those losses, of course, may be losses of opportunity and such like and a claimant may fail to establish such an entitlement. But if there is evidence and if the adjudicator is satisfied of that being established, then he can make an award based on that claim.

Now, your Honours, we say that on both counts the decision of the Court of Appeal is correct and that one does not go any further because the questions based on the correctness of Brodyn become hypothetical. Nonetheless, if one then goes to a question of the correctness of Brodyn, we say, your Honour, on a fair reading of what Justice Hodgson said in that decision, there is no departure from the orthodoxy of Craig. What the court, in fact, did is find a contrary intention in the Act, that is to say, an intention inconsistent with a wide power to review the decision of the adjudicator and confined that power to questions of error in relation to the basic or essential requirements for the validity of a determination of an adjudicator.

We say that the methodology that was followed by Justice Hodgson is one which is orthodox. It does not rely on the need for a privative clause nor does it necessarily rely on the Hickman principle. But insofar as the decision may be supported on other grounds, we say that in any event it is strongly arguable that the Act does contain a provision which is in the nature of a privative clause.

That appears in section 25 which provides the only way in which an adjudication determination may be enforced, and that is by registration in a court of competent jurisdiction as a judgment. Once that occurs, section 25(4) provides that in any application to set aside that judgment the respondent cannot cross-claim, cannot raise any defence in relation to matters arising under the construction contract and cannot challenge the adjudicator’s determination.

As a matter of logic, it would be inimical to the interpretation of the Act as a whole that what cannot be done directly can be done indirectly by, as it were, heading off the claimant at the pass to the court of competent jurisdiction by seeking orders in the form of prerogative relief. Of course, the finding of the Court of Appeal in that regard that an injunction is available to declare a determination to be a nullity is not inconsistent with that proposition because in that case there is no determination that is capable of being registered as a judgment.

GLEESON CJ: Yes, Mr Walker.

MR WALKER: Your Honours, on that last point, the provisions of section 25 are, if anything, precisely why the jurisdiction of the adjudicator is something to be examined and in precise terms and then the adjudicator’s authority at law to be enforced by the only method the law provides, namely, to treat as a nullity that which is without the authority of..... Particularly that is so where it represents what appears to have been a calculated and calibrated interference with the bargain made by parties in relation to matters of finance, obligations and property. So section 25 is no answer to the importance of the judicial review point which we have raised.

Next, in our submission, in relation to section 13 on the interpretation question, one can see the way in which the Court of Appeal dealt with that at application book page 149, paragraph 40 where the phrases that my learned friend drew to attention were quite consciously addressed at the end of paragraph 40 as being insufficient to do the work that my friend seems to be implying they ought now be regarded as having done.

So the question still remained whether or not there was guidance given by the statutory words as to the nature of what may and may not be included in an adjudication of a progress payment. It is not the same thing as a contractual progress payment. That can be seen by the care with which Parliament carried out the definition, admittedly by those inclusive words, which in particular in paragraph (c) refers to matters provided for payment other than for what might be called “for construction work”.

We know it is other than that because these are found in a sequence (a), (b) and (c) separated by the word “or”. Parliament regards the notion of payment for construction work or for carrying out construction work as not something which would naturally carry, pursuant to a particular contract or otherwise, the notion of a payment known as a milestone payment, that is, an event or date being the contingency upon which it based. They, of course, are extremely familiar payments to be provided for in progress payments, six months out, 12 months out, et cetera, et cetera.

GLEESON CJ: Mr Walker, as to the clause of the contract here – I am looking at page 103 of the application book – I do not think we have seen the definition of “compensable cause”, but would it be the case that a common example of an occasion for what are called “delay damages” would be interruption of the progress of work because of rain?

MR WALKER: Probably not. May I take your Honours to pages 106 and 107 of the application book. “Compensable cause” is defined here to mean:

any act, default or omission of –

a number of persons separate from the subcontractor in question. Now, those listed in item 35, I am not sure if that is contained within the application book. Paragraph (b) was considered by everyone arguing and deciding the case as worthy of an ellipsis, your Honour. I cannot take it further. I do not have the contract with me, but it may be that item 35 is where neutral causes such as industrial unrest beyond the ambit of any of the parties, rain, civil commotion, et cetera, might be inserted. In any event, “any act, default or omission” is not a phrase which is restricted to matters of breach but will include matters of breach.

It is for those reasons, in our submission, that coupled with the way in which the statute defines “progress payment”, it is clear that there was a distinction drawn between those things which a contract might very well provide to be paid by a progress payment such as a milestone payment, and distinguish between that and payment for carrying out or for construction. It is for those reasons, in our submission, that one cannot read it in the way in which one finally sees Justice Hodgson concluding, namely, that such payments may be included notwithstanding they are not for construction work at all. This is not a milestone payment. This is not a goods and services payment. It could only be, in our submission, for carrying out construction work or for undertaking to carry out construction work.

Now, it is of some significance, if passing only, that the parties decided to call these things delay damages. Juristically it is obvious from the definition of “compensable cause” that they often will be truly damages even if not always. It is for those reasons that one then is driven back to the
matter upon which we relied and to which my learned friend paid some attention, namely, the shortness of the process involved. In our submission, it is scarcely to be considered that the allocation of risk in relation to insolvency was to be altered in such a massive fashion for such complex matters in such a short time.

GLEESON CJ: We will adjourn for a short time to consider the course we will take in this matter.

AT 10.45 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.49 AM:

GLEESON CJ: The decision of the Court of Appeal of New South Wales in this matter concerned the interpretation of a statute of the New South Wales Parliament that does not appear to have its counterparts in other jurisdictions and the decision does not turn upon or affect wider questions of contractual interpretation. The statutory provisions that had to be construed by the Court of Appeal of New South Wales have occasioned some difficulty and some differences of opinion among judges. The conclusion reached by the Court of Appeal, whilst not inevitable, was well open to it and we are not persuaded that it is likely to be productive of injustice.

In those circumstances, we think that there is insufficient reason to doubt the correctness of the decision of the Court of Appeal of New South Wales to warrant a grant of special leave to appeal to this Court and the application is dismissed with costs.

MR WALKER: May it please your Honours. Your Honours, in order that the first part of your reasons – this has nothing to do with the second part, the decisive part of your reasons - be perhaps reconsidered may I draw to attention at page 220 of the application book, paragraph 30, there is a qualification that perhaps your Honours would care to consider to the opening remarks. I stress it would not affect what your Honour has said about the justice or otherwise of the outcome.

GLEESON CJ: Yes. Mr Walker has drawn our attention to the existence of the Victorian legislation referred to in paragraph 30 of his application on page 220 of the application book. The existence of that legislation does not materially alter the decision that we have reached, but we are obliged to Mr Walker for drawing that to our attention.

AT 10.52 AM THE MATTERS WERE CONCLUDED