Supreme Court New South Wales

• Medium Neutral Citation: Machkevitch v Andrew Building Constructions [2012] NSWSC 546
• Hearing dates: 16/04/2012 and 17/04/2012
• Decision date: 24 April 2012
• Jurisdiction: Equity Division - Technology and Construction List
• Before: McDougall J

Decision

Summons dismissed with costs. Declarations as sought in cross-claim.

• Catchwords: [BUILDING AND CONSTRUCTION] - Building and Construction Industry Security of Payment Act 1999 (NSW) - preliminary issue - whether court should leave matter to be disputed before another adjudicator - adjudication determination - meaning of "arrangement" - whether there was an "arrangement" amounting to a construction contract for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW) - whether the definition of "construction contract" requires that an "arrangement" must be legally enforceable - whether the defendant's attempts to press its payment claims against the plaintiff is an abuse of the processes of the Act.; [ESTOPPEL] - Issue estoppel - Anshun estoppel whether the defendant is estopped (by way of narrow or Anshun estoppel), by reasons of the determination of the first adjudicator, from pressing its claim under the alleged construction contract.; [PROCEDURE] - civil - documents - cross-claim - application for leave to file a cross-claim - whether court should grant declaratory relief in accordance with the cross-claim.
• Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW); Home Building Act 1989 (NSW)
• Cases Cited: Okaroo Pty Limited v Vos Construction and Joinery Pty Limited [2005] NSWSC 45; Newton v Federal Commissioner of Taxation (1958) 98 CLR 1; Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 8) (1999) 165 ALR 468; Dualcorp v Remo Constructions [2009] NSWCA 69; Watpac Constructions v Austincorp [2010] NSWSC 168; Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589; Urban Traders v Paul Michael [2009] NSWSC 1072
• Category: Procedural and other rulings
• Parties: Alexandre Machkevitch (Plaintiff/Cross-Defendant); Andrew Building Constructions Pty Limited (ACN 001 123 619) Defendant/Cross-Claimant)
• Representation: Counsel: Michael Christie SC / N Shaw (Plaintiff/Cross-Defendant); D E Grieve QC / F G Kalyk (Defendant/Cross-Claimant); Solicitors: Harris Friedman (Plaintiff/Cross-Defendant); William Cotsis & Associates (Defendant/Cross-Claimant)
• File Number(s): 2012/99684

Judgment

1 HIS HONOUR: On 23 or 24 March 2010, the defendant (the builder) entered into a written building contract and "bonus deed" with a company known as 873 NSHR Investments Pty Ltd (the proprietor). The builder claimed that the proprietor owed it a substantial amount of money. It took that claim to adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). The adjudicator made a determination in favour of the builder, although not for the full amount of the claim. The proprietor then went into liquidation. It has a substantial deficiency of liabilities over assets.

2 The builder asserts that, in addition to the building contract and the "bonus deed", it made a "construction contract" for the purposes of the Act, to which it, the proprietor and the plaintiff (Mr Machkevitch) were parties. That construction contract is said to include the building contract and the bonus deed, and also an oral undertaking, given by Mr Machkevitch to, and relied upon by, the builder, that Mr Machkevitch would ensure that the builder was paid if the proprietor did not pay it. The builder has served a payment claim on Mr Machkevitch. In the likely event that he does not accept liability, it will take the claim to adjudication unless restrained.

3 In these proceedings, Mr Machkevitch seeks an order restraining the

builder from prosecuting any claim based on the payment claim served on him, and associated declaratory and other relief.

The real issues in dispute

4 Mr Grieve QC, who appeared with Mr Kalyk of counsel for the builder, stated that the real issues in dispute were:

(1) whether there was an "arrangement" amounting to a construction contact for the purposes of the Act, as alleged by the builder?

(2) whether the builder is estopped, by reason of the determination of the first adjudicator, from pressing its claim under the alleged construction contract against Mr Machkevitch?

(3) alternatively, whether the builder's attempts to press its payment claim against Mr Machkevitch is, in all the circumstances, an abuse of the processes of the Act?

5 Mr Christie SC, who appeared with Ms Shaw of counsel for Mr Machkevitch, accepted that these were the substantial issues in dispute.

A preliminary issue

6 In its written submissions provided prior to the hearing, the builder raised, as a preliminary question, whether the court should intervene, or whether it should leave the matter to be disputed before another adjudicator. Ultimately, Mr Grieve accepted that the matter should proceed in court.

7 In my view, it is appropriate in the circumstances of this case for the court to deal with the matter. There are a number of reasons why this is so.

8 First, the court has had the benefit of all the evidence that the parties wish to put on. That evidence includes both affidavit evidence from the principals of the builder, Mr Andrew Kladis and Mr Spiro Kladis, and from Mr Machkevitch and an associate of his, Mr Michael Haldey. Further, each of those witnesses has been cross-examined and the court has had an opportunity to form a clear impression as to credibility, and as to whose evidence should be believed where there is conflict. An adjudicator would not have that significant advantage.

9 Secondly, even if the matter were left to an adjudicator, he or she (for convenience, from now I shall refer to one gender only) could not determine conclusively the question of jurisdiction. Thus, if an adjudicator were to determine (for example) that she did have jurisdiction, the court would not be precluded from re-examining that question on an application for relief in the nature of certiorari. Alternatively, if the adjudicator concluded that she did not have jurisdiction, the court would not be precluded from examining the matter upon an application for the determination to be quashed, on the basis that the adjudicator had failed to perform her statutory function.

10 Thirdly, and as a consequence of the first two matters, the just, quick and cheap resolution of the real issues in dispute, in particular as to the existence or otherwise of a construction contract, suggests firmly that there should be one hearing only, and that it should be in this court.

11 I wish to stress that this is a conclusion based entirely on the peculiar facts of this case and that it should not be taken as an invitation to press in court applications to prevent matters from going to adjudication. In the ordinary way, disputes arising under construction contracts, as to progress payments, should be dealt with by adjudicators. That is the particular method of dispute resolution that the legislature has intended.

First issue: was there a construction contract?

The pleaded case

12 The construction contract on which the builder relies is set out in paragraph 1 of its list response to Mr Machkevitch's contentions. That paragraph reads as follows:

1. In answer to paragraph C1 the defendant says and the facts are:

(a) on 24 March 2010 the defendant and 873 PL entered into a lump sum building contract for the carrying out of construction work by the defendant at 873 New South Head Road, Rose Bay, New South Wales ("the building contract");

(b) prior to the defendant's entry into the building contract, the plaintiff informed the defendant that:

(i) he was a developer;

(ii) 873 NSHR Investments Pty Ltd ("873 NSHR") was his company;

(iii) 873 NSHR did not have sufficient funds to pay the contract sum under the building contract available to it under the construction funding which he had arranged;

(iv) the parties would need to enter the bonus deed to provide for payment to the defendant of the part of the contract sum as was not funded under that construction funding; and

(v) in any event, that in consideration of the defendant's entry into the building contract, should 873PL have insufficient resources to pay all of the money payable to the defendant under that contract and the bonus deed, he would pay whatever sum remained owing by 873PL to the defendant out of his own funds ("the plaintiff's personal commitment");

13 Mr Christie submitted that this was an allegation of a formal contract. He referred in particular to subpara 1(b)(v) and to the reference to "consideration". I do not accept that submission. In my view, it is clear, when one reads the paragraph as a whole, that the allegation in subpara 1(b)(v) is of a commitment undertaken by Mr Machkevitch to the builder, and that the construction contract on which the builder relies includes, but is not limited to, that alleged personal undertaking.

The legal principles

14 The Act gives, to those who undertake to carry out construction work or to supply related goods and services (for convenience, I will confine myself to "construction work") under a construction contract, the right to recover progress payments, and a statutory mechanism intended to ensure the swift implementation of that right.

15 One of the central concepts in the Act is that of "construction contract". That expression is defined, in s 4, to mean:

... a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party.

16 The expressions "contract" and "arrangement" are not separately defined.

17 As a matter of language, it seems to be clear that the legislature intended that a "construction contract" could include both a "contract" (as that concept is known to and understood in the law) and some "other arrangements" that would not in law be regarded as contracts.

18 It seems to me, as a simple matter of reading the legislative words, that the concept of "other arrangement" is something which goes beyond the concept of "contract".

19 No doubt, the legislature had in mind that, from time to time, work would be done pursuant to arrangements which might not be susceptible to classification as contracts, formal or informal. Clearly, it did not intend that the entitlement to payment should depend on the degree of formality in the arrangements pursuant to which work should be done. In this respect, the legislative intention could be contrasted with the intention underlying s 10 of the Home Building Act 1989 (NSW), under which a builder is not entitled to enforce a contract unless it is licensed, and carries out work pursuant to a written contract.

20 The word "arrangement" may be thought to be a somewhat strange one in the context of the Act. It its primary meaning, it denotes the ordering or disposition of things (see, for example, the online editions of the Macquarie Dictionary and the Oxford English Dictionary). But the same reference sources suggest that a secondary meaning of "arrangement" denotes measures or preparations, or plans for the accomplishment of some purpose.

21 Nicholas J considered the proper construction of the definition of construction contract in Okaroo Pty Limited v Vos Construction and Joinery Pty Limited [2005] NSWSC 45. His Honour noted [at 40] that the word "arrangement" lacked precise meaning. His Honour observed that it was a word that appeared in many different statutory contexts, and that it would derive its meaning from its context. His Honour referred to what was said in Newton v Federal Commissioner of Taxation (1958) 98 CLR 1 at 7, and in Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 8) (1999) 165 ALR 468 at 469.

22 In the former case, the court concluded that an "arrangement" was something less than a binding contract It could be something in the nature of an understanding, or a plan not enforceable at law.

23 In the second of those cases, the court observed that the composite expression of "arrangement or understanding" required something more than a mere expectation. It required some assumption of obligation, or assurance, or undertaking.

24 In Okaroo [at 41], Nicholas J said, in my respectful opinion correctly, that in its context in the definition of "construction contract" in the Act, the word "arrangement" encompasses transactions or relationships which are not legally enforceable. Thus, his Honour said, and again in my respectful opinion correctly, that a construction contract would include both a legally enforceable agreement and other transactions which were not. He therefore concluded:

...that contract is to be given its common law meaning and that "arrangement" means a transaction or relationship which is not enforceable at law as a contract would be.

25 At [42], his Honour observed that the only express limitation on the "arrangement" was that it must be one under which one party to it undertakes to carry out construction work for another party to it. I respectfully agree.

26 Further, his Honour concluded [at 55], there was nothing either in the definition of construction contract or in the Act as a whole which supported the suggestion that an "arrangement" must have the quality of legal enforceability. Again, I respectfully agree. I add only that an "arrangement" enforceable at law, for example through the doctrine of estoppel, would nonetheless be capable of being an arrangement for the purposes of the Act.

27 In my view, what is required is that there be something more than a mere undertaking; or something which can be said to give rise to an engagement, although not a legally enforceable engagement, between two parties; or a state of affairs under which one party undertakes to the other to do something; or an arrangement between parties to like effect.

28 In those circumstances, the court must look for a concluded state of affairs, which is bilateral at least, which can amount to an arrangement under which one party to it undertakes to perform construction work for another party to it. It is not necessary that the arrangement be legally enforceable; but an "arrangement" which is legally enforceable may be, a priori, a construction contract.

29 I do not think that much more assistance is to be gained from considering how the word "arrangement" (or its plural form) has been construed in other statutory contexts. Ultimately, the meaning to be given to the word must depend on an analysis of its place in the particular legislative scheme which is under consideration, and by reference to the context in which it appears. In my view, considerations of legislative purpose and context indicate, in the present case, that the word "arrangement" denotes some engagement, or state of affairs, or agreement (whether legally enforceable or not) under which, perhaps among other things, one party undertakes to perform construction work for another.

30 Whether an "arrangement" in this sense imposes any obligation (whether legally enforceable or not) on one of the parties to pay for construction work depends on the terms of the engagement, or agreement, or state of affairs.

The witnesses in the case

31 Whether there was any such arrangement in this case was the subject of dispute. The builder called as witnesses Mr Andrew Kladis and Mr Spiro Kladis. Mr Machkevitch gave evidence, and called as a witness Mr Haldey.

32 I start by saying that I formed the view that Messrs Andrew and Spiro Kladis were witnesses of truth who sought, to the best of their ability, to give accurate evidence. I accept that, since the builder is a family company in which each of them is interested, each has a significant practical (if not legal) interest in the outcome of the proceedings. But in my view, neither allowed that interest to interfere with the veracity of his evidence.

33 I did not find either Mr Machkevitch or Mr Haldey to be an impressive witness. I do not propose to give detailed citations of evidence for this conclusion, but I will set out the essential basis on which I have reached it.

34 In the case of Mr Machkevitch, his evidence in cross-examination reveals a pattern of behaviour that does not in my view demonstrate any conspicuously high standard of commercial morality. Mr Machkevitch has been associated with a number of development companies, each apparently being formed or acquired to carry out a single development project. The proprietor is not the only one of those companies to have suffered the unfortunate fate of liquidation with a substantial deficiency of liability over assets. In each case, there is an observable pattern that an asset of the company (a unit in the particular development for the purpose of which the company was incorporated or acquired) has been transferred, to Mr Machkevitch or his associates, either for a nominal consideration or for a consideration which very much understates the value of the asset. In each case, the effect has been to diminish the assets available to satisfy the claims of creditors.

35 In relation to the builder and the subject development, the best of the four units in the development, estimated to have been worth about $4.5 million, was transferred to Mr Machkevitch for the sum of $1. When cross-examined on this, Mr Machkevitch sought to dissemble, and would not agree that this was the consideration stated on the transfer (as plainly, it was). He suggested that he had advanced the proprietor of the order of $4.5 million to enable it to carry out the development. No justification for that suggestion could be found in the records that were in evidence. It is correct to say that Mr Machkevitch was an owner, as to 25%, with the proprietor as to 75%, of the land on which the development was carried out. But on the evidence, even if (as was suggested, and as is probably correct), the true consideration for the transfer included the severance of the tenancy in common and the transfer of Mr Machkevitch's interest to or for the benefit of the proprietor, that could not have amounted to consideration of any more than $2.15 million.

36 I add, in relation to this tenancy in common, that Mr Machkevitch, who negotiated with Messrs Andrew and Spiro Kladis, was careful - in my view, deliberately so - to conceal from them the fact that he, as well as the proprietor, owned the land. In my view, he did so to persuade them to contract only with the proprietor, and not with him as well. I do not regard that as the conduct of an honest man.

37 As to Mr Haldey, his evidence came at the heel of the hunt. It was directed to words that were said in a particular meeting. Mr Haldey claimed, for the first time, that particular words were not said at that meeting. (I say "for the first time" because there are other proceedings in this court in which the same meeting is in issue, and Mr Haldey has not put on an affidavit in those proceedings.) Mr Haldey claimed to have been present for the whole of the meeting. However, he could not recollect anything else that was said at it. It is remarkable that someone could remember that precise words were not said, but could not remember anything - even in substance or effect - of what was said. In any event, Mr Haldey's evidence that he was present for the whole of the meeting is contradicted by the evidence of Mr Machkevitch, who was prepared to assert no more than that Mr Haldey was present for part of it.

38 In fact, I find, Mr Haldey was not present at any part of the meeting, and that his, and Mr Machkevitch's evidence, that he was in part is untrue.

39 I accept the substance of the evidence given by Messrs Andrew and Spiro Kladis. I do so notwithstanding the divergence between their accounts, to which I refer later in these reasons. I prefer their evidence to the evidence given by Mr Machkevitch and Mr Haldey to the extent that there is a conflict.

40 In forming these conclusions I have sought to put aside considerations of demeanour. That is for two reasons. The first is that demeanour is not always a certain guide to truth. The second is that three of the witnesses - Mr Andrew Kladis, Mr Machkevitch and Mr Haldey - were not giving evidence in their native language. I add, however, that if considerations of demeanour were to be taken into account, they would not in any way disturb the views that I have formed, but rather might tend to confirm them.

41 Further, in considering the question of whose evidence I should prefer, I have taken into account, as best I can, the probabilities, objectively ascertained. For reasons that will become apparent, it is my view that those probabilities favour acceptance of the evidence of Messrs Andrew and Spiro Kladis to Mr Machkevitch and Mr Haldey to the extent that there is any conflict.

The relevant facts

42 On any view, the contract between the proprietor and the builder was documented in two places. There was the formal building contract, and there was in addition the bonus deed made on the same day. The building contract, said to have been made on 23 March 2010, specified a lump sum price of $4,500,000 exclusive of GST. However, the quotation submitted by the builder, and which was accepted after negotiation, became one to carry out the contract works for a lump sum of $4,854,000, again exclusive of GST.

43 It appears to be uncontested that, when the parties met on 23 or 24 March 2010 to sign the contract, Mr Machkevitch produced not one but two contractual documents. According to Mr Andrew Kladis, there was a discussion to the following effect:

(1) Mr Machkevitch produced the two forms of contract and Mr Andrew Kladis asked why there were two;

(2) Mr Machkevitch replied to the effect that he had approval for $6 million of which he had spent about $1.5 million. If it were necessary to go back to the bank, it would take a long time, and since there was money to start the project and Mr Machkevitch was anxious to proceed, he would prefer to commence on the basis of the existing approval;

(3) there was further discussion to the same effect, after which

Mr Andrew Kladis asked why they could not be paid in advance and Mr Machkevitch said that was because he did not have the money presently available;

(4) Mr Andrew Kladis enquired, "If you don't have the money from the bank, how are we going to get paid?";

(5) Mr Machkevitch replied, "I got a unit at Bondi Beach; if I have to sell it I will sell it. I will have money from other sources. I will pay you. You will get paid. I have another project at Double Bay and I have some DAs coming along."; and

(6) Mr Andrew Kladis asked again if Mr Machkevitch was sure that he was going to pay; Mr Machkevitch confirmed this; and Mr Andrew Kladis replied "All right. We have to trust you."

44 Mr Machkevitch did not dispute the first five points of the conversation as I have just summarised it.

45 The account given by Mr Spiro Kladis was somewhat different. He said, as did his father, that Mr Machkevitch presented the two documents and said that he could only have the building contract for $4.5 million because of the "bank's" requirements. Mr Spiro Kladis said that:

(1) There was a later discussion in which there was talk about the way in which the payments would be made. It included reference to payments on completion of trades;

(2) Mr Andrew Kladis then asked, "But if the bank is not funding, where are you going to pay us from?"; and

(3) Mr Machkevitch replied "I will pay you. I have other projects. I have other funds. I have a unit at Bondi Beach that I will be selling prior to completion of this project. I have done quite a few projects as you can see on these walls...and I had a project at Double Bay which I am in the process of pre-selling. I will use those funds also to pay you. I have a DA site that I have an option on. I am also selling that option and that will give me funds."

46 Mr Machkevitch and Mr Haldey deny so much of the evidence of Mr Andrew Kladis as I have summarised at [43(5), (6)] above and so much of the evidence of Mr Spiro Kladis as I have summarised in para [-(3)] above. According to Mr Machkevitch, when asked in effect "How are you going to pay?" he replied in words to the effect "We should be able to increase the loan towards the end of the project. By that stage the units will be close to completion."

47 As I have noted, Mr Haldey was not able to recollect that Mr Machkevitch replied in words to that effect.

48 Although the versions given by Mr Andrew Kladis and Mr Spiro Kladis are not entirely consistent, there is a common thread between them. It was not put to them that they had put their heads together and concocted their evidence, or that they had agreed on the substance of the reply given by Mr Machkevitch to what might be called the crucial question of payment. As I have said, I accept the substance of their evidence in preference to the denials of Mr Machkevitch and Mr Haldey.

49 Mr Spiro Kladis was cross-examined on the conversation. He was unable, in the witness box, to recount the whole of it in cross-examination. However, he said that there was more, which he could not immediately remember; and that it was in his affidavit. He was not directly challenged on the whole of the conversation. It was put to him that Mr Machkevitch never said that he would pay. Mr Spiro Kladis denied this strongly, and said that Mr Machkevitch said so many times, again including before the contract documents were signed. I accept that evidence.

50 Mr Andrew Kladis was likewise cross-examined on the conversation. His recall of it in the witness box was less than perfect. Again, he was not directly challenged on the whole of the conversation. Again, it was put to him that Mr Machkevitch never said that he would pay. Again, he denied that strongly, and said that Mr Machkevitch said so many times.

Conclusion

51 In those circumstances, I find that there was an "arrangement" between Mr Machkevitch, both on his own behalf and on behalf of the proprietor, the proprietor and the builder, substantially in the terms pleaded (set out at [11] above). For the reasons that I have given, I conclude that this conversation amounted to an engagement, or agreement (not legally enforceable), under which Mr Machkevitch assured the builder that he had sufficient personal resources to pay it if the proprietor did not; that he would do so; and that the builder accepted and acted on this assurance by executing the building contract and the bonus deed.

52 In my view this amounts to an "arrangement" for the purposes of the definition of "construction contract". It follows, in my view, that there was a construction contract between, among others, Mr Machkevitch and the builder. As I have said, the proprietor was also a party to that arrangement. The essence of the arrangement, and thus of the construction contract, was that the builder undertook to carry out construction work for the proprietor; the proprietor bound itself through the building contract and deed to pay; and Mr Machkevitch undertook or engaged personally to pay if the proprietor did not.

The payment claims

53 The builder served a payment claim on the proprietor dated 26 September 2011. The amount claimed was a little over $1.1 million. It included some ten or so variations and associated charges for related goods and services. The proprietor provided a payment schedule which proposed a scheduled amount of nil dollars. The dispute was referred to adjudication. Mr Sean O'Sullivan determined an adjudicated amount of, in round figures, $453,000.

54 The proprietor did not pay. Instead, it chose the course of liquidation. The builder then served a payment claim on Mr Machkevitch, dated 23 March 2012. It is common ground that the bulk of the amount claimed replicates the payment claim served on the proprietor. Mr Grieve accepted that, to the extent of the overlap, the duplicated amounts should be determined as they had been determined, in the earlier adjudication, by Mr O'Sullivan.

Issue estoppel

55 The Court of Appeal concluded in Dualcorp v Remo Constructions [2009] NSWCA 69 that the determinations of adjudicators attract limited issue estoppels, in the narrow sense. Their Honours (Macfarlan JA, with whom Handley AJA agreed) said that determinations of adjudicators made under the Act estopped the parties to the adjudication from disputing the entitlement to payment of a progress claim in accordance with the reasons and findings of the adjudicator.

56 Further, for the reasons that I give in Watpac Constructions v Austincorp [2010] NSWSC 168 at [123] to [129], decisions of adjudicators attract also the extended doctrine of issue estoppel frequently described as "Anshun" estoppel (Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589).

57 In the present case, the parties were content to proceed on the basis that the decision of adjudicators could attract both narrow and "Anshun" issue estoppels.

58 It is not entirely clear why the question of issue estoppel was raised. Presumably, Mr Machkevitch raised it because the payment claim that was served on him claimed the full amount that had been claimed from the proprietor in circumstances where, in the earlier adjudication, less than half this amount had been determined as the adjudicated amount.

59 As I have indicated, Mr Grieve stated, at the close of his submissions, that his client would not put before any subsequent adjudicator that the amounts determined by the previous adjudicator should be determined in any different way. In other words, as I understood it, Mr Grieve accepted that in any subsequent determination the principle or spirit of s 22(4) of the Act should apply, even though (because the adjudication would not be between the same parties as the earlier adjudication) it might not, as a matter of construction, have any application.

60 In those circumstances, I do not understand there to be any live question as to issue estoppel. If there were, I would accept, as Mr Christie submitted, that there is a sufficient relationship between Mr Machkevitch and the proprietor to make him its privy for the purposes of that doctrine. However, for the purposes of Anshun estoppel, I would not accept that it was not relevantly reasonable for the builder not to have brought its claim, in the alternative, against Mr Machkevitch in the earlier adjudication. I will give my reasons when dealing with the issue of abuse of process.

61 I turn to the question of Anshun estoppel. That is asserted because the previous claim was one made under, and relying only on, the building contract. If the present dispute goes to adjudication, the builder will be relying on a different construction contract, of which the building contract forms part only. It was not put to Mr O'Sullivan that there was any such construction contract, and thus there was no point, as to the existence of any such construction contract, decided.

62 It follows that Anshun estoppel has no application.

Third issue: abuse of process

63 In Dualcorp, Allsop P agreed with Macfarlan JA as to the orders to be made, but preferred to rest his decision on the basis of abuse of process. Macfarlan JA was also prepared to recognise that considerations of abuse of process might be relevant to the domain of adjudications.

64 I considered the question of abuse of process in Urban Traders v Paul Michael [2009] NSWSC 1072, and again in Watpac Constructions. For the reasons that I gave in those cases, I remain of the view that the doctrine of abuse of process is applicable to the determination of adjudicators, or more precisely, to attemps to reagitate matters that have been put before, and decided by, adjudicators. Since the parties appear to accept that this was so, it is not necessary to say more.

65 The real question is whether there is, in this case, any repetitious and abusive reagitation of a claim. For the purposes of Anshun estoppel, the question may be taken to include also whether it is relevantly unreasonable for the two claims to be advanced separately.

66 It is possible to state the conclusion very shortly. The construction contract alleged by the builder is one under which the proprietor had what might be called primary liability and under which Mr Machkevitch undertook to pay, by way of what might be called secondary liability, in the event that the proprietor did not. In my view, it was reasonable for the builder to have its claim against the proprietor adjudicated, and to see whether it would get paid. Once it became clear that it would not be paid (because the proprietor, after transferring out an asset at a very significant undervalue, went into liquidation and is unable to pay) it cannot be unreasonable for the builder to seek to enforce what it says is the secondary or alternative liability of Mr Machkevitch. Nor, in doing so, will the builder seek to reagitate any matters that were decided by the first adjudicator. On the contrary, as I have said, it now accepts that, in any subsequent adjudication, there should be no departure from the decision of Mr O'Sullivan, to the extent that he decides common issues that are pressed against Mr Machkevitch personally.

67 In those circumstances, it is not necessary to go to a detailed, let alone line by line, comparison of the two payment claims. It is sufficient to say that it is only to the extent that they differ that any second adjudicator will be asked to deal with the issues.

The cross-claim

68 Again late in the hearing, Mr Grieve sought leave to file a cross-claim. It sought declaratory relief, the effect of which was:

(1) that there was a construction contract between the builder and Mr Machkevitch and the proprietor as alleged in para C1 of the builder's list response; and

(2) a declaration that the payment claim addressed by the builder to Mr Machkevitch was a valid payment claim, for the purposes of the Act (with a rider, which need not be stated, intended to mimic the operation of s 22(4)).

69 Mr Christie did not oppose the filing of that cross-claim. Further, Mr Christie attempted that, if I were to come to the conclusion that I have, it would be appropriate to define the position by granting declaratory relief in accordance with the cross-claim.

Other matters

70 Mr Christie made a formal submission that the reasoning of Nicholas J in Okaroo from [44] to [55] was incorrect, to the extent that his Honour concluded that there was nothing in the definition of "construction contract" in the Act, or otherwise in the Act, which required that an "arrangement", for the purposes of the definition of "construction contract", must be legally enforceable.

71 With respect, I think that his Honour's reasoning was correct. Even if I were of a different view, I would nonetheless follow it in circumstances where it has stood not only unchallenged and accepted but followed, at first instance, for some seven years. I indicated as much in the course of argument, which is why Mr Christie made the formal submission that I have recorded.

Conclusion and orders

72 Mr Machkevitch has failed to sustain the proposition that the builder should be restrained from proceeding on the payment claim that it has served on him. The summons should be dismissed with costs. In addition, declaratory relief should be made as sought in the cross-claim.

73 I make the following orders:

1. Summons dismissed.

2. Plaintiff to pay first defendant's costs; otherwise no order as to costs;

3. Declarations in accordance with prayers 1 and 2 of the cross-claim;

4. Exhibits to be returned.

**********

Decision last updated: 23 May 2012