Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: The Owners - Strata Plan 74635 v Buildcorp Group Pty Limited [2013] NSWCA 40
• Hearing dates: 25 February 2013
• Decision date: 25 February 2013
• Before: Allsop P at [1], [18]; Ward JA at [17]

Decision

Application for leave to appeal dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: PRACTICE AND PROCEDURE - no question of principle
• Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW); Civil Procedure Act 2005, ss56 - 60
• Cases Cited: The Owners Strata Plan 56587 v Consolidated Quality Projects [2009] NSWSC 1476
• Category: Principal judgment
• Parties: The Owners - Strata Plan No 74635 (Applicant); Buildcorp Group Pty Limited CAN 091 336 168 (Respondent)
• Representation: Counsel: D E Grieve QC and D Hand (Applicant); M Ashhurst SC and M Gunning (Respondent); Makinson & d'Apice Lawyers; BCP Lawyers & Consultants (Respondent)
• File Number(s): 2012/397122

Decision under appeal

• Date of Decision: 2012-12-14 00:00:00
• Before: Ashford DCJ
• File Number(s): 2012/186930

Judgment

1 ALLSOP P: This is an application for leave to appeal from orders made by a District Court Judge refusing the defendants to the proceedings below (the applicants to the proceedings here) an amendment to a defence in the District Court.

2 A number of issues were run in the District Court, most particularly what I will refer to as the question of service and the question of estoppel or waiver. The background to the case is that the applicants, whom I will refer to as the Owners, they being Owners of Strata Plan No 74635, entered a building contract with Buildcorp Group Pty Limited. The dispute between the parties involves disputes over entitlements to payments claimed by Buildcorp. Those competing views then find their place in the operation of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the "Act").

3 Buildcorp delivered to a Mr Kokolis, the engineer to the works, a payment claim under the Act on 29 February 2012. The ten business days for the serving of a schedule in answer expired on or about 14 March 2012. No such payment schedule in response was served. The estoppel argument was directed below to what occurred thereafter from 16 March. There is no need to deal with this in this application. Mr Grieve QC for the Owners does not press the application for leave to appeal in relation to the estoppel or waiver point.

4 That leaves what the parties debated before us as to the service point. It is said here, as it was said to the primary judge, that there was a point to be argued that the payment claim was not served in accordance with the Act, thereby undermining the totality of Buildcorp's reliance upon the Act for summary judgment in the District Court. The difficulty for the owners in that regard was that the original defence that had been filed admitted that the plaintiff (that is, Buildcorp) served a document that purported to be a claim within the meaning of the Act, and otherwise denied the allegations. Various other matters were pleaded by way of defence but the pleader had admitted service of what purported to be a payment claim.

5 The matter came before her Honour as an application to amend the defence, which involved the withdrawal of the admission of service. The proposed new amended defence sought to include a denial that the document referred to in the relevant paragraph of the statement of claim, para 8, was served on the owners in accordance with s 31 of the Act. Her Honour refused to permit this amendment to be made on the basis that she set out in her reasons. There are two parts of those reasons to consider. The first is the matter that her Honour refers to in paras [43] - [45], which is the quality of the evidence necessary for the withdrawal of an admission and the need to explain why, if they were deliberate decisions, those decisions should be permitted to be changed in the course of litigation or, if there was an oversight, why an oversight should be rectified.

6 I will not set out the general principles in this regard. They are well known and do not require further explication by the Court of Appeal in an ex tempore judgment. Her Honour referred to the important cases, as do the helpful submissions of the respondent in this Court. Those submissions will remain with the file. Suffice it to say that the importance of regularity, certainty and clarity in the running of litigation requires that steps taken by parties, in particular - but not only - when they are competently advised, should be the foundation for the litigation and its conduct without the constant difficulty and uncertainty of changes of mind as to the structure of litigation by different legal advisers. Thus the courts generally require clear evidence as to why an admission was made, explaining a mistake if a mistake was made and frankly and appropriately disclosing that a deliberate decision was made, but is now sought to be changed. That is the first matter that her Honour directed her attention to and her Honour was not satisfied with the material that was before her. That is hardly surprising, if I may say so respectfully.

7 The only real evidence that can be relied upon and was relied upon before the primary judge was what can be gleaned from para 7 of the affidavit of Suzanne Odette Broome sworn in October, at some date I presume in 2012. That paragraph is in the following terms:

"In late August 2012, when in conjunction with counsel I started preparing evidence in relation to the plaintiff's Notice of Motion for summary judgment, it became apparent that the defendant would need to amend its defence to raise the issue of whether or not the purported payment claim had been properly served in accordance with the requirements of the contract."

8 With respect, that is an inadequate foundation for an explanation of the change that was desired. It can be accepted that from August 2012 the owners desired to run the service point. What is not explained is the circumstances of their clear admission of the service prior to that point in time.

9 The importance of this first body of material may depend upon the clarity of the quality of the point. This is the second matter dealt with by the learned primary judge. The learned primary judge said at para [46] of her reasons that on the material before her it seemed clear that the plaintiff had in fact effected service in accordance with s 31(1)(e) of the Act and no proper reason had been advanced for withdrawal of the admission.

10 Parties addressed the Court on the service point. Respectfully, I would not agree with the learned primary judge that it was clear that service had been effected under s 31(1)(e). Nor, however, is it clear that it has not been. Section 31(1)(e) of the Act is in the following terms:

"31 Service of notices

(1) Any notice that by or under this Act is authorised or required to be served on a person may be served on the person:

...

(e) in such other manner as may be provided under the construction contract concerned."

11 The contract between Buildcorp and the owners provided in its terms for an owners' representative in schedule 1 item 1, who was Ms Walshaw, and an engineer, Mr Kokolis, in item 2 of schedule 1. The contract generally refers to "architect" but, from the terms of item 2 of schedule 1, "architect" is to be read as "engineer".

12 Mr Kokolis fulfils a number of roles under the contract. Clause A6, entitled "Architect to administer contract", sets out the well known division of function of someone in Mr Kokolis' position. For instance, cl A6.3 refers to the architect/engineer being the owners' agent for giving instructions to the contractor but in acting as an assessor, valuer or certifier, the architect acts independently and not as an agent. Likewise in cl A6.5, the architect/engineer is not the owners' agent for giving or receiving notices under cl A8, section P and section Q. The payment claim was delivered to Mr Kokolis at his address in item 2 of sch 1.

13 Section N, "Payment for the works", deals with progress claims. The procedure for the contractor is described in N3. It provides that the contractor may submit to the architect (engineer) one claim for a progress payment in each month, et cetera. The terms of N3 indicate that the progress claim is to be submitted to the architect. Section R, "Miscellaneous", dealing with transmission of documents in R1, is in the following terms:

"1 A party or the architect may only deliver a document under this contract to the other party or the architect by:

a. delivering it to the party or the party's representative or the architect by hand or mail at the address shown in item 1 of schedule 1

b. faxing it to the party or the architect at the fax number shown in item 1 of schedule 1

c. emailing it to the party or the architect or attaching an electronic copy to the email. However, email may only be used to deliver a document if the receiving party or the architect has given an email address in item 1 or schedule 1, or, the party or the architect has confirmed in writing that email communication to the party or the architect is acceptable for use under this contract.

2 If the fax numbers, or email addresses of the party and the party's representative are different, the document must be sent to both the party's address and the address of the party's representative.

3 If a party or the architect has had 5 working days written notice from another party or the architect of a change of postal address, email address, or fax number, a document may then only be delivered to that party or the architect at the latest address, email address or fax number.

14 The argument of the owners below was that whatever the proper place for service under N3 the document in question was not a progress claim but a payment claim under the Act, and it fell to be served on the party's representative, Ms Walshaw, which it was not, rather than upon the engineer, which it was. There are a number of not straightforward matters to consider in the resolution of this question of construction of the contract, most particularly: the relationship between N3 and R1; the reference to item 1 schedule 1 in R1, and the absence of a reference to item 2 of schedule 1 in R1; the question as to the distributive nature of the identity of the parties in R1; and whether or not it would be sufficient on a distributive basis to look at service on the architect under R1 when that was appropriate by another clause such as N3.

15 There is also the question as to whether one should distinguish between progress claims and payment claims. The document in question, of course, was not a progress claim, but was a payment claim for progress claims. In The Owners Strata Plan 56587 v Consolidated Quality Projects [2009] NSWSC 1476 McDougall J at [29] said the following:

"The parties should not be taken to have contracted unaware of the provisions of the Act. Accordingly, it seems to me, if one looks at the matter objectively, the intention of cl 23 of the contract should be taken to be that it deals with claims to progress payments not only having regard to their contractual character but also having regard to their statutory character. Looking at the matter objectively, it seems to me that the parties could not have intended that there should be a dual track mechanism whereby contractual claims were provided and assessed in one way and statutory claims were provided and assessed in quite a different way. That would be a most unbusiness-like way to go about the administration of their contract."

16 It is unnecessary for the Court today to resolve these questions. What I have indicated is in effect a view that there is a clear argument that, reading N3 and R1 together against the background of the Act, service was effected. A competent counsel/solicitor could, in my view, at least at the level I have examined the matter today, come to that view. That is not to say that there is not an argument to the contrary. In my view that throws up starkly the evidence, or lack thereof, of how the admission came to be made. The cases referred to by the learned primary judge and the respondent in its submissions must be attended to, and from them the parties should realise that admissions made in pleadings will generally form the foundation of the conduct of the case. Also, the text and substance and spirit of the Civil Procedure Act 2005 (NSW), ss 56 - 60 should be recalled. Without any evidence I am, speaking for myself, quite unpersuaded that counsel/solicitor, properly taking into account his or her responsibilities, did not form a deliberate view that while there may be a point it was not a good one. If that kind of decision was responsibly made, parties should be held to it, not out of punishment but for the proper and due administration of justice. We just do not know on the evidence whether there was mistake, and for my part, in those circumstances, I am not prepared to grant leave to appeal on the service point. I would dismiss the application for leave to appeal with costs.

17 WARD JA: I agree with the reasons of the President and with the order that his Honour proposes.

18 ALLSOP P: For those reasons the application for leave to appeal is dismissed with costs.

**********

Decision last updated: 27 February 2013