Supreme Court New South Wales

• Medium Neutral Citation: IWD No 2 Pty Ltd v Level Orange Pty Ltd [2012] NSWSC 1394
• Hearing dates: 6 & 15 November 2012
• Decision date: 20 November 2012
• Jurisdiction: Equity Division - Technology and Construction List
• Before: Stevenson J

Decision

Leave to amend granted

• Catchwords: PRACTICE AND PROCEDURE - pleadings - amendment; BUILDING AND CONSTRUCTION - construction contract - determination by adjudicator - natural justice
• Legislation Cited: Building and Construction Industry Security of Payment Act 1999; Civil Procedure Act 2005; Uniform Civil Procedure Rules
• Cases Cited: Chase Oyster Bar v Hamo Industries [2010] NSWCA 190; (2010) 78 NSWLR 393; Cropper v Smith (1884) 26 Ch D 700; Dennis v Australian Broadcasting Corporation [2008] NSWCA 37; Estate Property Holdings Pty Ltd v Barclay Mowlem Construction Limited (Unreported, Supreme Court of New South Wales, Court of Appeal, McColl JA, 26 July 2004); Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2004] NSWSC 344; John Goss Projects Pty Ltd v Leighton Contractors [2006] NSWSC 798; (2006) 66 NSWLR 707; State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146; Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399
• Category: Interlocutory applications
• Parties: IWD No 2 Pty Limited (ACN 109 910 358) (plaintiff); Level Orange Pty Limited (ACN 133 786 437) (first defendant); Philip Martin (second defendant); Adjudicate Today Pty Limited (ACN 109 605 021) (third defendant); Registrar General of New South Wales (fourth defendant)
• Representation: Counsel: I G B Roberts SC (plaintiff); M Christie SC with A R R Vincent (first defendant); Solicitors: Sparke Helmore (plaintiff); Salim Rutherford Lawyers (first defendant)
• File Number(s): SC 2012/313669
• Publication restriction: Nil

Judgment

Introduction

1 These proceedings relate to a dispute under the Building and Construction Industry Security of Payment Act 1999 ("the Act").

2 The plaintiff, IWD No 2 Pty Limited ("IWD") seeks a declaration that a determination ("the Determination") made on 27 September 2012 by Mr Philip Martin, an adjudicator appointed under Division 2 of the Act ("the Adjudicator") was: -

(a) made without jurisdiction;

(b) contains jurisdictional errors; and

(c) is void and of no effect;

together with consequential orders.

3 The Adjudicator determined that there existed between IWD and the first defendant, Level Orange Pty Limited ("Level Orange") a "construction contract" within the meaning of s 4 of the Act, and that IWD was liable to pay Level Orange a "progress payment" for the purpose of s 8 of the Act of $142,449.00.

4 I heard the matter on 6 November 2012.

5 In the pleadings at that time, in written submissions received before the hearing, and during oral argument at the hearing, the only basis agitated by IWD to impugn the Determination was IWD's contention that there was no "construction contract" between IWD and Level Orange and that, for that reason, the Adjudicator lacked jurisdiction to make the Determination. Thus, at the hearing, the argument before me focused exclusively on the question of the alleged jurisdictional error of the Adjudicator.

6 IWD now seeks to amend its Summons to add a claim that the Determination is void by reason of the failure of the Adjudicator to afford natural justice to IWD.

7 IWD now wishes to plead: -

"The finding by the [Adjudicator] that there existed the construction contract was made: -

(a) on a basis for which neither party contended;

(b) without notifying the parties of [the Adjudicator's] intention to do so;

(c) without giving the parties the opportunity to make submissions on the issue."

Background

8 The Adjudicator's reasons for coming to his conclusion that there existed between IWD and Level Orange a "construction contract" were: -

"I am satisfied that in taking over the completion of the project an arrangement was made between [Level Orange] and [IWD] for [IWD] to take over responsibility for the whole of the work including the payment of outstanding amounts to [Level Orange]. I determine that there is an arrangement between [Level Orange] and [IWD] which is a construction contract as defined in the Act."

9 IWD took over completion of the project in February 2012.

10 At the hearing on 6 November 2012 Level Orange did not embrace the Adjudicator's finding but, rather, contended (as it had done before the Adjudicator) that the relevant construction contract was made between the parties in January 2011; that is some 13 months earlier than the February contract found by the Adjudicator.

11 Before me, and before the Adjudicator, IWD contended that no construction contract had ever been entered into between it and Level Orange.

12 On 6 November 2012, there was argument as to the significance of the Determination that the relevant construction contract was made in February 2012 (rather than, as Level Orange submitted in January 2011).

13 Level Orange submitted, and IWD disputed, that as long as there was a construction contract between the parties (whenever made) the Adjudicator had jurisdiction under the Act, and that it was irrelevant whether the Adjudicator erred in coming to his conclusion that the relevant construction contract was made in February 2012.

14 In the course of that debate, my attention was taken to the submissions made by the parties to the Adjudicator; by Level Orange in its Adjudication Application, and by IWD in its Adjudication Response. It is clear from those documents that neither party submitted to the Adjudicator that a construction contract was made in February 2012.

15 On 6 November 2012 I reserved by decision.

16 On 8 November 2012 I asked my Associate to write to the parties seeking confirmation that certain matters were common ground.

17 One of those matters was: -

"If there was...a 'construction contract', the Adjudicator did have jurisdiction and the Determination cannot be set aside (even if the Adjudicator erred in his conclusion as to what the 'construction contract' comprised)".

18 On 9 November 2012 Mr Roberts SC, who appears for IWD, responded to that enquiry. At the conclusion of that response, Mr Roberts stated: -

"Neither party contended in either the adjudication application nor the adjudication response that the construction contract as found by the Adjudicator was the relevant construction contract. By determining the adjudication application in that way without inviting the parties to make submissions on the issue of whether such a contract existed the Adjudicator substantially denied IWD natural justice (John Goss Projects Pty Ltd v Leighton Contractors [[2006] NSWSC 798;] (2006) 66 NSWLR 707 at [31] and [54]). That denial is itself a form of jurisdictional error (Chase Oyster Bar v Hamo Industries [[2010] NSWCA 190;] (2010) 78 NSWLR 393 at [148])."

19 That submission was not responsive to the enquiry. It was also the first time that IWD had suggested that the Adjudicator had denied it natural justice; notwithstanding the fact that the basis of the Adjudicator's decision had been canvassed at the hearing.

20 In submissions in reply, Level Orange objected to the point being raised. I listed the matter for further argument on 15 November 2012. Shortly before that date IWD foreshadowed the amendment now sought.

General principles

21 As a general rule, a party should be entitled to an amendment, even at a late stage in a trial, to permit the real issues in dispute between the parties to be finally resolved: Cropper v Smith (1884) 26 Ch D 700 at 710.

22 A significant qualification to that rule follows from the case management principles established by the Civil Procedure Act 2005 and Uniform Civil Procedure Rules ("UCPR").

23 The common law position is stated by the majority of the High Court in State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at 154 as follows: -

"Case management is not an end itself. It is an important and useful aid for ensuring the prompt and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim."

24 However, in Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 Spigelman CJ with whom Basten and Campbell JJA agreed, observed that, while State of Queensland v J L Holdings Pty Ltd, above, remained binding authority with respect to applicable common law principles, those principles could be and had been modified by statute both directly and via statutory authority for rules of court: [28].

25 Spigelman CJ said at [29]: -

"In this State J L Holdings must now be understood as operating subject to the statutory duty imposed upon the courts by s 56(2) of the Civil Procedure Act 2005, which requires the Court in mandatory terms - 'must seek' - to give effect to the overriding purpose - to 'facilitate the just, quick and cheap resolution of the real issues in the proceedings' - when exercising any power under the Act or Rules. That duty constitutes a significant qualification of the power to grant leave to amend a pleading under s 64 of the Civil Procedure Act."

26 In a matter arising under the Act, I accept that I should also take into account: -

"[W]hat the legislature had effectively achieved was 'a fast track interim progress payment adjudication vehicle' and ... what the legislature had provided for, was no more or no less than an interim quick solution to progress payment disputes which solution critically does not determine the parties' right inter se. Those rights may be determined by curial proceedings, the Court then having available to it the usual range of relief, most importantly including the right to a proprietor to claw back progress payments which it had been forced to make through the adjudication determination procedures. That clawback route expressly includes the making of restitution orders." (Estate Property Holdings Pty Ltd v Barclay Mowlem Construction Limited (Unreported, Supreme Court of New South Wales, Court of Appeal, McColl JA, 26 July 2004, at [23], citing Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2004] NSWSC 344 (Emphasis in original).

Factors weighing in the balance

Application is made late, without good reason, and will cause further delay and expense

27 The amendment application is made very late in the day. It arises from a submission made non-responsively to an enquiring from the Court.

28 There is no good reason why the point was not thought of earlier and included in the Summons as filed.

29 Mr Christie SC, who appears with Mr Vincent for Level Orange, submits that, had the matter been raised in a timely manner, Level Orange would have been entitled to serve a cross claim seeking, in the event that IWD succeeded in its natural justice submissions, an order in the nature of mandamus requiring the Adjudicator to determine the adjudication in accordance with law.

30 Such an application would have been available: Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399 per McDougall J at [78]-[90].

31 If IWD is granted leave to amend, Level Orange may seek to take this course. If it did, and were IWD to be successful in relation to its natural justice submission, it will be necessary to give the Adjudicator (who is a party to these proceedings but has played no role in them) an opportunity to be heard: Trysams at [80].

32 This will cause delay. It is not possible to know the likely length of that delay.

33 I also bear in mind that there is a small amount at issue in these proceedings, $142,449 and the "fast track" procedure that the Act is intended to provide for the making of interim progress payments.

Alleged denial of natural justice

34 On the other hand, it does seem clear that the Adjudicator decided the case of a basis different from that advocated by the parties; and without notifying the parties of his intention to do so.

35 That is a serious matter. On the face of it, the Adjudicator did not behave in a procedurally fair way and thereby denied natural justice to, at least, IWD: eg Musico v Davenport [2003] NSWSC 977 per McDougall J at [107] and [108]. If that denial of natural justice was "material" or "germane" to the Determination (eg Watpac Constructions Pty Limited v Austin Corp Pty Limited [2010] NSWSC168 per McDougall J at [144]), the Determination is a nullity.

36 Mr Christie submitted that IWD was deprived of no more than the opportunity to put a submission to the Adjudicator that there was no "construction contract", that it would have been an error for the Adjudicator to accept that submission and that, accordingly, IWD has not been denied procedural fairness.

37 This submission depends on, amongst other matters, the proposition that it would have been an error for the Adjudicator to determine there to be no "construction contract" between the parties. But that is the issue argued before me on 6 November 2012. It is not appropriate that I express a view about that matter on this application.

Decision

38 Weighing up all these factors, my opinion is that there is much to be said for refusing the amendment.

39 It is late; there is no good reason for it being late; and it will cause delay, and further expense to Level Orange.

40 On the other hand, a breach of natural justice in the making of a determination under the Act is a serious matter. And the consequence of finding a "material" or "germane" breach of natural justice in relation to the Determination (were such a finding to be made) would be that it is a nullity; whether within jurisdiction or not.

41 In my opinion, that issue is of such seriousness that, despite the matters weighing in the balance against granting leave, leave should be granted.

42 For that reason, I propose to grant leave to allow the amendment. But the grant of leave will be subject to the condition that IWD pay the costs of Level Orange from and including 14 November 2012 (by which date this was the only remaining issue) on an indemnity basis; and in any event.

43 I will hear the parties as to the directions that should now be made. In that regard, I note that Mr Roberts has stated that IWD has now made all the submissions it wishes to make, in chief, in relation to the natural justice issue.

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Decision last updated: 20 November 2012