NEW SOUTH WALES SUPREME COURT
CITATION:
Watpac Constructions v Austin Corp [2010] NSWSC 168
JURISDICTION:
Equity Division
Technology and Construction List
FILE NUMBER(S):
2010/41832
HEARING DATE(S):
25/2/10
JUDGMENT DATE:
19 March 2010
PARTIES:
Watpac Construction (NSW) Pty Limited (Plaintiff)
Austin Corp Pty Limited (Defendant)
JUDGMENT OF:
McDougall J
LOWER COURT JURISDICTION:
Not Applicable
LOWER COURT FILE NUMBER(S):
Not Applicable
LOWER COURT JUDICIAL OFFICER:
Not Applicable
COUNSEL:
N J Kidd (Plaintiff)
F C Corsaro SC (Defendant)
SOLICITORS:
Maddocks Lawyers (Plaintiff)
Crisp Legal (Defendant)
CATCHWORDS:
BUILDING AND ENGINEERING CONTRACTS – Building and Construction Industry
Security of Payment Act 1999 – validity of second adjudication determination –
where payment claim for amounts the subject of previous adjudication determination
– where determination by previous adjudicator that defendant not entitled to amounts
claimed – whether valid payment claim – whether subsequent claim before second
adjudicator precluded by principles of issue estoppel or principles of abuse of
process – whether plaintiff denied procedural fairness.
ESTOPPEL – issue estoppel – whether earlier determination created issue estoppel
– whether abuse of process for defendant to reagitate claim leading to second
adjudication determination.
LEGISLATION CITED:
Building and Construction Industry Security of Payment Act 1999 (NSW)
CASES CITED:
Blair v Curran (1939) 62 CLR 464
Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421
Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33
Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69
Greenhalgh v Mallard [1947] 2 All ER 255
Henderson v Henderson (1843) 3 Hare 100
John Goss Projects Pty Ltd v Leighton Contractors (2006) 66 NSWLR 707
Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 435
Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2004] NSWSC 823
Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259
Musico v Davenport [2003] NSWSC 977
Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd t/as Novatec Construction Systems [2009] NSWSC 416
Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589
Rothnere Pty Ltd v Quasar Constructions NSW Pty Ltd [2004] NSWSC 1151
The University of Sydney v Cadence Australia Pty Limited [2009] NSWSC 635
Urban Traders v Paul Michael [2009] NSWSC 1072
TEXTS CITED:
DECISION:
(1) Direct the parties to exchange draft short minutes of the orders to be made in the consequence of these reasons, and written submissions in support of those orders, by 31 March 2010.
(2) Direct the parties to exchange written submissions in reply by 12 April 2010.
(3) Direct copies of all documents exchanged pursuant to orders 1 and 2 to be delivered to my Associate when they are exchanged.
(4) Stand proceedings over to 9:30am on 16 April 2010 for the making of final orders.
(5) Reserve liberty to apply, either in respect of any application for oral argument in respect of the form of orders to be made or generally, on 7 days’ notice.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY & CONSTRUCTION LIST
McDOUGALL J
19 March 2010
2010/41832 WATPAC CONSTRUCTION (NSW) PTY LTD v AUSTIN CORP PTY LTD
JUDGMENT
1 HIS HONOUR : In these proceedings, the plaintiff (Watpac) challenges the validity of an adjudication determination made by the second defendant (the second adjudicator) in favour of the first defendant (Austin) on 11 February 2010 (the February determination). There are two grounds for the challenge:
(1) the payment claim that was the subject of the second defendant’s adjudication (the December payment claim) included a claim for payment of $844,375.00 for what were called variations 1 to 8. Those variations had been the subject of an earlier adjudication determination (the November determination) made by another adjudicator (the first adjudicator) in which the first adjudicator had determined that Austin had no entitlement, as claimed, to be paid for those variations; and
(2) there was a substantial denial of natural justice because the second adjudicator dealt with a set-off for backcharges claimed by Watpac on a basis for which Austin had not contended, and in respect of which Watpac had been given no opportunity to put submissions.
The issues
2 The essential issues for decision are:
(1) was the December payment claim a valid payment claim for the purposes of the Act?
(2) Did the November determination create an issue estoppel in respect of variations 1 to 8?
(3) Was it an abuse of process for Austin to reagitate the claim for variations 1 to 8 in the December payment claim, and to press those in the adjudication application (the January application) that led to the February determination?
(4) Did the second adjudicator deal with the claimed set-off for backcharges in a way that constituted a substantial denial of the measure of justice that Watpac was entitled to receive?
3 In substance, the first three issues arise out of the decision of the Court of Appeal in Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69, as explained and applied in subsequent cases including Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd t/as Novatec Construction Systems [2009] NSWSC 416, The University of Sydney v Cadence Australia Pty Limited [2009] NSWSC 635 and Urban Traders v Paul Michael [2009] NSWSC 1072.
4 As to the second issue: Mr N J Kidd of Counsel, who appeared for Watpac, relied on both “issue estoppel in the strict sense” and on the “extended principle” defined by Wigram V-C in Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 at 319. (Each of the quoted phrases in the preceding sentence comes from the joint judgment of Gibbs CJ, Mason and Aickin JJ in Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589 at 597 and 598 respectively. The former phrase was used by their Honours to describe the principle of issue estoppel discussed, for example, by Dixon J in Blair v Curran (1939) 62 CLR 464 at 532.) Mr F C Corsaro of Senior Counsel, for Austin, submitted that it was not open to Watpac to rely on the extended principle of issue estoppel, because that had not been properly notified in Watpac’s Commercial List statement. I will return to that contention when dealing with the second issue.
Factual background
5 The construction contract between Watpac and Austin (the subcontract) was a subcontract under which Austin and an associated company (described together as “Subcontractor”) agreed to carry out airconditioning and mechanical services work for Watpac (described as “Builder”) for a project known as the Trio Apartments development at Camperdown. It was common ground that the subcontract was a construction contract for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act).
The October payment claim and payment schedule
6 On 15 October 2009, Austin served a payment claim (the October payment claim) on Watpac. The October payment claim sought payment for what it said was the work comprised in what were described as variations 1 to 8. The amount claimed for those variations totalled $765,647.00 exclusive of GST, or $842,211.70 inclusive of GST. The October payment claim included the following statement:
All construction work claimed by Austin Corp Pty Limited in this payment claim is claimed as a variation to the subcontract, or in the alternative, by way of quantum meruit.
7 On 29 October 2009, Watpac provided a payment schedule (the October payment schedule). That payment schedule stated, among other things, that after account was taken of backcharges raised by Watpac against Austin, retentions and amounts paid to date, the scheduled amount was negative: - $790,813.25 inclusive of GST.
The November application and response
8 The dispute thereby constituted was submitted to adjudication on 12 November 2009 (the November application). The November application comprised five folders of material, including the October payment claim and the October payment schedule, and a statutory declaration of Mr Bryan Phillips made on 12 November 2009 (Mr Phillips’ declaration).
9 The submissions in support of the November application included the following:
[22] The Claimant’s Payment Claim lists eight variations. The Claimant claims it is entitled to restitution based on unjust enrichment. The Claimant submits that the Statutory Declaration of Bryan Phillips sworn 12 November, 2009 herein is evidence that:-
(a) each variation was outside the Scope of Works of the Contract;
(b) the Claimant was required by the Respondent to carry out such work identified in the Payment Claim;
(c) the Respondent was aware that such work was outside the Scope of Contract;
(d) the Respondent was aware at [sic] prior to the Claimant commencing such work that the claimant would make a claim for this work in addition to the Contract Sum and further knew the value of each variation as determined by the Claimant would be the amounts claimed;
(e) the Respondent has received the benefit of the Claimant’s work in respect of the work identified in the Payment Claim; and
(f) it is unjust for the Claimant not to be paid by the Respondent for the work in the Payment Claim.
…
[24] The Claimant disputes that the value of the eight variations as certified by the Respondent are a true and fair value of the work performed by the Claimant. Because the Claimant has carried these works outside of the Contract and for the facts above (a) – (e), the Claimant claims a restitution based on unjust enrichment for these variations in the amount claimed in the Payment Claim. In this regard the Claimant submits that the Statutory Declaration of Bryan Phillips supports the Adjudicator in determining the value of the Variations as per the Payment Claim, see s. 10(1)(b)(ii) of the Act.
…
[33] Because this is an unjust enrichment claim outside the Contract, the Claimant submits that the Adjudicator only consider for the purpose of this adjudication the value of variations in the Payment Claim and whether it is just in the circumstances for the Claimant to be awarded the sums claimed.
10 Watpac submitted to the first adjudicator and to the Court that Austin had chosen to justify its claim for variations 1 to 8 on the basis of “unjust enrichment” because it had not complied with the contractual regime relating to variations and the entitlement to be paid for them. That is an available inference from the form of the payment claim, considered in conjunction with the relevant provisions of the subcontract (to which I shall turn in the next section of these reasons). It is open to infer that Austin perceived that it would be in its best interests to frame the October application as it did, by relying only on the doctrine of unjust enrichment and not on the terms of the subcontract. Whether such an inference should be drawn is another matter. For the reasons given at [123] and [124] below, it is not necessary to reach a conclusion on this.
11 Watpac served an adjudication response on 19 November 2009 (the November response). Among other things, that response asserted that Austin’s only entitlement to be paid was one arising pursuant to the terms of the subcontract, and that there was no freestanding right – at least, of a kind within the power of an adjudicator to determine – to be paid on the basis of unjust enrichment. Further, Watpac made submissions on the merits of the claim, and (as it had done in the October payment schedule) relied on its asserted entitlement to set off, against any amount otherwise due, backcharges.
The November determination
12 The dispute was referred to the first adjudicator for adjudication. He issued the November determination on 30 November 2009, in which he concluded that the adjudicated amount was “$nil”.
13 At para 8.1 of the November determination, the first adjudicator observed, correctly, that the claim was one in restitution “based on unjust enrichment”. At para 12, he identified the issues as follows:
[12] Issues
12.1 The issues thrown up by the Application and Response essentially are:
Is Austin Corp entitled to anything over and above what it has already been paid, for what it asserts are eight variations, on the basis of unjust enrichment?
Is Watpac entitled to offset the money it so asserts it is entitled to in the Payment Schedule?
14 At para 13, the first adjudicator set out, from para 22 of Austin’s submission, the claimed basis of entitlement (see at [9] above). The adjudicator stated his understanding of this claim as follows:
Because the Claimant has carried out these works outside of the Contract and for the facts above (a) – (e) [of para 22 of the submissions], the Claimant claims a restitution based on an unjust enrichment for these variations in the amount claimed in the Payment Claim.
15 At para 13.3, the first adjudicator observed that Austin had not proceeded “in the more conventional way – presenting a cogent argument in the Submissions themselves, that establishes the entitlement contractually, for each and every claimed “variation”.”
16 At paras 13.5 and 13.6, the first adjudicator reasoned:
13.5 The subcontract does indeed provide in a quite prescriptive way, for variations, and in my view it was crucial for Austin Corp to demonstrate compliance with the contractual regime, for the Act unlike for example, the rules of equity, does not permit departure from the determination of entitlement, based on the proper construction of the contract. An entitlement under the Act can only have as its basis, a contractual right or entitlement, Appeals to justice, unjust enrichment and restitution have no place in an adjudication.
13.6 As will be evident from the time I have spent on this Application, I attempted to find a cogent contractual basis for Austin Corp’s claims, reliant essentially on the bundled correspondence found in Volumes 2, 3 and 4 of the Adjudication Application, however I have not been able to in any way that gives me confidence that Austin Corp has proven on the balance of probabilities that it has a contractual entitlement beyond what has been paid.
17 The adjudicator then turned to the claimed offset for backcharges. He said at para 14.1 that even if Austin “had… succeeded for the full face value of its eight variations”, the claimed offsets “would effectively zero out anything that Austin Corp might be entitled to”.
18 The first adjudicator summarised his reasons at para 15 as follows:
15. Summary
15.1 It follows from my analysis above that I am not satisfied that Austin Corp is entitled to any amount in this Application for the reason that it has failed to make out a contractual basis for what it has claimed, and the Act does not permit an Adjudicator to make a determination based on unjust enrichment, even if there were some evidence to support that assertion.
15.2 Furthermore, I consider that the provisions of the subcontract do allow Watpac to backcharge as it has, and on balance, I cannot detect any item of such magnitude that could possibly change the outcome of the Application.
15.3 It is of course not open to me to determine that Watpac has any entitlement against Austin Corp, and I do not do so.
15.4 The adjudication process is by virtue of Section 32 of the Act only as interim process and the final determination of rights must in any case, await arbitration, litigation, or, one hopes, settlement by agreement.
The December payment claim and January payment schedule
19 On about 15 December 2007, Austin served the December payment claim on Watpac. The amount claimed was $1,656,994.90 inclusive of GST. So far as I can tell, the entire claim was for variations. They comprised:
(1) variations numbered 1 to 20;
(2) variations identified as A to Z; and
(3) variations identified as A1 to S1.
20 Of the numbered variations, 1 to 8 repeated (with a change in variation 3) variations 1 to 8 that had been the subject of the November determination. The change to variation 3 was to convert it from negative $1,500.00 to positive $467.00. The effect of this, was, obviously enough, to increase the total amount claimed for variations 1 to 8 by $1,967.00.
21 The case proceeded on the basis that variation 1 to 8 were repeated from the October payment claim to the December payment claim, and that the change to the amount claimed for variation 3 was not material. If that were not common ground, I would make a finding to that effect.
22 It appeared to be common ground also that further work had been done between the date of submission of the October payment claim and the date of submission of the December payment claim. Again, if that were not common ground, I would make a finding to that effect.
23 Watpac provided a payment schedule on 5 January 2010 (the January payment schedule). That payment schedule specified the scheduled amount as negative $1,217,228.00, inclusive of GST. As to variations 1 to 8, the payment schedule stated:
Watpac refers to its previous payment schedule dated 29 October 2009, its adjudication response dated 19 November 2009 and the adjudication determination of Mr David Campbell- Williams dated 30 November 2009. This item claimed by AustinCorp was claimed previously (and was included in AustinCorp’s adjudication application), following which it was determined by Mr Campbell-Williams in his adjudication determination that AustinCorp has no further entitlement to payment in respect of this item (under the Contract or SOP Act). The Act prohibits re-agitation of issues which have previously been determined through the adjudication process (refer Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69), therefore, AustinCorp has no entitlement to make any claim in respect of this item in this payment claim.
24 The January payment schedule also identified, and set off, a number of claimed backcharges. As to about 12 of those backcharges, which apparently had been the subject of the October payment schedule and of the November determination, Watpac included a note which was substantially to the effect of the note, in relation to variations 1 to 8, that I have just set out.
The January application and response
25 Austin made the January application on 19 January 2010. It was referred to the second adjudicator for adjudication. The following matters of relevance appear from the January application:
(1) it was based in part on Mr Phillips’ declaration, which had formed the basis for the November application;
(2) the variations, including variations 1 to 8, were claimed on the basis of an “other arrangement” which was said to constitute a “construction contract” for the purposes of the Act;
(3) alternatively, Austin said that Watpac had excused Austin from complying with the notice requirements of the subcontract relating to variations, or alternatively had waived compliance with, or was estopped from relying upon, those provisions; and
(4) Austin was entitled to be paid the full amount of the claim, including the amount claimed for variations 1 to 8.
26 In addition, the January application:
(1) made submissions with respect to the claimed set-offs for backcharges; and
(2) made submissions in relation to the notes in the January schedule that had referred to and relied upon the decision of the Court of Appeal in Dualcorp .
27 Watpac submitted an adjudication response dated 28 January 2010 (the January response). In essence, it repeated and expanded upon the position set out in the January payment schedule, and drew attention to what it said was the fact that the first adjudicator had determined Austin’s entitlement (or lack of it) to be paid for variations 1 to 8, and to his determination on the backcharges relied upon in the October payment schedule.
The February determination
28 The second adjudicator gave the February determination on 11 February 2010.
29 The second adjudicator dealt with the “ Dualcorp ” submissions as follows: (at paras 84 to 135):
(1) He identified the issue determined by the first adjudicator as “whether [he] had jurisdiction to decide a claim based on unjust enrichment… not… whether, in respect of the 8 items, the claimant had an entitlement to a progress payment under the contract” (at para 86);
(2) the first adjudicator did not determine “a claim for a progress payment as defined in the Act” or “a progress claim under the contract” (at paras 94, 96);
(3) the first adjudicator “did not value any work” so that s 22(4) of the Act had no application (at para 100);
(4) the extended, or “ Anshun ”, principle of issue estoppel had no application to the scheme of the Act: at least where a previous claim and adjudication application did not include a claim under the contract for all work done up until the date of the previous payment claim (at paras 109, 110); and
(5) the first adjudicator did not need to, and did not, determine the validity of the backcharges (at paras 116-118, 135).
30 Mr Kidd accepted, correctly, that even if this part of the second adjudicator’s reasoning were wrong, it betrayed no “ Brodyn ” error ( Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; see, in particular, the categories of “basic and essential requirements” laid down by Hodgson JA, with whom Mason P and Giles JA agreed, at 441 [53]).
31 The second adjudicator then considered the backcharges. He dealt with various backcharges, either individually or in groups, in a way that was not submitted to involve Brodyn error. He then moved, at para 176, to “other backcharge claims”. Those other backcharge claims themselves fell into two categories. One category related to a variation known as variation M. That was a claim by Austin in effect for extra work necessary to repair damage to its works caused by other trades. At paras 340 and following of the February determination, the second adjudicator held that Austin was entitled to recover his assessed value of variation M.
32 At para 177, the second adjudicator referred to the “variation M” reasons, saying that it followed from those reasons that Watpac’s claim to offset backcharges relating to the variation M work could not succeed. That was because, the second adjudicator having accepted that Austin was entitled to recover the cost of the work as a variation, Watpac had failed to establish that the backcharges should be levied against Austin. On the contrary, on the second adjudicator’s view, the amount that Watpac was liable to pay Austin for variation M could be levied as backcharges against the other trades who had caused the damage. Mr Kidd accepted that this aspect of the second adjudicator’s reasoning betrayed no “ Brodyn ” error.
33 That left what may be called the rump of the other backcharges. In this context, it may be noted that the claimed total value of the other backcharges was $567,925.00. The parties agreed that of that total, at least $192,313.00 was attributable to what might be called variation M backcharges – backcharges that, in the second adjudicator’s view, Watpac was not entitled to levy against Austin. I deal with the amount of the variation M backcharges and related matters at [163] to [167] below. Of those remaining backcharges, the second adjudicator said (at paras 178-179):
[178] I am satisfied that all of the remaining disputed backcharge claims are claims for alleged damages. The bases of the alleged entitlements and the amounts claimed differ from claim to claim but when analysed each claim is based upon an alleged default of the claimant and the amount claimed is a claim for damages. It would only delay my determination and unnecessarily increase the adjudication fees if I was to deal with each claim separately.
[179] In each instance liability and quantum have yet to be determined and there is no evidence that the respondent has paid the security which the respondent would be required to pay if the respondent wished to have liability and quantum decided in expert determination. For reasons set out above under the subheading BC52, the respondent is not entitled to set off the claimed amounts.
34 The reference back to “subheading BC52” takes one back to paras 141 and following of the February determination. The second adjudicator said at para 146 that:
[t]he claimed amount is not an amount due from the claimant to the respondent. It is the respondent’s estimate of amounts which the respondent asserts will become due… . … it is an unproven claim for alleged damages.
35 The second adjudicator followed this observation with the comment that attracted the allegation of denial of natural justice. He said at para 147:
[147] I don’t accept that clause 14.5 effectively allows the respondent to set off against an amount claimed in a payment claim under the Act, any amount that the respondent asserts will become due. That would defeat the object of the Act. The provision would contravene s.34 of the Act [no contracting out].
36 The second adjudicator then gave consideration to certain clauses of the contract. In reasoning that I must say that I have difficulty in understanding, let alone accepting, he appeared to express the view that Watpac could not levy a backcharge against Austin under cl 14.5 unless and until (in the event of dispute) the dispute resolution procedure set out in cl 20.3 had been followed through, or alternatively the dispute resolution procedure in special condition 13.1.
37 This aspect of the reasoning appears to misconceive the proper construction and operation of cl 14.5 (which I set out at [41] below). In terms, that clause permits an offset to be made for the estimated amount of a backcharge, whether or not the amount of the backcharge has been settled authoritatively as between Watpac and Austin. Where Watpac alleges that an amount is due, but there is some dispute in relation to this, what can be set off is no more than a reasonable estimate of the amount due. It seems to me that a reasonable estimate of an amount said (but disputed) to be due by Austin by Watpac must take into account not only the valuation of the claim but also whether there are in truth sound grounds for making it. This aspect of the second adjudicator’s reasoning appears to me to overlook both the express requirement for any unquantified back charge to be “a reasonable estimate” and the likely incidence of implied obligations to act reasonably and in good faith in the exercise of the powers given by cl 14.5.
38 I refer to these matters not because they suggest any “ Brodyn” error (of course, they do not), but because there is an issue as to whether any denial of natural justice, in relation to cl 14.5 and s 34, was material. If what I have just said is correct, it would suggest that there were submissions that Watpac could have made to seek to dissuade the second adjudicator from his view that cl 14.5 did offend s 34.
39 The second adjudicator then said, at para 155, that Watpac had not satisfied him that Austin had committed a breach of contract that might support the claimed backcharges, nor of the amount of damages. The claimed amount appeared to be, he said, “no more than an arbitrary assessment”. Accordingly, the second adjudicator concluded at para 156:
[156] For reasons covered, I am satisfied that the respondent is not entitled to make the set off claimed. The claim is totally without justification.
40 The second adjudicator then valued the variations, including variations 1 to 8. Mr Kidd did not submit that the process of valuation (assuming it to have been open to the second adjudicator to proceed to valuation of variations 1 to 8) betrayed any relevant error.
Clause 14.5
41 Clause 14.5 of the subcontract reads as follows:
14.5 Set-Off
Without limiting the Builder’s rights under the Subcontract the Builder may deduct from any money due to the Subcontractor:
(a) any money due, or a reasonable estimate of amounts which the Builder asserts will become due, from the Subcontractor to the Builder whether under or in connection with the Subcontract or otherwise; and
(b) all losses, costs, charges, damages or expenses which the Builder has incurred or paid and for which the Subcontractor is or may be liable to make reimbursement to the Builder or to any corporation which is a subsidiary of or related to the Builder within the meaning of the Corporations Act 2001 (Cth) , but has failed to pay or reimburse, and if those moneys are insufficient the Builder may have recourse to any Bank Guarantees and retention under the Subcontract.
42 Although the second adjudicator referred to cl 20.3 and special condition 13.1, it is not necessary to set out those provisions.
Relevant provisions of the Act
43 Section 8 gives, to a person who carries out construction work or supplies related goods and services under a construction contract, a right to progress payments on and from each reference date under that contract. I set out s 8:
8 Rights to progress payments
(1) On and from each reference date under a construction contract, a person:
(a) who has undertaken to carry out construction work under the contract, or
(b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment.
(2) In this section, "reference date" , in relation to a construction contract, means:
(a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or
(b) if the contract makes no express provision with respect to the matter—the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month.
44 Section 9 specifies how the amount of a progress payment is to be calculated, and s 10 provides for valuation of construction work and related goods and services.
45 Part 3 of the Act deals with the recovery of progress payments. By s 13, a person who is or who claims to be entitled to a progress payment may serve a payment claim on the person who is or may be liable to make that payment (subs (1)). Subsections (2) and (3) do not require consideration. Subsection 4 limits the time within which a payment claim may be served. Subsections (5) and (6) deal with multiplicity of payment claims. The section reads as follows:
13 Payment claims
(1) 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 on the person who, under the construction contract concerned, is or may be liable to make the payment.
(2) A payment claim:
(a) must identify the construction work (or related goods and services) to which the progress payment relates, and
(b) must indicate the amount of the progress payment that the claimant claims to be due (the "claimed amount" ), and
(c) must state that it is made under this Act.
(3) The claimed amount may include any amount:
(a) that the respondent is liable to pay the claimant under section 27 (2A), or
(b) that is held under the construction contract by the respondent and that the claimant claims is due for release.
(4) A payment claim may be served only within:
(a) the period determined by or in accordance with the terms of the construction contract, or
(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied), whichever is the later.
(5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
(6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.
46 Section 14 deals with the provision of a payment schedule and its contents. It does not require consideration. Neither do ss 15 and 16, which deal with the situations where there is no payment schedule or where the scheduled amount is not paid.
47 Section 17 provides for adjudication applications. The subject of adjudication is “a payment claim” (subs (1)). Subsection (2) does not require consideration. Subsection (3) specifies some formal requirements relating to adjudication applications, and subsequent subsections contain other machinery provisions. Section 17(1) reads as follows:
17 Adjudication applications
(1) A claimant may apply for adjudication of a payment claim (an "adjudication application" ) if:
(a) the respondent provides a payment schedule under Division 1 but:
(i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or
(ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount, or
(b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount.
48 Section 20 deals with adjudication responses. It does not require consideration. Neither does s 21, which deals with adjudications procedures.
49 Section 22 deals with the determination that is to be made. The adjudicator is to determine among other things, “the amount of the progress payment (if any) to be paid…” (subs (1)(a)). Subsection (2) specifies the matters to be considered by the adjudicator. Subsection (3) requires the determination to be in writing, and to be reasoned unless the parties request otherwise. Subsection (4) deals with the valuation of work that was valued by a prior adjudicator. Subsection (5) is in effect a “slip” rule.
50 I set out s 22 so far as it is relevant:
22 Adjudicator’s determination
(1) An adjudicator is to determine:
(a) the amount of the progress payment (if any) to be paid by the respondent to the claimant (the "adjudicated amount" ), and
(b) the date on which any such amount became or becomes payable, and
(c) the rate of interest payable on any such amount.
(2) In determining an adjudication application, the adjudicator is to consider the following matters only:
(a) the provisions of this Act,
(b) the provisions of the construction contract from which the application arose,
(c) the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim,
(d) the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule,
(e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates.
…
(4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined:
(a) the value of any construction work carried out under a construction contract, or
(b) the value of any related goods and services supplied under a construction contract, the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.…
51 Sections 24 and 25 deal with enforcement of adjudicated amounts. They do not require consideration.
52 Finally, it is necessary to refer to s 34, which prohibits contracting out. It is widely expressed:
34 No contracting out
(1) The provisions of this Act have effect despite any provision to the contrary in any contract.
(2) A provision of any agreement (whether in writing or not):
(a) under which the operation of this Act is, or is purported to be, excluded, modified or restricted (or that has the effect of excluding, modifying or restricting the operation of this Act), or
(b) that may reasonably be construed as an attempt to deter a person from taking action under this Act, is void.
Issue estoppel, abuse of process and the Act
53 I dealt with the authorities, and the principles to be derived from them, in Urban Traders at [19] to [43]. With one exception, what I there said is sufficient to state the relevant principles for the purposes of these proceedings, and I incorporate those paragraphs into these reasons:
[19] The doctrines of estoppel by res judicata and issue estoppel are founded on the principle that controversies, once resolved by a court or tribunal of competent jurisdiction, should not be reopened except in limited circumstances: D’Orta Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 at 17 [34]. Estoppels may arise from the decisions of judicial tribunals, domestic tribunals (including arbitrators and others given authority, by consent of the parties or otherwise, to hear and determine disputes) and in some cases administrative tribunals. See Spencer Bower, Turner and Handley, Res Judicata (third edition, 1996) at 25; and, as to administrative tribunals, the judgments of Barwick CJ and Gibbs J (with whom, on this point, Menzies and Stephen JJ agreed) in The Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353 at, respectively, 403 – 404 and 453 – 454.
[20] In Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69, the Court of Appeal considered a situation where a builder, having obtained adjudication on four invoices and been dissatisfied with the outcome, made a further adjudication application based on those four invoices and two others. The proprietor did not serve a payment schedule. The builder sought summary judgment in the District Court. The primary judge declined to give summary judgment because to do so “is barred because of principles akin to res judicata at least or constitutes an abuse of process” (see her Honour’s reasons quoted by Macfarlan JA at [31]). The Court of Appeal upheld her Honour’s decision.
[21] Macfarlan JA, with whom Handley AJA agreed, held that on the proper construction of the Act, an adjudicator’s determination possessed a sufficient degree of finality to raise an issue estoppel precluding subsequent reagitation (in another adjudication) of the same issue: see, in particular, at [68] to [70]. However, as Macfarlan JA pointed out at [68], an adjudicator’s determination does not attract the principles of res judicata, because “the analogy between an adjudicator’s determination and a completed cause of action is an incomplete one”. Thus, as his Honour said (again at [68]), “[i]t is best that the applicable principles be recognised to be those of issue estoppel”.
[22] The conclusion, that the determinations of adjudicators attract the principles of issue estoppel, was based upon considerations of finality. This is apparent from the review of those principles undertaken by Macfarlan JA: see (under the general law) at [42] to [50] and (under the Act) at [51] to [62]. That review led his Honour to the conclusion that the legislature intended to render the determinations of adjudicators “relevantly conclusive”: i.e., conclusive as to entitlements to progress payments. As his Honour said at [60], where a dispute is resolved by determination, the intention of the Act is that the “determination… be final and binding between the parties as to the issues determined, except to the extent that the Act allows the determination to be revisited”.
[23] Further, Macfarlan JA said that to permit reagitation, in a subsequent adjudication, of issues decided in an earlier adjudication might amount to abuse of process: see, in addition to the paragraphs that I have referred to, his Honour’s reasons at [71]. I return to this at [28] below.
[24] Allsop P agreed that reagitation, in a subsequent adjudication, of issues decided in an earlier adjudication might be an abuse of process: see his Honour’s reasons at [2], [13] and [16]. His Honour would have reserved consideration of the applicability “of principles of estoppel to prevent any apparently abusive operation of the Act not specifically covered by” its relevant provisions: see, again, at [16].
[25] In Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd [2009] NSWSC 416, Rein J held at [41] that the ground of the decision of the majority (Macfarlan JA and Handley AJA) in Dualcorp was based on estoppel.
[26] In The University of Sydney v Cadence Australia Pty Limited [2009] NSWSC 635, Hammerschlag J was faced with a submission that the majority holding in Dualcorp on issue estoppel was obiter. His Honour said at [46] that he had “significant doubt” that it was. I agree, as I agree with the analysis of Rein J on this point. In my view, Macfarlan JA and Handley AJA decided the matter on the basis that there was an issue estoppel even though an adjudicator’s determination could not give rise to res judicata. I think, reading the judgment of Macfarlan JA, it is clear that his Honour decided the matter on the basis of issue estoppel, and that what his Honour said about abuse of process was obiter.
[27] In any event, this is in my view academic, because even if the majority view on issue estoppel were obiter, I agree with Hammerschlag J in Cadence at [47] that it is for someone other than a first instance judge to say that their Honours’ view is plainly wrong, and should not be followed.
[28] Rein J concluded in Perform that there was an issue estoppel, and that there was also an abuse of process, because the builder in that case had sought to reagitate, in a subsequent adjudication, claims decided by an earlier adjudication. In those circumstances, his Honour said, the Court could and should intervene to prevent the later adjudication from proceeding. His Honour gave five reasons for that at [47]. I paraphrase those reasons as follows:
(1) a subsequent payment claim seeking to reagitate matters determined in an earlier adjudication “is not… within the intent of the Act” and “is not… permitted by the Act”, and hence is not a payment claim for the purposes of the Act;
(2) the remedies for abuse of process or issue estoppel are dismissal or permanent stay, remedies that an adjudicator cannot grant
(3) it is no answer to say that the respondent can raise the issue estoppel before the adjudicator, because requiring, or leaving, the respondent to do that is the very abuse that ought to be restrained;
(4) the Act aims to provide a speedy determination of claims for payment on an interim basis, not to burden parties to construction contracts with a repetitious and quasi-litigious process; and
(5) a determination under the Act is not final, but a means of enforcing interim payment; an unsuccessful party (claimant or respondent) retains all of its rights and remedies at law.
[29] Thus, his Honour said at [50], “[w]here steps have been taken in breach of and/or against the intent of a statutory scheme… it is part of this Court’s function to step in and prevent that occurring.”
[30] Hammerschlag J was faced with the same issue in Cadence . His Honour said that the considerations enunciated by Rein J in Perform favoured the grant of injunctive relief to prevent the proceedings continuing where there was abuse of process.
[31] As I have noted, the decision in Dualcorp concerned four only of the six claims that were put before the second adjudicator. The primary judge entered summary judgment in respect of the two claims that were not repetitious. The Court of Appeal upheld her Honour in this. As Macfarlan JA said at [73], “the primary judge was correct to refuse summary judgment in respect of the amounts which were the subject of the four invoices referred to in the [first] adjudicator’s determination”. Further, his Honour said at [74] “the primary judge was correct in the course she took”.
[32] In Perform , it appears from Rein J’s reasons at [22] that there was a complete correspondence between the first and second claims, in the sense that the second claim raised nothing that had not been raised in the first.
[33] There was no such exact correspondence in Cadence . However, Hammerschlag J said at [5], “even though [the second claim] is not exactly the same as the earlier claim, a substantial and unseverable part of it has already been adjudicated”. His Honour’s reasons at [13], [17], [19] and [20] show why this is so. Accordingly, his Honour held that the adjudication should not go forward. It does not follow that his Honour would have made the same order if the repetitious claims were not “substantial and unseverable”.
[34] The concept of abuse of process requires some further consideration. Gleeson CJ, Gummow, Hayne and Crennan JJ said in Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at 265 [9]:
“What amounts to abuse of court process is insusceptible of a formulation comprising closed categories. Development continues.”
[35] The width of the concept is explained in the following paragraphs of their Honours’ reasons. As they said at [14] and following, one category of abuse of process is the use of a court’s procedures in a way that is frivolous, vexatious or oppressive; although it may be noted, as Gaudron J said in Ridgeway v The Queen (1995) 184 CLR 19 at 74, “there is no very precise notion of what is vexatious”.
[36] In Walton v Gardiner (1993) 177 CLR 378, Mason CJ, Deane and Dawson JJ said at 393 that the institution or maintenance of proceedings in a court would constitute an abuse of process “if they can be clearly seen to be foredoomed to fail” or “if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings”. Although their Honours gave no examples of proceedings “foredoomed to fail”, proceedings bound to fail by application of the doctrine of issue estoppel would fall into this category.
[37] Further, as Rein J noted in Perform at [48], it is also clear from the decision in Walton that this Court has power to restrain proceedings not only in the Court itself but also in other tribunals where those proceedings are an abuse of process. That follows from s 23 of the Supreme Court Act 1970, which gives this Court “all jurisdiction which may be necessary for the administration of justice in New South Wales”. Although in Walton the majority talked of the supervisory jurisdiction of the Court of Appeal under that section, by s 40 of the Supreme Court Act the court may be constituted (and in proceedings in any division and in business arising out of proceedings in a division is constituted) by a single judge.
[38] In the context of the Act (i.e., when asking whether there has been an abuse of the processes established by the Act), the essence of abuse of process is what Allsop P in Dualcorp described as:
(1) the “repetitious use of the adjudication process to require an adjudicator or successive adjudicators to execute the same statutory task in respect of the same claim on successive occasions” (at [2]);
(2) the use of the Act “to re-ignite the adjudication process at will in order to have a second or third or fourth go at the process provided by the Act merely because [the claimant] is dissatisfied with the result of the first adjudication” (again, at [2]); or
(3) “repetitious re-agitation of the same issues” (at [16]).
[39] Similarly, in Perform , the essence of Rein J’s reasons for concluding that there was an abuse of process was that, where an adjudication had been conducted and a determination given, the dissatisfied claimant sought to propound a claim, differently framed, for the very same works, goods or services (see at [42], [46]).
[40] Again, in Cadence at [56], Hammerschlag J made it clear that the abuse of process lay in the fact that the claimant was seeking to re-agitate a payment claim that had been made and adjudicated upon.
[41] It does not follow from the decisions to which I have referred that every repetition, in a subsequent payment claim, of a claim made in an earlier payment must amount to an abuse of process. That is so even if that earlier payment claim has been the subject of an adjudicator’s determination. The relevant concept is not abuse of process at large. It is abuse of the processes of the Act: specifically, the processes of the Act designed to ensure that builders and subcontractors (and of course others) received prompt and progressive payment for construction work performed or related goods and services provided. The question of whether there has been an abuse the processes of the Act must take into account relevant provisions of the Act. Specifically:
(1) s 13(6) of the Act recognises that a claimant may include in a payment claim an amount that has been the subject of a previous payment claim; and
(2) s 22(4) of the Act deals, to an extent, with a repeated claim by providing that if particular construction work or related goods and services have been valued by an adjudicator, an adjudicator in a subsequent adjudication application is to give them the same value unless satisfied that the value has changed since that previous determination.
[42] Further, whether or not the repetition of a claim amounts to an abuse of process requires consideration of all relevant contextual facts. In addition, it requires consideration of the reasons why the courts intervene to prevent abuse of process. Those reasons include intervention to prevent a person from being vexed by having to reargue an issue already authoritatively decided. Thus, in deciding whether a repetition of a claim amounts to abuse of process, it may be relevant to take into consideration whether, because of fresh claims that are advanced, the respondent will be required to defend itself in any event.
[43] I do not think that it is possible to state in some exhaustive fashion what combination of factors, including repetition, will lead to the conclusion that there is an abuse of process. (See, as to this, French CJ, Gummow, Hayne and Crennan JJ in Jeffery & Katauskas Pty Limited v SST Consulting Pty Limited [2009] HCA 43 at [27].) My concern is simply to make it clear that, in my opinion, it would be inconsistent with the provisions of the Act to which I have referred above to hold that repetition, by itself and without more, always amounts to abuse of process.
54 There is one aspect of the reasons in Dualcorp which I did not consider in Urban Traders . Mr Kidd relied upon the approach of Allsop P summarised at [13] of his Honour’s reasons. His Honour there said that neither the contract under consideration nor s 8 of the Act permitted the creation of fresh reference dates by lodging the same claim for the same completed works in successive payment claims:
[13] I see no warrant under either the contract or the Act, s 8 for permitting a party in Dualcorp’s position to create fresh reference dates by lodging the same claim for the same completed works in successive payment claims. That is not the intended operation of the last phrase of s 8(2)(b) (“and the last day of each subsequent named month”).
55 The result, his Honour said at [14], was that a repetitious payment claim (i.e., one that purely repeated an earlier payment claim) was not a payment claim under the Act and did not attract the statutory consequences for which the Act provided:
[14] Here, the work had been done; Dualcorp, the subcontractor, had left the site; it claimed payment by six invoices; six weeks later it repeated that claim by reference to the same invoices and, in my view, in respect of the same reference date. Dualcorp was prevented from serving the second payment claim. The terms of s 13(5) are a prohibition. The words “cannot serve more than one payment claim” are a sufficiently clear statutory indication that a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment claim under the Act and does not attract the statutory regime of the Act.
56 Those observations should be read in the context of what Allsop P had said at [8]. His Honour there noted that, although a claimant was limited to one payment claim per reference date (s 13(5)), amounts the subject of an earlier payment claim could be included in a later payment claim made by reference to another, and later, reference date (s 13(6)). Thus, cumulative payment claims, each based on a separate reference date, could include amounts the subject of previous claims. In those circumstances, if there had been an adjudication of the value of work included in one payment claim, it should be given the same valuation in subsequent payment claims unless the later adjudicator concluded that the value of the work had changed (s 22(4)).
57 Allsop P drew a distinction between:
(1) (at [8]), a situation where successive payment claims were served, based on successive reference dates, but later payment claims included work the subject of earlier payment claims; and
(2) (at [13]), a situation where, once works were complete, a fresh reference date was “created” by the service of a repetitious payment claim (“the same claim for the same completed works”).
58 It follows from his Honour’s analysis that there is no necessary vice in submitting payment claims, incorporating claims for work that were made in earlier payment claims, on fresh reference dates where work is continuing under the contract. The vice arises (if at all) only where work has been completed, and the claimant takes advantage of the 12 month period referred to in s 13(4)(b) to “create” a reference date by serving, as a fresh payment claim, a claim that has been the subject of an earlier payment claim.
59 In this context, Mr Kidd relied also on what Macfarlan JA said at [53]: that s 13(6) of the Act did not authorise the inclusion in a later payment claim of an amount that had been the subject of an earlier adjudication. To allow this, his Honour said, would be inconsistent with the carefully structured provisions of the Act dealing with adjudication and other provisions pointing to considerations of finality:
[53] Secondly, as earlier mentioned, under s 13(5) only one payment claim may be served in respect of each reference date under the construction contract. There is a qualification that the claimant may include in a payment claim an amount that has been the subject of a previous claim. However, taking into account the Act’s objectives and its provisions, I do not consider that that qualification can, or should, be read as authorising the inclusion in a payment claim of an amount which has been the subject of an earlier adjudication. It would in my view be inconsistent with the carefully structured procedures as to adjudication and the provisions, which I am in the course of mentioning, pointing towards finality of adjudication determinations to give it that construction.
60 I confess that I have some difficulty with this aspect of the reasoning of Macfarlan JA. Section 13(6) authorises the inclusion in a later payment claim of an amount that has been the subject of an earlier payment claim. Section 22(4) contemplates that the amount that is “re-claimed” might have been the subject of earlier adjudication and provides for the consequences. I accept, of course, that s 22(4) does not deal with all occasions on which amounts are “re-claimed”, and that it is not an exclusive or exhaustive code dealing with the treatment of “re-claimed” amounts. Nonetheless, I do not understand how, in those circumstances, it can be said that the Act impliedly prohibits the inclusion, in a later payment claim, of an amount that has been the subject of a prior adjudication. His Honour’s approach would, with respect, make it difficult for the claimant to seek to have a later adjudicator revalue the work on appropriate evidence; yet the prospect of revaluation is expressly preserved by s 22(4).
61 The approach emerging from those paragraphs of the judgment of Allsop P in Dualcorp that I have set out at [54] and [55] above was picked up by Rein J in Perform at [42] and by Hammerschlag J in Cadence at [54] and [56].
62 Rein J said, as an alternative to his decision based on considerations of finality, that the payment claim with which he was concerned was incompetent, because the Act permits only one claim in respect of the same work. For the reasons that I have just given, I think, if I may say so with respect, that this overstates the position. Rein J based himself on the approach taken by Allsop P. However, as I have sought to point out, Allsop P did not consider that repetition of itself was itself sufficient to take a payment claim outside the Act.
63 Hammerschlag J expressed himself – at least, initially - in somewhat more limited terms. His Honour said at [54] that s 13(6) did not contemplate resubmission of a claim that had previously been adjudicated and rejected. If I may say so, that more limited statement of principle finds support both in the approach of Macfarlan JA and in that of Allsop P in Dualcorp .
64 However, at [56], Hammerschlag J appeared to put the matter somewhat more widely. His Honour said (echoing, I think, what I think Macfarlan JA had said in Dualcorp at [53]), “that the Act gives no right to re-make a payment claim which has earlier been made and adjudicated upon”. Such a “remade” claim was, his Honour said, “not a payment claim within the meaning of the Act”. For the reasons that I have just given in relation to what Macfarlan JA said in Dualcorp at [53], I have difficulty with this aspect of the reasoning of Hammerschlag J.
65 I might add that it was essentially because of the concerns that I have stated above, as to some of the wider aspects of the reasoning in Dualcorp , Perform and Cadence , that I expressed the reservations that I did in Urban Traders at [41] to [43].
First issue: was the December payment claim a valid payment claim?
The competing submissions
66 Mr Kidd submitted that the December payment claim was not a valid payment claim for the purposes of the Act. He relied on what was said by Allsop P in Dualcorp at [8], [13] and [14]; by Macfarlan JA in the same case at [53]; by Rein J in Perform at [42]; and by Hammerschlag J in Cadence at [54], [56]. Mr Kidd drew from those cases the proposition that where a later payment claim resubmitted a claim for work the subject of an earlier payment claim and adjudication determination, that later payment claim was not a valid payment claim for the purposes of the Act: at least, in circumstances where there was no contention that the value of those works had changed since the previous determination. Alternatively, Mr Kidd submitted, the December payment claim was invalid to the extent that it repeated the claim for variations 1 to 8.
67 Mr Kidd submitted, correctly, that Austin had not suggested that there was any change in the value of the work comprised in variations 1 to 8. Indeed, as I have observed, the only change was an immaterial one relating not to the value of the work but, at most, the amount claimed for it (variation 3). Further, as Mr Kidd submitted, the evidence relied upon in support of those variations was identical in each payment claim.
68 It followed, Mr Kidd submitted, that the February determination was void. That was because it included in the adjudicated amount $844,266.50 for the works that had been included in the October payment claim and the November determination, where that determination had concluded that nothing was payable for that work. Mr Kidd submitted that a determination that was void was wholly void. “There is no notion of partial invalidity of an adjudication determination”, he said.
69 Mr Corsaro submitted that even if the December payment claim were not valid for the purposes of the Act (and he contested this proposition), it did not follow that the February determination was void for the reasons submitted by Mr Kidd. Mr Corsaro pointed out the relatively limited circumstances in which an adjudication determination will be void. In brief, those circumstances are failure to comply with one of the essential requirements of validity identified (as has been observed on many occasions, in a non-exhaustive way) by Hodgson JA in Brodyn at 441 [53] or substantial denial of that measure of justice that the Act intended to afford. Mr Corsaro noted that although the second of the basic and essential requirements was the service of a payment claim, Hodgson JA had said at 441 [54] that the “more detailed requirements” of “s 13(2) as to the content of payment claims” were excluded from the list of basic and essential requirements.
70 Mr Corsaro noted that, in Dualcorp , the primary judge had refused summary judgment in respect of the four invoices that had been the subject of the earlier adjudication, but had given it for the amount of the other two invoices. The Court of Appeal upheld her Honour’s decision. Thus, Mr Corsaro submitted, it appears that their Honours did not consider that the inclusion, in the later payment claim and adjudication, of the four invoices that had been the subject of the prior adjudication invalidated the whole of the later payment claim.
Decision
71 Neither the judgments in Dualcorp nor the judgments at first instance that adopt and apply Dualcorp consider, in terms, whether an adjudication determination of an “invalid” payment claim is void. In this context, by “invalid”, I mean to pick up the language of Allsop P in Dualcorp at [14], as describing “a document purporting to be a payment claim that… is not a payment claim under the Act and does not attract the statutory regime of the Act”. His Honour’s choice of words echoes the words of Hodgson JA in Brodyn at 441 [52], where his Honour considered what were the essential conditions for there to be a determination which would “have the strong legal effect provided by the Act”.
72 If a payment claim is not a valid payment claim, capable of attracting the statutory regime of the Act, then it might seem to follow that it is not a valid payment claim capable of satisfying the second of the basic and essential conditions set out in Brodyn at 441 [53].
73 However, one must take into account that a payment claim is a document served by a person who is or claims to be entitled to a progress payment. Undoubtedly, a claimant in the position of Austin who serves a payment claim that reagitates earlier claims, which have been the subject of adjudication, is nonetheless, by service of the later payment claim, claiming an entitlement to the progress payment described therein.
74 There are difficulties in concluding that resubmission of a claim that has been the subject of an earlier claim and adjudication means that the whole of the later claim is not a payment claim for the purposes of the Act, so as to fall within the second of the five categories of basic and essential requirements listed by Hodgson JA in Brodyn at 441 [53]. At most, it seems to me, any invalidity (whether sufficient to bring the matter within the second of those categories or not) could apply only to the extent of the repetition. That seems to follow from the result in Dualcorp , where the Court of Appeal upheld the decision of the primary judge to grant summary judgment for the amount of the two invoices (out of the total of six that had been submitted in each of the earlier and the later payment claims) that had not been the subject of the earlier adjudication.
75 Another way of looking at the matter is to say that, even though a payment claim is “invalid” in the sense referred to at [71] above, and even if, accordingly, it “does not attract the statutory regime of the Act”, that is a matter for an adjudicator to decide, and not want of an essential condition of validity of a determination.
76 Accordingly, I think, if on the facts of a particular case the consequences of repetition of a payment claim that has been the subject of an earlier adjudicator are, or include, invalidity, those consequences should not extend to, so as infect with invalidity, the whole of the payment claim if and to the extent that it includes claims in respect of work that has not been the subject of a prior adjudication.
77 I do not think that the decisions to which I have referred support the proposition for which Mr Kidd contended, or require a different conclusion to that which I have just expressed. The ratio of Dualcorp is found in the judgment of Macfarlan JA, and is based on the application, to adjudications under the Act, of principles of issue estoppel. Allsop P would not have based the decision on that principle. As his Honour said at [16], he “would leave to another occasion, should it be necessary, the consideration of principles of estoppel to prevent any apparently abusive operation of the Act not specifically covered by ss 13(5) and 22(4)”.
78 The approach taken by Allsop P in Dualcorp is more restricted than the principle for which Mr Kidd contended. His Honour accepted at [8] that a later payment claim could include an amount that had been the subject of a previous payment claim, even though there had been an adjudication on the previous claim. The prohibition that Allsop P saw on the lodgement of successive payment claims was, as His Honour described it at [13] and [14], on the use of s 8(2)(b) (and, I think, s 13(6)) “to create fresh reference dates by lodging the same claim for the same completed works in successive payment claims” in circumstances where work had been completed, and the claimant had left the site, by the time the anterior payment claim had been lodged. There is nothing in the approach of Allsop P to support the proposition that, where work under a construction contract is ongoing, a fresh payment claim (including a claim for payment for work not covered by previous claims) is invalid simply because it includes work the subject of a previous payment claim which claim had been the subject of adjudication.
79 I accept that what Macfarlan JA said at [53] goes beyond what I understand to have been the approach of Allsop P. However, as I have indicated at [60] above, I have some difficulty with this aspect of the reasoning of Macfarlan JA. In any event, I think, what his Honour said at [53] is not a free-standing conclusion, but an aspect of his Honour’s analysis of the Act that was in itself a step in his reasoning process towards the conclusion that the doctrine of issue estoppel applied to adjudication determinations.
80 Further, and essentially for the reasons that I have given at [62] to [64] above, I do not think the decisions in Perform and Cadence should be accepted as supporting a proposition of the width for which Mr Kidd contended.
81 If there is to be found in the Act some implied limitation on the resubmission of payment claims for amounts that have been the subject of earlier payment claims and adjudication, it must, I think, be narrower than that for which Mr Kidd contended. A reference point for the identification for such an implied prohibition may be found in s 22(4); more specifically, in the relatively limited operation of that subsection.
82 In Rothnere Pty Ltd v Quasar Constructions NSW Pty Ltd [2004] NSWSC 1151, I said at [43] that a determination made by an adjudicator may involve both questions of entitlement (is the claimant contractually entitled to any payment at all?) and quantification (how much?). I said at [44] that s 22(4) applies only to questions of quantification – the valuation of construction work once it is decided that there is an entitlement to be paid for it. I repeated that view, and expanded on the somewhat delphic phrasing of what I had said in Rothnere at [43], in John Goss Projects Pty Ltd v Leighton Contractors (2006) 66 NSWLR 707 at 715 [37] – 716 [41]. This aspect of what I said in those cases received the unanimous support of the Court of Appeal in Dualcorp : see Allsop P at [16] and Macfarlan JA at [66].
83 In the present case, the first adjudicator, in dealing with the statutory task entrusted to him by s 22(1) of the Act, decided that Austin was not entitled to the payment that it claimed. He did not perform any valuation of work comprised in the claim (although he did refer to what he saw as the unsatisfactory nature of the evidence advanced in support of the claim). Thus, in terms of s 22(4), the first adjudication did not contain any valuation of the work the subject of variations 1 to 8 that could have bound the second adjudicator. The second adjudicator understood this, and concluded at para 100 of the February determination that s 22(4) had no application.
84 Since, as I have now said more than once, the Act expressly contemplates that a fresh payment claim may include a claim for work that has been the subject of an earlier payment claim an adjudication thereon, it may be that any limiting principle for the kind for which Mr Kidd contended should take into account the confined operation of s 22(4). In the circumstances of this case, the determination of the first adjudicator did not bind the second adjudicator under s 22(4), simply because the first adjudicator did not value the work in question.
85 If there is to be found, on the proper construction of the relevant provisions of the Act, some prohibition on the repetition of claims (where that occurs in the context of ongoing work under the construction contract) that have been the subject of earlier claims and adjudication, then that prohibition should in my view be limited to circumstances such as the present. That is to say, it should be limited to circumstances not expressly covered by s 22(4): namely, where the prior adjudicator has considered the claim and, in the course of performing the statutory function of deciding the amount of any progress payment (see s 22(4) of the Act), has determined that there was no entitlement to recover.
86 In my view, there are two possible categories of payment claims that could be described as “invalid” in the sense given at [71] above:
(1) first, that described by Allsop P in Dualcorp at [14]: a repetitious payment claim, being no more than the same claim for the same completed works, resubmitted after work under the construction contract in question had ceased, and resubmitted purely for the purpose of “creating” a fresh reference date. On his Honour’s reasoning, this would be outside the permission given by ss 8(2)(b) and 13(6) of the Act.
(2) The second is a payment claim claiming an amount that has been the subject of a prior payment claim and adjudication thereon, in circumstances where the prior adjudicator has determined that there is nothing due by the respondent to the claimant. That might occur in circumstances where (as Macfarlan JA postulated at [71] of Dualcorp ) the prior adjudicator had rejected the claim for want of evidence, without considering on its merits. It could also occur where (as here) the prior adjudicator rejected the claim because he concluded that the claimant had not made out any legal entitlement to it, or had not put the claim on a basis that was capable of being the subject of an adjudicator’s determination.
87 The case for invalidity is, I think, stronger where the earlier adjudicator has determined that there is no entitlement to the amount of the payment claim (or to a severable portion of the amount claimed by that payment claim). I say that because s 22(4) deals with the situation where, entitlement having been found, the prior adjudicator determines the value of the work that is the subject of the payment claim, and thus avoids the evil of inconsistent outcomes. But, for the reasons that I gave in Rothnere and John Goss , s 22(4) has no operation where the prior adjudicator determined the fate of the payment claim on the basis that the claimant had made out no entitlement to be paid. In those circumstances – where there is no question of abiding by the previous valuation (or of showing that the value of the work has changed) and no question of a cumulative payment claim where work is ongoing, it is easier to see why mere resubmission might be regarded as outside the scheme of the Act, and in particular outside whatever permission to resubmit can be implied from ss 8(2)(b) and 13(6). If there is some freestanding doctrine of invalidity, separate from issue estoppel and abuse of process, then that may well define its sphere of operation. It is however difficult to see how the operation of any such principle of invalidity could add anything to the operation of issue estoppel or abuse of process.
88 In the present case, it is common ground that the December payment claim did more than merely repeat the October payment claim. Thus, the January adjudication application sought more than the November adjudication application, and the February determination was wider in extent accordingly then the November determination. In summary: the December payment claim sought payment of $1,655,994.00, of which a little more than half - $844,375.00 – related to variations 1 to 8 which had been the sole subject of the October payment claim. This is not a case where the claimant, Austin, sought “to create [a] fresh reference [date] by lodging the same claim for the same completed works in successive payment claims” and no more.
89 It follows, if I am right in concluding, from the outcome in Dualcorp , that any invalidity (and again, I refer to the sense in which I have used this word at [71] above) arising from resubmission extends only to the extent of the resubmitted claims, only the resubmitted claim for variations 1 to 8 would be invalid. Leaving aside for the moment the question of denial of natural justice, the only basis on which the Court could restrain enforcement of the February determination is that the underlying (December) payment claim is “invalid”. For reasons that I give below, in dealing with the second and third issues, that result follows in any event from application of the doctrine of issue estoppel (in both the limited and the extended, or Anshun , senses) and abuse of process. Accordingly, given (as I have said) that I do not regard the authorities on which Watpac relied as requiring me to conclude that a payment claim of the kind presently under consideration is invalid, either in whole or in part, so as to render void or unenforceable any determination founded upon it, I propose to rest my decision on issue estoppel and abuse of process.
Second issue: issue estoppel
90 For the reasons that I gave in Urban Traders at [26], it is my view that the ratio of Dualcorp is to be found in the view of Macfarlan JA and Handley AJA that the prior adjudicator’s determination gave rise to an issue estoppel. Further, as I said at [27] of Urban Traders , even if I were wrong in that, and what their Honours had said were obiter, I should follow it.
91 Before I turn to the parties’ submissions on the second issue and my decision on it, I should note that Mr Corsaro put the formal submission that Dualcorp was wrongly decided. Although this was put specifically in the context of issue estoppel, I think that I should take it as applying also to the reasoning on abuse of process.
92 The second issue involves four separate questions:
(1) does the concept of issue estoppel, insofar as it is applicable to determinations of adjudicators, include the extended (or Anshun ) principle (which I will call “the extended principle)?
(2) If it does, should Watpac be permitted to call that principle in aid when it was not expressly referred to in its list statement?
(3) What was the issue decided by the first adjudicator, and was that issue repeated in the January adjudication application?
(4) Does the extended principle (assuming that it is open to Watpac to rely on it) operate in the facts of this case?
First question: the parties’ submissions
93 Mr Kidd submitted that the relevant principles of issue estoppel included its extended form. Mr Corsaro’s submissions did not in terms deal with this point. His primary position was (as I set out at [106] below) that Watpac should not be permitted to rely on the extended principle.
Decision: first question
94 I start with the proposition, which as I have said I regard as established by the ratio on which the majority decided Dualcorp , that the determinations of adjudicators do attract the principles of issue estoppel. I accept, however, that the ratio is limited to issue estoppel in the limited sense, and does not in terms include the extended principle.
95 Nonetheless, I think, the applicable content of issue estoppel should include the extended principle. I start with the judgment of Wigram V-C in Henderson at Hare 115, ER 319. His Lordship said that where something is litigated, “the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case”. His Lordship said that the principle of res judicata extends “except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time”.
96 There is a distinction between res judicata and issue estoppel. Dixon J expressed that distinction in Blair v Curran (1939) 62 CLR 464 at 532. In the first case, his Honour said, “the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence”. By contrast, in the second case, “for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order”.
97 A relationship between issue estoppel and abuse of process was noted by Somervell LJ in Greenhalgh v Mallard [1947] 2 All ER 255 at 257. His Lordship said that:
res judicata… is not confined to the issues which the court is actually asked to decide but… covers issues or facts which are so clearly part of the subject–matter of the litigation and so clearly could have been raised that it be an abuse of the process of the court to allow a new proceeding to be started in respect of them.
98 However, the majority (Gibbs CJ, Mason and Aickin JJ) in Anshun at 602 doubted the utility of “the abuse of process test”. Thus, in Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33, Allsop P pointed out at [3], in the context of discussing issue estoppel, that “it is necessary to eschew language of abuse of process”.
99 Another circumstance that has been recognised as calling into play issue estoppel, in the extended sense, is where an action if successful would result in a judgment that conflicts with an earlier judgment: Anshun at 603.
100 Although Wigram V-C and Somervell LJ used the expression “res judicata” to denote what in Australia is called issue estoppel, so that their observations have to be read with the distinction drawn by Dixon J in Blair in mind, they show, nonetheless, that finality and inconsistency are two of the underlying principles supporting the doctrine of issue estoppel.
101 Macfarlan JA referred to those considerations in Dualcorp . His Honour drew from various provisions of the Act that the legislature intended “to render adjudication determinations relevantly conclusive” (see his Honour at [60], noting the underlying reasons given at [51] to [59]). Thus, his Honour concluded (again at [60]), an adjudicator’s determination that resolves a dispute is:
final and binding between the parties as to the issues determined, except to the extent that the Act allows the determination to be revisited. It would be… quite contrary to the scheme of the Act to permit claimants simply to resubmit the already adjudicated claims if they were dissatisfied with the adjudication.
102 His Honour returned to this theme at [70] where he said that the idea that a disappointed claimant can go from adjudicator to adjudicator until satisfied:
would… conflict with the policy of the Act to render adjudicators’ determinations final on issues which they resolved, subject only to provisions of the Act conferring limited rights of correction of determination.
103 His Honour was not dissuaded by the prospect of “unfair” outcomes (for example, as he said at [71], where a claim was rejected for want of evidence rather than on its merits). He said at [72] that “[i]t is not at all unusual that persons seeking remedies in courts or other forums have a once only opportunity to bring forward evidence and submissions in support of their claim”.
104 In my view, both as a matter of principle and because of the clear policy of the Act, as to the finality of determinations, identified by Macfarlan JA, the doctrine of issue estoppel, in so far as it applies to determinations of adjudicators under the Act, includes the extended principle. To conclude otherwise would permit a party to retain the opportunity to resubmit claims, until finally it got an advantageous outcome, by holding back part of its case each time. Except in special circumstances, a party should put the whole of its case, in support of a particular payment claim, before an adjudicator who is charged with the statutory responsibility of deciding that parties’ entitlement to the amount claimed.
Second question: the parties’ submissions
105 Mr Kidd submitted that in circumstances where the list statement had expressly raised issue estoppels (see para 12 of the statement of contentions), it was open to Watpac to rely on both the limited and the extended principles.
106 Mr Corsaro submitted that Watpac should not be permitted to rely on the extended principle. He said that if it had properly flagged its intention to do so, it would have been open to Austin to lead evidence as to why it chose to put the October payment claim only on the basis of unjust enrichment, and why it did not rely, in the alternative, on some contractual entitlement (based either on the express terms of the written contract or alternatively upon some wider “arrangement” falling within the definition of “construction contract”).
Decision: second question
107 It has been understood clearly for many years that the principles of issue estoppel apply not only to issues actually raised and necessarily decided but also to issues that could (and perhaps should) have been raised, but were not. If the decision of the majority in Anshun signalled some change of significance in the law (and I doubt that it did), that is something of which the legal profession has been aware for almost 30 years.
108 The formal requirements of a list statement include that it should state the material facts and legal propositions on which a party relies in support of its claims for relief. Watpac’s list statement set out those material facts and concluded, in my view sufficiently, that those facts gave rise to an issue estoppel. In particular, the list statement asserted (para 6) that the amount determined by the first adjudicator in the November determination, in respect of the payment claim for variations 1 to 8, “was $ nil”. It asserted, correctly, that the December payment claim and January adjudication application raised again the claim for variations 1 to 8, and sought adjudication of the entitlement to payment for those variations. In those circumstances, the list statement asserted, the principles of issue estoppels applied to the extent of that repetition.
109 In my view, the list statement was sufficient to apprise Austin of the fact that Watpac relied on, among other things, the doctrine of issue estoppel. Thus apprised, Austin should have realised that issue estoppel included the extended principle to which I have referred.
110 I conclude that it is open to Watpac to rely on the extended principle of issue estoppel.
Third question: the parties’ submissions
111 Mr Kidd submitted that the issue decided by the first adjudicator was whether Austin was entitled to be paid anything by way of a progress claim for variations 1 to 8. He referred to s 22(1)(a), and submitted that it followed that the issue determined by the first adjudicator was “the amount of the progress payment (if any) to be paid by the respondent to the claimant”.
112 Mr Corsaro took the approach that the second adjudicator had taken. He identified the issue decided by the first adjudicator as being that he had no jurisdiction to make a determination of a claim based on unjust enrichment. He did not decide (because it formed no part of the application before him) any entitlement based on either the contract in its expressed terms or some wider arrangement. As Mr Corsaro said at para 13 of his written outline:
It is a refusal to proceed to make a determination of those items. The issue decided by the first adjudicator was whether the adjudicator had jurisdiction to decide a claim based on restitutionry principles.
Decision: third question
113 The issues before, and decided by, the first adjudicator should be determined by reference to the payment claim and payment schedule, together with the legitimate supporting submissions, the provisions of the subcontract and the provisions of the Act (see s 22(2)).
114 Starting with the Act: the subject of a payment claim is a claimed entitlement to a progress payment under a construction contract (see s 13(1)). Where the entitlement is disputed in whole or in part, the claimant is entitled to apply for adjudication of that payment claim (see s 17(1)). Where an adjudicator accepts appointment, his or her task is to determine “the amount of the progress payment (if any) to be paid by the respondent to the claimant” (see s 22(1)(a)) and ancillary matters (see paras (b), (c)).
115 Bearing in mind that any analogy between adjudications under the Act and proceedings in a court is of only limited application, and bearing in mind the informality that may (but all too often does not) attend adjudications, it is not appropriate to subject payment claims and payment schedules, adjudication application and adjudication responses, or submissions by the parties, to the degree of scrutiny with which pleadings in a court may be scrutinised, in an attempt to determine the issue decided by an adjudication determination. The appropriate course, I think, is to consider the nature of the entitlement that can be enforced through the statutory mechanism, and the role of adjudicators in performing their functions under the Act. The entitlement of which enforcement is sought is an entitlement to a progress payment under a construction contract. The role of the adjudicator is to determine that entitlement.
116 Thus, I think, in any determination, the issue determined by the adjudicator is the entitlement to the progress payment that is the subject of the payment claim and the adjudication application.
117 It follows that, in this case, the issue decided by the first adjudicator was Austin’s entitlement to a progress payment in respect of variations 1 to 8. It does not matter that he decided it on the basis that, as propounded, the claim was beyond his jurisdiction, any more than it would matter had he decided it on the basis that Austin had adduced no evidence capable of persuading him of any entitlement. Indeed, in parts of his reasons, the first adjudicator made the point that there was nothing in Austin’s submissions or supporting material to support any contractual entitlement to the amount claimed. In that sense, his determination went beyond the description given to it by the second adjudicator and Mr Corsaro. It negated not only any entitlement based on unjust enrichment, but also any entitlement based on a relevant provision of the contract in the circumstances of the case as they appeared from the supporting material.
118 It may be correct to say, as the second adjudicator concluded and Mr Corsaro submitted, that the first adjudicator lacked jurisdiction to determine an entitlement to a payment claim based on unjust enrichment. But even if that be correct (and I, proceed, without deciding, on the basis that it is), it does not mean that the October payment claim was anything other than a payment claim for the purposes of the Act. In the language of s 13(1), it was a claim by Austin to be entitled to a progress payment. Thus, there was a payment claim that was referred to the first adjudicator through the November adjudication application (see s 17(1)) and it was the first adjudicator’s function to decide Austin’s entitlement (if any) in respect of that payment claim (see s 22(1)). If the first adjudicator lacked jurisdiction to decide a claim based on unjust enrichment, and dealt with the payment claim accordingly, nonetheless he fulfilled his statutory function of determining the subject matter of the payment claim.
119 Thus, in my view, there is no reason to go to the extended principle. But in case I am wrong in what I have just said, I will deal with that question.
Fourth question: the parties’ submissions
120 As I have noted at [10] above, Mr Kidd submitted that it was open to infer, from the terms of the November adjudication application, that Austin had made a considered tactical decision to frame its case on the basis of unjust enrichment. He submitted that it was open to infer that Austin had so acted because it recognised that a claim based on the express terms of the contract must fail.
121 Mr Corsaro’s submissions did not address this point in terms. No doubt, that reflected his primary stance: that the issue was not open, and that to deal with it would deny his client the opportunity of considering whether to lead evidence on the point. However, he submitted that even if the second adjudicator’s analysis of the “issue” determined by the first adjudicator were incorrect, that would be an error made within the jurisdiction of the second adjudicator, and could not give rise to any Brodyn error.
122 Mr Corsaro noted also that, by its summons, Watpac sought to restrain enforcement of the whole of the adjudicated amount under the February determination, and not that part of it which related to variations 1 to 8. Watpac has since amended its summons (with leave, which Mr Corsaro did not oppose), to seek in the alternative such limited relief.
Decision: the fourth question
123 It is clear from the November adjudication application that Austin accepted that it had no contractual claim. It asserted (para 24) that the works were carried on “outside of the Contract”: at least an implicit acknowledgment that the claim could not be justified under the express terms of the subcontract, or that it might be defeated by the application of those terms. Plainly, it was that conscious decision that caused Austin to frame the case the way that it did. In those circumstances, it is very difficult to see what credible evidence Austin could have led to support the proposition that there were valid reasons, other than tactical ones which had perceived to be to its advantage, for framing its claim the way it did in the November adjudication application.
124 Were it necessary to decide the fourth question, I would conclude that the extended principle of issue estoppel applies. It is an available inference from the form of the November adjudication application that the decision to rely only on unjust enrichment was taken consciously, for what were perceived to be beneficial tactical reasons. I accept, however, that it is possible (although for the reasons given in the preceding paragraph perhaps unlikely) that Austin could have shed light on this point had it gone into evidence. But the real point, I think, is not so much the underlying reasons for the decision but the imperatives of the statutory scheme.
125 As Allsop P said in Dualcorp at [2]:
the Act was not intended to permit the repetitious use of the adjudication process to require an adjudicator or successive adjudicators to execute the same statutory task in respect of the same claim on successive occasions. … [a claimant] … should not be able to re-ignite the adjudication process at will in order to have a second or third or fourth go… merely because it is dissatisfied with the result of the first adjudication.
126 Macfarlan JA spoke to similar effect at [70]:
I thus disagree with the view ultimately arrived at by McDougall J in John Goss Projects that s 22(4) defines the extent to which an adjudicator is bound by an earlier adjudication. The view that the claimant once disappointed by an adjudicator can seek a different determination from another, or indeed from a succession of others, until a favourable decision is reached would in my view conflict with the policy of the Act to render adjudicators’ determinations final on issues which they resolved, subject only to provisions of the Act conferring limited rights of correction of determinations.
127 The purpose of the Act is to ensure that progress claims are dealt with promptly. Thus, in the event of dispute, an adjudication process is provided to provide what might often be a “rough and ready” approach to the resolution of the dispute. The Act does not decide, but on the contrary preserves for later resolution, final rights (see s 32). If the determinations of adjudicators were conclusive of final rights then there might be some warrant for considering more carefully the precise nature of the estoppel created by a determination, particularly where what is relied upon is the extended principle of issue estoppel. But determinations do not have that impact. Nothing decided by an adjudicator, to the extent that it creates estoppels, has any relevance to or impact on the final determination of rights and liabilities in arbitration or litigation.
128 Thus, as I have said, it is not so much the reasons for framing a claim in a particular way as the fact that the claim was made, and thereafter decided, that is of significance in considering the application of the doctrine of issue estoppel in both its limited and its extended sense. That is why, in my analysis of the issue decided, I looked in particular to the statutory scheme. In my view, an understanding of the statutory scheme is essential to inform, and enable a proper application of, the test of unreasonableness, which lies at the heart of issue estoppel. The judgment to be made, when a claim of issue estoppel is raised, is not whether it is an abuse of process to reagitate a claim, but whether it is unreasonable to do so. See Gibbs CJ, Mason and Aickin JJ in Anshun at 603; and see Handley AJA (with whom Allsop P and Tobias JA agreed on this point) in Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 435 at [60]. The question is whether it was reasonable not to raise the matter in earlier proceedings; and as Allsop P pointed out in Champerslife at [4], merely because something could have been raised in earlier proceedings does not mean that it should have been, or that it was unreasonable not to do so.
129 Were it necessary to do so, I would, as I have said, conclude that the extended principle of issue estoppel precluded Austin from re-agitating, in the December payment claim and the January adjudication application, the very same claims (in respect of variations 1 to 8) that it had agitated in the October payment claim and the November adjudication application, simply by attributing a different legal basis for the entitlement to be paid. It was unreasonable, in all the circumstances and taking into account the scheme and aims of the Act, for Austin to put its claim in respect of variations 1 to 8 on one basis before the first adjudicator and on another (and inconsistent) basis before the second. It was unreasonable for Austin to seek thus twice to engage the processes of the Act, and to put Watpac to either the trouble and expense of replying on the second occasion, or the risk of an adverse determination if it did not.
Third issue: abuse of process
The parties’ submissions
130 Mr Kidd submitted that there had “been a repetitious use of the adjudication process in relation to claims already adjudicated and rejected, in circumstances where there has been no change to the scope or value of the relevant works, no [material] change to the amounts claimed for that work… and the same evidence has been relied on to support the claims in the subsequent adjudication” (written outline, para 42). Further, he submitted, “[t]he fact that the repeated claims were included in a payment claim together with a large number of other claims to which the defendant was required to respond, merely compounds the abuse” (ibid, para 43). That was because Watpac was required to respond, within the short timeframe allowed, not merely to the substantial new claims but also to the claims that had been made and dealt with.
131 Mr Corsaro submitted that the December payment claim and January application included “legitimate and fresh claims which [Austin] was entitled to make and which [Watpac] was required to defend” (written outline, para 18). Thus, he submitted, Watpac was required to defend itself anyway; there was always going to be a claim which would proceed to adjudication. He referred to what I had said in Urban Traders at [59].
Decision
132 In Urban Traders at [59], I said that I was prepared to conclude that the reagitation of the claims in question was an abuse of process. I gave three reasons for that. The first was that the claim was foredoomed to fail because it was the subject of issue estoppel. The second was that the builder was seeking to get a better outcome from the second adjudicator than it had got from the first. The third was that the builder had obtained judgment on the first adjudicated amount, and was essentially seeking to reopen the basis on which it obtained that judgment.
133 However, as I pointed out [60], the reagitated claims were essentially severable, and the abuse of process was limited to the extent of the reagitation.
134 I set out paras [59] and [60]:
[59] Were it necessary to do so, I would conclude also that the reagitation of the claims in question amounts to an abuse of process, insofar as that concept is capable of application to the scheme of interim dispute resolution contained in the Act. That is so for at least three reasons. First, the claim, being barred by issue estoppel, is foredoomed to fail. Secondly, the builder seems to be doing no more than seeking, from a second adjudicator, a better result than it got from the first. There is nothing in payment claim 21 to suggest that there are some new circumstances or material that might warrant reconsideration of the claims in question. Thirdly, the builder has obtained judgment for the amount determined by the first adjudicator. In essence, it now seeks to reopen the basis on which it obtained that judgment.
[60] However, the claims in question are not the major part of the claims raised by payment claim 21: either in absolute terms or (and again acknowledging for the moment Dr Greinke’s other submissions) those claims shorn of the claims for loss of profit and cost of repricing. Further, in my view, they are readily severable. It is easy enough to go through payment claim 21 and, by comparing it with a table helpfully annexed to the adjudicator’s determination, to identify the variations that are sought to be reagitated.
135 Perhaps of more relevance to Mr Corsaro’s submissions, I had said, at [42], that a matter to take into account in deciding whether there was an abuse of process was whether the respondent would be required to defend itself in any event. That is certainly the case in these proceedings, because on any view there were fresh claims raised.
136 Nonetheless, I think, the first two reasons that I gave in Urban Traders at [59] for concluding that there was an abuse of process can be applied directly on the facts of this case. The third factor does not arise because, there having been no adjudicated amount, there was no judgment to be recovered on the November determination. However, I was not intending to suggest that there would have been no abuse of process apart from the concurrence of the three reasons. On the contrary, in my view, each of those reasons was (in Urban Traders ) capable of supporting the conclusion. Equally, each of the first two reasons, applied in the context of this case, is capable of supporting the conclusion that there is an abuse of process.
137 Further, in this case, it may be noted that although the ground of the application changed, the evidence relied on did not. That confirms that the resubmitted claim was no more than the old claim dressed up in new clothes.
138 In any event, as Somervell LJ pointed out in Greenhalgh at 257, it may be an abuse of process to make a claim on one ground then, when it fails, re-make it on another. Although his Lordship was speaking in the context of civil litigation, what he said should be applied, in my view a fortiori, in the context of the Act.
139 In my view, it is an abuse of the processes established by the Act for a claimant in Austin’s position to put a substantial and detailed claim on one carefully articulated ground and, when that claim fails, to remake it on a substantially different ground that could have been advanced, but was not, when the claim was first made. It is difficult enough for respondents in the position of Watpac to deal with complex payment claims within the timeframe allowed by the Act, without having to consider, and waste management and perhaps other resources on, repetitious claims.
140 For those reasons, I would conclude, were it necessary to do so, that the reagitation of the claims for variations 1 to 8, in the December payment claim and January application, was an abuse of the processes of the Act.
Fourth issue: denial of natural justice
The relevant principles
141 Hodgson JA discussed natural justice, in the scheme of the Act, in Brodyn at 441-442 [55]. His Honour said in that paragraph that an adjudication determination will be void if, among other things, “there is a substantial denial of the measure of natural justice that the Act requires to be given”.
142 Any entitlement to natural justice must accommodate the scheme of the Act, including the extremely compressed timetable provided for the submission of payment schedules, adjudication applications, and adjudication responses; and the limited time (subject to the consent of the parties, which they may give or withhold at their will) for an adjudicator to determine an application. It must also accommodate the fact that, in many cases, claimants and respondents will prepare their documents themselves, and will not avail themselves of legal advice in doing so.
143 In Musico v Davenport [2003] NSWSC 977, I said at [107] that where an adjudicator is minded to decide a dispute on a basis for which neither party has contended, then natural justice requires the adjudicator to notify the parties of that intention, so that they could put submissions on it.
144 However, as I pointed out in John Goss at 716 [42], “the concept of materiality is inextricably linked to the measure of natural justice that the Act requires parties to be given in a particular case.” That meant, I said, that the principles of natural justice “could not… require an adjudicator to give the parties an opportunity to put submissions on matters that were not germane to his or her decision”.
145 I see no reason to depart from those views; and neither party submitted that I should. In particular, I think, my insistence on materiality is consistent with the reference by Hodgson JA in Brodyn to “substantial denial… of natural justice.”
146 In this context, Gleeson CJ said in Re Minister for Immigration and Multicultural Affairs ; ex parte Lam (2003) 214 CLR 1 at 13 – 14 [37] that fairness is not abstract but practical. His Honour said that “[w]hether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice”. To like effect, Kirby J said in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 291 that the court should not undertake the task of “combing through the words of the decision-maker with a fine appellate tooth-comb [sic], against the prospect that a verbal slip will be found warranting” the intervention of the court.
147 I accept, however, that the court should not be too ready to find that a denial of natural justice was immaterial; that it had no real or practical effect; or that (in the present context) there was nothing that could have been put on the point in question. But it remains the case, I think, that the denial of natural justice must be material, and that submissions that could have been put might have had some prospect of changing the adjudicator’s mind on the point.
The parties’ submissions
148 Mr Kidd submitted that s 34 had not been mentioned anywhere in the payment claim or adjudication application. Further, he submitted, it was relevant to the second adjudicator’s determination on at least what I have called the rump of the other backcharges, because, for the backcharges within that confined class, there was no reason given by the adjudicator for rejecting them other than his view on the operation of s 34.
149 Further, Mr Kidd submitted, it would have been open to his client to put submissions on the point, noting in particular the absence of any authority to support the view that the adjudicator took and the extreme contrast (as he submitted it was) between the terms and operation of cl 14.5 in this case, and the operation of the relevant contractual provisions in (for example) Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2004] NSWSC 823; [2005] NSWCA 142. Further, Mr Kidd submitted, his client could have reminded the second adjudicator that in John Goss at 715 [38] I referred to the possibility that contractual requirements might justify deductions for at least conceded backcharges.
150 Mr Corsaro submitted that, on a proper analysis, the second adjudicator’s reasons extended beyond s 34. Since those other reasons could not be impugned on Brodyn grounds, Mr Corsaro submitted that any reliance on s 34, even if it involved some theoretical denial of natural justice, would not justify the conclusion that the determination was void.
151 Mr Corsaro did not submit that s 34 had been raised in any submission or other document that his client put before the second adjudicator. Nor did he submit that the second adjudicator had given any prior notice of his view that s 34 was relevant.
Decision
152 Since it appears to be effectively common ground that s 34 had not been raised by either party, and that the second adjudicator had given no notice of his view that it was relevant, it is necessary to consider whether the possible denial of natural justice flowing from the second adjudicator’s reliance on s 34 was material. Materiality seems to me to involve at least the following three questions:
(1) was reliance on s 34 an important part of the second adjudicator’s reasoning process, in rejecting Watpac’s claim to offset the backcharges in question?
(2) Were those backcharges themselves significant in the overall context of the amounts at stake in the December payment claim and the January payment schedule?
(3) Were there submissions that Watpac could have put that might have been capable of dissuading the second adjudicator from his view as to the relevance of s 34?
First question: the second adjudicator’s reasoning process
153 I have summarised this aspect of the second adjudicator’s reasons at [33] to [39] above. It is necessary to return to those reasons, because Mr Corsaro submitted that, on a fair reading of them, the second adjudicator had given reasons for rejecting the backcharges in question which did not rely on s 34, and that what he said as to s 34 was no more than an additional reason for the conclusion to which, in any event, he had come.
154 In essence, the second adjudicator said, at paras 178 and 179, that “the remaining disputed backcharges claims” (which are those with which I am presently concerned) were no more than “claims for alleged damages”. He said that the basis of the claims, and the amounts claimed, varied, “but when analysed each claim is based upon an alleged default of [Austin] and the amount claimed is a claim for damages.” He said, correctly, that “liability and quantum have yet to be determined” in respect of those claims.
155 In that context, his reliance on the dispute resolution procedures under the subcontract becomes relevant. As I have indicated at [36] and [37] above, the second adjudicator appears to have taken the view that, on the proper construction of cl 14.5, it could have no application unless and until the amount claimed by way of backcharges had been established either by agreement or by following through the dispute resolution procedures under the contract. (As to the former: the second adjudicator noted at para 136 that Austin had agreed to a set-off of $1,035,855.00 for backcharges – the parties agreed that the word “respondent” in the third sentence of this paragraph should read “claimant”.) The core of the second adjudicator’s reasons appears at para 139 where he says that “I don’t accept that [Watpac] is entitled to set off claims for damages where the damages have not been determined”. That conclusion is said to be justified “for reasons following”.
156 The only “reasons following” that support the second adjudicator’s construction of cl 14.5 are those found at paras 146 to 155 of the second determination. In summary, that reasoning is as follows:
(1) the amount claimed for backcharges (over and above those conceded by Austin) is not an amount due but Watpac’s estimate of an amount that it asserts will become due; an unproven claim for damages (para 146).
(2) Cl 14.5 does not permit Watpac to set off against the amount of a progress claim any amount that Watpac asserts will become due; that would defeat the object of the Act and would contravene s 34 (para 147).
(3) It was an “abuse” for Watpac to “simply withhold payment of an amount on account of its claim for damages” rather than establishing its entitlements under the dispute resolution procedures of the subcontract. “The very purpose of the Act was to negate such abuses” (para 149).
(4) Nothing is due for damages until the liability to pay is determined and the damages are quantified, and that involves following through the dispute resolution procedures in the contract (paras 150 and 151).
(5) Those procedures are “a condition precedent to the entitlement of [Watpac] to commence proceedings to recover damages for breach of contract” (para 152).
(6) If cl 14.5 entitled Watpac to deduct, from amounts otherwise due to Austin, any amount that Watpac claimed for damages, this would negate the requirements of the subcontract relating to security and expert determination (para 153).
(7) Watpac had not satisfied him that Austin committed a breach of contract which might support the claimed backcharges or of the amount of those backcharges; they appear “to be no more than an arbitrary assessment”.
157 The paragraphs that I have just summarised come from that part of the second determination that deals with BC52. That was the reasoning that the second adjudicator cross-referenced in concluding, at para 179, that Watpac was not entitled to set off the amounts claimed for backcharges against the amount otherwise due to Austin. Thus, as Mr Corsaro submitted, it is to be read not only as the reasoning relevant to the rejection of BC52 but also as the reasoning for the rejection of the backcharges presently under consideration.
158 In discussing BC52, the second adjudicator referred to the arbitrary allocation of certain amounts as a backcharge, and to what he saw as an unjustified claim for overhead and preliminary costs on the amount of the backcharge. Whilst those comments might be thought to be specific to BC52, it is at least arguable that they are specific examples of the generic complaint made by the referee at para 178, when in discussing the backcharges presently under consideration he said, in effect, that the entitlements had not been proved to his satisfaction.
159 As a matter of construction, cl 14.5 permits Watpac to set off, against amounts otherwise due to Austin, not only amounts actually due from Austin to Watpac but also a reasonable estimate of amounts that Watpac asserts will become due, whether under or in connection with the subcontract or otherwise. Thus, as a matter of language, it is no answer to a backcharge that the entitlement to it or the amount of it has not been established. That is why, at [37] above, I referred to express and perhaps implied constraints on the exercise of that power.
160 The second adjudicator took the view that only amounts actually established, by concession or otherwise, to be due could be set off. It was in my view an essential part of his reasoning on this point that the wider operation of cl 14.5 (according to its terms as he read them) was something that would defeat the object of the Act, or an abuse of a kind that it was the very purpose of the Act to negate, and thus that s 34 was attracted. If the second adjudicator had not considered s 34, he would have been required to consider whether, on the material before him, he was satisfied not only as to the amounts actually due and owing, but also that there were reasonable bases for claiming that other amounts might become owing. In the latter category, he would have been required to consider both whether there was a reasonable likelihood that some amount would become owing and whether the amount claimed pursuant to that reasonable likelihood was in itself reasonable. He did not undertake that task because, as I read this aspect of his reasons, he concluded that the effect of s 34 was to avoid the operation of the relevant part of cl 14.5.
161 I accept that the second adjudicator said also that he was not satisfied as to Watpac’s quantification of the alleged set-offs. But it is very difficult to disentangle this aspect of his reasons from his view that it was an abuse, and an attempt to circumvent other provisions of the contract, for Watpac to claim those set-offs.
162 Thus, I conclude, the second adjudicator’s reliance on s 34 was material to his conclusion that Watpac was not entitled to off set, as backcharges, the value of the variations in question: for the reasons following, at least $131,188.00. Further, because the second adjudicator took that view, he did not carry out (on the contrary, he expressly abjured) the task of considering the justification for those backcharges one by one.
Second question: significance of the amount
163 The total amount claimed in the December payment claim and January application was $1,655,994.90. That claim took account of the backcharges conceded by Austin, $1,035,855.00. The remaining backcharges totalled, according to the second adjudicator (para 138), $1,110,999.00. The second adjudicator rejected, for reasons that give rise to no present complaint, backcharges totalling $543,074.00. The “other backcharge claims” to which the second adjudicator referred totalled $567,925.00. Once the agreed “variation M” backcharges are put out of consideration (again, they are not the subject of any present complaint) the value of the “rump” of backcharges is $375,612.47.
164 Austin contended that there were two further backcharges within this “rump” that should have been considered along with the variation M backcharges. The second adjudicator did not identify those as covered by the variation M reasoning, and did not give them any separate consideration.
165 Further, Austin contended that there were other backcharges included in those that the second adjudicator discussed and rejected at paras 92 to 94 and 120 to 124 of the February determination. It conceded, however, that the second adjudicator had not specifically identified those particular variations.
166 The arithmetic outcome of those contentions is that Watpac submitted that the “rump” variations that were dealt with generically at pars 176 to 179, leaving out those specifically nominated as governed by the “variation M” reasoning, is $375,612.47 (the last, or resulting amount referred to at [163] above). Austin submitted that the total of the backcharges dealt with at paras 176 to 179 was $131,118.00.
167 It is neither necessary nor possible to resolve this dispute. However, given that adjudicators are required to give reasons for their decision unless the parties agree otherwise in writing (see s 22(3) of the Act), I think that the Court should be slow to attribute to an adjudicator reasons other than those actually given.
168 I do not think that a claimed set-off, even if “only” of the magnitude of $131,118.00, can be regarded as insignificant or irrelevant; and Mr Corsaro did not seek to support the second adjudicator’s reasoning on this basis.
Third question: other arguments that could have been put
169 Section 34 is extremely wide in its operation. By subs 2(a), it avoids a provision of any agreement that excludes, modifies or restricts the operation of the Act, or purports to do so, or has the effect of doing so. It is not hard to understand why an untrammelled power to set off, against amounts otherwise due to a subcontractor, any amounts claimed by the head contractor to be due for backcharges might fall foul of s 34.
170 However, as I pointed out at [37] above, it is at least arguable that the power to set off backcharges that cl 14.5 gives to Watpac is constrained by both express and implied considerations of reasonableness. The basis for implying constraints (over and above what might flow from the use of the words “a reasonable estimate”) could include that the known background to the making of the subcontract included the terms of the Act, and the known consequences of an untrammelled power to make set-offs could well include that the whole of cl 14.5 is void.
171 The parties did not address as to whether clause 14.5 was in fact void, by operation of s 34, and I do not propose to go where the parties did not. It is however necessary to consider whether there were reasonable arguments that could be put against that conclusion. Mr Kidd emphasised that cl 14.5 did not authorise arbitrary or unreasonable estimates, and did not impose any condition precedent or subsequent on Austin’s entitlement to a progress payment. It bore, at most, on the proper quantification of that entitlement.
172 As Mr Kidd submitted, it has not been held that a clause in terms similar to cl 14.5 was avoided by the operation of s 34. As I said in John Goss at 715 [38], a determination of the amount due in respect of a payment claim would require attention to relevant provisions of the contract that justify deductions or set-offs for, among other things, “retention payments or conceded back charges for defective or incomplete work”. (I was not intending to give an exhaustive list of legitimate off sets, and Mr Corsaro did not submit otherwise.)
173 I have indicated earlier some of the arguments that could have been advanced. It cannot be said that those arguments were futile (or that they would have been futile to one hearing them with an open mind). If the second adjudicator, having asked the parties for submissions on the operation of s 34, had considered the arguments in good faith and concluded, nonetheless, that cl 14.5 was void, his decision would be immune from interference. But it is not self-evident that, had he called for and considered submissions, he must have come to that conclusion. Thus, it is not self-evident that any submissions that could have been put must have failed to achieve their intended purpose.
174 It follows, in my view, that the second adjudicator’s failure to notify the parties of his views and to invite them to put submissions before him did deprive Watpac of an opportunity to put submissions that, if considered in good faith, could have caused the second adjudicator to conclude that s 34 did not operate. At least, the submissions would have put the s 34 point into its proper contractual context, and might have dispelled other misconceptions (including as to the “pre-conditional” operation of cl 20.3 in relation to backcharges). Thus, they might have caused the second adjudicator to change his provisional view.
Conclusion on the fourth issue
175 There has been a material denial of the measure of natural justice that the Act entitles a respondent in Watpac’s position to receive. That is because, simply put, an important element of its defence to the amount of the progress claim was rejected for a reason that Austin had never raised, and in respect of which it had been afforded no opportunity to put submissions.
Consequences and orders
176 It follows from what I have said as to issue estoppel and abuse of process that Austin should not have been permitted to reagitate its claim for variations 1 to 8. Since the matter went to adjudication, the appropriate relief, in relation to this aspect of the matter, would be to restrain Austin from enforcing its rights under the February determination to the extent of the amount allowed for those variations: $844,375.00.
177 It may follow from what I have said as to denial of natural justice that the February determination is void. A void determination creates no rights. The impact of that conclusion on Austin is far more significant than the amount of the backcharges in question. If the February determination is wholly void, Austin has no entitlement whatsoever under it.
178 The parties’ submissions did not address in detail the consequences of a finding of denial of natural justice of the kind that I have made. Mr Kidd submitted that a determination was either void or not; that there was “no notion of partial invalidity of an adjudication application”. The cases cited in support of this proposition included Brodyn at 443 [57]). Hodgson JA there said that “where there is a disclosed legislative intention to make a particular measure of natural justice a pre-condition of validity, failure to afford that measure of natural justice does make the determination void”.
179 His Honour was speaking in the context of a denial of natural justice that infected the whole of the claim. In this case, it is at least arguable that the denial affects a discrete part of the claim or, more accurately, a discrete aspect of the quantification debate. It is, perhaps, arguable that in those circumstances the consequence of denial of natural justice should be limited to the extent of the denial, on the basis that to leave otherwise unchallengeable conclusions enforceable is more consistent with the overall objectives of the Act.
180 Since the parties have not had an opportunity of addressing on this point, I think that the safest course is to publish these reasons and to direct the parties to bring competing short minutes of order together with written submissions in support. Unless the parties request otherwise, I would propose to deal with the form and extent of relief to be granted on the basis of those written submissions, without a further hearing.
181 In those circumstances I make the following orders:
(1) Direct the parties to exchange draft short minutes of the orders to be made in the consequence of these reasons, and written submissions in support of those orders, by 31 March 2010.
(2) Direct the parties to exchange written submissions in reply by 12 April 2010.
(3) Direct copies of all documents exchanged pursuant to orders 1 and 2 to be delivered to my Associate when they are exchanged.
(4) Stand proceedings over to 9:30am on 16 April 2010 for the making of final orders.
(5) Reserve liberty to apply, either in respect of any application for oral argument in respect of the form of orders to be made or generally, on 7 days’ notice.
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LAST UPDATED:
19 March 2010