2012] WASAT 178

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM : COMMERCIAL & CIVIL

ACT : CONSTRUCTION CONTRACTS ACT 2004 (WA)

CITATION : ALL ROOFS PTY LTD and SOUTHGATE CORPORATION PTY LTD [2012] WASAT 178

MEMBER : MS NATASHA OWEN-CONWAY (MEMBER)

HEARD : 4 MAY 2012

DELIVERED : 22 AUGUST 2012

FILE NO/S : CC 313 of 2012

BETWEEN : ALL ROOFS PTY LTD Applicant

AND

SOUTHGATE CORPORATION PTY LTD Respondent

Catchwords:

Construction Contracts Act 2004 (WA) - Payment claim - Payment dispute - Claim arising under construction contract - Payment due under construction contract - Contract of variation - No variation or no oral variation term in original contract - Consideration and certainty for valid contract of variation - Alleged contract of variation not for extra work or work 'outside the contract' - No consideration for variation of contract - Claim in estoppel or unjust enrichment is not a claim under the construction contract

Legislation:

Construction Contracts Act 2004 (WA), s 3, s 6, s 25, s 26, s 31(2)(a), s 31(2)(a)(ii), s 34(2), s 46(1)

State Administrative Tribunal Act 2004 (WA), s 17

Result:

Application for review dismissed

Category: B

Representation:

Counsel:

Applicant : Mr S Brown

Respondent : Mr R Shaw

Solicitors:

Applicant : Contract Intelligence Pty Ltd

Respondent : Lavan Legal

Case(s) referred to in decision(s):

Branir v Owston Nominees Pty Ltd (No 2) [2001] FCA 1833

Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110

David Securities Pty Ltd v Commonwealth Bank of Australia ; (1992) 175 CLR 353

David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48 ; (1992) 175 CLR 353

Equuiscorp Pty Ltd v Haxton, Bassat and Cunningham Warehouse Pty Ltd [2012] HCA 7

GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 50

Hall v Busst [1960] HCA 84

Marine & Civil Bauer Joint Venture and Leighton Kumagai Joint Venture [2005] WASAT 269

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221

Roscola v Thomas (1842) 3 QB 234

Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251

REASONS FOR DECISION OF THE TRIBUNAL :

Summary of Tribunal's decision

1 All Roofs Pty Ltd made an application for adjudication of a 'payment dispute', pursuant to the Construction Contracts Act 2004 (WA), against Southgate Corporation Pty Ltd. All Roofs Pty Ltd claimed that there had been a delay in the performance of the contract works caused by a direction by, or on behalf of, Southgate Corporation Pty Ltd, as to the manner in which the performance of the contract works were scheduled, and that All Roofs Pty Ltd was entitled to payment of reasonable costs arising from that delay pursuant to the contract between the parties.

2 Alternatively, All Roofs Pty Ltd asserted that there was a variation to the contract between the parties and that it was entitled, pursuant to that contract of variation, to payment of 'fair and reasonable costs' associated with a variation to the scheduled performance of the contract works, in addition to the contract sum. There was no additional work performed at all.

3 All Roofs Pty Ltd primarily alleged that the contract of variation was written and was comprised in a series of emails between All Roofs Pty Ltd and individuals whom All Roofs Pty Ltd alleged were agents of Southgate Corporation Pty Ltd. Alternatively, All Roofs Pty Ltd alleged that the contract of variation was implied from the conduct of the parties.

4 The Tribunal concluded, on the authorities, that a subsequent agreement to vary a contract that did not comply with the proscriptive express term of the original contract was, nonetheless, an enforceable contract between the parties. The Tribunal concluded on the facts, however, that there was no contract of variation between the parties as asserted, and none could be inferred from the facts relied upon. The Tribunal also concluded that there was no consideration for any alleged contract of variation, as the alleged contract of variation did not involve the performance of additional work or provision of additional goods/materials to Southgate Corporation Pty Ltd. The Tribunal further concluded that there was no certainty of the terms of the alleged contract of variation. Further, the Tribunal concluded that there was no direction by Southgate Corporation Pty Ltd to All Roofs Pty Ltd to alter the scheduled works that gave rise to a delay and a claim for additional monies for any delay pursuant to the contract.

5 The Tribunal concluded that the claim for payment did not arise under the contract or any valid contract of variation, and that any claim based upon an estoppel was not a payment claim within the meaning of s 3 of the Construction Contracts Act 2004 , and did not give rise to a payment dispute for the purposes of s 6 of the Construction Contracts Act 2004 .

6 The Tribunal concluded that All Roofs Pty Ltd's application for adjudication did not concern a payment dispute, as required by s 25 and s 26 of the Construction Contracts Act 2004 , and was not one that prepared and served in accordance with s 26 of the Construction Contracts Act 2004 . All Roofs Pty Ltd's application for review of the decision of the adjudicator, pursuant to s 46(1) of the Construction Contracts Act 2004 , was dismissed and the adjudicator's decision was affirmed.

7 The Tribunal concluded that it had no jurisdiction to review and make any order in respect of an adjudicator's decision to order All Roofs Pty Ltd to pay the adjudicator's costs, pursuant to s 34(2) of the Construction Contracts Act 2004 .

The application to the Tribunal

8 On 28 February 2012, All Roofs Pty Ltd (All Roofs), the applicant, made an application to the Tribunal, pursuant to s 46(1) of the Construction Contracts Act 2004 (WA) (CC Act), for a review of the decision to dismiss All Roofs' application for adjudication, pursuant to s 31(2)(a) of the CC Act, made by the appointed adjudicator. The respondent to the application for adjudication is Southgate Corporation Pty Ltd (Southgate). The adjudicator dismissed the application for adjudication pursuant to s 31(2)(a) of the CC Act, and concluded that All Roofs' application for adjudication was vexatious because it was 'clearly untenable'. The adjudicator made the 'decision', pursuant to s 34(2) of the CC Act, that All Roofs pay the adjudicator's costs of the application for adjudication.

9 The application seeks the following orders:

1. The Applicant seeks that the adjudicator's dismissal of the adjudication application under s 31(2)(a) of the [CC Act] be reversed and that the matter be remitted back to the adjudicator to make a determination on the merits in accordance with s 31(2)(b) of the CC Act.

2. Should the matter be remitted back to the adjudicator, the adjudicator is to reconsider the matter as to costs under s 34 of the CC Act.

10 The grounds of All Roofs' application are simply stated:

1. The adjudicator erred in finding that the application for adjudication was not prepared and served in accordance with s 26 of the CC Act on the misconception that no payment claim, as defined by s 3 of the CC Act, had been made under the contract to give rise to a payment dispute capable of being adjudicated.

2. The Applicant's conduct in applying for adjudication was not vexatious and frivolous, in any event.

The proceedings in the Tribunal

11 The application was listed for an initial directions hearing on 8 March 2012. Orders were made to facilitate the parties filing and serving documents and a statement of issues, facts and contentions in support of their positions. The application was listed for hearing on 4 May 2012.

12 In support of this application, All Roofs filed in the Tribunal and served on Southgate:

a) the application for adjudication dated 19 January 2012 with 14 attached folios;

b) a statement of issues, facts and contentions; and c) submissions dated 1 May 2012.

13 All Roofs' application in the Tribunal had attached the adjudicator's decision dated 16 January 2012, (which must be an error, as the application for adjudication is dated 19 January 2012 and was served on the appointer on 24 January 2012).

14 In response, Southgate filed in the Tribunal and served on All Roofs:

a) Southgate's statement of issues, facts and contentions and submissions;

b) Southgate's response to All Roofs' application for adjudication; and

b) Southgate's amended statement of issues facts and contentions and submissions.

The Tribunal's jurisdiction

15 Section 46(1) of the CC Act confers jurisdiction to review a decision made under s 31(2)(a) of the CC Act. All Roofs' application to the Tribunal for a review of the adjudicator's decision to dismiss its application for adjudication falls within the Tribunal's review jurisdiction (s 17 of the State Administrative Tribunal Act 2004 (WA)).

16 However, s 46(1) of the CC Act does not confer on the Tribunal any jurisdiction to review an adjudicator's decision that one party should pay the adjudicator's costs made pursuant to s 34(2) of the CC Act. There is no provision in the CC Act that confers jurisdiction to review a decision made pursuant to s 34(2) of the CC Act upon the Tribunal. The application to the Tribunal to review and make orders in respect of the adjudicator's decision to order All Roofs to pay the adjudicator's costs, pursuant to s 34(2) of the CC Act, is dismissed for want of jurisdiction.

The issue

17 The issue is whether the claim, which is the subject of the dispute comprised in All Roofs' application for adjudication, is a payment dispute within the meaning of that term, as provided for by s 6 of the CC Act. This, in turn, involves a consideration of whether the payment claim, which is the subject of the payment dispute, is a payment claim within the meaning of that term provided by s 3 of the CC Act. As will be seen, this involves a consideration of the facts as presented to the adjudicator, and the law.

The application for adjudication

18 All Roofs' application for adjudication was made on 19 January 2012 and served on the appointer - the Master Builders Association of Western Australia. The adjudicator, Mr Logue, was appointed. The payment dispute concerned All Roofs' claim against Southgate for the sum of $301,034.21, including GST, (over and above the contract sum), as monies due to All Roofs, under the contract between the parties, for costs associated with delays caused by Southgate's direction to All Roofs, or, alternatively, pursuant to a contract of variation between the parties, or, alternatively, for an estoppel.

The evidence and facts

The contract

19 There is no issue between the parties that the written contract between them, dated 3 June 2010, is a construction contract within the meaning of that term, as provided for in s 3 of the CC Act. The Tribunal notes that, although it is dated 3 June 2010, Southgate's representative did not execute that contract until 15 June 2010.

20 The following facts do not appear to be in dispute:

1) The parties entered into a Master Builders Association of Western Australia medium works contract, dated 3 June 2010, on or about 15 June 2010 (contract).

2) The contract is a lump sum contract and the contract price for the works is expressed in the contract as $340,000, inclusive of GST.

3) The scope of the works is as described in All Roofs' quote dated 21 May 2010, which included the removal and disposal of 'existing asbestos/CGI roof sheeting' and the replacement thereof with 'CGI profile 0.42BMT' sheeting, supply and other related work.

21 Appendix I of the contract identifies Rob Anson Architect Pty Ltd as Southgate's representative, but only for the purposes of cl 14 of the contract. The provisions of cl 14 are not material, and there is no other term concerning Southgate's contractual representative. Appendix II of the contract contains special conditions of the contract. Special condition 2 provides:

The parties hereby acknowledge that this is a guaranteed maximum price contract with no variations and that the contractor takes responsibility for determining the required works . (Tribunal emphasis)

22 The following are the most relevant terms of the contract:

…

17. VARIATIONS

(a) The Contract may be varied at the request of the Owner by omissions from the Works or by the performance of extra work with the consent of the Builder, which consent shall not be unreasonably withheld. No variation shall vitiate the Contract.

(b) The Builder may decline to execute any variation required by the Owner unless the Owner first:

(i) gives notice in writing of the requirements of the variation; and

(ii) in response to the Builder's written notice requiring evidence to the Builder's satisfaction of capacity to pay for the variation, gives such evidence.

(c) If the Builder agrees to undertake any variation then before the work to which the variation relates is commenced, the details:

(i) must be in writing:

(A) setting out the cost and all the terms of the variation;

(B) showing the date of the variation;

(ii) must be signed by the Builder and the Owner or their respective agents.

This paragraph does not apply to any variation arising by virtue of paragraph (d).

(d) Where any variation to the Contract or the Drawings and Specification is necessary:

(i) to comply with any written direction lawfully given by a building surveyor or other person acting under a written law; or

(ii) by virtue of circumstances that could not reasonably have been foreseen by the Builder at the time when the Contract was entered into[,]

then the Builder shall be entitled to such a variation provided that before carrying out the work relating to the variation, he gives to the Owner a statement setting out the reason for, and the cost to be incurred on account of[,] the variation, together with a copy of any written direction referred to in subparagraph (i).

(e) The Builder shall give the statement referred to in paragraph (d) to the Owner within 7 days after the Builder:

(i) received notice of the direction under paragraph (d) (i); or

(ii) became aware or should reasonably have become aware of the circumstances referred to in paragraph (d) (ii).

(f) The value, inclusive of GST, of all omissions from the Works less the allowance specified in Appendix 1 Item 1 shall be deducted from the Contract Sum.

(g) The value, inclusive of GST, of all extra work shall be:

(i) added to the Contract Sum; and

(ii) added to the next progress payment due after the execution of that work.

(h) Where practicable the following shall apply in calculating the price for extra work:

(i) the rates of labour shall be those set out in Appendix 1 Item 3; and

(ii) the price for materials used in the work shall be the actual cost, inclusive of GST, to the Builder plus the percentage stated in Appendix 1 Item 1.

(i) Notwithstanding the previous provisions the Builder shall not be entitled to payment for any variations which are due to the default of the Builder.

…

26. PAYMENT

(a) The Contract Sum shall be paid to the Builder by payments made progressively during the execution of the Works . Progress claims shall be made no more frequently than each four weeks. (Tribunal emphasis)

…

(c) Payment of the progress claims shall be made by the Owner to the Builder within the period stated in Appendix 1 Item 4 or, if not stated, within 10 days of the date of submission to the Owner of the said claim or account.

…

29 PAYMENT ON PRACTICAL COMPLETION

(a) When the Works have reached Practical Completion, the Builder shall be entitled to receive the unpaid balance of the Contract Sum, together with any money which is payable under the Contract . (Tribunal emphasis)

…

23 The contract provided for a defects liability period of 52 weeks following practical completion. The contract price and any additional amount payable by reason of:

1) the performance of 'extra work' pursuant to a direction made by Southgate to All Roofs under cl 17(a) of the contract, the performance of which, and the cost of which, is agreed to by both, pursuant to cl 17(c); and

2) the performance of any work occasioned by necessity on notice by All Roofs to Southgate, pursuant to cl 17(d) and cl 17 (e) of the contract, the price for which can be calculated by reference to the rates identified in Appendix I,

was to be paid on progress claims submitted to Southgate by All Roofs 'during the execution of the Works'. Progress claims were to be made no more frequently than each four weeks, and were to be paid within 10 days from the date of the issue of the progress claim. Ultimately, All Roofs was entitled to payment of the balance of the contract sum and all other monies payable under the contract at practical completion.

24 Clause 17(h) of the contract also provides for how additional labour and materials were to be calculated - in the case of additional labour, by reference to the labour rates referred to in item 3 in Appendix I, and in the case of additional materials, the cost of the materials plus the margin referred to in item 1 in Appendix I of the contract. However, items 1 and 3 of Appendix I of the contract include no margin and no rates of labour.

25 Clause 17 of the contract is also concerned with variations that resulted in a reduction to the contract sum. Clause 17 of the contract is not concerned with a variation to the contract, other than to make omissions from the work or to perform extra work (see: cl 17(a) of the contract). As will be seen, there was no extra work performed in this case and there were no omissions from the contract works.

26 On the Tribunal's interpretation of the contract as a whole, it was the intention of the parties that, if there were to be a clause 17-type of variation or any other valid contract of variation entitling All Roofs to additional monies over and above the contract sum, then all such monies were to be paid 10 days following the submission of All Roofs' final progress claim made pursuant to cl 26 of the contract, as provided for by cl 29 of the contract.

27 Clauses 26, 28 and 29 of the contract provide expressly for the making of progress claims and the time within which claims were to be responded to by way of objection or payment. Those clauses also provide that the progress claims - including the final progress claim - were to be submitted during the course of the execution of the contract works (cl 26 of the contract). Notwithstanding that the defects liability period extends the life of the contract for 52 weeks after practical completion, the defects liability does not extend the time within which All Roofs may make any further 'final' progress claim. The defects liability period is not intended to allow All Roofs time to execute the works. The contract works were to have been completed by the date of practical completion. As the contract provides for when and how claims are to be made and responded to, the implied terms, as provided for in the CC Act, have no operation in this matter.

28 It was common cause that there was no cl 17-type of variation to the contract. The question remains: was there a valid contract of variation and was it enforceable in the face of the 'no variation' term contained in special condition 2 in Appendix II of the contract, and in the face of its non-compliance with the cl 17 (of the contract) notice and agreement procedure?

The scheduling of the performance of the works under the contract

29 There is evidence before the Tribunal that, as at 5.14 pm on 3 June 2010, and before the contract was executed by Southgate on 15 January 2010, All Roofs' representative knew there was a possibility that some of Southgate's tenants had concerns about remaining on site while the roof was replaced. The applicant's document at tab 5 (which is document 5 attached to the application for adjudication) is an email from All Roofs to Mr Victor Sankey of McGees Property, who was, at all times, Southgate's property managing agent and who dealt directly with Southgate's tenants. In that email, All Roofs state:

Peter has informed me that there is talk of weekend work on this project. Please note that [w]e have allowed for works on site from Monday - Friday. Saturdays we have factored in for 1 - 2 labourers on site to clean up, and secure the site if required. We have priced [these] works on the site being available and free from having to manage tenants on site. If this becomes a[n] issue, it will be a variance, along with having to work weekends to factor this in. We charge our labour at $112.50 per man on Saturdays, and $150 [p]er man on Sundays. Site supervisors are charged at a higher rate than this.

30 As the contract was not concluded until 15 June 2010, it was open to All Roofs to withdraw from the negotiations before Southgate had executed the contract, and to negotiate a further proposal that involved the additional rates and costs in the event that All Roofs was directed to work weekends.

31 The Tribunal also notes that the memorandum dated 21 May 2010 from All Roofs was incorporated into the contract: see the definition of 'Works' in the particulars of the contract (Appendix I at page 5 of the contract). The memorandum states that All Roofs was to provide a program of performance of the contract works. The schedule of the works appears in Southgate's documents at tab 3.4 (which document formed part of the respondent's response to the application for adjudication).

32 It is immediately noticeable from that schedule of works that All Roofs had allowed for work to be performed on Saturdays, but not on Sundays. There is no restriction in the contract as to the days that All Roofs could perform the contract works. The work proposed by All Roofs to be performed on Saturdays in that schedule was not limited to the minimal work referred to in All Roofs' representative's email on 3 June 2010. Rather, it refers to flashing of the roof being undertaken on each Saturday of the first four weeks, guttering on the fifth Saturday, and work concerning:

Snag

Anchor points

Walkway

to be undertaken on the sixth Saturday of the schedule.

33 The Tribunal therefore infers from these facts that, although as at 3 June 2010 at 5.14 pm there was a concern about weekend work for the price of $340,000, including GST, All Roofs ultimately agreed to undertake the contract works for $340,000, including GST, to be performed Monday to Saturday.

34 There was, however, no restriction on All Roofs performing the contract works during Monday to Saturday. A direction that All Roofs should perform the contract works, or part of the works, only on the weekend days would amount to a change to the terms of the contract, albeit that it involved no extra work to be performed by All Roofs.

The final payment and the defects liability period

35 There is no dispute that the whole of the contract sum of $340,000, plus GST, was paid by Southgate to All Roofs. The further information in the response tends to suggest that, as at 22 December 2010, all but $8,500, being the retention sum, was paid, totalling $331,500. There is no dispute as to the sum of $8,500, and the Tribunal infers (as did the adjudicator) that the whole of the contract sum was paid soon after 22 December 2010, even though the defects liability period did not expire until about December 2011. The adjudicator inferred that the parties agreed that practical completion had been achieved on or about 22 December 2010, by which time the final progress claim was made and paid soon thereafter. The Tribunal considers that such an inference is open and correct.

The basis of the disputed payment claim

36 On 14 December 2011, almost 12 months after payment of the final progress claim in late December 2010, All Roofs issued a letter to Southgate wherein All Roofs made a claim for an additional sum of $301,035.21 (inclusive of GST) against Southgate, said to be for the increased cost of labour on Saturdays and Sundays; and increased site management cost on Saturdays and Sundays, plus additional crane hire. In that letter, All Roofs claimed that the variation arose by reason of a delay caused by a direction issued by Southgate to perform part of the works only on weekends (cl 20(a)(i) of the contract), or another event beyond the control of All Roofs necessitating that part of the works to be performed only on weekends (cl 20(a)(viii) of the contract). Both rely upon there being at least a valid direction by, or on behalf of, Southgate to that effect.

37 Alternatively, All Roofs alleges that there was a variation to the terms of the contract that Southgate would pay the 'fair and reasonable' costs incurred by All Roofs 'due to the change in the work method', or, alternatively, Southgate represented that it would pay the 'fair and reasonable' costs incurred by All Roofs 'due to the change in work method', and Southgate is 'estopped from relying on the strict adherence to cl 17(c)'.

38 All Roofs submitted that the alleged direction and/or contract of variation was evidenced by a series of emails on 27 July 2010, which amounted to a direction to perform the work only on weekends, or an agreement that Southgate would pay All Roofs additional monies (fair and reasonable costs) for undertaking some of the works only on the weekend. Before the Tribunal, All Roofs also relied, alternatively, on there being a contract of variation that arose by implication from Southgate's knowledge that All Roofs performed work on the weekends, and that All Roofs required payment for that change in the schedule.

39 Finally, if there was no delay caused by a direction by Southgate and there is no valid contract of variation, All Roofs relies on an estoppel against Southgate to prevent Southgate from denying that it induced All Roofs to believe that Southgate was obliged to pay All Roofs 'fair and reasonable' costs.

The evidence and facts of the relevant circumstances

40 The building licence for the work was granted on 22 July 2010.

41 By 27 July 2010, it appears that at least one of Southgate's tenants was concerned that the roof replacement work was to be undertaken during its normal business hours. In the letter to Southgate dated 14 December 2011, All Roofs states:

The contract was entered into on the basis that the works would be performed during week days only. In mid-2010, after the contract was executed, certain tenants started to express safety concerns with respect to working in the premises at the same time roofing works were being carried out. In an effort to overcome these concerns whilst minimising costs and the disruption to the tenants, All Roofs was directed by Southgate's agent on 27 July 2010 to carry out the works for these tenancies during weekends instead of during weekdays. (Tribunal emphasis)

All Roofs advised Southgate's agent and Southgate's agent acknowledged that the change in work method would result in additional costs and delay the completion date for the works. Southgate accepted that this change in work method was the most cost effective and practical solution and advised All Roofs to proceed on this basis . (Tribunal emphasis)

42 All Roofs relies on the following documents to evidence the direction or contract of variation:

a) an email from 'Jon' of All Roofs to Mr Sankey, Southgate's property manager, dated 27 July 2010 at 2.57 pm;

b) an email from Mr Sankey to All Roofs dated 27 July 2010 at 3.45 pm;

c) an email from Mr Anson, Southgate's architect, to Mr Sankey dated 27 July 2010 at 3.48 pm; and

d) an email from Mr Sankey to Mr Anson and All Roofs dated 27 July 2010.

43 The full email trail is referred to by All Roofs' application for adjudication, tab 6. That email trail discloses earlier emails and the relevant statements from these emails, in order and in context, are as follows:

• 27 July 2010 at 12.55 pm - Mr Keenan's (a representative of Southgate's property manager) email to All Roofs notes:

… nine (9) sections of the roof that will be removed and replaced. …

• 27 July 2010 at 1.35 pm - All Roofs' email to Mr Keenan notes:

… its [sic] my understanding that Saw-tooth's 4/5/6 are to now be completing [sic] Saturdays only.

Does this resolve the issue with the tenants?

• 27 July 2010 at 2.18 pm - Ms Sankey's email to All Roofs notes:

Not exactly. …

• 27 July 2010 at 2.57 pm - All Roofs' email to Mr Sankey notes:

We can complete these works into a weekend program, but this will be a variation.

• 27 July 2010 at 3.45 pm - Mr Sankey's email to All Roofs notes, as to his discussions with the tenant concerned:

We have agreed that the best possible option is to schedule all of the BEC roof sections into weekend work. …

• 27 July 2010 at 3.48 pm - Mr Anson's email to Mr Sankey and All Roofs notes:

Weekend work makes sense …

• 27 July 2010 at 3.55 pm - Mr Sankey's email to Mr Anson and All Roofs notes:

Rob [Anson], I have discussed this with Jon [All Roofs]. He will want a variation to do this which is probably not unreasonable and is likely to be the cheapest and best way forward. I am not sure[,] however[,] how much he is considering but as I see it this is the only practical way to keep all parties happy. …

44 The only other fact relied upon by All Roofs is that the contract works were completed to the knowledge of Southgate, including performing some works only on weekends.

The law

The Construction Contracts Act

45 Section 25 of the CC Act provides:

If a payment dispute arises under a construction contract, any party may apply to have the dispute adjudicated under this Part …

46 In order to make an application for adjudication, the application must concern a 'payment dispute' and it must be one that is said to arise 'under a construction contract', as dictated by s 25 of the CC Act. As can be seen from the facts of this proceeding, there is no dispute that the original contract between the parties is a 'construction contract' for the purposes of the CC Act.

47 There is no legislative definition of the term 'contract' contained in the CC Act. Various sections of the CC Act refer to the term 'construction contract' and various sections refer to the term 'contract'. There is no obvious meaningful reason why there is a discrepancy in the terms used. The long title to the CC Act indicates the express purpose of the CC Act, and concerns the regulation of construction contracts. From that express purpose, the Tribunal concludes that the references to the term 'contract' contained in the CC Act are to be read as a reference to the term 'construction contract'.

48 Section 26 of the CC Act relevantly provides:

(1) To apply to have a payment dispute adjudicated, a party to the contract, within 28 days after the dispute arises … must -

(a) prepare a written application for adjudication;

…

(2) The application -

…

(b) must set out the details of, or have attached to it -

…

(ii) any payment claim that has given rise to the payment dispute;

…

49 Section 31(2) of the CC Act relevantly provides:

…

An appointed adjudicator must, within the prescribed time or any extension of it made under section 32(3)(a) -

(a) dismiss the application without making a determination of its merits if -

…

(ii) the application has not been prepared and served in accordance with section 26[.]

…

50 A 'payment dispute' has the meaning given to that term in s 6 of the CC Act: see s 3 of the CC Act. Section 6 of the CC Act provides:

For the purposes of this Act, a payment dispute arises if -

(a) by the time when the amount claimed in a payment claim is due to be paid under the contract , the amount has not been paid in full, or the claim has been rejected or wholly or partly disputed;

(b) by the time when any money retained by a party under the contract is due to be paid under the contract, the money has not been paid; or

(c) by the time when any security held by a party under the contract is due to be returned under the contract, the security has not been returned. (Tribunal emphasis)

51 The payment dispute does not involve a claim for the retention monies under the contract, or any security held by a party under the contract. Consistent with s 25 of the CC Act, a 'payment dispute' must concern a 'payment claim' that is 'due to be paid under the contract'. Should a claim for payment arise outside the terms of the construction contract or be due for payment outside of the terms of the contract, any failure or refusal to pay such a claim will not constitute a 'payment claim' for the purposes of s 6 of the CC Act, in the Tribunal's view.

52 This position is clarified by the statutory definition of 'payment claim' in s 3 of the CC Act, which relevantly provides:

payment claim means a claim made under a construction contract -

(a) by the contractor to the principal for payment of an amount in relation to the performance by the contractor of its obligations under the contract ; or

(b) by the principal to the contractor for payment of an amount in relation to the performance or non-performance by the contractor of its obligations under the contract. (Tribunal emphasis)

53 In the context of s 25 and s 26 of the CC Act, the Tribunal concludes that the words 'in relation to', as they appear in the definition of 'payment claim' in sub-paragraph (b), mean that the claim for payment that is made under the construction contract must also be referrable to the contractor's performance of its 'contractual' obligations. The term is not limited to only those claims for payment made pursuant to a construction contract that comply with the express contractual definition of a claim ( Marine & Civil Bauer Joint Venture and Leighton Kumagai Joint Venture [2005] WASAT 269), but the term excludes claims that arise by operation of the law, including, but not limited to, claims for unjust enrichment, claims in estoppel, claims that arise under statute and claims that arise in tort.

54 To the extent that All Roofs' claim arises from a contract of variation, the question is whether the express terms of special condition 2 in Appendix II of the contract preclude the contract of variation having any legal effect, and whether the failure of the contract of variation to comply with the provisions of cl 17 of the contract, as to notice and form, preclude the Tribunal giving any effect to the same.

55 As to this question, the following passages from the judgment of His Honour Finn J in GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 50 ( Marconi ) are relevant:

…

(2) The principal cases in this country dealing with non-compliance with contractually imposed written modification clauses are those dealing with claims to be paid for extra work or services rendered under contracts which require written orders or written agreements for such works or services: Liebe v Molloy [1906] HCA 67 ; (1906) 4 CLR 347; see generally, Halsbury's Laws of Australia , vol 3(2), 65-1145. The conclusions to be drawn from the cases in this category are that (i) notwithstanding the writing requirement, it is open to the parties by express oral agreement or by contract implied from conduct to impose further or different rights and obligations on each other from those contained in the original contract: Liebe v Molloy , above at 353-355; Commonwealth of Australia v Crothall Hospital Services (Aust) Ltd (1981) 36 ALR 567 at 576ff; or (ii) that one party may so induce or encourage the other's assumption on which it relies that the relevant formal requirements need not be complied with, as to be estopped from later setting up those requirements: Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251. The relevant principle, for present purposes, was stated concisely by Ellicott J in the Crothall Hospital case in the following terms (at 576):

' It is open to the parties to a written contract to vary it. This may be done in writing or, except where the contract is required by law to be evidenced in writing, by oral agreement. The agreement to vary may be express or implied from conduct. ' (Tribunal emphasis)

The common, often fatal, difficulty experienced by a party in seeking to make out a contract to vary has been the evidentiary one of proof of the contract itself: see Liebe v Malloy , above; Trimis v Mina , above at [64].

(3) For an alleged subsequent variation to be contractually effective notwithstanding non-compliance with the written modification requirement, it must itself otherwise satisfy the requirements of a valid contract, ie ' the terms of the arrangement must be certain , and ... there must generally be real consideration for the agreement': Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8 ; (2002) 187 ALR 92 at 99; and see below, _{'Formation of a contract of variation'.}

…

(6) Though lacking legal effect in the face of a subsequent oral or implied agreement, it seems to be accepted that a no oral modification clause can have significant evidentiary effect. As Holmes J commented in Bartlett v Stanchfield , above: 'The [clause] is a fact to be taken into account in interpreting the subsequent conduct of the plaintiff and defendant'; see also Principles of European Contract Law , above, Art 2:106.

(7) As a practical matter, the lack of legal efficacy of a no oral modification clause may be attributable as much to the law of estoppel as it is to the apparent policy of the law to favour a later agreement over an earlier one: cf Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd , above, 275ff; see also W J Alan & Co Ltd v El Nasr Export and Import Co [1972] 2 QB 189 at 213. As Farnsworth observes: 'In most cases [in the US] holding such clauses ineffective ... the party that seeks to escape the effect of the no oral modification clause has relied upon the oral modification': Contracts , 450 (3rd ed).

… While there may be interesting questions yet to be resolved in applying the relevant principles to claims for extra works/variations under building contracts containing writing requirements for such works: see eg the judgment of Mason P in Trimis v Mina , above, at [55]ff; the principles themselves are not, in my view, open to serious question - the more so in a court of first instance: see Liebe v Malloy , above; the Crothall Hospital case, above.

56 If the Tribunal were to find a valid contract of variation, it must give it full effect, notwithstanding the express terms of cl 17 of the contract or special condition 2 in Appendix II of the contract.

57 However, the difficulty in such matters, as stated by Finn J in Marconi , is establishing a contract of variation that 'must … satisfy the requirements of a valid contract'.

58 As to the formation of a valid contract of variation, his Honour Finn J stated in Marconi:

…

(ii) Formation of a contract of variation

… For present purposes I would merely note the following propositions which are relevant to issues raised in this proceeding.

(1) Parties to an existing agreement may vary or extinguish some of its terms by a subsequent agreement: Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd , above. In so doing the parties will have made 'two contracts': Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35 ; (2000) 172 ALR 346 at 350; with the latter, no less than the former being subject to the ordinary rules governing contract formation: eg BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1977] HCA 40; (1977) 180 CLR 266 at 286; Tekmat Pty Ltd v Dosto Pty Ltd (1990) 102 FLR 240 at 248.

(2) Conduct engaged in for the purposes of ongoing commercial arrangements is not always readily susceptible to the traditional forms of analysis employed by common lawyers for the purposes of determining whether a contract has been formed: Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117. This can be particularly the case when dealings are analysed on an offer and acceptance basis. So in Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32 at 81, Ormiston J was prepared to accept:

' that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances. ' (Tribunal emphasis)

Likewise in Integrated Computer Services Pty Ltd , above, at 11,118 McHugh JA observed that:

' in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed. ' (Tribunal emphasis)

(3) 'In determining whether the communications between the parties constitute a contract the court is not confined to a consideration of the terms or manner in which the communications were made: they must be interpreted by reference to the subject matter and the surrounding circumstances including, inter alia, the nature of, and the relationship between, the parties, and previous communications between them, as well as to standards of reasonable conduct in the known circumstances': Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9255 . See also Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 550.

(4) Post-contractual conduct is admissible on the question whether a contract was formed though it is not admissible on the question of what that contract, if formed, means: Brambles Holdings Ltd v Bathurst City Council , above, at 163-164; Lord Steyn, 'The Intractable Problem of The Interpretation of Legal Texts', 9ff, The John Lehane Memorial Lecture (2002).

(5) The need frequently arises in relational contracts of significant duration to adjust terms to accommodate changed or unforeseen circumstances. For that reason it is common for such contracts to make express provision for variation. Nonetheless, and notwithstanding their contract, parties in an ongoing business relationship equally commonly 'regulate their relationships in accordance with what they consider is fair and reasonable or commercially necessary at particular points in time rather than by reference to a priori rights and duties arising under a contract': Integrated Computer Services Pty Ltd , above, at 11,117.

59 Where the contract is implied from the evolving conduct of the parties, as considered in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117, a court or tribunal must still find actual agreement, albeit inferentially. As was stated in Branir v Owston Nominees Pty Ltd (No 2) [2001] FCA 1833 per Allsop J (with whom Drummond and Mansfield JJ agreed):

The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent , which bespeaks an intention to be legally bound to the essential elements of a contract. (Tribunal emphasis)

60 All Roofs' contention is that there was a contract to vary the original contract which required no change to the work to be performed under the original contract, but the payment of a greater amount of money to All Roofs being 'fair and reasonable costs'. All Roofs must establish either an express contract (oral or written), or one that is implied in the sense discussed above - one where mutual assent can be positively inferred. If the Tribunal were to find a written agreement or mutual assent implied from the circumstances, the Tribunal must be satisfied that the objects of the agreement are certain and that the agreement is supported by consideration from All Roofs. Where the variation agreement is to perform no extra work, or to provide no extra goods or material for the extra payment, there is no consideration for the extra payment. In such a case, performance of the original contract is not consideration for a new promise ( Roscola v Thomas (1842) 3 QB 234). Where the amount to be paid is no more certain than a 'reasonable' amount, without any agreed method of calculating the sum, the terms of that agreement are not sufficiently certain so as to constitute a valid contract ( Hall v Busst [1960] HCA 84).

61 Alternatively, All Roofs relies on estoppel. To the extent that All Roofs' claim is based on estoppel, the further question is whether a claim made on such bases is a claim under the contract. The Tribunal concludes that such claims do not arise under a contract ( Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 ( Update ) per Kirby P at page 262; ( Marconi ).

62 There is no claim in restitution, as such an action arises where there is an unjust retention of a benefit by one party conferred by, and at the expense of, the other party 'by reasons of one or more of the recognised classes of "qualifying or vitiating" factors' ( Equuiscorp Pty Ltd v Haxton, Bassat and Cunningham Warehouse Pty Ltd [2012] HCA 7 ( Equuiscorp )). Here, there is no benefit conferred, as the work performed by All Roofs was the same as that required to be performed under the contract. In any event, such a claim for restitution does not arise in contract ( Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221; David Securities Pty Ltd v Commonwealth Bank of Australia ; (1992) 175 CLR 353; Equuiscorp ).

Consideration

63 For the reasons referred to under the heading concerning the law, the Tribunal concludes that an express term in a contract that provides that the contract cannot be varied, or that a variation must be in a particular form or follow a particular process, is no bar to a subsequent oral, written or implicit contract to vary that first contract. However, in this matter, the Tribunal finds that there was no agreement between the parties to vary the contract.

64 There is no evidence in any of the documents before the Tribunal that Mr Sankey or Mr Keenan had any authority to conclude any contract with, or give any direction to, All Roofs, or in any way bind Southgate with respect to the contract between All Roofs and Southgate. The Tribunal is satisfied that Mr Sankey and Mr Keenan were not Southgate's agents for the purposes of agreeing to any variations to the contract. They were Southgate's agents in respect of dealing with Southgate's tenants. To the extent that Southgate had an agent, the Tribunal finds that agent to be Mr Anson, as it was to him that Mr Sankey put All Roofs' requirement for additional monies to perform some of the contract works only on weekends. The Tribunal notes that a number of the emails were copied to 'goh_menghang@yahoo.com.sg', and the Tribunal was informed that this is the email address of the principal of Southgate. However, there was no active conduct by the principal of Southgate in response to any email communications, or at all on the evidence.

65 In any event, although Mr Sankey stated in his email to All Roofs that:

[w]e have agreed the best possible option is to schedule all of the BEC roof sections into weekend work

in context, Mr Sankey did no more than inform All Roofs that, as Southgate's property manager, he had reached an agreement with Southgate's tenant that weekend work was the best possible option - that is, for that tenant. There is nothing to suggest in that email, nor in any of the emails relied upon, when read in context, that there was any assent by, or on behalf of, Southgate to pay additional monies to All Roofs for some of the contract works to be performed only on weekends. On the contrary, at the critical point in the email trail - the final email - when the fact that All Roofs required additional unspecified money to perform part of the contract works only on weekends was squarely stated by Mr Sankey to both Mr Anson and All Roofs, there was no response from Southgate or Mr Anson. The Tribunal finds that, once the demand for additional monies was made by All Roofs, there was no response from Southgate. As there was no response from Southgate, there was no assent to that demand.

66 The extent of Mr Anson's contribution to the email discussion was that weekend work 'made sense'. If Mr Anson was Southgate's agent, the email comment is not sufficient to constitute (alone or in the circumstances) a direction by Southgate to All Roofs that resulted in a delay pursuant to cl 20 of the contract, and does not constitute agreement by Southgate to pay All Roofs additional monies to perform the contract work on an altered schedule. The Tribunal finds that there was no direction by Southgate, as asserted by All Roofs, and no acceptance or agreement by Southgate, to pay All Roofs additional unspecified monies expressly or implicitly.

67 As to All Roofs' assertion of a contract of variation implied from the emails and Southgate's alleged inaction and acquiescence, the Tribunal finds that there is no evidence in the application for adjudication from which the Tribunal can positively infer that Southgate assented to the proposal by All Roofs to pay All Roofs an additional unidentified sum of money to perform the same contract works.

68 Further, if the Tribunal were to find an agreement, it concludes that there is no consideration for the payment of any additional monies to All Roofs, as All Roofs was not promising to provide anything more than it was already obliged to provide to Southgate. The Tribunal also concludes that any such agreement fails to constitute a valid contract of variation because of the lack of certainty of its terms. For each of these reasons, the Tribunal concludes that there is no valid contract of variation entitling All Roofs to the payment of any additional monies, under the original contract or a variation thereto, for the work performed pursuant to the original contract. As the Tribunal has concluded that Southgate made no direction, as alleged, All Roofs is not entitled to additional monies arising from a delay caused by any direction by Southgate.

69 Further, had the Tribunal found that there was a valid contract of variation between the parties, or an entitlement to the payment for delays based upon a direction by Southgate, as asserted by All Roofs, the express terms of the contract provide that All Roofs was at liberty to claim the sum of $301,031.21, inclusive of GST, when it became entitled to claim that sum - during the execution of the works up to and including practical completion. It did not claim that sum during the execution of the works or at practical completion, as required by cl 26, cl 28 and cl 29 of the contract. After that time, All Roofs' right to claim that sum under the contract expired, and as at 14 December 2011, All Roofs claim is not one that arose under the contract.

70 The Tribunal concludes that All Roofs' claim is not one that, as at 14 December 2011, arose under the contract or any other construction contract, and is not a payment claim for the purposes of s 3 of the CC Act, and cannot support a payment dispute for the purposes of s 6 of the CC Act.

71 As to All Roofs' estoppel claim, the Tribunal finds there to be no evidence to support such a claim. The most that can be said is that weekend work was discussed. Unlike the situation in Update , Mr Sankey, Mr Anson and Mr Keenan did not indicate to All Roofs that Southgate would have to pay the additional costs to be charged by All Roofs. Unlike Update , the contract works could be performed without a variation, so it cannot be inferred from the fact of completion of the contract works that Southgate knew that All Roofs performed some of the contract work only on weekends.

72 Even if the Tribunal were to find there to be an estoppel, such a claim is not one that arises under the contract, and cannot give rise to a payment claim or a payment dispute as defined by s 3 and s 6 of the CC Act respectively, for the reasons referred to above.

73 For all of these reasons, the Tribunal concludes that the adjudicator correctly dismissed the application for adjudication pursuant to s 31(2)(a)(ii) of the CC Act.

Order

74 The Tribunal makes the following orders:

1. The application for review of the adjudicator's decision in 24-12-01 dated 16 January 2012 made pursuant to s 31(2)(a) of the Construction Contracts Act 2004 (WA) is dismissed.

2. The adjudicator's decision in 24-12-01 dated 16 January 2012 made pursuant to s 31(2)(a) of the Construction Contracts Act 2004 (WA) to dismiss that application for adjudication under s 31(2)(a) of the Construction Contracts Act 2004 (WA) is affirmed.

3. The application in respect of the adjudicator's decision in 24-12-01 dated 16 January 2012 made pursuant to s 34(2) of the Construction Contracts Act 2004 (WA) that the applicant pay the adjudicator's costs is dismissed for want of jurisdiction.

I certify that this and the preceding [74] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

MS NATASHA OWEN-CONWAY, MEMBER