Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229

What the court decided

Coordinated Construction Co Pty Ltd engaged Climatech (Canberra) Pty Ltd under a subcontract to provide air conditioning and mechanical services for the redevelopment of the former Gazebo Hotel at Elizabeth Bay [3]. Between April and December 2004 Climatech submitted what were called variation claims, whose tax invoices claimed site supervision costs and office overheads and stated that they were submitted under clause 34.9 of the subcontract (Delay Damages) [4]. Under clause 34.9, for each day of an extension of time for a compensable cause, damages certified by the Subcontract Superintendent under subclause 41.4 became due and payable to the subcontractor if it had given the Subcontract Superintendent a claim for delay damages under subclause 41.1 [8].

On 23 December 2004 Climatech served a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) for $697,928.47 excluding GST, and Coordinated's payment schedule proposed to pay nothing [5]. The adjudicator determined a progress payment of $588,275.15 [7]. He treated the claims as variation claims that could be included in progress claims, because they resulted from an extension of time that Coordinated had brought about [10].

Bergin J held that the adjudicator had erred in construing the contract by treating them as variations, but that, applying Brodyn Pty Ltd v Davenport, the error was not a failure to comply with the "basic and essential requirements" of the Act [13]. She also held that the amounts could be allowed as payment for a related service, the provision of labour to carry out construction work [15]. She therefore refused the relief that Coordinated had sought [16]. Coordinated appealed, contending among other things that the delay damages were not "for construction work", so that the determination was void, and that certiorari was available [17]. The appeal was dismissed with costs, each judge giving separate reasons [33], [35], [54].

Hodgson JA repeated views he had expressed in Coordinated Construction Co Pty Ltd v J M Hargreaves (NSW) Pty Ltd, another Court of Appeal case involving Coordinated [19], [22]. In those views, neither section 8 nor section 9 limited a progress payment to payment for construction work or related goods and services, and section 9(a) strongly suggested that amounts which the contract included in progress payments were to be included whether or not they were for construction work or related goods and services [22]. The word "for" in the definition of "claimed amount" was not to be read narrowly, and a contractual label of "damages" was not conclusive [22]. An amount payable under the contract as part of the overall price of the work was generally due for that work, while an amount truly payable as damages for breach generally was not [22]. In Hargreaves he had said that delay damages under clause 34.9 were not by nature damages for breach, but additional amounts that could become payable under the contract and were then to be included in progress payments under clause 37.1 [22]. He concluded that such delay damages could be claimed as due for construction work or for related goods and services, and that even if section 13 limited claims in that way, it was for the adjudicator to decide whether to include them [22].

On the requirement that a payment claim identify the work or goods and services to which it relates, Hodgson JA said the identification had to be enough for the respondent to understand the basis of the claim, and that for delay damages of this kind it was generally enough, assuming the contract itself was sufficiently identified, to show the contractual basis of entitlement [25]. Whether that basis was adequately set out was generally for the adjudicator [26]. No one suggested that the contractual basis was inadequately indicated here, and a claim that was in substance for related goods or services need not be expressly identified as such [27]. Coordinated had to establish that the claim could not validly be made under the Act and had not done so, and the adjudicator's silence on whether the claim was one for related goods and services did not matter [28].

Applying Brodyn, Hodgson JA held that there was no error of the kind that could invalidate the determination, and no unlawful act that, under Project Blue Sky, could justify an injunction [29]. Coordinated also sought leave to re-argue Brodyn, and Hodgson JA said its application appeared to focus on the availability of certiorari [31]. He was not persuaded that there were grounds for leave to re-argue whether review extended to determinations that were not invalid, said that certiorari would not be granted here even if it lay for an error of law on the face of the record, and would not give leave [30], [32].

Ipp JA agreed with Hodgson JA, for the reasons Hodgson JA gave in Hargreaves, that "delay damages" can amount to payments "for construction work" [34]. He regarded that as enough to dispose of the appeal, agreed with the proposed orders and declined to comment on the other issues [35], [36].

Basten JA noted Coordinated's concession that the conditions of validity listed in Brodyn did not extend to non-compliance with section 13(2) [37]. He said the primary judge had held that treating the claims as variation claims was an error within jurisdiction, and that she was correct to hold that, in the sense explained in Brodyn, such an error would not make the determination invalid [38]. He accepted that section 13(2), as it then stood, imposed mandatory requirements for payment claims, but said it did not follow that the Court should set a determination aside because, in its view, the claim failed to meet them [44]. He treated the elements of section 13(2) as depending on the adjudicator's satisfaction or opinion, pointing to the adjudicator's expertise, the procedural character of the requirement and the Act's purpose of securing progress payments quickly and without undue formality [45]. He read the omission of section 13(2) from the requirements listed in Brodyn as giving effect to those principles [46]. He added that such an opinion would not in all circumstances be beyond review: one reached by misconstruing the legislation was not the opinion required [47].

Basten JA saw a difficulty in each limb of Hodgson JA's reasoning on the related goods and services point [50]. In his view, the scope and nature of the payment claim were matters for the adjudicator, and on the assumption that the adjudicator had made a jurisdictional error, the primary judge could not uphold the determination on a different basis unless affirmatively satisfied that every relevant fact had been found and that the error was an "immaterial misconception of law" [51]. He found it unnecessary to rule on her approach, because that assumption was not made out: for the reasons given in Hargreaves, he rejected the argument that delay damages could not amount to payments "for construction work" [52]. He agreed with Hodgson JA's reasons on Project Blue Sky, adding that the Act's enforcement scheme was inconsistent with injunctive relief for a legal error not going to validity [53].

Why it matters

Under the Building and Construction Industry Security of Payment Act 1999 (NSW) as it then stood, all three judges rejected the argument that delay damages payable under the subcontract could not be payments "for construction work", and the challenge to a determination that included them failed on that footing.

Ipp JA confined his reasons to that point. Basten JA agreed with Hodgson JA on Project Blue Sky, but otherwise gave his own reasons. He treated compliance with section 13(2) as a matter for the adjudicator's opinion, though not one beyond review in all circumstances. He saw difficulties in Hodgson JA's reasoning on whether the primary judge could uphold the determination as payment for related services, but found it unnecessary to rule on her approach.

The decision concerns the New South Wales Act as it stood in 2005, and its reasoning on review applied Brodyn, so readers should check the current text of the Act and later authority before relying on it. Victorian readers should check the Victorian Act's own provisions before applying it.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.