Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Complete Irrigation NSW Pty Ltd v John McMillan [2015] NSWCATAP 34 Hearing dates: 13 January 2015 Date of orders: 13 January 2015 Decision date: 06 March 2015 Before: J Redfern, Principal Member G Meadows, Senior Member Decision: Appeal dismissed. Matter remitted for hearing with directions. Catchwords: APPEAL – ancillary decision – question of law – jurisdiction to determine matter where previous adjudication of the issues – whether proceedings frivolous or vexatious Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Civil and Administrative Appeal Tribunal Act 2013 (NSW) Cases Cited: Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49 Brodyn Pty Ltd t/as Time Cost and Quality v Davenport and Anor [2004] NSWCA 394 General Steel Industries Inc v Commissioner for Railways (NSW) ; Texts Cited: Macquarie Dictionary (Online Edition) Category: Principal judgment Parties: Complete Irrigation NSW Pty Ltd (Appellant) John McMillan (Respondent) Representation: Not applicable File Number(s): AP 14/46406 Publication restriction: Nil Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: [2014] NSWCATCD 75 Date of Decision: 13 May 2014 Before: J Ringrose, General Member File Number(s): GEN 14/03093 reasons for decision Background 1. The appellant, Complete Irrigation (NSW) Pty Limited (Complete Irrigation), has appealed against a decision of the Consumer and Commercial Division of the Tribunal (CCD) made on 13 May 2014 dismissing an application to strike out a claim made by Mr John McMillan, who is the respondent to the appeal but the applicant in the proceedings below. Mr McMillan seeks compensation for what he alleges is a defective sprinkler system that does not perform in accordance with agreed specifications. 2. The system was supplied and installed by Complete Irrigation pursuant to a contract entered into in October 2010. There was dispute between Complete Irrigation and Mr McMillan in relation to the performance of the sprinkler system and on 27 January 2012 Complete Irrigation made a claim for adjudication of its payment claim from Mr McMillan under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the BCISP Act). This claim and the determination made by the adjudicator will be referred to in these reasons as the "adjudication proceedings". 3. An adjudicator considered the claim for payment and on 16 February 2012 ordered that the amount payable by Mr McMillan was $8,810.22 (including GST). The adjudicator also ordered that Mr McMillan pay 100% of the adjudication fees. 4. On 15 January 2014, Mr McMillan made an application in the CCD seeking compensation against Complete Irrigation in the sum of $20,564.55. Complete Irrigation made application for Mr McMillan's application be struck out on the basis that the claims made by Mr McMillan were the subject of cross claims in the adjudication proceedings. It was submitted that these claims had been determined and the Tribunal therefore did not have jurisdiction to determine Mr McMillan's claim. In the alternative, Complete Irrigation requested that the proceedings be struck out as frivolous, vexatious, misconceived and lacking in substance. 5. The strike out application was determined as a preliminary issue by a member of the CCD following written submissions by the parties and a hearing. In summary, the member was not satisfied that the adjudication proceedings precluded Mr McMillan's claim. The application of Complete Irrigation to have Mr McMillan's application struck out was dismissed and the proceedings were adjourned for further directions. 6. Complete Irrigation lodged an internal appeal against the decision on 5 June 2014, requesting leave to appeal on the basis that the decision was an interlocutory decision. Mr McMillan opposed the appeal. Both parties provided extensive written submissions. 7. The Appeal Panel heard the appeal on 13 January 2015. The appeal was dismissed and the substantive proceedings were remitted to the CCD for determination with directions. Our reasons follow. Legislative framework 1. The legislation relevant to this internal appeal is the BCISP Act, the Consumer Claims Act 1998 (NSW) (the CC Act) and the Civil and Administrative Appeal Tribunal Act 2013 (NSW) (the CAT Act). 2. The adjudication proceedings were conducted pursuant to the BCISP Act. According to s 3, the object of the BCISP Act is, to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services. 1. Relevantly, s 17 provides that a claimant may apply for adjudication of a disputed payment claim; s 22 provides that the adjudicator is to determine the amount of the progress claim to be paid by the respondent to the claim and s 25 provides that an adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and enforced accordingly. Section 32 provides as follows: Effect of Part on civil proceedings (1) Subject to section 34, nothing in this Part affects any right that a party to a construction contract: (a) may have under the contract, or (b) may have under Part 2 in respect of the contract, or (c) may have apart from this Act in respect of anything done or omitted to be done under the contract. (2) Nothing done under or for the purposes of this Part affects any civil proceedings arising under a construction contract, whether under this Part or otherwise, except as provided by subsection (3). (3) In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal: (a) must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order or award it makes in those proceedings, and (b) may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings. 1. Nearly two years after the adjudication proceedings were finalised, Mr McMillan commenced his claim for compensation under the CC Act. Section 7(1) of the CC Act provides that the Tribunal has the jurisdiction to hear and determine consumer claims. 2. Section 16 of the CAT Act provides for the creation of certain Divisions on the establishment of the Tribunal, one of which is the CCD. The Tribunal exercises functions under "enabling legislation" such as the CC Act. These functions are allocated to a Division of the Tribunal by the relevant Division Schedule for the Division (subs 16(2)). Schedule 4 of the CAT Act contains the provisions relating to the functions allocated to the CCD. 3. Complete Irrigation relies on cl 5 of Schedule 4, and in particular subcll (7) and (10) of Part 5, which provide as follows: (7) Effect of pending court proceedings on Tribunal If, at the time when an application is made to the Tribunal for the exercise of a Division function, an issue arising under the application was the subject of a dispute in proceedings pending before a court, the Tribunal, on becoming aware of those proceedings, ceases to have jurisdiction to hear or determine the issue. (10) Clause prevails over other law This clause has effect despite Part 3 of this Act or any other Act or law to the contrary. 1. Complete Irrigation also relies on s 55(1)(b) of the CAT Act, which provides that the Tribunal may dismiss proceedings before it if the Tribunal considers that the proceedings are "frivolous or vexatious or otherwise misconceived or lacking in substance". 2. Section 80(1) of the CAT Act provides that an appeal against an "internally appealable decision" may be made to the Appeal Panel by a party to the proceedings in which the decision was made. An "internally appealable decision" is a decision over which the Tribunal has "internal appeal jurisdiction" (s 32(4) of the CAT Act). The Tribunal has "internal appeal jurisdiction" over any decision made by the Tribunal in proceedings for a "general decision" (s 32(1)(a)). A "decision" includes an "interlocutory decision" and an "ancillary decision". An "interlocutory" decision includes a decision concerning a stay, adjournment, an evidentiary matter and "any other interlocutory issue before the Tribunal" (s4 of the CAT Act). An "ancillary" decision means a decision made by the Tribunal that is "preliminary to or consequential on a decision determining proceedings", including a decision about jurisdiction or costs (s 4). 3. Under subs 80(2)(b) of the CAT Act an internal appeal may be made as of right in respect of a final or ancillary decision on any question of law but with the leave of the Appeal Panel on any other grounds. Relevantly, cl 12 of Schedule 4 of the CAT Act provides that for the purposes of s 80(2)(b), the Appeal Panel may grant leave to appeal in respect of a decision made by the CCD but only if satisfied that the appellant may have suffered a "substantial miscarriage of justice" because the decision was not fair and equitable or against the weight of evidence or significant new evidence is available that was not available at the hearing. It is also important to note that an internal appeal against an interlocutory decision may only be made with the leave of the Appeal Panel (s 80(2(a)). 4. In determining an internal appeal, the Appeal Panel has broad powers under s 81 of the CAT Act and may make such orders as it "considers appropriate in light of its decision" on the appeal. Those orders include, but are not limited to, orders that the appeal be allowed or dismissed, the decision under review be confirmed, affirmed or varied, the decision under appeal be quashed or set aside, the decision under appeal be quashed or set aside for another decision to be substituted or that the whole or part of the case be reconsidered by the Tribunal, either with or without further evidence, according to the directions of the Appeal Panel. 5. In this case, the decision made by the CCD was described by the member in his reasons as an "interlocutory determination". However, the principal challenge made by Complete Irrigation was to the jurisdiction of the Tribunal in circumstances where there had been adjudication of the claim in February 2012. The submission that Mr McMillan's application should be dismissed under s 55(1)(b) was primarily based on the jurisdiction argument and was determined by the member on this basis. On the face of it, the decision made by the member was an ancillary rather than interlocutory decision. Accordingly, leave to appeal is only required if the grounds raised by Complete Irrigation do not raise a question of law. Whether the Tribunal has jurisdiction to determine this claim is a question of law and leave to appeal is therefore not required. Grounds of appeal and submissions of the parties 1. Mrs Carrier, a director of Complete Irrigation, represented the company at the hearing. She submitted that subcl 5(7) prevents the Tribunal from determining Mr McMillan's claim. His claim has already been determined under the BCISP Act. Mr McMillan is seeking to raise the same issues in his present application that had been litigated by way of a cross claim in the adjudication proceedings. He is thereby precluded from re-litigating the matter and his claim should be struck out. The member was in error in concluding that the adjudicator was not required to "embark upon a consideration of the cross claim" when making a determination under ss 22 of the BISCP Act. He was so required and in fact did so. The member should have concluded that the Tribunal did not have jurisdiction to determine Mr McMillan's application. 2. Mr McMillan submitted that he had not raised precisely the same issues in the adjudication proceedings as those raised in the current proceedings but, in any event, he was not precluded. Section 32 of the BCISP Act expressly allows further disputes to be determined and subcl 5(7) does not apply because it only relates to "pending" proceedings, not proceedings that have already been heard. 3. Mrs Carrier responded that subcl 5(7) should be interpret broadly to cover proceedings "already determined". Furthermore, subcl 5(10) provides that the provisions of the CAT Act prevail over other legislation. As such, to the extent there is an inconsistency with the BCISP Act, cl 5 prevails. 4. Mrs Carrier further submitted that the Appeal Panel should dismiss Mr McMillan's claim under section 55(1)(b) of the CAT Act because it was lacking in substance; first, because his claim had already been determined and dismissed in the adjudication proceedings and, secondly, because the claim for compensation could not be substantiated. Consideration 1. Mr McMillan denied liability to pay the claim made by Complete Irrigation in the adjudication proceedings because he said there was no jurisdiction under the BCISP Act because the claim related to residential work. Even if there was jurisdiction for the claim to be adjudicated, Mr McMillan argued he was not liable to pay the sum claimed by Complete Irrigation because the sprinkler system did not perform to specifications; some of the variations to the contract were incorrect and excessive; Complete Irrigation had not completed the work and had refused to provide a warranty. Mr McMillan has made similar claims in these proceedings. 2. It is clear from the reasons of the adjudicator that he considered each of the claims made by Mr McMillan, not as a cross claim but on the question of whether Mr McMillan was justified in withholding payment or deducting amounts from the sums claimed. The adjudicator was not satisfied McMillan was so entitled, other than an amount of $500 which was conceded by Complete Irrigation during the adjudication process. 3. In his reasons, the member noted [at 24] that "consideration of a potential cross claim is not one of the matters which an Adjudicator is entitled to consider for the purposes of section 22 of the Act". Much of Complete Irrigation's written submissions sought to address this issue. 4. While it is correct that s 22 does not require this in express terms, the section does direct the adjudicator to take into account all submissions made by the respondent to the claim. In so far as submissions represent a claim that may justify the withholding of payment or a deduction, the adjudicator is to consider them. In this case, the adjudicator did so. If the member suggested otherwise, and we do not understand this to be the case on a fair reading of his reasons, this would be an error. However, any such error would be of no consequence because, as the member correctly identified, any civil rights, whether they be categorised as a cross claim or a substantive claim, are not affected by an adjudication determination under the BCISP Act. This is the crux of the case and the critical issue for determination in this appeal. 5. Section 32 of the BCISP Act has the effect of preserving civil claims. The nature of proceedings under the BCISP Act was considered by the Court of Appeal of the Supreme Court of NSW in Brodyn Pty Ltd t/as Time Cost and Quality v Davenport and Anor [2004] NSWCA 394 and Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49. 6. In Brodyn the Court of Appeal (Hodgson JA, with whom Giles JA and Mason P agreed) held, at [51]: I agree with McDougall J that the scheme of the Act appears strongly against the availability of judicial review on the basis of non-jurisdictional error of law. The Act discloses a legislative intention to give an entitlement to progress payments, and to provide a mechanism to ensure that disputes concerning the amount of such payments are resolved with a minimum of delay. The payments themselves are only payments on account of liability that will be finally determined otherwise: ss3(4), 32. [emphasis added] 1. In Falgat a builder sued an owner for damages in the District Court and later commenced proceedings under the BCISP Act. The District Court judge granted an injunction restraining the builder from pursuing its remedies under BCISP Act. In determining the appeal, Handley JA (with whom Santow JA and Pearlman AJA agreed) found that the Act did not affect the rights of any party under a construction contract and relevantly found as follows at [21] and [22]: 21. …….A builder can pursue a claim in the courts although it was rejected by the adjudicator and the proprietor may challenge the builder's right to the amount awarded by the adjudicator and obtain restitution of any amount it has overpaid. 22. The common law does not permit inconsistent judgments, but this may be sanctioned by statute and this is not the only example of such a statute in this jurisdiction. The power under s 32(3)(b) to make such other orders as it considers appropriate would probably allow the court to set aside or vary any judgment entered under s 25. It is clear that the Act confers statutory rights on a builder to receive an interim or progress payment and enables that right to be determined informally, summarily and quickly, and then summarily enforced without prejudice to the common law rights of both parties which can be determined in the normal manner. [case citations removed] His Honour further stated at [26]: If, as I have concluded, the statutory rights are adjudicated on an interim basis and supplement the rights of the parties under the general law which can be fully determined by a court there is no basis for holding that the builder's statutory claim was vexatious and oppressive. And at [30]: The Act contemplates that proceedings in a court of competent jurisdiction will be completed after the statutory proceedings have been completed. This is because s 32 provides that the court is to allow for any interim payments and order appropriate restitution. However, there is nothing in the Act which prevents the proceedings being concurrent. 1. It is therefore clear that prior adjudication under the BCISP Act, regardless of whether it raises the same issues subsequently sought to be raised before the Tribunal, does not include a party from bringing a similar claim before this Tribunal. There is no estoppel, nor would such a claim be vexatious or oppressive (Falgat at [26])). 2. Complete Irrigation contends that cl 5 precludes recovery. It applies to the adjudication proceedings because "court" is given a wide definition under subcl 5(1) and includes any person that is empowered under any Act or by consent or agreement between two or more persons has authority to decide or resolve any issue that is in dispute whether through arbitration or any other means. 3. We agree that the definition of court is broad enough to cover the adjudication proceedings. However, we do not otherwise accept this submission. 4. Subclause 5(7) is in Part 5 of Schedule 4. Part 5 deals with "special practice and procedure" in the CCD. Clause 5 deals with the "relationship between [the] Tribunal and courts and other bodies in connection with Division functions". Subclause (7) refers to proceedings "pending". This term is not defined for the purposes of Part 5. There is a definition of "pending proceedings" for the purposes of the transitional provisions (Schedule 1 Part 2, cl 6) but this definition is not relevant because it relates to proceedings in the tribunals that were abolished on the commencement of the CAT Act, not to proceedings commenced under the CAT Act. As such, the expression proceeding "pending" should be given its ordinary English meaning having regard to its context within Part 5. According to the Macquarie Dictionary (Online Edition), pending means "remaining undecided" or "awaiting decision". 5. Complete Irrigation submitted that the words proceedings "pending" should include proceedings "already determined". We reject this submission. It is inconsistent with the unambiguous terms of cl 5(7). If the legislature had intended subcl (7) to include proceedings already determined, the subclause would have been so expressed. Moreover, such an interpretation would be inconsistent with the balance of the provisions in cl 5 and would leave subcl (9) with no meaning or relevant work. 6. Subclause (7) provides that if the time an application is made to the Tribunal an issue arising under the application was the subject of proceedings pending before a court, the Tribunal ceases to have jurisdiction to hear or determine the issue once it becomes aware of the those proceedings. Subclause (8) provides that subcl 7 ceases to apply to the extent that the proceedings pending are dismissed or quashed or decided without the issue on its merits being determined. Subclause (9) provides that any finding or decision made by a court in a previous proceeding is admissible as evidence of the finding or decision before the Tribunal. These provisions are designed to ensure there is no duplication or inconsistency between the various courts, tribunals and other bodies that have jurisdiction to determine an issue in dispute. In other words, an issue should only be prosecuted in one forum at a time and any findings in the forum where the issue has been determined should be given weight as evidence in subsequent proceedings. 7. In summary, cl 5(7) does not preclude Mr McMillan's claim, s 32 of the BCISP Act specifically preserves it but cl 5(9) provides that the Tribunal should have regard to any previous findings. It is therefore open to Complete Irrigation to draw upon the findings of the adjudicator in proceedings before this Tribunal but it will equally be open to Mr McMillan to argue those findings should be given little weight because of the circumstances in which his claims were prosecuted at the time. There is no estoppel and furthermore this Tribunal has jurisdiction to hear Mr McMillan's claim. It therefore follows that his claim should not be struck out under s 55(1)(b) of the CAT Act for this reason alone. 8. A claim may be struck out as frivolous, vexatious and lacking substance but the benchmark for summary dismissal on this ground is high, as explained by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at p129 as follows: The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26, r. 18, were the suggested source of authority to deal summarily with the claim in question. It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal – is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense." At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or "so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; "so to speak apparent at a glance." As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. 1. This is not a case where Mr McMillan's claims are so weak as to be "manifestly groundless". On their face, his claims raise an arguable case. As the applicant in the proceedings below, the onus will be on Mr McMillan to establish his various claims, which we note are strenuously opposed by Complete Irrigation. Prosecution of the case will involve, amongst other things, evidence from the parties as to the terms of the contract for the supply and installation of the sprinkler system and evidence about the operation of the system. In circumstances where a case relies on evidence which has not yet been tested, it would be inappropriate to strike out the claim. Conclusion 1. For the reasons outlined above, we dismissed the appeal and remitted the proceedings to the Consumer and Commercial Division for hearing, with directions as to the further conduct of the case. 2. It should be noted that Complete Irrigation did not appeal against the findings made by the member at paragraph 29 of the reasons in respect of Mr McMillan's claim for the cost of legal advice concerning the adjudication process ($1,601.60) or the cost of adjudication paid to the adjudicator ($1,100). Relevantly, the member stated as follows: The claim should not however, include a claim for the cost of legal advice relating to previous proceedings nor should it include a claim for reimbursement of the Adjudicators fees. These two matters could and should properly have been raised in the original proceedings in 2012 and I am not satisfied that they can be recovered in the present proceedings. 1. These findings were not challenged and should stand. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 March 2015