CPB Contractors Pty Ltd v Transport for NSW

1. [1]

   By a contract dated 23 March 2017 (“the Contract”) made between Roads and Maritime Services (“RMS”) and the Plaintiff, CPB Contractors Pty Ltd (“CPB”), RMS engaged CPB to carry out work widening approximately 12.5km of the M1 Pacific Motorway from Tuggerah to Doyalson.

2. [2]

   The defendant, Transport for NSW (“Transport”) is the statutory successor to RMS. I will not refer further to RMS but will refer simply to Transport.

3. [3]

   In the course of carrying out the road widening work, CPB accumulated excess non contaminated spoil.

4. [4]

   Transport issued CPB with a series of Site Instructions to remove that spoil from nominated stockpile sites to a location on Kooragang Island. CPB transported that spoil to Kooragang Island (“the Works”).

5. [5]

   CPB and Transport fell into dispute about the amount that CPB was entitled to be paid for the Works.

6. [6]

   Transport contended that its Site Instructions constituted a contractual variation and that CPB was to be paid for the Works on a “Dayworks” basis; in effect costs plus a margin. CPB on the other hand contended that it was entitled to be paid for the Works in accordance with a particular schedule of rates (“the Rates”) on a per square meterage basis.

7. [7]

   The amounts involved are large. Transport paid CPB $1.4 million for the Works on the Dayworks basis. CPB claims to be entitled to a total payment of $11.4 million.

8. [8]

   CPB made six separate “Claims” on Transport in relation to the Works. In those Claims CPB sought to be paid for the Works at the Rates. Transport rejected those Claims and they became “Unresolved Claims” for the purposes of the Contract.

9. [9]

   The Contract provided for expert determination of such disputes.

10. [10]

    The dispute concerning four of the six Claims was referred to the Honourable Robert McDougall QC (“the Expert”) on 1 May 2020.

11. [11]

    The Expert issued a determination on 18 August 2020 (“the Determination”) the effect of which was that CPB was not entitled to further payments for the Works the subject of those four Claims.

12. [12]

    On 13 October 2020, CPB commenced these proceedings seeking payment in accordance with the Rates for all six Claims; that is, including the four Claims the subject of the Determination.

13. [13]

    By Notice of Motion filed on 4 November 2020, Transport seeks a stay on the proceedings in so far as they concern the four Claims on the basis that, under cl 71 of the Contract, CPB agreed to accept the Determination as being “final and binding” in respect of those Claims.

14. [14]

    By a further Notice of Motion, filed on 18 February 2021, Transport seeks, as an alternative to a stay, a separate determination of the two issues that CPB has raised as reasons why no stay should be granted.

Decision

1. [15]

   My conclusion is that I should grant a stay as sought by Transport and that it is not necessary that I determine any separate question.

The relevant provisions

1. [16]

   The Contract included the New South Wales Government GC 21 (Edition 2) “General Conditions of Contract” (the “General Conditions”).

2. [17]

   I will substitute the parties’ names when setting out the relevant clauses of the General Conditions.

3. [18]

   Clause 68.6 of the General Conditions provides that:

4. [19]

   Clause 69.1 to 69.3 provide, relevantly:

5. [20]

   Clause 71 provides for “Expert Determination”.

6. [21]

   Clause 71.5 provides that the “procedure for Expert Determination” is as set out in Sch 5 to the Contract. I will return to that below.

7. [22]

   Subclauses 71.7 to 71.8 provide, relevantly:

8. [23]

   Clause 1 of Sch 5 of the General Conditions provides:

9. [24]

   Clause 4.1 of the Sch 5 provides, relevantly:

The Issues – a balancing exercise

1. [25]

   CBP contends it is not bound by the Determination concerning Claims 1 to 4 and is free to prosecute those Claims as well as Claims 5 and 6 in these proceedings for two reasons.

2. [26]

   First, CBP contends that the Expert made no determination for the purposes of cl 71 of the Contract because there is a “deficiency or error” in the Determination that reveals that the Expert did not make “a determination in accordance with the contract” (“the No Determination Point”). [2]

3. [27]

   Second, CPB contends that, assuming a valid determination has been made, it did not “involve paying a sum of money”, and thus falls within the exception stipulated in cl 71.8.1 to the contractual prohibition in cl 71.8 against commencing litigation in respect of matters determined by the Expert (“the Sum of Money Point”).

4. [28]

   I heard full argument on these questions, in effect as if on a separate question.

5. [29]

   Neither Mr Breakspear for Transport nor Mr Braham SC for CPB contended that there was anything further that could be put on those questions.

6. [30]

   Questions such as the proper construction of a contract [3] are apt for final determination on a stay application such as this. Questions such as whether there has been a waiver or an estoppel [4] or whether a contract is void for uncertainty [5] have also been finally determined on a stay application.

7. [31]

   As I have heard full arguments on the No Determination Point and the Sum of Money Point, I am able to decide those questions in the course of dealing with Transports’ stay application.

8. [32]

   However, Mr Braham submitted that I should leave any determination of the No Determination Point or the Sum of Money Point until the final hearing and refuse to grant a stay.

9. [33]

   First, Mr Braham pointed out that as the Expert was not asked to and did not determine Claims 5 and 6, those Claims will require determination in these proceedings in any event. It follows, as Mr Braham submitted, that a determination of the No Determination Point and the Sum of Money Point favourably to Transport, and the granting of a stay will not be dispositive of the proceedings.

10. [34]

    Mr Braham submitted that CPB’s evidence in relation to Claims 5 and 6 will be of the same nature as will be required in relation to the Claims that were subject of the Determination, that is, Claims 1, 2, 3 and 4.

11. [35]

    Mr Braham submitted that this, alone, was a sufficient reason to refuse the stay application.

12. [36]

    Second, Mr Braham pointed out that a decision to stay the proceedings would be amenable to an application by CBP for leave to appeal. Indeed, Mr Breakspear accepted that I should decide Transport’s stay application on the assumption that CPB would likely seek to challenge any stay on appeal. Mr Braham suggested that as the contractual terms in question are part of the frequently used form of NSW General Conditions the appeal process may not end at the Court of Appeal.

13. [37]

    The parties’ preparation of the proceedings following a stay as sought by Transport, and pending resolution of any appeal process, would doubtless be by reference only to Claims 5 and 6. Were an appeal to be allowed, the parties would have to revise their preparation to include all six Claims. That would cause inconvenience and cost.

14. [38]

    A further factor is, as Mr Breakspear accepted, that no hearing date could be allocated to the proceedings until the appeal process was exhausted.

15. [39]

    However, all these factors are outweighed, in my opinion, by the desirability of determining now the merits of the bases on which CPB contends it is not bound by the Determination and thereby deciding whether CPB is bound by the Determination.

16. [40]

    The two questions are in short compass. There is no suggestion here that the Expert Determination clause is not enforceable. CPB’s points are that either there has been no determination all, or that the contractual prohibition against commencing proceedings is not engaged. If Transport is correct, the result is that the Determination is binding on CPB. If that is so, there are strong grounds to grant a stay and thereby hold CBP to its bargain not to litigate issues the subject of a binding determination. [6]

17. [41]

    I propose to determine the two questions.

The No Determination Point

1. [42]

   In relation to an expert determination such as that involved here:

2. [43]

   Mr Braham submitted that there was a “deficiency or error” in the Expert Determination on both these bases and raised three points.

3. [44]

   Mr Braham’s first point related to the manner in which the Expert answered the question in cl 1.1 of Sch 5 of the Contract. [8]

4. [45]

   The Expert answered Question 1.1 in Sch 5 to the Contract: “no”.

5. [46]

   Thus, the Expert expressed his “conclusion and determination” as follows:

6. [47]

   Mr Braham submitted that this answer was “plainly incorrect” because “the parties were in agreement that at least some compensation was payable”.

7. [48]

   Mr Braham’s point was that, in its submissions to the Expert, Transport stated:

8. [49]

   CPB made the same submission.

9. [50]

   These submissions reflected the fact that it was common ground that CPB had performed the Works and was entitled to payment for having done so.

10. [51]

    The dispute was between the parties as to the basis on which that payment should be made.

11. [52]

    Transport asserted that CPB was entitled to be paid for the Works at the Dayworks rate and, prior to the dispute being referred to the Expert, had paid CPB on that basis. [9]

12. [53]

    CPB, on the other hand, contended that it was entitled to be paid for the Works at the Rates.

13. [54]

    The Expert’s Determination was that CPB was not entitled to be paid for the Works at the Rates and that, as Transport had paid CBP for the Works at the Dayworks rate, no further “compensation” was due.

14. [55]

    The Expert’s answer “no” to Question 1.1 must be seen in that context, and in the light of his statement at [96] of the Determination that CPB’s “claim fails”. The Determination was that CPB had not made out its case to be paid at the Rates.

15. [56]

    In effect, the Expert was upholding Transport’s position and rejecting CPB’s position.

16. [57]

    I see no basis to conclude, in these circumstances, that the answer given by the Expert to this question was “plainly wrong”, nor that he thereby failed to make a determination in accordance with the Contract.

17. [58]

    As I have set out, cl 4.1.3 of Sch 5 of the General Conditions obliged the Expert to give reasons. [10]

18. [59]

    Mr Braham submitted that the Expert had not given reasons for rejecting Claims 2, 3 and 4.

19. [60]

    The Expert dealt with Claim 1 from [54] to [84] of the Determination, and said, at [54]:

20. [61]

    Having rejected CPB’s contentions concerning Claim 1 the Expert concluded, under the heading “Consequences for [Claims 2, 3 and 4]”: [11]

21. [62]

    These are the Expert’s reasons for rejecting Claims 2, 3 and 4. The Expert was saying, quite clearly in my opinion, that Claims 2, 3 and 4 failed for the same reasons as Claim 1 failed.

22. [63]

    The Expert then dealt with an estoppel argument raised by Transport and concluded: [12]

23. [64]

    Mr Braham submitted that what the Expert said in this passage meant that CPB was unable to understand why they had not been successful in relation to Claims 2, 3 and 4.

24. [65]

    But this passage does not touch on the reasons the Expert rejected Claims 2, 3 and 4. Those reasons were set out in the passage I have set out at [61] above. In the passage set out at [63] the Expert was doing no more than mentioning an issue which had not been raised by the parties.

25. [66]

    Mr Braham submitted that the Expert’s reasoning did not address the answer to Question 1.3 in Sch 5 to the Contract being, in light of the answers given to Question 1, “what compensation, if any, is payable by one party to the other and when did it become payable?”

26. [67]

    But as the Expert rejected CPB’s claim, this question did not arise.

27. [68]

    For these reasons I do not accept that there was any “deficiency or error” in the reasons given by the Expert.

28. [69]

    The “No Determination Point” fails.

29. [70]

    The Expert determined that CPB was entitled to no further compensation for the Works.

30. [71]

    The question is whether the Determination that CPB had no right to compensation was a determination that “does not involve paying a sum of money” for the purpose of cl 71.8.1 of the Contract.

31. [72]

    If it was, the Expert’s Determination was not “final and binding” on CPB, the prohibition in the chapeau to cl 71.8 against commencing litigation does not apply and CPB is free to bring these proceedings.

32. [73]

    The Court of Appeal recently considered cl 71.8 of the General Conditions in Lahey Constructions Pty Ltd v State of New South Wales [13] albeit in relation to cl 71.8.2, rather than cl 71.8.1.

33. [74]

    Speaking generally of cl 71.8, Gleeson JA [14] said: [15]

34. [75]

    For Transport, Mr Breakspear submitted that:

35. [76]

    For CPB, Mr Braham submitted that the question is what the Determination, not the “matters for determination”, “involves” and that in a case where the issues involve a claim for payment of money, a determination that no money is payable is in effect a dismissal or rejection of the claim, and does not and cannot involve “paying” a sum of money; as the Determination is that no money is to be paid.

36. [77]

    The critical question is whether a determination dismissing or refusing a money claim “involves” paying a sum of money.

37. [78]

    The Macquarie Dictionary defines “involve” as: “to include as a necessary circumstance, condition or consequence; to entail”; “to affect, as something within the scope of operation” and “to include, contain, or comprehend within itself or its scope”.

38. [79]

    The Concise Oxford English Dictionary defines “involve” as to “include as a necessary part or result”. It also defines “concern” as “affect or involve”.

39. [80]

    There is a limit to the extent to which it is permissible to have regard to dictionary definitions in construing the meaning of a contract [17] and a dictionary definition will not itself resolve a dispute about construction. A word in a contract must take the meaning that its context requires, having regard to the usual principles of contractual construction: text, context, commercial purpose and what a reasonable person in the position of the parties would understand the word to mean. [18]

40. [81]

    In the context in which “involve” is used in cl 71.8.1 it cannot in my opinion mean “require”. The parties have used the words “involve” and “requires” in the same clause and must have meant those words to have different meanings. “Involve” thus cannot mean “include as a necessary part” or as a “necessary circumstance” [19] because so to construe “involve” would, in effect, give it the same meaning as “require”.

41. [82]

    In the context of the scale of work called for by the Contract, the scheme of the clause appears directed to ensuring that determination of Claims that are relatively small, that is, under $500,000, are binding; whereas the parties are free to litigate claims where the determination “requires” one party to pay the other more than $500,000.

42. [83]

    Thus, in Lahey Constructions Gleeson JA observed, of cl 71.8.2:

43. [84]

    However, the clause, and cl 71.8.1 in particular, works awkwardly in a case where the determination is that a money claim is refused or, in effect, dismissed.

44. [85]

    On Transport’s case, a dismissal of a money claim is binding no matter how big the claim.

45. [86]

    In this case, CPB’s claim before the Expert was for some $8.2 million dollars. Had it succeeded, the Determination would not have been binding because it would “require” the payment of more than $500,000, and cl 71.8.2 would be engaged. Yet, on Transport’s case, the Expert’s Determination that the claim be dismissed is binding.

46. [87]

    On CPB’s case, a dismissal of a money claim is not binding no matter how small the claim.

47. [88]

    Thus, on CPB’s case, were the claim to be $50, a determination dismissing the claim would not be binding because it would not “involve paying a sum of money”. And yet a determination upholding the claim would be binding because it would not “require” payment of more than $500,000 and thus would not engage cl 71.8.2.

48. [89]

    Despite these matters, and because of the evident overall object of the clause as I have set out at [82] above, an interpretation of cl 71.8 that leaves as final and binding a determination of a money claim that has the effect that the amount payable is $500,000 or less, including nothing, appears to me more closely to accord with what a reasonable business person in the position of the parties would understand the clause to mean.

49. [90]

    For that reason, my opinion is that, in the context in which it appears in cl 71.8.1, “involve” means something like “concern” or “have to do with” so that a determination involves “paying a sum of money” if it concerns or has something to do with the paying of a sum of money. This meaning of involve is something like the expression “comprehend within itself” referred to in the Macquarie Dictionary and is consistent with the Oxford Dictionary’s definition of “concern” as including “affect or involve”. [21]

50. [91]

    A determination dismissing a claim for money does “involve” “paying a sum of money” in this sense as it deals with the claim that, if successful, would have resulted in the paying of a sum of money; and rejects that claim.

51. [92]

    In my opinion, that is the preferable way of reading cl 71.8.1 so far as concerns determinations in relation to a claim for payment of money. Its focus is not on the amount to be paid or not paid pursuant to the determination, as that threshold has already been set in cl 71.8.2, but on the nature of the determination: whether it does or does not “involve” in the sense of “concern” paying a sum of money.

52. [93]

    The effect of reading the clause this way is that a determination of a money claim will be binding if the determination is either to dismiss the claim (in which event the exclusion in cl 71.8.1 will not be available as the termination will “involve paying a sum of money”) or is for $500,000 or less (in which case the exception in cl 71.8.2 will not be available).

53. [94]

    This construction would leave as not final and binding a determination of a money claim in excess of $500,000 and the distinct category of determinations that are not in respect of money claims; such as a dispute about the construction of the Contract or the General Terms, as expressly contemplated by cl 69.2 of the General Terms. [22]

54. [95]

    The Determination did “involve the paying of sum of money”. The exception to the “preclusion of litigation” [23] does not apply. The proceedings should be stayed to that extent.

Conclusion

1. [96]

   The parties should bring in short minutes to give effect to these reasons.

2. [97]

   If there is any dispute as to costs, the parties should confer and agreed on a timetable for short submissions.

3. [98]

   I will deal with that question on the papers.