ACE Structural Ltd v John Green and Firma Construction Ltd
| Jurisdiction | New Zealand |
| Judge | Gordon J |
| Judgment Date | 04 July 2019 |
| Neutral Citation | [2019] NZHC 1558 |
| Court | High Court |
| Docket Number | CIV-2018-404-2555 |
| Date | 04 July 2019 |
Under the Judicial Review Procedure Act 2016
In the Matter of an application for judicial review
In the Matter of the Construction Contracts Act 2002
[2019] NZHC 1558
CIV-2018-404-2555
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
Arbitration, Judicial Review — applicant successful in the Building Disputes Tribunal — application for judicial review of arbitrators decision not to award costs — whether Tribunal decision with different parties was admissible — lack of reasons in Tribunal determination — Construction Contracts Act 2002
B Martelli for the Applicant
No appearance by or on behalf of the First Respondent
K A Badcock, K Badcock and L Badcock for the Second Respondent
This judgment was delivered by me on 4 July 2019 at 3.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date.
Ace Structural Ltd (Ace) applies for judicial review of the decision of the first respondent, John Green, sitting as an adjudicator in the Building Disputes Tribunal (the BDT), not to award costs to Ace following Mr Green's determination of disputes between Ace and the second respondent, Firma Construction Ltd (Firma), in favour of Ace.
Firma opposes the application, which it says, in short, is an appeal dressed up as an application for judicial review.
Mr Green was not represented at the hearing and he abides the decision of the Court.
Firma was the head contractor for the construction of commercial units at 18 Corinthian Drive, Albany, Auckland. It engaged Ace, by subcontract dated 2 November 2016, to supply and install fabricated steel for the project at Corinthian Drive.
Between April and September 2017, disputes arose between Ace and Firma.
On 28 September 2017, Firma cancelled the subcontract on the basis (it said) that Ace had repudiated the subcontract by serving a notice of intention to stop work. Ace's position was that it served the notice as a last resort to be paid for steel supplied and installed. It said the notice was not a repudiation of the subcontract. In fact, before Firma cancelled the subcontract, Ace made it clear to Firma that it would continue to supply and install steel for Firma.
On 16 May 2018, Firma served a notice of adjudication on Ace under the Construction Contracts Act 2002 (the CCA), initiating proceedings in the BDT. Firma claimed $107,598 from Ace for costs of rectifying alleged defective steel installation and to complete work after the subcontract was cancelled. Ace denied the allegations.
On 4 July 2018, Ace served its own notice of adjudication on Firma in the BDT. Ace claimed $147,824 for alleged unpaid contract work, variations and interest. Firma denied all allegations.
Ace and Firma agreed to Mr Green as adjudicator on both claims and that their claims be consolidated under s 40 of the CCA.
The issues for determination by Mr Green were:
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(a) Whether Firma lawfully cancelled the subcontract and, if so, whether Ace was liable to Firma for the costs of completion and rectification of allegedly incomplete and defective work;
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(b) Whether Ace was entitled to recover in respect of unpaid progress claims and variations and, if so, in what amount;
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(c) What amount of interest should be paid; and
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(d) Whether costs should be ordered and, if so, in what amount.
Mr Green, in his decision of 6 September 2018, determined that: 1
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(a) Firma unlawfully cancelled the subcontract as Ace had not repudiated it. Therefore, Ace was not liable for the costs of completion and rectification;
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(b) Firma was liable to pay Ace for unpaid progress claims and variations in the sum of $105,737.12 (GST-inclusive) 2 and interest up to and including the date of the determination, within two working days of receipt of the determination;
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(c) Firma was liable to pay Ace interest from the date of the determination to the date of actual payment at the per diem rate of $32.26;
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(d) The parties were to bear their own costs and expenses of the adjudication. There was no bad faith on part of Firma, nor were its allegations and objections without substantial merit; and
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(e) The parties were to meet the costs of the adjudicator ($70,254) in equal proportions ($35,127 each).
Mr Green also made an order in relation to security paid by each of the parties. It is not necessary to detail that order for the purpose of this decision.
It is the orders in [11](d) and (e) above, that each of the parties bear its own costs and that Mr Green's costs be borne equally by the parties, that are the subject of Ace's application for review.
Mr Green recorded that both parties sought a determination that the other was liable to pay its legal costs and expenses under s 56 of the CCA and his fees and expenses in full in accordance with s 57 of the CCA. He then stated:
164 The power to determine liability for the costs and expenses of a party in adjudication proceedings is addressed at section 56 of the Act, which provides:
56 Costs of adjudication proceedings
(1) An adjudicator may determine the costs and expenses must be met by any of the parties to the adjudication (whether those parties are or are not, on the whole, successful in the adjudication) if the adjudicator considers that the party has caused those costs and expenses to be incurred unnecessarily by—
(a) bad faith on the part of that party; or
(b) allegations or objections by that party that are without substantial merit.
(2) If the adjudicator does not make a determination under subsection (1), the parties to the adjudication must meet their own costs and expenses.
165 The power to determine the apportionment of the adjudicator's fees and expenses is addressed at section 57 of the Act.
166 Under section 57, the parties to an adjudication are jointly and severally liable to pay the adjudicator's fees and expenses in equal proportions, or the proportions that the adjudicator may determine. An adjudicator may make a determination that a party pays all or bears a greater proportion of his or her fees if, in the adjudicator's view, the claimant's claim or the respondent's response was without substantial merit, or a party to the adjudication acted in a contemptuous or improper manner during the adjudication.
167 The legal position can be summarised by saying that an adjudicator has a limited discretion to determine liability for costs against any of the parties, which discretion should be exercised judicially not capriciously. There is clearly an overarching presumption that the parties will bear their own costs and an equal proportion of the adjudicator's fees and expenses in adjudications under the Act, unless the particular circumstances dictate otherwise.
168 Ace has advised that it has incurred costs of $74,750.00. I have not been advised as to Firma's costs and expenses.
169 I have carefully considered the parties' claims for costs.
170 I am not satisfied that there are any circumstances to warrant a conclusion under section 56(1)(b) that allegations or objections by either party were without substantial merit. In my view, both parties had a point to put forward, regardless of the actual determinations I have made on the matter at issue.
171 Further, there are no grounds to consider there has been bad faith on the part of any party to these adjudication proceedings under section 56(1)(a).
172 I therefore decline to make a determination under section 56 as between the parties. The result is that, pursuant to section 56(2), the parties will bear their own costs and expenses of this adjudication.
The adjudicator then turned to address the position in relation to his expenses:
173 I have fixed my fees and expenses of this my [sic] determination in respect of these two consolidated proceedings in the GST inclusive amount of $70,254.00.
…
178 I wish to record that my actual costs and expenses incurred in the execution of my duties in these two consolidated adjudication proceedings are in excess of $70,000.00. The reason for that outcome is solely due to the manner in which the claims and response have been presented to me. Overall, the parties' arguments lacked cogency and clarity in respect of the issues to be determined and the relevant evidence (which I suspect was borne of the contractual circumstances that gave rise to the disputes referred), and as a result the determination of these claims has been unduly complicated and time consuming. This is not meant as a criticism but is merely an observation to explain the costs of this determination which are somewhat higher than I might have expected.
The appropriate approach to judicial review of an adjudicator's determination in CCA cases is well settled. It is grounded in the objective of the CCA which is to solve cash flow problems, which are common in the construction industry, by facilitating quick payments. 3 The scheme of the CCA is to provide interim or provisional relief while the parties work through other, more formal, dispute resolution procedures (such as litigation or arbitration). 4 For this purpose, a party with the benefit of a money determination in the BDT may still enforce it even where judicial review proceedings are afoot. 5 Given the CCA's “pay now, argue later” philosophy, the Court of Appeal in Rees v Firth observed that it will be very difficult to satisfy the courts that intervention is necessary: 6
[27] The courts must be vigilant to ensure that judicial review of adjudicators' determinations does not cut across the scheme of the CCA and undermine its objectives. But this does not mean that judicial review should be limited to instances of...
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