Main Roads Construction v Samary Enterprises [2005] VSC 388
In the Supreme Court of Victoria, Habersberger J gave a contractor summary judgment on unpaid progress certificates under a Standards Australia general conditions contract, holding that the contract allowed the principal no set-off against progress certificates except by its own certification procedure, so its cross-claims could not be raised in answer and there was no real question to be tried [4], [42], [45], [48].
What the court decided
On or about 27 April 2004 Main Roads (contractor) and Samary (principal) made a contract on the Standards Australia General Conditions of Contract AS 4000-1997 [4]. Main Roads sought summary judgment for $456,978.98 said to be owing under six progress certificates, plus contractual interest [1]. Any argument that Samary had not received the unpaid certificates was removed by an admission in Mr Sabri's affidavit and a statement by Samary's counsel [5].
There was no evidence of the dates on which Samary received, or was deemed under the contract to have received, each unpaid certificate, so no "date of default" could be fixed [6]. His Honour therefore held that the interest claim had not been verified at that stage [7]. An objection that not all contract documents were exhibited failed, since counsel conceded that no argument was impeded and the documents were not relevant to the issues raised [8]. An objection that only photocopies were exhibited had, in his Honour's opinion, no substance [9]. Main Roads had therefore made out a prima facie case for summary judgment unless Samary showed that a question ought to be tried under rule 22.06(1)(b) of the Supreme Court (General Civil Procedures) Rules 1996 [10]. His Honour applied the established test that summary judgment should not be given unless it is clear that there is no real question to be tried, although the procedure is not confined to plain and obvious cases [11].
Samary's amended defence and counterclaim alleged delay in practical completion, failure to install a rising main, wrongful caveats and false statements about its solvency [12]. The purport of its evidence was that it arguably had set-offs or counterclaims exceeding the claim [18]. Main Roads argued that testing them was unnecessary because the contract excluded the ordinary right of set-off other than as the contract provided [18].
His Honour reviewed decisions on contracts with similar wording, including L U Simon Builders Pty Ltd v H D Fowles, John Holland Construction and Engineering Pty Ltd v Majorca Projects Pty Ltd and Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd [21], [24], [26], [48].
Samary argued that whether this contract excluded its right of set-off was a triable issue, relying on a statement by White J that "it takes very clear words to exclude the common law principle" [39]. His Honour found that contract significantly different, in particular because it had no provision that payment of progress certificates was "on account only" [39]. He rejected the argument that the reference to set-off in clause 34.7 was not limited to the procedure in clause 37.2 [41], [42]. The contract read as a whole recognised no right of set-off other than in accordance with the procedure set out in clause 37.2 [42]. Samary did not dispute that it could have sought to have the superintendent certify liquidated damages and defect costs and then elected to set them off, but it did not do so [43].
His Honour also rejected Samary's contrast with the conclusive final certificate under clause 37.4 [44], [45]. He held that, apart from the clause 37.2 procedure, the principal must pay the amount of progress certificates, which are payments "on account only" [45]. The parties had worded the contract that way because progress payments are the "life-blood" of contractors, so set-offs were permitted only within the agreed scheme [45]. Samary therefore could not rely on the set-off rule in rule 13.14 of the Supreme Court Rules [25], [45]. Assuming without deciding that the suspension of payment in clause 39.4 applied to issued but unpaid certificates, that provision, concerned with situations not present, did not override the clear intent of the contract [47]. Satisfied that there was no real question to be tried, his Honour ordered judgment for Main Roads for $456,978.98 once the plaintiff's name was amended [48].
Why it matters
On this decision, a principal under a contract in these terms that wants to resist payment of a progress certificate because of delay or defects should seek certification and set-off under the contract's own procedure, since otherwise its cross-claims are unlikely to answer the claim. This is a single first-instance ruling on summary judgment, and it turns on the construction of this contract read as a whole. Whether clause 39.4 can apply to issued but unpaid certificates was left open [47]. Contractors claiming interest need evidence of when each certificate was received or deemed received [6].
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.