FEDERAL COURT OF AUSTRALIA

Birdon Pty Ltd v Houben Marine Pty Ltd [2011] FCAFC 126

Citation:

Birdon Pty Ltd v Houben Marine Pty Ltd [2011] FCAFC 126

Parties:

BIRDON PTY LTD (ABN 59002810255) v HOUBEN MARINE PTY LTD (ACN 14002623396), PHILLIP DAVENPORT and ADJUDICATE TODAY PTY LTD (ABN 39109605021)

File number(s):

NSD 667 of 2011

Judges:

KEANE CJ, RARES AND BUCHANAN JJ

Date of judgment:

13 October 2011

Catchwords:

ADMIRALTY whether a charter agreement is a construction contract – liability of parties pursuant to an agreement for the hire of a back hoe dredge vessel – whether having invoked federal jurisdiction in proceedings in the Federal Court an adjudication application under a State Act can be pursued – whether the State Act purports to withdraw the Federal Court’s authority to quell a controversy within its jurisdiction – source of rights and remedies in federal jurisdiction – application of surrogate federal laws – maritime claim – admiralty jurisdiction in personam

CONSTITUTIONAL LAWoperation and effect of the Constitution conflict between State and Federal legislation – whether Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW) regarding the enforcement of a statutory claim for progress payments is inconsistent with the institutional integrity of Chapter III Courts exercise of Commonwealth judicial power

CONSUMER LAWAustralian Consumer Lawmisleading and deceptive conduct

Legislation:

Constitution ss 71, 73, 75, 76, 77, 109, 118

Admiralty Act 1988 (Cth) ss 3, 4, 9, 10, 12, 14

Australian Consumer Law ss 18, 19, 29, 232, 236

Bankruptcy Act 1966 (Cth) s 27

Competition and Consumer Act 2010 (Cth) Sch 2

Family Law Act 1975 (Cth) s 87

Federal Court of Australia Act 1976 (Cth) ss 19, 22, 23, 53

Judiciary Act 1903 (Cth) ss 38, 39(2), 39B, 44, 79, 80

Native Title Act 1993 (Cth) s 81

Patents Act 1990 (Cth) s 154

Trade Marks Act 1995 (Cth) s 191

Trade Practices Act 1974 (Cth) s 52

Workplace Relations Act 1996 (Cth) s 850

Building and Construction Industry Security of Payment Act 1999 (NSW) ss 4, 6, 7, 8, 9, 10, 11, 13, 14(2)(b), 15, 17, 18, 19, 20, 21(3), 22, 23, 24, 25, 26A, 26B, 32, 34

Sentencing Act 1989 (NSW) s 13A(3A)

Supreme Court Act 1970 (NSW) ss 22, 23

Cases cited:

Abebe v The Commonwealth (1999) 197 CLR 510 followed

Australian Industry Group v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2002) 125 FCR 529 cited

Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 cited

Baker v The Queen (2004) 223 CLR 513 cited

Bitannia Pty Ltd v Parkline Construction Pty Ltd (2006) 67 NSWLR 9 cited

Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245 cited

Dickson v The Queen (2010) 241 CLR 491 cited

Energetech Australia Pty Ltd v Sides Engineering Pty Ltd (2005) 226 ALR 362 cited

Ex parte McLean (1930) 43 CLR 472 cited

Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385 followed

Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 280 ALR 206 cited

Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 considered

Kirk v Industrial Relations Commission of New South Wales (2010) 239 CLR 531 cited

Owners of the Ship “Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404 cited

Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 cited

Re Cram; Ex parte Newcastle Wallsend Coal Co Pty Ltd (1987) 163 CLR 140 cited

Re Macks; Ex parte Saint (2000) 204 CLR 158 considered

Re McJannet; Ex Parte Australian Workers’ Union of Employees (Qld) (No 2) (1997) 189 CLR 654 cited

Re Wakim; Ex parte McNally (1999) 198 CLR 511 cited

Roseville Bridge Marina Pty Ltd v Bellingham Marine Australia Pty Ltd [2009] NSWSC 320 followed

RJ Neller Building Pty Ltd v Ainsworth [2008] 1 Qd R 390 cited

Silbert v Director of Public Prosecutions (WA) (2004) 217 CLR 181 considered

Smith v Smith (1986) 161 CLR 217 cited

Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 cited

Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 cited

The Commonwealth v McCormack (1984) 155 CLR 273 cited

The Queen v Kirby; Ex parte Boilermakers’ Society of Australia (1956) 94 CLR 254 cited

Victoria v The Commonwealth (1937) 58 CLR 618 cited

Wallis v Downard-Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388 cited

Date of hearing:

4 August 2011

Place:

Sydney

Division:

GENERAL DIVISION

Category:

Catchwords

Number of paragraphs:

178

Counsel for the Plaintiff:

Mr AW Street SC with Mr EG Romaniuk

Solicitor for the Plaintiff:

Hicksons Lawyers

Counsel for the First Defendant:

Mr RA Dick SC with Mr E Cox and Mr D Barnett

Solicitor for the First Defendant:

Piper Alderman

The Second and Third Defendants did not appear

Counsel for the Intervener:

Dr JG Renwick with Mr AM Stewart

Solicitor for the Intervener:

Crown Solicitor for the State of New South Wales

IN THE FEDERAL COURT OF AUSTRALIA

in admiralty

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 667 of 2011

BETWEEN:

BIRDON PTY LTD (ABN 59002810255)

Plaintiff

AND:

HOUBEN MARINE PTY LTD (ACN 14002623396)

First Defendant

PHILLIP DAVENPORT

Second Defendant

ADJUDICATE TODAY PTY LTD (ABN 39109605021)

Third Defendant

JUDGES:

KEANE CJ, RARES AND BUCHANAN JJ

DATE OF ORDER:

13 october 2011

WHERE MADE:

sydney

THE COURT ORDERS THAT:

1.    The questions reserved in the special case be answered as follows:

QUESTION 1:

Whether the plaintiff having invoked federal jurisdiction under ss 4(3)(f) and 9 of the Admiralty Act 1988 (Cth) and the Australian Consumer Law, that is not colourable, in these proceedings, the adjudication procedure under Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW) is inoperative and the adjudication procedure cannot be exercised.

Answer 1:

No.

QUESTION 2:

Whether Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW) impermissibly interferes with the institutional integrity of courts upon which the judicial power of the Commonwealth can be conferred and is thereby invalid.

Answer 2:

No.

QUESTION 3:

Whether ss 25 and 32 of the Building and Construction Industry Security of Payment Act 1999 (NSW) purport to withdraw from this Court the effective authority to quell any controversy, or part thereof, in respect of which federal jurisdiction is conferred by ss 4(3)(f) and 9 of the Admiralty Act 1988 (Cth).

Answer 3:

No.

QUESTION 4:

Whether ss 25 and 32 of the Building and Construction Industry Security of Payment Act 1999 (NSW) are applicable as a source of rights and remedies in federal jurisdiction under s 9 of the Admiralty Act 1988 (Cth) because they are picked up and applied as surrogate federal laws by reason of ss 79 and 80 of the Judiciary Act 1903 (Cth).

Answer 4:

Unnecessary to answer.

QUESTION 5:

Having regard to the answers to the above questions, should the interlocutory injunctions granted on 20 May 2011 as extended and varied on 14 June 2011 and on 17 June 2011 be continued.

Answer 5:

No.

2.    The plaintiff pay the first defendant’s costs in respect of the special case.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

IN THE FEDERAL COURT OF AUSTRALIA

in admiralty

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 667 of 2011

BETWEEN:

BIRDON PTY LTD (ABN 59002810255)

Plaintiff

AND:

HOUBEN MARINE PTY LTD (ACN 14002623396)

First Defendant

PHILLIP DAVENPORT

Second Defendant

ADJUDICATE TODAY PTY LTD (ABN 39109605021)

Third Defendant

JUDGES:

KEANE CJ, RARES AND BUCHANAN JJ

DATE:

13 october 2011

PLACE:

sydney

REASONS FOR JUDGMENT

keane cj

introduction

1    On 17 May 2011 Birdon Pty Ltd (the plaintiff) commenced proceedings in the Federal Court of Australia seeking to establish, among other things, that it has no further obligations by way of payment for the hire of a back hoe dredge vessel, the Ain Dschsalut (the dredge) chartered to it by the first defendant, Houben Marine Pty Ltd. Indeed, the plaintiff claims repayment of moneys paid by it to the first defendant by reason of the first defendant’s misleading and deceptive conduct relating to the hire of the dredge. The plaintiff also seeks to restrain the first defendant from pursuing an application to the second and third defendants for an adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Security of Payment Act) in respect of moneys which the first defendant contends are owed to it under the terms of the charter of the dredge. In this regard, the first defendant contends that the charter agreement is a construction contract within the meaning of the Security of Payment Act.

2    The terms of the agreement for the hire of the dredge are in dispute. The plaintiff contends for a hire period of three months (for which it says the first defendant has been paid). The plaintiff contends that it physically redelivered the vessel to the first defendant’s yard at the conclusion of the three months, paid the hire fee for three months and did not again use the vessel. The first defendant contends that the agreement for hire continued for a longer period. It submitted invoices, some of which were paid, during that period.

3    The plaintiff and the first defendant were parties to several contractual arrangements which are now the subject of litigation between them. Only one of these contracts was for the charter and hire of the dredge, but it is only in relation to the hire of the dredge that the first defendant has sought to pursue an adjudication under the Security of Payment Act. Accordingly, it is not necessary to discuss the other agreements.

4    The plaintiff says that the case gives rise to a matter arising under and involving the interpretation of the Constitution, viz, whether provisions of the Security of Payment Act relating to the enforcement of a statutory claim for progress payments are inconsistent with the federal jurisdiction invoked by the plaintiff pursuant to the Admiralty Act 1988 (Cth) (the Admiralty Act), and the Australian Consumer Law. The plaintiff also says that the scheme for the adjudication and enforcement of progress payments is contrary to the institutional integrity of courts mandated by Chapter III of the Constitution.

5    The issues for determination by this Court arise upon questions posed by a special case. The questions which require determination are:

1.    Whether due to the plaintiff having invoked federal jurisdiction under ss 4(3)(f) and 9 of the Admiralty Act and the Australian Consumer Law in proceedings in the Federal Court, the adjudication procedure under Part 3 of the Security of Payment Act may not proceed.

2.    Whether Part 3 of the Security of Payment Act impermissibly interferes with the institutional integrity of courts upon which the judicial power of the Commonwealth can be conferred and is thereby invalid.

3.    Whether ss 25 and 32 of the Security of Payment Act purport to withdraw from the Federal Court of Australia the effective authority to quell any controversy, or part thereof, in respect of which federal jurisdiction is conferred by ss 4(3)(f) and 9 of the Admiralty Act and are, for that reason, inoperative.

4.    Whether ss 25 and 32 of the Security of Payment Act are applicable as a source of rights and remedies in federal jurisdiction under s 9 of the Admiralty Act because they are picked up and applied as surrogate federal laws by reason of ss 79 and 80 of the Judiciary Act 1903 (Cth) (the Judiciary Act).

5.    Having regard to the answers to the above questions, should the interlocutory injunctions granted on 20 May 2011 as extended and varied on 14 June 2011 and on 17 June 2011, be continued.

6    The plaintiff contends that these questions should be answered in the affirmative; except for question 4, which should be answered in the negative.

7    In this Court the second defendant and third defendant have filed submitting appearances save as to costs. Because they have taken no active part in the argument, and for the sake of brevity, I will refer to the first defendant as “the defendant”.

8    The Attorney-General for New South Wales intervened in this matter and made submissions in support of the defendant.

THE FACTS

9    The facts relevant to the determination of the questions posed for determination by this Court are not in dispute. It is convenient to summarise them now. The statement of facts that follows is drawn from the special case.

10    Both plaintiff and defendant agree that the hire agreement for the dredge was a contract within s 4(3)(f) of the Admiralty Act, that the dredge is a seagoing ship within the meaning of s 3 of the Admiralty Act, and that it is not an excluded ship within the meaning of that Act.

11    On 21 April 2011 the defendant served a claim on the plaintiff under s 13 of the Security of Payment Act for payment of the amount of $2,132,907.86 (the Payment Claim).

12    On 9 May 2011, pursuant to s 14(2)(b) of the Security of Payment Act, the plaintiff provided a payment schedule challenging the defendant’s attempt to invoke the Security of Payment Act. The plaintiff indicated that it did not propose to make payment of any part of the Payment Claim.

13    On 18 May 2011, i.e. the day after the plaintiff commenced proceedings in the Federal Court, the defendant made an adjudication application to the third defendant with respect to its Payment Claim under s 17 of the Security of Payment Act (the Adjudication Application).

14    On 18 May 2011 the defendant served a payment withholding request on Defence Maintenance Management Pty Ltd (DMM), the principal contractor in relation to the work for which the dredge was used by the plaintiff, in respect of the Payment Claim under s 26A of the Security of Payment Act (the Payment Withholding Request).

15    On 19 May 2011 the second defendant accepted appointment as adjudicator for the Adjudication Application under s 19 of the Security of Payment Act.

16    On 25 May 2011 the plaintiff lodged with the second defendant a response challenging the Adjudication Application under s 20 of the Security of Payment Act (the Adjudication Response).

17    On 30 May 2011 DMM, as principal contractor, informed the plaintiff by letter that, pursuant to s 26B of the Security of Payment Act, DMM would withhold payment to the plaintiff of approximately $250,000 by reason of the Payment Withholding Request.

18    The plaintiff seeks to restrain the defendant from pursuing the adjudication process under the Security of Payment Act. It is relevant to note here that the plaintiff asserts that the defendant engaged in misleading and deceptive conduct in contravention of ss 19 and 29 of the Australian Consumer Law in relation to the hire of the dredge and the making of payment claims. The plaintiff also seeks a declaration that the defendant is not entitled to make an application for a progress payment under the Security of Payment Act on the basis that the charter agreement between the plaintiff and the defendant was not a construction agreement within the scope of the Security of Payment Act. Thus the plaintiff submits that its claims challenge the defendant’s title to any payment under the Security of Payment Act.

19    On 20 May 2011, on 14 June 2011 and 17 June 2011, on the giving by the plaintiff of the usual undertaking as to damages, the Court below made interlocutory orders, by consent, which restrain the second defendant from determining the Adjudication Application under s 21(3) of the Security of Payment Act. These orders noted the agreement between the plaintiff and the defendant under s 21(3)(b) of the Security of Payment Act to extend the time for the second defendant to determine the adjudication application made by the defendant until the determination of these proceedings (including any appeal therefrom), or such other time as the defendant notified in writing to the second defendant, copied to the plaintiff.

20    It is convenient to set out now the legislative provisions which are referred to in the arguments agitated before this Court before proceeding to a discussion of the arguments.

THE SECURITY OF PAYMENT ACT

21    Section 8 of the Security of Payment Act creates a novel right to progress payments in respect of a construction contract. It provides:

8     Rights to progress payments

(1)    On and from each reference date under a construction contract, a person:

(a)     who has undertaken to carry out construction work under the contract, or

(b)     who has undertaken to supply related goods and services under the contract,

is entitled to a progress payment.

(2)    In this section, reference date, in relation to a construction contract, means:

(a)    a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or

(b)     if the contract makes no express provision with respect to the matter—the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month.

22    By virtue of s 14(2)(b) of the Security of Payment Act, a person on whom a payment claim is served may reply to the claim by providing a payment schedule to the claimant. A payment schedule must indicate the amount of the payment that the respondent proposes to make (the scheduled amount). The plaintiff’s response was that it proposed to pay nothing in respect of the claim because it denied that any amount was owing.

23    Section 17 of the Security of Payment Act prescribes the steps necessary for the making of an application for the adjudication of a constructor’s entitlement to a progress payment. It provides as follows:

17       Adjudication applications

(1)      A claimant may apply for adjudication of a payment claim (an adjudication application) if:

(a)     the respondent provides a payment schedule under Division 1 but:

(i)      the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or

(ii)      the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount, or

(b)      the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount.

(2)     An adjudication application to which subsection (1)(b) applies cannot be made unless:

(a)      the claimant has notified the respondent, within the period of 20 business days immediately following the due date for payment, of the claimant’s intention to apply for adjudication of the payment claim, and

(b)      the respondent has been given an opportunity to provide a payment schedule to the claimant within 5 business days after receiving the claimant’s notice.

(3)      An adjudication application:

(a)      must be in writing, and

(b)      must be made to an authorised nominating authority chosen by the claimant, and

(c)      in the case of an application under subsection (1)(a)(i)—must be made within 10 business days after the claimant receives the payment schedule, and

(d)      in the case of an application under subsection (1)(a)(ii)—must be made within 20 business days after the due date for payment, and

(e)      in the case of an application under subsection (1)(b)—must be made within 10 business days after the end of the 5-day period referred to in subsection (2)(b), and

(f)      must identify the payment claim and the payment schedule (if any) to which it relates, and

(g)     must be accompanied by such application fee (if any) as may be determined by the authorised nominating authority, and

(h)     may contain such submissions relevant to the application as the claimant chooses to include.

(4)      The amount of any such application fee must not exceed the amount (if any) determined by the Minister.

(5)      A copy of an adjudication application must be served on the respondent concerned.

(6)      It is the duty of the authorised nominating authority to which an adjudication application is made to refer the application to an adjudicator (being a person who is eligible to be an adjudicator as referred to in section 18) as soon as practicable.

24    Section 19 provides for the appointment of an adjudicator. The provision states:

19     Appointment of adjudicator

(1)     If an authorised nominating authority refers an adjudication application to an adjudicator, the adjudicator may accept the adjudication application by causing notice of the acceptance to be served on the claimant and the respondent.

(2)     On accepting an adjudication application, the adjudicator is taken to have been appointed to determine the application.

25    Section 20 provides as follows:

20       Adjudication responses

(1)     Subject to subsection (2A), the respondent may lodge with the adjudicator a response to the claimant’s adjudication application (the adjudication response) at any time within:

(a)      5 business days after receiving a copy of the application, or

(b)      2 business days after receiving notice of an adjudicator’s acceptance of the application,

          whichever time expires later.

(2)      The adjudication response:

    (a)      must be in writing, and

(b)      must identify the adjudication application to which it relates, and

(c)     may contain such submissions relevant to the response as the respondent chooses to include.

(2A)     The respondent may lodge an adjudication response only if the respondent has provided a payment schedule to the claimant within the time specified in section 14(4) or 17(2)(b).

(2B)      The respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant.

(3)     A copy of the adjudication response must be served on the claimant.

26    Under s 21(3) of the Security of Payment Act, an adjudicator must determine an adjudication application as expeditiously as possible.

27    Section 22 of the Security of Payment Act provides:

22     Adjudicator’s determination

(1)    An adjudicator is to determine:

(a)     the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount), and

(b)    the date on which any such amount became or becomes payable, and

(c)    the rate of interest payable on any such amount.

(2)    In determining an adjudication application, the adjudicator is to consider the following matters only:

    (a)    the provisions of this Act,

(b)    the provisions of the construction contract from which the application arose,

(c) the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim,         

(d)    the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule,

(e)     the results of any inspection carried out by the adjudicator of any matter to which the claim relates.

(3)     The adjudicator’s determination must:

    (a)    be in writing, and

(b)    include the reasons for the determination (unless the claimant and the respondent have both requested the adjudicator not to include those reasons in the determination).

(4)    If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined:

(a) the value of any construction work carried out under a construction contract, or

(b)    the value of any related goods and services supplied under a construction contract,

the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.

(5)    If the adjudicator’s determination contains:

(a)     a clerical mistake, or

(b)    an error arising from an accidental slip or omission, or

(c)    a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or

(d)    a defect of form,

the adjudicator may, on the adjudicator’s own initiative or on the application of the claimant or the respondent, correct the determination.

28    Section 23 of the Security of Payment Act provides:

23     Respondent required to pay adjudicated amount

(1)    In this section:

relevant date means:

(a)    the date occurring 5 business days after the date on which the adjudicator’s determination is served on the respondent concerned, or

(b)    if the adjudicator determines a later date under section 22(1)(b)—that later date.

(2)    If an adjudicator determines that a respondent is required to pay an adjudicated amount, the respondent must pay that amount to the claimant on or before the relevant date.

29    Section 25 is a provision of particular importance to the arguments of the parties. It provides:

25     Filing of adjudication certificate as judgment debt

(1)     An adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly.

(2)     An adjudication certificate cannot be filed under this section unless it is accompanied by an affidavit by the claimant stating that the whole or any part of the adjudicated amount has not been paid at the time the certificate is filed.

(3)     If the affidavit indicates that part of the adjudicated amount has been paid, the judgment is for the unpaid part of that amount only.

(4)     If the respondent commences proceedings to have the judgment set aside, the respondent:

(a)     is not, in those proceedings, entitled:

(i)     to bring any cross-claim against the claimant, or

(ii)     to raise any defence in relation to matters arising under the construction contract, or

(iii)     to challenge the adjudicator’s determination, and

(b)     is required to pay into the court as security the unpaid portion of the adjudicated amount pending the final determination of those proceedings.

30    I pause here to note that s 25(1) does not deem an adjudication certificate to be a judgment of a court of competent jurisdiction for all purposes. Rather, it provides only that it may be “filed as a judgment” and is “enforceable” as if it were a judgment for a debt. It is also to be noted that s 25(4) does not speak to the court seized of the underlying dispute, if any, between the parties.

31    Sections 26A and 26B of the Security of Payment Act deal with situations where a principal contractor can be required to retain money owed to a respondent and the obligation of the principal contractor to retain money owed to a respondent respectively.

32    Section 32 acknowledges the essentially provisional nature of the adjudication process. It provides as follows:

32       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.

33    It may be noted here that the Security of Payment Act is not concerned to give effect to the rights of the parties under the construction agreement. As is apparent from the terms of s 32(2), it expressly leaves the determination of those rights to the courts. The process for which the Security of Payment Act provides does not involve a determination, even of a provisional kind, of the actual rights of the parties under their construction contract. Section 23 contemplates an “assessment” by the adjudicator, and this assessment may be enforced as if it were a judgment of a court of competent jurisdiction but only insofar as a court has not determined, or does not determine, otherwise.

THE ADMIRALTY ACT

34    The Admiralty Act, by s 4(3)(f), provides as follows:

4     Maritime claims

(3)     A reference in this Act to a general maritime claim is a reference to:

(f)     a claim arising out of an agreement that relates to the carriage of goods or persons by a ship or to the use or hire of a ship, whether by charterparty or otherwise;

35    It is well settled that s 4(3)(f) is to be given a broad reading: Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 at 421. For present purposes it may be taken that both the plaintiff’s Payment Claim and the defendant’s Certificate Claim fall within the definition of maritime claim in s 4(3)(f) of the Admiralty Act.

36    Section 9 of the Admiralty Act provides:

9    Admiralty jurisdiction in personam

(1)     Jurisdiction is conferred on the Federal Court, the Federal Magistrates Court and on the courts of the Territories, and the courts of the States are invested with federal jurisdiction, in respect of proceedings commenced as actions in personam:

(a)     on a maritime claim; or

(b)    on a claim for damage done to a ship.

(2)     Subsection (1) does not confer on a court other than the Federal Court or a Supreme Court of a Territory, or invest a court of a State other than the Supreme Court of a State with, jurisdiction in respect of limitation proceedings.

37    It is important to note that the jurisdiction conferred by s 9(1) of the Admiralty Act is not vested exclusively in the Federal Court. That having been said, it is also important to note that any controversy falling within the broad scope of the definition of a “maritime claim” will be resolved by a court exercising the judicial power of the Commonwealth.

THE AUSTRALIAN CONSUMER LAW

38    Section 18 of the Australian Consumer Law provides:

18     Misleading or deceptive conduct

(1)     A person must not, in trade or commerce, engage in conduct that is

misleading or deceptive or is likely to mislead or deceive.

(2)     Nothing in Part 3-1 (which is about unfair practices) limits by

implication subsection (1).

Note:     For rules relating to representations as to the country of origin of

goods, see Part 5-3.

39    Section 29 (1) and (2) of the Australian Consumer Law provide:

29     False or misleading representations about goods or services

(1)    A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

(a)    make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or

(b)    make a false or misleading representation that services are of a particular standard, quality, value or grade; or

(c)    make a false or misleading representation that goods are new; or

(d)    make a false or misleading representation that a particular person has agreed to acquire goods or services; or

(e)    make a false or misleading representation that purports to be a testimonial by any person relating to goods or services; or

(f)    make a false or misleading representation concerning:

(i)    a testimonial by any person; or

(ii)    a representation that purports to be such a testimonial;

relating to goods or services; or

(g)    make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or

(h)    make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or

(i)    make a false or misleading representation with respect to the price of goods or services; or

(j)    make a false or misleading representation concerning the availability of facilities for the repair of goods or of spare parts for goods; or

(k)    make a false or misleading representation concerning the place of origin of goods; or

(l)    make a false or misleading representation concerning the need for any goods or services; or

(m)    make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); or

(n)    make a false or misleading representation concerning a requirement to pay for a contractual right that:

(i)    is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); and

(ii)    a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law).

    

    Note 1:    A pecuniary penalty may be imposed for a contravention of this subsection.

    Note 2:    For rules relating to representations as to the country of origin of goods, see Part 5-3.

(2)    For the purposes of applying subsection (1) in relation to a proceeding concerning a representation of a kind referred to in subsection (1)(e) or (f), the representation is taken to be misleading unless evidence is adduced to the contrary.

THE COMMONWEALTH CONSTITUTION

40    Section 71 of the Constitution provides:

The judicial power of the Commonwealth shall be vested in a Federal Supreme Court, to be called the High Court of Australia, and in such other federal courts as the Parliament creates, and in such other courts as it invests with federal jurisdiction. The High Court shall consist of a Chief Justice, and so many other Justices, not less than two, as the Parliament prescribes.

41    Section 75 of the Constitution invests the High Court with original jurisdiction in respect of a number of matters.

42    Section 76 goes on to provide relevantly:

The Parliament may make laws conferring original jurisdiction on the High Court in any matter:

(iii)    of Admiralty and maritime jurisdiction;

43    Section 77 of the Constitution empowers the Parliament to make laws with respect to any of the matters mentioned in ss 75 or 76:

(i)    defining the jurisdiction of any federal court other than the High Court;

(ii)    defining the extent to which the jurisdiction of any federal court shall be exclusive of that which belongs to or is invested in the courts of the States;

(iii)    investing any court of a State with federal jurisdiction.

44    Section 109 of the Constitution provides:

When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.

The Judiciary Act

45    Section 79(1) of the Judiciary Act provides:

The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in the State or Territory in all cases to which they are applicable.

46    Section 80 of the Judiciary Act provides:

So far as the laws of the Commonwealth are not applicable or so far as their provisions are insufficient to carry them into effect, or to provide adequate remedies or punishment, the common law in Australia as modified by the Constitution and by the statute law in force in the State or Territory in which the Court in which the jurisdiction is exercised is held shall, so far as it is applicable and not inconsistent with the Constitution and the laws of the Commonwealth, govern all Courts exercising federal jurisdiction in the exercise of their jurisdiction in civil and criminal matters.

47    I turn now to address the arguments advanced in respect of the questions posed for determination by this Court.

question 2

48    In this Court, the plaintiff put its submissions in respect of Question 2 at the forefront of its argument; it is therefore convenient to deal with that question immediately.

49    The plaintiff contends that the Security of Payment Act is invalid because it falls foul of the principle in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 (Kable). In particular, it is said that the certificate which s 25 makes enforceable as a judgment of a Court (which in this case, having regard to the potential quantum of the certificate, could be a judgment of the Supreme Court of New South Wales) is incompatible with the integrity, independence and impartiality of the Supreme Court of New South Wales as a court in which federal jurisdiction has been vested by s 77(iii) of the Constitution. In my respectful opinion, the plaintiff’s contention cannot be accepted.

50    The principle in Kable was succinctly explained by Kirby J in Silbert v Director of Public Prosecutions (WA) (2004) 217 CLR 181 at [25]:

Kable holds that Ch III of the Constitution limits the power of State Parliaments to confer non-judicial functions or non-judicial characteristics on State courts that are incompatible with, or repugnant to, the core requirements of such courts as potential recipients of federal jurisdiction, as provided for in the Constitution. The core requirements referred to include those of the manifest independence and impartiality of the judiciary in the discharge of their functions. This includes independence from legislative directions over individual judicial decisions and in the findings of fact and law that are necessary to them.

51    The plaintiff contends that the Security of Payment Act purports, by s 25, to conscript the courts to do the work of the legislative or executive branches of government of the State of New South Wales. That contention is not correct: as is apparent on its face, s 25 does not require any court to undertake a non-judicial function much less a court exercising the judicial power of the Commonwealth over maritime claims.

52    As Gummow J said in Re Macks; Ex parte Saint (2000) 204 CLR 158 at [207] – [208]:

207    …[T]he reference to conscription does not advance analysis. State and federal courts are regularly and validly conscripted to adjudicate rights and liabilities established purely by statute, for example, in matters arising under laws made by the Parliament within s 76(ii) of the Constitution. …

208    …[C]ertain consequences are attached to them [invalid orders of the Federal Court] “as acts in the law”; rights and liabilities are created as if orders had been made by a judge of the Supreme Court. There is ample legislative precedent at the State and federal level for providing, if stipulated conditions be satisfied, for the registration of foreign judgments in State Supreme Courts and in the Federal Court with the effect they would have if given in those courts and entered on the day of registration. The functions performed by courts of federal jurisdiction under such laws of the Commonwealth or the States are not incompatible with the exercise of the judicial power of the Commonwealth by those courts. The reasoning in Kable might be applicable where, for example, legislation of a State obliged its Supreme Court to enforce as if it were its own judgment an executive or legislative determination of a nature which was at odds with the fundamentals of the judicial process. That situation is far from that which is presented here.

[Footnotes omitted].

53    There is nothing about the enforcement of the adjudication certificate as if it were a judgment of a court which is at odds with the fundamentals of the judicial process. The concern which informs the Kable principle is that the other branches of government should not be able to claim the authority of the judicial branch of government for their decisions by representing an executive or legislative decision as an exercise of the judicial power. Section 25 of the Security of Payment Act does not engage that concern. It is readily apparent from the terms of ss 22-25 of the Act that the adjudication certificate which s 25 makes enforceable as if it were a judgment of a court is not the product of the exercise of judicial power. It cannot seriously be suggested that s 25 makes the Supreme Court of New South Wales an unsuitable repository of the judicial powers of the Commonwealth. And, in any event, no exercise of the judicial power of the Commonwealth is involved in the enforcement of an adjudication certificate.

54    In Baker v The Queen (2004) 223 CLR 513 at [43], McHugh, Gummow, Hayne and Heydon JJ said:

[I]n general, a legislature can select whatever factum it wishes as the “trigger” of a particular legislative consequence.

55    The important point here is that the factum, which is the trigger of the particular legislative consequence for which s 25 of the Security of Payment Act provides, is the adjudication of the quantum of the entitlement to a provisional and defeasible progress payment created by s 8 of the Security of Payment Act.

56    The plaintiff’s argument under this heading rises no higher than the proposition that s 25 attaches consequences, in terms of enforcement, to what is an adjudicator’s assessment of a statutory entitlement. That statutory entitlement is provisional in that it must yield to the final determination of a court. Section 32 of the Security of Payment Act makes the position clear in this regard. As Handley JA explained in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385 at [22]:

[T]he 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 then be determined in the normal manner.

[Emphasis added].

57    There is a further point to be made here. The Federal Court is seized of issues as to whether there is a legal foundation for the adjudication process. The plaintiff raises issues in the proceedings in the Federal Court as to whether the charter of the dredge was a “construction contract” for the purposes of the Security of Payment Act, and whether any money at all is owing to the defendant under the charter, be it under the terms of the charter or by reason of the operation of the Australian Consumer Law. These issues are aspects of the controversy which may only be resolved by the exercise of the judicial power of the Commonwealth; but the assessment by the adjudicator of a provisional entitlement to progress payments is a different matter altogether.

58    Section 9 of the Admiralty Act is a grant of jurisdiction, meaning “the authority to adjudicate” derived from federal law: Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at [3] (Edensor Nominees). That authority to adjudicate involves the application of judicial power to quell, finally and authoritatively, a controversy as to an existing right, title or duty in issue between the parties. Section 9 manifests an intention that, in all cases involving the exercise of judicial power to quell a controversy as to exercising rights or obligations falling within the expression “maritime claim”, the authority to do so derives exclusively from s 9, so that the jurisdiction thereby exercised is wholly federal. But to say that is not to deny the possible operation of the Security of Payment Act.

59    Section 4(1) of the Admiralty Act provides that “a reference in this Act to a maritime claim is a reference to a proprietary maritime claim or a general maritime claim”. By virtue of s 4(3)(f), a reference in the Act to a general maritime claim is a reference relevantly to “a claim arising out of an agreement that relates to … the use or hire of a ship, whether by charterparty or otherwise”.

60    No doubt the provisions of the Admiralty Act are not to be read down, but in my respectful opinion a claim for progress payments pursuant to the Security of Payment Act is not aptly described as “a claim arising out of an agreement that relates to… the use or hire of a ship”, as per s 4(3)(f) of the Admiralty Act. It is not to read down the language of the Admiralty Act to treat the words “arising out of an agreement” as requiring that the right or duty sought to be enforced by the claim owes its existence to a provision of the agreement: Re McJannet; Ex Parte Australian Workers’ Union of Employees (Qld) (No 2) (1997) 189 CLR 654 at 656-657.

61    The right to claim progress payments owes its existence not to the provisions of the charter agreement but to the provisions of the Security of Payment Act. The charter agreement is no more than the factum on which the provisions of the Security of Payment Act operate to confer the right to progress payments.

62    Sections 17 - 25 of the Security of Payment Act are evidently concerned with ensuring that a claimant may receive a payment determined by the adjudication process thus described notwithstanding that there is an unresolved controversy as to the rights and obligations of the parties under the charter agreement. These provisions create a novel statutory right to receive a provisional payment of an adjudicated amount. The existence and value of this novel right depends on the adjudicator’s determination and not on rights and obligations of the parties under the charter agreement as they might finally be determined by the exercise of judicial power.

63    There is no overlap between the regime established under the Security of Payment Act and the Admiralty Act. The former creates and provides for the enforcement of a novel statutory right to provisional payment, while the latter provides for the quelling by the exercise of judicial power of a controversy as to the rights and obligations of the parties under the charter agreement and the Australian Consumer Law. The provisions of the Security of Payment Act establish the content of a new statutory right created by that Act, including the quantification of the entitlement (ss 9 and 17 - 25), the incidents of the right (s 23), and the enforcement of the right (ss 25 and 32). That is, they define the incidents of the novel right. Critically, the existence and quantum of the new statutory right depends not on the true state of underlying facts as regulated by the charter agreement, but on the assessment of the adjudicator who is not required or authorised to make any findings about those facts: Energetech Australia Pty Ltd v Sides Engineering Pty Ltd (2005) 226 ALR 362 at [97] and [101].

64    There is not a single matter or controversy which encompasses both the “maritime claim” made by the plaintiff, and the claim for an adjudication of the quantum of provisional progress payments under the Security of Payment Act. Separate and distinct matters arise.

65    The plaintiff contends that the “matter” with which the Federal Court is seized is not divisible in a way which enables the provisional adjudication contemplated by the Security of Payment Act to be seen as a separate “matter”. This contention cannot be accepted. The federal jurisdiction exercised by the Federal Court is co-extensive with the content of the matter within ss 75 or 76 of the Constitution raised in the proceedings by the parties: Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 290. The circumstance that part of the substratum of fact necessary to give rise to both the Federal and State issues may be common to each is not sufficient to sustain the conclusion that there is but one matter to be determined.

66    In this regard, in Abebe v The Commonwealth (1999) 197 CLR 510 at [31], [32] and [36], Gleeson CJ and McHugh J said:

31    The term “matter” has meaning only in the context of a legal proceeding… A “matter” cannot exist in the abstract. If there is no legal remedy for a “wrong”, there can be no “matter”. A legally enforceable remedy is as essential to the existence of a “matter” as the right, duty or liability which gives rise to the remedy. Without the right to bring a curial proceeding, there can be no “matter”. …

32    The existence of a “matter”, therefore, cannot be separated from the existence of a remedy to enforce the substantive right, duty or liability…

36    Once it is accepted that a “matter” cannot be identified without regard to the remedies available in the court where it is litigated, it necessarily follows that the same legal controversy can give rise to separate matters because different courts may provide different remedies. …[T]he “matter” determined in one court is separate and independent from the “matter” determined in the other court even though each “matter” arises out of the same factual substratum.

67    It is apparent from this passage that the task of identifying the “matter” at issue in any particular proceeding is a tripartite inquiry. The inquiry involves first, the identification of the subject matter for determination in the proceeding; second, the identification of the right, duty, or liability to be established in the proceeding; and third, the identification of the controversy between the parties for the quelling of which the judicial power of the Commonwealth is invoked.

68    Any quantification of the entitlement of the defendant by the adjudicator under the Security of Payment Act will not be resolved as part of the matter before the Federal Court. To the extent that the underlying rights and liabilities of the parties are so resolved in the Federal Court that the quantum of the plaintiff’s liability is less than the amount which the plaintiff might have paid under that Act, the Federal Court may order restitution of that amount as money had and received. I respectfully consider that the provisional and defeasible right created by the Security of Payment Act does not create an inextricable link between the liability which arises on the filing of an adjudication certificate with the Supreme Court and the final determination by the Federal Court of the underlying dispute arising from the charter of the dredge. The provisional and defeasible right arising under the s 25 judgment is manifest in the very terms of s 32. That character is quite inconsistent with the notion that the s 25 judgment is inextricably linked to the matter within federal jurisdiction. That matter, that is the matter within federal jurisdiction, can be decided without the Court entering into any consideration of that judgment and whether it should stand or be set aside. The provisions of s 32(3)(a) of the Security of Payment Act do not distract from the authority of the Federal Court to give such judgment as is just having regard to monies paid provisionally by the plaintiff to the defendant where those amounts exceed the defendant’s true entitlements under the contract: see The Commonwealth v McCormack (1984) 155 CLR 273 at 276.

69    In my opinion, Question 2 should be answered in the negative. The Security of Payment Act is not incompatible with the institutional integrity of courts invested with the judicial power of the Commonwealth.

QUESTION 1

70    In relation to Question 1, the plaintiff’s argument is put on the basis that there is a conflict between federal law and the Security of Payment Act, which is resolved in favour of federal law by the operation of s 109 of the Constitution.

71    The first step in the plaintiff’s argument under this heading is the proposition that federal law is paramount where it conflicts with State legislation. That this is so must be accepted: s 109 of the Constitution says as much. Further, it may be accepted that all claims associated with the charter of the dredge, including the claim that the defendant has no entitlement at all to any payment may be determined only by the exercise of the judicial power of the Commonwealth: Edensor Nominees at [7] - [8].

72    The next step in the plaintiff’s argument postulates a conflict between the Security of Payment Act and a federal law. It is not easy to identify any federal law which forbids what the Security of Payment Act allows: Wallis v Downard-Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388 at 398. No federal law requires that there be no entitlement under State law for any party to seek progress payments on a provisional basis in respect of any claim which might be brought in federal jurisdiction. Nor is it possible to identify a federal law which evinces an intention to enter upon, much less cover, the field occupied by the Security of Payment Act: Ex parte McLean (1930) 43 CLR 472 at 483.

73    The plaintiff’s principal focus under this heading is upon the proposition that the Security of Payment Act purports to impair, negate or detract from the operation of a federal law: Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 at 78. In that regard, the plaintiff argues that the provision which the Security of Payment Act makes in relation to the enforceability of the adjudication certificate impairs, or is apt to impair, the operation of federal law in respect of the claims which arise outside the Security of Payment Act.

74    It may be accepted that admiralty jurisdiction is federal jurisdiction and that the resolution of all the substantive claims and cross-claims between the parties will be effected by the exercise of the judicial power of the Commonwealth. But nothing in the Security of Payment Act is apt to impair or detract from the achievement of that outcome. Nothing in the Security of Payment Act provides for the resolution of the controversy of which the Federal Court is seized by the exercise of a form of governmental power other than the judicial power of the Commonwealth. Nothing in s 25 or s 32 of the Security of Payment Act purports to inhibit the resolution of the controversy between the parties of which the Federal Court is seized. It may be said that a court dealing with the underlying dispute is provided (by s 32(3)) with the mechanism to ensure that it has full control over the determination of the rights of the parties to the construction contract. But it is not necessary to read s 32 as if it were addressed to the Federal Court to arrive at that result; it is sufficient to say that there is nothing in the Security of Payment Act which purports to prevent the Federal Court giving such judgment as reflects its determination of the respective entitlements of the parties, having regard to the substantive rights under the contract and the true operation of the Australian Consumer Law, as found by the Federal Court.

75     It is possible, of course, to imagine a case in which a provisional payment made pursuant to a certificate under s 25 of the Security of Payment Act might not be recoverable from a builder if the builder has become insolvent between payment and a judgment in favour of the other party. To the extent that such a prospect threatens the efficacy of the final judgment of the Federal Court, then the Federal Court may meet that risk by granting an injunction to restrain the parties from asserting rights pursuant to the adjudication process. Thus in the present case, the plaintiff might obtain an interlocutory injunction to restrain the defendant from prosecuting an application for an adjudication under the Security of Payment Act if it were able to establish that it has a sufficiently strong case that the defendant is not entitled to rely upon that Act and that the balance of convenience favours that course: see RJ Neller Building Pty Ltd v Ainsworth [2008] 1 Qd R 390 at [40]-[41].

76    In my opinion, Question 1 should be answered in the negative. The provisions of the Security of Payment Act are not inconsistent with the jurisdiction conferred on the Federal Court by ss 4(3)(f) and 9 of the Admiralty Act or by the Australian Consumer Law.

QUESTION 3

77    Neither ss 25 nor 32 of the Security of Payment Act seek to give direction, procedural or substantive, in respect of the determination of any aspect of the matter of which the Federal Court is seized. Much less does either provision purport to withdraw the authority of the Federal Court, or any other court for that matter, to quell the controversy, or any aspect of the controversy, of which it is seized.

78    The plaintiff’s contention that the Security of Payment Act operates to remove, by an administrative decision making process arising from the Court exercising federal jurisdiction in respect of the controversies, the matters which would be otherwise before it in the controversies by reason of the federal law must be rejected. The administrative decision making process, being the adjudication process under ss 17 - 23 of the Security of Payment Act, does not purport to remove any jurisdiction from the Court. The adjudicator’s determination does nothing more than provide the factum upon which the Security of Payment Act operates to create a new statutory right. Accordingly, it cannot and does not resolve any controversy.

79    Question 3 should be answered in the negative. Sections 25 and 32 of the Security of Payment Act do not purport to withdraw the authority of the Federal Court of Australia to determine the controversy, or any part thereof, of which the Federal Court is seized.

QUESTION 4

80    It will be apparent from the foregoing that I consider that the matter of which the Federal Court is seized does not include the quantification of the dependent’s entitlement to progress payments under the Security of Payment Act.

81    In any event, there is as yet no occasion for the actual operation of s 25 of the Security of Payment Act.

82    For these reasons it is unnecessary to answer this question.

question 5

83    It will be apparent that because of my answers to Questions 1 to 4, I consider that the interlocutory injunction has no foundation. Question 5 must be answered in the negative.

ORDERS

84    I conclude that the questions the subject of the stated case should be answered:

Question 1 –     No.

Question 2 –     No.

Question 3 –     No.

Question 4 –    Unnecessary to answer.

Question 5 –     No.

85    The plaintiff must pay the costs of the stated case.

I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Keane.

Associate:

Dated:    13 October 2011

IN THE FEDERAL COURT OF AUSTRALIA

in admiralty

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 667 of 2011

BETWEEN:

BIRDON PTY LTD (ABN 59002810255)

Plaintiff

AND:

HOUBEN MARINE PTY LTD (ACN 14002623396)

First Defendant

PHILLIP DAVENPORT

Second Defendant

ADJUDICATE TODAY PTY LTD (ABN 39109605021)

Third Defendant

JUDGES:

KEANE CJ, RARES AND BUCHANAN JJ

DATE:

13 october 2011

PLACE:

sydney

REASONS FOR JUDGMENT

rares j

86    The facts, the text of the relevant legislation and the questions reserved are set out in the separate reasons of the Chief Justice and Buchanan J which I have had the privilege of reading. Unfortunately, I have reached a different conclusion on the questions to theirs and will state my reasons for doing so as shortly as possible below.

THE LEGISLATIVE SCHEME

87    By force of s 8(1)(b) of the Security of Payment Act, a person who has undertaken to supply related goods and services under a construction contract (a claimant) is entitled to a progress payment on and from each “reference date” under the contract. In the event that the contract itself does not so provide, the Act, first, creates a new right or entitlement to a progress payment and, secondly, provides a mechanism for ascertaining the reference dates and the amounts (ss 8(2), 9, 10, 11). And, when the contract does provide for progress payments, the Act creates its own self-contained code for recovering and enforcing such payments regardless of the terms of the construction contract (Pt 3, see too s 34 which prohibits contracting out of the effect of the Act).

88    Next, under s 13(1), a claimant is entitled to serve a payment claim under the Act “on the person who, under the construction contract concerned, is or may be liable to make the payment” (a debtor). If the debtor does not respond with its own payment schedule, it becomes liable, by force of s 14(4), to pay the amount sought in the claimant’s payment schedule. The consequence of this is set out in s 15(2)(a) of the Act, namely, the claimant is given two rights: first, to recover the unpaid amount from the debtor as a debt in any court of competent jurisdiction or, secondly, to make an adjudication application in relation to the claim under s 17(1)(b) of the Act. According to Hodgson, Tobias and Basten JJA, a claimant can even make a payment claim under s 13 without having a genuine belief in its entitlement to do so: Bitannia Pty Ltd v Parkline Construction Pty Ltd (2006) 67 NSWLR 9 at 12 [2]-[3], 17 [17], 26-27 [57]-[60], 30 [73].

89    Thus, s 15(2)(a)(i) has the effect, in a case such as the present, of creating a new cause of action in debt. If a claimant exercises its right under s 15(2)(a)(i) to commence an action in debt for the unpaid portion of the amount of its claim, it must prove only that the debtor did not file a responsive payment schedule in time and has not paid the sum sued for (s 15(4)(a)). And, s 15(4)(b) prevents the debtor in those proceedings from bringing any cross claim at all or raising any defence in relation to matters arising under the construction contract. Likewise, if an adjudicator makes a determination that the debtor is liable to pay an adjudicated amount under s 22, then s 23 creates an obligation of the debtor to pay this to the claimant on or before the date specified by the adjudicator: Energetech Australia Pty Ltd v Sides Engineering Pty Ltd (2005) 226 ALR 362 at 381-382 [97] per Campbell J. If the debtor fails to pay all or part of that sum, then the claimant may seek the provision of an adjudication certificate under s 24. Once such a certificate is issued, s 25(1) entitles the claimant to file it in any court of competent jurisdiction “as a judgment for a debt” and makes the judgment enforceable accordingly.

THE NATURE OF THE CONTROVERSY

90    Critically, Birdon claimed that it was entitled to declaratory and injunctive relief in the proceedings it began in this Court against Houben Marine in respect of the latter’s attempt to invoke rights under the Security of Payment Act. Birdon’s substantive claim for relief was for declarations that the contracts for the charter and hire of the dredge Ain Dschalut and Hopper Barge 139 (the ships) were terminated on respectively 17 July 2010 and 25 November 2010 when each was redelivered to Houben Marine. Houben Marine contended that each contract remained on foot so that it was entitled, in late February 2011 and early March 2011, to raise invoices on Birdon for hire of each ship. In addition, Birdon sought relief against Houben Marine in respect of alleged contraventions of s 18 of the Australian Consumer Law in Sch 2 of the Competition and Consumer Act 2010 (Cth) and claimed relief under that Act.

Question 2: Is Pt 3 of the Security of Payment Act incompatible with Ch III of the Constitution?

91    Birdon’s proceedings raised a controversy in federal jurisdiction. First, that controversy involved a general maritime claim within s 4(3)(f) of the Admiralty Act that arose out of the agreements that related to the use or hire of each ship. That claim included a dispute as to whether each agreement already had come to an end before any payment claim was made and whether the Security of Payment Act could apply in respect of either agreement because, if Birdon were correct, neither was on foot at the time the 2011 invoices were raised. Secondly, the controversy involved claims arising under the Australian Consumer Law.

92    The Admiralty Act does not create a cause of action. Rather, that Act confers (federal) jurisdiction to hear and determine certain classes of matters that exist independently of, and owe their existence to, sources of law, including foreign law, different to itself: Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 420 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. However, s 232 of the Australian Consumer Law creates a cause of action for an injunction for a contravention of the norm of conduct prescribed by s 18 and s 236 creates a cause of action for damages for such a contravention.

93    Here, it was common ground between the parties that an adjudicator does not exercise judicial power in making an adjudication. But, the act of filing the adjudication certificate creates a “judgment for a debt in any court of competent jurisdiction and is enforceable accordingly” (s 25(1)). If a certificate is filed in the Supreme Court, the “judgment” so created by s 25(1), is a judgment, decree or order of that Court that attracts the appellate jurisdiction of the High Court under s 73 of the Constitution. The first issue that arises is what would be the subject of an appeal to the High Court against such a “judgment”? If the adjudication process was non-judicial, then what error in respect of such a judgment, or an order based on it, could the High Court correct in an appeal?

94    Secondly, by filing the certificate, depending on the controversy between the parties, the party enforcing it may create a matter in federal jurisdiction, such as, in this case, a general maritime claim and a claim under the Australian Consumer Law. This is because s 32 of the Security of Payment Act inextricably links that certified amount to the adjustment of accounts between the parties that must occur in the course of a court deciding finally the underlying dispute on the “construction contract”.

95    By force of s 25(4) of the Security of Payment Act a debtor who brings proceedings to set aside a judgment of a court made on the basis of the unpaid amount of an adjudication certificate under s 25(1) and (2) is not entitled to bring any cross claim (s 25(4)(a)(i)), raise any defence in relation to matters arising under the construction contract (s 25(4)(a)(ii)) or challenge the adjudicator’s determination (s 25(4)(a)(iii)). Generally speaking, the Security of Payment Act does not permit the debtor to make any challenge to the merits of an adjudicator’s determination by way of defence to its liability to pay the sum outstanding under an adjudication certificate: Bittania 67 NSWLR at 27 [60] per Basten JA with whom Hodgson and Tobias JJA agreed. Section 15(4) has a similar effect where the debtor does not provide a responsive payment schedule. Thus, s 25(4)(a)(ii) effectively excludes from consideration, in proceedings to set aside a judgment enforceable by reason of s 25(1), any issue that may arise under a general maritime claim in s 4(3)(f) of the Admiralty Act, and hence any issue in federal Admiralty jurisdiction. So, in proceedings under s 25(4) to set aside a judgment enforceable under s 25(1), a debtor could not argue that the contract had been fully performed and that no sum was capable of being found due by it then or in the future.

96    A judgment under s 25(1) must be recognised and given full faith and credit under s 118 of the Constitution as a judicial proceeding of a State. Although s 25(4) refers to a debtor commencing proceedings to set aside such a judgment, that section, if it is a valid law, and s 118 of the Constitution, exclude any basis on which the judgment could be challenged directly in the exercise of jurisdiction under s 4(3)(f) of the Admiralty Act or by a cross claim seeking an injunction under s 232 of the Australian Consumer Law to prevent the adjudication certificate becoming binding and enforceable as a judgment of the court in which the certificate was filed.

97    Houben Marine argued that the purpose of ss 17-25 of the Security of Payment Act was to ensure that a claimant could receive a payment determined by the process those sections created “notwithstanding that there is a controversy as to the underlying rights and obligations of the parties”. It argued that the effect of the Security of Payment Act was to create a separate, stand alone right to payment that was subject to later adjustment under s 32. It and New South Wales contended that somehow the State legislation could create an hermetically sealed right to payment that did not, and necessarily could not, form part of a constitutional “matter” involving the underlying controversy between the parties that would be resolved separately and with the aid of s 32.

98    I cannot accept that argument. The Security of Payment Act recognises in s 32(3) that the rights created by Pt 3 are part of one controversy. This is because s 32(3)(a) seeks to require a court or tribunal dealing with the underlying construction contract to take account of any payment made in respect of the right created earlier under the process in Pt 3 and s 32(3)(b) creates a discretion to make orders for restitution. Thus, s 32(3) creates an integral connection between the parties, their rights under the adjudication and other processes in the earlier provisions of Pt 3 and the underlying controversy.

99    If a judgment debt created by proceedings brought under s 15 or a judgment created by s 25(1) must be taken into account in resolving the underlying controversy by force of s 32(3), the circumstances in which such a judgment can come into being, namely, the existence, operation and effect of a construction contract are part of one cognate controversy that may arise in federal jurisdiction. Houben Marine argued that ss 25(4) and 32 operated to limit the scope of proceedings to ensure that no matters relevant to the underlying dispute involving the construction contract could be raised in proceedings to set aside a judgment under s 25(1). But a State law cannot limit or withdraw a part of a controversy from the scope of the application of a valid federal law or the exercise of federal jurisdiction.

100    Houben Marine and New South Wales argued that this Court could grant an injunction to restrain Houben Marine from enforcing the judgment and, thus, the exercise of federal jurisdiction would not be ousted by s 25. But this argument is in the teeth of each of ss 15(4)(b) and 25(4)(a). This is because each expressly excludes, as a ground to set aside a judgment under s 25(1) that must be given full faith and credit, any defence or cross claim, including as to enforceability or the proper construction (i.e. interpretation) of the construction contract in relation to a general maritime claim that arises from the subject matter (s 4(3)(f) of the Admiralty Act) or in relation to contraventions of the Australian Consumer Law by the claimant in the process of it obtaining the adjudication certificate or a judgment based on it.

101    In other words, each of ss 15(4)(b)(i) and 25(4)(a)(i), by expressly prohibiting a debtor bringing any cross claim in proceedings brought under s 15 or a judgment created by s 25(1), purports to exclude a court in such proceedings from exercising federal jurisdiction under any law of the Parliament. If the making of a payment claim consisted of a claimant engaging in conduct that was misleading or deceptive in contravention of s 18 of the Australian Consumer Law, a State parliament cannot legislate to prevent any court invested with federal jurisdiction under Ch III and seized of the controversy so enlivened from exercising that jurisdiction if it is invoked by a debtor exercising its right to seek an injunction under s 232 of that Law to prevent the claimant obtaining or retaining a judgment debt based on that misleading or deceptive conduct. That is because the moment that a debtor seeks to rely on its rights under a law made by the Parliament in proceedings, the court seized of them exercises exclusively the judicial power of the Commonwealth.

102    In Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at 588 [59] Gleeson CJ, Gaudron and Gummow JJ said (with the agreement of Hayne and Callinan JJ at 637 [213]; and see too McHugh J at 613 [141]):

It should be emphasised that the law of a State cannot withdraw from this Court federal jurisdiction conferred by s 75 of the Constitution, nor the federal jurisdiction which a court (State or federal) otherwise may exercise under a conferral or investment of jurisdiction by a law made under s 76 or s 77 of the Constitution; nor may a State law otherwise limit the exercise of federal jurisdiction.”

[Emphasis added].

103    A State law cannot exclude the effect of s 39(2) of the Judiciary Act or the use by the Parliament of the Commonwealth of the autochthonous expedient in s 77(iii) of the Constitution: cf The Queen v Kirby: Ex parte Boilermakers’ Society of Australia (1956) 94 CLR 254 at 268 per Dixon CJ, McTiernan, Fullagar and Kitto JJ. As their Honours said there, in a passage cited with approval many times (see e.g. Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 574-575 [111] per Gummow and Hayne JJ with whom Gleeson CJ and Gaudron J agreed):

The demarcation of the powers of the judicature, the constitution of the courts of which it consists and the maintenance of its distinct functions become therefore a consideration of equal importance to the States and the Commonwealth. While the constitutional sphere of the judicature of the States must be secured from encroachment, it cannot be left to the judicial power of the States to determine either the ambit of federal power or the extent of the residuary power of the States. The powers of the federal judicature must therefore be at once paramount and limited. The organs to which federal judicial power may be entrusted must be defined, the manner in which they may be constituted must be prescribed and the content of their jurisdiction ascertained.

[Emphasis added].

104    Just as a State Parliament cannot confer State jurisdiction on a court created by the Parliament of the Commonwealth, so too it cannot prevent any court, State or federal, invested with the judicial power of the Commonwealth, from exercising that judicial power in a matter arising under Ch III of the Constitution. In Re Wakim 198 CLR at 585-586 [140]-[141] Gummow and Hayne JJ explained (with the agreement of Gleeson CJ and Gaudron J) that the determination of whether there is a single controversy:

“… “depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships” (Fencott (1983) 152 CLR 570 at 608, per Mason, Murphy, Brennan and Deanne JJ). There is but a single matter if different claims arise out of “common transactions and facts” or “a common substratum of facts” (Philip Morris (1981) 148 CLR 457 at 512, per Mason J), notwithstanding that the facts upon which the claims depend “do not wholly coincide” (Fencott (1983) 152 CLR 570 at 607, per Mason J, Murphy, Brennan and Deane JJ). So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other (Philip Morris (1981) 148 CLR 457 at 512, per Mason J), as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are “completely disparate” (Felton v Mulligan (1971) 124 CLR 367 at 373, per Barwick CJ), completely separate and distinct” (Philip Morris (1981) 148 CLR 457 at 521, per Murphy J) or “distinct and unrelated” (Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 481, per Stephen, Mason, Aickin and Wilson JJ) are not part of the same matter.

Often, the conclusion that, if proceedings were tried in different courts, there could be conflicting findings made on one or more issues common to the two proceedings will indicate that there is a single matter. By contrast, if the several proceedings could not have been joined in one proceeding, it is difficult to see that they could be said to constitute a single matter.”

105    I reject Houben Marine’s and New South Wales’ argument that s 25 of the Security of Payment Act is valid because it does not prevent other proceedings being commenced in a federal or State Court to seek an injunction under, say, s 232 of the Australian Consumer Law or ss 22 and 23 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) in aid of a claim that challenges the creation or validity of a debt based on a judgment under s 25 of the Security of Payment Act. The only reason that such other proceedings, asserting a right under a law made by the Parliament, would be necessary, is if the prohibition against a cross claim, made in the State Act, is effective to exclude the operation of a law made by the Parliament that applies in the circumstances of the parties to create a matter. The very statement of the issue demonstrates that there can only be one matter where, as here, Birdon contends that:

    the contract on which it makes its general maritime claim under the Admiralty Act was at an end well before Houben Marine made a payment claim premised on that contract being on foot; and

    by making its payment claim, Houben Marine contravened s 18 of the Australian Consumer Law.

106    This is not a situation in which the nature of the right created by a State law is incapable of being litigated in federal jurisdiction. So, in Smith v Smith (1986) 161 CLR 217, a State Act conferred jurisdiction on its Supreme Court to approve a deed giving effect to rights created by that statute. The High Court held that the Family Court did not have jurisdiction to make an order of approval of a deed of release by a person of his rights under the State law and there was no inconsistency between the power of the Family Court under s 87 of the Family Law Act 1975 (Cth) to approve a maintenance agreement and the power of the Supreme Court under the State Act to approve the deed of release. One reason for this was that s 87 of the Family Law Act did not confer jurisdiction on the Family Court to create a matter involving the granting of an approval under the State Act: Smith 161 CLR at 238 per Gibbs CJ, Wilson and Dawson JJ, 249 per Mason, Brennan and Deane JJ.

107    In Edensor 204 CLR at 571 [7] Gleeson CJ, Gaudron and Gummow JJ said:

“A “matter” in respect of which that jurisdiction is conferred may, in a given case, include claims arising under common law or under the statute law of a State. But the jurisdiction invoked remains, in respect of all of the claims made in the matter, “wholly” federal; even in a State court “there is no room for the exercise of a State jurisdiction which apart from any operation of the Judiciary Act the State court would have had” and “there is no State jurisdiction capable of concurrent exercise with the federal jurisdiction invested in the State court”. These terms were used by Barwick CJ in Felton v Mulligan ((1971) 124 CLR 367 at 373-374).” [Emphasis added].

108    In Bitannia 67 NSWLR 9 Hodgson, Tobias and Basten JJA each held that a debtor could litigate a defence in proceedings under s 15(4)(b) of the Security of Payment Act based on a contention that the claimant had engaged in misleading or deceptive conduct in obtaining an enforceable debt under s 15(1) in contravention of the analogue of s 18 of the Australian Consumer Law in its previous form in s 52 of the Trade Practices Act 1974 (Cth). They held that such a claim was not a defence in relation to matters arising under the construction contract. They explained that a debtor could do this by impeaching the basis on which the payment claim was served as being affected by misleading or deceptive conduct and seeking damages as a set off in its defence (Bitannia 67 NSWLR at 32 [79] and 36 [96] per Basten JA, 16 [11] per Hodgson JA and 17 [17] per Tobias JA) or as Hodgson JA suggested, by bringing a notice of motion for an injunction under what is now s 232 of the Law: Bitannia 67 NSWLR at 15-16 [7]-[12].

109    However, as Basten JA correctly held, if a claim under the Trade Practices Act could not have been raised as a defence because of the preclusion in s 15(4)(b)(ii) of the Security of Payment Act, then the prohibition on the claimant bringing a cross claim in s 15(4)(b)(i) would create an operational inconsistency between the federal and State laws so that the State law would be inoperative to the extent of the inconsistency: Bittania 67 NSWLR at 42 [118]-[119] (Hodgson JA at 16 [13] and Tobias JA at 17 [19] did not express a view on this issue).

110    The significance of this discussion is that s 25(4) of the Security of Payment Act operates differently to s 15(4). First, s 25(1) will have created a court order that the debtor pay a sum certain. Secondly, the chapeau to s 25(4) envisages in terms that the debtor will “commence[…] proceedings to have the judgment set aside”. This must be understood as a reference to taking steps within the notional proceeding or action which the court created when the adjudication certificate was filed, since the prohibitions on the debtor bringing a cross claim or raising a defence in relation to matters arising under the construction contract are only apt to reflect that the debtor is taking steps as a respondent in the extant “proceeding” to set aside the judgment under s 25(1). Thirdly, as a condition of exercising any right to apply to the court to set that judgment aside, s 25(4)(b) requires the debtor to pay into court the unpaid sum due under the judgment, as security. There is no apparent discretion given to the court to relieve the debtor of that potentially onerous obligation.

111    It is difficult to see how a State law can require a person to pay money into court as a mandatory, and not judicially imposed, condition of that person being allowed to litigate his, her or its rights under a federal law. No doubt a court can order a person to pay a disputed sum into court as security as an incident of the exercise of judicial power. However, the amount of a judgment under s 25(1) can be very substantial. In these proceedings, the Full Court was informed that the payment claim seeks over $2 million. Suppose that an extravagant payment claim were made and, because of the claimant’s misleading or deceptive conduct in contravention of the Australian Consumer Law, the debtor was not served, as was alleged in Bittania 67 NSWLR 9, and then a judgment under s 25(1) were created. The effect of s 25(4)(b) would be to create a potentially impossible financial barrier to the debtor commencing proceedings to set aside that judgment. Likewise, a barrier would be created if s 25(4)(a)(iii) operates to preclude a challenge to the adjudicator’s determination based, for example, on the debtor being denied natural justice because it was never served with, and was at all relevant times unaware of, the payment claim or any process relating to the adjudication.

112    The laws made by the Parliament of the Commonwealth that have been relied on in these proceedings do not impose a mandatory precondition, of payment into court of the sum in dispute, on the right of a person to invoke the exercise of the federal jurisdiction they create. Such an inflexible precondition imposed by State law is operationally inconsistent with the rights of all persons to apply to a court exercising the judicial power of the Commonwealth for relief under laws made by the Parliament.

113    Houben Marine also argued that a matter for the purposes of ss 75 and 76 of the Constitution did not exist in the abstract and necessarily required that a remedy could be granted by a court to enforce the right, duty or liability that gave rise to it, as explained by Gleeson CJ and McHugh J in Abebe v The Commonwealth (1999) 197 CLR 510 at 527-530 [31]-[36]. So much may be accepted. However, Houben Marine’s argument seeks to turn what their Honours said on its head. They were discussing the power of the Parliament to identify a “matter” in a law that it had enacted by reference to the remedy it created and the court it authorised to hear and determine the controversy. Nothing said in Abebe 197 CLR 510 supports a contention that the Parliament of a State can so define a controversy as to limit the exercise by a Ch III court of federal jurisdiction when it otherwise exists. The authority that a court exercising federal jurisdiction possesses is to determine the whole of the controversy between the parties arising under federal and, where applicable, State law.

114    It may be, as was the case in Smith 161 CLR 217, that the jurisdiction conferred by the Parliament on a court exercising federal jurisdiction will be limited so that the court concerned (there the Family Court) will not have been given jurisdiction to resolve issues under State law that, had the grant of federal jurisdiction been greater, it could have resolved. But here, this Court can resolve all issues between the parties, including whether the construction contract is on foot and so entitles Houben Marine to proceed with the adjudication process. However, a State law cannot limit the exercise of federal jurisdiction to resolve all matters in the controversy between the parties in respect of the construction contract, including by use of a restriction of justiciable issues, such as is found in s 25(4) of the Security of Payment Act: Boilermakers 94 CLR at 268; Re Wakim 198 CLR at 574-575 [111], 585-586 [140]-[141]; Edensor 204 CLR at 588 [59].

115    A State law cannot preclude a court from exercising the judicial power of the Commonwealth by precluding a party from exercising rights that arise in a “matter” within the meaning of ss 75 and 76 of the Constitution. Here, Birdon has raised a real controversy as to whether the Security of Payment Act can apply to it at all in the circumstances that it alleges, namely, that the construction contract was at an end well before Houben Marine made its payment claims.

116    Houben Marine and New South Wales argued that the adjudicator’s determination was a “factum” selected by the legislature as the “trigger” of the statutory consequence in s 25(1): cf Baker v The Queen (2004) 223 CLR 513 at 532 [43] per McHugh, Gummow, Hayne and Heydon JJ. However, the issue in Baker 223 CLR 513 concerned a restrictive criterion, selected by the Parliament of a State in legislation, that had to be satisfied before its Supreme Court was authorised to exercise a judicial function: see the terms of s 13A(3A) of the Sentencing Act 1989 (NSW) set out by Gleeson CJ at 519 [3], 523 [12]-[13]; see also McHugh, Gummow, Hayne and Heydon JJ at 532 [41]-[43], 534 [49].

117    The proposition concerning the legislative authority to select a factum as a “trigger” for a legislative consequence identified by McHugh, Gummow, Hayne and Heydon JJ in Baker 223 CLR at 532 [43] was sourced to Re Macks; Ex parte Saint (2000) 204 CLR 158 at 178 [25] per Gleeson CJ, 187-188 [59]-[60] per Gaudron J, 200 [107] per McHugh J, 232-233 [208] per Gummow J and 280 [347] per Hayne and Callinan JJ. In that case, the Court considered the effect of State legislation that conferred, imposed and affected rights and liabilities of persons by reference to ineffective judgments, as defined, of the Federal Court. The State legislation used the criterion that the Federal Court judgments had been made without jurisdiction because the State Act purporting to confer that jurisdiction had subsequently been held invalid in Re Wakim 198 CLR 511. However, the State legislation did not purport to affect the Federal Court judgments or to deem them to be judgments of the State’s Supreme Court. The legislation simply declared that the rights and liabilities of the parties to the litigation in the Federal Court were the same as if its judgment had been a valid judgment of a State court: see Gleeson CJ at 178 [25]. As the Chief Justice said at 179 [31], the legal operation of the remedial State Act:

“… does not purport to validate ineffective judgments. It creates rights and liabilities of persons. It does so by reference to such judgments; but it does not affect the judgments.

118    And, as Gummow J said in Re Macks 204 CLR at 232-233 [208]:

Thirdly, the provisions of the SA Act do not by legislative fiat convert the orders of the Federal Court to orders made by the Supreme Court. Rather, certain consequences are attached to them “as acts in the law” (R v Humby; Ex parte Rooney (1973) 129 CLR 231 at 243); rights and liabilities are created as if orders had been made by a judge of the Supreme Court. There is ample legislative precedent at the State and federal level for providing, if stipulated conditions be satisfied, for the registration of foreign judgments in State Supreme Courts and in the Federal Court with the effect they would have if given in those courts and entered on the day of registration (see Foreign Judgments Act 1971 (SA) and now Foreign Judgments Act 1991 (Cth), and, within Australia, Pt 6 (ss 104-109) of the Service and Execution of Process Act 1992 (Cth)). The functions performed by courts of federal jurisdiction under such laws of the Commonwealth or the States are not incompatible with the exercise of the judicial power of the Commonwealth by those courts (Kable (1996) 189 CLR 51 at 98, 106, 117, 132). The reasoning in Kable might be applicable where, for example, legislation of a State obliged its Supreme Court to enforce as if it were its own judgment an executive or legislative determination of a nature which was at odds with the fundamentals of the judicial process. That situation is far from that which is presented here.” [Emphasis added].

119    An adjudication certificate is very different from an ex parte or interlocutory injunction, a default or summary judgment, a judgment of a foreign court or an arbitration award. In the first category of case (an ex parte or interlocutory injunction and a default or summary judgment), the domestic court exercises its ordinary judicial power. An ex parte or interlocutory injunction, even one given in circumstances of urgency without time for the court fully to assess the evidence or law, is no less an exercise of judicial power, despite not finally determining rights. It is a provisional order; it can be reconsidered; adjustments can be made by the court at a final hearing, including by enforcing the undertaking as to damages. The provisional nature of an interlocutory order does not derogate from the fact that it is an exercise of judicial power. Similarly, an ordinary incident of the judicial process creating a judgment debt is that it resolves a controversy as to the debtor’s liability: Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245 at 270 per Deane, Dawson, Gaudron and McHugh JJ. That is so even in the case of a judgment entered by default or summarily.

120    In the second category of case (a foreign judgment), a foreign judicial process recognised by the law of the forum, as such, is enforced. In the third category of case (an arbitration award), the parties’ arbitration agreement involved an agreed method of dispute resolution that, when agreed, had as an incident, the consequence that the award would be enforceable in this way. That is also well recognised as an ordinary incident of judicial power. In effect, by agreeing to having an arbitration clause in a contract, the parties to that contract consent to judgments being entered that are based on the award, subject to the applicability of any legislative exception.

121    In contrast, the adjudication process under the Security of Payment Act is not judicial. It creates, in a summary fashion, a new right, namely, the right to be paid the sum certified. The procedure in s 25 provides one means by which that right is enforced. An adjudicator must make a determination under Pt 3 of the Security of Payment Act that is enforceable under the Act, independently of any underlying provisions and rights contained in the construction contract. If the construction contract already provides for progress payments and the times at which they are payable, s 8(1) gives those provisions statutory force as an entitlement of the claimant under the Act. A claimant whose construction contract has such provisions can serve any payment claim under s 13(1) and thus initiate the adjudication procedure provided by Pt 3 of the Security of Payment Act.

122    Accordingly, the adjudication procedure under Pt 3 can involve the adjudicator making a determination under the Act that either gives effect to the claimant’s existing contractual rights to a progress payment or creates a new right to such a payment. The adjudicator’s determination is made enforceable by the operation of s 25. That makes the adjudication certificate recording the determination binding and conclusive once filed because it has effect, and is enforceable, as a judgment of a court.

123    Legislation can vest in a court the power to make orders creating new rights and imposing new liabilities as an incident of judicial power: Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 at 191 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. But, under the Security of Payment Act, the court in which the certificate is filed does nothing itself to make the adjudicator’s determination have the effect of an order. Moreover, s 25 enlists the ordinary enforcement powers of the court in which the certificate is filed in respect of orders that that court might make in the exercise of its judicial functions. Importantly, under s 25, the adjudicator’s determination does not become a determination by the court in which the adjudication certificate is filed. While s 25(4) contemplates that proceedings may be taken to set aside a “judgment” created by s 25(1) and some process of judicial review of the adjudicator’s determination may also be available, the adjudication certificate becomes a judgment of the court in which it is filed by force of the Security of Payment Act and not as a result of any judicial proceeding. This scheme is similar to that considered in Brandy 183 CLR at 269-270 per Deane, Dawson, Gaudron and McHugh JJ.

124    The fact that s 25(1) provides that an adjudication certificate becomes a judgment of the court in which it is filed and “is enforceable accordingly”, transforms the previous non-judicial character of the adjudication process into the exercise of judicial power. Deane, Dawson, Gaudron and McHugh JJ said in Brandy 183 CLR at 268-269 that the enforceability of a decision was an aspect of judicial power that may serve to characterise a function as judicial when it was otherwise equivocal. They applied the principle that “the concept of judicial power includes enforcement: the capacity to give a decision enforceable by execution”. In that case, their Honours held that the determination of the Human Rights and Equal Opportunity Commission was made enforceable by the legislation operating upon the registration of that decision in the Federal Court. The result was that the decision could be enforced by execution under s 53 of the Federal Court Act: Brandy 183 CLR at 270. The enforceability of the Commission’s determination upon its registration, by use of the Court’s powers, was the critical factor that made the determination an exercise of judicial power. But the enforceable determination was in no sense a determination of the Federal Court whose process of execution was conscripted by the legislation providing for registration and enforceability of the determination: Brandy 183 CLR at 270-271.

125    Here, the last portion of what Gummow J said, in the passage quoted above from Re Macks 204 CLR at 232-233 [208], has particular relevance, for the court in which the adjudication certificate is filed, must enforce the amount due as if it were that court’s own judgment made in the exercise of its judicial power. The adjudication process does not at any point involve the exercise of judicial power. It is one thing, as Gummow J explained, for legislation to enable registration of the judgment of a foreign court so that it may be enforced as a judgment of a local State or federal court, because that is not incompatible with the exercise of the judicial power of the Commonwealth by the court in which registration occurs. Indeed, that exercise is compatible with the fundamentals of the judicial process because it accords recognition to a determination of a foreign court’s orders arrived at in a manner that involves the exercise of judicial power.

126    But, it is quite another process to register in a court, exercising the judicial power under Ch III of the Constitution, an act of a person, such as either an adjudicator or the Human Rights and Equal Opportunity Commission, so that that person’s determination is deemed to be a judgment of the Court and enforceable using its processes: Brandy 183 CLR at 270-271. Such a process involves the exercise of a court’s powers in a manner unauthorised by, and fundamentally at odds with, the judicial process envisaged in Ch III of the Constitution.

127    Section s 25 of the Security of Payment Act precludes a court, in proceedings commenced to set aside the judgment, from dealing with the very existence of any reason under the construction contract as to why liability for the judgment entered under s 25(1) exists, or from considering any contest to the filing of the adjudication certificate and from challenging the entry of a judgment as a consequence. That results in the courts conscripted by s 25(1) being precluded from giving any consideration at all to the exercise of the judicial power that creates and gives effect to an enforceable judgment. This is contrary to the ordinary functions of a court exercising, or capable of exercising, the judicial power of the Commonwealth under Ch III of the Constitution.

128    Houben Marine and New South Wales also argued that the judgment created by s 25(1) of the Security of Payment Act could be set aside for jurisdictional error by reason of the decision in Kirk v Industrial Court of New South Wales (2010) 239 CLR 531. This is a curious argument. In this case, if Houben Marine obtained an adjudication certificate for about $2 million, it would have to be filed in, and become a judgment of, the Supreme Court of New South Wales. That court is a superior court of record: ss 22-23 of the Supreme Court Act 1970 (NSW). It would not exercise supervisory jurisdiction over its own judgment and its jurisdiction to set aside a judgment obtained under s 25(1) would be confined by s 25(4) which expressly precludes the respondent from challenging the adjudicator’s determination (s 25(4)(a)(iii)) or raising any defence in relation to matters arising under the construction contract (s 25(4)(a)(ii)). But, presumably that determination could be challenged for jurisdictional error in proceedings to set aside a judgment entered on the adjudication certificate being filed: cf Kirk 239 CLR at 581 [99]-[100] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. If the second preclusion in s 25(4)(a)(ii), from raising a defence in relation to matters arising under the construction contract is effective, how can a debtor argue, as Birdon would wish to here, that the construction contract was at an end and therefore the adjudicator committed a jurisdictional error in proceedings to have the Supreme Court set aside its own judgment? And, if the argument that Birdon wishes to raise is available under s 25(4), then it is part of the very controversy in this Court.

129    I am of opinion that the entry of an adjudication certificate as an enforceable judgment of a court arrived at by a process that was not at all judicial, with no judicial scrutiny, or even any opportunity for such scrutiny, is fundamentally inconsistent with the judicial process. It uses the status and powers of a court to clothe the adjudication certificate in a judicial guise. But, this is a chimera. It is an usurpation of the judicial authority of the court whose process is conscripted to give the appearance of a judicial determination – an enforceable judgment – to an unjudicial exercise. The “judgment” created by force of s 25(1) is not an exercise of judicial power, yet, if it were valid, ss 73 and 118 of the Constitution would clothe it in judicial raiments. No judicial process is engaged at any point prior to the entry of judgment enforceable, if s 25(1) is a valid law, throughout the Commonwealth by force of s 118 and covering cl 5 of the Constitution. For these reasons, question 2 should be answered: “Sections 25 and 32(3) are invalid because they impermissibly interfere with the institutional integrity of the courts upon which the judicial power of the Commonwealth can be conferred”.

Question 3:    Do ss 25 and 32 of the Security of Payment Act withdraw from the Federal Court authority to quell any part of a controversy in federal jurisdiction?

130    For the reasons I have given in answer to question 2, s 25 does withdraw from this and any court power to quell a controversy in respect of a debtor’s liability to pay the amount certified in an adjudication certificate. It does so in express terms in s 25(4), after the court has arrived, or its processes have been conscripted to arrive, at a non-judicial but enforceable “judgment” through the mechanism envisaged in s 25(1).

131    However, s 32(3) of the Security of Payment Act then operates to confer on any court with jurisdiction to make allowances or restitutionary orders in respect of any amount paid under Pt 3, jurisdiction in proceedings “in relation to any matter arising under a construction contract”, including in, inter alia, proceedings on a general maritime claim under s 4(3)(f) of the Admiralty Act, such as a case like the present. The effect of s 32(3) is to require a court dealing with, inter alia, a general maritime claim, to adjust the relief it grants to take account of an amount paid under an enforceable judgment created under s 25(1).

132    Nonetheless, the Act contemplates that the s 25(1) judgment, to the extent it is unpaid, will remain a valid and enforceable judgment accorded recognition under s 118 of the Constitution. Suppose a secured creditor of the person in whose favour an unsatisfied s 25(1) judgment is entered exercises its security over the right to enforce the judgment before an order is made under s 32(3) between the parties to a construction contract that later adjusts accounts to extinguish the sum due under the judgment. The debtor, being the other party to the construction contract, would not be able to secure an order setting aside the s 25(1) order. In a situation where the creditor has become insolvent, the debtor would have paid the judgment debt and be left only with a hollow right to prove in the “creditor’s” insolvency.

133    The practical effect of s 25 is to interpose a “judgment” in the process of a court exercising federal jurisdiction in a matter, such as Admiralty jurisdiction in respect of a general maritime claim or a claim under the Australian Consumer Law. Next, s 32(3) of the State Act requires that interposed judgment to be taken into account in formulating final orders to quell the federal controversy. The only way that s 32(3) can do so effectively is if it operates as a surrogate federal law picked up by ss 79 and or 80 of the Judiciary Act. Obviously, s 32(3) cannot confer State jurisdiction of its own force on a court created by the Parliament or the High Court: Re Wakim 198 CLR 511. Thus, the answer to question 3 depends on the answer to question 4. For the reasons below, question 3 should be answered “yes”.

Question 4:    Are ss 25 and 32 of the Security of Payment Act surrogate federal laws?

134    I am of opinion that Question 4 must be answered “no”. This is because s 32(3) of the Security of Payment Act operates on the premise, that I consider wrong, that s 25 is a valid law with respect to matters in federal jurisdiction. Those provisions alter, impair or detract from the operation of federal law by substantially, if not completely, proscribing the right of a person in the same proceedings to seek, or a court to set aside, a judgment under s 25 or to raise a cross claim in the same proceedings by relying on rights under federal law: Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 280 ALR 206 at 214-216 [36]-[42] per French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ; Dickson v The Queen (2010) 241 CLR 491 at 504 [22] per French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ. Since s 25 is invalid, s 32(3) can have no operation and cannot be “picked up” to give effect to, and allow adjustments to be made in respect of, a judgment under s 25(1).

Question 1:    Is the adjudication procedure under Pt 3 of the Security of Payment Act inoperative by reason of the commencement of the present Federal Court proceedings?

135    For the reasons I have given, ss 25 and 32(3) in Pt 3 of the Security of Payment Act are operationally inconsistent with the exercise of jurisdiction in a matter under a law made by the Parliament, such as ss 4(3)(f) and 9 of the Admiralty Act and the Australian Consumer Law. The process that culminates in a judgment created by force of s 25(1), involves no exercise of, and is fundamentally inconsistent with the exercise of, judicial power under Ch III of the Constitution. It follows that, to that extent, Pt 3 of the Security of Payment Act is operationally inconsistent with the exercise of federal jurisdiction in any matter. Question 1 must be answered “yes”.

Question 5:    Should the interlocutory injunctions continue to restrain proceedings under Pt 3 of the Security of Payment Act?

136    Because I have concluded that ss 25 and 32(3) are operationally inconsistent with the exercise of federal jurisdiction and are invalid, question 5 must be answered “yes”.

Conclusion

137    In my opinion the questions should be answered as follows:

Question 1:    “Yes”

Question 2:    “Sections 25 and 32(3) are invalid because they impermissibly interfere with the institutional integrity of the courts upon which the judicial power of the Commonwealth can be conferred.”

Question 3:    “Yes”

Question 4:    “No”

Question 5:    “Yes”

138    Houben Marine should pay Birdon’s costs of the questions reserved for the consideration of the Full Court.

I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Associate:

Dated:    13 October 2011

IN THE FEDERAL COURT OF AUSTRALIA

in admiralty

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 667 of 2011

BETWEEN:

BIRDON PTY LTD (ABN 59002810255)

Plaintiff

AND:

HOUBEN MARINE PTY LTD (ACN 14002623396)

First Defendant

PHILLIP DAVENPORT

Second Defendant

ADJUDICATE TODAY PTY LTD (ABN 39109605021)

Third Defendant

JUDGES:

KEANE CJ, RARES AND BUCHANAN JJ

DATE:

13 october 2011

PLACE:

sydney

REASONS FOR JUDGMENT

buchanan j

139    Section 19 of the Federal Court of Australia Act 1976 (Cth) invests the Federal Court with such original jurisdiction “as is vested in it by laws made by the [federal] Parliament”. One such law is the Admiralty Act 1988 (Cth) which, by ss 9, 10 and 12, confers jurisdiction on the Federal Court (and other courts) in relation to admiralty actions in personam, admiralty actions in rem and matters associated with those actions. Section 4 of the Admiralty Act identifies maritime claims to which the Admiralty Act applies. Included in such claims are:

4(3)(f)    a claim arising out of an agreement that relates to the carriage of goods or persons by a ship or to the use or hire of a ship, whether by charterparty or otherwise;

140    The present proceedings are concerned with such a claim.

141    Another federal statute which invests this Court (and other courts) with federal jurisdiction is the Australian Consumer Law which creates statutory rights and obligations and provides methods for their enforcement. The present proceedings also concern claims arising under that federal legislation.

142    The Building and Construction Industry Security of Payment Act 1999 (NSW) (“the State Act”) contains a statutory scheme intended to facilitate the ready enforcement of obligations to make “progress payments” under certain agreements. The first defendant alleges that the State Act applies to arrangements made between the first defendant and the plaintiff, which concerned the hire of a back hoe dredge vessel, an arrangement which gave rise to a claim by the first defendant and which, apart from its character for the purpose of the State Act, also fell within the description of one type of maritime claim in s 4(3)(f) of the Admiralty Act.

143    A factual summary offered by the plaintiff in its written submissions (and not challenged by any party) was as follows:

3    The controversy between the plaintiff and the first respondent concerns the plaintiff’s alleged obligation to pay hire for a back hoe dredge vessel, and primarily concerns a controversy as to the period of hire.

4    There is a controversy as to the terms of the agreement for hire of the vessel. The controversy includes, first, the identification of the terms of the agreement for hire by recourse to, amongst other matters, documents exchanged, conversations, representations and the use of a pre-printed standard document with additional clauses. The controversy also includes, second, and following the identification of the terms of the agreement for hire, the meaning of the terms of the agreement for hire.

5    The plaintiff, by way of general summary of the respective positions, contends the controversy results in a hire period of 3 months (for which the first defendant has been paid), and the first defendant, conversely, contends the controversy results in an agreement for hire that continued until the plaintiff had completed works at a different project (the Garden Island project in Sydney Harbour), resulting in a hire period of about 11 months. The plaintiff physically redelivered the vessel to the first defendant’s yard at the conclusion of 3 months, paid the hire fee for 3 months and did not again use the vessel. The charter was not in the nature of a demise charter, and the first defendant provided crew whilst the vessel was used by the plaintiff.

6    The plaintiff used the vessel at Henderson, Western Australia, for 3 months and then redelivered the vessel to the first defendant at Homebush, Sydney, and paid for the 3 month hire. The alleged obligation to pay hire concerns a period of about after that 3 month period and after that redelivery.

7    The first defendant made a ‘payment claim’ on the plaintiff pursuant to Building and Construction Industry Security of Payment Act 1999 (NSW) (‘the State Act’). The plaintiff, reserving its position as to the application of the State Act, served a ‘payment schedule’ in which the plaintiff raised its position as to the application of the State Act, and jurisdictional matters in respect of the administrative process created by the State Act. The first defendant pursued the progress of its payment claim in that administrative process, and the second defendant is the ‘adjudicator’ to which the first defendant’ [sic] application for adjudication of the payment claim was referred by the third defendant, and the third defendant is an ‘authorised nominating authority’ for the purposes of the State Act.

    ...

9    The plaintiff commenced proceedings in this Court in respect of the controversy as to the obligations under the charter, seeking declarations and other remedies. In respect to the payment claim and the administrative process, the plaintiff obtained interim interlocutory relief to prevent those matters being progressed.

144     The State Act applies to “construction contracts” (s 7). “Construction contract” is defined by s 4 of the State Act to mean:

a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party.

145    “Related goods and services” is defined in s 6 of the State Act to include various kinds of identified services. The first defendant takes the position, but the plaintiff disputes, that the hire of the back hoe dredge vessel arose from a construction contract constituted by a contract or arrangement for services related to construction work. That dispute does not require resolution at present.

146    The State Act, by s 8, creates a statutory right to progress payments in relation to construction contracts to which it applies. “Progress payment” is defined by s 4 of the State Act in a way which includes a final payment or a single or one-off payment. Section 13 of the State Act permits a person to claim a progress payment. A person upon whom such a claim is served may respond by providing a payment schedule indicating what (if any) payment is proposed in response to the claim (s 14). If, speaking generally, payment in full is not made, the claimant may recover the unpaid portion as a debt or may make “an adjudication application”. Sections 15 and 16 have the effect that, if the unpaid amount is sued on as a debt a court must be satisfied that the statutory procedures in ss 13 and 14 have been followed but the respondent is not, in those proceedings, entitled to bring any cross-claim or raise any defence in relation to matters arising under the construction contract.

147    The effect of the statutory scheme to this point seems to be that, in a case where a claimant wished to move immediately for recovery of claimed (but unpaid) amounts, the proceedings would be confined in scope. Very little attention was given to this aspect of the statutory scheme in argument. It appears to involve a statutory limitation on a statutory right of action created by the same legislation. It was not suggested that arrangement gave rise to any invalidity in the State Act of the kind alleged against subsequent provisions.

148    Where a respondent elects to make an adjudication application, the provisions of Division 2 of Part 3 of the State Act apply. There are a number of procedural requirements to be observed. An adjudicator may be appointed. The adjudicator need not be legally qualified. It is common ground in the present proceedings that the functions performed by an adjudicator do not involve the exercise of judicial power. The adjudicator has the authority to determine (s 22(1)):

(a)    the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount), and

(b)    the date on which any such amount became or becomes payable, and

(c)    the rate of interest payable on any such amount.

149    The matters which the adjudicator may consider are limited by s 22(2). Generally speaking, the adjudicator is confined to consideration of the provisions of the State Act, the provisions of the contract, some procedural elements concerning the claim and response and the results of any inspection which may be conducted by the adjudicator. Although the adjudicator may consider submissions advanced in support of the progress payment claim or the payment schedule relied on by the respondent, there is no indication that the adjudicator may deal with any substantive defence or claim for a set-off. Whether or not that is open need not be further considered for the purpose of this judgment.

150    Section 23(2) provides:

(2)    If an adjudicator determines that a respondent is required to pay an adjudicated amount, the respondent must pay that amount to the claimant on or before the relevant date.

151    If payment of the adjudicated amount is not made, the claimant may set in train steps to obtain “an adjudication certificate” (s 24). It is at this point in the statutory scheme that the provisions which require closer attention appear. It will be apparent from the facts earlier recounted that events have moved to the point where there are claimed, but unpaid, amounts outstanding and where an adjudicator has been appointed. For the moment the adjudicator has been restrained from proceeding further. Should the adjudicator proceed there is the potential for an adjudicated amount to be determined and for an adjudication certificate to be issued.

152    Section 25 of the State Act provides:

(1)    An adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly.

(2)    An adjudication certificate cannot be filed under this section unless it is accompanied by an affidavit by the claimant stating that the whole or any part of the adjudicated amount has not been paid at the time the certificate is filed.

(3)    If the affidavit indicates that part of the adjudicated amount has been paid, the judgment is for the unpaid part of that amount only.

(4)    If the respondent commences proceedings to have the judgment set aside, the respondent:

(a)    is not, in those proceedings, entitled:

(i)    to bring any cross-claim against the claimant, or

(ii)    to raise any defence in relation to matters arising under the construction contract, or

(iii)    to challenge the adjudicator’s determination, and

(b)    is required to pay into the court as security the unpaid portion of the adjudicated amount pending the final determination of those proceedings.

153    Finally, s 32 of the State Act provides:

(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.

154    It will be noted that s 25 confines the operation of an adjudication certificate as a judgment (when filed) to the unpaid portion of the adjudicated amount. Section 32(3) directs that in any (civil) proceedings in relation to any matter arising under a construction contract any amount paid must be allowed for and permits restitution of any such amount if appropriate. In this way the statutory scheme seems to confine its intended operation to the establishment of an administrative procedure concentrated upon the timely recovery of claimed, upheld and unpaid “progress payments”, without any payment made in response to a claim or an adjudication becoming legislatively fixed, unreviewable or irrecoverable in due course. The scheme bears all the hallmarks of an administrative arrangement for a speedy adjudication which will operate without prejudice to ultimate legal rights and, to the extent necessary, on an interim basis.

155    The statutory scheme established by the State Act has received judicial attention. In Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385, Handley JA (with whom Santow JA and Pearlman A-JA agreed) said, of s 32 of the State Act (at [21]–[22]):

21    Subsection (1) provides that Pt 3 of the Act (s 13–s 32), does not affect the rights of any party under a construction contract. Subsection (2) is particularly important because it relevantly provides that nothing done under, or for the purposes of Pt 3, affects any civil proceedings arising under a construction contract. Finally, subs (3)(b) makes a judgment entered under s 25 on an adjudication certificate provisional only, both in what it grants and in what it refuses. 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. Compare Toubia v Schwenke (2002) 54 NSWLR 46 at 50. 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.

[Emphasis added].

156    In Roseville Bridge Marina Pty Ltd v Bellingham Marine Australia Pty Ltd [2009] NSWSC 320, Brereton J said (at [55]–[56]):

55    ... Under the Act, the statutory rights are adjudicated only on an interim basis, and as such supplement the rights of the parties under the general law. Not only are consecutive proceedings under the Act and the general law permissible, but statutory proceedings need not be completed before curial proceedings are commenced, and a builder is entitled to pursue concurrently its statutory and common law remedies, subject to the limitation that the Act contemplates that a court will be free to undertake a final adjudication ...

56     That an adjudicator can determine (for the purposes of the adjudication) the contractual rights of the parties does not mean that the adjudicator exclusively can do so; s 32 makes clear that a court’s jurisdiction is unaffected, and plainly contemplates that the parties may resort to the Courts for the final determination of their rights under the construction contract, and that one of the remedies may be restitution of amounts paid as a result of an adjudication. In such proceedings, the Court gives effect to the legal and equitable rights of the parties to the construction contract, and the prior adjudication is of no moment — except that any progress payment must be brought to account, and restitution can be ordered of any amount which it is adjudged on a final basis ought not have been paid.

[Emphasis added].

157    I respectfully agree with the observations made in the preceding passages, which in my view represent an accurate statement of the effect of the statutory scheme.

158    However, the plaintiff alleges in the present proceedings that the whole of Part 3 of the State Act is invalid, or inoperative, and that ss 25 and 32 of the State Act, in particular, impose an impermissible fetter upon the power of this Court to deal with matters within its own jurisdiction.

159    The parties agreed that the following questions should be considered by the Court:

1.    Whether the plaintiff having invoked federal jurisdiction under ss 4(3)(f) and 9 of the Admiralty Act 1988 (Cth) and the Australian Consumer Law, that is not colourable, in these proceedings, the adjudication procedure under Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW) is inoperative and the adjudication procedure cannot be exercised.

2.    Whether Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW) impermissibly interferes with the institutional integrity of courts upon which the judicial power of the Commonwealth can be conferred and is thereby invalid.

3.    Whether ss 25 and 32 of the Building and Construction Industry Security of Payment Act 1999 (NSW) purport to withdraw from this Court the effective authority to quell any controversy, or part thereof, in respect of which federal jurisdiction is conferred by ss 4(3)(f) and 9 of the Admiralty Act 1988 (Cth).

4.    Whether ss 25 and 32 of the Building and Construction Industry Security of Payment Act 1999 (NSW) are applicable as a source of rights and remedies in federal jurisdiction under s 9 of the Admiralty Act 1988 (Cth) because they are picked up and applied as surrogate federal laws by reason of ss 79 and 80 of the Judiciary Act 1903 (Cth).

5.    Having regard to the answers to the above questions, should the interlocutory injunctions granted on 20 May 2011 as extended and varied on 14 June 2011 and on 17 June 2011 be continued.

160    In my view, for the reasons which follow, those questions should be answered as follows:

Question 1 – No.

Question 2 – No.

Question 3 – No.

Question 4 – Unnecessary to answer.

Question 5 – No.

Question 1

161    I see no conflict or inconsistency between the provisions of the State Act, or their operation in the present case, and the provisions or operation of either the Admiralty Act or the Australian Consumer Law. The State Act establishes an administrative procedure for claiming, determining and recovering progress payments. It does so, in my view, without disclosing any intention, or having any operative effect, of intruding upon the exercise of the jurisdiction of this Court or the exercise of federal judicial power generally, as to which I will say a little more hereunder. The provisions of the Admiralty Act which are relied upon involve an express grant of jurisdiction with respect to identified classes of legal controversy. To the extent that vindication of a suggested legal right, or an attempt to enforce a suggested legal obligation, might invoke the jurisdiction granted by the Admiralty Act, then a “federal matter” will have been identified. Similarly, proper invocation of rights given by the Australian Consumer Law will engage the exercise of federal judicial power. It may be accepted, having regard to the pleadings, that so much has occurred in the present case. However, neither the effective exercise of that jurisdiction (in whatever court it might have been invoked) or the effective exercise of the authority of this Court is affected by the provisions or operation (to date or potentially) of the State Act. Nothing done, or to be done, in the adjudication procedure will alter, impair or detract from, or should be seen as reflecting a legislative attempt to alter, impair or detract from, the exercise of the jurisdiction of this Court (see Victoria v The Commonwealth (1937) 58 CLR 618 at 630; see also Jemena Asset Management (3) Pty Ltd v Coinvest Limited (2011) 280 ALR 206; 85 ALJR 945).

Question 2

162    For the reasons already given, Part 3 of the State Act does not interfere with the institutional integrity of courts upon which the judicial power of the Commonwealth may be conferred. There is no attempt by the State Act to confer upon a relevant court a function incompatible with the exercise of federal judicial power. Neither is there, in my view, for the reasons given by the judgments in the New South Wales Supreme Court, to which I have referred, a basis for concluding that the exercise of judicial power by any court is affected by the procedures established by the State Act.

163    The argument of the plaintiff, relevant to this question, was also based on the premise that use of the judicial power of the Commonwealth was necessarily engaged by any legislative direction concerning, or legislative attempt to deal with, any aspect of a controversy or dispute falling potentially within the grant of jurisdiction made by the Admiralty Act. Correspondingly, it was argued, any such controversy was, without more, a federal matter. I do not accept those propositions.

164    To begin with, it is useful to bear in mind that a grant of jurisdiction to a particular court does not have the consequence that the jurisdiction thereby given is exclusive unless that is stated or necessarily implied. Under s 77 of the Constitution the federal Parliament may define the jurisdiction of federal courts (other than the High Court whose original and appellate jurisdiction is stated in ss 75 and 76 of the Constitution), define “the extent to which the jurisdiction of any federal court shall be exclusive of that which belongs to or is invested in the courts of the States” and invest State courts with federal jurisdiction. Section 38 of the Judiciary Act 1903 (Cth) states that the jurisdiction of the High Court shall be exclusive in relation to matters there identified, subject to s 39B and s 44 of the Judiciary Act. Section 39B of the Judiciary Act gives this Court jurisdiction with respect to a number of stated matters, including (in s 39B(1A)(c)) original jurisdiction “in any matter arising under any laws made by the Parliament …”. However, that jurisdiction is not thereby given to any extent to the exclusion of other courts. By s 39 of the Judiciary Act, State courts are also invested with federal jurisdiction in all matters in which the High Court has, or may be granted, original jurisdiction except insofar as the High Court’s jurisdiction is made exclusive by s 38, subject to some limitations not here relevant.

165    There are some areas in which the jurisdiction of this Court has been made exclusive. Some examples are, or were: s 81 of the Native Title Act 1993 (Cth); s 850 of the Workplace Relations Act 1996 (Cth) (as at 15 May 2008); s 154 of the Patents Act 1990 (Cth); s 27 of the Bankruptcy Act 1966 (Cth) (concurrently with the Federal Magistrates Court); s 191 of the Trade Marks Act 1995 (Cth).

166    This Court does not have exclusive jurisdiction to deal with the federal matters which now arise, and are the subject of the proceeding in this Court. The jurisdiction of this Court to deal with actions for misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) was once exclusive, but did not remain so. Its jurisdiction to deal with matters of that kind under the Australian Consumer Law is not exclusive. This Court also does not have exclusive jurisdiction under the Admiralty Act.

167    There is no case, therefore, to suggest that the jurisdiction of this Court is, in relation to the matters at issue between the parties in the present case, in any sense exclusive. More generally, the most that can be said in any particular case is that, in an appropriate set of circumstances, a controversy might reveal a federal matter, but that concept also must be approached with limitations in mind. First, it does not necessarily result in any form of exclusivity apart from the fact that the judicial power of the Commonwealth (and not of any State or Territory) will apply to the whole of the matter. Secondly, it is important to be able to identify that the judicial power of the Commonwealth has, in fact, been engaged.

168    For example, a claim on a contract which falls within a class identified in s 4 of the Admiralty Act may or may not be dealt with using the grant of jurisdiction under the Admiralty Act for that purpose. A notable exception is contained in s 14 of the Admiralty Act, which provides:

In a matter of Admiralty or maritime jurisdiction, a proceeding shall not be commenced as an action in rem against a ship or other property except as provided by this Act.

169    Exceptions of that kind apart, a contract claim may be commenced, and remain, outside federal jurisdiction if no step is taken which engages the judicial power of the Commonwealth. As Mason, Brennan and Deane JJ stated in Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 290:

… a court does not begin to exercise federal jurisdiction until a “matter” within ss. 75 or 76 is raised in the proceedings and … the federal jurisdiction then exercised by the court is co-extensive with the content of that “matter”.

170    In Australian Industry Group v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2002) 125 FCR 529, Goldberg and Finkelstein JJ pointed out (at [82]):

82    According to the Constitution the jurisdiction of federal courts, including the Federal Court of Australia, can only be invoked with respect to any of the matters mentioned” in ss 75 and 76: see s 77. “We need to recollect ... that a court does not begin to exercise federal jurisdiction until a ‘matter’ within s 75 or 76 is raised in the proceedings and that the federal jurisdiction then exercised by the court is co-extensive with the content of that ‘matter’”: Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 290 per Mason, Brennan and Deane JJ. Although the concept of “matter may be elusive, the following propositions are established by the cases. Central to the meaning of “matter is the need for there to be a justiciable controversy: Abebe v Commonwealth (1997) 197 CLR 510 at 523-524 and 585. The controversy must be about “some immediate right, duty or liability to be established by the determination of the Court: Re Judiciary and Navigation Acts (1921) 29 CLR 257 at 265. Without the right to bring a proceeding in respect of which there is a remedy, there can be no “matter”.

171    In any particular controversy, a matter within s 75 or s 76 of the Constitution may or may not be raised for attention. The mere potential for attention to such an issue does not suffice to actually engage the exercise of the judicial power of the Commonwealth.

172    Furthermore, not every aspect of every controversy need be addressed by the use of judicial power, whether the judicial power of the Commonwealth or any other judicial power. It is not outside the authority or legitimate function of a non-judicial body to come to a view about legal questions, or employ its own opinion about such matters in the discharge of its administrative or other functions, even if that results in the creation of a legally binding obligation under a statutory scheme. Such a process does not involve, or usurp, the exercise of judicial power and does not operate as a binding declaration of rights (see, for example, Re Cram; Ex parte Newcastle Wallsend Coal Co Pty Ltd (1987) 163 CLR 140 at 148–9, 155–6, 159–160).

173    There is no doubt that the controversy between the parties now requires the use of the judicial power of the Commonwealth, and that the use of that particular power, by which ever court it is exercised, will occur in a context that a federal matter is now involved. That is the consequence of the fact that the plaintiff has invoked rights and remedies arising under federal laws. It is not the consequence of the fact that it was merely open to the plaintiff to do so.

Question 3

174    My view about this question may be found in my observations about Question 1.

Question 4

175    In my view, it is not necessary to answer this question. First, the point has not yet been reached, under the procedures established by the State Act, for s 25 to have any application. Secondly, so far as s 32 is concerned, the only possible operation it may have at present is that there is no fetter upon the rights of any party, or any effect upon the proceedings commenced by the plaintiff in this Court.

176    In those circumstances, neither s 25 nor s 32 has any effective operation to which ss 79 and 80 of the Judiciary Act might apply.

Question 5

177    In my view, the injunctions should be dissolved. There is no longer any reason to suppose that preservation of the integrity of the Court’s processes requires further restraint to be imposed on any of the defendants.

Orders

178    I would answer the questions in the Special Case as I have indicated. In my view, the plaintiff should pay the costs of the defendants in the usual way.

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan.

Associate:

Dated:    13 October 2011