Russell Consolidated Pty Ltd v Russell Noble Constructions Pty Ltd [2021] WASC 155

Tom French  |  Candice Lamb  |  Ljubica Petrovic

Key takeouts

A construction contract under which the developer charges its interest in the property, with due payment to the builder of all moneys that may become payable arising out of the subject matter of the contract, is broad enough to encompass a debt created by an adjudication determination under the Construction Contracts Act 2004 (WA) (CCA). If successful, this debt can be enforced as a security interest.

Facts

Trupalm Pty Ltd (developer) owed money to Russell Noble Constructions Pty Ltd (builder) and Russell Consolidated Pty Ltd (lender).

The developer’s debt to the builder arose from a contract for the construction of residential units in South Hedland, Western Australia.  Under the contract, the developer charged its interest in the units with due payment to the builder of all moneys that may become payable to the builder arising out of the subject matter of the contract.

The developer’s debt to the lender arose from a loan agreement which granted the lender a first registered mortgage over the residential units as security for the loan.

The builder obtained an adjudication determination against the developer under the CCA for the debt.  It sought to enforce it against the residential units which were already mortgaged to the lender.

The issue in dispute in the enforcement proceedings was whether the amount of the adjudication determination in the builder’s favour was secured by the charge given by the developer under the construction contract.

Decision

Curthoys J concluded that the amount of the adjudication determination was secured by the charge.

Two matters were considered: 

• the nature of an adjudication determination under the CCA; and
• whether the charge under the contract encompassed the debt created by the adjudication determination.

Curthoys J agreed with the builder and found that the debt owed by the developer to the builder resulting from the unpaid adjudication determination arises from the builder’s rights under the construction contract. The CCA provides no separate statutory payment system. Rather, it gives primacy to the parties’ agreed contractual payment regime.  It does not override the parties’ contractual rights but preserves them.  Curthoys J referred to the Second Reading Speech of the Construction Contracts Bill 2004 (Bill) which states that, ‘[the Bill] is based on enforcing the contract between the parties and does not introduce a separate, and possibly conflicting, statutory right to payment’.  Therefore, it is the contract, not the determination itself, that gives rise to the entitlement to the debt.

The builder argued that the contract was clearly broad enough to encompass the debt arising from the adjudication determination.