Argyle Services Pty Ltd v One Three Wilson Pty Ltd
[2019] VCC 1567
•4 October 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-19-04053
| ARGYLE BUILDING SERVICS PTY LTD (ACN 151 322 520) | Plaintiff |
| v | |
| ONE THREE WILSON PTY LTD (ACN 613 945 396) | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 September 2019 | |
DATE OF JUDGMENT: | 4 October 2019 | |
CASE MAY BE CITED AS: | Argyle Building Services Pty Ltd v One Three Wilson Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 1567 | |
REASONS FOR JUDGMENT
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Subject: Building Contract
Catchwords: Building Contract; validity of final 2 payment claims; whether provisions for recovery of payment claims “picked up” as part of statutory process or excluded by s48 of the Building and Construction Industry Security of Payment Act 2002
Legislation Cited: Building and Construction Industry Security of Payment Act 2002; A New Tax System (Goods and Services Tax) Act 1999; Interpretation of Legislation Act 1984
Cases Cited:SSC Plenty Road Pty Ltd v Construction Engineering (Aust) PtyLtd [2016] VSCA 11; Abacus Funds Management Limited v Davenport [2003] NSWSC 935; Saville v Hallmarc Construction Pty Ltd (2015) 47 VR 177; [2015] VSCA 318; Isis Projects Limited v Clarence Street Limited ([2004] NSWSC 222; Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd (2009) 26 VR 112; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106; Facade Treatment Engineering Pty Ltd v Brookfield Multiplex Constructions Pty Ltd [2015] VSC 41; Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2004] NSWSC 823; Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142; John Holland Pty Ltd v Coastal Dredging and Construction Pty Ltd [2012] QCA 150; Lean Field Developments Pty Ltd v E & I Global Solutions (Aust) Pty Ltd [2014] QSC 293; Transgrid v Walter Construction Group [2004] NSWSC 21; Leighton Contractors Pty Ltd v Campbelltown Catholic Club [2003] NSWSC 1103;
Judgment: 1. Summons dismissed.
2. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Silver | Noble Lawyers Pty Ltd |
| For the Defendant | Mr O. El-Hissi, Solicitor | Noh Legal Pty Ltd |
HIS HONOUR:
1 According to Mr Paritsi (affidavit sworn 28 August 2019), a construction manager for the plaintiff, Argyle Building Services Pty Ltd (“Argyle”), “Argyle is a construction company that specialises in medium-density, multi-unit residential projects”. (Paragraph 7)
2 On 10 November 2017, it entered into an agreement with the defendant for the construction of six apartments “over two levels with a single-storey basement at 13 Wilson Street, Brighton, VIC 3186”. (Paragraph 13)
3 Mr Paritsi said he understood the defendant to be “a special purpose vehicle, formed and registered primarily for the purpose of financing and carrying out the property development …”. (Paragraph 10)
4 The Building Contract, which is part of Exhibit PP1 to Mr Paritsi’s affidavit, provides for the person described as “the architect” to “administer the contract”. (Clause A8, page 38)
5 Schedule 1 of the contract named the architect as Jaime Antrobus. (Exhibit PP1, page 18) Part N of the contract contained the provisions for Argyle to be paid for its works. (Exhibit PP1, pages 68-69)
6 In acting as an assessor, valuer or certifier, the architect was said to act “independently and not as the agent of the owner [viz the defendant]”. (Exhibit PP1, page 38, A6.3)
7 Clause N6 under the heading “Certificates – Obligation to Pay”:
“1.The amount stated as owing in any certificate must be paid within the period shown in item 10 of schedule 1 after the delivery of the certificate and the tax invoice (if applicable).
2.The architect may issue a certificate for payment at any time up until the final certificate is issued.” (Exhibit PP1, page 68)
8 Clause N8 made specific provisions for circumstances in which the architect failed to issue certificates.
9 Schedule 1, Item 10 provided for payment for the value of works certified to be made within “14 calendar days”. (Exhibit PP1, page 20)
10 The parties have fallen into dispute over progress claims 19 and 20 made by Argyle.
11 Progress claim “019” was forwarded under cover of an email from Argyle to “Matthew Lee”. This document was copied to Mr Franek, a director of the defendant, One Three Wilson Pty Ltd (“Wilson”). (Paritsi affidavit, Clause 39, Exhibit PP1, page 89ff) The amount inclusive of GST sought was $116,964. (Ibid, 90)
12 Although the contract identified Mr Antrobus as being the architect for the purpose of administration of the contract, he was not in fact an architect and did not undertake the administration role provided for in the contract. (Paritsi affidavit, paragraphs 23-25)
13 The procedure which was in practice adopted was as follows:
“a. Argyle submits its payment claims to Wilson directly (to Mr Franek).
b.Following this, Wilson conducts an assessment, often including a site walkthrough by Wilson and Argyle in conjunction with Henry Riley, a quantity surveyor engaged by Wilson and acting on behalf of Wilson's financier. National Australia Bank (NAB).
c.On some occasions, a "certificate" is issued by the quantity surveyor, after which payment is made according to the amount shown on the certificate.
d.On other occasions, no "certificate" is issued, and in each of those cases, payment has been made according to the amount claimed.” (paragraph 26)
14 Argyle commenced work on or about 21 November 2017 and, until 30 May 2019, submitted and was paid for some 18 progress claims. (Paritsi affidavit, paragraphs 27-28)
15 In an email from Mr Franek to Mr Guardiani of Argyle dated 15 May 2019, Mr Franek said:
“…Henry Riley are engaged by the bank as independent assessors.
Quantity Surveyors are not required to answer or justify their position to any party other than the bank. Their report is not for your review or sign off.
This is the bank process.”
16 On 6 June 2019, Mr Carson of Henry Riley, provided “our assessment” to both Mr Franek of Wilson and Mr Guardiani of Argyle under cover of an email of 6 June 2019. (Exhibit PPI, page 92ff)
17 The value of the work the subject matter of progress claim 019 was set as $89,547.15 exclusive of GST. (Exhibit PP1, page 99) This equates to a certification of $98,501.87 inclusive of GST. (Paritsi affidavit, paragraph 40)
18 According to Mr Paritsi, neither the amount claimed by Argyle nor the amount certified by Henry Riley, whether inclusive or exclusive of GST, has been paid. Nor has any “payment schedule” been served by Wilson pursuant to the Building and Construction Industry Security of Payment Act 2002. I will turn to a detailed consideration of the provisions of that Act presently.
19 Under cover of an email dated 30 June 2019, addressed to Mr Caron of Henry Riley copied to Matthew Lee and Mr Franek, Argyle made claim 020 for an amount inclusive of GST of $43,252. (Exhibit PP1, pages 100-101)
20 No payment has been made of the amount claimed. (Paritsi affidavit, paragraph 46) Nor it seems has any certification or assessment been carried out by Henry Riley of that claim.
21 According to an affidavit sworn 17 September 2019 by Mr Franek of Wilson with respect to both disputed claims, no tax invoice had been issued by Argyle. (Franek affidavit, paragraph 25, 29)
22 Mr Franek referred to clause N8.1 of the contract which, it will be recalled, dealt with the circumstance where the architect for the contract failed to issue a certificate and required the contractor (viz Argyle) to:
“issue a notice in writing to the owner, [Wilson] copied to the architect, requesting [Wilson] to ensure the architect issues the certificate within 5 working days after the notice is delivered.” (Franek affidavit, Clause 7, paragraph (i))
23 According to Mr Franek, following a series of contractual notices relative to breach and suspension given by Wilson, “by reason of Argyle’s failure to reach practical completion in accordance with the Contract” Wilson ultimately issued a Notice of Termination terminating the contract on 26 August 2019. (Franek affidavit, paragraphs 37-46)
This proceeding
24 On 28 August 2019, solicitors acting for Argyle commenced this proceeding by an Originating Motion. The substantive relief sought was payment of $160,216, comprised of $116,964 with respect to payment claim 19, and $43,252 with respect to payment claim 20. There was also an application for the payment of interest and for an order directing the defendant to open a trust account for the benefit of Argyle with a deposit of $205,000 together with ancillary relief. On the same day, a Summons seeking substantially the same relief was filed in the proceeding commenced by the Originating Motion.
25 At the hearing before me, the relief sought was restricted to payment of the amounts claimed under the two nominated progress claims and ancillary relief.
Statutory framework
26 In enacting the Building and Construction Industry Security of Payment Act 2002, on the basis of which the present proceeding has been brought, the Victorian Parliament stated:
“1The main purpose of this Act is to provide for entitlements to progress payments for persons who carry out construction work or who supply related goods and services under construction contracts.”
27 In establishing its own special regime for the recovery of progress payments, the statute enacts:
“47(2) Nothing done under or for the purposes of this Part affects any proceedings arising under a construction contract (including any arbitration proceedings or other dispute resolution proceedings), whether under this Part or otherwise, except as provided by subsections (3) and (4).”
This section is found within Part 3 of the Act “Procedure for Recovering Progress Payments”. Determinations made under the Act may be revisited in ordinary contractual proceedings between the parties, with amounts awarded under the statute susceptible of restitutionary reversal. The statute establishes a regime of “pay now, litigate later”.
Section 47(3) provides:
“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, determination 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.”
28 Section 5 of the Act provides a detailed definition by way both of inclusions and exclusions of the phrase “construction work”. Neither party suggested that the work in question here did not fall within that phrase as defined.
29 The entitlement to progress payments referred to in the introductory purpose section of the Act is provided for in s9, which states as follows:
“(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 under this Act, calculated by reference to that date.
(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—
(i)a date on which a claim for a progress payment may be made; or
(ii)a date by reference to which the amount of a progress payment is to be calculated—
in relation to a specific item of construction work carried out or to be carried out or a specific item of related goods and services supplied or to be supplied under the contract; or
(b)subject to paragraphs (c) and (d), if the contract makes no express provision with respect to the matter, the date occurring 20 business days after the previous reference date or (in the case of the first reference date) the date occurring 20 business days after—
(i)construction work was first carried out under the contract; or
(ii)related goods and services were first supplied under the contract; or
(c)in the case of a single or one-off payment, if the contract makes no express provision with respect to the matter, the date immediately following the day that—
(i)construction work was last carried out under the contract; or
(ii)related goods and services were last supplied under the contract; or
(d)in the case of a final payment, if the contract makes no express provision with respect to the matter, the date immediately following—
(i)the expiry of any period provided in the contract for the rectification of defects or omissions in the construction work carried out under the contract or in related goods and services supplied under the contract, unless subparagraph (ii) applies; or
(ii)the issue under the contract of a certificate specifying the final amount payable under the contract a final certificate; or
(iii)if neither subparagraph (i) nor subparagraph (ii) applies, the day that—
(A)construction work was last carried out under the contract; or
(B)related goods and services were last supplied under the contract.
30 Section 10, headed “Amount of progress payment” provides inter alia:
“(1) The amount of a progress payment to which a person is entitled in respect of a construction contract is to be—
(a)the amount calculated in accordance with the terms of the contract; or
(b)if the contract makes no express provision with respect to the matter, the amount calculated on the basis of the value of—
(i)construction work carried out or undertaken to be carried out by the person under the contract; or
(ii)related goods and services supplied or undertaken to be supplied by the person under the contract—
as the case requires.
…”
31 As to the valuation of construction work, s11 provides inter alia:
“(1) Construction work carried out or undertaken to be carried out under a construction contract is to be valued—
(a)in accordance with the terms of the contract; or
(b)if the contract makes no express provision with respect to the matter, having regard to—
(i)the contract price for the work; and
(ii)any other rates or prices set out in the contract; and
(iii)if there is a claimable variation, any amount by which the contract price or other rate or price set out in the contract, is to be adjusted as a result of the variation; and
(iv)if any of the work is defective, the estimated cost of rectifying the defect.
…”
32 As to the date when such progress payments are due, s12 provides:
“(1) A progress payment under a construction contract becomes due and payable—
(a)on the date on which the payment becomes due and payable in accordance with the terms of the contract; or
(b)if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made under Part 3 in relation to the payment.
…”
33 The statute contemplates that building contractors and others claiming to be remunerated for construction work may serve payment claims which, if served in accordance with the statute, create a liability to pay the amount claimed in the absence of service of what the statute describes as a payment schedule. Sections 14 and 15 provide:
“14 Payment claims
(1)A person referred to in section 9(1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.
(2)A payment claim—
(a)must be in the relevant prescribed form (if any); and
(b)must contain the prescribed information (if any); and
(c)must identify the construction work or related goods and services to which the progress payment relates; and
(d)must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount); and
(e)must state that it is made under this Act.
(3)The claimed amount—
(a)may include any amount that the respondent is liable to pay the claimant under section 29(4);
(b)must not include any excluded amount.
(4)A payment claim in respect of a progress payment (other than a payment claim in respect of a progress payment that is a final, single or one-off payment) may be served only within—
(a)the period determined by or in accordance with the terms of the construction contract in respect of the carrying out of the item of construction work or the supply of the item of related goods and services to which the claim relates; or
(b)the period of 3 months after the reference date referred to in section 9(2) that relates to that progress payment—
whichever is the later.
(5)A payment claim in respect of a progress payment that is a final, single or one-off payment may be served only within—
(a)the period determined by or in accordance with the terms of the construction contract; or
(b)if no such period applies, within 3 months after the reference date referred to in section 9(2) that relates to that progress payment.
(6)Subject to subsection (7), once a payment claim for a claimed amount in respect of a final, single or one-off payment has been served under this Act, no further payment claim can be served under this Act in respect of the construction contract to which the payment claim relates.
(7)Nothing in subsection (6) prevents a payment claim for a claimed amount in respect of a final, single or one-off payment being served under this Act in respect of a construction contract if—
(a)a claim for the payment of that amount has been made in respect of that payment under the contract; and
(b)that amount was not paid by the due date under the contract for the payment to which the claim relates.
(8)A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
(9)However, subsection (8) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim if the amount has not been paid.
15 Payment schedules
(1)A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.
(2)A payment schedule—
(a)must identify the payment claim to which it relates; and
(b)must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount); and
(c)must identify any amount of the claim that the respondent alleges is an excluded amount; and
(d)must be in the relevant prescribed form (if any); and
(e)must contain the prescribed information (if any).
(3)If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment.
(4)If—
(a)a claimant serves a payment claim on a respondent; and
(b)the respondent does not provide a payment schedule to the claimant—
(i)within the time required by the relevant construction contract; or
(ii)within 10 business days after the payment claim is served;
whichever time expires earlier—
the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.”
34 Section 16 provides that when a payment schedule has been served and payment is not made, the claimant may recover the amount claimed from the respondent “as a debt due to the claimant, in any court of competent jurisdiction”. It is this jurisdiction which Argyle invokes, or purports to invoke, in this proceeding.
35 Section 17 says that if payment is not made by a respondent in accordance with the terms of the payment schedule, the unpaid portion may similarly be recovered “in any court of competent jurisdiction”.
36 Where a payment schedule indicates a payment less than the amount claimed, the claimant may seek an adjudication from an adjudicator under s18 of the statute.
37 Mr Silver, counsel for the plaintiff, contended that the two payment claims (19 and 20) constituted valid payment claims for the purposes of the statute and, no payment schedule or schedules having been served, his client was entitled to judgment for the relevant amounts. Section 48 prohibits parties from contracting out of the statute’s terms, providing –
“48 No contracting out
(1) The provisions of this Act have effect despite any provision to the contrary in any contract.
(2) A provision of any agreement, whether in writing or not—
(a) under which the operation of this Act is, or is purported to be, excluded, modified or restricted, or that has the effect of excluding, modifying or restricting the operation of this Act; or
(b) that may reasonably be construed as an attempt to deter a person from taking action under this Act—
is void.”
Contentions on behalf of the Defendant Wilson
38 Mr El-Hissi for the defendant, referred to the payment procedures stipulated in Part N of the relevant contract. He noted that these provisions authorised Argyle to submit a progress claim once a month on the 30th day of each month. He referred to clause 3.2(d) and Item 26 of Schedule 1 of the contract. He said the progress claim was required to set out:
(i) the necessary work completed;
(ii) materials and equipment delivered to the site for incorporation in the works provided that title had passed to Argyle;
(iii) the percentage of the contract price claimed.
39 This claim, he said, was not a tax invoice and had to be supported by a declaration that:
(i) all wages and other entitlements, including building industry superannuation and long service leave levies due at the date of the declaration had been paid to or on behalf of all employees of Argyle;
(ii) all monies due to subcontractors at the date of the declaration had been paid;
(iii) all insurances required to be maintained by Argyle were in force.
40 He said that the progress claim was to be assessed within ten working days after being received (clause N4.4), upon which the architect must issue a certificate as to the amount payable. He referred to clause N4.4 and the requirement that, following receipt of the certificate, the person entitled to payment, whether Argyle or Wilson, was obliged to deliver a tax invoice to the other party (he referred to clause N5.1). The obligation to make payment, he said, arose seven calendar days after delivery of the certificate and the tax invoice. He referred to Item 10 of Schedule 1 and clause N6.1.
41 Next, he referred to the special procedure required where the architect failed to issue a notice. He referred to clauses N8.1, N5.1 and N6.1.
42 He said that special procedures were required in the case of a final claim. He referred to clause N10.1, where a final claim could be made only when the defects liability period had ended, or defects had been rectified and finalised, and the works had been completed in accordance with the contract. Clause N11.1 required the architect to assess that claim, with money being payable either to Argyle or Wilson in accordance with the architect’s certificate. He referred to N12.1, with the amount being payable seven calendar days after delivery of the certificate and the tax invoice. He referred to clause N13.1.
43 Next, Mr El-Hissi noted that all the progress claims under the contract had been assessed by Henry Riley and the amounts certified therefore constituted “the amount calculated in accordance with the terms of the contract”. He referred to SSC Plenty Road Pty Ltd v Construction Engineering (Aust) PtyLtd [2016] VSCA 119 at [78], wherein the Victorian Court of Appeal adopted a statement by McDougall J, in Abacus Funds Management Limited v Davenport [2003] NSWSC 935.
44 He said, “It is therefore submitted that any assessment and certification by Henry Riley was, in the circumstances adopted by the parties throughout the duration of the Contract, [as] an assessment of the amount calculated in accordance with the terms of the Contract”.
45 The two claims, he said, were not in compliance with s14(2) of the Act. The special entitlements provided to claimants for remuneration for construction under the Act were, he said, dependant on strict observance of the statutory requirements. He referred to Saville v Hallmarc Construction Pty Ltd ((2015) 47 VR 177, 207 [80]; [2015] VSCA 318).
46 He said that s10(1)(a) of the Act provided that the amount of the progress payment was to be calculated in accordance with the terms of the contract. This, necessarily, required observance of the provisions of clause N of the contract.
47 He referred to the requirements of s14(2) as to the form of payment claim. As to progress claim 19, therefore, a tax invoice should have been issued which:
“… would have constituted a payment claim under s14(2) of the Act subject to it also satisfying s14(2)(a) and (b)” [that is, containing the prescribed information and identifying the construction work to which the progress payment related].
48 He said that progress claim 19 was not a tax invoice “and, therefore, not in the prescribed form as required by s14(2)(a) of the Act and clause N5 of the Contract.” Further, he said that in claiming amounts in excess of what had been certified by Henry Riley, Argyle was seeking amounts which were not calculated in accordance with the contract.
49 As to progress claim 20, he said, likewise, it was not in the form of a tax invoice and, therefore, not in the appropriate form, and did not include the prescribed information “as set out in clause N3.4 of the Contract”. It had not been assessed. Even if he were wrong on these matters, the claim, in the circumstances, needed to be treated as a final claim, and it had not been served in the manner stated by s14(5)(a) of the Act.
50 Since clause N6.1 of the contract provided that the amount stated to be owing in any certificate needed to be paid seven calendar days after the delivery of the certificate and the tax invoice, and one or, perhaps, both of these matters had not occurred, the amount claimed was not due and so the payment claim was not valid.
51 He said that on 2 August 2019:
“Wilson invited Argyle to submit a tax invoice and any supporting documentation required by the Contract for the purposes of a payment claim. Argyle has not availed itself of the opportunity but has instead issued this proceeding”.
52 Mr El-Hissi noted that s16(4)(a) of the Act, provided that a judgment was not to be given unless “the court is satisfied of the existence of the circumstances set out in s16(1).” On the evidence, and in light of the matters to which he referred, which are noted above, it said judgment could not be given in light of that provision.
53 The test, he said, should be “similar to the test in summary judgment applications”. He referred to Isis Projects Limited v Clarence Street Limited ([2004] NSWSC 222 per Einstein J). He noted that, in the proceeding before his Honour, the validity of the payment claim and the due date for payment were found to be “triable issues” and, therefore, the application for judgment was dismissed.
54 He contended the application should be dismissed. The gravamen of his contention was that, absent compliance with the terms of clause N of the contract for a claim, there was no amount “due and payable” as required by section 12(a) of the Act for there to be an effective statutory remedy.
Submissions on behalf of Argyle
55 Mr Silver said that, insofar as the word “prescribed” was to be found in s14 of the Act, it should be understood as prescribed by the Victorian Building Authority, not by the contract. He referred to a series of judgments of Vickery J who, he said, “was central in birthing the jurisdiction”. He referred to Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd (2009) 26 VR 112, 123-4 [53]; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 [139] and Facade Treatment Engineering Pty Ltd v Brookfield Multiplex Constructions Pty Ltd [2015] VSC 41 [26]-[27].
56 Mr Silver said that even although the claims in question were “cc’d” to Mr Franek of Wilson, they should nevertheless be treated as having been served by Wilson in accordance with the Act. The fact that they were primarily delivered to another person was beside the point.
57 Mr Silver took the contentions of Mr El-Hissi, on behalf of Wilson, to include the contention that Henry Riley’s certification for progress claim 19, should be treated as a payment schedule. In my survey of the Outline of Submissions made by Mr El-Hissi, this contention did not emerge self-evidently to me. Nevertheless, Mr El-Hissi did not disagree with Mr Silver’s interpretation of his submissions. Mr Silver said that the Henry Riley certification could not be regarded as a payment schedule.
58 Mr Silver contended that claim 20 could not properly be characterised as a final claim. He referred to the definition of such a claim at clause N10 of the contract, and that, despite the fact that it asserted “100 per cent completion is claimed”, the variations had not been dealt with. There was no attempt, in the circumstances, to have a final certificate issued by the architect, or some other certifying authority, or to recover retention amounts.
59 He said that a principal in receipt of a payment claim failing to provide a payment schedule, does so at his, her, or its peril.
60 Mr Silver said, “Liability for a payment claim does not require going through contractual hoops such as issuing a tax invoice”. He said, “the right to a tax invoice is not contractual, but statutory”. He referred to A New Tax System (Goods and Services Tax) Act 1999 (Cth), s29.70(2) which states: “The supplier of a taxable supply must, within 28 days after the recipient of the supply requests it, give to the recipient a tax invoice for the supply, unless it is a recipient created tax invoice”. This section, he said, indicates that provision of a tax invoice is not a condition precedent to payment of the price. Mr Silver said, requiring observance of the payment provisions in the contract as conditions precedent to liability for a progress claim under the statute would be inconsistent with s48(2) of the Act, which prohibits contracting out of its statutory provisions. The further formalities which Wilson contended needed to be observed had the effect of restricting the operation of the statute and were therefore void under that subsection. As to the operation of s48, he referred to the judgment of McDougall J, dealing with the corresponding section of the New South Wales Act, s34 in Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2004] NSWSC 823 at [40]-[43], and to his Honour’s extrajudicial statements in an article, “Prohibition or Contracting out of the Building and Construction Industry Security of Payment Act 1999 (NSW)” [2006] NSW Judicial Scholarship 6, page 3.
Conclusion
61 I can deal immediately with two subsidiary points made by Mr El-Hissi on behalf of Wilson. First, the reference in s14(1) to various matters “prescribed”, is a reference not to any provision in the contract. In accordance with s38 of the Interpretation of Legislation Act 1984, it means “prescribed by the Act in which the word is used or by a subordinate instrument made under or pursuant to that Act”. When I referred Mr El-Hissi to that provision, he did not persist with the submission. Secondly, if Mr El-Hissi is to be regarded as contending that with respect to a progress claim the Henry Riley certification is to be regarded as a payment schedule for the purposes of the Act, I reject that contention. Payment schedules are provided for in s15 of the Act, which states, “A person on whom the payment claim is served … may reply to the claim by providing a payment schedule to the claimant”. Granted that, in accordance with the procedure which, according to Mr Paritsi the parties adopted in the present case, Henry Riley could be regarded as a surrogate architect for the purposes of the contract, at least one vital requirement for a document to be a payment schedule is that it be a reply from the person on whom the claim is made, viz Wilson. There is nothing in the evidence which I have summarised earlier, relevant to Henry Riley’s role, which would support the view that, in giving its certification it was certifying on behalf of Wilson. Rather, in accordance with an email from Wilson clarifying the point, the certification was made on behalf of, and for the benefit of, National Australia Bank. Further, if in light of the manner of performance of the contract one is to regard the provisions of the contract as they refer to the `architect’ to be treated as speaking of Henry Riley, clause A6.3 (Exhibit PP1, page 38), provides: “the architect is the owner’s (viz Wilson’s) agent for giving instructions to the contractor. However, in acting as assessor, valuer or certifier, the architect acts independently and not as the agent of the owner”. This contractual provision, if it is to be deemed to be applicable to Henry Riley, specifically rebuts any contention that Henry Riley can be regarded as speaking on behalf of Wilson.
62 I now come to what is the central issue in dispute, namely, whether, in the events that have occurred, and on the proper construction of the contract, detailed provisions as to the steps to be taken under clause N of the contract, including the submission of tax invoices and the like, are to be regarded as “picked up” as part of the statutory process under the Act for the recovery of progress claims as contended by Wilson or, on the other hand, are to be regarded as not picked up at all, or excluded by s48 of the Act, as contended by Argyle.
63 In support of the view that s48 of the statute excludes these provisions for the purposes of recovery of progress payments under the Act, Mr Silver placed primary reliance on the judgment of McDougall J in Minister for Commerce v Contrax Plumbing [2004] NSWSC 823. The provisions in question before his Honour were to be found in clause 42 of the relevant contract. The provisions are set out at paragraph 7 of his Honour’s judgment as follows:
“Clause 42 dealt with payment. By cl 42.1, Contrax was given an entitlement to progress payments. In aggregate, progress payments were not to exceed the Contract Price. Clause 42.2 provided for the valuation of Progress Payments: either by reference to a method specified in ‘the Annexure’ or by reference to the Contract Price. The relevant provisions of cl 42 are as follows:
42 PAYMENT
Payment Claims and Payment Periods
The Contractor’s only entitlement to payment for carrying out work under the Contract is the Contract Price.
Prior to becoming entitled to the Contract Price, the Contractor can make payment claims. In aggregate, payment claims shall not exceed the Contract Price.
…
Amount of progress payments
If the amount of a progress payment or the method of valuing a progress payment is not specified in the Annexure, the progress payment shall be an instalment of the Contract Price which reflects the value of the work carried out by the Contractor in performance of the Contract to the end of the payment period to which the Progress Claim relates less:
[Amounts to be deducted were then specified]
…
In valuing work, regard shall not be had to the value of variations which value has not been included in the Contract Price.
…”
64 His Honour concluded that the no-contracting-out provision in the New South Wales Act rendered certain provisions of clause 42 invalid. See [47] of the judgment, where his Honour stated:
“It follows, in my judgment, that the following provisions of cl 42 are void under s 34:
(1) In cl 42.1, the sentence ‘In aggregate, payment claims shall not exceed the Contract Price’ in the second unnumbered and unlettered sub paragraph.
(2)In cl 42.2, the third unnumbered and unlettered sub paragraph, reading ‘In valuing work, regard shall not be had to the value of variations which value has not been included in the Contract Price’.”
65 The matter went on appeal to the New South Wales Court of Appeal [2005] NSWCA 142 and the court, consisting of Hodgson and Bryson JJA and Brownie AJA, unanimously dismissed the appeal from his Honour’s judgment. Hodgson JA was inclined to agree with the decision of the trial judge as to the operation of the no-contracting-out provision [51], though he found it unnecessary to reach a concluded view. Bryson JA said that he did “not join in Hodgson JA’s observations … to the effect that s34 invalidates some parts of clause 42 of the construction contract” [58]. Brownie AJA refrained from expressing an opinion on the point one way or another [51]. In his article on the operation of the prohibition on contracting out, McDougall J carried out calculations as to the number of days involved in completing the procedures under the statute and continued:
“These calculations show that, in general, the Act contemplates that a diligent claimant would only have to wait 15 business days before lodging an adjudication application and another 10 to 15 business days before receiving an adjudication determination. This figure of approximately 30 business days stands in stark contrast to the 200 days required for the working out of clauses 42 and 46 in Minister v Contrax. Even allowing for weekends and public holidays, the difference is huge”. (“Prohibition or Contracting out of the Building and Construction Industry Security of Payment Act 1999 (NSW)” [2006] NSW Judicial Scholarship 6, page 4)
66 Later, in the same article, his Honour said, with respect to clauses in building contracts requiring certification, was:
“… certainly arguable that such clauses may exclude, restrict or modify the operation of the Act and to the extent that they subordinate the adjudicator’s role to that of the superintendent [the contractual certifying officer in the cases to which he referred]. If the adjudicator is bound by a superintendent’s certification, the adjudication process is fruitless or futile … and a claimant would be reluctant to engage in it”. (Ibid, page 6)
67 In John Holland Pty Ltd v Coastal Dredging and Construction Pty Ltd [2012] QCA 150, clause 12.6 of a construction subcontract provided detailed requirements for the submission of a payment claim on John Holland as head contractor. It was contended that the decision given by an adjudicator was void because the subcontractor had failed to comply with some of the procedural requirements laid down for the making of subcontract payment claims. The court, Fraser and White JJA and Peter Lyons J, dismissed an appeal from a determination of the trial judge that the adjudication was not, for that reason, to be regarded as void. The leading judgment was given by Fraser JA, with whom White JA and Peter Lyons J concurred. Clause 12.6 of the relevant subcontract provided:
“‘…
The Subcontractor warrants and represents that if a Payment Claim does not comply with the conditions set out in this clause 12.6:
(h) that Payment Claim is void; and
(i) the Reference Date for the purposes of the Security of Payment Act shall be the same day on the following month.’”
68 At [21], Fraser JA said:
“The effect of the appellant’s argument is, therefore, that cl 12.6(h) and (i) operated to defer what otherwise would have been the respondent’s statutory entitlement to a progress payment from a reference date ascertained in accordance with the Act. The intended effect of cl 12.6(h) might be debatable, but cl 12.6(i) certainly purports to have that effect. It follows that it (and cl 12.6(h) if it would have a similar effect) is void as a provision that, in terms of s 99(2)(b) of the Act ‘purports to … modify … or otherwise change the effect of a provision of this Act, or would otherwise have the effect of … modifying, or otherwise changing the effect of a provision of this Act’”.
69 A similar issue came before Applegarth J in Lean Field Developments Pty Ltd v E & I Global Solutions (Aust) Pty Ltd [2014] QSC 293. This case concerned a dispute arising out of the supply of high voltage and fibre-optic cable in Central Queensland. The contractual obligations existing between the parties included provisions set out at clauses 33.7 and 33.8 of the documentation dealing, respectively, with draft payment claims. His Honour concluded that s99 of the Queensland Act – the contracting-out-provision:
“… renders “clauses 33.7 and 33.8 void to the extent they condition a ‘reference date’ under the Act and a statutory entitlement to a progress payment coming into existence. A reference date had arisen at the time the payment claim was made under the Act. As a result, the adjudicator had jurisdiction to determine the adjudication proceeding.” [111]
70 Applegarth J reasoned that the effect of these clauses was to create a condition precedent to the occurrence of a reference date which was inconsistent with the terms of the statute. His Honour said:
“… A contract which erects requirements which pre-condition the coming into existence of a reference date may be inimical to the Act and be invalided by s 99. To take an extreme example, a contract which provides that the date on which a claim for a progress payment may be made is 14 days after the contractor has finally jumped through 47 burning hoops may render the reference date illusory. It may be practically impossible to jump through so many hoops. The statutory entitlement to a progress payment, as contemplated by s 12, from each reference date would be effectively denied.” [33]
71 Later in the judgment, the learned judge referred to the same theme, saying:
“The authorities establish that contractual provisions which require, as it were, a contractor to jump through a number of hoops, failing which, a reference date that has arisen is deferred are invalidated. It might be observed that, on the applicant’s argument, whilst the Act does not permit a reference date that has arisen to be deferred until the hoops are jumped through, it permits a contract to provide that a reference date will not arise until the same hoops are jumped through. This curiosity or anomaly may simply be that. It may be, as Mr O’Shea QC who appeared with Mr May for the applicant submitted, that this curiosity follows from the wording of the Act. If this is so, then the curiosity or anomaly must be accepted, since it is not the function of a court to construct its own idea of a desirable policy and impute it to the legislature.” [65]
72 He continued:
“There is a distinction between two categories of case. The first is where a reference date has arisen and the contract purports to require a payment claim to meet certain conditions in making a payment claim or provides that if certain conditions are not met, the payment claim is ineffective and the reference date is deferred. In such a case, the statutory reference date is not conditional upon compliance with the condition, such as the delivery of a statutory declaration. Also the contract is ineffective to defer what would have otherwise been the contractor’s statutory entitlement to a progress payment from a reference date. The second category of case, and the one with which I am concerned, is where a reference date has not arisen because the contract purports to provide that no reference date will arise until certain conditions are fulfilled. Authorities about the first category of case do not determine what the position should be in the second category.”
(Footnotes omitted.)
73 After further analysis, his Honour said that the examples he considered indicated it was “impossible to say that provisions which condition the timing of a reference date for the purpose of the Act are necessarily valid or necessarily invalid”. [71] Therefore, he said, there was no “hard and fast rule about the validity of such conditions”. [72]
74 He concluded:
“The inquiry into validity requires the identification of the condition or conditions in the absence of which there would be a statutory entitlement to a progress payment. Even a condition which has some utility in a contractor making a payment claim and receiving a progress payment may be excessively onerous and be invalid because of its unjustified effect in denying a party what otherwise would be a statutory entitlement. A condition which has no significant utility in terms of the scheme created by the Act may be invalid, not because it is particularly onerous, but because it impedes a statutory entitlement without any corresponding benefit.” [76]
It will be seen that Applegarth J analysed the matters by reference to the effect of the terms of the contract upon the occurrence of reference dates which is not the manner in which Mr El-Hissi put his contentions. Ultimately, however, the issues considered by Applegarth J can be seen as going to the question whether moneys were due and payable in accordance with section 12(1).
75 One might have thought, at least in the context of the Victorian Act, that the question as to whether provisions such as the one under consideration, here, are avoided by s48(2), would turn upon whether they attempted or purported to exclude, modify or restrict the operation of the Act or have that effect. Yet, according to the reasoning in the Lean Field Developments case, the question is whether conditions have “some utility” or are “excessively onerous” or “unjustified”. An analysis on these lines appears to inject and require the making of value judgements upon which reasonable minds may differ. Given that the statute is aimed at establishing speed and certainty in cash flow in the building and construction industry, it is difficult to see that requiring this sort of analysis advances such a policy. It seems calculated to enhance cash flow in the legal profession rather than the building and construction industry. Nevertheless, this approach has been adopted by court decisions of high authority. The extrajudicial analysis referred to earlier by McDougall J of the Supreme Court of New South Wales, similarly points up the complexity of analysis required in this area.
76 Turning, then, to the facts of the present case, the lack of a certification from Mr Antrobus or Henry Riley ought not to stand in the way of success for the plaintiff. As far as Mr Antrobus is concerned, the evidence would appear to suggest that the parties have abandoned the clause requiring certificates from him or varied their contract in the course of performance. Assuming that, in the circumstances, the present situation is one where the parties should be regarded as having agreed that a certification from Henry Riley constitutes a condition precedent to the making of a claim, for reasons given in Transgrid v Walter Construction Group [2004] NSWSC 21 and by Einstein J in Leighton Contractors Pty Ltd v Campbelltown Catholic Club [2003] NSWSC 1103 at [73], requiring certification by someone like Henry Riley or in those cases, “the superintendent” under a contract, would be inconsistent with the Act because it would subordinate the adjudicator’s role under the statute. See also the treatment of this issue by McDougall J in his article.
77 The issue of the tax invoice is in a different situation. Issuing tax invoices is not an onerous task. It scarcely ranks with leaping through flaming hoops or undergoing a process that would consume 200 days, rather than the statutory 15 or so. Given that the balance of authority and commentary suggests that a precondition which is not onerous and might serve some legitimate commercial interest, such as facilitating record-keeping by the principal or owner for tax purposes, it is difficult to see, in accordance with the principles which appear in the cases and the commentary, that this requirement should be regarded as struck down by s48(2). Once this conclusion is reached, it cannot be said with respect to either of the progress claims that the money was “due”, the contractual bar to recovery constituted by the provisions of clause N, in this respect, not being avoided. The claim, therefore, is not a valid one for the purposes of the Building and Construction Industry Security of Payment Act.
Disposition
78 The Summons is dismissed. Costs are reserved.
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