BRB Modular Pty Ltd v AWX Constructions Pty Ltd

Case [2015] QSC 218

SUPREME COURT OF QUEENSLAND

CITATION:

BRB Modular Pty Ltd v AWX Constructions Pty Ltd & Ors [2015] QSC 218

PARTIES:

BRB MODULAR PTY LTD
ACN 114 678 349

(applicant)

v
AWX CONSTRUCTIONS PTY LTD
ABN 118 400 098

(first respondent)
THE REGISTRAR (QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION)
(second respondent)

JORAM (JOHN) MURRAY
(third respondent)

FILE NO/S:

SC No 7073 of 2015

DIVISION:

Trial Division

PROCEEDING:

Originating application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

31 July 2015

DELIVERED AT:

Brisbane

HEARING DATE:

28 July 2015

JUDGE:

Applegarth J

ORDERS:

1.   The application be dismissed.

2.   The Registrar pay by cheque payable to the first respondent, AWX Constructions Pty Ltd, from the amount paid into the Court Suitors Fund by the applicant pursuant to an order made 22 July 2015:

a.   the sum of $3,935,707.39; and

b.   interest calculated at the daily rate of $833.95 from 24 July 2105 to the date on which the first respondent has received the money referred to in order 2(a) above.

3.   The Registrar pay by cheque payable to the applicant, BRB Modular Pty Ltd, the balance of the amount paid into the Court Suitors Fund by the applicant pursuant to an order made 22 July 2015, together with any accretions due.

4.   The applicant pay the first respondent’s costs of and incidental to the application on a standard basis, excluding the costs of and incidental to the interlocutory hearing on 22 July 2015  which remain reserved.

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT AND RECOVERY OF PROGRESS PAYMENTS – where the applicant seeks a declaration that an adjudication decision is void by reason of jurisdictional error and an injunction restraining a sub-contractor from giving effect to it – where applicant submits that no reference date accrued pursuant to Building and Construction Industry Payments Act 2004 (Qld) – where contract required submission of a statutory declaration before a payment claim could be made – where contract required the sub-contractor to depose that, to the best of its knowledge, all sub-contractors had been paid – where sub-contractor delivered a payment claim together with a statutory declaration in the prescribed form with the addition “other than those owed variations, payable by the head contractor” – where applicant submits that no reference date for the making of a payment claim arose as the declaration was not in the required form – whether the contractual condition is effective to exclude the sub-contractor’s statutory entitlement to make a progress claim under the Act

Building and Construction Industry Payments Act 2004 (Qld), ss 4, 16, 99
Building and Construction Industry Security of Payment Act 1999 (NSW), ss 13(7), 13 (9)
Subcontractors’ Charges Act 1974 (Qld), s 5

BHW Solutions Pty Ltd v Altitude Constructions Pty Ltd [2012] QSC 214, cited

Capricorn Quarries Pty Ltd v Inline Communication Construction Pty Ltd [2013] 2 Qd R 1; [2012] QSC 388, cited
De Neefe Signs Pty Ltd v Build1 (Qld) Pty Ltd; Traffic…

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Details
AGLC
BRB Modular Pty Ltd v AWX Constructions Pty Ltd [2015] QSC 218
Case
[2015] QSC 218
Decision Date

CaseChat Overview and Summary

In the case of BRB Modular Pty Ltd v AWX Constructions Pty Ltd, the applicant sought a declaration that an adjudication decision was void by reason of jurisdictional error and an injunction to prevent a sub-contractor from enforcing it. The dispute arose under a building contract where the applicant, BRB Modular Pty Ltd, sought to deny the sub-contractor, AWX Constructions Pty Ltd, a progress payment on the basis that the sub-contractor had not complied with a contractual requirement to submit a statutory declaration with its payment claim. Specifically, the sub-contractor had included an additional statement in its declaration which the applicant argued rendered it non-compliant with the contractual requirement.

The central legal issue before the court was whether the contractual precondition could effectively exclude the sub-contractor's statutory entitlement to make a progress claim under the Building and Construction Industry Payments Act 2004 (Qld). The court had to determine whether the contractual requirement concerning the form of the statutory declaration could deprive the sub-contractor of its statutory right to a progress payment under the Act.

The court ruled that the contractual precondition was ineffective. It found that the purpose of the Act is to ensure cash flow to qualifying contractors, and that contractual provisions which exclude or restrict the beneficial effect of the Act are inconsistent with its purpose. The court concluded that the provision in question, which required the sub-contractor to attest that all sub-contractors had been paid, did not facilitate the making or processing of claims under the Act but rather impeded its objectives by potentially depriving contractors of essential cash flow. The draconian consequences of such a provision, which could prevent contractors from receiving payments to which they are entitled under the Act, outweighed any benefits it might have in encouraging contractors to pay sub-contractors. Consequently, the court held that the adjudicator had jurisdiction to determine the sub-contractor's payment claim, and the application to set aside the adjudication decision was dismissed. The court further ordered that the Registrar pay certain sums to the sub-contractor and the applicant, and that the applicant pay the sub-contractor's costs of the application.

Orders

Orders of the court

1. The application be dismissed.

2. The Registrar pay by cheque payable to the first respondent, AWX Constructions Pty Ltd, from the amount paid into the Court Suitors Fund by the applicant pursuant to an order made 22 July 2015:

a. the sum of $3,935,707.39; and

b. interest calculated at the daily rate of $833.95 from 24 July 2105 to the date on which the first respondent has received the money referred to in order 2(a) above.

3. The Registrar pay by cheque payable to the applicant, BRB Modular Pty Ltd, the balance of the amount paid into the Court Suitors Fund by the applicant pursuant to an order made 22 July 2015, together with any accretions due.

4. The applicant pay the first respondent’s costs of and incidental to the application on a standard basis, excluding the costs of and incidental to the interlocutory hearing on 22 July 2015 which remain reserved.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

It is unnecessary to address another matter raised by AWX’s submissions to the effect that the statutory declaration met the requirements of cl 14.10.Conclusion The adjudicator had jurisdiction to determine AWX’s payment claim. BRB’s argument about jurisdictional error, namely that no reference date for the making of a payment claim under the Act had arisen because of non-compliance with cl 14.10, has not been established. The contractual precondition relied upon by BRB to deny AWX a progress payment under the Act was ineffective to prevent AWX from making its payment claim dated 28 January 2015 and to rely upon the reference date stated or worked out in the contract. The contractual provision has no real utility in advancing the purpose of the Act. Its content and practical operation has the effect of depriving a contractor in AWX’s position of a progress payment to which it would be entitled in the absence of that contractual provision. Such a contractual provision has the effect of excluding, modifying, restricting or otherwise changing the beneficial effect of the Act in conferring a statutory entitlement to a progress payment upon a contractor. By depriving a contractor of such a progress payment, the contractor (and, in turn, its creditors including sub-contractors) is deprived of an important cash-flow. The purpose of the Act is to ensure cash-flow to a party which qualifies for a statutory entitlement. The limited contractual freedom which the Act confers upon parties to agree certain matters, including the working out of a reference date under the contract, does not extend to the imposition of a contractual provision of the kind under consideration. Such a condition purports to exclude what would otherwise be a statutory entitlement to a progress payment. The practical operation of such a provision prevents cash flowing to a contractor. Rather than having utility in facilitating the making, processing and determination of claims made under the Act, the contractual provision impedes the objects of the Act. It is inconsistent with the purpose of the Act of ensuring cash-flow to such a contractor. Any benefits such a clause may have in encouraging a contractor to pay sub-contractors if it is able to do so before making a payment claim are outweighed by its draconian consequences in depriving a contractor (and, in turn, the contractor’s creditors including sub-contractors) of essential cash-flow. Encouraging a contractor to pay its sub-contractors, if it is able to do so, before itself making a payment claim, is desirable. But contractors who experience a temporary shortage of liquidity may be unable to pay their sub-contractors. The Act is intended to assist them to do so by providing a cash-flow from developers and head contractors for whom they have done work. A contractual provision which has the effect of stopping that cash-flow pursuant to what otherwise would be a statutory right, is contrary to the Act’s purpose. Whatever benefit such a provision has in the case of contractors who are able to pay their sub-contractors is outweighed by the consequences for contractors who are not able to do so. Depriving contractors of the cash-flow which the Act is intended to ensure harms contractors. It has incidental consequences for sub-contractors, other creditors and workers in the construction industry. To the extent the interests of those third parties should be taken into account in a case such as this, their interests are better served, in general, by the contractor being paid a progress payment, than by essential cash-flow being blocked.Orders

Ratio Decidendi

Legal Principle Established

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