Canberra Drilling Rigs Pty Ltd v Haides Pty Ltd
[2018] ACTSC 282
•12 October 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Canberra Drilling Rigs Pty Ltd v Haides Pty Ltd |
Citation: | [2018] ACTSC 282 |
Hearing Date: | 9 May 2018 |
DecisionDate: | 12 October 2018 |
Before: | McWilliam AsJ |
Decision: | 1. The application is dismissed. 2. The plaintiff is to pay the first defendant’s costs. |
Catchwords: | BUILDING AND CONSTRUCTION – Building and Construction Industry (Security of Payment) Act 2009 (ACT) – validity of payment claim – whether work carried out under a contract such as to enliven the statutory regime – whether a second payment claim was served in respect of the same reference date under contract |
Legislation Cited: | Building and Construction Industry Security of Payment Act 1999 (NSW) |
Cases Cited: | Broadview Windows Pty Ltd v Architectural Project Specialists Pty Ltd [2015] NSWSC 955 |
Parties: | Canberra Drilling Rigs Pty Ltd (ACN 608 411 972) (Plaintiff) Haides Pty Ltd (ACN 158 994 257) (First Defendant) Max Tonkin (Second Defendant) |
Representation: | Counsel Mr D Weinberger (Plaintiff) Mr B Katekar (First Defendant) |
| Solicitors Chamberlains Law Firm (Plaintiff) WMG Legal (First Defendant) | |
File Number: | SC 493 of 2017 |
The plaintiff in this proceeding, Canberra Drilling Rigs Pty Ltd, is in the business of performing excavation and earthmoving works for commercial developments. In February or March 2016, it was engaged by an entity described as Core Building Group (Core) to perform piling and anchoring works for a multi-storey residential building development in Gungahlin, known as “Mezzo”.
The plaintiff in turn sub-contracted the first defendant, Haides Pty Ltd (Haides), to perform at least hard ground drilling and anchoring works for the Mezzo project. The contract was oral, and has given rise to a dispute between the plaintiff and Haides as to what work was to be performed under the contract, or alternatively, if all the work done was included as part of the contract, what price was to be paid for it.
By way of a broad summary only of the background to the dispute, Haides undertook anchoring and drilling work on the Mezzo site in April and May 2016 and served what may be described as the first payment claim dated 22 May 2016 for $165,000 under s 15(1) of the Building and Construction Industry (Security of Payment) Act 2009 (ACT) (SOPAct). The plaintiff paid $120,000 of that amount.
A year later, Haides did two more days of work at the Mezzo site at the request of Core, which the plaintiff says it did not know about. Haides then served a second payment claim dated 16 June 2017 on the plaintiff, which included not only the extra two days’ work, but piling work extending back to April and May 2016 and totalling a further $242,068.50, bringing the total outstanding amount claimed to $287,068.50.
On 1 September 2017, Haides then served a third payment claim (dated 31 August 2017) in the same amount as the second payment claim. The plaintiff has not paid any further sums in response to the service of either the second or third payment claim.
It is perhaps understandable that unexpectedly receiving a payment claim for such sum, the bulk of which was for work done more than a year before, may cause surprise and some dismay for the plaintiff. Enhancing that sense of grievance was no doubt the fact that the plaintiff did not include such additional sums in the quote it had provided to Core for the work to be undertaken on the Mezzo project, which formed the basis of the contract between Core and the plaintiff.
On 17 October 2017, having received no payment for the work the subject of the third payment claim, nor any payment schedule, Haides applied for adjudication of the third payment claim, in accordance with s 19(1)(b) of the SOP Act.
The second defendant, Mr Max Tonkin, was the adjudicator appointed. On 2 November 2017, the adjudicator issued a determination in which it determined that the plaintiff should pay the first defendant the sum of $284,057.50 inclusive of GST, plus interest and costs.
On 13 December 2017, the order was entered as a judgment in this Court.
On 15 December 2017, the plaintiff commenced judicial review proceedings, challenging the adjudicator’s decision of 2 November 2017. The adjudicator has filed a submitting appearance, save as to costs.
The Court’s power
Initially the Court’s jurisdiction was invoked pursuant to s 34B of the Supreme Court Act 1933 (ACT). The plaintiff sought an order that the adjudication decision be quashed or declared void.
However, following the hearing on 9 May 2018, an amended originating application was filed on 10 May 2018. Through the amendments, the plaintiff sought leave of the Court to appeal pursuant to s 43 of the SOP Act. The material parts of s 43 are as follows:
Judicial review of adjudication decision
(1) Except as provided for in this part, a court does not have jurisdiction to set aside or remit an adjudication decision on the ground of error of fact or law on the face of the decision.
(2)An appeal may be made to the Supreme Court on any question of law arising out of an adjudication decision.
(3)An appeal under subsection (2) may be brought by any of the parties to an adjudication decision—
(a)with the consent of the parties to the decision; or
(b)with the leave of the Supreme Court.
(4)The Supreme Court must not grant leave under subsection (3) (b) unless it considers that—
(a)having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of 1 or more parties to the adjudication decision; and
(b)there is—
(i) a manifest error of law on the face of the adjudication decision; or
(ii) strong evidence that the adjudicator made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of the law.
(5)The Supreme Court may make any leave which it grants under subsection (3)(b) subject to the applicant complying with any conditions it considers appropriate.
(6)On the determination of an appeal under subsection (2) the Supreme Court may by order—
(a)confirm, amend or set aside the adjudication decision; or
(b) remit the adjudication decision, …
…
The remaining parts of the section deal with remittal and amendment of the decision, and are immaterial to these proceedings.
The plaintiff also expanded the relief sought to include an injunction against the enforcement of the judgment obtained consequent upon the adjudicator’s decision, and that the judgment be set aside or alternatively be permanently stayed. This relief was considered necessary because Haides argued that as the adjudicator’s determination had now been registered as a judgment, the Court did not have power to go behind it and review the adjudication.
Master Mossop (as his Honour then was) gave detailed consideration to the authorities relevant to that question as part of considering an issue about whether the certificate being registered as a judgment created an issue estoppel in Denham Constructions project Company 810 Pty Ltd v Smithies & Anor; Denham Constructions Project Company 810 Pty Ltd v Risgalla & Anor [2014] ACTSC 169.
His Honour ultimately found at [40]:
…The acceptance or rejection of a document for filing is not an exercise of judicial power: Eastman v Higgins [2007] ACTSC 29 at [61], King v Higgins [2009] ACTSC 153 at [24]-[25]; Satchithanantham v National Australia Bank Ltd [2010] FCAFC 47 at [49]. Rather it is an administrative act. It therefore involved no binding determination of the status of the adjudication certificate and does not create an issue estoppel which would prevent a party contending that the adjudication decision was vitiated by jurisdictional error.
Similar reasoning may have applied to the question of whether an appeal could be brought in respect of a decision that had been registered as a judgment, although relevant to the resolution of that question is s 27(4)(a)(iii) of the SOP Act, the terms of which are set out in the next paragraph.
Further, by seeking, among other things, to set aside the judgment, s 27 of the SOP Act is enlivened, the relevant parts of which are in the following terms:
(1) An adjudication certificate may be filed as a judgment for a debt, and may be enforced, in any court of competent jurisdiction.
...
(4) If the respondent starts a proceeding to have the judgment set aside, the respondent—
(a)is not, in the proceeding, 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 decision; and
(b)is required to pay into the court as security the unpaid part of the adjudicated amount pending the final decision of the proceeding.
The plaintiff did not pay into Court the requisite security, and this was a matter raised at the hearing. The difficulty was that the issue only arose late in the proceedings and on one view, it only arose formally after the matter was heard, through the filing of the amended originating application with the additional relief.
Faced with those circumstances, the parties took what I understood to be a practical approach in this regard and preferred that the substantive issues that had been raised, and fully argued, be determined. The position may have been different if the amendments had been made at an earlier point.
Returning to the source of the Court’s power being invoked, notwithstanding that the heading to s 43 of the SOP Act refers to “judicial review”, it may be that the words in s 43(1) purport to oust the Court’s inherent power of judicial review or the statutory jurisdiction under s 34B of the Supreme Court Act 1933 (ACT), instead creating a statutory right of appeal. The wording of the section appears to be unique to the SOP Act, in that there is no statutory equivalent in other jurisdictions. The issue would have squarely arisen for consideration if the plaintiff had not amended the application to bring the proceedings under s 43 of the SOP Act, as an alternative.
The question remains relevant to the application as amended, because if the section does limit the source of the Court’s power only to the remedies under s 43 of the SOP Act, then s 43 does not confer any power to grant declaratory relief, which was part of the relief sought by the plaintiff.
However, my findings below mean that it is unnecessary to embark upon any detailed consideration of the language of s 43 of the SOP Act for the purpose of resolving the present dispute.
As to the question of leave itself, this issue was also only formally raised by the belated amendments to the originating application after the substantive hearing. As the issues raised by the plaintiff are all issues of law and have been fully argued, I considered it appropriate to determine the substantive grounds first, with the question of leave rising or falling with the merit of the grounds. Again, that course was only taken because of how the proceedings developed.
Grounds of complaint
The plaintiff put its grounds of review/appeal in six different ways, variously arguing:
(a)The decision did not comply with the basic and essential requirements the Act, including to act in good faith.
(b)The requirements of ss 10(1) and 15(4) of the Act were not bona fide addressed.
(c)The adjudicator misconstrued ss 10(1) and 15(4) of the Act, which was a jurisdictional error.
(d)The adjudicator erred in finding that destressing works on the anchors and jackhammering works, carried out on 31 May 2017 and 1 June 2017 were works for which Haides was entitled to claim payment pursuant to s 15(1) of the Act, which was a jurisdictional error.
(e)The adjudicator misapprehended his functions and powers under the Act, which was a jurisdictional error.
(f)The adjudicator failed to carry out the task that the Act required to be carried out in the manner the Act required it to be carried out, thereby failing to exercise the jurisdiction conferred on him by the Act.
It transpired that the above grounds overlapped and the plaintiff ultimately refined the issues in written and oral argument, submitting that the decision was “void”, for four reasons. First, the work carried out on 31 May 2017 and 1 June 2017 was not work carried out under the contract between the plaintiff and the Haides. The work undertaken by Haides on those days was separate to the contract, not discussed with the plaintiff at all, and requested by Core, not the plaintiff.
If the Court finds, contrary to that first argument, that the work had been carried out for the plaintiff under the contract, there are three further arguments:
(a)The second and third payment claims were made in respect of the same reference date, in contravention of s 15(5) of the Act.
(b)The same work was claimed in both the first payment claim and the third payment claim, in further contravention of s 15(5) of the Act.
(c)The third payment claim was not a valid payment claim because it was for works for which Haides was not entitled to claim payment, insofar as the third payment claim covered works undertaken on 31 May and 1 June 2017. Accordingly, the third payment claim was not a valid payment claim due to the time limit stipulated in s 15(4)(b) of the Act.
These four arguments form the issues for the appeal.
Statutory framework
It is appropriate to start with the object of the SOP Act. It is contained in s 6 as follows:
Object of Act
(1)The object of this Act is to ensure that a person is entitled to receive, and is able to recover, progress payments if the person—
(a) undertakes to carry out construction work under certain construction contracts; or
(b) undertakes to supply related goods and services under certain construction contracts.
(2)In particular, this Act—
(a)grants an entitlement to a progress payment for construction work, whether or not a construction contract provides for progress payments; and
(b)establishes a recovery procedure for construction work progress payments.
In Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69, 74 NSWLR 190 (Dualcorp), speaking of the statutory equivalent in New South Wales, the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW Act), Macfarlan JA stated at [28]-[29]:
The Act provides a mechanism by which a person who undertakes construction work is able to obtain progress payments, even if the construction contract does not provide for them to be made. The procedure for obtaining a progress payment involves the making of a payment claim, the provision of a Payment Schedule by the person on whom the claim is made, the referral of any disputed claim to an adjudicator for determination and the payment of the progress payment determined to be payable.
The procedure is plainly one designed to facilitate the speedy making and payment of progress claims and, where necessary, the speedy resolution of any disputes.
As seen from the object in s 6 of the SOP Act and the provisions that follow, these observations as to the purpose of the statutory scheme apply equally to the statutory framework created by the SOP Act in the Territory.
Section 15 outlines the necessary conditions for a payment claim for a progress payment. It provides:
(1)A person who is or who claims to be entitled to a progress payment under section 10 (1) (the claimant) may give a claim (a payment claim) to the person who, under the construction contract concerned, is or may be liable to make the payment (the respondent).
(2)A payment claim must—
(a) identify the construction work or related goods and services to which the progress payment relates; and
(b) state the amount of the progress payment that the claimant claims is payable (the claimed amount); and
(c) state that it is made under this Act.
(3)The claimed amount may include any amount—
(a) that the respondent is liable to pay the claimant under section 29 (3); or
(b) that is held under the construction contract by the respondent and that the claimant claims is due for release.
(4)A payment claim may be given only before the later of—
(a) the end of the period worked out under the construction contract; and
(b) the end of the period of 12 months after the construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied.
(5)A claimant must not give more than 1 payment claim for each reference date under the construction contract.
(6)However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.
The section refers to work done “under a construction contract”. Construction contract is defined broadly in the Dictionary to the SOP Act as:
…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.
The use of the word “arrangement” broadens the scope of application of the SOP Act to include multi-party arrangements, including circumstances where a third party arranges for a claimant to undertake work on the basis that a different party will be liable to make payment: see Levadetes Pty Ltd v Iberian Artisans Pty Ltd [2009] NSWSC 641 at [50]-[51].
For s 15 of the SOP Act to be enlivened, there needs to be at least a claimed entitlement to a progress payment. That directs attention to s 10 of the SOP Act, which is in the following terms:
Right to progress payments
(1)On and from each reference date under a construction contract, a person is entitled to a payment (a progress payment) if the person has undertaken, under the contract, to—
(a)carry out construction work; or
(b)supply related goods and services.
(2)A progress payment may include—
(a)the final payment for construction work carried out, or for related goods and services supplied, under a construction contract; or
(b)a single or one-off payment for carrying out construction work, or for supplying related goods and services, under a construction contract; or
(c)a milestone payment.
(3)In this section—
milestone payment means a payment that is based on an event or date.
reference date, for a construction contract, means—
(a)a date stated in, or worked out under, the contract as the date when a claim for a progress payment is to 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 does not provide a date mentioned in paragraph (a)—
(i) the last day of the calendar month in which the construction work was first carried out, or the related goods and services were first supplied, under the contract; and
(ii) the last day of each subsequent named month.
NoteCalendar month—see the Legislation Act, dictionary, pt 1.
From the opening words of that section “on and from each reference date”, it can be seen, that the existence of a reference date is what triggers the entitlement. Thus, a valid reference date is a precondition to the right of a claimant to make a progress claim: Southern Han Breakfast Point Pty Ltd (in liquidation) v Lewence Construction Pty Ltd [2016] HCA 52; 260 CLR 340 (Southern Han) at [2], [47] and [61] per Kiefel, Bell, Gageler, Keane and Gordon JJ (delivered a month before Kiefel J was sworn in as Chief Justice). Whilst this judgment was concerned with the equivalent provision in the NSW Act, the proposition is equally applicable to the Territory as the same statutory language in s 10 of the SOP Act is used.
With regard to the reference date, par (b) of the definition in s 10(3) of the SOP Act is the applicable provision in the present case, as the contract was oral and there was no date stated for when a claim for a progress payment is to be made.
Section 38 is also relevant to the resolution of the first issue. It is in the following terms:
(1)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 3 (Right to progress payments) in relation to the contract; or
(c)may have apart from this Act for anything done or omitted to be done under the contract.
(2)Nothing done under this part affects any civil proceeding arising under a construction contract, whether under this part or otherwise, except as provided by subsection (3).
(3)In any proceeding before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal—
(a)must in any order or award it makes in the proceeding, take into account any amount paid to a party to the contract under or for the purposes of this part; and
(b)may make the orders it considers appropriate for the restitution of any amount so paid, and any other orders it considers appropriate, having regard to its decision in the proceeding.
Importantly then, the SOP Act does not limit any other entitlement that a claimant may have under a construction contract, or any other remedy that a claimant may have for recovering any such other entitlement.
In Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd [2005] NSWCA 49; 62 NSWLR 385, Handley JA (with whom Santow JA and Pearlman AJA agreed), that a judgment entered pursuant to the provisions of the NSW Act (in the case here, pursuant to s 27(1) of the SOP Act), was effectively a provisional judgment, both in what it grants and what it refuses. His Honour added (at [21]):
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.
Handley JA observed at [22] that the common law does not permit inconsistent judgments, but this may be sanctioned by statute. Referring to that observation in Shellbridge Pty Ltd v Rider Hunt Sydney Pty Ltd [2005] NSWSC 1152, Barrett J reiterated (at [38]) that the statutory context is one in which inconsistent judgments are both contemplated and allowed, stating at [39]:
These points should be borne in mind by principals or proprietors who consider themselves to have good claims in contract or on other grounds outside the Act and, at a first stage, suffer an adverse determination by an adjudicator involving a modest sum. The consequences the Act produces go, in commercial terms, to matters of cash flow and credit risk without definitive and final creation of legal rights. …
In short, the statutory scheme has an overall objective and process of ‘pay now, argue later’: see Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151; 95 NSWLR 82 (Probuild) at [102] and the cases there-cited. It is designed to let the money flow to the sub-contractors while building and construction projects continue, in some cases over years. If it is later found that the claimant was not entitled to the payment, either because someone else was liable to pay for the work, or the work was defective, or the amounts charged were not the terms of the contract, the amount paid under the SOP Act can be paid back or otherwise taken into account.
The evidence
Mr Dale Gaffey, sole director of the plaintiff, gave evidence by way of two affidavits affirmed 15 December 2017 and 19 April 2018. Mr John Tziaprazis, head operations manager of Haides, gave evidence for Haides by affidavit affirmed 27 February 2018. Neither were cross-examined and the question of whether the affidavits – all of which were affirmed after the adjudicator’s decision – were admissible on an appeal, or even on judicial review, was not traversed.
The parties’ affidavit evidence set out competing versions of the conversations between the two gentlemen in January/February 2016, which were alleged to form the oral contract to perform the work in question. The two agreed that the contract included anchoring works.
However, Mr Gaffey said there was no mention of any separate or additional charge for destressing of the anchors, or for pile preparation, which entails cutting of the strands of the anchor back into the pile to enable the pile to be patched. He says he knows he did not agree to any rates for piling preparation and de-stressing, as it would have meant that the plaintiff would have lost money on the Mezzo project.
Whatever the terms of the contract, Mr Gaffey’s evidence was that the de-stressing of the anchors on the Mezzo site, pile preparation and other jackhammering works carried out on 31 May and 1 June 2017 were not works he instructed Mr Tziaprazis to perform, or that he even knew about.
Mr Tziaprazis, on the other hand, deposed to de-stressing works as being an integral part of the installation of the anchors, and his evidence was that he did discuss the separate pricing for de-stressing the anchors and pile preparation.
Mr Gaffey and Mr Tziaprazis were also at odds as to what work was carried out, whether the average length of the anchors increased or decreased, and what level of involvement Mr Gaffey had in the supervision of his contractor. The evidence of Mr Tziaprazis was that a representative from Core signed off on his daily records and provided instructions to him as to the works because Mr Gaffey was often not on site. Further, Mr Gaffey was the person who instructed him to take direction from a representative from Core if he was not on site. Mr Gaffey denied that have gave any such direction.
The payment claims
Given the issues raised, it is important to understand the nature of the work listed in the schedules to each payment claim.
The first payment claim, dated 22 May 2016, was issued for $165,000 including GST. The schedule accompanying the claim is entitled “anchoring progress invoicing”. It is a one page document indicating that the amount charged was for work completed by Haides over the period 10 May to 21 May 2016. The itemisation lists anchor establishment on 10 and 21 May 2016, and drilling and installation of the anchors on consecutive days in the period.
The second payment claim, dated 16 June 2017, claimed $287,068.75 including GST. There were two schedules attached to this claim:
(a)An “anchoring progress invoicing” schedule for $177,680.25, which comprised $165,000 for the work previously included in the first payment claim (of which $120,000 was recorded on the payment claim as having been paid), and then an additional $12,680.25 (including GST) for the destressing and jackhammering work on 31 May and 1 June 2017.
(b)A “piling progress” schedule totalling $229,388.50 including GST, for rock drilling conducted in medium and hard strength rock over 5 April – 3 May 2016, and pile preparation 1 June 2017.
The third payment claim was in terms identical to the second payment claim. The difference was that the date of the third payment claim was 31 August 2017.
The adjudicator’s decision
The findings of the adjudicator, published on 2 November 2017, may be summarised as follows:
(a)The payment claim was made under a contract for piling and anchoring works in relation to a residential development at Gungahlin. The plaintiff, a subcontractor on the project, engaged Haides as a sub-subcontractor. Having regard to the meaning of s 7 of the SOP Act, the contract was a construction contract for the purposes of the Act.
(b)The third payment claim had a reference date of 31 August 2017.
(c)Construction work comprising de-stressing of the anchors was carried out on 1 June 2017. On that basis, the adjudicator was satisfied that the payment claim was made within the time period required under s 14(4) of the SOP Act.
(d)The third payment claim complied with the requirements of s 14(2) of the SOP Act.
(e)Haides had complied with the service and notification requirements in the SOP Act for both the payment claim and the application for adjudication.
(f)No payment schedule was served by the plaintiff within the period required under s 16 of the SOP Act. Accordingly, the third payment claim was ‘uncontested’ and Haides was not entitled to lodge an adjudication response by the operation of the provisions of the SOP Act.
(g)In terms of the quantum of the claim, the adjudicator accepted the quantities and rates claimed for anchors, rig establishment, piling in hard rock and pile preparation for patching.
(h)The adjudicator also accepted the rates claimed, but not the quantities, for anchor de-stressing and piling in medium strength rock. The adjudicator allowed de-stressing of 88 anchors, not the 92 anchors that had been claimed. Further, after comparing the amount claimed with the daily record sheet submitted by Haides, the adjudicator also reduced the quantities for piling in medium strength rock. The adjudicator found that 11.8m of medium rock had been over-claimed. This reduced the sum claimed to $284,057.50 which became the adjudicated amount.
First issue: whether work performed ‘under the contract’
Any determination made on the basis of a payment claim that the claimant had not been entitled to make is void for lack of jurisdiction. Unless a payment claim is made answering the description in the Act, there can be no adjudication application and, hence, no adjudication: Southern Han at [44].
Applying that principle, one of the basic and essential requirements for the existence of an adjudicator's determination is the existence of a construction contract between the claimant and a respondent to which the SOP Act applies: see Brodyn Pty Limited t/as Time Cost and Quality v Davenport & Anor [2004] NSWCA 294; 61 NSWLR 421 (Brodyn), per Hodgson JA at [53]. The successive judgments of the New South Wales Court of Appeal in Dualcorp and Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; 78 NSWLR 393 (Chase Oyster Bar) did not overturn that proposition.
However, this does not mean that the Court must determine whether or not the work was actually performed ‘under the Contract’ in every case. This is because of the breadth of the words used in s 15(1) of the SOP Act. A person may make a claim, not only if the person “is entitled” to a progress payment, but also if that person “claims to be” entitled to a progress payment.
Further, the claim may be issued to the person who under the construction contract concerned either “is liable” or “may be” liable to make the payment.
Those words are intended to ensure that a person on whom the SOP Act confers an entitlement to a progress payment is able to make a valid payment claim even though it may ultimately be proved that no payment was due under the construction contract: Probuild per McColl JA (Beazley ACJ and Macfarlan JA agreeing) at [104], discussing the amendments to the NSW Act to insert those words, the wording of which has been replicated in the SOP Act.
As discussed above, the words of s 15(1), combined with the broad definition of ‘construction contract’ and the express reservation of a party’s rights to sue under s 38 of the SOP Act, have created a statutory regime which recognises that the existence of a contractual dispute does not prevent payment.
The present circumstances are an example of such a contractual dispute. The plaintiff says that the work was not part of the contract it had with Haides, or if it was, it was included as part of the existing rates which the plaintiff quoted to Core. Haides was therefore not entitled to charge the extra amount claimed. Haides says the opposite. A claim under the SOP Act is not the forum to resolve those questions of construing the terms of the contract.
It is sufficient for the purposes of enlivening the operation of the SOP Act that there was a construction contract between the two parties, that Haides claims the work was done under it, and that it is at least arguable that the work was either expressly incorporated or necessarily part of the work to be performed under the contract (noting that one of the arguments made by Haides was that destressing the anchors was an integral part of the installation of them).
If the position were otherwise, it would defeat the entire objective of the SOP Act, as parties would be attempting to prove the existence or otherwise of contractual terms, for the purpose of establishing whether work was done ‘under the contract’. Where, as in this case, the terms of the contract were through conversations and not subsequently written down, the resolution of such an issue may be a matter determined by credibility of witnesses.
That there is no provision in the SOP Act for adjudicators to allow cross-examination in order to determine the point, or for the parties to be legally represented (see s 23 of the SOP Act) confirms that, properly construed, the words ‘claims to be entitled’ and ‘may be liable’ remove the need for the claimant to prove that the work was in fact performed ‘under a construction contract’.
For this reason, it is unnecessary to decide which of the conversations recalled by Mr Gaffey and Mr Tziaprazis represent the terms of the construction contract between them, so as to make a finding as to whether the additional work claimed was part of the construction contract.
It follows that there was no legal error in the adjudicator proceeding to determine the third payment claim, even if it is ultimately found that the work the subject of that claim was not part of the contract, and the plaintiff was not liable to pay for it.
Second issue: whether the second and third payment claims were made in respect of the same reference date
This issue arises by virtue of the prohibition in s 15(5) of the SOP Act, namely that a claimant must not give more than 1 payment for each reference date. The plaintiff submitted that the second and third payment claims were made in respect of the same reference date.
In Dualcorp, Allsop P considered the effect of a contravention of the NSW equivalent of s 15(5) and found as follows at [14]:
…The terms of s 13(5) are a prohibition. The words “cannot serve more than one payment claim” are a sufficiently clear statutory indication that a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment claim under the Act and does not attract the statutory regime of the Act.
In Falco’s Pty Ltd v AB Developments (Australia) Pty Ltd [2017] NSWSC 1320, McDougall J stated (at [18]) that the effect of contravening such a provision was that it “follows inevitably that there was no right to make the adjudication application and the adjudicator has no power to consider it”.
The task, then, is to ascertain whether the second and third payment claims had the same reference date.
A payment claim or purported payment claim under the SOP Act should be interpreted in the same way as commercial contracts are interpreted: Fernandes Constructions Pty Ltd v Tahmoor Coal Pty Ltd (trading as Centennial Coal)[2007] NSWSC 381 at [37]. This involves an objective approach and requires that the document be considered as a whole and in its commercial context: Creative Building Services Pty Ltd v TIO Air Conditioning Pty Ltd[2016] ACTSC 367 at [26]. The documents brought into existence should not be approached in an “unduly technical manner” but rather, insofar as they “are used in relation to events occurring in the construction industry, they should be applied in a common sense practical manner”: see Probuild at [109] and the authority there-cited.
The second payment claim had a “claim date” of 16 June 2017, and the third payment claim had a “claim date” of 31 August 2017. The contents of the work claimed was identical.
Although these two dates are different, an objective approach to each document and its commercial context is that those dates merely record the dates each claim was made, and not the ‘reference date’ as defined in the SOP Act. Both the plaintiff and Haides appear to have read the dates on the second and third payment claims in that manner. Thus, there is no ‘reference date’ expressly stated on either of the payment claims.
The plaintiff submitted that both claims were made in respect of the same reference date of 30 June 2017. That is because each schedule recording the work for the claim is for work that occurred up to 1 June 2017. The plaintiff says no further reference date can have arisen after that date. That submission is consistent with the decision in Perform (NSW) Pty Ltd v Mev-Aust Pty Ltd (trading as Novatec Construction Systems) [2009] NSWSC 416, in which Rein J held (at [39], [42]) that where no further work has been done since a payment claim is served, then if that claim is made again the following month, the reference date for the second claim will be the same as the first claim, and therefore not permissible. Similarly, in Grid Projects NSW Pty Ltd v Proyalbi Organic Set Plaster Pty Ltd [2012] NSWSC 1571 (Grid) at [23]-[39], it was held by Stevenson J that for reference dates to arise on the last day of a month, it is necessary that some construction work be undertaken in that month.
However, in Brodyn at [63], Hodgson JA (with whom Mason P and Giles JA agreed) held that reference dates that are calculated by reference to the equivalent of s 10(3)(b) of the SOP Act (as opposed to a date specified in the construction contract itself) do not cease on termination of a contract or cessation of work.
In Veer Build Pty Ltd v TCA Electrical and Communication Pty Ltd [2015] NSWSC 864 (Veer Build) at [44], Darke J considered that this particular finding in Brodyn was not affected by the later decisions of Dualcorp and Chase Oyster Bar, so that a single judge at first instance should still follow that authority.
The reasoning in Brodyn is applicable to s 10(3)(b) of the SOP Act. All that the section provides is that the reference date is the last day of the “calendar month in which the construction work was first carried out” (in this case 30 April 2016) and then the last day of each subsequent named month.
The SOP Act does not require work to have been carried out in a particular month in order for it to be a ‘named month’ and thus come within the definition of a reference date. That construction was confirmed with regard to the NSW Act by both Darke J in Veer Build at [42] and McDougall J in Broadview Windows Pty Ltd v Architectural Project Specialists Pty Ltd [2015] NSWSC 955 (Broadview Windows) at [31]-[43], who each considered that the words ‘named month’ simply referred to the names of the months, such as January, February etc.
The reasoning in each of Veer Build and Broadview Windows was based on s 21 of the Interpretation Act 1987 (NSW) which defined “named month” as meaning “January, February, March, April, May, June, July, August, September, October, November or December.”
In the Territory, although the Legislation Act 2001 (ACT) does not contain a definition of ‘named month’ the definitions of “month” and “calendar month” (noted in the SOP Act itself) achieve the same result. “Calendar month” means “one of the twelve months of the year”.
Accordingly, and consistent with Brodyn, Veer Build and Broadview Windows, the only limits on when a payment claim may be given are those provided by s 15(4) of the SOP Act, discussed below in the context of issue four.
In my view, this construction of the SOP Act is supported by s 19(2)(a) of the SOP Act, which provides that a claimant who wants to apply for adjudication must notify the respondent of an intention to do so within 20 business days immediately following the due date for payment.
If no further ‘reference date’ could arise after a payment claim had been served because the claimant had not done any further work in the months that followed, then a claimant who allowed a respondent some time to pay before embarking upon an adjudication process would be prevented from subsequently enlivening that process by issuing a fresh payment claim with a fresh due date for payment, because the reference date would not have changed. I do not consider that furthers the object of the SOP Act.
The preferable construction is one that allows a claimant time to issue a payment claim any time up to 12 months (in the absence of any time stipulated in the contract) from the date the work was last carried out.
Applying this construction of the SOP Act, the work carried out on 1 June 2017 gave rise to a reference date of 30 June 2017, and subsequent reference dates of 31 July 2017 and 31 August 2017.
The second payment claim had a reference date of 30 June 2017. The third payment claim had a reference date of 31 August 2017, because the right to a progress payment arose ‘on and from each reference date’: s 10(1) of the SOP Act.
The third payment claim was not issued in respect of the same reference date and was therefore permissible.
In any event, there was force in the submission of Haides that the second payment claim was invalid. Again, under s 10(1) of the SOP Act, the entitlement arises on and from the reference date. If the reference date was 30 June 2017, as I have found, Haides was not yet entitled to make the claim on 16 June 2017. This may well explain why a third payment claim was served, and it was that later payment claim which Haides then applied to have adjudicated.
For these reasons, the adjudicator was correct to find that the third payment claim had a reference date of 31 August 2017.
Third issue: whether the third payment claim was in respect of the same work
As I have found that the second payment claim was invalid, the comparison is between the first payment claim and the third payment claim. However, even if the second payment claim was valid, this would not change the reasons that follow.
There is no doubt that the third payment claim included the work that had been claimed in the first payment claim. However, the third payment claim also credited the payment that had been made by the plaintiff to the amount claimed.
Section 15(6) of the SOP Act makes it clear that s 15(5) does not prevent a claimant from including in a payment claim an amount that has been the subject of a previous claim. The first payment claim was not the subject of any adjudication. Accordingly, no issue estoppel arises: see Dualcorp at [60] and [68].
As found by Darke J in Veer Build at [46], a claimant is entitled to make a claim for earlier work done and for which it has not been paid. That is all that Haides claimed in the third payment claim.
Thus, the fact that the same work was recorded in successive payment claims did not invalidate the third payment claim. To the extent that the submission was that additional amounts were claimed for the same work, I reject that submission having closely reviewed the nature of the work claimed, the hours, the amounts and the rates stipulated in the schedule of work attached to each payment claim. In any event, if there is a dispute between the parties as to whether the piling work separately claimed in the third payment claim was actually part of the “anchors drilled and installed” work done and claimed in the first payment claim, that argument is preserved for a later date, should the plaintiff choose to pursue it, for the reasons given above.
Fourth issue: whether the third payment claim was for work performed outside a 12 month period
The foundation for this argument is s 15(4) of the SOP Act. I accept the plaintiff’s submission that the time frames imposed by the SOP Act are such that the time limit specified in s 15(4) is an essential condition for a valid adjudication application, relying on Chase Oyster Bar at [46].
However, the complete answer to this argument is to be found in Estate Property Holdings v Barclay Mowlem Construction Limited [2004] NSWCA 393; 61 NSWLR 515 at [21]. As long as some of the work was undertaken in the 12 months that preceded the giving of the third payment claim, that is sufficient.
The plaintiff’s argument really depended upon the Court accepting that the work carried out on 31 May 2017 and 1 June 2017 was not work under the contract, which would have left all of the remaining work claimed in the third payment claim last being carried out in May 2016. As I have found that Haides was entitled to claim for that work, at least on the basis that it was arguable that the plaintiff ‘may be liable’ to make the payment, the argument based on work last being completed outside the statutory 12 month limit must fail.
Conclusion
For these reasons, the plaintiff has not succeeded in establishing any error of law in the adjudicated decision. I consider that costs ought to follow the event. If either party seeks a variation to that order, it should make such an application within 7 days, through my associate in chambers in the first instance.
The orders of the Court will be:
(1) The application is dismissed.
(2) The plaintiff is to pay the first defendant’s costs.
| I certify that the preceding ninety eight [98] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: |
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