Citi-Con v Punton's Shoes
[2020] VCC 804
•9 June 2020
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION BUILDING CASES LIST | Revised (Not) Restricted Suitable for Publication |
Case No. CI-20-00020
| Citi-Con (Vic) Pty Ltd (ACN 143 889 678) | Plaintiff |
| v | |
| Punton’s Shoes Pty Ltd (ACN 004 133 751) | Defendant |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF JUDGMENT: | 9 June 2020 | |
CASE MAY BE CITED AS: | Citi-Con v Punton’s Shoes | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 804 | |
REASONS FOR JUDGMENT
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BUILDING AND CONSTRUCTION – whether payment claim valid – claimant served a payment claim in relation to a reference date and three months later claimant purported to withdraw the payment claim and serve a substituted payment claim – no consent for withdrawal – application of s14(8) of the Building and Construction Industry Security of Payment Act 2002 (Vic) – Valeo Construction v Pentas [2018] VSC 243, Melbourne Steel Erectors v M & I Samaras [2017] VSC 308, NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842, Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Ms C Jones | Eidelweisz Lawyers |
| For the defendant | Mr A R Morrison | Holman Fenwick Willan |
HER HONOUR:
The plaintiff seeks judgment for $284,073.11 (including GST) pursuant to 16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act).
In seeking that judgment, the plaintiff relies on what it claims is a valid payment claim under the SOP Act, served on the defendant on 29 October 2019 (the October claim). The October claim relied on a reference date of 30 July 2019 under the construction contract between the plaintiff and the defendant.
The plaintiff had already served a payment claim relying on that same reference date, nearly three months earlier, on 31 July 2019 (the July claim). When it served the October claim, it did so with an email stating that it was withdrawing the July claim.
One of the defences raised by the defendant was that the October claim was not valid because it was a second payment claim for the same reference date under the construction contract.
Section 14(8) of the SOP Act provides:
A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
The defendant did not agree to the July claim being withdrawn.
So, the issue is: was the plaintiff entitled to unilaterally withdraw the July claim, three months after serving it, such that the October claim was then a valid payment claim?
For the reasons set out below, I find that it was not.
As the October payment claim was invalid, the plaintiff’s application for judgment based on that claim must fail.
The plaintiff brought its claim by originating motion. The application was initially listed to be heard on 20 March 2020. In the circumstances of the coronavirus pandemic, it was then listed to be determined on the papers. I have determined it on the basis of the affidavits and submissions filed, without a hearing taking place.
The plaintiff relies on three affidavits of Brendon Smith, affirmed on 23 December 2019, 10 March 2020 and 20 March 2020. The defendant relies on three affidavits of David Charles Rouch, sworn 27 February 2020, 16 March 2020 and 20 March 2020. Both parties filed two sets of submissions, and subsequently each had input into a final version of a Table of Variations which summarised their submissions regarding variations claimed by the plaintiff as part of the October claim. The final version of that Table of Variations was filed on 24 April 2020.
The evidence establishes that the construction contract was entered by the parties on 16 December 2016. By it, the plaintiff agreed to design and construct 27 apartments and carparks at 107-109 Upper Heidelberg Road, Ivanhoe. The original contract sum was $8,100,000.
Relevantly, the contract provided that the time for claims for payment was the 30th day of each month and on the issue of a certificate of practical completion.
The plaintiff served various progress claims seeking payment for work it claimed it had carried out under the contract, including ‘Progress Claim 26’, served on 29 June 2019.
On 31 July 2019, it served ‘Progress Claim 27’ (which I have called the ‘July claim’ in this judgment). It sought $281,393.51.
On that same day the plaintiff also served a progress claim seeking the release of half the retention money under the contract: $222,750. The plaintiff does not seek the release of retention monies in this application.
Six days later, on 6 August 2019, the plaintiff purported to serve a further payment claim for the July 30 reference date, describing it as ‘revised claim’ and as ‘Progress Claim No. 27 Revision B’ (the August claim). It sought $284,073.11, which was $2,679.60 more than it sought in the July claim. It said that sum included an additional variation and attached documentation about that. It also sent again, a progress claim for $222,750. for the release of half the retention monies.
The August claim, and the August retention monies claim, were the subject of an adjudication application.
On 9 August 2019, a Certificate of Practical Completion was issued by the Superintendent.
On 18 September 2019, the adjudicator determined the August claim (and the August retention monies claim) was invalid.
On 26 September 2019, the plaintiff served a further claim in relation to the release of half the retention monies, again claiming $222,750.00. That payment claim was submitted to adjudication under the Act, and the adjudicator’s determination is the subject of an application for judicial review in the Supreme Court of Victoria.
Just over a month later, on 29 October 2019, the plaintiff served the October claim – the claim on which it seeks judgment in this case. The October claim seeks the same amount as had been sought in the August claim - $284,073.11.
The email sent by the plaintiff attaching the October claim stated:
Please see attached payment claim in respect of progress claim 27 Rev C dated 29 October 2019 (Progress Claim 27 Rev C).
We confirm that:
·Citi-Con has withdrawn any and all payment claims previously issued by it in respect of Progress Claim 27 and no longer relies on those claims (as detailed below);
·Citi-Con relies on Progress Claim 27 Rev C attached to this email.
For the sake of clarity, we confirm that Citi-Con has withdrawn and no longer relies upon:
a.Progress claim no. 27 dated 31 July 2019 in the amount of $281,393.51 (GST inclusive), which was emailed to you at 5:20am on 31 July 2019 (copy attached);
b.Progress claim no. 27 dated 31 July 2019 in the amount of $284,073.11 (GST inclusive), which was emailed to you at 10.11am on 6 August 2019 (copy attached).
On 13 November 2019 the plaintiff’s solicitor wrote noting that the defendant had failed to issue a payment schedule in relation to the October claim or otherwise make payment, and demanded payment by the following day.
Twenty-one minutes later, the defendant served a payment schedule in response to the October claim. In it, it said that its primary position was that ‘the purported claim cannot be made under the Act as there is no valid reference date available’. It went on to state that the amount the plaintiff proposed to pay (the scheduled amount) was $Nil.
The plaintiff issued this claim for judgment.
Leaving aside the central issue as to whether the October claim was valid due to the reference date issue, there was no dispute that the October claim otherwise complied with the requirements of a payment claim under s 14(2) of the SOP Act. These are that a payment claim:
·must be in the relevant prescribed form (there is no prescribed form in this case);
·must contain the prescribed information (there is no prescribed information in this case)
·must identify the construction work or related goods and services to which the progress payment relates (the claim identifies that);
·must indicate the amount of the progress payment that the claimant claims to be due (it is indicated); and
·must state that it is made under the SOP Act (it states that).
Pursuant to s 9 of the SOP Act, a person who has undertaken to carry out construction work under a construction contract, or to supply related goods and services under the contract, is entitled to a progress payment under the Act on and from each reference date under the contract.
The work the subject of the October claim is ‘construction work’ as defined in the SOP Act, provided under a ‘construction contract’ for the purposes of the SOP Act. So, the plaintiff was entitled to progress payments under section 9(1) of the SOP Act on and from each reference date.
The term ‘reference date’, for the purposes of section 9 of the SOP Act, is defined in section 9(2). It provides:
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—
The existence of a reference date is a precondition to the making of a valid payment claim: Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340 at [61]-[62].
The construction contract provides a mechanism for three types of reference dates. These arise:
·on the 30th day of each month [contract, clause 42.1 read together with Annexure Part A, Item 46];
·upon the issue of a Certificate of Practical Completion [contract, clause 42.1]; and
·upon the expiry of the defects liability period [contract, clauses 42.1 and 42.5 and Annexure Part A Item 46]
Clause 42.1 of the contract provides that:
At the times for payment claims … and upon the issue of a Certificate of Practical Completion and within the time prescribed by Clause 42.5, the Contractor shall deliver to the Superintendent claims for payment supported by evidence of the amount due to the Contractor and such information as the Contractor may reasonably require. Claims for payment shall include the value of the work carried out by the Contractor in the performance of the Contract to that time together with all amounts then otherwise due to the Contractor arising out of the Contract.
Each of the July claim, the August claim, and the October claim relied on the reference date of 30 July 2019.
The plaintiff’s case is that the July claim was abandoned or withdrawn at the same time as the October claim was served.9F9F
The parties agree that the August claim was invalid. This was determined by the adjudicator in relation to that claim (and argued by the defendant in that adjudication). The plaintiff says that in any event, the August claim was also abandoned or withdrawn at the same time as the October claim was served.
Given the concession that it was invalid, the August claim is not relevant for the purposes of determining whether the October claim was valid.
The July claim was a valid claim, and the question is whether the plaintiff could unilaterally withdraw it three months later and replace it with the October claim?
As set out above, section 14(8) of the SOP Act provides:
A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
Section 14(9) of the SOP Act states:
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 that amount has not been paid.
The consequence of serving more than one payment claim in respect of the same reference date is that the second claim is void: Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190 at [14]; Commercial & Industrial Construction Group Pty Ltd v King Construction Group Pty Ltd [2015] VSC 426 at [95] and [97].
The parties referred in their submissions to just one case in relation to the issue of whether the plaintiff could unilaterally withdraw the July claim thus making the October claim valid: Valeo Construction v Pentas [2018] VSC 243. The plaintiff submitted that it was authority for the principle that a claim could be withdrawn.
The facts of this case are distinct from those in Valeo. Further, in Valeo, the Court did not need to consider the issue of whether unilateral withdrawal was effective.
In Valeo, Digby J dealt with a situation where a payment claim had been withdrawn and sought to be replaced, three days later, by a new one for a different amount, and for the same reference date. Here, the attempted withdrawal is three months later.
His Honour usefully outlined the mandatory regime that the SOP Act sets up facilitating vital cash flow to those entitled to a progress payment pursuant to a construction contract:
[27] The scheme of the Act reflects a mandatory regime whereby, on an interim basis, in compliant circumstances the Act facilitates vital cash
flow to a person entitled to a progress payment pursuant to a
construction contract.
[28] That regime, if invoked, imposes expedited times within which the critical steps defined by the Act are required to be undertaken and the Act creates certain rights contingent upon the strict observance of the statutory requirements giving rise to such rights.
[29] Under the Scheme of the Act, the service by a claimant on the respondent of a payment claim for a claimed amount is a trigger for the procedures provided for in ss 14 and 15. Accordingly, the establishment of service of a payment claim by a claimant is a critical aspect of the claimant enlivening its potential statutory right to a progress payment pursuant to ss 9, 10 and 15 of the Act.
[30] To avail its potential payment claim entitlement, it is necessary for a claimant under Part 2 of the Act to comply with each of the mandatory stipulations of the Act, including in respect of the prescribed form and timing of the payment claim served pursuant to s 14(1) of the Act and the negative stipulation in s 14(8) that a claimant cannot serve more than one payment claim in respect of each reference date under the construction contract, fixed by s 9(2) of the Act.
The decision in Valeo was premised on Digby J’s finding that the plaintiff did not serve the second payment claim:
[44] … in a way which clearly and unequivocally communicated to the defendant and the Superintendent that the 28 February 2018 claim was withdrawn or abandoned or wholly replaced by the 1 March 2018 claim and the 28 February 2018 claim should therefore be disregarded. In my view this was required in the circumstances of this matter
Digby J referred in Valeo to some of the practical ramifications of multiple payment claims:
[63] In my view, as a practical observation, it could be problematic for respondents to payment claims, and their advisers, if it was valid and effective for a payment claim to be revised or amended or corrected after initial service, by means of the service of a subsequent payment claim in relation to the same reference date, unless the earlier payment claim served is clearly abandoned or withdrawn prior to or contemporaneously with the revised or amended or corrected subsequently served payment claim in respect of the same reference date.
[64] If it were otherwise, difficult issues would be likely to arise as to what the nature or extent of a permissible charge might be and as to when under the relevant construction contract and the Act, such a charge could be made to a payment claim earlier served.
[65] Undesirable issues and uncertainties could also well arise as to the implications, if any, in relation to the time within which a responsible payment schedule must be provided under the Act and in addition such a change, or possible multiple changes at different times, could unduly burden the respondent, and its consultants. Such issues would be likely to vex the parties to applicable construction contracts, contract administrators and the courts.
[66] By contrast, the application of the Act in accordance with the requirement for strict compliance is reflected in the approach taken in Saville v Hallmarc Construction Pty Ltd, SSC Plenty Road Pty Ltd v Construction Engineering (Aust) Pty Ltd, Dualcorp Pty Ltd v Remo Constructions Pty Ltd, and Commercial Industrial Construction Group Pty Ltd v King Construction Group Pty Ltd. Such an approach would likely obviate a potential plethora of issues of the type generally described above.
As set out above, at [63] Digby J suggests that at least some of the problems he identifies may occur ‘unless the earlier payment claim served is clearly abandoned or withdrawn prior to or contemporaneously with the revised or amended or corrected subsequently served payment claim in respect of the same reference date’.
That clear abandonment is what the plaintiff sought to do here when it served the October claim.
However, in Valeo, His Honour did not need to decide if unilateral withdrawal would suffice such that the second payment claim would not be invalid. As he records at [51], Valeo proceeded on an agreed basis about withdrawal if adequately communicated: ‘the parties … acknowledge that if adequately communicated a payment claim can be withdrawn or abandoned and a new or resubmitted payment claim can then be served in respect of the relevant reference date’.
In Melbourne Steel Erectors v M & I Samaras [2017] VSC 308, Digby J considered an application for judicial review of an adjudication determination. The plaintiff, MSE, submitted a Progress Payment Claim No 21 dated 20 October 2016. On 1 December 2016, MSE submitted a second payment claim using the same reference date as the 20 October 2016 payment claim. MSE challenged the decision of the adjudicator that the second payment claim was invalid pursuant to s14(8) as it had not been withdrawn with the consent or agreement of the parties. MSE argued that the defendant, SSE, had invited or offered it to resubmit or revise its payment claim, in a cover letter to its payment schedule dated 31 October: see the letter extracted at [63]. SSE rejected MSE’s contention that it made an unqualified offer or invited MSE to resubmit its payment claim: see [45]. Digby J found, at [64] that the letter of 31 October 2016 did not convey an unqualified invitation by SSE to MSE to withdraw MSE’s payment claim and resubmit that claim. Nor was it an offer by SSE to consent to MSE’s withdrawal of its payment claim or any other relevant offer. Digby J said:
[67] In substance and detail Ezra Legal’s said letter was an expressly
qualified invitation to MSE to submit a compliant Payment Claim,
effectively reserving SSE’s position if Payment Claim No 21 was
deemed to be a valid payment claim. That letter also more than once
reminded MSE that the relevant Act and its requirements must be
considered and complied with.
One of the matters His Honour there took into account, at [70], was that ‘Furthermore, at no time did MSE communicate that it was withdrawing or abandoning its payment claim dated 20 October 2016’. However, it is not clear that that was an essential element of his decision, nor is it clear what submissions were made in relation to the efficacy, or otherwise, of unilateral withdrawal.
There are a number of cases in which parties have agreed to a withdrawal of a payment claim and a substitution of another, or where no issue has been taken as to validity of withdrawal. See, for example, NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842, Veer Build Pty Ltd v TCA Electrical and Communication Pty Ltd [2015] NSWSC 864 and Reitsma Constructions Pty Ltd v Davies Engineering Pty Ltd t/as In City Steel [2015] NSWSC 343.
In Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602, McDougall J dealt with a second payment claim being served for the same reference date following negotiations, where no submission was made that the second payment was in breach of s13(5) of the Building and Construction Industry Security Payment Act 1999 (NSW), the corresponding provision of the New South Wales legislation. His Honour there saw no reason in principle that unilateral withdrawal could not take place, if the fact of withdrawal was made clear, but preferred to express no final opinion. He did not need to decide that issue in that case. Relevantly, His Honour commented:
[17] The concept of withdrawal of a payment claim, at least by consent,
was recognised by Hammerschlag J in NC Refractories Pty Limited
v Consultant Bricklaying Pty Limited [2013] NSWSC 842 at [38] and[39]. I agree with his Honour that it is at least open to a claimant,
with the consent of the respondent, to withdraw a payment claim and
to substitute for it another one, relating to the same reference date,
without contravening s 13(5). His Honour's actual decision appears
to contemplate, as well, unilateral withdrawal. Whilst I see no reason
in principle why that could not happen, (at least where the fact of
withdrawal is made clear to the respondent), I prefer to express no
final opinion on that particular issue.
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[21] It has been held that s 13(5) means what it says. That is to say, it has
been held that when s 13(5) says that more than one payment claim
cannot be served in respect of the same reference date, it is intended
to have a prohibitory effect. Allsop P expressed that view very clearly
in Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR
190 at [13], [14]. I set out the last two sentences of the latter
paragraph:
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 Building and Construction Industry Security of Payment Act and does not attract the statutory regime of the Act
[22] I came to the same conclusion in Trustees of Roman Catholic Church
for Diocese of Lismore v TF Woollam & Son [2012] NSWSC 1559.Although the reasoning extends over a number of paragraphs, the
conclusion that I reached, stated at [49], was founded on what Allsop
P had said in Dualcorp:
[49] As I have indicated already, any other approach would set at naught
the statutory prohibition. And if the statutory prohibition is not to be
given effect, then the subsection serves no useful purpose. It would
be as though s 13(5) reads to the effect that a claimant cannot serve
more than one payment claim in respect of each reference date but,
if it does so, the payment claim nonetheless initiates the statutory
enforcement or recovery mechanisms.
The underlying objective of the Act ‘is to provide an enforceable right to progress payments supported by an expeditious and efficient means for enforcement of those rights’: Jotham Property Holdings Pty Ltd v Cooperative Builders Pty Ltd & Ors [2013] VSC 552, per Vickery J at [46].
Section 14(8) is in my view, clear. It states:
A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
The section does not say a claimant ‘cannot rely’ on more than one payment claim in respect of each reference date under the construction contract at a time. The prohibition is on service of more than one payment claim. I do not consider this section allows for unilateral purported withdrawal of a payment claim which has been served, and service of another payment claim using the same reference date.
As occurred in the cases mentioned above, parties may choose not to take this point, and may agree to a substitution of a payment claim in particular circumstances. This will often be a cost effective, and expeditious way in itself of dealing with the disputes between them.
However, in this case there was no such agreement, the point is taken, and in my view, the October claim is invalid.
I note that the defendant contends that an appropriate reading of clause 42.1 of the contract is that the monthly progress payment entitlement ceased upon the issue of a certificate of practical completion which occurred on 9 August 2019. Clause 42.1, as set out above, provided that:
At the times for payment claims … and upon the issue of a Certificate of Practical Completion and within the time prescribed by Clause 42.5, the Contractor shall deliver to the Superintendent claims for payment supported by evidence of the amount due to the Contractor and such information as the Contractor may reasonably require. Claims for payment shall include the value of the work carried out by the Contractor in the performance of the Contract to that time together with all amounts then otherwise due to the Contractor arising out of the Contract.
I do not consider that clause 42.1 had the effect that a progress claim using the July reference date could not have been issued after the certificate of practical completion, provided the reference date had not already been used. Section 14(4)(b) of the SOP Act provides that 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 within three months after the relevant reference date. The October claim was within that three month period from the July reference date.
There were other issues raised in this case about which detailed submissions were made, including the extent to which amounts claimed were claimable variations. Given my finding that the October claim was not valid, I do not need to determine those issues.
I will dismiss the plaintiff’s application.
I direct the parties to consider the costs orders that should be made as a result of these reasons and either provide consent orders, or submissions as to costs, by 10 am on 16 June 2020.
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Certificate
I certify that these 14 pages are a true copy of the reasons for judgment of Her Honour Judge Marks, delivered on 9 June 2020, revised 11 June 2020.
Dated: 11 June 2020
Zeinab Ali
Associate to Her Honour Judge Marks
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