Cool Logic Pty Ltd v Citi-Con (Vic) Pty Ltd
[2020] VCC 1261
•20 August 2020
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Building Cases List
Case No. CI-20-01006
| COOL LOGIC PTY LTD (ACN 169 192 027) | Plaintiff |
| v | |
| CITI-CON (VIC) PTY LTD (ACN 143 889 678) | Defendant |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the Papers | |
DATE OF JUDGMENT: | 20 August 2020 | |
CASE MAY BE CITED AS: | Cool Logic Pty Ltd v Citi-Con (Vic) Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1261 | |
REASONS FOR JUDGMENT
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Subject: CONTRACTS
Catchwords: Building contracts – payment claims – grounds for resisting payment claims when no payment schedule is provided – whether payment claims had a valid reference date – whether payment claim validly withdrawn – whether payment claim served out of time – whether payment claim included excluded amounts – whether prohibition on excluded amounts extends to payment schedules – whether work comprising claimable amounts must be completed when payment claim served – principles of statutory construction – whether payment claim failed to provide mandatory documents – whether payment claim for retention moneys is valid
Legislation Cited: Building and Construction Industry Security of Payment Act 2002 (Vic) ss4, 9, 10, 10A, 10B, 12, 14, 15, 16(2), 17(2); Building and Construction Industry Security of Payment Act 1999 (NSW) ss13
Cases Cited:Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112; 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674; John Beever v Road Corporation [2018] VSC 635; Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183; MKA Bowen v Carelli Constructions [2019] VSC 436; Valeo Construction v Pentas [2018] VSC 242; Branlin Pty Ltd v Totaro [2014] VSC 492; John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126; Zulform Pty Ltd v Donmar Construction Pty Ltd [2020] VCC 562; Vanella Pty Ltd v TFM Epping Land Pty Ltd [2019] NSWSC 1379; Cat Protection Society of Victoria v Arvio Pty Ltd [2018] VSC 757; Levi Pty Ltd v Z&H Building Development Pty Ltd [2019] VSC 633
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APPEARANCES: | Counsel | Solicitors |
| For Cool Logic | Mr R Chayle | Maddocks |
| For Citi-Con | Ms C Jones | Eidelweisz Lawyers |
HIS HONOUR:
1 In this proceeding, Cool Logic Pty Ltd (“Cool Logic”) applies for judgment against Citi-Con (Vic) Pty Ltd (“Citi-Con”) pursuant to ss16(2) and 17(2) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (“SOP Act”). Cool Logic makes the application by summons on originating motion dated 10 March 2020. The application arises out of mechanical air-conditioning ventilation works that Cool Logic performed pursuant to four contracts with Citi-Con.
2 Cool Logic submits that it is entitled to judgment because Citi-Con failed to make payment in accordance with its payment schedules or failed to submit payment schedules in response to its payment claims. Citi-Con opposes the application on the following grounds:
· the payment claims do not have a reference date;
· the payment claims failed to adequately identify the construction work to which they related;
· the payment claims contained “excluded amounts” in the form of non-claimable variations;
· the payment claims failed to provide mandatory documents; and
· the payment claims included claims for retention moneys, which are not claims for construction works under a construction contract.
3 For the reasons below, I am satisfied that Cool Logic has a valid claim in respect of each of INV-0503, INV-0562, INV-0363, INV-0577, INV-0498 and INV-0619. However, I reject Cool Logic’s claims in respect of INV-0547 and INV-0548 on the ground that neither of these claims had a valid reference date. Further, I reject Cool Logic’s claim in respect of INV-0489, on the ground that it included excluded amounts and those amounts cannot be validly severed from the claim.
4 There is some lack of clarity on the material (at least to my mind) of the amount still owing under each of the upheld claims, so I will invite the parties to determine the precise sum for which judgment should be given for Cool Logic, and bring forward a draft judgment and orders to give effect to my reasons. On the question of costs, I will order that Citi-Con pay Cool Logic’s costs of and incidental to the proceeding on the standard basis, in default of agreement, unless either party can show a basis (such as an offer of compromise or Calderbank letter) for seeking a different order as to costs. I will determine any issue concerning costs on the papers.
The facts
5 Cool Logic relies upon three affidavits of Robert Rondi, a Partner and Senior Estimator of Cool Logic affirmed 10 March, 17 April and 6 May 2020. In opposition, Citi-Con relies upon two affidavits of Brendon Smith, a director of Citi-Con affirmed 14 and 30 April 2020.
6 Cool Logic entered four contracts with Citi-Con to perform air conditioning and ventilation works at the following properties:
· 501-503 Plenty Road, Preston (“Plenty Road”);
· 22-28 Nicholson Street, Fitzroy North (“Fitz & Co”);
· 21-23 Moore Street, Moonee Ponds (“Moore Street”); and
· 8-10 New Street, Richmond (“New Street”).
7 The reference dates of the contracts were as follows:
· Plenty Road and New Street: the ‘25th day of the month projected to end of month’[1];
· Fitz & Co: ‘by the 25th day of the month with payment no later than 45 days after the end of the month in which the claim is made’[2]; and
· Moore Street: ‘no later than the 25 [sic] day of the month’[3].
[1]Plenty Road Schedule 1, New Street Schedule 1
[2]Fitz & Co clause 37.2, as amended by clause 18 of Annexure B
[3]Moore St clause 37.2, as amended by clause 18 of Annexure B
8 The due date for payment under all contracts was ‘45 days after the end of the month in which the claim was made’.[4]
[4]Plenty Road clause 12.2, Fitz & Co clause 37.2, Moore Street clause 37.2, New Street clause 12.2
9 Cool Logic issued various payment claims and Citi-Con responded as set out in the table below:
Claim Sum Response Plenty Road INV-0363 dated 22 June 2018. $58,000.00 (ex GST). Payment schedule for $52,200 (ex GST) and part-payment of $48,950 (ex GST). INV-0489 dated 25 March 2019. $15,000 (ex GST): No payment schedule or payment. INV-0548 dated 24 July 2019. $8,166 (ex GST). Payment schedule for $8,166 (ex GST) and part-payment by credit note CN-0571 of $1,222.43 (ex GST). Amended INV-0562 dated 23 August 2019. $21,881.48 (ex GST). Payment schedule for $33,731.89 (ex GST) but no payment. Fitz & Co INV-0498 dated 14 May 2019. $13,088.25 (ex GST): the balance of the subcontract sum of $7,775.75 (ex GST) and 50% retention moneys totalling $5,312.50 (ex GST). No payment schedule or payment. INV-0619 dated 13 December 2019. $10,625.00 (ex GST): 100% retention moneys. No payment schedule or payment. Moore Street INV-0503 dated 21 May 2019. $10,733.89 (ex GST): the balance of the subcontract sum of $5,013.89 (ex GST) and 50% retention moneys totalling $5,720.00 (ex GST). Payment schedule for $7,515.98 (ex GST) but no payment. New Street INV-0547 dated 24 July 2019. $15,072.96 (ex GST). No payment schedule or payment. INV-0577 dated 20 September 2019. $37,766.50 (ex GST). No payment schedule or payment.
10 Two other background matters are relevant. First, on 10 September 2019, Cool Logic applied for an adjudication of amended INV-0562 issued under the Plenty Road contract to the Resolution Institute. On 8 October 2019, the adjudicator determined that Citi-Con pay Cool Logic $21,881.46 (excluding GST). On 9 December 2019, Citi-Con applied for judicial review of the adjudication in the Supreme Court of Victoria. On 17 February 2020, the Court quashed the determination.
11 Secondly, the Fitz & Co and Moore Street contracts stipulated that Citi-Con would reimburse 50% of the retention moneys it held under those agreements upon practical completion and 50% when the Defects Liability Period expired.[5] The Defects Liability Period was 52 weeks.[6]
[5]Clause 5.1.
[6]Clause 35 and Annexure A.
12 Cool Logic now claims from Citi-Con the sum of $86,310.91 (including GST) under s 16(2)(a) of the SOP Act and $65,138.91 (including GST) under s 17(2)(a) of that Act.
The legal context
13 The SOP Act seeks to ensure that persons who undertake to carry out construction work can recover progress payments for the performance of that work.[7] Section 4 defines construction contract 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 Act applies to any construction contract whether written or oral, or partly written and partly oral.[8] “Construction work” is defined by SOP Act s5. There is no dispute that the works the subject of this proceeding is “construction work” within the meaning of SOP Act s5.
[7]SOP Act s 3.
[8]Ibid s 7.
14 SOP Act s16(2)(a) provides that a claimant may recover from a respondent any unpaid portion of an amount claimed in a payment claim where the respondent fails to submit a payment schedule within time (or at all) in response to the payment claim. SOP Act s17(2)(a) provides that where a respondent provides a payment schedule within time, a claimant may recover from the respondent any unpaid portion of the amount which the payment schedule states the respondent proposes to pay to the claimant.
15 SOP Act s14 concerns the form and content of payment claims. SOP Act ss14(2) and (3) relevantly provide that a payment claim:
· must be in the prescribed form (if any) and contain the prescribed information (if any) – neither is prescribed;
· must identify the construction work or related goods and services to which it relates;
· must indicate the amount of progress payment that the claimant claims to be due;
· must state that it is made under the SOP Act; and
· must not include any “excluded amounts” (being amounts referable to particular categories of variations described below).
16 SOP Act s14(4) deals with when a payment claim can be served, where it is not a payment claim in respect of a final, single or one-off progress payment. It provides that such a payment claim may only be served within:
· the period determined in accordance with 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
· the period of 3 months after the “reference date referred to in SOP Act s9(2) that relates to the progress payment”.
17 SOP Act ss14(5), (6) and (7) concern payment claims claim in respect of a final, single or one-off progress payment and are not relevant for present purposes. SOP Act s14(8) provides that a claimant “cannot serve more than one payment claim in respect of each reference date under the construction contract”, and s14(9) provides that this limitation does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous payment claim if the amount has not yet been paid.
18 Another important set of provisions informing the formal requirements for payment claims under the SOP Act is found in s9. Section 9(1) provides that “on and from each reference date under a construction contract” a claimant is “entitled to a progress payment under this Act calculated by reference to that date”. SOP Act s9(2)(a) provides that a reference date is a date determined by or in accordance with the construction contract as:
· a date on which a claim for a progress payment may be made; or
· 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. The rest of s9 concerns situations where the contract makes no express provision for reference dates.
19 One on view, the submissions of counsel for Cool Logic seem to suggest that where a respondent fails to provide a payment schedule on time, the respondent effectively loses entirely the right to resist a payment claim on any ground. But, as counsel for Citi-Con observed, it is trite that there are grounds upon which a respondent can resist a payment claim despite not providing a payment schedule. In particular, there can be no dispute that unless a payment claim answering the description in SOP Act s14(1) is served, there can be no application to a court under SOP Act s16(2)(a)(i). Although dealing with the alternative option of an adjudication application referred to in the New South Wales equivalent of s16(2)(a)(ii), this follows inexorably from the decision of the High Court in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd[9] (“Southern Han”). On the other hand, the available defences to a payment claim are very limited.
[9](2016) 260 CLR 340 at [44]
20 Generally speaking, the available defences concern either the nature of the underlying contract or the form and service of the purported payment claim, and thus whether the payment claim is effective to trigger the procedures established by SOP Act Part 3.[10] More particularly, the defences to a payment claim enlivened by the formal requirements of the SOP Act are, in substance, that the payment claim:
[10]Southern Han at [62]
· does not relate to a “construction contract” (including because it does not involve carrying out “construction work”), or it relates to a construction contract excluded from the operation of the SOP Act under s7 (for example, a construction contract that forms part of a loan agreement, or one that is a domestic building contract under the Domestic Building Contracts Act 1995);
· fails to satisfy the formal requirements of SOP Act s14(2) (for example, by failing to identify the construction work or failing to state that it is made under the SOP Act);
· was made when no valid reference date existed,[11] including where it is served before an applicable reference date or relies on a reference date that has already been used up by an earlier payment claim;[12]
· includes variations that are “excluded amounts” under SOP Act s10B which cannot be severed consistently with authority; and
· was not validly served on the respondent under either the terms of the contract or under SOP Act s50.
[11]Southern Han at [61]-[62]; Vanguard Developments v Promax [2018] VSC 386, Kennedy J at [121]
[12]SOP Act s14(8)
21 Under s47, nothing in Part 3 of the SOP Act precludes bringing or continuing proceedings under the construction contract, including where those proceedings deal with the same issues in dispute in the proceeding relying on Part 3. Thus a judgment under ss16 and 17 is a provisional judgment in what it grants and what it refuses.[13] The statutory context both contemplates and permits inconsistent judgments.[14] This section is, in effect, the statutory manifestation of the “pay now, argue later” epithet often used to describe the policy behind the SOP Act and its counterparts in other states.[15]
[13]Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 [2] and [43]-[46] (Vickery J), cited with approval in Pearl Hill Pty Ltd v Concorp Construction Group (Vic)Pty Ltd [2011] VSCA 99 [11]
[14]Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385 [22] (Handley JA, with whom Santow JA and Pearlman AJA agreed)
[15]Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 [2] and [43]-[46]
22 Further, in considering any purported defences to a payment claim, it is important to be mindful of SOP Act s48. This section provides that the provisions of the SOP Act have effect despite any provision to the contrary in any contract. It further provides that any provision in any contract purporting to exclude, restrict or modify the operation of the SOP Act or that may reasonably be construed as an attempt to deter a person from taking action under the Act, is void.
23 This court has endorsed the hearing of SOP Act applications on a summary basis by summons on originating motion with affidavit evidence.[16] Such claims are properly assessed on the balance of probabilities,[17] with the quality of the evidence weighed having regard to the fact that the legislation seeks facilitate a swift but temporary remedy.[18] Occasionally, a plaintiff nevertheless applies for relief under SOP Act s16 by bringing a proceeding commenced by writ and statement of claim, then issuing a summons seeking summary judgment pursuant to s61 of the Civil Procedure Act 2010 (Vic) (“CPA”).[19] This can add an additional layer of complexity in determining the test to be applied to any defences raised.[20] However, the present proceeding was commenced by summons on originating motion, so questions of the application of the test under CPA ss61 and 63 do not arise.
[16]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 [39]-[54]. See also SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 [26]
[17]Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 449-450 (Mason CJ, Brennan, Deane and Gaudron JJ)
[18]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 [51]-[54]
[19]John Beever v Roads Corporation [2018] VSC 635; see also Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053
[20]SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 [31]
Preliminary issues
24 Cool Logic raises two preliminary issues. First, it argues in favour of an approach to the “summary judgment” issue that is both contrary to the clear statements in the recent decisions of John Beever v Road Corporation[21]; SJ Higgins Ltd v The Bays Healthcare Group Inc[22] and 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd[23] and, indeed, its own interest. As noted above, applying a test equivalent to that invoked by CPA ss 61 and 63 adds a layer of complexity to a plaintiff’s task that is unnecessary and unhelpful where, as here, the proceeding is brought by summons on originating motion as endorsed by those authorities and the Building Cases List practice note PNCO 2 - 2019. Accordingly, I will approach the evidence in the proceeding consistently with those authorities, as discussed above.
[21][2018] VSC 635 [56]-[63]
[22][2018] VCC 805 [30]
[23][2018] VCC 674 [39]-[54]; Citi-Con’s submissions [8]
25 Second, Cool Logic has made extensive submissions both in its primary and reply submissions to the effect that: “where a Defendant has not timeously served a payment schedule in response to a particular payment claim made by Cool Logic, and used that opportunity provided by the Act to dispute the payment, it may not then raise a defence in bar to entry of judgment against it for the amount claimed”, citing at length from numerous (mainly New South Wales) authorities. Cool Logic further submits that “…the merits of a payment claim, including whether it is valid, is not a matter that can be raised in order to resist summary judgment”.[24] However, it is difficult to reconcile these submissions with Cool Logic’s later submission that: “It is uncontroversial that, in order to meet the requirements of the Act, Cool Logic’s payment claims must meet the statutory requirements specified in s 14(2) of the Act”.[25]
[24]Cool Logic’s reply submissions [7]
[25]Cool Logic’s reply submissions [7]
26 In any event, it is unnecessary for me to engage in detail the Cool Logic’s submissions on this issue. The overwhelming weight of authority, certainly in Victoria, is that there are matters that a defendant can raise in opposition to an application under SOP Act s16(2), despite Citi-Con’s failure to raise those matters in a payment schedule. These are generally defences going to jurisdiction or the validity of service of a payment claim, of the kind listed above.[26] And the basis for doing so is well established, including by High Court authority. The authorities frequently describe these defences as resulting in the payment claim being a nullity.[27] Indeed, these types of defences are raised with monotonous regularity in applications of this kind. This may well be regrettable and contrary to the spirit of the SOP Act but, absent legislative change, it is a reality that this court and the Supreme Court will continue to confront on an almost weekly basis.
[26]See at [20] above
[27]Brookhollow Pty Ltd v R&R Consultants Pty Ltd [2006] NSWSC 1 at [41] and Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 at [140] and [165]
The substantive issues
27 Citi-Con submits that the payment claims:
· did not have a reference date;[28]
[28]INV-0363, INV-0489, INV-0548, INV-0498, INV-0503, INV-0547 and INV-0577
· failed to establish whether they contained excluded amounts;[29]
[29]INV-0363, INV-0489, INV-0548, INV-0562, INV-0547 and INV-0577
· failed to sufficiently identify the construction work to which they related;[30]
[30]INV-0363, INV-0548, INV-0562, INV-0498, INV-0503 and INV-0577
· failed to provide mandatory documents;[31] and
· involved a claim for retention moneys, which is not a claim for construction work under a construction contract.[32]
[31]INV-0363, INV-0489, INV-0548, INV-0562, INV-0498, INV-0503, INV-0547, INV-0577 and INV-0619
[32]INV-0619
Did the payment claims have a reference date?
28 Citi-Con submits that INV-0363, INV-0489, INV-0548, INV-0503, INV-0547 were issued prematurely and thus did not have a reference date. In relation to INV-0489, it submits that Cool Logic issued this before the works the subject of the claim had been performed. For INV-0548 and INV-0577, it argues that Cool Logic had already served a payment claim for those reference dates (25 June and 25 July 2019 respectively).
29 In relation to the principles to be applied, Citi-Con submits that a payment claim must be made on or from a reference date.[33] Thus, it contends that a premature payment claim is invalid,[34] relying on Southern Han discussed above, and in particular the High Court’s finding that a reference date is the “precondition” to a valid payment claim.[35] Citi-Con also referred to the recent decision of the New South Wales Court of Appeal in All Seasons Air Pty Ltd v Regal Consulting Services Pty Ltd,[36] in which the majority applied Southern Han and held that:
“[A] statutory payment claim served before the relevant reference date is not served ‘on or from’ that reference date for the purpose of the NSW SOP Act, the effect being that the phrase ‘on or from’ when properly construed, is to be understood as meaning ‘on or after’ the relevant reference date.”[37]
[33]Plaintiff submissions [14]
[34]Ibid
[35]At [61]-[62]
[36][2017] NSWCA 289
[37]Ibid [14]
30 Finally, the Citi-Con relied on MKA Bowen v Carelli Constructions (“MKA Bowen”)[38] in which Digby J considered held that:
“In my view … it is sufficiently clear in light of Southern Han and All Seasons that s 9 and s 14 of the SoP Act (Vic) do not operate so as to permit the valid service of a payment claim prior to the relevant reference date which itself establishes a valid foundation for that payment claim to be made under the SoP Act (Vic) ….”
[38][2019] VSC 436
31 Cool Logic submits that a payment claim can be valid even if it was submitted shortly before a reference date[39] and that the claim need only be issued in good faith,[40] relying on Seabay Properties Pty Ltd v Galvin Construction Pty Ltd[41] (“Seabay”) and Metacorp Pty Ltd v Andeco Construction Group Pty Ltd.[42] I reject those submissions for the reasons discussed in relation to the preliminary issues discussed above, as amplified in Citi-Con’s submissions. The passages from the two decisions of Vickery J relied on must now be read as qualified by the findings in Southern Han and by the application of those findings in both All Seasons Air Pty Ltd v Regal Consulting Services Pty Ltd[43] and MKA Bowen.[44]
[39]Plaintiff submissions [17]
[40]Ibid
[41][2011] VSC 183, Vickery J at [130]-[138]
[42][2010] VSC 199, Vickery J at [109] – [114]
[43][2017] NSWCA 289
[44][2019] VSC 436 (‘MKA Bowen’)
32 In relation to the payment claims under the Plenty Road and New Street contracts, Cool Logic has a fall-back argument.[45] It submits that it can rely on the reference date from the previous month in respect of any premature payment claims, providing that the reference date from that previous month has not been used up by a payment claim sent on or after the 25th day of that month. I agree. I also accept that the evidence establishes that, except for INV-0547 and INV-0548, all of the payment claims sent under the Plenty Road and New Street contracts could rely on a reference date from the previous month. Accordingly, in my view, INV-0547 under the New Street contract and INV-0548 under the Plenty Road contract are invalid for their failure to rely on a valid reference date. But the balance of the payment claims under those contracts do not fail on that ground.
[45]Plaintiff reply submissions [29]
33 For completeness, I note that a provision which deems an early payment was made on the reference date, is of no effect.[46] For example, clause 12.2 of the Plenty Road contract provides that: “an early progress claim shall be deemed to have been made on the date for making the claim as stated in Schedule 1”.[47] In MKA Bowen, Digby J held that such provisions are contrary to the intent and purpose of the SOP Act. This is because the SOP Act seeks to establish a strict and time critical regime for the submission of, the response to and the adjudication of payment claims.[48]
[46]Ibid [75]
[47]Exhibit RR-1 to the first affidavit of Robert Rondi
[48]Ibid [74]
34 Turning to the payment claims under the Moore Street and Fitz & Co agreements, Cool Logic argues that Citi-Con misconstrues the reference date for those contracts.[49] It says that those agreements stipulate the last date on which a payment claim can be submitted. Cool Logic submits that those agreements permit that a payment claim can be issued from the 26th day of the month prior, up to the 25th of relevant month.[50] I agree. Clause 37.1 of the Fitz & Co contract provided that the reference date was (emphasis added) “by the 25th day of the month with payment no later than 45 days after the end of the month in which the claim is made” and clause 37.2 of the Moore Street contract provided that the reference date was “no later than the 25 [sic] day of the month”. In my view, on their proper construction, those agreements allow for a payment claim to be issued from the 26th day of the month before, up to the 25th of relevant month, and that both INV-0489 and INV-0503 were so issued.
[49]Plaintiff reply submissions [26]
[50]Plaintiff reply submissions [28]
35 Accordingly, the payment claims represented by INV-0489 and INV-0503 are not invalid for failing to rely on a valid reference date.
Is the amended payment claim valid?
36 As outlined above, on 23 August 2019, Cool Logic issued amended INV-0562 for the sum of $21,881.48 (excluding GST). On 29 August 2019, the parties exchanged the following correspondence in relation to the amendment:
“Please be advised that, due to a reconciliation of our accounts, we have amended the original invoice 0562 to a current amount of $24,069.61.
Please disregard the previous invoice amount of $44,291.50.
I have attached a copy of the new invoice for your records.
Kind regards,
Brigette Kennedy.
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Brigette,
Thank you for your email. May I ask what the reconciliation is for?
Kind regards,
SHADY ANTONIOU
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In reconciling the Plenty Road account, the previous invoice 0562 sent to you had incorrectly added the invoice amount for the variation of $16,500 (which is still outstanding) and also the outstanding amount from invoice 534. We have now corrected the invoice as advised.
Regards,
Brigette.
---
Thank you Brigette,
Rob,
I assume your [sic] overseas. Please advise when you are back, to discuss the below. As per SOP we need to finalise this by the 6th of September.
Kind regards,
SHADY ANTONIOU
---
Shady,
I arrive Back on the 8th. Please respond by email and we will address any concerns you have.
Kind regards,
Robert Rondi
0408 392 429
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Rob,
I’m at a total loss for the credit. As I explained last month the CV for fire dampers were paid along with the progress claim. And you had been additament [sic] it had not. Can you please comment on the credit? Are you now not wanting to do the fire dampeners?
Kind regards,
SHADY ANTONIOU”
37 Citi-Con argues that amended INV-0562 is an additional payment claim in respect of the same reference date, contrary to SOP Act s14(8).[51] Relying on Commercial and Industrial Constructions Group Pty Ltd v King Construction Group Pty Ltd[52] and Dual Corp Pty v Remo Constructions Pty Ltd,[53] Citi-Con submits that the latter payment claim is therefore void.[54] Citi-Con concedes that a payment claim can be “revised” if the claimant unequivocally communicates that the payment claim is withdrawn or abandoned and replaced,[55] referring to Valeo Construction v Pentas[56] (“Valeo”). In support of its submission on this point, Citi-Con sets out examples from Valeo where a revision is unequivocally communicated and where it is not. It asserts that Cool Logic’s communication here falls into the latter category.[57]
[51]Defendant submissions [31]-[32]
[52][2015] VSC 426 [95]-[97]
[53](2009) 74 NSWLR 190 at [14]
[54]Ibid
[55]Citi-Con’s submissions [33]
[56][2018] VSC 242 [36]
[57]Citi-Con’s submissions [52(a)]
38 Cool Logic submits that Citi-Con was plainly aware of which payment claim it was responding to when it issued the relevant payment schedule,[58] reinforced by the fact that Citi-Con contended before the Supreme Court that its payment schedule responded to amended Payment Claim INV-0562, as the basis for disputing the adjudication determination. Cool Logic submits that, in any event, INV-0562 and amended INV-0562 have different reference dates, and therefore SOP Act s14(8) does not apply.[59]
[58]Cool Logic’s submissions [36]
[59]Ibid [39]
39 I am satisfied that Ms Kennedy’s initial email set out above effectively withdrew and replaced INV-0562. In particular, the passages in her email: “we have amended the original invoice 0562 to a current amount of $24,069.61” and “Please disregard the previous invoice amount of $44,291.50” clearly communicated to Cool Logic that the original INV-0562 was withdrawn and replaced. Although Ms Kennedy did not provide the level of clarity evident in Valeo (for example, use of the phrases “withdrawn” and “no longer relies on that payment claim”), in my view it was to the same overall effect. I also agree with Cool Logic that the effect of these expressions is reinforced by the fact that Citi-Con clearly understood that the invoice had been withdrawn and replaced and relied upon the amended invoice before the Supreme Court.
40 Accordingly, in my view, the payment claim represented by the replacement INV-0562 is not invalid by operation of SOP Act s14(8).
Is the payment claim submitted out of time valid?
41 Citi-Con submits that INV-0498 issued under the Fitz & Co contract is invalid because it was served beyond three months after the last available reference date which could have been said to arise on 25 November 2018.[60] Relying on s14(4) and Shape Australia Pty Ltd v The Nuance Group (Australia) Pty Ltd,[61] Citi-Con argues that the phrase “for works done to the end of that month” in clause 37.1 of the Fitz & Co contract, sets up a “threshold requirement” that the work had to be carried out in a relevant month to enliven a reference date in that month.
[60]Citi-Con’s submissions [56(a)]
[61][2018] VSC 808
42 Cool Logic submits that it is unclear how Citi-Con alleges that the reference dates available under the Fitz & Co contract were limited in the way it contends.[62] It argues that there is no express contractual provision that stipulates a date or time when reference dates no longer accrue under the contract. Without such express provision, it says that reference dates continued to arise each month under that contract until the contract came to an end, at the conclusion of the Defects Liability Period. Cool Logic further argues that to the extent Citi-Con alleges the works claimed in INV-0498 could not be claimed in that invoice due to a contractual stipulation as to the scope of work that may be claimed in respect of a particular reference date, that amounts to a contractual defence contrary to s17(4)(b)(ii) of the SOP Act.[63]
[62]Cool Logic’s submissions [29A]
[63]Ibid
43 I agree with Cool Logic that the reference dates under the Fitz & Co contract were not limited in the way alleged by Citi-Con. To begin with, despite my searches through the Fitz & Co contract (including Annexure A) and the General Conditions of Subcontract AS4901-1998, I was unable to find the phrase that Citi-Con asserts sets up the threshold requirement. In any event, I agree with Cool Logic that reference dates continued to arise each month under the contract until it came to an end. I also agree that a defence in relation to the alleged effect of a contractual stipulation as to the scope of works that may be claimed is a defence in relation to a matter arising under the construction contract that is precluded by SOP Act s17(4)(b)(ii).
Do the payment claims contain excluded amounts?
44 Citi-Con submits that Cool Logic has failed to establish whether INV-0363, INV-0489, INV-0547, INV-0548, INV-0562 and INV-0577 contain excluded amounts.[64] It submits that the payment claims do not identify with sufficient particularity the construction works to which they relate, such that it is not possible to determine whether the amounts claimed included “excluded amounts”.[65] Citi-Con refers to evidence that suggests it is likely Cool Logic’s claims include excluded amounts,[66] and argues that Cool Logic bears the onus of establishing the absence of excluded amounts, citing John Beever v Road Corporation[67] (“John Beever”).
[64]Citi-Con’s submissions [3(c)]
[65]Ibid [24(a)].
[66]Ibid [24(b)]; Second affidavit of Brendon Smith [13]-[21]
[67][2018] VSC 635, Digby J at [44], [131] and [132]
45 Cool Logic submits in reply that it only bears an onus for claims made under SOP Act s16, where a court must be satisfied (pursuant to s 16(4)(a)(ii)) that the claimed amount does not include any excluded amount.[68] It submits that no such onus exists for claims under SOP Act s17. Cool Logic submits that the reference to John Beever[69] relates only to claims under s16.[70] Thus, it says, it only bears an onus in relation to the payment claims relying on s16, namely INV-0489, INV-0547 and INV-0577.[71] It later also argues that, even if it had an onus to show the s17 invoices did not contain excluded amounts, the evidence of Mr Rondi demonstrates that the claims under s17 were for contract scope works only and did not contain excluded amounts.[72]
[68]Cool Logic’s reply submissions [30]
[69][2018] VSC 635 at [131]-[132]
[70]Cool Logic’s reply submissions [30]
[71]Ibid [31]
[72]Ibid [34]
46 Dealing with the claims based on INV-0548, INV-0363 and INV-0562, it is not in dispute that these rely on payment schedules provided by Citi-Con pursuant to SOP Act s15. Thus, the threshold question posed by the parties is whether the onus on a claimant to show that a payment claim does not include any excluded amounts, extends to these three claims. It is well established that the onus applies to payment claims.[73] However, neither party has referred me to any authority touching on the question of whether the onus extends to a claimant suing on a payment schedule provided under SOP Act s17 and I am not aware of any. In particular, I agree with Cool Logic that John Beever is silent on the issue. I will therefore approach the question from first principles of statutory construction.
[73]SOP Act s16(4)(a)(ii) and John Beever at [44], [131] and [132]
47 The purpose of the SOP Act has been repeatedly and authoritatively stated and is well understood. I adopt with respect the summary of the effect of the SOP Act by Justice Vickery in Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor.[74]
[74](2009) 26 VR 112 at [2] and [43]-[46]
The Act has had a substantial effect in shifting the power balance between principals and subcontractors in construction contracts in Victoria and in other States and Territories where legislation in similar terms and with the same objects has been enacted. Subcontractors are now in a position to promptly secure payments of progress claims with the aid of a statutory mechanism which compliments the provisions of the construction contract. Outstanding claims of the principal under the contract, arising for example from poor workmanship or delay, are preserved as future enforceable claims, but cannot stand in the way of prompt payment of a progress claim found to be due under the expeditious process provided for in the Act.
The Victorian Act also preserves a claimant’s right to commence proceedings under the relevant construction contract, including proceedings in a court, and any arbitration proceedings or other dispute resolution proceedings: s48 [sic - s47]. Further, in any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal is required to make allowance for any sum paid pursuant to the Act in any order which is made: s 48(3) [sic – s47(3)].
The principle that the respondent to a payment claim for a progress payment “should pay now and argue later” is given full effect under the Act. This regime promotes the object of the Act, being to facilitate timely payments between the parties to a construction contract and to provide for the rapid resolution of disputes arising in respect of progress claims under construction contracts.
From this analysis, I readily accept the observation made in a number of recent authorities that the Act places the claimant in a privileged position in the sense that it acquires rights that go beyond its contractual rights.
The Act also manifests another central aspiration, that of freedom from excessive legal formality. The provisions demonstrate a pragmatic concern to provide a dispute resolution process which is not bedevilled with unnecessary technicality. The Building and Construction Industry Security of Payment Act 1999 (NSW) has led to a spate of litigation in its relatively short life. If the Victorian Act became prone to challenges founded on fine legal points, an important object of the Act would be defeated by the twin adversaries of cost and time.”
48 This last passage was cited with approval by the Court of Appeal in Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd.[75]
[75][2011] VSCA 99 at [11]
49 In my view, where a recipient of a payment claim responds to that claim by the provision of a payment schedule under s17, it has moved to the next phase of the statutory mechanism for facilitating prompt payment of claimed amounts, consistently with the purpose of the SOP Act. The provision of the payment schedule effectively gives the claimant the fresh option of either accepting the (usually lower) sum offered by the payment schedule (for the time being) or seeking an adjudication under SOP Act s18. In my view, it would not advance the purpose of the SOP Act if, having provided a payment schedule, the recipient can seek to thwart the claimant from taking the first option, by raising an objection to the payment claim that has been effectively overtaken by the payment schedule.
50 The SOP Act provides a clear stepped and incremental process for swift recovery of sums owing under construction contracts. Providing a claimant meets the minimum statutory requirements set out in the SOP Act, each step opens up options for recovery. In particular, under s16, if a party served with a valid payment claim fails to provide a payment schedule, the claimant can sue on the payment claim or make an adjudication application. If the claimant chooses to bring an adjudication application under s18, this opens up an alternative pathway to recovery. But if the party served provides a payment schedule, the payment schedule provides a claimant with a new source for either an action in court or an adjudication application. In my view, it supersedes the payment claim and comes with its own set of statutory requirements.
51 Against that background, and noting that it is a rule of construction that is to be applied with caution, I am satisfied that this is an appropriate case for the application of the principle of statutory construction: expressio unius est exclusion alterius – an express reference to one matter indicates that other matters are excluded.[76] Put simply, an equivalent provision to s16(4)(a)(ii) is conspicuously absent from s17(4)(a), which is otherwise in almost identical terms to s16(4)(a). It follows that I agree with Cool Logic’s submission that its onus of establishing that claims under s16 do not contain excluded amounts, does not extend to a claim relying on a payment schedule under s17.
[76]In the sense applied in Salemi v MacKellar (No 2) (1977) 137 CLR 396
52 Thus I am satisfied that Cool Logic’s claims in respect of INV-0548, INV-0363 and INV-0562 are not defeated by any failure by Cool Logic to establish the absence of any excluded amounts. It is therefore not necessary for me to consider the question of whether the evidence demonstrates that the claims under s17 were for contract scope works only and did not in fact contain excluded amounts. Had it been necessary to do so, I would likely have agreed with Cool Logic on this issue, with the exception of INV-0562. This is because, to my mind, the reference in that invoice to “Rectify Fire pump Duct” raises a question as to whether the invoice concerns, at least in part, a variation.
53 Turning next to whether the three payment claims under SOP Act s16 (namely INV-0489, INV-0547 and INV-0577) contain excluded amounts, in relation to INV-0547, Cool Logic submits this claim relates to Cool Logic’s scope of works under the New Street Agreement, which is not an excluded amount.[77] In this regard, Cool Logic relies on the third affidavit of Robert Rondi, in which Mr Rondi deposes that:
“The works the subject of Payment Claim INV-0547 is described as ‘Supply & Install(fit off) [sic] AC Indoor to 14 Appts’ and ‘Supply and Install (Fitt off) Ventitlation [sic] to 14 Appts’. This relates solely to Cool Logic’s contract scope of works under the New Street Agreement.[78]
[77]Ibid [32]
[78]Third affidavit of Robert Rondi [17(e)]
54 Cool Logic submits that Citi-Con does not positively allege that INV-0547 includes any excluded amounts.[79]
[79]Cool Logic’s reply submissions [32]
55 In relation to INV-0489 and the part of INV-0577 that relates to variations, Cool Logic’s submissions can be summarised as follows:
· these are “second class variations” within the meaning of s 10A(3) (which are claimable variations);[80]
[80]Ibid [33(a)]
· SOP Act s10A(3)(a) is satisfied because the work which is the subject of those invoices has been carried out;
· in response to Citi-Con’s assertion for INV-0489 that the work was not carried out prior to submitting the payment claim contrary to s10A(3)(a),[81] that the work need not be carried out prior to the payment claim;[82]
[81]Citi-Con’s submissions [46(b)]
[82]Cool Logic’s reply submissions [33(a)]
· under SOP Act s10, a person is entitled to payment for “construction work carried out or undertaken to be carried out”, which suggests that the work need not be carried out prior to the date of the payment claim;[83]
[83]Ibid
· thus, s10A(3)(a) requires only that the work has been carried out by the time Cool Logic is suing on the payment claim and it does not matter that the variation work was in prospect when the payment claim was served;
· SOP Act s10A(3)(b) is satisfied because Cool Logic was directed to carry out the claimable variations;[84]
[84]Cool Logic’s reply submissions [33(c)]
· SOP Act s10A(3)(c) is satisfied because the parties disagree that Cool Logic is entitled to a progress payment that includes an amount for the variations in INV-0489 and INV-0577 (s10A(3)(c)(iv));[85]
[85]Ibid [33(d)]
· in the alternative, a claim which contains excluded amounts remains valid provided the excluded amount can be severed or “cleanly excised” or “blue-pencilled” from the balance of the claim; [86]
[86]Cool Logic’s submissions [18]. Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183 Vickery J at [65] – [74]
· thus, even if it is wrong about the work not needing to be completed prior to payment claim, the evidence demonstrates that when Cool Logic submitted INV-0489, it had completed 50% of the works;
· it follows that 50% of payment claim INV-0489 can be claimed, with the remaining 50% severed as an excluded amount;[87] and
· similarly, if the court finds that the variations in INV-0577 are excluded amounts, these too can be severed, leaving a valid claim for the part of INV-0577 that relates to scope work (being $19,569.20).[88]
[87]Ibid [35]
[88]Ibid [35]
56 In relation to each of these three payment claims, I reject Citi-Con’s submission that they do not sufficiently identify the construction work, such that it is not possible to determine whether they claim for excluded amounts. As I conclude below, I am satisfied that all of the payment claims sufficiently identify the construction work to which they relate.
57 Starting with payment claim INV-0547, I am satisfied that the description of the works in that payment claim is sufficient to discharge Cool Logic’s onus of establishing that it does not extend to any excluded amounts. In my view, the description “Supply & Install…AC Indoor to 14 Apts”, read together with the quantity, unit price and total, is sufficient to establish that no part of the claim relates to anything other than this straightforward component of the original scope of works under the New Street contract. I am reinforced in this view by the fact that Citi-Con does not adduce any evidence to suggest otherwise.
58 Turning next to payment claim INV-0489, it is not in dispute that this payment is in respect of a variation and thus requires consideration of whether all or part of the payment claim is a claimable variation under SOP Act s10A. As noted above, Cool Logic says that it is claimable, because it is a “second class variation” and all the elements of s10A(3) are satisfied. The first of these (s10A(3)(a)) is relevantly that “the work has been carried out…under the construction contract”. Citi-Con says this element requires that the work must be completed (“has been carried out”) when the payment claim is served. Cool Logic argues that, when read with s10, the payment claim for a claimable variation can include work that that is “undertaken to be carried out” (that is, future work). The work need only be completed at the time the claim is sought to be enforced. It adds that the evidence is that the work was “approximately 50%” completed when the payment claim was sent.[89]
[89]Third affidavit of Robert Rondi [14]
59 I reject the argument that Cool Logic can pursue 50% of the payment claim on the basis that the work was 50% completed at the time the payment claim was served. There is no way of identifying the actual value of any completed work from the payment claim, which might otherwise have supported an argument that the part of the claim representing uncompleted work can be severed. Thus, the payment claim will stand or fall on the question whether SOP Act s10(3)(a) requires that the work be completed before the payment claim is served. Again, neither party has referred me to any authority directly on this point and I am otherwise unaware of any.
60 In seeking to resolve this issue, I would again adopt (with respect) the observations of Vickery J, this time on the difficulties attending the construction of SOP Act s10A.[90] On one view, it could be argued that the focus of s10A(3)(a) is on whether the work was carried out “under the construction contract”, rather than when it was carried out, and thus the words “has been carried” out should be read as Cool Logic contends. However, it is interesting to compare s10A(2)(a) and (b), where the focus seems to be squarely on the need to establish that the work is complete. On the other hand, s10A(2)(d) reverts to language similar to 10(1)(b)(i) (“undertaken to carry out”), suggesting perhaps it can encompass work that is agreed but is yet to be completed.
[90]Branlin Pty Ltd v Totaro [2014] VSC 492 at [34]-[35]
61 The frankly poor drafting of the provision makes the whole task of construction particularly problematic. To read the provisions as limiting claimable variations to those where the work has been completed at the time the payment claim is served, instinctively seems unduly restrictive and does not sit comfortably with the purpose of the SOP Act. But the contrary position is supported both by the literal meaning of the words and another principle of statutory construction, namely, generalia specialibus non derogant: where there is conflict between general (SOP Act s10(1)(b)) and specific (SOP Act s10A(3)(a)), the specific provisions prevail. On balance, I am reluctantly forced to conclude that the latter section speaks to the state of affairs as at the date when the payment claim is served. Cool Logic’s own evidence is that the work covered by the claim had not been completed at the time INV-0489 was served.
62 Cool Logic’s claim in respect of payment claim INV-0489 must therefore fail.
63 Finally, in relation to payment claim INV-0577, I agree with Cool Logic that two items of the work identified in that payment claim totalling $19,569.20 (ex GST) relate to the scope of works under the New Street contract. This is sufficiently clear from the description of those two items in isolation, and is reinforced by the fact that each of the other items is clearly identified as a variation. If it were necessary to do so, I would also accept Cool Logic’s submission that the variation items in INV-0577 can be severed from the balance of the claim,[91] leaving a valid claim for $19,569.20. In my view, the way the payment claim itemises and describes part of this claim attracts the operation of the principles of severance, as applied by Vickery J in the two cases cited.
[91]Vickery J Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183 at [65] – [74] (Vickery J) and Gantley Pty Ltd v Phoenix International Group [2010] VSC 106, Vickery J at [93]-[116]
64 However, there is first the question of whether the works had been carried out when INV-0577 was served (20 September 2019). If this was so, it will get past the first hurdle posed by SOP Act 10A(3)(c), based on the construction discussed above. On this issue, there is a conflict between the evidence of Mr Rondi and that of Mr Smith. Mr Rondi deposes in effect that all the work which was the subject of INV-0577 had been carried out on or before 20 September 2019.[92] He relies upon the photographs of the works allegedly the subject of INV-0577 and a letter sent from Cool Logic, dated 18 September 2019, which purports to show photos of works continuing on the New Street Project. [93]
[92]Second affidavit of Robert Rondi [13]
[93]Exhibit RR-45 to the second affidavit of Robert Rondi
65 Brendan Smith of Citi-Con deposes that Cool Logic did not perform any work on-site after July 2019. He says this was because the parties were in dispute in relation to the works that formed part of the scope of works and the works that remained outstanding. Further, he deposes that Cool Logic refused to undertake further works.[94] Mr Smith relies upon emails between the parties between 29 and 31 July 2019, which refer to a meeting on-site between the parties on 29 July 2019 and makes reference to discussions about outstanding works.[95] Mr Smith deposes that Cool Logic did not perform any works on-site after that exchange of emails.[96]
[94]Second affidavit of Brendan Smith [13]
[95]Exhibit BS-14 to the second affidavit of Brendan Smith
[96]Second affidavit of Brendan Smith [16]
66 Mr Smith also:
· relies upon an email from Citi-Con to Cool Logic dated 1 August 2019 which referred to incomplete works;[97]
[97]Exhibit BS-15 to the second affidavit of Brendan Smith
· deposes that Cool Logic did not return to the site and complete those incomplete works;[98]
[98]Second affidavit of Brendan Smith [18]
· relies upon a show cause notice Cool Logic sent to Citi-Con dated 16 August 2019, which relevantly stated “work on this project has been suspended pending payment”;[99] and
· relies upon the fact that Citi-Con engaged another subcontractor – Alpha Heating and Cooling – to complete the works.[100]
[99]Exhibit BS-16 to the second affidavit of Brendan Smith
[100]Second affidavit of Brendan Smith [21]
67 In reply, Mr Rondi relies upon the following evidence that the works were complete:
· delivery reports for deliveries from Alpha Supply for the New Street project on 5 August 2019;[101]
[101]Exhibit RR-48 to the third affidavit of Robert Rondi
· a photograph of a completion register which showed that a Cool Logic employee (Matthew McPhee) had signed off on works for Apartments 101 and 102 of the project on 7 August 2019;[102]
[102]Exhibit RR-49 to the third affidavit of Robert Rondi
· a signed variation advice notice no. IV14 dated 8 August 2019 in relation to condensing units for balconies to alternative locations for various apartments and other ancillary works for the New Street Project;[103] and
· a signed delivery docket from Victoria Ductwork & Sheetmetal showing that on 20 September 2019, Cool Logic received a delivery from Victoria Ductwork & Sheetmetal for works to be carried out at the New Street Project.[104]
[103]Exhibit RR-50 to the third affidavit of Robert Rondi
[104]Exhibit RR-51 to the third affidavit of Robert Rondi
68 Mr Rondi also notes that:
· Cool Logic had in fact completed the works referenced in the spreadsheet of Citi-Con as incomplete (mechanical ducts hanging from the ceiling in Apartment 101) and it is likely other subcontractors subsequently unfixed the ductwork to complete their works; and
· even though Citi-Con issued a show cause notice dated 16 August 2019 to the effect that works were suspended pending payment, Cool Logic did not in fact suspend works.[105]
[105]Third affidavit of Robert Rondi [12]
69 On balance, I find the evidence of Mr Rondi and the documents he relies upon as more persuasive and am sufficiently satisfied for the purpose of this proceeding (noting that it provides only a temporary remedy) that the work in respect of the variation items in INV-0577 was complete when the payment claim was served. In relation to the balance of the matters necessary to establish a second class of claimable variation under s10A(3), I agree with and accept Cool Logic’s submissions,[106] with one exception.
[106]Cool Logic’s reply submissions at [33(b)-(e)]
70 The exception arises from the fact that the total amount for the claims under the New Street contract for the second class variations ($18,207.30 ex GST) exceeds 10% of the consideration under the New Street contract ($12,900 ex GST), so the reference to $5,000,000 is to be read as $150,000 (SOP Act s10A(3)(d) and (4)). However, the New Street contract still satisfies these requirements because the consideration under the contract at the time it was entered into was less than $150,000 (namely $129,500, ex GST).
71 Accordingly, I am satisfied that payment claim INV-0577 is not invalid on the basis that it includes excluded amounts.
72 For completeness, I note that Cool Logic also submits in relation to all of its claims for claimable variations, that if Citi-Con considered Cool Logic was not entitled under the relevant contract to payment for claimable variations, the SOP Act provides that it may issue a payment schedule under s15, indicating the amount it intends to pay in respect of each claimable variation.[107] Cool Logic asserts that Citi-Con chose not to do so and must now bear the consequences of that decision.[108] Subject to the issue of severance, I have found above that a payment claim that includes an excluded amount fails to satisfy the minimum requirements under SOP Act s14 and is therefore a nullity. It is not saved by Citi-Con’s decision not to issue a payment schedule under SOP Act s15.
[107]Cool Logic’s reply submissions [33(b)]
[108]Ibid
Did the payment claims adequately identify the construction work?
73 On this issue, Citi-Con submits that INV-0363, INV-0548, INV-0562, INV-0498 and INV-0577 fail to adequately specify the construction works, value, percentage and detail to which they relate, contrary to s14(2)(c) of the SOP Act.[109] Cool Logic submits that the payment claims adequately identify the construction work to which they relate.[110] Relying on Seabay Properties Pty Ltd v Galvin Construction Pty Ltd,[111] Cool Logic submits that the fact Citi-Con submitted payment schedules in response to the payment claims is a strong indication that it understood the work to which the claims related.[112]
[109]Citi-Con’s submissions [3(b)]
[110]Cool Logic’s reply submissions [23]
[111]Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183 at [146] (Vickery J)
[112]Cool Logic’s reply submissions [23]
74 Whether a payment claim sufficiently identifies the construction work is an objective test.[113] The test is whether a reasonable person in the position of Citi-Con can comprehend the basis of the claim.[114] The test is not overly stringent; the court must not adopt an unduly technical approach.[115] The context of the payment claim is relevant, including industry conventions and earlier contractual dealings.[116] The background knowledge of the parties from their past dealings and prior exchanges of information (including correspondence) are also relevant.[117] Thus the court may look beyond the face of the payment claim.
[113]John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126, Lyons J at [83]
[114]Ibid
[115]Ibid; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106, Vickery J at [51]
[116]Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391 [40]
[117]John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126, Lyons J [83]; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 Vickery J, at [51]
75 The impugned claims described the construction work as follows:
· INV-0363: “supply & install basement 1&2 exhaust ductwork”;[118]
[118]Exhibit RR-02 to the first affidavit of Robert Rondi
· INV-0548: “supplied and installed apartment outdoor condensing units” and “supplied and installed balance of basement grills”;[119]
[119]Exhibit RR-06 to the first affidavit of Robert Rondi
· INV-0562: “supply & install remaining outdoor condensing units & rectify fire pump duct”;[120]
· INV-0498: “balance of contract” and “50% retention due as per contract terms (total retention $11687.50)”;[121]
· INV-0577: “basement ductwork supplied & installed @70% of contract value”, “variation IV43 – fire rated dampers and collars to mechanical fixtures on level 4 @ (80% of variation value)”, “50% balance rough in level 5”; “50% balance rough in level 5 (variation)”, “variation IV13 – relocation of condensing units + ductwork changes” and “IV14 – apartment 101 AC upgrade”.[122]
[120]Exhibit RR-09 to the first affidavit of Robert Rondi
[121]Exhibit RR-20 to the first affidavit of Robert Rondi
[122]Exhibit RR-29 to the first affidavit of Robert Rondi
76 In my view, this is a specious basis for opposing the claims. Given the nature of Cool Logic’s specialist engagement and the scope of works set out in the various contracts, the construction work covered by the claims could hardly be clearer. I am comfortably satisfied that a reasonable person in the position of Citi-Con, on receiving the impugned claims, would readily comprehend the work to which they related.
77 I find that each of INV-0363, INV-0548, INV-0562, INV-0498 and INV-0577 adequately identified the construction work to which they related.
Did the payment claims fail to provide mandatory documents?
78 Citi-Con submits that the following payment claims failed to provide a statutory declaration or other evidence, contrary to the agreements:
· INV-0363, INV-0489, INV-0548, and INV-0562[123];
[123]Contrary to clause 12.1(a) and Schedule 3 of the Plenty Road agreement
· INV-0498;[124]
[124]Contrary to clause 38.1 of the Fitz & Co agreement
· INV-0503[125]; and
· INV-0547 and INV-0577.[126]
[125]Contrary to clause 38.1 of the Moore Street agreement
[126]Contrary to clause 12.1(a) and Schedule 3 of the New Street agreement
79 Citi-Con further submits that Cool Logic failed to complete a certificate of release agreeing to the final adjusted contract sum for INV-0619, contrary to clause 37.4 of the Fitz & Co agreement.[127]
[127]Citi-Con’s submissions [59(b)]
80 Cool Logic submits in response that Citi-Con is relying upon a contractual defence, contrary to s17 of the SOP Act.[128] Relying on J Hutchinson Pty Ltd v Glavcom Pty Ltd,[129] Cool Logic argues that non-compliance with contractual provisions will not affect the validity of a payment claim.[130]
[128]Cool Logic’s reply submissions [40]
[129][2016] NSWSC 126 [27]
[130]Cool Logic’s reply submissions [41]
81 I broadly agree with Cool Logic’s submissions. Citi-Con seeks to impugn the invoices on the basis that they failed to comply with a contractual provision. This amounts to a contractual defence, contrary to SOP Act s16(4)(b)(ii) and 17(4)(b)(ii). However, I note that similar argument was recently considered Macnamara J in a recent decision of this court in Zulform Pty Ltd v Donmar Construction Pty Ltd.[131] In that case, his Honour held:
In Argyle Services Pty Ltd v One Three Wilson Pty Ltd [2019] VCC 1567, I considered a contention that a purported “payment claim” was invalid by reason of it not being accompanied by a required tax invoice. The same sort of arguments were pressed upon me relative to the tax invoice as were raised in the present proceeding relative to the statutory declaration. I referred to a number of the same authorities and, in addition, to a journal article by MacDougall J, the trial judge in the Contrax Plumbing case dealing with this issue. The upshot of these matters seems to be that additional conditions as to payments such as these may be contractually imposed, but such clauses may be regarded as invalidated by the “no contracting out” principle of the Act, where the conditions are onerous and have no legitimate utility. In Argyle I concluded that the requirement for the provision of a tax invoice as part of the payment claim process was not onerous and not lacking in utility. The same may be said for the requirement here for the provision of the statutory declaration as to the meeting of various liabilities. MacDougall J had concluded that the contractual provisions with which he was dealing in Contrax Plumbing would have added 200 days to the payment claim process; see [65] of the judgment in Argyle Building Services. If the requirement for the statutory declaration is imposed by contract, it can be regarded as an obstacle to the validity of the invoice as a payment claim under the Act, and this situation is not affected by the prohibition of contracting out because that requirement is not onerous or devoid of utility.”
[131][2020] VCC 562
82 In that case, the relevant provision of the construction contract was to the effect that the statutory declaration need only be provided “on request”, and his Honour found that no request had in fact been made. I confess (with respect) that I have some reservations about the argument that provisions of this kind in a contract should be regarded as not offending the prohibition against contracting out in SOP Act s48, regardless of questions of whether the provisions are onerous and of no utility.
83 However, it is not necessary for me to embark on a more detailed analysis of the issue, because I am satisfied that in the context of the series of relatively small contracts for work by a specialist contractor like Cool Logic, the requirements in this case are sufficiently onerous and lacking in utility. In respect of the latter issue, I note that there is no suggestion that Citi-Con was in the least concerned to follow up the failure to provide the statutory declarations apparently until it was seeking grounds for opposing the payment claims. I therefore reject Citi-Con’s defence to the claims based on Cool Logic’s failure to supply these documents.
Is a claim for retention moneys a claim for ‘construction work’?
84 Citi-Con submits that INV-0619 seeks the recovery of retention moneys, which is not a claim for construction work within the meaning of SOP Act s5.[132] Cool Logic argues in response that a claim for retention moneys is a claim for construction work within the meaning SOP Act of s5,[133] relying on Vanella Pty Ltd v TFM Epping Land Pty Ltd[134] (“Vanella”). Cool Logic submits that although Henry J in Vanella assessed the New South Wales SOP Act, the provisions with which he was concerned are materially similar to those under the Victorian counterpart.[135]
[132]Citi-Con’s submissions [59]
[133]Cool Logic’s reply submissions [24]
[134][2019] NSWSC 1379, Henry J at [119]-[123]
[135]Cool Logic’s reply submissions [25]
85 In Vanella, the NSW Supreme Court held that a payment claim may include a claim for retention moneys because of s 13(3)(b) of the NSW SOP Act.[136] That provision relevantly provides:
[136][2019] NSWSC 1379, Henry J at [122]
“(3) The claimed amount may include any amount--
(a)that the respondent is liable to pay the claimant under section 27(2A), or
(b)that is held under the construction contract by the respondent and that the claimant claims is due for release.”
86 I do not accept Cool Logic’s submission that the provisions with which Henry J was concerned are “materially similar” to those in the Victorian SOP Act. Section 14 of the Victorian SOP Act provides:
“(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.”
87 Two recent Victorian decisions have also considered the question of whether retention moneys can form part of a SOP application. In Cat Protection Society of Victoria v Arvio Pty Ltd,[137] Digby J held that a progress claim for the balance of retention moneys on the expiration of a defects liability period was impermissible, because it was not contemplated by the contract.[138] The relevant contract stipulated that payment claims could be made “for the value of materials supplied and work done by the Contractor under this Contract”. Digby J held that retention moneys did not fall within that provision.[139] In Levi Pty Ltd v Z&H Building Development Pty Ltd[140], the first defendant submitted that a claim for retention moneys was not a claim for carrying out work directed by a registered building surveyor under the SOP Act. Regrettably, his Honour considered that the question of whether retention moneys could be claimed on an SOP application was beyond the scope of the judicial review application before him.[141]
[137] [2018] VSC 757
[138]Ibid [64]
[139]Ibid
[140] [2019] VSC 633
[141]Ibid [107]-[108]
88 As a general observation, it seems to me surprising that a claim for retention moneys (providing that it meets the other statutory requirements) would not generally be treated as relating to construction work given that, almost by definition, it is retained from sums otherwise due for that work. However, in this case it seems to me that there is an alternative basis for Cool Logic’s claim under INV-0619. It is clear from the material filed in support of Cool Logic’s claims generally that the practice as between Cool Logic and Citi-Con was that:
· Cool Logic’s payment claims were for the full amount owing for the claimed construction work, without allowing for retention; and
· as a general rule, Citi-Con would issue a payment schedule deducting (sometimes among other things) the amount of the retention.[142]
[142]See, for example, Exhibit RR-02 and RR-03 to the first affidavit of Robert Rondi
89 Although the material (thankfully) does not extend to including a copy of every payment claim under every contract, there is nothing to suggest that the parties adopted a different practice in respect of the Fitz & Co contract, and I so infer. Accordingly, I am satisfied that payment claims under the Fitz & Co contract preceding claim INV-0619 are likely to have included claims in respect of the construction work represented by the retention amounts. In my view, INV-0619 can therefore be treated as a payment claim under SOP Act 14(8), that is, a claim for an amount that has been the subject of previous claims where the amount has not been paid.
90 Citi-Con also argues that INV-0619 is not a valid payment claim because Cool Logic failed to complete a certificate of release agreeing to the final adjusted contract sum before the claim was made pursuant to clause 37.4 of the Fitz & Co contract.[143] I agree with Cool Logic that this argument should be rejected on the basis that it constitutes a contractual pre-condition to the making of a valid payment claim other than those set out above as leading to a finding that the payment claim is a nullity.[144] It is therefore inconsistent with SOP Act s48.
[143]Citi-Con’s submissions at [59]
[144]Cool Logic’s replay submissions at [42]
91 It follows that I am satisfied that INV-0619 is a valid payment claim.
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Certificate
I certify that these 31 pages are a true copy of the judgment of His Honour Judge Woodward delivered on 20 August 2020.
Dated: 20 August 2020
Claire Findlay
Associate to His Honour Judge Woodward
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