Drake Constructions Vic Pty Ltd v Three Construct Group Pty Ltd

[2023] VCC 1325

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

Case No. CI-23-03289

Drake Constructions Vic Pty Ltd (ACN 159 218 596)	Plaintiff
v
Three Construct Group Pty Ltd (ACN 622 604 246)	Defendant

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JUDGE:	Her Honour Judge Burchell
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers, written submissions dated 24 July 2023
DATE OF RULING:	4 August 2023
CASE MAY BE CITED AS:	Drake Constructions Vic Pty Ltd v Three Construct Group Pty Ltd
MEDIUM NEUTRAL CITATION:	[2023] VCC 1325

RULING
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Subject:CONTRACTS

Catchwords:              Building contract – payment claim – entitlement to unpaid amounts – failure to issue payment schedule

Legislation Cited:      Building and Construction Industry Security of Payment Act 2002 (Vic) ss3–7, 9, 12, 14–17, 47, 48; Civil Procedure Act 2010 (Vic) s7; County Court Civil Procedure Rules 2018 rr6.03, 63A.07

Cases Cited:Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; Vanguard Developments v Promax [2018] VSC 386; Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385; Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112; Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd [2011] VSCA 99; 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674; SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; John Beever v Roads Corporation [2018] VSC 635; Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053; Titcher v Marcelis [2015] VSC 578; APR Structural Steel Pty Ltd v Devco Project & Construction Management Pty Ltd [2021] VCC 1577

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	T B D Gorton	Gadens Lawyers
For the Defendant	--	--

HER HONOUR:

Summary and outcome

1In this proceeding, the plaintiff, Drake Constructions Vic Pty Ltd (“Drake”), applies for judgment against the defendant, Three Construct Group Pty Ltd (“TCG”), pursuant to s16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (“SOP Act”). Drake makes the application by summons on originating motion dated 27 June 2023. The application arises out of carpentry works which Drake performed on three projects at the following sites:

(a)   36 Martins Lane, Portsea;

(b)   64 Sutherland Road, Armadale;

(c)   2 Chamois Road, Mount Buller.

2Drake submits it is entitled to judgment because TCG did not provide payment schedules and became liable to pay the total claimed amount to Drake under s15(4) of the SOP Act, being $29,519.60 plus interest and costs. Although TCG was served and procedural orders were made for the filing of affidavits and submissions in opposition, TCG did not file a notice of appearance and did not participate in the proceeding.

3In my judgment, Drake has satisfied the necessary requirements of s14 of the SOP Act in respect of the payment claims. TCG, therefore, is liable to pay the total claimed amount, being $29,519.60, which is yet to be paid.

4Accordingly, I will order that there be judgment for Drake against TCG in the sum of $29,519.60 plus interest pursuant to s12(2)(a) of the SOP Act in the sum of $1,181.69. Further, I order that TCG pay Drake’s costs of and incidental to the proceeding fixed in the sum of $11,374.59.

Factual background

5Drake relies upon the affidavit of Vincenzo Salvatore Riali, Construction Manager of Drake, sworn 14 June 2023. On 3 July 2023, Drake’s solicitor personally hand-delivered an envelope addressed to TCG to its registered office. It contained:

(a)   a covering letter dated 3 July 2023;

(b)   copy of sealed Originating Motion filed 27 June 2023;

(c)   copy of sealed summons filed 27 June 2023;

(d)   affidavit of Vincenzo Salvatore Riali sworn 14 June 2023; and

(e)   copy of orders made by her Honour Judge Burchell dated 23 June 2023.

6Drake relies upon the affidavit of service of Pearl Yan-Ru Chen sworn 21 July 2023 and its written submissions. According to r6.03 of the County Court Civil Procedure Rules 2018 (“the Rules”), personal service was effected on TCG on 3 July 2023. The time by which TCG was to file a notice of appearance was 13 July 2023. TCG has not filed a notice of appearance as required by the Rules and, therefore, the application is being determined in the absence of TCG.

Martins Lane Agreement

7Drake deposes that Matt Hill, on behalf of TCG, signed a written carpentry labour services agreement on 12 October 2022 (“Martins Lane Agreement”).

8Under the Martins Lane Agreement, Drake provided carpentry services and issued payment claims on the following dates:

Carpentry services provided	Payment claim issued
17 and 18 October 2022	25 October 2022
21 and 23 November 2022	29 November 2022
29 and 30 November 2022	6 December 2022

9TCG did not give a payment schedule for any of Drake’s payment claims above.  No amount has been paid in respect of any of these invoices, which total $3,432.00.

Sutherland Road Agreement

10On 14 February 2023, Mr Hill and Max Edema, on behalf of Drake, exchanged text messages regarding the project at 64 Sutherland Road, Armadale. On the same day, Drake provided a written agreement to TCG (“Sutherland Road Agreement”).

11Under the Sutherland Road Agreement, Drake provided carpentry services and issued payment claims on the following dates:

Carpentry services provided	Payment claim issued
15 to 17 February 2023	22 February 2023
20 February to 3 March 2023	7 March 2023
6 to 9 March 2023	14 March 2023
14 to 16 March 2023	21 March 2023

12TCG did not give a payment schedule for any of Drake’s payment claims above.  No amount has been paid in respect of any of these invoices, which total $25,066.80.

Chamois Road Agreement

13On 10 March 2023, Mr Hill and Mr Edema exchanged text messages regarding the project at 2 Chamois Road, Mount Buller. On the same day, Drake provided a written agreement to TCG (“Chamois Road Agreement”).

14Under the Chamois Road Agreement, Drake provided carpentry services and issued a payment claim on the following dates:

Carpentry services provided	Payment claim issued
10 March 2023	17 March 2023

15TCG did not give a payment schedule for Drake’s payment claim above. No amount has been paid in respect of this invoice, which totals $1,020.80.

Legal framework

16The SOP Act seeks to ensure that people who undertake to carry out construction work can recover progress payments for the performance of that work.[1] It applies to any construction contract whether written or oral, or partly written and partly oral.[2]

[1] SOP Act s3.

[2] Ibid s7.

17The following terms are defined under the SOP Act:

(a)   “construction contract” is 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;[3]

(b)   “construction work” is defined under s5;

(c) “related goods and services” is defined under s6.

[3] Ibid s4.

18Section 16(2)(a) of the SOP Act 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.

19Section 14 of the SOP Act concerns the form and content of payment claims. Section 14(1) reflects that, if entitled to a progress payment, a claimant may issue a payment claim to a respondent who is liable to make payment. The payment claim must identify the construction work to which the progress payment relates; must indicate the amount of the progress payment that the claimant claims to be due; and must state that it is made under the SOP Act.

20Sections 14(2) and (3) of the SOP Act relevantly provide that a payment claim:

(a)   must be in the prescribed form (if any) and contain the prescribed information (if any) – neither is prescribed;

(b)   must identify the construction work or related goods and services to which it relates;

(c)   must indicate the amount of progress payment that the claimant claims to be due;

(d) must state that it is made under the SOP Act; and

(e)   must not include any “excluded amounts” (being amounts referable to particular categories of variations).

21Section 14(4) of the SOP Act addresses 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:

(a)   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

(b)   the period of 3 months after the “reference date referred to in s9(2) that relates to the progress payment”.

22Sections 14(5), (6) and (7) of the SOP Act concern payment claims claim in respect of a final, single or one-off progress payment and are not relevant for present purposes. Section 14(8) provides that a claimant “cannot serve more than one payment claim in respect of each reference date under the construction contract”. Section 14(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.

23Under s15 of the SOP Act, a person on whom a payment claim is served (the respondent) may reply to the claim with a payment schedule. Section 15(2) requires that a payment schedule must identify payment the claim to which it relates, schedule the amount of the payment that the respondent proposes to make and must identify any excluded amounts.

24Another important provision informing the formal requirements for payment claims under the SOP Act is 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”.

25Section 9(2)(a) of the SOP Act provides that a reference date is a date determined by or in accordance with the construction contract as:

(a)   a date on which a claim for a progress payment may be made; or

(b)   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.

26It is now well established in Victoria that unless a payment claim answering the description in s14(1) of the SOP Act is served, there can be no application to a court under 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[4] (“Southern Han”). On the other hand, the available defences to a payment claim are very limited.

[4] (2016) 260 CLR 340 at [44].

27Generally 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 Part 3 of the SOP Act.[5] More particularly, the defences to a payment claim enlivened by the formal requirements of the SOP Act are, in substance, that the payment claim:

(a) 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 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);

(b) fails to satisfy the formal requirements of s14(2) (for example, by failing to identify the construction work or failing to state that it is made under the SOP Act);

(c)   was made when no valid reference date existed,[6] 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;[7]

(d)   includes variations that are “excluded amounts” under s10B; and

(e)   was not validly served on the respondent under either the terms of the contract or under s50.

[5] Southern Han at [62].

[6] Ibid at [61]–[62]; Vanguard Developments v Promax [2018] VSC 386, Kennedy J at [121].

[7] SOP Act s14(8).

28Under 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.[8] The statutory context both contemplates and permits inconsistent judgments.[9] This section is, in effect, the statutory manifestation of the “pay now, argue later” description often given to the policy behind the SOP Act and its counterparts in other states.[10]

[8] Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 at [2] and [43]-[46] (Vickery J), cited with approval in Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd [2011] VSCA 99 at [11].

[9] Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385 at [22] (Handley JA, with whom Santow JA and Pearlman AJA agreed).

[10] Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 at [2] and [43]–[46].

29Further, in considering any purported defences to a payment claim, it is important to be mindful of s48 of the SOP Act. This section provides that the provisions of the SOP Act have effect despite any contractual provision to the contrary. 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.

30This court has endorsed the hearing of applications under the SOP Act on a summary basis by summons on originating motion with affidavit evidence.[11] Such claims are properly assessed on the balance of probabilities,[12] with the quality of the evidence weighed having regard to the fact that the legislation seeks to facilitate a swift but temporary remedy.[13] Occasionally, a plaintiff nevertheless applies for relief under 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”).[14] This can add an additional layer of complexity in determining the test to be applied to any defences raised.[15] However, the present proceeding was commenced by summons on originating motion, so questions of the application of the test under ss61 and 63 of the CPA do not arise.

[11] 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 at [39]–[54]. See also SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 at [26].

[12] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 449-450 (Mason CJ, Brennan, Deane and Gaudron JJ).

[13] 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 at [51]–[54].

[14] John Beever v Roads Corporation [2018] VSC 635; see also Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053.

[15] SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 at [31].

Analysis

31I have analysed the payment claims under the Martins Lane Agreement, Sutherland Road Agreement and Chamois Road Agreement (collectively, “the Agreements”) according to the legal framework set out above.  

32I accept Drake’s submissions that the carpentry services the subject of this proceeding are “related goods and services” within the meaning of s6 of the SOP Act and that the Agreements are each a “construction contract” under the Act.[16]

[16] SOP Act s7.

33The Agreements are each subject to the same written terms. The Martins Lane Agreement was signed by TCG, demonstrating agreement to the terms stated therein. The Sutherland Road Agreement and Chamois Road Agreement were not signed by TCG. Nonetheless, I accept Drake’s submission that TCG accepted the terms by requesting the attendance of labour on-site, or allowing the labour to attend on-site pursuant to cl 6.1 of each of the Agreements, which reads:

“This Contract commences on the date it has been accepted by email, signed and returned by the Customer, or the date on which the Personnel are requested to attend the Site, or the date the Personnel attend the Site, whichever is earlier”.

34Further, I accept that the terms regulating the Martins Lane Agreement are taken to have applied to the Sutherland Road Agreement and Chamois Road Agreement pursuant to cl 6.2 of each of the Agreements, which reads:

“The terms of this Contract will apply to any future services that may be provided by the Personnel at a different Site or project for the Customer, unless a separate contract is entered into for those services”.

35In my view, the payment claims under the Agreements satisfy the formal and procedural requirements of s14 of the SOP Act, given that they:

(a)   were issued on TCG, who is liable to make payment to Drake and indicate the amount for construction work due;

(b)   adequately identify the works to which the payment claims relate;

(c) state that they are made under the SOP Act;

(d)   have a valid reference date — here, stipulated in the schedule to each of the Agreements as “weekly in arrears”, meaning that a reference date accrued every seven days;

(e)   do not include excluded amounts;

(f)    were validly served on TCG in accordance with the terms of the Agreements; and

(g)   were made within three months of the relevant reference dates accruing.

36As TCG has failed to provide any payment schedules to Drake within the contractual and statutory timeframes,[17] it has become liable to pay the amount set out in each payment claim, totalling $29,519.60.[18] As TCG has failed to pay the claimed amounts on or before the due dates, Drake is, therefore, entitled to make an application to the Court to recover the total amount of $29,519.60.[19]

[17] SOP Act s12(1)(a).

[18] Ibid s15(4).

[19] Ibid s17(2)(a)(i).

37I am satisfied that, based on the material provided and relied upon by Drake, it is entitled to the amount owing according to each payment claim under the Agreements, totalling $29,519.60. Further, TCG has to date not provided any material in opposition of Drake’s application or addressed how the SOP Act has not been complied with in the circumstances.

38Drake seeks to fix its costs in the sum of $11,374.59 to avoid the further expense of taxation. Justice Riordan in Titcher v Marcelis[20] made observations regarding the desirability of fixing fees to avoid the inconvenience and expense of taxation. 

[20] [2015] VSC 578 at [12].

39Given that the amount claimed by Drake is modest, in my view, it is in the interests of the administration of justice and the just, efficient, timely and cost-effective resolution of the issues in dispute to have costs fixed, rather than subject to taxation.[21] The Court will fix Drake’s costs in the sum of $11,374.59 pursuant to paragraph 576 of the Practice Note and r63A.07 of the Rules, to avoid the inconvenience and expense of having costs formally taxed.[22]

[21] Civil Procedure Act 2010 (Vic) s7.

[22] APR Structural Steel Pty Ltd v Devco Project & Construction Management Pty Ltd [2021] VCC 1577 at [26].

Conclusion

40For the foregoing reasons, there is judgment for Drake in the amount totalling $29,519.60 together with interest pursuant to s12(2)(a) of the SOP Act in the sum of $1,181.69 and costs fixed in the sum of $11,374.59.

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Certificate

I certify that these 11 pages are a true copy of the ruling of her Honour Judge Burchell delivered on 4 August 2023.

Dated: 4 August 2023

Andrea Ko
Associate to Her Honour Judge Burchell