Elenberg Fraser Pty Ltd v Brady Lonsdale Pty Ltd
[2022] VCC 294
•16 March 2022
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-21-05365
| Elenberg Fraser Pty Ltd | Plaintiff |
| v | |
| Brady Lonsdale Pty Ltd | Defendant |
---
JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF JUDGMENT: | 16 March 2022 | |
CASE MAY BE CITED AS: | Elenberg Fraser Pty Ltd v Brady Lonsdale Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 294 | |
REASONS FOR JUDGMENT
---
Subject: CONTRACTS
Catchwords: Building contract – payment claim – where defendant failed to issue payment schedule in response to payment claims – whether more than one payment claim in respect of reference date – identification of construction work
Legislation Cited: Building and Construction Industry Security of Payment Act2002 (Vic) ss4, 9, 10A, 10B, 12, 14(2), 15, 16(2) and 48; Civil Procedure Act 2010 (Vic) ss61 and 63; Domestic Building Contracts Act1995 (Vic)
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; 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; Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385; 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; Shells Venture Management Pty Ltd v Agresta [2019] VSC 863; John Beever v Roads Corporation [2018] VSC 635; Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053; Grave v Blazevic Holdings Pty Ltd (2010) 79 NSWLR 132; Seabreeze Manly v Toposu [2014] NSWSC 1097; Baron Forge Contractors v Vaughn [2015] VCC 1424; MPA Construction Pty Ltd v Profine Construction Pty Ltd [2020] VCC 1035; APR Structural Steel Pty Ltd v Devco Project & Construction Management Pty Ltd [2021] VCC 1048; Spirito Development Pty Ltd v Sinjen Group Pty Ltd [2020] VCC 1368; Elenberg Fraser Pty Ltd v Pamato Corporation Pty Ltd [2021] VCC 1563; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106; Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391;Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2021] VSCA 44.
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms C Jones | Eidelweisz Lawyers |
| For the Defendant | Mr A T Schlicht | Warlows Legal |
HER HONOUR:
Introduction
1In this proceeding, the plaintiff (“Elenberg”) applies for judgment against the defendant (“Brady”) pursuant to s16(2) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (“SOP Act”). Elenberg makes the application by summons on originating motion dated 30 November 2021. The application arises out of architectural design and construction services which Elenberg performed at 380 Lonsdale Street, Melbourne, Victoria, 3000 (“the site”).
2Elenberg submits that it is entitled to judgment because Brady failed to issue a payment schedule in response to its payment claims.
3Brady opposes the application on the basis that:
(a) Brady was not a party to the Contract;
(b) Elenberg issued multiple invoices in September 2020 and November 2020; and
(c) the payment claims do not identify the works to which they relate.
4In my judgment, grounds (a) and (b) relied on by Brady in opposition to Elenberg’s claim are made out. My reasons in respect of each ground are set out below. If the payment claims had satisfied the threshold criteria in s14(1) of the SOP Act, then in my view, invoices ML007910, ML007920, ML007940, and ML007969 would have been valid. However, the September 2020 and November 2020 payment claims would be invalid because they comprise two distinct payment claims in respect of the same reference date.
5There will therefore be an order that the plaintiff’s summons on originating motion be dismissed and that the plaintiff pay the defendant’s costs of and incidental to the summons on the standard basis, to be taxed in default of agreement, unless either party has a basis for seeking a different order as to costs. I will invite the parties to prepare draft orders to give effect to these reasons and will determine any issue concerning costs on the papers.
The facts
6Elenberg relies upon two affidavits of Callum Fraser, its director, affirmed 30 November 2021 and 16 February 2022. In response, Brady relies upon the affidavit of Simon Philip Pethica, sworn 7 February 2022.
7Unless otherwise stated, the facts of the proceeding are not materially in dispute.
8By a written contract dated 25 May 2016, Elenberg and Brady Lonsdale Ventures (ACN 134 167 114) (“Brady Lonsdale”) entered into a contract pursuant to which Elenberg was to undertake architectural design and construction services at the site.
9Pursuant to schedule 2 part B of the contract:
(a) fees were to be issued “progressively on a monthly basis;” and
(b) all monies payable to Elenberg shall be paid within 30 days of invoice.
10On or about 25 May 2016, Elenberg commenced the works.
11On 24 September 2020, Elenberg issued an alleged payment claim to Brady comprising two separate invoices, as follows (“September payment claim”):
(a) invoice no. ML007910 in the sum of $17,820.00 (GST inclusive), which was served on Brady by way of email on 24 September 2020 to [email protected] and [email protected]; and
(b) invoice no. ML007911 for a variation described as ‘DV#026: Removal of L67 Damper Tanks, Updates to L67 & Roof Extents’ in the sum of $3,630.00 (GST inclusive), which was served on Brady by way of email on 30 September 2020 to [email protected] and [email protected].
12On 30 June 2020, Elenberg provided a written notification of variation DV#026 to Brady. On 6 July 2020, Robert Giano, development director, signed the written notification on behalf of the client.
13On 22 October 2020, Elenberg issued an alleged payment claim (invoice ML007920) in the sum of $17,820.00 (GST inclusive) (“October payment claim”). The alleged payment claim was served on Brady by way of email to [email protected] and [email protected].
14On 24 November 2020, Elenberg issued an alleged payment claim to Brady comprising two separate invoices, as follows (“November payment claim”):
(a) invoice no. ML007940 for services described as ‘Phase 6 – Construction Services - 98.00% complete’ with a claimed amount of $17,820.00, which was served on Brady by way of email on 24 November 2020 to [email protected] and [email protected]; and
(b) invoice no. ML007953 for an approved variation described as DV#027: L64 Apartment Layout Updated’ with a claimed amount of $1,452.00 (GST inclusive), which was served on Brady by way of email on 1 December 2021 to [email protected] and [email protected].
15On 9 November 2020, Elenberg provided a written notification of variation DV#027 to Brady. That day, Mr Giano signed the written notification.
16On 21 December 2020, Elenberg issued an alleged payment claim (invoice ML007969) in the sum of $17,820.00 (GST inclusive) (“December payment claim”). The December payment claim was served on Brady by way of email to [email protected] and [email protected].
17Mr Fraser confirms that the works the subject of each alleged payment claim were completed during phase 6 of the contract. He also alleges that no payment schedules, or any payment, were received for any of the alleged payment claims.
18Elenberg now claims the sum of $76,362.00 (GST inclusive) under s16(2) of the SOP Act.
The legal context
19The 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]
[1] SOP Act s3.
20Section 4 of the SOP Act 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 SOP Act applies to any construction contract whether written or oral, or partly written and partly oral.[2] “Construction work” is defined in s5.
[2] Ibid s7.
21Section 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.
22Section 14 of the SOP Act concerns the form and content of payment claims. Sections 14(2) and (3) 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.”
23Section 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 three months after the “reference date referred to in s9(2) that relates to the progress payment”.
24Sections 14(5), (6) and (7) of the SOP Act concern payment claims claimed 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.
25Another important provision informing the formal requirements for payment claims is s9 of the SOP Act. 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”.
26Section 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.
27It 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.[3] On the other hand, the available defences to a payment claim are very limited.
[3](2016) 260 CLR 340 at [44].
28Generally 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.[4] More particularly, the defences to a payment claim enlivened by the formal requirements of the SOP Act are, in substance, that the payment claim:
[4]Ibid at [62].
(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 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 (Vic));
(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,[5] 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;[6]
(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]Ibid [61]– [62]; Vanguard Developments v Promax [2018] VSC 386 at [121] per Kennedy J.
[6] SOP Act s14(8).
29Under 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.[7] The statutory context both contemplates and permits inconsistent judgments.[8] 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.[9]
[7] Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 at [2] and [43]– [46] per Vickery J, cited with approval in Pearl Hill Pty Ltd v Concorp Construction Group (Vic)Pty Ltd [2011] VSCA 99 at [11].
[8] Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385 at [22] per Handley JA, with whom Santow JA and Pearlman AJA agreed.
[9]Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (supra) at [2] and [43]– [46].
30Further, 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 SOP Act, is void.
31This Court has endorsed the hearing of applications under the SOP Act on a summary basis by summons on originating motion with affidavit evidence.[10] Such claims are properly assessed on the balance of probabilities,[11] with the quality of the evidence weighed having regard to the fact that the legislation seeks to facilitate a swift but temporary remedy.[12] 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”).[13] This can add an additional layer of complexity in determining the test to be applied to any defences raised.[14] 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.
Are the requirements of the SOP Act satisfied?
[10] 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].
[11] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449-450 per Mason CJ, Brennan, Deane and Gaudron JJ.
[12]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd (supra) at [51]– [54].
[13] John Beever v Roads Corporation [2018] VSC 635; see also Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053.
[14]SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 at [31].
Construction contract
32The contract in issue is a construction contract because it is a contract under which Elenberg undertook to carry out construction work, namely architectural design and construction services (ss4 and 5 of the SOP Act).
33Brady submits that the parties to the contract for the provision of architecture design and construction services was with Brady Lonsdale Ventures (ACN 134 167 114) (a separate legal entity that is not a party to this proceeding) (“Brady Lonsdale”) and not with Brady and therefore the SOP Act does not apply.
34Brady relies on the decision of Shells Venture Management Pty Ltd v Agresta,[15] (“Shells”) in which Digby J observed:
“The judgments of Baron Forge and Grave are, in my view, not to the point. In substance, those cases, in the parts referred to by the plaintiff, recognised that the Security of Payment legislation is limited in its operation to the rights and entitlements of the parties to the relevant construction contract and does not extend to imposing obligations or establishing rights in those who are not parties to that construction contract.” [emphasis added]
[15] [2019] VSC 863 at [48] per Digby J.
35Brady contends that as it is not a party to the agreement, s14(1) of the SOP cannot be satisfied. Further, it notes that no assignment of contract from Brady Lonsdale to Brady is produced by Elenberg.
36It is common ground that Brady and Brady Lonsdale form part of the Brady Property Group. Brady is a wholly owned subsidiary of Brady Lonsdale. Mr Pethica is a director of both companies and the group general manager of the Brady Property Group.
37Elenberg submits that between July 2016 and July 2018, it issued and served on Brady Lonsdale regular monthly payment claims, each of which were paid under the Contract.
38Mr Fraser deposes that, in about August 2018, the Brady Group accounts department requested that Elenberg issue all future payment claims under the Contract to Brady in lieu of Brady Lonsdale. Despite searches, Mr Fraser has been unable to locate a copy of the email request.
39Mr Fraser’s evidence is that between August 2018 and August 2020, and in accordance with the Brady Group’s request, Elenberg issued regular monthly payment claims to Brady. Neither Brady, nor Brady Lonsdale, raised any complaint about Elenberg issuing its payment claims under the Contract to Brady and each of these payment claims were paid.
40Elenberg contends that Brady is or may be liable to make payment pursuant to the terms of s14(1) of the SOP Act.
41Subsection 14(1) provides that:
“A person referred to in section 9(1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment”. [emphasis added]
42Elenberg submits that the wording of s14(1) of the SOP Act makes clear that a payment claim may be served on the other party to a construction contract or a party who is or may be liable under that contract.
43Elenberg relies heavily on his Honour Judge Woodward’s observations in 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd,[16] (“3D Flow Solutions”) as follows:
“In my view, the decision in Grave should not be taken as authority for the proposition that a claimant can engage the provisions of the SOP Act only by serving a payment claim on the person who is, in the strict or formal sense, the “other party” to the construction contract. The passages above clearly recognise that the person may be either a party to or liable under the contract. McDougall J gave the example of a guarantor being a person who may be liable under the construction contract. If the guarantor executed a separate instrument (as often occurs under a performance guarantee), they would not be a party to the construction contract in the strict sense, but would still be a person who “may be liable” under the construction contract.
Thus, as long as the person on whom the payment claim was served can be shown to be a party to or otherwise arguably liable under the construction contract concerned, the provisions of the SOP Act will be engaged. The gravamen of Grave (as Allsop P made clear) is that the person on whom the payment claim is served must be someone who is not a stranger to the construction contract.” [emphasis added]
[16]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd (supra) at [63] - [64].
44Elenberg contends that the passage in 3D Flow Solutions confirms that Grave v Blazevic Holdings Pty Ltd,[17] (“Grave”) is not authority for the proposition that a claimant can only engage the SOP Act by serving a payment claim on the person who is, in the strict sense, the other party to the contract. Further, Judge Woodward also considered the more recent decision of McDougall J in Seabreeze Manly v Toposu[18], (“Seabreeze Manly”) where it was held that, for the purposes of the definition of “construction contract” under the Act, (a) an arrangement or contract need not be a contract as understood under the general law, (b) an arrangement or contract may be multilateral, and (c) an arrangement for a principal to pay a subcontractor directly may give rise to a construction contract under which the subcontractor may seek to enforce payment claims against the principal under the Act.
[17] (2010) 79 NSWLR 132.
[18][2014] NSWSC 1097 at [25]-[40] per McDougall J.
45Elenberg applied Judge Woodward’s findings in paragraph 70 of 3D Flow Solutions,[19] in support of its argument that there was a multilateral agreement between Elenberg, Brady Lonsdale and Brady, alternatively, a parallel agreement between Elenberg and Brady that it too may be liable for the payment claims. It relied on the evidence on this application that:
(a) in about August 2018, the Brady Group accounts department requested that Elenberg issue all future payment claims under the Contract to Brady in lieu of Brady Lonsdale (the former being its wholly owned subsidiary);
(b) from August 2018 to December 2020, and in accordance with the abovementioned request, Elenberg served regular monthly payment claims on Brady;
(c) the payment claims issued between August 2018 and August 2020 were all paid; and
(d) neither Brady nor Brady Lonsdale raised any complaint about the payment claims under the Contract being issued to Brady until after the commencement of this proceeding.
[19]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd (supra) at [70].
46To resolve the threshold issue of whether Brady is or may be liable to make payment under s14(1) of the SOP Act, an analysis of the relevant authorities is required.
47In 3D Flow Solutions, the plaintiff builder (“3D”) performed construction works for the defendant landowner (“LTP”). LTP engaged MOC Developments Pty Ltd (“MOC”) to undertake the role of construction manager of the project. 3D claimed $105,556.72 against LTP as a debt due under a construction contract pursuant to s16 of the SOP Act. One of the issues for determination was whether LTP was a person who is or may be liable under that construction contract.
48Judge Woodward held that 3D succeeded on its claims and awarded the sum of $105,556.72 (GST inclusive). His Honour determined that the provisions of the SOP Act can be engaged if a payment claim is served on a person who is either a party or liable under the contract.[20] Examples of persons who may become liable under a construction contract include: a guarantor that executes a separate instrument; or an agent executing a construction contract for a named principal.[21]
[20]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd (supra) at [63] per Judge Woodward.
[21] Ibid [64].
49In 3D Flow Solutions, the construction contract contained an express term that payment claims rendered by 3D would be paid by MOC, but this did not negate the parallel arrangement between 3D and LTP that LTP too may be liable for the payment claims.[22] The parallel arrangement may have arisen simply by virtue of MOC acting as LTP’s agent, or because of MOC’s express instruction to 3D to invoice LTP direct, or both.
[22] Ibid [69].
50The position in relation to the contract for ad hoc works in that case was found to be even clearer. 3D had been invoicing LTP directly for several months, numerous purchase orders had been issued by LTP as “customer” in the period leading up to the issue of instructions for the ad hoc works and it was unclear whether MOC continued to have any parallel liability to pay for the works.[23]
[23] Ibid [69].
513D made its invoices to LTP upon a specific arrangement between LTP and MOC whereby LTP agreed to make payments to various subcontractors on its behalf. However, under the construction contract, it was always MOC that was liable to make payment for all works performed by 3D. Thus, it is clear that MOC was authorised by LTP to give the direction to invoice LTP. Simply because MOC was liable, does not exclude the possibility that LTP was also at least arguably a “person who…may be liable” for the purposes of s14(1), even under the construction contract.[24]
[24] Ibid [70].
52In Seabreeze Manly,[25] McDougall J held that while there was no contract between Seabreeze Manly Pty Ltd (“Seabreeze”) and Toposu Pty Ltd (“Toposu”), the evidence in that case demonstrated the existence of a trilateral arrangement between Seabreeze, Castle Projects Pty Limited (“Castle Projects”) and Toposu sufficient to amount to a “construction contract” under the Act.
[25]Seabreeze Manly v Toposu (supra).
53In that case, Seabreeze was responsible for developing land in Manly. It engaged Castle Projects as a builder. Under the contract, Castle Projects could only retain subcontractors with the prior consent of Seabreeze and if subcontractors were retained by Castle Projects with Seabreeze’s consent, Seabreeze would pay those subcontractors directly.
54Castle Projects subcontracted the supply and installation of steel and aluminium to Toposu on the basis that Seabreeze would pay Toposu directly.
55Toposu addressed invoices to Castle Projects. Castle Projects prepared payment schedules in response to these invoices as if Toposu had submitted a payment claim directly to Seabreeze and submitted the payment claim to the superintendent. Seabreeze paid the amount of the payment schedule certified by the superintendent directly to Toposu. This occurred on at least four occasions.
56Seabreeze disputed one of Toposu’s payment claims and applied to the Supreme Court of New South Wales to restrain the adjudicator's subsequent determination in favour of Toposu on the basis that there was no “construction contract” between Seabreeze and Toposu, as defined under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“NSW SOP Act”).
57A “construction contract” under the NSW SOP Act was defined to mean “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”.
58Justice McDougall found that Toposu agreed to undertake to carry out construction work for Seabreeze because Seabreeze had instructed Castle Projects to put in place a system whereby subcontractors were to receive payment from Seabreeze directly. This system was communicated to Toposu and Toposu took the job on that express and authorised basis. Seabreeze acknowledged this arrangement by paying Toposu directly on four prior occasions. The contract between Seabreeze and Castle Projects was a conduit or medium between Seabreeze and its subcontractors who did the actual work of building the project.
59In Grave,[26] the Court of Appeal for New South Wales considered an appeal of the District Court of New South Wales judgment refusing to set aside default judgment entered in favour of the respondent against the applicant. The primary judge held that even though there was no formal contract signed for the respondent to undertake fit-out work at the applicant’s dental surgery, there was nonetheless an arrangement between the applicant and respondent for the respondent to undertake construction work.[27] The applicant’s defence was that his service company, Gradenco, and not the applicant himself, was a party to the construction contract under which the respondent had carried out work.
[26]Grave v Blazevic Holdings (supra).
[27] Ibid at [15].
60The Court of Appeal for New South Wales found that applicant had demonstrated an arguable defence and he was not a person that fell within the definition of s13(1) of the NSW SOP Act. Justice McDougall observed that s13 of the NSW SOP Act is the starting point of statutory mechanism for enforcement. The person claiming the progress payment must be a person who has undertaken to carry out construction work under the contract.[28] The words “may be liable” under s13(1) of the NSW SOP Act may be capable of referring, for example, to primary or secondary liability, but it must be a liability “under the construction contract concerned”. If the recipient is not a party to or liable under the construction contract, then the provisions of the NSW SOP Act are not engaged.[29]
[28] Ibid at [25].
[29] Ibid [26].
61President Allsop (as he then was) held that the person on whom the payment claim is served must be someone who is not a stranger to the construction contract.[30] The applicant had a valid defence in that case as the contract was between the respondent and the applicant’s company, and not the applicant himself, and the work undertaken by the respondent was for the applicant’s company, and not the applicant himself.[31]
[30] Ibid [44].
[31] Ibid [46].
62Judge Cosgrave in Baron Forge Contractors v Vaughn,[32] (“Baron Forge”) referred to the Court of Appeal for New South Wales decision in Grave.[33] Baron Forge Contractors Pty Ltd (“Baron Forge”) sought summary judgment under s16(2) of the SOP Act on the basis that Vaughn Constructions Pty Ltd (“Vaughn”) had failed to provide a payment schedule in response to claims 9 and 10 and not fully paid the claimed amounts. Vaughn argued that Baron Forge was not party to the construction contract and, therefore was not entitled to commence the action or serve the payment claims. Further, the payment claims were invalid because claims were made for work not yet performed or that were defective.
[32][2015] VCC 1424.
[33]Grave v Blazevic Holdings Pty Ltd (supra).
63Based on historical negotiations, Vaughn argued that they had contracted with Baron Forge Contractors (Vic) Pty Ltd (“BFVic”) and not Baron Forge. The contract referred only to Baron Forge, however, there were differences in ABNs on various payment claims and correspondence served.
64Judge Cosgrave dismissed Baron Forge’s application for summary judgment for reasons which included that Vaughn’s contention that Baron Forge was not a party to the construction contract and, therefore, had no claims under the SOP Act was arguable. His Honour noted that Baron Forge had not clearly rebutted why BFVic was not the contracting party and the strongest factual arguments put forward were based on payment claims sent to Vaughn which were paid.
65Judge Cosgrave applied the principles in Grave to interpret the corresponding sections of the SOP Act and held that the relevant provisions of the SOP Act can only apply to those who are party to the construction contract.[34] A person serving a payment claim who is not party to a contract has no entitlement to serve the payment claims. Sections 14 and 9 of the SOP Act are guided by the underlying legislative assumption that the claimant serving a progress payment claim is party to a construction contract.[35]
[34]Grave v Blazevic Holdings Pty Ltd (supra).
[35] Ibid at [34].
66In Shells, the first defendant Adolfo Agresta (“Agresta”), entered into a contract for constructions works in relation to two houses in Sorrento, Victoria. The plaintiff, Shells Venture Management Pty Ltd (“Shells”), a property developer, was the other party to the contract. The contract was executed by Agresta’s project manager Howard Junkeer (“Junkeer”) who helped Agresta with various day to day tasks, management of the project and acted as the primary point of contact for Shells.
67Works were carried out and a progress payment claim was issued. Shells disputed the completion of works and did not pay any sum in accordance with the payment schedule.
68Agresta made an adjudication application for the claimed amount. An adjudication determination decided that Shells was liable to pay Agresta. Pursuant to s28R of the SOP Act, the County Court of Victoria entered judgment for Shells to pay the sum in respect of the Adjudication Determination.
69Shells commenced proceedings in the Supreme Court of Victoria to set aside the judgment on the basis of an application for judicial review. Before Shells had filed its application, judgment had already been entered pursuant to s28R of the SOP Act.
70Justice Digby dismissed Shells’ application to set aside the judgment and ordered Shells to pay Agresta the outstanding sum for reasons which included that Agresta was party to the construction contract, and it was clear on the facts that Junkeer was his agent acting on Agresta’s behalf and not in his own right.[36]
[36]Shells Venture Management Pty Ltd v Agresta (supra) at [52] per Digby J.
71Further, Digby J distinguished the cases of Baron Forge and Grave, as the circumstances in those cases did not assist with questions of how a progress payment claim may be served under the SOP Act.[37] Justice Digby also rejected the relevance of the plaintiffs’ submissions that the SOP Act operation is limited to those who are party to the construction contract.[38]
[37]Baron Forge Contractors Pty Ltd v Vaughan Constructions Pty Ltd (supra); Grave v Blazevic Holdings Pty Ltd (supra).
[38]Shells Venture Management Pty Ltd v Agresta (supra) at [47] per Digby J.
72Applying the principles set out above to the relevant facts in the present case, I find on a balance of probabilities that Elenberg’s payment claims to Brady are invalid under s14(1) of the SOP Act because:
(a) Brady is not a party to the construction Contract;
(b) Brady Group gave instructions to Elenberg to issue all future payment claims under the contract to Brady in lieu of Brady Lonsdale;
(c) the evidence before the Court is not sufficient to come within the agency principles set out in 3D Flow Solutions and Shells; [39]
(d) if the evidence was that Brady Lonsdale had given the express instructions to invoice Brady, then this would be more consistent with the findings of Judge Woodward in 3D Flow Solutions[40] in which it was MOC who gave express instructions to 3D to invoice LTP direct; and
(e) having regard to Judge Cosgrave's reasoning in Baron Forge,[41] something more is needed to rebut why Brady was not the contracting party or liable to make payment beyond Elenberg relying on the fact that previous payments were sent to Brady direct, which were then paid.
[39]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd (supra); Shells Venture Management Pty Ltd v Agresta (supra).
[40]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd (supra) at [69] – [70] per Judge Woodward.
[41]Baron Forge Contractors Pty Ltd v Vaughan Constructions Pty Ltd (supra) at [28] per Judge Cosgrave.
73For the foregoing reasons, I agree with Brady that the SOP Act does not apply because it is not a party to the contract, and it does not satisfy the requirement that it “is or may be liable to make payment” under s14(1) of the SOP Act.
74Brady raises further grounds in which it claims render Elenberg’s invoices invalid under the SOP Act. For completeness, I consider these matters below.
Reference dates
75The next ground raised by Brady is the requirement that the payment claims have a reference date. In effect, the payment claims must only be submitted “on and from” a reference date (s9(1) of the SOP Act).
76In this proceeding, the contract provides for reference dates. Pursuant to schedule 2 part B, fees were to be issued “progressively on a monthly basis, or commensurate with works completed”.
77Elenberg issued the payment claims on the following dates:
(a) September payment claim – 24 September 2020 (invoice no. ML007910) and 30 September 2020 (invoice no. ML007911);
(b) October payment claim – 22 October 2020;
(c) November payment claim – 24 November 2020 (invoice no. ML007940) and 1 December 2020 (invoice no. ML007953);
(d) December payment claim – 21 December 2020.
78Accordingly, each payment claim was issued on and from a reference date[42] and included works referable to a future date pursuant to s9(1) of the SOP Act.[43]
[42]MPA Construction Pty Ltd v Profine Construction Pty Ltd [2020] VCC 1035 at [79].
[43]APR Structural Steel Pty Ltd v Devco Project & Construction Management Pty Ltd [2021] VCC 1048 at [83].
79The issue is whether the September payment claim and November payment claim constitute two payment claims in respect of the same reference date, since they comprise two invoices with different dates (cf s14(8) of the SOP Act).
80In my view, the invoices constitute two distinct payment claims in breach of s14(8) of the SOP Act. The decision of Spirito Development Pty Ltd v Sinjen Group Pty Ltd[44] is instructive — I adopt the reasoning of Judge Woodward:[45]
“Two invoices sent in the same envelope, or in the same facsimile, or in the same email will often (but not necessarily always) be considered a single payment claim. Even where invoices are sent under two separate emails, there may be something in the emails or invoices themselves to show that they form part of a single payment claim. For example, they may be headed “Payment Claim XX, invoice 1 of 2” and then “Payment Claim XX, invoice 2 of 2”, or something to that effect.
But where emails attaching discrete invoices are separated in time even by only a few minutes, and there is nothing on their face to confirm that they constitute a single payment claim, I consider that they must be viewed as separate payment claims…”
[44] [2020] VCC 1368.
[45] Ibid at [23] – [24] per Judge Woodward.
81In circumstances where the September invoices were sent six days apart, and the November invoices seven days, that reasoning holds even more true.
82In my previous Elenberg Fraser Pty Ltd v Pamato Corporation Pty Ltd,[46] (“Elenberg”) decision, I held that two invoices sent by email on the same day constituted a single payment claim. I reasoned that — in circumstances where this was an ongoing practice between the parties, and the defendant accepted that practice without complaint — a reasonable person in the position of the defendant would understand that the invoices constituted one payment claim.[47]
[46] [2021] VCC 1563.
[47]Elenberg Fraser Pty Ltd v Pamato Corporation Pty Ltd (supra) at [52] – [53].
83The present proceeding is different from the previous Elenberg[48] proceeding relied on by the plaintiff. Here, the September invoices were sent six days apart, and the November invoices seven days. Further, the emails or invoices themselves did not show that they form part of a single payment claim.
[48] Ibid.
84Accordingly, the September and November payment claims constitute two separate payment claims in respect of the same reference date, contrary to s14(8) of the SOP Act. Mr Fraser exhibited a schedule purporting to set out available reference dates to support each of the four invoices as separate stand-alone payment claims in the alternative. This is a derivative document of unknown authorship and without the supporting source material. The Court cannot place any weight on the schedule in the circumstances. Therefore, on a balance of probabilities, the invoices issued on 30 September 2020 and 1 December 2020 are invalid for the purposes of the SOP Act.
Identification of construction work
85The next question is whether the payment claims adequately identify the construction work.
86Whether a payment claim adequately identifies the construction work is an objective test.[49] The question is whether a reasonable person in the position of the respondent would understand the basis of the claim.[50] The test is not overly strict; the Court must not adopt an unduly technical approach.[51]
[49]John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126 at [83].
[50] Ibid.
[51] Ibid; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [51].
87The context of the payment claim is relevant, including industry conventions and earlier contractual dealings.[52] The background knowledge of the parties from their past dealings and prior exchanges of information (including correspondence) are also relevant.[53] Thus, the Court may look beyond the face of the payment claim.
[52]Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391 at [40].
[53] John Beever (Aust) Pty Limited v Paper Australia Pty Ltd (supra) at [83]; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [51].
88In my view, invoices ML007911 (September payment claim) and ML007940 (November payment claim) satisfy this requirement.
89Invoice ML007911 is described: “DV#026: Removal of L67 Damper Tanks, Updates to L67 & Roof Extents.’” Invoice ML007953 is described “DV#027: L64 Apartment Layout Updated”. A reasonable person in the position of Brady would readily comprehend the works to which those invoices relate.
90At first blush, the same cannot be said for invoices ML007910, ML007920, ML007940, and ML007969. Each is merely described as “Construction Services.” No trade breakdown appeared on the invoices themselves.
91However, having regard to the past dealings and background knowledge of the parties and applying the principles in Gantley Pty Ltd v Phoenix International Group Pty Ltd,[54] I am satisfied that these payment claims adequately identify the construction work when cross referenced to the breakdown of the services for the relevant Part under the construction contract. The descriptions of services on each of the payment claims were consistent with the descriptions on the previous payment claims. Importantly, Brady accepted the previous claims without complaint. It follows that a reasonable person in the position of Brady would understand the works to which the claims at issue relate.
[54]Gantley Pty Ltd v Phoenix International Group Pty Ltd (supra) at [51] and [117].
Excluded amounts
92The next issue is whether CNC has satisfied me that the payment claims do not contain excluded amounts (ss10A and ss10B of the SOP Act).
93The only payment claims which may contain excluded amounts are the September and November payment claims, which contain variations.
94The issue is whether the variations are claimable variations. However, the written variation notification — signed by the development director — reinforces that the parties agreed to the requisite elements of a first-class variation (s10A(2) of the SOP Act).
95The Court may only assess “the face of the payment claim”.[55] However, this includes the supporting documents, such as documentation in the lead up to the payment claim. Accordingly, Elenberg has satisfied me that the payment claims do not contain excluded amounts.
[55] Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2021] VSCA 44 at [44] per McLeish and Niall JJA and at [120] per Sifris JA.
Other formal requirements
96Each payment claim indicates the amount of the progress payment which Elenberg claims is due (s14(2)(d) of the SOP Act).
97Each claim indicates that it is a claim made under the SOP Act in terms: “This is a payment claim under the applicable Security of Payment Legislation in each State or Territory” (s14(2)(e) of the SOP Act).
98Each payment claim was not validly served by as they were addressed to Brady and not to Brady Lonsdale.
Failure to issue payment schedule
99Mr Fraser confirms that Brady failed to serve a payment schedule in response to the payment claims. However, given my anterior finding that Elenberg has not issued valid payment claims under s14(1) of the SOP Act, Elenberg may not recover the unpaid portion of the amount claimed as a debt due (s16(2)(a) of the SOP Act).
Conclusion
100Accordingly, for the purposes of this proceeding, Elenberg’s claims do not constitute a valid payment claim and thus do not fall within the SOP Act. The plaintiff’s summons on originating motion is dismissed and Brady is given leave to defend the claim.
- - -
Certificate
I certify that these 23 pages are a true copy of the judgment of Her Honour Judge Burchell delivered on 16 March 2022.
Dated: 16 March 2022
Nikki Thomson
Associate to Her Honour Judge Burchell
0
23
0