Fabtech Aust P/L v Exact Contracting P/L - [2017] SADC 44

District Court of South Australia
(Civil: Application)
FABTECH AUST P/L v EXACT CONTRACTING P/L
[2017] SADC 44
Judgment of His Honour Auxiliary Judge Muecke
28 April 2017
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - PAYMENT CLAIMS
STATUTES - ACTS OF PARLIAMENT - INTERPRETATION - GENERAL APPROACHES TO INTERPRETATION - PURPOSIVE APPROACH - GENERAL PRINCIPLES
Application for summary judgment under the Building and Construction Industry Security of Payment Act 2009 (SA) – whether Exact provided a “payment schedule” to Fabtech’s “payment claim”.
Held: Exact’s email to Fabtech dated 5 August 2016 was not a payment schedule that complied with the Act. Estoppel and severance arguments not allowed. Judgment for Fabtech in the sum of $313,959.48.
Building and Construction Industry Security of Payment Act 2009 (SA) s 4, s 8, s 13, s 15(2)(a)(i), s 15(4)(b)(ii), s 33; Evidence Act 1929 (SA) s 67C, referred to.
Barclay Mowlem Construction v Tesrol Walsh Bay [2004] NSWSC 716; Built Environs Pty Ltd v Tali Engineering Pty Ltd & Ors [2013] SASC 84; Façade Treatment Engineering Ltd v Brookfield Multiplex Constructions Pty Ltd (2015) 294 FLR 141; Linke Developments Pty Ltd v 21st Century Developments Pty Ltd (2014) 121 SASR 425, considered.

FABTECH AUST P/L v EXACT CONTRACTING P/L
[2017] SADC 44
Civil: Application

MUECKE ADCJ: This is an application for summary judgment for $367,918.89 plus GST ($404,710.78).
On 21 September 2016 the plaintiff, Fabtech Australia Pty Ltd (“Fabtech”), filed in this Court a Summons and Statement of Claim naming Exact Contracting Pty Ltd (“Exact”) as the defendant.
In its claim Fabtech stated that it carries on the business of design, supply and installation of geomembrane liners, covers and tanks. It stated that Exact carries on the business of civil construction.
Fabtech alleged that on or around 23 March 2016, it and Exact entered into a written contract under which it undertook to supply and install a liner, underlay material and undertake ballast construction for a 700ML dam constructed to hold water harvested from several sources at Seppeltsfield Wines (“the Contract”). It alleged that the Contract was a “construction contract” as defined in s 4 of the Building and Construction Industry Security of Payment Act 2009 (SA) (“the Act”).
Fabtech alleged that pursuant to s 8 of the Act it was entitled to progress payments under the Contract. It alleged that pursuant to s 13 of the Act it, as a person who is or who claims to be entitled to a progress payment, may serve a payment claim on the person who, under the contract, is or may be liable to make the payment.
Fabtech alleged that, on 29 July 2016, it served on Exact a payment claim dated 28 July 2016 in the sum of $367,918.89 plus GST ($404,710.78 including GST) (“Payment Claim”).
Fabtech alleged that, pursuant to s 14 of the Act, Exact was entitled to provide a payment schedule, in reply to its claim, within the time required by the contract, namely 14 days from service of the Payment Claim. Fabtech alleged that Exact failed to provide a payment schedule to it in response to the Payment Claim within that period.
Fabtech alleged that pursuant to s 14(4) of the Act, Exact became liable to pay the amount of the Payment Claim to Fabtech on its due date, being 21 September 2016, being 14 days after Fabtech issued Exact with a Tax Invoice No. 34039 for the Payment Claim on 7 September 2016.
Fabtech alleged that Exact failed to pay the whole or any part of the Payment Claim. Fabtech alleged that in those circumstances, pursuant to s 15(2)(a)(i) of the Act, it is entitled to recover from Exact the Payment Claim as a debt due.
Fabtech sought a declaration that it is so entitled and sought an order that Exact pay it the amount of the Payment Claim, being $404,710.78. Fabtech also sought interest and costs.
On 21 September 2016, the same date as Fabtech filed its claim in this Court, Fabtech filed an application by which it sought that the matter be listed for a Directions Hearing prior to Exact filing a defence.
Further, Fabtech sought an order that “summary judgment be given for (Fabtech) in the sum of $367,918.89 plus GST ($404,710.78 inc. GST) being the unpaid portion of the Payment Claim dated 28 July 2016 (served 29 July 2016) made under the … Act or in such other amount as this Court deems fit”.
In support of its application for summary judgment Fabtech filed, on 21 September 2016, an affidavit of Graham Fairhead, affirmed on 20 September 2016 (“Mr Fairhead’s affidavit”).
In Mr Fairhead’s affidavit he stated that Fabtech’s Payment Claim was served on Exact on 29 July 2016. He exhibited the Payment Claim as “GF3”. Mr Fairhead’s affidavit stated that on 5 August 2016 he and Alan Hepworth met with the Chief Executive Officer of Exact, Mr Colin Mayberry. At that meeting, Mr Mayberry confirmed receipt of the Payment Claim and discussed with him variation claims made by Fabtech as set out in the Payment Claim.
Mr Fairhead’s affidavit stated that following that meeting Mr Mayberry sent him an email dated 5 August 2016. That is exhibited to the affidavit as “GF5”. By that email, Exact purported to reject the claims associated with “wet weather and its effects” which Mr Fairhead understood to be certain variation claims. Exact also rejected certain claims for alternative construction techniques. Mr Fairhead’s affidavit stated, however, that Exact failed to confirm its position in respect to claims made for the sacrificial liner which was another variation claim, or the water ballast tubes (yet another variation claim) and made no assessment of that portion of the Payment Claim which claimed for the original scope of work carried out under the Contract.
Mr Fairhead’s affidavit stated that Fabtech had not received a payment schedule from Exact in response to the Payment Claim, or any correspondence in response to the Payment Claim, other than the email dated 5 August 2016.
Mr Fairhead’s affidavit stated that on 7 September 2016 Fabtech wrote to Exact providing a tax invoice for the full amount of the Payment Claim and gave notice of its intention to commence these proceedings as a result of the failure by Exact to provide a payment schedule under the Act or to make payment of the full amount of the Payment Claim.
Mr Fairhead’s affidavit stated that, by letter dated 15 September 2016, Exact wrote to Fabtech denying that the Payment Claim was a valid payment claim under the Act. That letter was exhibited to the affidavit as “GF7”.
Mr Fairhead’s affidavit stated that his view was that Fabtech has a contractual entitlement to payment and that the Payment Claim is valid. He denied that Fabtech had claimed common law damages in its letter to Exact dated 22 June 2016 as alleged by Exact. He annexed that letter to his affidavit as “GF8”.
Exact has not filed a Defence. Nothing turns on that.
On 30 September 2016 Exact filed two affidavits in this Court. It filed these affidavits for use by me on 4 October 2016 at 10.00am. That was the date and time at which Fabtech’s application for summary judgment was first listed in this Court. The affidavits were sworn by Colin Luke Mayberry (“Mr Mayberry’s first affidavit”) and by Thomas Alexander Thwaites (“Mr Thwaites’ first affidavit”).
Mr Mayberry’s first affidavit stated that he was the Director and Chief Executive Officer of Exact. He set out in some detail the background to Exact subcontracting Fabtech to undertake lining work at Hill Dam which was located on land owned by Seppeltsfield in the Barossa Valley. The primary purpose for the construction of Hill Dam was to irrigate vineyards in the Barossa region.
Mr Mayberry’s first affidavit also set out his involvement in those works. It set out in some detail claims by Fabtech for “extensions of time and delay costs and variation claims”. These are referred to as EOTs and VOs.
In paras [45] to [49] inclusive of Mr Mayberry’s first affidavit he set out what he said occurred at the meeting between Fabtech and Exact on 5 August 2016. He stated that “when we met we specifically discussed the Progress Claim” of 28 July 2016. He set out what was discussed about it.
Mr Mayberry’s first affidavit then indicated (para [50]) that after the meeting he returned to his office and prepared an email that summarised the matters discussed and agreed at the meeting. He stated that his email set out:
… which claims Exact rejected and the basis upon which those claims were rejected. It was not formally described as a payment schedule, but it was intended to perform the role of a payment schedule (i.e. define the issues in dispute between the parties) and set out out Exact’s response to the 28 July progress claim and identified which elements of the claim Exact were not paying and why.
He stated that he sent the email to Fabtech on 5 August 2016, “setting what Exact’s position was on the items which it was not prepared to pay”. He exhibited that email to his affidavit as “CLM23”.
In Mr Mayberry’s first affidavit he stated that by early September 2016 the final stages of the project were completed. He tried to find out, by telephoning Fabtech, what their response to his 5 August 2016 email was. On 13 September 2016 he received an email from Fabtech. It attached correspondence from Fabtech dated 7 September 2016. That letter was from Mr Fairhead, the Managing Director of Fabtech (“CLM24”). In it Mr Fairhead referred to Fabtech’s letter dated 28 July 2016 enclosing a Payment Claim made under the Act. He referred to a clause of the Contract which required Exact to issue a payment certificate stating the amount of the payment which is to be made by Exact to Fabtech. He referred to s 14(4) of the Act. He “confirm(ed) that Exact … failed to serve a payment certificate as required” and, accordingly, the full amount of the Payment Claim was due and payable to Fabtech.
In his letter Mr Fairhead then wrote:
We confirm that on 5 August 2016, by email from Colin Mayberry of Exact to Graham Fairhead of Fabtech, Exact purported to confirm its position with respect to variations claimed by Fabtech as part of the Payment Claim. By that email, Exact purported to reject claims associated with “wet weather and its effects” (VO3, VO4, VO6 and VO10) and further rejected claims made for alternative construction techniques (VO12) with the exception of the mobilisation/demobilisation of the ATV ($2,926 plus GST).
However, Exact failed to confirm its position with respect to claims made for the sacrificial liner (VO5) or the water ballast tubes (VO7) and made no assessment of the claims made for the original scope of works carried out under the Subcontract. Further, Exact failed to refer to the Payment Claim in that email. In the circumstances, the email dated 5 August 2016 is not a valid payment schedule for the purposes of the Act.
Section 14(2) of the Act provides that a payment schedule is only valid if it:-
1.Identifies the payment claim to which it relates; and
2.Indicates the amount of the payment (if any) that Exact proposes to make.
In circumstances where Exact has failed to refer to the Payment Claim, has failed to make an assessment as to any amounts to be paid for the original scope of subcontract works, the claim for costs associated with the additional sacrificial material (VO5) or the water ballast tubes (VO7), the email cannot constitute a valid Payment Schedule. Exact have failed to indicate the amount of the payment to be made and further failed to provide reasons for withholding payment.
In his letter Mr Fairhead then informed Exact that Fabtech intended to commence proceedings to recover the sum of $367,918.89 plus GST. He then wrote this:
We advise that pursuant to section 15(4) of the Act, on commencement of proceedings by Fabtech to recover the Payment Claim (or any unpaid portion of the claimed amount) from Exact as a debt due, Exact is not entitled to bring a cross claim against Fabtech or raise a defence in relation to matters arising under the Subcontract.
Accordingly, Fabtech will seek summary judgment of the Payment Claim (or any unpaid portion of the Payment Claim) and will rely on decision of the Supreme Court of South Australia Linke Developments Pty Ltd v 21^st Century Developments Pty Ltd [2014] SASC 203 as to Fabtech’s entitlements to seek summary judgment without set off or deduction.
…
However, notwithstanding that Fabtech has elected to proceed with an application for summary judgment, it remains our preference that this matter be resolved on mutually acceptable terms and without the need for judicial intervention. Accordingly, we are prepared to meet with you on a without prejudice basis to resolve all of our entitlements arising under the Subcontract and we will write to you separately in this regard.
Mr Mayberry’s first affidavit stated that on 15 September 2016 he caused a letter to be sent to Fabtech in response to Mr Fairhead’s letter. In that letter (“CLM25”) Exact “strenuously” denied Fabtech’s assertion that their letter of 28 July 2016 and its enclosed document was a payment claim under the Act. The letter set out reasons why Exact denied that Fabtech’s document was a payment claim under the Act. In its letter Exact asserted that in its email to Fabtech after the meeting (5 August 2016) Exact had:
… confirmed that all claims for the costs associated with wet weather and its effects are rejected on the grounds that the contract is a lump sum arrangement and that the risk of wet weather and its consequences are at your cost; noted your agreement at the meeting that you would review your position in relation to costs of wet weather and advise us of that position; and noted your agreement at the meeting to review your claims for alternative construction methods.
The letter referred to the fact that in its email to Fabtech after the meeting Exact had stipulated that any matters arising as a result of Fabtech’s review of two of the above matters were to be advised to Exact by 12 August 2016. The letter stated that that had never occurred.
Exact’s letter of 15 September 2016 then states that even “if our email does not constitute a valid payment schedule under the Act (which we deny), it does not follow that an application for summary judgment will succeed in any event for the reasons set out below (i.e. there was no valid payment claim by which the Act was enlivened)”. The letter sets out why it is said by Exact that there was no valid payment claim. It states, “In order for a payment claim to be valid it must relate to a valid contractual entitlement. That is not the case. In this case, there is no contractual entitlement to many of the items claimed…”.
Mr Mayberry’s first affidavit indicated (para [58]) that he had not, by 21 September 2016, had any response from Fabtech. The affidavit stated that he had a telephone call with Mr Fairhead on 22 September 2016 (para [60]). He stated that 30 minutes after that conversation he went downstairs from his office and was handed a parcel containing a Summons, a Statement of Claim, and two affidavits. These were the documents filed in this Court on 21 September 2016.
Mr Mayberry’s first affidavit concluded by referring to a leak being detected after completion of the Hill Dam. He referred to the potential costs of rectifying the leak. He swore, “My preliminary estimate is that the cost of releasing the water from the dam, locating and repairing the leak, and then returning the lost water to the dam, could be in the order of 2 to 5 million”.
In Mr Thwaites’ first affidavit he stated that he was the Commercial and Finance Manager for Exact. He refers to Fabtech’s letter of 28 July 2016 to Exact. He refers to the fact that in that letter “reference is made … to ‘our progress claim’”. He notes that an attachment to Fabtech’s letter is a document entitled “Progress Claim – July 2016”. He states that he “considered the Progress Claim as provided by Fabtech as comprising a summary of its claims previously discussed in the subject of correspondence”. He recalled having a conversation with Mr Mayberry “whereupon we determined that the best approach would be to convene a meeting with the representatives of Fabtech to discuss the progress claim”. That meeting ultimately occurred in the morning of 5 August 2016 at the offices of Exact. The meeting was approximately one and a half hours in duration. He stated that at “the meeting, the covering letter, the progress claim and the documents were considered by the attendees. In particular, the progress claim was opened up on the table at the meeting and discussed”.
In Mr Thwaites’ first affidavit he stated that he made notes of the meeting and he set out, by reference to those notes, some of what was said at the meeting about some of the matters on Exact’s “Progress Claim”.
In Mr Thwaites’ first affidavit he stated that as at 30 September 2016 the total amount paid by Exact to Fabtech in respect of the works is $971,073.10. He stated that on 29 September 2016 he caused a letter to be sent by Exact to Fabtech advising of a payment on 28 September 2016 for $53,959.41 and confirming that the total amount of $971,073.10 had been paid by Exact to Fabtech.
Security of Payment Act
The Act is an “Act to provide for payments for construction work carried out, and related goods and services supplied, under construction contracts…”.
The object of the Act is to “ensure that a person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services” (s 3(1)).
The means by which the Act ensures that a person is entitled to receive a progress payment “is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments” (s 13(2)).
The means by which the Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves “the making of a payment claim by the person claiming payment; and the provision of a payment schedule by the person by whom the payment is payable; and the referral of any disputed claim to an adjudicator for determination; and the payment of the progress payment so determined” (s 3(3)).
It is intended that the Act “does not limit any other entitlement that a claimant may have under a construction contract; or any other remedy that a claimant may have for recovering any such other entitlement” (s 3(4)).
I gratefully adopt what Nicholson J said in Linke Developments Pty Ltd v 21^st Century Developments Pty Ltd (2014) 121 SASR 425 at 430 concerning the Act:
[16]The Act provides a statutory entitlement to a person who is owed money under a construction contract, in defined circumstances, to obtain progress payments for the carrying out of the work and the supply of construction goods and services. Such an entitlement subsists irrespective of any contractual terms regarding progress payments. However, the Act does not limit or detract from any other remedy to which a claimant may be entitled pursuant to the terms of the contract itself or otherwise.
[17]Legislation in similar terms has been operating in all Australian jurisdictions for a number of years.[1] The New South Wales Act, which has been in operation for more than ten years, is substantially identical to the South Australian legislation. As such, the New South Wales case law can be of assistance where the provisions are comparable.
[18]The Act provides that a person can make a “payment claim” (as defined) against the person said to be liable to make that payment. The person liable may respond by providing a “payment schedule” (as defined) indicating what amount, if any, it proposes to pay. Should the amount offered in satisfaction of the payment claim be less than that claimed, the payment schedule must set out the reasons why that is so and, if it is because money is being withheld, the reasons for the withholding.
[19]A responding payment schedule must be provided within the period provided for by the contract or, if the contract is silent as to any such period, within 15 days of service of the payment claim. If a payment schedule is not provided within the relevant period, the claimant may seek recovery of the amount claimed as a debt due. The Act further provides that in such proceedings, the respondent is not entitled to bring a cross-claim or raise a defence in relation to matters arising under the contract.
(Citations in original)
[1] Building and Construction Industry Security of Payment Act 1999 (NSW), the Building and Construction Industry (Security of Payment) Act 2009 (ACT), the Construction Contracts (Security of Payments) Act 2004 (NT), the Building and Construction Industry Payments Act 2004 (Qld), the Building and Construction Industry Security of Payment Act 2002 (Vic), the ConstructionContracts Act 2004 (WA) and the Building and Construction Industry Security of Payment Act 2009 (Tas).

Part 3 of the Act sets out the procedure for recovering progress payments. Division 1 of that Part provides for payment claims and payment schedules.
Section 13 provides for payment claims as follows:
13—Payment claims
(1)A person referred to in section 8 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 contract concerned, is or may be liable to make the payment.
(2)A payment claim—
(a)     must identify the construction work (or related goods and services) to which the progress payment relates; and
(b)     must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount); and
(c)     must state that it is made under this Act.
(3)The claimed amount may include an amount—
(a)     that the respondent is liable to pay the claimant under section 28(3); or
(b)     that is held under the construction contract by the respondent and that the claimant claims is due for release.
(4)A payment claim may be served only within—
(a)     the period determined by or in accordance with the terms of the construction contract; or
(b)     the period of 6 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),
whichever is the later.
(5)A claimant cannot serve more than 1 payment claim in respect of each reference date under the construction contract.
(6)However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.
Section 14 provides for payment schedules as follows:
14—Payment schedules
(1)A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.
(2)A payment schedule—
(a)     must identify the payment claim to which it relates; and
(b)     must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).
(3)If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment.
(4)If—
(a)     a claimant serves a payment claim on a respondent; and
(b)     the respondent does not provide a payment schedule to the claimant—
(i)within the time required by the relevant construction contract; or
(ii)within 15 business days after the payment claim is served,
whichever time expires earlier,
the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.
Section 15 provides for consequences of not paying a claimant where there is no payment schedule as follows:
15—Consequences of not paying claimant where no payment schedule
(1)This section applies if the respondent—
(a) becomes liable to pay the claimed amount to the claimant under section 14(4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section; and
(b)     fails to pay the whole or a part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
(2)In those circumstances, the claimant—
(a)     may—
(i)recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in a court of competent jurisdiction; or
(ii)make an adjudication application under section 17(1)(b) in relation to the payment claim; and
(b)     may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.
(3)A notice referred to in subsection (2)(b) must state that it is made under this Act.
(4)If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt—
(a)     judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1); and
(b)     the respondent is not, in those proceedings, entitled—
(i)to bring a cross claim against the claimant; or
(ii)to raise a defence in relation to matters arising under the construction contract.
The issue in this case
In this matter Fabtech has brought an action against Exact pursuant to s 15 of the Act. It alleges that it made a Payment Claim on Exact pursuant to s 13 of the Act. It alleges that Exact did not within time provide to it a payment schedule pursuant to s 14 of the Act.
Fabtech alleges that it is thereby entitled to and has thereby sought recovery of the amount of its Payment Claim from Exact as a debt due to it pursuant to s 15 of the Act.
Fabtech seeks by application for summary judgment, an order against Exact for the unpaid portion of its Payment Claim. That is the effect of the relief Fabtech seeks against Exact in its Statement of Claim filed in this Court.
Exact contended here that s 15 of the Act was not, in the circumstances, enlivened and therefore Fabtech is not entitled to summary judgment, or any judgment, in this Court. It was contended that that was so because it had replied to Fabtech’s Payment Claim by providing a payment schedule to Fabtech which complied with s 14 of the Act.
It was common ground before me that whatever decision I made on Fabtech’s application for summary judgment, that would be the end of this matter in this Court. Whatever that result was, the parties would have preserved to them and would pursue any contractual rights or remedies they had one against the other. That would likely occur within the provisions of the Contract relating to arbitration.
I have earlier referred to the fact that in a letter it wrote to Fabtech dated 15 September 2016 Exact “strenuously” denied Fabtech’s assertion in its letter of 28 July 2016 that Fabtech had made a Payment Claim pursuant to the Act. In that letter Exact set out its reasons for denying that Fabtech’s document was a payment claim under the Act.
Before me Mr O’Sullivan QC, of senior counsel for Exact, submitted: “It’s not pressed that we say it wasn’t a valid payment claim because the document is fairly easily brought within it, it calls itself a progress claim but when one looks at the notation at the bottom of the document, that says ‘this is a payment claim within the meaning of the Act’, that’s a very hard hurdle to get over…”. Mr O’Sullivan said that his client did not try to get over that hurdle.
Mr O’Sullivan’s “concession” was, in my view, rightly made. Section 13 of the Act requires that a payment claim under the Act “must state that it is made under this Act” (s 13(2)). The construction work and related goods and services was identified and an amount claimed was indicated. The claim notes at its foot that “This payment claim is made under the Building and Constructions Industry Security of Payment Act 2009 (SA)” or equivalent legislation in other States and Territories.
I am satisfied and find that the document, part of which is attached to this judgment and marked “A”, was a payment claim pursuant to s 13 of the Act made by Fabtech on Exact. Whether Exact appreciated that it was, or understood and dealt with it as if it was, is another question to which I shall return later.
The principal issue before me was whether or not Exact had replied to the Payment Claim by providing a payment schedule to Fabtech. More particularly, was Exact’s email of 5 August 2016 a payment schedule as envisaged by and complying with s 14 of the Act. This email is attached to this Judgment and marked “B”.
Fabtech submitted that it was not and that Exact had not replied to its Payment Claim by providing a payment schedule to it.
Exact submitted that it was a payment schedule which it provided to Fabtech in reply to Fabtech’s Payment Claim.
Did Exact provide a payment schedule to Fabtech?
In Façade Treatment Engineering Ltd v Brookfield Multiplex Constructions Pty Ltd (2015) 294 FLR 141, Vickery J said:
[29]The courts have recognised that the requirements of the security of payments legislation, including s 15 of the BCISP Act, should not be approached in an overly technical manner. For example, in Protectavale v K2K Pty Ltd[2] Finkelstein J held:[3]
As the words are used in relation to events occurring in the construction industry, they should be applied in a commonsense practical manner; Multiplex Constructions [2003] NSWSC 1140 [76] (‘[A] payment claim and a payment schedule must be produced quickly; much that is contained therein in an abbreviated form which would be meaningless to the uninformed reader will be understood readily by the parties themselves’); Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA Pty Ltd) [2007] QSC 333 [20] (‘The Act emphasises speed and informality. Accordingly one should not approach the question whether a document satisfies the description of a payment schedule (or payment claim for that matter) from an unduly critical viewpoint’).
[30]In Multiplex Constructions Pty Ltd v Luikens and Anor,[4] Palmer J set out the approach that the court should take in considering whether documents purporting to be payment claims or payment schedules complied with the relevant mandatory requirements of the security of payments legislation. His Honour noted that:[5]
A payment claim and a payment schedule are, in many cases, given and received by parties who are experienced in the building industry and are familiar with the particular building contract, the history of construction of the project and the broad issues which have produced the dispute as to the claimant’s payment claim. A payment claim and a payment schedule must be produced quickly; much that is contained therein in an abbreviated form which would be meaningless to the uninformed reader will be understood readily by the parties themselves. A payment claim and a payment schedule should not, therefore, be required to be as precise and as particularised as a pleading in the Supreme Court. Nevertheless, precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in the dispute.
A respondent to a payment claim cannot always content itself with cryptic or vague statements in its payment schedule as to its reasons for withholding payment on the assumption that the claimant will know what issue is sought to be raised. Sometimes the issue is so straightforward or has been so expansively agitated in prior correspondence that the briefest reference in the payment schedule will suffice to identify it clearly. More often than not, however, parties to a building dispute see the issues only from their own viewpoint: they may not be equally in possession of all of the facts and they may not equally appreciate the significance of what facts are known to them. This will be so especially where, for instance, the contract is for the construction of a dwelling house and the parties are the owner and a small builder. In such cases, the parties are liable to misunderstand the issues between them unless those issues emerge with sufficient clarity from the payment schedule read in conjunction with the payment claim.
Section 14(3) of the Act, in requiring a respondent to “indicate” its reasons for withholding payment, does not require that a payment schedule give full particulars of those reasons. The use of the word “indicate” rather than “state”, “specify” or “set out”, conveys an impression that some want of precision and particularity is permissible as long as the essence of “the reason” for withholding payment is made known sufficiently to enable the claimant to make a decision whether or not to pursue the claim and to understand the nature of the case it will have to meet in an adjudication.
(Footnotes in original)
[2] [2008] FCA 1248 (‘Protectavale’).
[3] Protectavale [2008] FCA 1248 [11].
[4] [2003] NSWSC 1140 (‘Multiplex Constructions’).
[5] Multiplex Constructions [2003] NSWSC 1140 [76]-[78].
In Linke Developments Pty Ltd v 21^st Century Developments Pty Ltd (2014) 121 SASR 425, Nicholson J said (at [41]) that “a practical, commonsense approach to the application of the requirements in ss13 and 14 of the Act is called for”. His Honour later (in [45]) indicated that he agreed with the observations of Palmer J and Finkelstein J as endorsed by Blue J of the Supreme Court of South Australia in Built Environs Pty Ltd v Tali Engineering Pty Ltd & Ors [2013] SASC 84 at [81]. Nicholson J indicated in Linke that although Blue J was referring to a payment claim, what he said was just as apposite to the question whether a payment schedule satisfies the requirements imposed by s 14. Nicholson J said:
[45]… It will be sufficient if a “payment schedule” in question achieves the basic objective of putting the claiming party on notice as to how much the party making payment intends to pay with reference to the payment claim and the reasons why that amount is lower than that claimed, if that is the case.
Blue J had said this:
[81]It is common ground that, in order to comply with section 13(2)(a), a payment claim must allow a reasonable principal to ascertain with sufficient certainty the basis of the claim so as to be able to provide a meaningful payment schedule. Both parties accepted that the relevant test was identified in Protectavale Pty Ltd v K2K Pty Ltd by Finkelstein J as follows:
It is necessary to decide whether the invoice meets the requirements of s 14. The test is an objective one; that is, it must be clear from the terms of the document that it contains the required information. But the terms must be read in context. Payment claims are usually given and received by parties experienced in the building industry who are familiar with the particular construction contract, the history of the project and any issues which may have arisen between them regarding payment. Those matters are part of the context.
The manner in which compliance with s 14 is tested is not overly demanding. …
Nonetheless a payment claim must be sufficiently detailed to enable the principal to understand the basis of the claim. If a reasonable principal is unable to ascertain with sufficient certainty the work to which the claim relates, he will not be able to provide a meaningful payment schedule. That is to say, a payment claim must put the principal in a position where he is able to decide whether to accept or reject the claim and, if the principal opts for the latter, to respond appropriately in a payment schedule.
(Citations omitted)
Whilst judicial authority is to the effect that whether or not a payment schedule has met the basic requirements of s 14 should not be approached in an overly technical manner, it must achieve the basic objective “of putting the claiming party on notice as to how much the party making payment intends to pay with reference to the payment claim and the reasons why that amount is lower than that claimed, if that is the case”.
A payment schedule must identify the payment claim to which it relates and must indicate the amount of the payment (if any) that the party making payment proposes to pay and the reasons for withholding some or all of the claimed amount.
There is no doubt that a “respondent” who is served with a payment claim, as referred to in s 14 of the Act, may indicate that it intends to withhold the whole of the amount the subject of a payment claim. However, if that is indicated, the respondent must give reasons for withholding the entirety of the payment claim.
What is said by Exact to be a payment schedule (Annexure B email dated 5 August 2016) does not purport, on its face, to operate as a payment schedule. It does not say it is and it does not identify any amount or amounts Exact proposes to pay or withhold.
This is hardly surprising as it purports to confirm Exact’s position following a meeting it had with Fabtech in which discussions were held regarding “Fabtech’s claims for variations at Hill Dam”. Exact sets out its understandings as to “actions required by Fabtech in relation to” five dot-pointed claims by Fabtech. The last two dot-pointed claims did not require any “action” by Fabtech, but rather by Exact. In one Exact indicated that it would recommend that certain costs be accepted by its client as a variation. In the other Exact indicated that it would recommend “costs of sacrificial liner and water ballast tubes” to its client as a variation and Exact would advise Fabtech following approval of those costs.
In respect of these last two dot-pointed claims, Exact could be understood to be saying that it may or may not pay all or any of these two items depending upon its own client’s acceptance and approval of some or all of them.
In Exact’s third dot point regarding Fabtech’s claims it rejected a claim “for alternative construction techniques” on the basis of information provided by Fabtech. It adds that that is “with the exception of mob/dmob of the ATV” although it does not identify what sum that comprised of the “alternative construction techniques”.
It is seen by the above that Exact was not refusing to pay the whole of Fabtech’s claim.
It is important for these matters to be identified by a respondent for the purposes of the Act. It is also important for the purposes of the Act that strict and limited time lines under the Act be complied with. This is because the Act provides in s 17 for the adjudication of disputes where an adjudicator must know with some precision what the claimed amounts are and for what, and what the disputed amounts are and for what, and what are the reason or reasons for the disputes. There are short and strict time lines because the Act deals not only with completed construction but with ongoing construction work and a possible consequence of a respondent failing to pay an adjudicated amount to the claimant may be the suspension of construction work or the suspension of supplying related goods and services under the construction contract.
I consider that Exact’s email of 5 August 2016 to Fabtech was not intended by Exact to be a “payment schedule” in reply to a “payment claim” to it from Fabtech. I consider that, in the circumstances of the meeting held between the parties on 5 August 2016 between Fabtech “Progress Claim” and Exact’s email, that to be an understandable position for Exact to take. It is consistent with Exact’s position not much later when it maintained “strenuously” that Exact had not made a “payment claim” on it pursuant to the Act. All this leads me to conclude that Exact did not intend to respond by providing a payment schedule to Fabtech, as it did not consider Fabtech’s claim to be a payment claim.
Whilst I understand, and in some ways I am sympathetic to, Exact’s position in what occurred here, I have no doubt that Fabtech had served a valid payment claim under the Act on Exact.
The requirements of the Act were described in various ways before me. The word “brutal” was used at one time, as were the words “pay now, argue later”. The latter words were used to describe the policy considerations underpinning the Act that operates in this State and also in other parts of Australia.
I do not consider that I should decide the matter before me in a way other than on an objective reading of Exact’s email of 5 August 2016, albeit in a commonsense, practical manner. I must give due regard to the clear requirements in s 14 of the Act. I must also give, as Mr O’Sullivan QC urged upon me, due regard, consideration and weight to the background to the Contract in question. I must also take account of what Finkelstein J said in Protectavale that “payment claims are usually given and received by parties experienced in the building industry who are familiar with the particular construction contract, the history of the project and any issues which may have arisen between them regarding payment. Those matters are part of the context”.

In this case, as I do not consider that Exact considered that it was responding to a payment claim under the Act, it is hardly surprising that what it now says to be a payment schedule did not, in my judgement, identify either the payment claim to which it related, it did not in any way at all identify the amount of the payment (if any) that it proposed to make to Fabtech, and it did not identify why it proposed to withhold payment or payments to Fabtech.
I so find.
Accordingly, I have concluded that Exact did not reply to Fabtech’s payment claim by providing a payment schedule to Fabtech.
Exact submitted that whatever my decision may be as to whether it provided a payment schedule to Fabtech, Fabtech is estopped and cannot now seek to take advantage of s 14 of the Act as it had agreed with Exact to a different course of action, being evidenced by Exact’s email of 5 August 2016 and subsequent communications between the parties.
Exact submitted that “in these circumstances, it is not appropriate on an application for summary judgment for the courts to embark on a forensic exercise directed to defining the extent and nature of the agreement reached, whether it formed an estoppel, or indeed whether such estoppel as may be found, was rendered nugatory by s 13 of the Act, which prevents contracting out of the Act”. The case of Barclay Mowlem Construction v Tesrol Walsh Bay [2004] NSWSC 716, per McDougall J at [20], [26] was cited. These submissions on “estoppel” move from a “legal” position to a “procedural” one.
These submissions by Exact involve a consideration of s 15(4)(b)(ii) and s 33 of the Act. The former provision is to the effect that in proceedings such as those brought by Fabtech here, Exact is not, in these proceedings, entitled “to raise a defence in relation to matters arising under the construction contract”. The latter provision provides that the provisions of the Act “have effect despite any provision to the contrary in any contract” and that “a provision of an agreement, whether in writing or not under which the operation of [the] Act is, or is purported to be, excluded, modified or restricted, or that has the effect of excluding, modifying or restricting the operation of [the] Act”.
In the case of Barclay McDougall J withheld summary judgment and indicated (in para [21]) that the proper application of a provision similar to s 33 of the Act was a matter for a final hearing rather than on a hearing of an application for summary judgment. In that case, his Honour set out (in para [16]) that it was said in that case that it had been “agreed that the parties would take no further step in response to the claim that otherwise might have been necessary until the [meeting] had taken place and the parties had failed to resolve the dispute”. It was also said that the respondent in that case relied on those matters and acted to its detriment by taking no further steps under the Act in respect of the payment claim.
In my view, there is nothing of that type in the case before me. In this case, Exact was not acting to its detriment in reliance upon any representation, let alone on any contract agreed upon by the parties for “a course of action going forward” whereby Fabtech agreed not to pursue any rights it may have under the Act on the basis of its payment claim.
As I do not consider any proper factual basis has been made out by Exact properly to found an estoppel against Fabtech, I do not consider it necessary for me to express any concluded view as to the proper construction and operation of s 15(4)(b)(ii) and s 33 of the Act.
I also do not consider it necessary for me to consider and decide the argument and submissions that were raised before me as to s 67C of the Evidence Act 1929 (SA). This provision deals with the exclusion of evidence of settlement negotiations and it was argued in relation to the meeting of 5 August 2016 at which Fabtech submitted “the parties discussed and sought to negotiate a settlement of (Fabtech’s) claims, albeit without success”. It was submitted by Fabtech that evidence of that meeting was irrelevant and should be excluded for that reason and also by reason of s 67C of the Evidence Act.
I do not consider it necessary for me to consider and resolve matters relating to s 67C of the Evidence Act in light of the way I have decided the two earlier issues.
One further matter was advanced by Exact in the hearing before me. It was advanced in reply by Mr Adams, of counsel, for Exact. It was submitted that the principle of severance arose as a result of Fabtech’s submission “that there was somehow some ambiguity about, for example, VO7”. It was submitted that if a respondent’s response to one item in a payment claim was ambiguous that should not “trigger” the Act so as to make the whole amount of the payment claim payable.
I do not consider that the principle of severance arises in this case. What the Act required Exact to do is to respond to Fabtech’s Payment Claim. The Act required it to do so in particular ways. I have found that it did not do so and, for the purposes of the so-called severance argument, Exact’s email of 5 August 2016 said nothing about whether Exact would pay Item No. VO-05 of the Payment Claim in the sum of $4,116.00 or Item No. VO-07 of the Payment Claim in the sum of $4,622.40. Those are the two items referred to in written submissions of the parties.
Item Nos. 1-12 of the Payment Claim total $49,337.01. The sum of that sum and $4,622.40 (Item No. VO-07) is $53.959.41. That sum was paid by Exact to Fabtech on 29 September 2016. The sum of $4,116.00 (Item No. VO‑05) has not been paid.
In these circumstances Fabtech is entitled to recover the unpaid portion of the claimed amount from Exact, as a debt due to it. I am satisfied that Fabtech is entitled to summary judgment for the sum of $367,918.89 less the amount paid by Exact to Fabtech after 5 August 2016.
There were two payments made. The first was in the sum of $53,959.41 which was paid on 29 September 2016. The second was in the sum of $5,395.94 which was paid on 5 October 2016. The latter sum was GST on the former sum.
I do not consider that GST was properly included in Fabtech’s proceedings brought in this Court. It was not included in Fabtech’s Payment Claim. GST is also not relevant to a judgment I will enter in this Court where some GST has been paid subsequent to proceedings being issued here.
I consider that Fabtech is entitled to summary judgment against Exact in the sum of $313,959.48.
I shall hear the parties as to interest and costs, whilst noting that the question of interest has already been the subject of written submissions.
Attachment A

Attachment B