Foursquare Construction Management Pty Ltd v Chevron Corporation Pty Ltd
[2020] VCC 1928
•4 December 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-20-04134
| Foursquare Construction Management Pty Ltd | Plaintiff |
| v | |
| Chevron Corporation Pty Ltd | Defendant |
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JUDGE: | Judicial Registrar Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the Papers | |
DATE OF JUDGMENT: | 4 December 2020 | |
CASE MAY BE CITED AS: | Foursquare Construction Management Pty Ltd v Chevron Corporation Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1928 | |
REASONS FOR JUDGMENT
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Subject: CONTRACTS
Catchwords: Building contract – payment claim – whether retention monies a claim for construction work or related goods or services – whether reference date available
Legislation Cited: Building and Construction Industry Security of Payment Act2002 (Vic) ss3, 4, 5, 7, 9(1),10B, 12, 14, 15, 16(2), 16(4), 17(2), 47, 48, 50; Civil Procedure Act 2010 (Vic) s61, 63; Building and Construction Industry Security of Payment Act 2002 (NSW) s13(3)(b); Building and Construction Industry Security of Payment Act 2004 (QLD) s17(3)(b)
Cases Cited: Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; Gantley Pty Ltd & Ors v Phoenix International Group Pty Ltd [2010] VSC 106; Cat Protection Society v ArvioPty Ltd [2018] VSC 757; Levi Pty Ltd v Z&H Building Development Pty Ltd [2019] VSC 633; Citi-Con Pty Ltd v Trojan Built Pty Ltd [2020] VSC 557; Zulin Formwork Pty Ltd v Valeo Construction Pty Ltd [2019] VCC 936; Cool Logic Pty Ltd v Citi-Con Pty Ltd [2020] VCC 1261; Punton’s Shoes Pty Ltd v Citi-Con Pty Ltd [2020] VSC 514; John Goss Pty Ltd v Leighton Contractors Pty Ltd & Anor (2006) NSWLR 707; Vanella Pty Ltd v TFM Epping Land Pty Ltd [2019] NSWSC 1379; EHome Construction Pty Ltd v GCB Constructions Pty Ltd [2020] QSC 291; Grocon (Belgrave St) Developer Pty Ltd v Construction Profile Pty Ltd [2020] NSWSC 2020; Watpac Constructions Pty Ltd v Collins & Graham Mechanical Pty Ltd [2020] VSC 637; Southern Region Pty Ltd v State of Victoria (No 2) [2001] VSC 381
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Mr A R Morrison | KCL Law |
| For the defendant | Ms C Jones | Norton Rose Fulbright |
JUDICIAL REGISTRAR:
1 The plaintiff (“Foursquare”) applies for judgment against the defendant (“Chevron”) pursuant to s16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (“the Act”). Foursquare makes the application by summons on originating motion dated 14 September 2020. The application arises out of Foursquare’s construction of an extension of an aged care facility at 135 Duff Street, Cranbourne.
2 Foursquare claims judgment on the basis that Chevron failed to serve a payment schedule in response to its payment claim.
3 Chevron resists judgment on two grounds:
· that the payment claim includes retention monies, which are not a claim for construction work or related goods or services; and
· that the payment claim lacks a reference date.
4 In my judgment, both grounds are made out. Therefore, I will order that Foursquare’s summons is dismissed. I will order that Foursquare pay Chevron’s costs of and incidental to the proceeding on the standard basis, in default of agreement, unless either party can show a basis for seeking a different order to costs. I invite the parties to prepare draft orders to give effect to these reasons. Any further issue as to costs will be determined on the papers.
The factual background
5 Foursquare relies upon two affidavits of Mr Brendan Canavan, its director, sworn 14 September 2020 and 22 October 2020. Chevron relies upon the affidavit of Mr Peter Reilly, its director, sworn 14 October 2020.
6 By a contract dated 28 February 2017, Chevron engaged Foursquare to construct an extension to an aged care facility at 135 Duff Street, Cranbourne.
7 General conditions of contract clause 1 defined the date of practical completion as follows:
a)the date evidenced in a Certificate of Practical Completion as the date upon which Practical Completion was reached; or
b)where another date is determined in any dispute resolution process in accordance with clause 42 as the date upon which practical completion was reached, that other date.
8 The defects liability period (“DLP”) was 12 months (item 27 of Annexure A).
9 General conditions of contract clause 35 governed the commencement and extension of the DLP:
The defects liability period stated in item 27 shall commence on the Date of Practical Completion at 4:00pm.
The Contractor shall carry out rectification at times and in a manner causing as little inconvenience to the occupants or users of the Works as is reasonable possible.
Within 28 days (or such longer period directed by the Superintendent) after the Date of Practical Completion, the Contractor shall rectify all Defects existing at the Date of Practical Completion. If the rectification work is not completed within that time, the Superintendent may have the rectification work carried out at the Contractor’s expense…
During the Defects Liability Period, the Superintendent may give the Contractor a Direction to rectify a Defect which:
a) shall identify the Defect and the date for completion of its rectification; and
b)states a date for commencement of the rectification and, unless the Direction specifies otherwise, there shall be a separate Defects Liability Period in relation to that defect. [Emphasis added].
10 General conditions of contract clause 37.4 governed payment claims, payment schedules, and retention moneys. In summary:
· within 28 days after the expiry of the last DLP, the contractor was to give the superintendent a final payment claim (endorsed ‘Final Payment Claim’);
· within 7 days after receipt of the contractor’s final payment claim, the Superintendent was to issue a final payment certificate, certifying the contract sum (with any adjustments), the total value of all previous certificates issued, and the final balance payable; and
· provided that the contractor gave the principal a deed of release – final completion executed by the contractor, the principal was to release any retention moneys held by the principal within 14 days of the presentation of the final payment certificate by the contractor, subject to any claim of the principal on the retention moneys or security.
11 Chevron was entitled to security in the form of retention monies at 2.5% of the contract sum, and to an unconditional bank guarantee at 2.5% of the contract sum (item 13 of Annexure 4).
12 Subject to Chevron using the security, upon issue of the certificate of practical completion, Chevron’s entitlement to the security would be reduced by 50%. The remainder of the security (the bank guarantee) would be released on the latter of the issue of the final payment certificate and the final determination of disputes arising out of the contract (general conditions of contract clause 5.4 and item 13(c) of Annexure A).
13 On 29 June 2018, the superintendent issued a certificate of practical completion, which deemed practical completion had occurred on 21 June 2018. The certificate confirmed the release of the bank guarantee. Chevron was to return the balance at the end of the DLP.
14 On 27 February 2019, the superintendent sent Foursquare an email directing it to rectify various defects within 30 days.
15 Mr Canavan deposes that Foursquare failed to rectify the defects within the time specified in the direction or by the expiration of the DLP.[1] Mr Reilly deposes that Foursquare completed some of the defects, but not others.[2]
16 On 25 July 2019, Foursquare served a final payment claim for the balance of the retention monies ($278,540.33). Chevron failed to issue a payment schedule in response to the payment claim.
The legal context
[1]First affidavit of Mr Canavan sworn 14 September 2020 [13].
[2]Affidavit of Peter Reilly sworn 14 October 2020 [15].
23 The Act seeks to ensure that persons who undertake to carry out construction work can recover progress payments for the performance of that work.[3] Section 4 defines construction contract as a “contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services for another party”. The Act applies to any construction contract whether written or oral, or partly written and partly oral.[4] “Construction work” is defined by s5.
[3]s3.
[4]s7.
24 Section 16(2)(a) of the 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.
25 Section 14 of the Act concerns the form and content of payment claims. Sections 14(2) and (3) relevantly provide that a payment claim:
· must be in the prescribed form (if any) and contain the prescribed information (if any) – neither is prescribed;
· must identify the construction work or related goods and services to which it relates;
· must indicate the amount of progress payment that the claimant claims to be due;
· must state that it is made under the SOP Act; and
· must not include any “excluded amounts” (being amounts referable to particular categories of variations described below).
26 Section 14(5), (6) and (7) of the Act concern payment claims claim in respect of a final, single or one-off progress payment. 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.
27 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”. Section 9(2)(a) provides that a reference date is a date determined by or in accordance with the construction contract as:
· a date on which a claim for a progress payment may be made; or
· a date by reference to which the amount of a progress payment is to be calculated.
in relation to a specific item of construction work “carried out or to be carried out” or a specific item of related goods and services “supplied or to be supplied” under the contract. The rest of s9 concerns situations where the contract makes no express provision for reference dates.
28 It is now well established in Victoria that unless a payment claim answering the description in section 14(1) of the Act is served, there can be no application to a court under s16(2)(a)(i) (Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd[5] (“Southern Han”)). On the other hand, the available defences to a payment claim are very limited.
[5](2016) 260 CLR 340 at [44].
29 Generally speaking, the available defences concern either the nature of the underlying contract or the form and service of the purported payment claim, and thus whether the payment claim is effective to trigger the procedures established by Part 3 of the Act.[6] In the present case, the relevant defences to the payment claim enlivened by the formal requirements of the Act are, in substance, that the payment claim:
[6]Southern Han at [62].
· does not relate to a “construction contract” (including because it does not involve carrying out “construction work”), or it relates to a construction contract excluded from the operation of the 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); and
· was made when no valid reference date existed,[7] 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.[8]
[7]Southern Han at [61]-[62]; Vanguard Developments v Promax [2018] VSC 386, Kennedy J at [121].
[8]SOP Act s14(8).
30 Under section 47, nothing in Part 3 of the 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.[9] The statutory context both contemplates and permits inconsistent judgments.[10] This section is, in effect, the statutory manifestation of the “pay now, argue later” epithet often used to describe the policy behind the SOP Act and its counterparts in other states.[11]
[9]Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 [2] and [43]-[46] (Vickery J), cited with approval in Pearl Hill Pty Ltd v Concorp Construction Group (Vic)Pty Ltd [2011] VSCA 99 [11].
[10]Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385 [22] (Handley JA, with whom Santow JA and Pearlman AJA agreed).
[11]Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 [2] and [43]-[46].
31 Further, in considering any purported defences to a payment claim, it is important to be mindful of s48 of the 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 Act or that may reasonably be construed as an attempt to deter a person from taking action under the Act, is void.
32 This court has endorsed the hearing of applications under the Act on a summary basis by summons on originating motion with affidavit evidence.[12] Such claims are properly assessed on the balance of probabilities,[13] with the quality of the evidence weighed having regard to the fact that the legislation seeks to facilitate a swift but temporary remedy.[14]
[12]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 [39]-[54]. See also SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 [26].
[13]Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 449-450 (Mason CJ, Brennan, Deane and Gaudron JJ).
[14]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 [51]-[54].
Retention monies
33 The first ground on which Chevron resists judgment is that the payment claim relates solely to retention monies, which do not relate to construction work or related goods or services (cf s5).
34 Foursquare responds that a payment claim may include retention monies.
35 Foursquare referred to Vickery J’s obiter in Gantley Pty Ltd & Ors v Phoenix International Group Pty Ltd[15] (“Gantley”) that:
[Payment] claims may include, for example, payment of retention monies due under the security arrangements provided for under the contract and variations which are “claimable variations” under s.10A. [Emphasis added]
[15][2010] VSC 106 [187].
36 The dicta is equivocal in its terms as it is premised by the word “may”.
37 Foursquare then referenced the obiter of Digby J in Cat Protection Society v Arvio Pty Ltd[16] (“Cat Protection Society”) as follows:
This entitlement arises as a result of cl 25.1(c) obliging the proprietor to pay the contractor the unpaid balance of the Contract price upon Practical Completion, and by operation of cl 26.4 which also obliges the specific payment of one half of the Retention Fund to the contractor shortly after Practical Completion. Such a claim would, when able to be made, be supported by s 9(2)(a)(ii) of the SOP Act which establishes a reference date in respect of a date by reference to which the amount of a progress payment is to be calculated. [Emphasis added]
[16][2018] VSC 757 [51].
38 Cat Protection does not assist the plaintiff as the phrase “[s]uch a claim would, when able to be made…” [emphasis added] is equivocal. It casts doubt upon whether retention moneys are claimable in all circumstances. Indeed, the contract in Cat Protection (at [64]), was such that the claim for the return of the unpaid balance of the retention moneys was not contemplated and the parties agreed they would not be included in progress claims. The retention monies could not be described as a claim ‘for the value of materials supplied and work done by the Contractor under this Contract.’
39 Thereafter, Foursquare relied upon Levi Pty Ltd v Z&H Building Development[17], which Stynes J applied in Citi-Con Pty Ltd v Trojan Built Pty Ltd[18]. In Levi, Digby J held that the fact a claim includes retention money is not of itself determinative of whether a payment claim is for “final payment”[19]. This authority does not assist Foursquare. It concerned the discrete issue of whether a payment claim is a final payment claim, rather than whether it concerns construction work. Further, Digby J considered that whether a claim for retention monies was permissible on a SOP application was beyond the scope of the judicial review application before him.[20]
[17][2019] VSC 633.
[18][2020] VSC 557 [59]-[60].
[19]Levi Pty Ltd v Z&H Building Development Pty Ltd [2019] VSC 633 [92]-[96].
[20]Ibid [107]-[108].
40 Foursquare then referenced the decisions of this court in Zulin Formwork Pty Ltd v Valeo Construction Pty Ltd (“Zulin”)[21] and Cool Logic Pty Ltd v Citi-Con Pty Ltd (“Cool Logic”)[22]. In Zulin, Judge A Ryan gave judgment for payment claims that included retention monies. However, Zulin is dissimilar to this proceeding. The payment claim was not simply for retention; it included the balance of a contractual sum (variations included) (see also Method Constructions Australia Pty Ltd v ABI Investment Holdings (Melbourne) Pty Ltd [2020] VCC 1797 at [77]).
[21][2019] VCC 936.
[22][2020] VCC 1261.
41 In Cool Logic, Judge Woodward allowed a claim for retention monies but on an alternative basis that the practice as between the parties in that case was that:
a) Cool Logic’s payment claims were for the full amount owing for the claimed construction work, without allowing for retention; and
b) as a general rule, Citi-Con would issue a payment schedule deducting (sometimes among other things) the amount of the retention. [23]
[23]Cool Logic Pty Ltd v Citi-Con Pty Ltd [2020] VCC 1261 [88].
42 In the circumstances outlined above, his Honour found that the claim could therefore be treated as a payment claim under the SOP Act.
43 Although his Honour went on to say in obiter that: “As a general observation, it seems to me surprising that a claim for retention monies (providing that it meets the other statutory requirements) would not generally be treated as relating to construction work given that, almost by definition, it is retained from sums otherwise due for that work”,[24] I make three observations. First, the excerpt is equivocal in its language (“[a]s a general proposition…”, “providing that it meets the other statutory requirements” and “generally”). Secondly, as discussed below, Judge Woodward determined Cool Logic without the benefit of the latter decision in Punton’s Shoes Pty Ltd v Citi-Con Pty Ltd[25] (“Punton’s”), and was unable to cite authority in support of his view. Thirdly, Judge Woodward allowed the claim on other grounds.
[24]Ibid [88].
[25][2020] VSC 514.
44 Accordingly, Judge Woodward’s observations were not relevant to his determination of the payment claim, and are obiter dicta.
45 Finally, Foursquare relied upon the New South Wales decisions of John Goss Protects Pty Ltd v Leighton Contractors Pty Ltd & Anor (“John Goss”)[26] and Vanella Pty Ltd v TFM Epping Land Pty Ltd (“Vanella”)[27]; and the Queensland decision of EHome Construction Pty Ltd v GCB Constructions Pty Ltd (“EHome”)[28]. However, as Foursquare concedes, the relevant New South Wales provisions differ from the Victorian Act. Contrary to the Victorian Act, s13(3)(b) of the NSW SOP Act appears to permit claims for retention monies:
(3) The claimed amount may include any amount—
(a) that the respondent is liable to pay the claimant under section 27(2A); or
(b) that is held under the construction contract by the respondent and that the
claimant claims is due for release.[29] [Emphasis added]
[26](2006) NSWLR 707, 715 [38].
[27][2019] NSWSC 1379 [119]-[130].
[28][2020] QSC 291 [6].
[29]Building and Construction Industry Security of Payment Act 2002 (NSW) s13(3)(b).
46 Section 17(3)(b) of the Queensland Act is in the same terms:
(3) The claimed amount may include any amount—
(a) that the respondent is liable to pay the claimant under section 33(3); or
(b) that is held under the construction contract by the respondent and that the
claimant claims is due for release.[30] [Emphasis added]
[30]Building and Construction Industry Security of Payment Act 2004 (QLD) s17(3)(b).
47 Accordingly, John Goss, Vanella and EHome are not “materially similar” to the Victorian SOP Act (Cool Logic (at [86]).
48 Chevron referred to the decision of the New South Wales Supreme Court in Grocon (Belgrave St) Developer Pty Ltd v Construction Profile Pty Ltd (“Grocon”).[31] In Grocon, the Court held that a payment claim predominantly for the value of bank guarantees was invalid as the claim did not relate to construction work. Foursquare submits that Grocon is distinguishable from this case on the basis that it concerned bank guarantees rather than retention monies. Foursquare notes that bank guarantees and retention have the same purpose, but operate differently. I accept the submissions of Foursquare, however, this does not assist Foursquare given the subsequent developments of the jurisprudence as outlined below.
[31][2020] NSWSC 2020.
49 Chevron then relied upon the recent decision of Digby J in Punton’s. His Honour’s observations regarding the distinction between a payment claim and a claim for return of retention monies are helpfully outlined as follows (citations included and emphasis added):
“110 Under the scheme of the Contract the retention moneys progressively deducted formed a separate and distinct security fund to ensure performance by the Contractor. The separate and distinct character of the contractual security fund created by the deduction of retention moneys is apparent from the terms and operation of cls 5.1, 5.2, 5.5, 5.6 and 42.8 of the Contract which establish the purpose of that security fund, the contractual mechanism for its accumulation and reduction and the bases upon which recourse may be had to that security fund by the Principal. The Contract makes no provision for a claim in respect of, or for payment to the Contractor in relation to the security fund. Accordingly, any implied right or entitlement there may be in the Contractor to return of a portion of retention moneys is different in character and distinct from either a claim under the Contract for the value of work carried out or an entitlement under the SoP Act for the value of construction work carried out and related goods and services.[32]
[32]Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340, [59]-[60].
111 In distinction to a payment claim entitlement, the Contract does provide a mechanism to adjust the parties’ entitlements in relation to moneys deducted by way of retention. Any sum held by way of retention is to taken into account in the Final certification process under cl 42.6 of the Contract and thereby accounted for in the amount ultimately payable as between the Contractor and the Principal on the final reconciliation of each parties entitlements under the Contract. The retention deduction, reduction, recourse and security related provisions of the Contract do not contemplate or accommodate payment claims by the Contractor for contract work undertaken or related goods and services supplied.
112 For the above reasons, and in particular because the Contract, including the progress payment provisions in cl 42.1 of the Contract make no provision for the return or payment of retention moneys, any implied entitlement to return of retention moneys upon the issue of the Certificate of Practical Completion under the Contract, or adjustment under cl 42.6, is not in the nature of a progress payment entitlement in relation to work carried out by the Contractor in the performance of the Contract.
113 Neither, for the same above reasons, is the first defendant’s September 2019 Payment Claim under the Contract for return or payment of half retention moneys in the nature of a payment claim under the SoP Act for construction work or related goods and services undertaken and provided under the Contract. This is so irrespective of whether the first defendant was able to establish a valid reference date, and any implied or other foundation for its claim to be paid half the deducted retention moneys.
114 Further, it follows from the conclusions in the last three preceding paragraphs that there can also be no relevant reference date under s 9 the SoP Act because a relevant reference date under the Act is determined on the basis of a progress payment entitlement in respect of construction work undertaken or the supply of related goods and services under the construction contract. The September 2019 Payment Claim does not make a claim for an entitlement of this type.” [Emphasis added]
50 Digby J applied Punton’s in Watpac Constructions Pty Ltd v Collins & Graham Mechanical Pty Ltd(“Watpac”)[33], and determined that claims for the reduction of security were not claims for construction work or related goods and services (on which Chevron also relies).
[33][2020] VSC 637 [180].
51 I note that Punton’s was handed down some days after Cool Logic. Punton’s was handed down on 24 August 2020, and Cool Logic on 20 August 2020.
52 Foursquare seeks to distinguish Punton’s and Watpac on the basis that the payment claims in those cases relied upon an independent reference date generated under security release clauses. Foursquare asserts that Punton’s is silent on whether retention is claimable when a payment claim was properly made in respect of a valid reference date.
53 I endorse Punton’s for five reasons. First, it is binding authority on me. Secondly, unlike the obiter in Gantley, Cat Protection Society and Cool Logic, it is unequivocal. Thirdly, it is the most relevant authority, as it concerned retention moneys on a Victorian SOP application (cf John Goss, Vanella and EHome). Fourthly, unlike Cool Logic, it is ratio decidendi rather than obiter dicta. Fifthly, as noted above, Judge Woodward made his general observations in Cool Logic without the benefit of Punton’s.
54 Applying the relevant authorities, the purpose of retention moneys is to provide security for defective work; it is not to compensate a person for construction work. Therefore, a claim for retention moneys does not facilitate the purpose of the SOP regime, namely to compensate persons who have undertaken to carry out construction work under the contract or to supply related goods and services under the contract (s9(1)).
55 Judge Woodward's observations in Cool Logic (at [88]) that: “it seems to me surprising that a claim for retention moneys (providing that it meets the other statutory requirements) would not generally be treated as relating to construction work given that, almost by definition, it is retained from sums otherwise due for that work,” describe the fact that retention moneys are held in case of defective works. Whether they are ultimately retained depends upon the nature of the works and the operation of the contractual provisions.
56 On a literal construction, retention moneys ‘relate to the construction work’, however, Digby J in Punton’s held that retention monies are a ‘separate and distinct security fund’ (at [110]), unrelated to the payment claim regime. His Honour relied upon the fact that ‘the Contract makes no provision for a claim in respect of, or for payment to the Contractor in relation to the security fund’ (also at [110]). Digby J further clarified the position in Watpac Constructions (at [180]), where he stated that the payment claims seeking payment of the final 50% retention on the project in that case “do not come within the scope of the SOP Act because the claim made … in its … Payment Claims are not claims in relation to construction work or relate to the supply of goods and services undertaken under the Contracts, but rather are claims in each case for reduction of security pursuant to … the Contract.”
57 Accordingly, the relevant question in relation to retention is not whether the payment claim was issued in respect of a valid reference date, but whether the claim validly included the amount for retention at all, as the claim for return of retention monies was not a claim for construction work as defined by s5 of the Act.
58 The payment claim in the present case only claims for the return of the final 50% retention being held by Chevron.
59 Clause 37.1 of the contract provides for progress payments, which includes the valuation of WUC, which is defined in clause 1.1 to mean work which the contractor is or may be required to carry out and complete under the contract and includes variations, remedial work, construction plant and temporary works and includes work, if any, carried out by the contractor before execution of the contract.
60 Clause 37.4 provides for the final payment, which required the progress claim to be together will other claims whatsoever in connection with the subject matter of the contract and the certification of the adjustments to the contract sum and final balance payable is within 7 days of the final payment claim or 28 days from the expiry of the last DLP.
61 The retention moneys terms under clause 5.4 (c) of the contract say that the security will be released on the later of the issue of the final certificate or the final determination of disputes which arise under the contract.
62 Here, the progress claim for the final 50% of retention was not made together with all other claims, nor was there a final certificate or determination of disputes. There is no other claimed amount that requires valuation or balancing of account.
63 Clause 5.4 does provide that upon the certificate of practical completion being issued, Chevron’s entitlement to security shall be reduced by 50% of the portion of security. The first portion of the retention moneys was released upon the issuing of the certificate of practical completion in accordance with this provision.
64 The payment claim therefore does not, as required by clause 37.4 above, constitute a payment claim in relation to construction work or the supply of related goods or services as required by ss 9(1), 10(1), and 14(2) of the Act.
23 In my view, seeking to recover the final portion of the retention monies via a payment claim solely for that purpose was not the appropriate forum. In this regard, Foursquare seeks to enforce a contractual provision separate from the mechanisms under the Act. As I have concluded that the amount claimed for the return of the retention cannot be considered a payment claim under ss5 or 14 of the Act, the claim must fail.
24 Accordingly, I uphold ground 1.
Reference date
25 The second ground on which Chevron resists judgment is that the payment claim lacks a reference date, because it was issued before the expiry of a further DLP.
26 As set out above, Foursquare could issue a final payment claim within 28 after the expiry of the last DLP (general conditions of contract clause 37.4).
27 The DLP commenced at 4.00pm on the date of practical completion (general conditions of contract clause 35).
28 On 29 June 2018, the superintendent issued a certificate of practical completion, which deemed practical completion occurred on 21 June 2018.
29 The DLP would be extended if the superintendent issued a direction to rectify defects in accordance with general conditions of contract clause 35. Where that occurred, there would be a separate DLP in relation to that defect (being the period specified in item 27, commencing at 4:00pm on the day the rectification is completed and governed by this clause).
30 On 27 February 2019, the superintendent issued a direction to rectify various defects. As noted above, some of those defects were completed, but not all.
31 In the premises, there is a dispute as to whether the DLP was extended.
32 Foursquare submits that the DLP was not extended. It says general conditions of contract clause 35 is ambiguous and should be construed in a manner which provides certainty as to when the DLP expired. It referred to the following dicta of Byrnes J in Southern Region Pty Ltd v State of Victoria (No 2) (“Southern Region”)[34]: “insofar as it [the clause] concerns a separate defects liability period, [it] should not be left to inference or supposition. The Contractor is entitled to know where it stands on this important matter.”
[34][2001] VSC 381 [23] (Byrnes J).
33 Thus, Foursquare submits that the DLP is only extended when all defects are rectified. It follows that the DLP was not extended, and a reference date existed.
34 Chevron responds that general condition of contract 35 is clear – there was a new DLP for each new defect, commencing at 4:00pm on the date each rectification was completed, unless the direction stated otherwise. It follows that the DLP was extended, and the payment claim lacked a reference date.
23 I accept the submissions of Chevron. In my view, general condition of contract 35 is unequivocal. The phrase “in relation to that defect”, reinforces that there was a new separate DLP for each defect. Accordingly, Southern Region has no application.
24 As noted above, various defects arose. Only some were rectified. Therefore, at 4.00pm on the date the defects were rectified, new separate DLPs arose for each of the defects that were rectified (but not for those which were outstanding).
25 On the evidence before the court, that date is unclear. It is apparent that the defects were completed sometime between March and July 2019, after the direction was issued on 27 February 2019, and the payment claim served on 25 July 2019.
26 The DLPs therefore lasted until 12 months later at 4.00pm (sometime between March and July 2020). The payment claim was issued on 25 July 2019, before the expiry of that period. Accordingly, the purported payment claim lacks a reference date.
Conclusion
27 For the foregoing reasons, I dismiss Foursquare’s summons with costs.
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Certificate
I certify that these 16 pages are a true copy of the judgment of Judicial Registrar Burchell delivered on 4 December 2020
Dated: 4 December 2020
Sean Bricknell
Associate to the Judge in Charge of the Building Cases List
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