Harcom Pty Ltd v Perfect Builders Pty Ltd
[2010] VCC 1970
•17 December 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
BUILDING CASES DIVISION
Case No. CI-10-04109
| HARCOM PTY LTD | Plaintiff |
| (ACN 004 790 167) | |
| v | |
| PERFECT BUILDERS PTY LTD | Defendant |
| (ACN 004 384 678) |
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| JUDGE: | HIS HONOUR JUDGE SHELTON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 10 and 26 November 2010 |
| DATE OF JUDGMENT: | 17 December 2010 |
| CASE MAY BE CITED AS: | Harcom Pty Ltd v Perfect Builders Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 1970 |
REASONS FOR JUDGMENT
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Catchwords: Summary judgment application - Building & Construction Industry Security of Payment Act 2002, s.16(2)(a)(i) – General Conditions of Contract AS214-1992 – Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332; Novawest Contracting Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205; Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd [2010] VSC 199; BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20; Southern Region Pty Ltd v State of Victoria (No 3) [2001] VSC 436.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Forrest | Wightons Lawyers |
| For the Defendant | Ms C Kirton | Meier Denison Guymer Pty Ltd |
| HIS HONOUR: |
1 This is an application for summary judgment pursuant to Order 22 of the Count Court Civil Procedure Rules 2008. The application is based upon s.16(2)(a)(i) of the Building & Construction Industry Security of Payment Act 2002 (“the Act”) and alternatively upon the terms of a contract between the parties.
2 The approach to be taken to an application such as this is as stated by the High Court in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, at 89, as follows:
“The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.”
3 To similar effect is the statement of Herring CJ and Lowe J in Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332, at 334, that:
“Where there is a real case to be investigated either in fact or law, leave
to defend should be given.”
4 It is not in dispute that in or about March 2008, the plaintiff and the defendant entered into a Contract (“the Contract”) pursuant to which the plaintiff agreed as contractor to undertake road, drainage and water supply works for the defendant in respect of a development being undertaken by the defendant at Lara. The Contract price was $478,687.00. Work commenced on site in September 2008. An amended form of General Conditions of Contract AS 2124-1992 (“AS 2124”) formed part of the Contract. Pursuant to it, the plaintiff was the Contractor and the defendant the Principal. The designated Superintendent under AS-2124 was Tomkinson Pty Ltd (“the Superintendent”) which at some stage became Brown & Tomkinson Pty Ltd.
5 The plaintiff’s Summons dated 24 October 2010 seeks summary judgment in the sum of $75,184.70. It appears that this sum is calculated as follows:
Progress Claim dated 30 September 2009 based on
Progress Certificate No. 7 dated 14 October 2009
issued by Superintendent $53,166.25 Interest claimed under AS 2124 on account of late payment of Progress Claim No 4 $1,826.13 Final payment claim of plaintiff dated 30 July 2010 and forwarded to Superintendent on 4 August 2010 $20,192.32 _________ $75,184.70 =========
6 In fact, the sum of $1,826.13 is included in the sum of $20,192.32. Further, the amount of the final payment claim is $20,129.32 and not $20,192.32. Thus the amount claimed by the plaintiff in this summary judgment application should be:
Progress Claim No 7 $53,166.25 Final payment claim $20,129.32 _________ $73,295.57 =========
7 I turn to consider the summary judgment application with respect to the seventh progress claim and the final claim both under the Act and under the Contract.
Progress Claim No 7
Under the Act
8 Pursuant to the Contract, the Superintendent issued Progress Certificate No 7 dated 14 October 2009 for the sum of $53,166.25. Upon receipt of this Progress Certificate, Graham Hart, a director of the plaintiff, deposes, in his affidavit sworn 13 October 2010, that the plaintiff prepared tax invoice No 9683, backdated to 30 September 2009, for the sum of $53,166.25. This tax invoice contained an appropriate notation to comply with s.14(2)(e) of the Act.
9 Hart deposes that tax invoice 9683 was sent to the defendant by ordinary prepaid post on or about 16 October 2010. He further deposes that no payment schedule was provided to the plaintiff pursuant to s.15 of the Act.
10 Max Bernard Schachter, a director of the defendant, deposes in an affidavit affirmed on 8 November 2010 that tax invoice 9683 was not received by the defendant.
11 The issue is whether tax invoice 9683 was served on the defendant.
12 In an affidavit sworn on 8 November 2010, Cordell Maree Gilson, office manager of the plaintiff, deposes that the plaintiff kept a mail book and that in it she wrote on 16 October 2009:
“Perfect Builder – Inv #7.”
13 She stated that this notation indicated that on 16 October 2009, the plaintiff’s tax invoice in respect of Payment Certificate No 7 “was being sent that day” to the defendant. She further deposes that she then took this envelope with other mail to the North Geelong Post Office and placed it in the letterbox there.
14 In a further affidavit sworn 9 November 2010, she deposes that she wrote on the envelope the plaintiff’s address as 1127 High Street, Armadale 3143.
15 In the face of Schachter’s denial that tax invoice 9683 was received by the defendant, I feel that there is some merit in the submission of Ms Kirton, who appeared for the defendant, that it would seem somewhat improbable that Gilson would be able to independently recall a precise address she put on an envelope more than twelve months previously with no evidence produced of a contemporaneous record of where the envelope was addressed to. I agree that Ms Gilson’s recollection of the address written upon the envelope is a matter for cross-examination which is inappropriate on a summary judgment application.
16 I refuse the summary judgment application so far as it is based on tax invoice 9683.
Under the Contract
17 Following non-payment of tax invoice 9683, the plaintiff served a creditor’s statutory demand upon the defendant for payment of the sum of $53,166.25. The plaintiff commenced proceedings in the Supreme Court to set aside this statutory demand. In support of its application, Schachter, in an affidavit affirmed in March 2010, stated, at paragraph 3:
“The plaintiff (Perfect Builders) does not dispute that Progress Certificate Number 7 authorised payment to the Defendant (Harcom) by the Plaintiff (Perfect Builders) in the amount of $53,166.25 as claimed in the statutory demand. The Plaintiff (Perfect Builders) does not claim that there is a genuine dispute about the existence or amount of the debt to which the demand relates. The Plaintiff’s (Perfect Builder’s) Application to set aside the creditor’s statutory demand is based on the existence of an offsetting claim, in the nature of liquidated damages, that exceeds the amount claimed by the Defendant (Harcom) in Progress Certificate Number 7.”
18 The plaintiff subsequently withdrew its creditor’s statutory demand.
19 In his affidavit, Schachter acknowledges that the sum claimed in the tax invoice 9683 is owing by the defendant to the plaintiff, but seeks to offset a claim for liquidated damages which exceeds the amount of $53,166.25.
20 In Novawest Contracting Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205, Gillard J considered AS 2124 in some detail. There, too, there was an arguable claim that the defendant was entitled to liquidated damages for delay. His Honour stated, at paragraph 99:
“In my opinion the provisions of cl42.1 which I have summarised and referred to make it clear that once the certificate is issued it must be paid without deduction.”
and at paragraph 128:
“To permit the defendant in the court proceeding to raise a defence of
set-off would be to defeat the common intention of the parties.”
and at paragraph 129:
“I am satisfied that the plaintiff has established that the presumption in favour of the defendant being permitted to raise its common law rights have been rebutted by the words of their contract.”
21 His Honour further stated, at paragraphs 136 and 137:
“I conclude by pointing out that the general conditions of contract were settled by a committee representing the interests of many sections of the construction industry including bodies that might be said to represent the interests of those other than construction contractors.
The end result was the standard form. If proprietors wish to protect themselves by having the right to set-off claims against interim certificates then it would be easy to change the standard form.”
22 His Honour concluded it was appropriate that summary judgment be entered against the principal for two progress payments certified by the Superintendent.
23 Although, as mentioned, AS 2124 has been amended in the matter before me, the amendments are not, in my opinion, material to the conclusion reached by Gillard J and Ms Kirton did not submit that they were. The issue of service of tax invoice 9683 is not, in my view, relevant where here the defendant has admitted owing the sum claimed in the tax invoice but seeks to raise a set-off which, on the basis of Novawest, is not allowable. It follows that there is no question to be tried with respect to the claim under the Contract based on tax invoice 9683.
24 I am therefore prepared to enter summary judgment in favour of the plaintiff against the defendant in respect of tax invoice 9683 in the sum of $53,166.25.
The Final Payment Claim
Under the Act
25 On 4 August 2010, the plaintiff forwarded a letter to Brown & Tomkinson Pty Ltd which, omitting formal parts only, stated:
“Re Altair Avenue Subdivision, Lara
Attached, please find our Progress Claim No 8 (Final) for the above
Contract, as at July 30, 2010.Please arrange for final Progress Certificate No 8 to be issued so we can produce our Tax Invoice.”
26 Enclosed was a document dated 30 July 2010 on the plaintiff’s letterhead, headed “Progress Claim No 8 (Final)”. This was for the sum of $12,277.05, being the balance owing, less GST, after taking the Contract sum, adding on variations and deducting amounts previously claimed. Also claimed, as mentioned above, was interest on Progress Claim No 4 on account of late payment of $1,826.13 and interest on Progress Claim No 7, again for late payment of $4,196.20. Adding GST gave a total sum payable for Progress Claim No 8 and outstanding interest on Progress Claims No 4 and No 7 of $20,129.32. The document contained at its foot an endorsement which would appear to comply with s.14(2)(e) of the Act and it was not submitted that it did not. The Superintendent acknowledged receipt of the letter and enclosure of 4 August 2010 by email to the plaintiff dated 18 August 2010. It read as follows:
“Graham
We are in receipt of your claim dated 4 August 2010.
According to our records a Final claim was processed which included an amount designated as Liquidated Damages.
The project is deemed completed and our role and services have ceased in this regard.
No action shall be undertaken with respect to the claim as it is not recognised as a claim.
As we have no commission to act on any latent matters we request that you refrain from direct contact with our office and channel your communications directly to Perfect Business Pty Ltd as deemed necessary.”
27 “Superintendent” is defined in Clause 2 of AS 2124 as meaning:
“The person stated in the Annexure as the Superintendent or other persons from time to time appointed in writing by the Principal to be the Superintendent and notified as such in writing to the Contractor by the Principal … .”
28 The Annexure in PART A states that the Superintendent is Tomkinson Pty Ltd. Clause 23 of AS 2124 provides:
“The Principal shall ensure that at all times there is a Superintendent ….”
29 It was not suggested that there was a replacement Superintendent appointed by the defendant. The defendant was required under Clause 23 to ensure that there was a Superintendent.
30 Clause 42.1 of AS 2124 required the Contractor to deliver to the Superintendent claims for payment.
31 I further note the comment of Vickery J in Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd [2010] VSC 199, at paragraphs 142 and 143:
“Section 14(1) does not seek to remove the service of a payment claim from this reality. Accordingly, a payment claim may be served upon any person who, under the construction contract concerned, is or may be liable to make the payment, or has the actual or ostensible authority of such a person to accept service.
Receipt of a payment claim by a respondent or its servant or agent with actual or ostensible authority to receive it, for the purposes of s 14(1) of the Act, constitutes service.”
32 The 30 July 2010 claim, so far as it was a final claim, was served within the time permitted by s.14(5)(a) of the Act. My reasons for so concluding are set out below.
33 I conclude that Progress Claim No. 8 was properly served upon the Superintendent under the Contract.
34 The defendant did not lodge a payment schedule pursuant to s.15 of the Act in response to the 30 July 2010 claim.
35 The plaintiff forwarded a tax invoice dated 12 October 2010 to the Superintendent which was in identical terms to that dated 30 July 2010. Again, it contained the notation required by s.14(2)(e) of the Act. In response, a payment schedule dated 21 October 2010 was provided within the time limited by s.15 of the Act. Ms Kirton submitted that the tax invoice of 12 October 2010 superseded the claim of 30 July 2010. I do not accept this submission. The later tax invoice could hardly supersede the claim dated 30 July 2010 since it was in identical terms. I accept the submission of Mr Forrest, counsel for the plaintiff, that this tax invoice was served to comply with Clause 42.1 of AS 2124 as amended.
36 PART B of Annexure 2, AS 2124, provides:
“The fourth paragraph of clause 42.1 is deleted and replaced by the
following paragraphs:
‘Upon receipt of a payment certificate issued by the Superintendent, and as a precondition to receiving payment under the clause 42.1, the Contractor must immediately give to the Superintendent a valid tax invoice (as defined in clause 14.5) for the amount certified by the Superintendent as being payable to the Contractor. If the Superintendent fails to issue a payment certificate within 7 days, the contractor may give to the Superintendent a tax invoice for the amount claimed by the Contractor. Upon receipt of the Contractor’s tax invoice pursuant to the preceding paragraph, the Superintendent must immediately give the Principal:
(a) a copy of the Superintendent’s payment certificate (if one has been issued): and (b) the Contractor’s tax invoice stamped with the date it was received by the Superintendent.
Within 18 days after the Superintendent receives a valid tax invoice from the Contractor in accordance with this clause 42.1, the Principle [sic] shall pay the Contractor the amount stated in the Contactor’s [sic] tax invoice.
. . . .”
37 Ms Kirton submitted that the claim for interest was a claim for damages. In paragraphs 14 and 22 of the Statement of Claim, the sums claimed for interest in Progress Claim No. 8 are claimed as “loss and damage”.
38 The relevance of this submission is that a claim under s.16(2)(a) of the Act must not include “any excluded amount” – see s.16(4)(a)(ii) of the Act. Section 10B(2)(c) of the Act defines excluded amounts to include:
“any amount claimed for damages for breach of the construction contract or for any other claim for damages arising under or in connection with the contract.”
39 In my view, the claim for interest on overdue payments is not a claim “for damages for breach of the construction contract or for any other claim for damages arising under or in connection with the contract” but rather a claim pursuant to Clause 42.9 and Annexure Part B of AS 2124 which provides for payment of interest on overdue payments at the rate of 10 per cent per annum.
40 In my view, there is no question to be tried with respect to the final payment claim under the Act. The plaintiff is entitled to judgment on this claim against the defendant in the sum of $20,129.32.
Under the Contract
41 Clause 42.7 of AS 2124 provides:
“42.7 Final Payment Claim
Within 28 days after the expiration of the Defects Liability Period, or where there is more than one, the last to expire, the Contractor shall lodge with the Superintendent a final payment claim and endorse it ‘Final Payment Claim’.”
42 Clause 37 of AS 2124 provides that the Defects Liability Period commences on the Date of Practical Completion. It is not in issue that Date of Practical Completion was 14 October 2009. In the Annexure, Part A to AS 2124, the Defects Liability Period is stated to be for a period of:
“13 weeks or until taken over for future care and maintenance by the City
of Greater Geelong and Barwon Water.”
43 The plaintiff relies upon its invoice of 30 July 2010 which is headed “Progress Claim No 8 (Final)” which was forwarded to the Superintendent on 4 August 2010 as a final payment claim for the purposes of Clause 42.7 of AS 2124. The email from the Superintendent to the plaintiff dated 18 August 2010 indicates that the Superintendent regarded the invoice of 30 July 2010 as a final claim though it regarded it as having been served out of time. In its payment schedule dated 21 October 2010 in response to the tax invoice dated 12 October 2010, the defendant accepts the invoice of 30 July 2010 as a final claim.
44 By letter dated 24 February 2010 to the Superintendent, the City of Greater Geelong advised the Superintendent that the plaintiff’s work was satisfactory and that “the Defects Liability Period is now formally terminated”. However, the Superintendent in fact had issued a Final Certificate on 3 February 2010 prior to receipt of this letter.
45 The specification provides, in Clause 1.24:
“Final Certificate
In addition to the provisions of Clause 42.8 of the General Conditions, a final certificate shall NOT be issued until all the relevant authorities certify in writing that they have taken over future care and maintenance of the Works.”
46 In breach of this term, the Superintendent issued a final certificate prior to receipt of the letter of 24 February 2010 from the City of Greater Geelong when it had no power to do so. In my view, it is appropriate to regard the premature final certificate dated 3 February 2010 as invalid. Graham Hart deposes that the letter of 24 February 2010 from the City of Greater Geelong was not forwarded to the plaintiff, and this is not disputed. He states that he was unaware whether the Defects Liability Period under the Contract had formally concluded and if so, when. Hart was only aware of the letter of 24 February 2010 when he attended the offices of the City of Greater Geelong on 17 July 2010. The final claim was then lodged within the 28-day period provided for in Clause 42.7.
47 As indicated by the Superintendent’s email to the plaintiff dated 18 August 2010, no final certificate was issued by the Superintendent in response to the 30 July 2010 final claim. Pursuant to Clause 42.8 of AS 2124, the Superintendent was required to issue a Final Payment Certificate within fourteen days after receipt of the Final Payment Claim.
48 The plaintiff could hardly have been expected to lodge a final payment claim within 28 days after the expiration of the Defects Liability Period when it was unaware of the expiration of the Defects Liability Period. Further, the Superintendent had knowledge that this had occurred without indicating it to the plaintiff. Clause 23 of AS 2124 provides:
“The Principal shall ensure that at all times there is a Superintendent and that in the exercise of the functions of the Superintendent under the Contract, the Superintendent –
(a) acts honestly and fairly. ….”
49 Here, it would appear there has been a breach of this Clause. The plaintiff cannot have been expected to lodge a final payment claim within twenty eight days after the expiration of the defects liability period when the fact that this triggering event has occurred has been withheld by the Superintendent from the plaintiff.
50 I agree with the submission of Mr Forrest that it is appropriate to imply a term pursuant to the principles outlined in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26, that Clause 42.7 only operates from the time that notification is provided by the Superintendent to the plaintiff that the appropriate certification from the Relevant Authorities that they have taken over future care and maintenance of the works has been received pursuant to Clause 1.24.
51 It follows that Progress Claim No. 8 was, in my view, lodged within time.
52 The Superintendent, pursuant to Clause 42.8 of AS 2124 was required to issue a final payment certificate in response to Progress Claim No. 8 within 14 days, which it failed to do.
53 In Southern Region Pty Ltd v State of Victoria (No 3) [2001] VSC 436, Byrne J was considering Clause 42.1 of AS 2124 which provided:
“Subject to the provisions of the Contract, within 28 days after receipt by the Superintendent of a claim for payment or within 14 days of issue by the Superintendent of the Superintendent’s payment certificate, whichever is the earlier, the Principal shall pay to the Contractor or the Contractor shall pay to the Principal, as the case may be, an amount not less than the amount shown in the Certificate as due to the Contractor or to the Principal, as the case may be, or if no payment certificate has been issued, the Principal shall pay the amount of the Contractor’s
claim. A payment made pursuant to this Clause shall not prejudice the right of either party to dispute under Clause 47 whether the amount so paid is the amount properly due and payable and on determination (whether under Clause 47 or as otherwise agreed) of the amount so properly due and payable, the Principal or the Contractor, as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable.”
(my emphasis).
54 Byrne J, at paragraph 38, stated:
“… There is no obligation to pay imposed by cl42.8 because it is imposed by cl42.1. Under the fourth paragraph of cl42.1 the obligation is pay the amount certified to be due within 14 days after the issue of the Final Certificate. The inescapable consequence of this is that, where no Final Certificate is issued, the time for and the amount of payment are also fixed by the fourth paragraph of cl42.1.”
(my emphasis).
55 Here the wording of Clause 42.1 considered by Byrne J has been amended, but in my view the different wording is irrelevant and the same principles apply. The amended Clause 42.1 provides a procedure which was followed by the plaintiff in forwarding its tax invoice dated 12 October 2010 to the Superintendent. The amended Clause 42.1 provides that when the procedure outlined there is followed “the Principal shall pay the Contractor the amount stated in the Contractor’s tax invoice”.
56 With respect to the final claim under the Contract, I am also of the view that there is no question to be tried. I conclude that the plaintiff is also entitled to judgment under the Contract pursuant to its final claim in the sum of $20,129.32.
Summary
57 The plaintiff is entitled to judgment against the defendant in the sum of $73,295.57.
58 I will hear from the parties on the question of interest and costs and a timetable for the finalisation of interlocutory matters leading to a hearing of the proceeding with respect to the defendant’s counterclaim.
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