Jacard Enterprises Pty Ltd v Merkon Constructions Pty Ltd

[2014] VCC 1778

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL LIST

BUILDING CASES DIVISION

Case No. CI-14-05132

JACARD ENTERPRISES PTY LTD	Plaintiff
v.
MERKON CONSTRUCTIONS PTY LTD	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	31 October 2014
DATE OF JUDGMENT:	31 October 2014
CASE MAY BE CITED AS:	Jacard Enterprises Pty Ltd v. Merkon Constructions Pty Ltd
MEDIUM NEUTRAL CITATION:	[2014] VCC 1778

REASONS FOR JUDGMENT

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Catchwords:              Building contract - Progress claims - Building and Construction Industry Security of Payment Act 2002 (Vic).           

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J. Twigg	M&K Lawyers
For the Defendant	Mr R. Hapgood (solicitor)	Hapgood Legal

HIS HONOUR:

1Jacard Enterprises Pty Ltd (“Jacard”) is a tiling contractor. During 2013 and 2014, it worked on a project at 108 Flinders Street in the Melbourne CBD as a subcontractor to Merkon Constructions Pty Ltd (“Merkon”).

2Jacard makes a claim for the sum of $91,435.84 pursuant to the Building and Construction Industry Security of Payment Act 2002 (Vic) (“the Act”) as the balance owing in respect of two progress claims, as follows:

a.a claim served on 25 June 2014 for $138,570.65, to which Merkon responded with a payment schedule acknowledging that a payment of $60,000 would be made;

b.a claim served on 28 July 2014 for $111,435.84, to which Merkon did not serve a payment schedule.

3Subsequent to the progress claims, Merkon made the following payments:

a.$30,000 on 18 September 2014;

b.$50,000 on 3 October 2014.

4The parties are in dispute about matters relating to Jacard’s performance under the construction contract. It was agreed that those issues were not relevant to the determination of Jacard’s claim under the Act.

5The matters of defence raised by Merkon’s counsel, Mr Hapgood, were as follows:

a.the basis of the claims made in progress claims 1 to 9 was changed by Jacard in progress claims 10 and 11, without prior notice to Merkon;

b.Merkon advanced funds to Jacard in excess of Jacard’s entitlements under the contract. These advances should be regarded as loans or prepayments to Jacard which took the progress claims outside the application of the Act by reason of the operation of s.7(3)(c)(i).

6Mr Hapgood submitted that progress claims 1 to 9 had been made by Jacard on the basis of the amounts previously certified and paid by Merkon. Progress claims 10 and 11 included, in addition, amounts previously claimed but not necessarily certified and paid.

7Mr Hapgood submitted that this “change” breached the requirements of s. 14(2)(c) of the Act as it meant that Merkon could not reasonably have been expected to identify how Jacard had calculated its claims.

8In fact, Merkon had assessed progress claim 10 and certified that only $60,000 of the claim of $138,570.65 was payable to Jacard. Apparently, Merkon’s first response had been to certify $30,199.50 as the amount payable. However, after further discussions between the parties, the initial payment schedule was marked as “superseded” and a revised payment schedule was issued certifying $60,000 as payable. In these circumstances, there did not appear to be any inability on Merkon’s part to understand the progress claim and to appropriately respond.

9In relation to Jacard’s progress claim 11, no payment schedule was served by Merkon. Mr Nicky Fabien, Merkon’s Project Manager, explained in an affidavit, that no payment schedule was issued because, “In reliance on clause 14.8.5 of the contract, I considered that [Jacard] had no entitlement to submit the payment claim 11 or that it was entitled to any payment as a result of the breach”.

10Clause 14.8.5 required a contractor submitting a “final claim” to provide with the claim a statutory declaration about the claimant’s sub-contractors and payments made to them. No statutory declaration was submitted with progress claim number 11.

11Mr Hapgood conceded that this “contractual” defence could not be relied upon because of the provisions of s.16(4)(b)(ii).

12Jacard’s counsel, Mr Twigg, submitted that there was a simple answer to Merkon’s assertions. He referred to the calculation of the amount of $111,435.84 in progress claim 11. Mr Hapgood had referred to difficulties Merkon had with the item in the calculation as follows:

“Less: Net value previously approved  $832,276.53”

13Mr Twigg submitted that this figure had two components:

a.the total amounts paid by Merkon to Jacard up to 27 June 2014 of $777,731.08 (exclusive of GST);

b.the amount of $54,545.45 (which was the figure of $60,000 exclusive of GST), certified as payable by Merkon in the payment schedule in response to progress claim 10.

14The total figure for payments made by Merkon of $777,731.08 (exclusive of GST) appeared to be non-controversial. Similarly, the figure of $54,545.45 was a matter of calculation from the figure of $60,000 certified by Merkon in the payment schedule responding to payment claim 10.

15Whether or not there had been “loans” or “pre-payments” included in the figure of $777,731.08, would be irrelevant as this figure was being deducted from the starting point (the contract price plus agreed variations), in calculating the progress claim.

16Mr Hapgood submitted that, in these circumstances, Jacard should have increased the quantum of progress claim 11 so that it would not need to deduct the further payments, which he characterised as “loans” or pre-payments. Mr Hapgood suggested that this would have somehow made the progress claim clearer. The submission has no merit.

17Mr Hapgood also submitted that it was not until the calculations of the “net value previously approved” of $832,276.63 had been referred to in an affidavit by Mr Marco Disauro, a director of Jacard, on 30 October 2014, that Merkon had understood the basis of how progress claim 11 was calculated.

18Whether that was so would not appear to matter, and Mr Hapgood was unable to suggest any further evidence which Merkon might have put forward, which might have afforded Merkon the basis of a defence to the claim.

19Mr Hapgood referred to other payments that Merkon had made to Jacard’s suppliers and for other purposes, which ordinarily it would have been Jacard’s responsibility to pay as they were part of the contract works, and therefore the contract price.

20However, in the calculation of progress claim 11, two further deductions were made:

a.“Less: Net value paid to tile suppliers on behalf of DTS $571,875.25”;

b.“Less: Net value paid to others on behalf of DTS $227,074.91”.

21The calculation of progress claim 11 appears to have been entirely transparent. If there were parts of the claim Merkon disputed, it should have served a payment schedule under the Act.

22The failure to serve a payment schedule means that, by s.16(2)(a)(i) of the Act, Jacard may “recover the unpaid portion of the claimed amount” from Merkon. This amount will be the figure of $60,000, referred to in the payment schedule in response to payment claim 10, and the sum of $111,435.84 in payment claim 11, less the subsequent payments of $30,000 and $50,000.

Orders

23The following orders are appropriate:

1.Judgment for the plaintiff against the defendant that the defendant pay to the plaintiff the sum of $91,435.84 (together with interest).

2.The defendant must pay the plaintiff’s costs of the proceeding, including any reserved costs and the costs of the hearing today, to be assessed by the Costs Court in default of agreement.

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Certificate

I certify that these 4 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 31 October 2014.

Dated: 31 October 2014

Catherine Kusiak 

Associate to His Honour Judge Anderson