Jalak Pty Ltd v Chargold Project Management Pty Ltd

[2010] VCC 2

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE
COMMERCIAL LIST

GENERAL DIVISION

Case No. CI-08-02032

JALAK PTY LTD	Plaintiff
v.
CHARGOLD PROJECT MANAGEMENT PTY LTD	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	27 January 2010
DATE OF JUDGMENT:	27 January 2010
CASE MAY BE CITED AS:	Jalak Pty Ltd v. Chargold Project Management Pty Ltd
MEDIUM NEUTRAL CITATION:	[2010] VCC 0002

REASONS FOR JUDGMENT

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Catchwords:  Building contract – Relevance of GST in calculation of balance due to the plaintiff – Compound interest claimed pursuant to clause N15.3 of the Conditions of Contract

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P. Duggan	Peter Mann Pty Ltd
For the Defendant	Mr S. Stuckey	Eric Faulkner
HIS HONOUR:

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1           Judgment was delivered in this matter on 15 July 2009. The purpose of the hearing today was to make final orders in the proceeding. This is not possible because certain information is not available and the parties wish to investigate certain issues. The two matters remaining for decision relate to how GST must be considered in calculating the amount to which the plaintiff is entitled and any entitlement to interest by the plaintiff.

2           After discussion with the parties, it seemed to be agreed that in order to calculate the balance due to the plaintiff, it was appropriate to consider the plaintiff’s entitlements and to subtract any set-offs to which the defendant is entitled, before GST was added. The relevant calculation is as follows:

Contract price	$953,500
Plus approved and claimed variations	$700,370
Subtotal	$960,870

Plus $16,925.80 and $9,000 deducted by the defendant by applying liquidated damages

Subtotal	$986,795.80
Less appropriate deductions and set-offs
Payments (exclusive of GST)	$892,152.72
Subtotal	$94,643.08
Less 20 May 2006 off-sets	$5938
And payments	$3,866
Less subsequent set-offs (exclusive of GST):

Tile Busters Grinding $23,336

Aluminium Angles $1,763

Subtotal $59,740.08

There is an issue as to whether a further sum for the transport of props should also suggests that because an allowance of $512.33 (inclusive of GST) had been claimed and allowed, that, in the absence of clear evidence, the further claim for $325 for prop hire should not be allowed because the appropriate contractual procedures for the setting off sums had not been followed. Plaintiff’s counsel was not able to clarify this matter, but unless he can produce evidence suggesting this sum is not a proper deduction, the sum of $465.45, being $512.33 less GST, should be deducted, leaving a balance owing to the plaintiff of $59,274.63.

4           In relation to interest, at present the statement of claim indorsed on the writ simply claims interest but not contractual interest. It is appropriate, before interest is allowed pursuant to the contract, that a specific claim be made. The plaintiff must first formulate an amendment to the statement of claim to claim interest pursuant to Clause N15 of the contract, and the defendant must then have the opportunity of considering and responding to that proposed amendment.

5           I have considered the matter on the basis that the pleading includes a claim for interest under the contract, although I have done so without prejudge to the determination of the issue of whether an amendment is appropriate. Clause N15 provides for the payment of compound interest and notes that “each party must pay interest on any money that it owes the other but fails to pay on time”.

6           Defendant’s counsel submitted that this clause only applied to amounts which were the subject of a final payment statement and not to amounts which a Court may find a party is entitled to at a later time. However, section N of the contract conditions make it clear that interest under Clause N15 includes “any delay caused by the failure of the contractor to issue a progress payment statement on time”. Section N also contemplates that a failure by a contractor to issue a progress payment statement within 5 working days entitles the sub-contractor to suspend works, and in certain circumstances to be paid “for any loss damage or expense that results from the suspension”.

7           The interest under Clause N15 is compounding interest at the rate of 10 percent per annum, as specified in the schedule to the contract. It was submitted by defendant’s counsel that penalty interest of this sort was only appropriate for delayed payment of amounts specified in a final payment statement. However, the contract does include very strict provisions about the times for carrying out certain acts and the ability to

claim for certain matters can be lost if claims are not made strictly in accordance with
those time limits.

8           The plaintiff seeks interest pursuant to the contract in respect of, firstly, the wrongful deduction of liquidated damages, which resulted in the plaintiff not being paid amounts to which it otherwise would have been entitled to be paid in about February 2006 or shortly thereafter. Secondly, the plaintiff claims that it was entitled to be paid further sums, at least by the date for practical completion or when the final payment statement was issued. I see no reason why the provisions of clause N15 should not apply in each of these circumstances and entitle the plaintiff to interest payable from an appropriate date and calculated in accordance with clause N15.3 on a compounding basis.

b.	The defendant’s attitude to this issue was made clear in a letter dated 20 February 2006. It is unclear, at present, on what date, pursuant to the contract, the defendant was obliged to pay the amounts which it should have paid the plaintiff if it had not made the wrongful deductions;
c.	retention of 5 percent of the sub-contract price as security until after notice of practical completion, upon which 50 percent of the retention must be released,

9           There are, however, certain matters which require clarification:

a. The defendant gave notice on 20 February 2006 that it was entitled to deduct $33,000 by way of liquidated damages and that it would not pay to the plaintiff the sum of $9,000 for extension of time costs to which it determined the

plaintiff was otherwise entitled. It is not clear whether the plaintiff was kept out
of the total sum of $42,000 or whether it was kept out of the sum of $9,000
plus an additional sum of $16,925.80, being further extension of time costs for
invoice no. 371, described as being for “prop hire”. The plaintiff is entitled to
interest pursuant to clause N15 on the sum which it would have otherwise
received if liquidated damages had not been wrongly allowed and the

accepted extension of time costs of $9,000 had been paid;

Clause C8 of the contract conditions entitled the defendant to retain a cash retention must be released. The plaintiff is entitled to interest calculated in accordance with condition N15.3 on the balance of $59,274.63, less the part of that sum which was not paid following the defendant’s decision to deduct liquidated damages, notified on 20 February 2006. It is likely that the date from which interest must be paid on the balance of the sum of $59,274.63 will be a later date because of the operation of clause C8, relating to when the defendant was obliged to release retention moneys. Under clause S of the contract, notice of practical completion is defined by reference to the head contract and further evidence would be necessary to clarify the relevant date from which interest should be calculated.

10         Once interest is calculated and added to the balance of $59,274.63, GST must be added to that sum. Once this calculation has been made, it will be possible to determine any dispute as to who should pay the costs of the proceeding.

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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 27 January 2010 and revised that day.

Dated: 27 January 2010

Caroline Dawes

Associate to His Honour Judge Anderson