LH Blue Pty Ltd v AXF Construction Pty Ltd

[2010] VCC 485

IN THE COUNTY COURT OF VICTORIA Unrevised

Not Restricted

AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST

BUILDING CASES DIVISION

Case No. CI-09-06169

LH BLUE PTY LTD	Plaintiff
(ABN 90 117 426 285)
v
AXF CONSTRUCTION PTY LTD	Defendant
(ABN 41 130 426 943)

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JUDGE:	HIS HONOUR JUDGE SHELTON
WHERE HELD:	Melbourne
DATE OF HEARING:	10, 15 and 29 March 2010
DATE OF JUDGMENT:	28 April 2020
CASE MAY BE CITED AS:	LH Blue Pty Ltd v AXF Construction Pty Ltd
MEDIUM NEUTRAL CITATION:	[2010] VCC 0485

REASONS FOR JUDGMENT

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Catchwords: Application to set aside judgment – application to vary judgment entered for excessive amount - Building & Construction Industry Security of Payment Act 2002 – s.14(2)(e) and s.16 – County Court Rules of Civil Procedure 2008 – Rules 36.01(3) and Rule 36.07 – Kostokanellis v Allen [1974] VR 596 – Building Guarantee & Discount Co Ltd v Dolejsi [1967] VR 764 – Cusack v De Angelis [2008] 1 Qd R 344 – Faircharm Investments Ltd v Citibank International plc [1998] EWCA Civ 171 – Parkville Court Pty Ltd v Salvaris [1975] VR 393 – Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd [2009] VSC 156.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr K C Oliver	Lovegrove & Lord
For the Defendant	Mr M Corrigan	Asia Pacific Lawyers
HIS HONOUR:

1          This is an application by the defendant pursuant to Rule 21.07 of the County Court Rules of Civil Procedure 2008 (“the Rules”) for the setting aside of a judgment entered in default of appearance on 2 February 2010 for the sum of $566,445.00, together with interest and costs.

Background

2          Pursuant to a Sub-Contract Agreement dated 14 August 2009, the plaintiff undertook to carry out plastering works at 10-12 Breese Street, Brunswick for the sum of $620,000.00 (“the Sub-Contract”).

3          The sum of $566,445.00, for which judgment has been entered, is the sum outstanding on three invoices forwarded by the plaintiff to the defendant, and is calculated as follows:

Invoice No. Date of Invoice Amount Date of Service

0312	25 August 2009	$49,500.00	29 September 2009
0313	25 September 2009	$280,500.00	29 September 2009
0331	9 November 2009	$280,500.00	9 November 2009

Sub-Total $610,500.00

Less paid on 12 October 2009 $44,055.00

Total $566,445.00

4          It became apparent to the defendant in the course of the application that the amount of invoice 0312 of $49,500 was included also in invoice 0313, and that a deduction had to be made from the sum claimed of $49,500.00, leaving a net sum now claimed by the plaintiff of $516,945.00. John Lu, the manager of the plaintiff, deposes in an affidavit sworn 24 March 2010 that it was only when in conference with counsel on 12 March 2010 that he realised there had been this duplication. The plaintiff seeks leave to amend the sum for which judgment was entered accordingly.

5 The plaintiff claims that the three progress claims which form the basis of the judgment were payment claims pursuant to s.14 of the Building and Construction Industry Security of Payment Act 2002 (“the Act”) and that no payment schedules were provided by the defendant within the relevant period referred to in s.15(4) of the Act. It brings its claim pursuant to s.16(2)(a)(i) of the Act.

The Law

6          In Kostokanellis v Allen [1974] VR 596, the Full Court, at pages 602-605, considered the principles to be applied on setting aside a regularly entered judgment. In summary, the Full Court held that in exercising the discretion as to whether or not to set aside a judgment, the main consideration is whether the defendant has a prima facie defence on the merits. Other matters can be taken into consideration, such as the reason why the defendant allowed judgment to be entered. Here, a director of the defendant, Steven Paglia, in his affidavit of 25 February 2010, adequately deals with this issue. He refers to the manner in which the Writ would have been delivered on 14 January 2010 to the ground floor reception of the building where the defendant’s registered office is located on the second floor. He deposes that he only became aware of the proceeding on or about 16 February 2010 when judgment had already been entered.

7          Delay in bringing the application to satisfy a judgment is another relevant factor. Here, again, this is not an issue since the defendant’s Summons seeking that judgment be set aside was filed on 26 February 2010, ten days after the defendant became aware of the entry of judgment.

8          As indicated, the plaintiff seeks to vary the sum for which judgment was entered. The Court has a discretion to allow the plaintiff to amend the sum for which judgment is entered pursuant to the inherent jurisdiction of the Court and Rule 36.07 of the Rules.

9          In Building Guarantee & Discount Co Ltd v Dolejsi [1967] VR 764, the plaintiff entered judgment for a sum in excess of what was owing to it by the defendant at the time of entry of judgment. The defendant made application to set the judgment aside on the ground of irregularity. The plaintiff made application to amend the sum for which judgment was entered. McInerney J. declined to amend the sum for which judgment was entered and set the judgment aside ex debito justitiae. A relevant factor was that the plaintiff had not sought to amend the judgment until the defendant had taken steps to set the judgment aside.

10        In Cusack v De Angelis [2008] 1 Qd R 344, the Queensland Court of Appeal considered the same issue. Muir J.A., with whom Lyons J. agreed, stated, at page 348, that in exercising the discretion, a court should:

“… do whatever is necessary to achieve justice between the parties and

to avoid unnecessary delay and expense. …”

11        In particular, he referred to a decision of the English Court of Appeal in Faircharm Investments Ltd v Citibank International plc [1998] EWCA Civ 171. There, Sir Christopher Staughton, with whom the other members of the Court agreed, stated, at page 10, that in exercising the discretion it would be pointless to set aside a judgment entered irregularly if the defendant was bound to lose on a subsequent application for summary judgment. He relied upon the maxim “lex non cogit ad inutilia”.

12        Commenting on that decision, Muir J.A. stated, at page 350:

“That decision is consistent with the contemporary approach of applying rules of practice and procedure, whether statutory or developed under the common law, not rigidly and with undue technicality, but with regard to considerations of cost, expedition, utility and justice.”

13        In his judgment, Muir J.A. referred to Building Guarantee and Discount Co Ltd v Dolejsi.

Defences to the Application

14        Mr Corrigan, who appeared for the defendant, opposed the application on a number of grounds. In the course of submissions, he abandoned a number of these grounds. Mr Corrigan now opposes the application on five grounds, and I turn to deal with them.

15 Firstly, he submits that where a claim is brought pursuant to s.16(2)(a)(i) of the Act, judgment cannot be entered administratively by the Court but rather must be done by a judge. He relied upon the wording of s.16(4)(a) of the Act which provides that where a proceeding is brought under s.16(2)(a)(i) of the Act, judgment cannot be given in favour of the plaintiff “unless the court is satisfied” of the matters referred to in s.16(2)(a)(i). The short answer to this submission is that every allegation of fact in the plaintiff’s Statement of Claim is taken to be admitted by virtue of the defendant’s default in filing an appearance – see Parkville Court Pty Ltd v Salvaris [1975] VR 393, at 395 per Anderson J.

16 Secondly, Mr Corrigan submitted that the payment claims lodged did not comply with s.14(2)(e) of the Act which requires that a payment claim “must state that it is made under this Act”.

17        The three payment claims stated:

“This invoice is issued under the Building & Construction Guarantee of

Payment Act 2002.”

18        The words “Industry Security” should have been used in the notice instead of the word “Guarantee”.

19        In Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd [2009] VSC 156, at paragraph 46, Vickery J. stated, with respect to the Act:

“The Act also manifests another central aspiration, that of freedom from excessive legal formality. The provisions demonstrate a pragmatic concern to provide a dispute resolution process which is not bedevilled with unnecessary technicality. The Building and Construction Industry Security of Payment Act 1999 (NSW) has led to a spate of litigation in its relatively short life. If the Victorian Act became prone to challenges founded on fine legal points, an important object of the Act would be defeated by the twin adversaries of cost and time.”

And at paragraph 53:

“The requirements of s.14 of the Act should not be approached in an overly technical manner. Finkelstein J in Protectavale Pty Ltd v K2K Pty Ltd said:

‘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: Walter Construction Group Ltd v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266 at [82]. 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: Multiplex Constructions [2003] NSWSC 1140 at [76].

The manner in which compliance with s 14 is tested is not overly demanding: Leighton Contractors Pty Ltd v Campbelltown Catholic Club Ltd [2003] NSWSC 1103 at [54] citing Hawkins Construction (Aust) Pty Ltd v Mac’s Industrial Pipework Pty Ltd [2002] NSWCA 136 at [20] (‘[The requirements for a payment claim] should not be approached in an unduly technical manner … 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 at [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 at [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’).’”

20 In the light of these authorities, there has been, in my view, compliance with s.14(2)(e) of the Act.

21        Further, Paglia, in his affidavit of 25 February 2010, deposes:

“9	THAT the Defendant delivered a notice confirming dispute in relation to the second tax invoice it received from the Plaintiff whilst paying the first tax invoice in accordance with its written agreement with the Plaintiff in relation to the works undertaken and to be undertaken by the Plaintiff. The Defendant had left the site before rendering its third tax invoice as it alleges in the Writ.
“10	THAT in relation to the tax invoice the subject of the notice confirming the dispute to the Plaintiff, the defendant did so in anticipation of the operation of the Act but the Plaintiff took no steps available to it under the Act to address.”

22 In paragraph 8 of that affidavit, he states that the Act he referred to is the Act.

23        I agree with the submission of Mr Oliver, who appeared on behalf of the plaintiff, that Paglia is in effect acknowledging that he knew the progress claims were payment claims under the Act.

24        In my view, this is not an arguable defence.

25        Thirdly, Mr Corrigan relies upon the fact that invoice numbered 0331 is stated in the Statement of Claim as only becoming due for payment on 25 December 2009, after the issue of the Writ on 21 December 2009. On this basis, Mr Corrigan challenges the validity of the claim for $280,000.00 contained in invoice 0331. The cause of action, however, with respect to the claim for $280,500.00 referred to in invoice 0331 had accrued by the time of service of the Writ on 14 January 2001 and entry of judgment on 2 February 2010.

26        Rule 36.01(3) of the Rules allows the addition of a cause of action which arises after the commencement of the proceeding which, in my view, covers the present situation. The observations of Sir Christopher Staughton in Faircharm are also apposite. Quite apart from Rule 36.01(3), there would be little point in setting the judgment aside if the plaintiff could then amend its Statement of Claim and obtain summary judgment for the amended sum. In my view, there is no merit in this ground.

27        Fourthly, Mr Corrigan submitted, somewhat diffidently, that by claiming retention monies in a payment claim showed a lack of good faith in making the claim. The Sub-Contract provided that the builder “may” deduct monies for retention. The defendant could have raised this issue in a payment schedule and chose not to do so. Making a claim for an excessive amount under the Sub-Contract cannot, in my view, on its own, possibly amount to a lack of good faith.

28        Lastly, Mr Corrigan submitted that in the exercise of my discretion I should set the judgment aside rather than allow the plaintiff to vary the sum for which judgment was entered.

29        Here, relevant considerations are that, as appears in my view, the defendant has not raised any prima facie defences and the plaintiff would succeed on a summary judgment application – see Faircharm – and that it was the plaintiff who brought to the attention of the Court the fact that judgment had been entered for a sum in excess of its entitlement.

Conclusion

30        The application by the defendant to set aside judgment entered on 2 February 2010 is dismissed. I give leave to the plaintiff to vary the amount for which judgment is entered to $516,945.00.

31        I will hear from the parties on the question of costs and the amended amount for which judgment is to be entered for interest.

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