Linke Developments Pty Ltd v 21st Century Developments Pty Ltd
[2014] SASC 203
•22 December 2014
SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
LINKE DEVELOPMENTS PTY LTD v 21ST CENTURY DEVELOPMENTS PTY LTD
[2014] SASC 203
Reasons for Decision of The Honourable Justice Nicholson
22 December 2014
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - PAYMENT CLAIMS
STATUTES - ACTS OF PARLIAMENT - INTERPRETATION - GENERAL APPROACHES TO INTERPRETATION - PURPOSIVE APPROACH - GENERAL PRINCIPLES
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT
The appellant, Linke Developments Pty Ltd, was contractually engaged by the respondent, 21st Century Developments Pty Ltd, to undertake certain building work. The appellant brought an application for summary judgment in the Magistrates Court for an amount purportedly owed by the respondent pursuant to that engagement. The application was made on the basis that the respondent failed to adequately respond to a payment claim by the appellant, and therefore, under the Building and Construction Industry Security of Payment Act 2009, was summarily liable for the amount claimed. The appellant further sought that the respondent’s defence and counterclaim be struck out on the basis that such pleadings were proscribed by s15 of the Act. The Magistrate dismissed both aspects of the appellant’s application.
The appellant now appeals on the basis that the Magistrate erred in finding that the respondent adequately responded to the appellant’s payment claim. The appellant also maintains it submission that the respondent’s defence and counterclaim should be struck out.
Held: Appeal dismissed. The response provided by the respondent to the appellant’s payment claim met the basic requirements under the relevant provisions of the Act. In addition, and in the circumstances of this matter, the respondent is not precluded from pleading a defence and counterclaim. The pleading by the appellant of an alternative claim for relief obviated the application of s15 of the Act.
Building and Construction Industry Security of Payment Act 2009 (SA) s3, s8-s27, s32, s33; Building and Construction Industry Security of Payment Act 1999 (NSW); Building and Construction Industry (Security of Payment) Act 2009 (ACT); Construction Contracts (Security of Payments) Act 2004 (NT); Building and Construction Industry Payments Act 2004 (Qld); Building and Construction Industry Security of Payment Act 2002 (Vic); Construction Contracts Act 2004 (WA); Building and Construction Industry Security of Payment Act 2009 (Tas); Supreme Court Civil Rules 2006 r232; Magistrates Court (Civil Rules) 2013 r8, referred to.
Ceneavenue Pty Ltd & Ors v Martin & Ors (2008) SASC 158; Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140; Built Environs Pty Ltd v Tali Engineering Pty Ltd & Ors [2013] SASC 84; Springs Golf Club Pty Ltd v Profile Golf Pty Ltd [2006] NSWSC 344; Project Blue Sky v ABA [1998] HCA 28, (1998) 194 CLR 355, considered.
LINKE DEVELOPMENTS PTY LTD v 21ST CENTURY DEVELOPMENTS PTY LTD
[2014] SASC 203Magistrates Appeal: Civil
NICHOLSON J.
Introduction
This is an appeal from a Magistrate’s dismissal of an application by the appellant, Linke Developments Pty Ltd, for summary judgment with respect to an amount purportedly owed by the respondent, 21st Century Developments Pty Ltd, for the completion of certain building work. The appellant claims that the respondent failed to respond appropriately to a payment claim issued by it and that, in accordance with its entitlement under the Building and Construction Industry Security of Payment Act 2009 (the Act), the respondent is summarily liable for the amount claimed.
Background facts
In or about April 2012, the appellant was contractually engaged by the respondent to undertake building works at the Woodcroft Shopping Centre, a site which the respondent owned. The construction manager appointed for the building works was Badge Constructions (SA) Pty Ltd (Badge).
Under the terms of the contract, the appellant had the right to claim periodic payments from the respondent for works it had completed. Such claims were described in the contract as “progress claims”. The appellant also enjoyed, pursuant to relevant provisions of the Act, a right to make, and receive payment for, periodic “payment claims”. This latter statutory process will be considered in greater detail later in these reasons.
The contract stipulated that progress claims were to be submitted by the appellant to Badge on the 20th of each month. Badge was required, within 14 days of receiving any such progress claim, to issue a progress certificate setting out its opinion of the amount of moneys due and the reasons for any shortfall.
On 20 April 2013, the appellant submitted a progress claim to Badge for the sum of $40,826.70 (inclusive of GST), described as “Claim No. 09”. By way of a document entitled “Payment Advice and Payment Schedule SC Inv No: PC11” and with “Reference Date” 30 April 2013, addressed to the attention of the appellant’s director, Mr Linke, the respondent advised that an amount of $42,548.62 had been certified by Badge as due and payable. The reason for the slightly higher certified amount was that Badge, in its capacity as independent certifier, had reached a different calculation as to the amount of monies due by the respondent. The document identified itself as a “Payment Schedule under [the Act]” and referred to a “Payment Claim 11”.
During argument, counsel for the appellant conceded that the reference by the respondent to “Payment Claim 11” had been an administrative oversight; no such document in fact existed. The respondent’s Payment Advice and Payment Schedule document was responding to the appellant’s Claim No. 09 dated 20 April 2013. The reference number on the progress certificate issued by Badge, being PC 11, had been erroneously adopted. It was agreed by counsel for both parties that subsequent references by the respondent in the correspondence to a “Payment Claim 11” were to be understood as referring to the progress claim dated 20 April 2013, Claim No. 09. To avoid confusion in these reasons, the appellant’s letter of 20 April 2013 will be referred to as Progress Claim 9 even through in subsequent correspondent it is referred to as Payment Claim 11.
By letter dated 3 July 2013, the respondent wrote to the appellant referring to Progress Claim 9 and indicating its desire to reach a final settlement of its account with respect to the building works. In the letter, the respondent expressed its intention to claim certain amounts from the appellant for rectification works already undertaken and which it proposed to undertake.
Representatives of the appellant and the respondent met on or about 9 August 2013 at the offices of the respondent. On that same day and after the meeting, the respondent sent a letter to the appellant outlining its position with respect to settling payment of the appellant’s claim. The letter set out the, as then, unresolved claims which can be summarised as follows:
(i)The appellant’s Progress Claim 9;
(ii)Four variation claims by the appellant for building work it had completed and which it claimed were additional to the contract work (“the variation claims”);
(iii)Two claims made by the respondent for completed rectification work with respect to alleged unfinished or poor quality building work by the appellant (“the completed rectification works”).
(iv)A claim by the respondent for allegedly required rectification work yet to be done (“the uncompleted rectification works”).
In this letter of 9 August 2013, the respondent denied liability for the variation claims and offered to pay $31,911.62, being the amount certified by Badge for Progress Claim 9 less an amount for the rectification works that had been completed. The respondent further advised that it would continue to hold retention monies under the contract, in the amount of $33,174, until the uncompleted rectification works had been finished. Enclosed with the letter was a certificate of release summarising this proposed resolution.
This proposal was not acceptable to the appellant. Under cover of a letter from its director, Mr Linke, dated 10 September 2013, the appellant enclosed by way of service on the respondent, a purported “payment claim”, pursuant to the Act, in the sum of $88,217.21. The 10 September letter also addressed each of the issues raised by the respondent in its letter of 9 August 2013. The appellant proffered further justification for each of the four variation claims. In the 10 September letter, the appellant also disputed the respondent’s claims for both completed and uncompleted rectification work.
The respondent replied to the 10 September letter with a letter from its director, Mr Hani, dated 16 September 2013. It repeated its position concerning the appellant’s variation claims and the respondent’s rectification claims. The 16 September letter also enclosed a cheque, in the amount of $31,966, in purported satisfaction of the appellant’s claim. This 16 September letter from the respondent is central to the determination of this appeal. It was in the following terms (omitting formal parts).
Dear [Mr Linke]
Woodcroft Shopping Centre – BV Ceilings Payment Claim[1]
I refer to my letter dated 9 August 2013 and your letter dated 10 September 2013.
Notwithstanding the information supplied with your letter dated 10 September 2013, I maintain my position that Variations VQ20, VQ35, VQ93 and VQ99 were not authorised by 21st Century Development Pty Ltd. These works were outside the scope of the contracted works and should have been referred to me with quotes for prior written approval. This process was not undertaken and I did not issue any approvals for these works.
In relation to your Payment Claim No. 11, I enclose a cheque for the sum of $31,966.00 made payable to BV Ceilings Pty Ltd, being the amount you have claimed less the rectification works I am claiming against your company (as detailed in my previous letter dated 9 August 2013).
In respect of the Rectification Works which are the subject of the $18,000 + GST quote we have received from Equip Painting and Maintenance, as previously advised, we propose to continue to hold the Retention Monies under the contract (being the sum of $33,174.00) and to apply these funds to pay for the Rectification Works. In due course, we will provide you with a copy of the tax invoice supplied by the Equip Painting and Maintenance as evidence that this service has been properly rendered. Once the Rectification works are complete, we will release the balance of the Retention Monies owing to BV Ceilings within 7 days of completion of those works.
Yours Sincerely,
[Mr Hani]
Director
[1] The appellant traded under the name BV Ceilings.
On 12 November 2013, the appellant issued the subject proceedings in the Magistrates Court against the respondent claiming the amount of $56,766.15. This represented the balance of the purported payment claim amount ($88,217.21 less the amount paid by cheque $31,966.00) plus an amount for accrued interest. In the alternative, the appellant sought to recover this amount pursuant to its rights under the contract.
On 2 December 2013, the respondent filed a defence challenging the appellant’s contractual entitlement to payment and a counterclaim seeking $34,027.78. The appellant filed a reply and defence to counterclaim dated 20 February 2014.
By interlocutory application, filed on 4 April 2014, the appellant sought, inter alia, an order for summary judgment with respect to its claim for $56,251.21, being the balance of the purported payment claim, plus an amount for further accrued interest. The application sought a further order that the respondent’s defence and counterclaim be dismissed. These orders were sought pursuant to ss15(4) and 15(4)(b) of the Act, respectively.
On 23 July 2014, the Magistrate dismissed both aspects of the appellant’s application.[2] The primary issue on appeal is whether or not the Magistrate erred in refusing summary judgment. This will turn, in essence, on the application of relevant provisions of the Act to the parties’ correspondence.
[2] Linke Developments Pty Ltd v 21st Century Developments Pty Ltd, Reasons for Ruling, 23 July 2014, AMCCI-13-4935.
The Act
The Act provides a statutory entitlement to a person who is owed money under a construction contract, in defined circumstances, to obtain progress payments for the carrying out of the work and the supply of construction goods and services. Such an entitlement subsists irrespective of any contractual terms regarding progress payments. However, the Act does not limit or detract from any other remedy to which a claimant may be entitled pursuant to the terms of the contract itself or otherwise.
Legislation in similar terms has been operating in all Australian jurisdictions for a number of years.[3] The New South Wales Act, which has been in operation for more than ten years, is substantially identical to the South Australian legislation. As such, the New South Wales case law can be of assistance where the provisions are comparable.
[3] Building and Construction Industry Security of Payment Act 1999 (NSW), the Building and Construction Industry (Security of Payment) Act 2009 (ACT), the Construction Contracts (Security of Payments) Act 2004 (NT), the Building and Construction Industry Payments Act 2004 (Qld), the Building and Construction Industry Security of Payment Act 2002 (Vic), the ConstructionContracts Act 2004 (WA) and the Building and Construction Industry Security of Payment Act 2009 (Tas).
The Act provides that a person can make a “payment claim” (as defined) against the person said to be liable to make that payment. The person liable may respond by providing a “payment schedule” (as defined) indicating what amount, if any, it proposes to pay. Should the amount offered in satisfaction of the payment claim be less than that claimed, the payment schedule must set out the reasons why that is so and, if it is because money is being withheld, the reasons for the withholding.
A responding payment schedule must be provided within the period provided for by the contract or, if the contract is silent as to any such period, within 15 days of service of the payment claim. If a payment schedule is not provided within the relevant period, the claimant may seek recovery of the amount claimed as a debt due. The Act further provides that in such proceedings, the respondent is not entitled to bring a cross-claim or raise a defence in relation to matters arising under the contract.
The appellant contends that the respondent failed to provide, within the relevant 15 day period, a responding payment schedule to the payment claim enclosed with its 10 September letter. To succeed with that contention the Court would need to be satisfied that the respondent’s letter of 16 September did not comprise a valid payment schedule under the Act. It is convenient to set out the relevant provisions of the Act in full.
Section 13 describes the necessary characteristics of a payment claim.
13—Payment claims
(1)A person referred to in section 8 who is or who claims to be entitled to a progress payment (the "claimant") may serve a payment claim on the person who, under the contract concerned, is or may be liable to make the payment.
(2)A payment claim—
(a) must identify the construction work (or related goods and services) to which the progress payment relates; and
(b) must indicate the amount of the progress payment that the claimant claims to be due (the "claimed amount"); and
(c) must state that it is made under this Act.
(3)The claimed amount may include an amount—
(a) that the respondent is liable to pay the claimant under section 28(3); or
(b) that is held under the construction contract by the respondent and that the claimant claims is due for release.
(4)A payment claim may be served only within—
(a) the period determined by or in accordance with the terms of the construction contract; or
(b) the period of 6 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied), whichever is the later.
(5)A claimant cannot serve more than 1 payment claim in respect of each reference date under the construction contract.
(6)However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.
Section 14 describes the necessary characteristics of a payment schedule and provides for the consequences following any failure to provide a qualifying payment schedule.
14—Payment schedules
(1)A person on whom a payment claim is served (the "respondent") may reply to the claim by providing a payment schedule to the claimant.
(2)A payment schedule—
(a) must identify the payment claim to which it relates; and
(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the "scheduled amount").
(3)If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment.
(4)If—
(a) a claimant serves a payment claim on a respondent; and
(b) the respondent does not provide a payment schedule to the claimant—
(i) within the time required by the relevant construction contract; or
(ii)within 15 business days after the payment claim is served,
whichever time expires earlier, the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.
Section 15 provides for further consequences where a qualifying payment schedule is not provided.
15—Consequences of not paying claimant where no payment schedule
(1)This section applies if the respondent—
(a) becomes liable to pay the claimed amount to the claimant under section 14(4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section; and
(b) fails to pay the whole or a part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
(2)In those circumstances, the claimant—
(a) may—
(i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in a court of competent jurisdiction; or
(ii) make an adjudication application under section 17(1)(b) in relation to the payment claim; and
(b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.
(3)A notice referred to in subsection (2)(b) must state that it is made under this Act.
(4)If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt—
(a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1); and
(b) the respondent is not, in those proceedings, entitled—
(i)to bring a cross-claim against the claimant; or
(ii)to raise a defence in relation to matters arising under the construction contract.
Summary judgment
The appellant’s application for summary judgment is brought pursuant to Rule 8 of the Magistrates Court (Civil Rules) 2013.
(1)Where a party wishes to obtain –
(a) summary judgment in, or the disposal of the whole or part of, an action; or
(b) immediate relief,
he or she may do so on application accompanied by an affidavit specifying –
(c) that there is no reasonable basis for the action or defence.
(2)The Court may –
(a) enter judgment accordingly;
(b) grant the whole or part of the relief sought, and order that the action continue in relation to the part not disposed of;
(c) make an order for an early trial; or
(d) make any other order.
(3)The Court may enter a summary judgment based on an Enforceable Payment Agreement verified by an affidavit.
A plaintiff seeking summary judgment must establish that there is “no reasonable basis” for a defence. The “no reasonable basis” test also applies under the analogous Rule 232 of the Supreme Court Civil Rules 2006. In Ceneavenue Pty Ltd & Ors v Martin & Ors[4] Debelle J[5] said this concerning Rule 232.
The only question to be considered is whether there is a real question to be tried and whether that question has reasonable as distinct from fanciful prospects of success. Once the Court concludes that there are reasonable prospects of success, it must dismiss the application for summary judgment.
[4] (2008) SASC 158 at [94].
[5] With whose reasons Duggan J (on this issue) and Anderson J (generally) agreed.
The Magistrate’s reasons
At first instance, the Magistrate dealt with three main issues: first, the appellant’s contention that the 16 September letter did not constitute a valid payment schedule in compliance with s14 of the Act; second, the respondent’s contention that the appellant’s 10 September letter was not a valid payment claim in compliance with s13 of the Act; and finally, the appellant’s contention that the respondent was precluded from bringing a defence and counterclaim pursuant to s15(4)(b).
As to the first issue, her Honour found that the 16 September letter was a valid payment schedule:[6]
In my view the 16/9 letter does contain the three matters as required by s 14 of the Act. It is clear from the terms of the letter (and its enclosed cheque) that it relates to the 10/9/13 payment claim (noting the reference to the covering letter to that payment claim), that the defendant proposes to pay $31,966 with respect to that claim (noting the enclosed cheque) and outlining the reasons for the shortfall (the lack of approval for variations, the need for rectification work, the expected cost of such rectification work). In my view it provides sufficient particularity for the plaintiff to understand what amount is being offered by way of payment and why, thus enabling it to determine whether it has good grounds to pursue the claim.
I find that the 16/9 letter was a payment schedule within the meaning of s 14 of the Act.
[6] Reasons at [45]-[46].
Although strictly unnecessary, given this finding, the Magistrate went on to reject the respondent’s contention that the 10 September letter was not a payment claim.[7]
Applying the reasoning as outlined in the above mentioned cases (and that of His Honour Justice Blue in Built Environs Pty Ltd v Tali Engineering Pty Ltd and Ors (2013) SASC 84), I consider the 10/9/13 payment claim does comply with the requirements of s 13 of the Act. The document clearly states that it is made under the Act, it states an amount claimed and it lists in a schedule the components of the claim by reference to Site Instruction numbers and/or Variation numbers. In my view the information contained therein is sufficient to comply with s 13 having regard to the manner in which the Act has been interpreted by our Supreme Court and how the NSW Act has been interpreted in that State.
[7] Reasons at [50].
The Magistrate then dealt with the question of whether the respondent should be prevented from bringing a defence and counterclaim.[8]
Having found that the 16/9 letter is a payment schedule within the meaning of s 14, it follows that the defendant has not become liable to pay the claimed amount pursuant to section 14(4) of the Act and therefore s 15 can not apply.
The Defence and Counterclaim filed by the defendant on 2 December 2013 on its face discloses a reasonable basis for the defence. In those circumstances, the application for summary judgment must fail. Further, in those circumstances there can be no basis to dismiss the Defence and Counterclaim pursuant to s 15(4)(b) of the Act, or pursuant to Rule 86.
[8] Reasons at [54]-[55].
The Magistrate further observed as follows.[9]
These proceedings way well be premature, the appropriate procedure for the plaintiff to follow being that as set forth in s 17 of the Act, namely adjudication. However, I note that in addition to seeking relief under the Act, the proceedings claim, by way of alternative relief, ‘the sum of $56,251.21 being the unpaid balance due in respect of the building works referred to in paragraph 2 hereof, plus pre-judgment interest’. This appears to be a claim based in contract. This also supports the defendant’s contention that even if s 15 did apply to this matter, this would not preclude the defendant from pleading a defence or counterclaim to the claim based in contract.
[9] Reasons at [56].
The Magistrate concluded as follows.[10]
The 10/9/13 payment claim is a payment claim within the meaning of s 13 of the Act.
The 16/9 letter is a payment schedule within the meaning of s 14 of the Act.
S 15 of the Act does not apply to this matter, meaning s 15(4)(b) of the Act is also inapplicable.
The Defence and Counterclaim filed by the defendant discloses a reasonable basis for the defence.
[10] Reasons at [56].
The primary issue on appeal
The respondent has not sought to re-agitate its contention that the appellant’s 10 September letter did not qualify as a payment claim. That leaves for consideration the question whether the Magistrate was correct in finding that the 16 September letter satisfied the requirements in s14 of a payment schedule. If not, the appellant would be entitled to recover the unpaid portion of the payment claim amount as a debt pursuant to s15(2)(a)(i). It would follow that the respondent had no reasonable basis on which to resist this statutory entitlement such that the appellant would become entitled to an order for summary judgment.
The arguments advanced on appeal
Under s14 of the Act, a payment schedule must satisfy the following three requirements:
(i)it must identify the payment claim to which it relates (s14(2)(a));
(ii)it must indicate the amount of the payment (if any) that the respondent proposes to make (the "scheduled amount") (s14(2)(b)); and
(iii)if the scheduled amount is less than the claimed amount, it must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) it must provide the respondent's reasons for withholding payment (s14(3)).
The 16 September letter specifically referred to the 10 September letter which enclosed the payment claim document. For this reason, the appellant concedes that s14(2)(a) was, in all likelihood, satisfied. However the appellant submits that the 16 September letter does not satisfy s14(2)(b) because it does not indicate the amount the respondent proposed to pay in relation to the payment claim. The appellant contends that the 16 September letter was not responding to its payment claim but rather was part of a continuing dialogue in respect of the amount of $42,548.62 originally certified as due and payable by Badge for the month ending 30 April 2013. The reference in the 16 September letter to “Payment Claim 11” was, in fact, a reference to Progress Claim 9. It follows, according to the appellant, that the $31,966 cheque enclosed in the 16 September letter was meant to be in purported satisfaction of Progress Claim 9, leaving the appellant’s 10 September payment claim unanswered.
The appellant also submits that, as there was no indication by the respondent of the “scheduled amount” to be paid with respect to the 10 September payment claim ((ii) above), s14(3) also was not satisfied.
The appellant submits that the pleading by the respondent of a counterclaim is directly contrary to s15(4)(b), and that such a pleading undermines the underlying purpose of the Act which is to facilitate the expeditious settlement of progress claim disputes.
The respondent submits that s14(2)(b) has been satisfied; the 16 September letter expressly stated that it intended to pay an amount of $31,966 and enclosed a cheque for that amount. The 16 September letter, when read in conjunction with the earlier correspondence and the payment claim, was clear to the effect that the respondent agreed to pay $31,966 with respect to the payment claim that accompanied the 10 September letter. The respondent submits that the 16 September letter provides a “basic idea” of why the respondent is not willing to pay various components of the payment claim sufficient to satisfy the payment schedule requirement in this respect.
In the alternative, the respondent contends that there is a reasonable basis to argue that the 16 September letter was a payment schedule for the purposes of the Act. This, of itself, is sufficient to dispose of an application for summary judgment.
The respondent also submits that its right to counterclaim should survive notwithstanding the operation of s15(4)(b) of the Act. It contends that the claim filed by the appellant on 12 November 2013 included an alternative claim in contract for the sum of $56,251.21 which permits the respondent to raise a defence or counterclaim in the proceedings.
During oral submissions on appeal counsel for both parties were invited to reflect on their position as to whether the extraneous pleadings with respect to the appellant’s claim for contractual relief should remain. The Court received further written submissions from the parties on this point.
The appellant’s position is that all aspects of the Magistrates Court pleadings which do not deal with its claim for summary judgment under the Act should be struck out. That would require amendments to the appellant’s original claim dated 12 November 2013 and the respondent’s defence dated 2 December 2013 so as to remove pleadings that do not concern the appellant’s claim for summary judgment. It also would lead to both the respondent’s counterclaim, dated 2 December 2013, and the respondent’s reply, dated 20 February 2014, being struck out completely.
The respondent maintained its submission that it is entitled to bring a counterclaim and opposes any such amendments to the pleadings being made. The respondent is concerned that any such order could have the effect of stopping or precluding the parties from commencing any further action in the future as to their respective entitlements under the terms of the contract.
Resolution of the appellant’s claim that the 16 September letter did not satisfy the requirements for a “payment schedule”
A practical, commonsense approach to the application of the requirements in ss13 and 14 of the Act is called for. In the New South Wales case of Multiplex Constructions Pty Ltd v Luikens & Anor,[11] Palmer J relevantly observed:
A payment claim and a payment schedule are, in many cases, given and received by parties who are experienced in the building industry and are familiar with the particular building contract, the history of construction of the project and the broad issues which have produced the dispute as to the claimant’s payment claim. [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. A payment claim and a payment schedule should not, therefore, be required to be as precise and as particularised as a pleading in the Supreme Court. Nevertheless, precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in the dispute.
[11] [2003] NSWSC 1140 at [76]-[77].
His Honour went on to specifically consider the operation of payment schedules, under the New South Wales legislation.[12]
A respondent to a payment claim cannot always content itself with cryptic or vague statements in its payment schedule as to its reasons for withholding payment on the assumption that the claimant will know what issue is sought to be raised. Sometimes the issue is so straightforward or has been so expansively agitated in prior correspondence that the briefest reference in the payment schedule will suffice to identify it clearly. More often than not, however, parties to a building dispute see the issues only from their own viewpoint: they may not be equally in possession of all of the facts and they may not equally appreciate the significance of what facts are known to them. This will be so especially where, for instance, the contract is for the construction of a dwelling house and the parties are the owner and a small builder. In such cases, the parties are liable to misunderstand the issues between them unless those issues emerge with sufficient clarity from the payment schedule read in conjunction with the payment claim.
Section 14(3) of the Act, in requiring a respondent to “indicate” its reasons for withholding payment, does not require that a payment schedule give full particulars of those reasons. The use of the word “indicate” rather than “state”, “specify” or “set out”, conveys an impression that some want of precision and particularity is permissible as long as the essence of “the reason” for withholding payment is made known sufficiently to enable the claimant to make a decision whether or not to pursue the claim and to understand the nature of the case it will have to meet in an adjudication.
[12] At [77]-[78].
Palmer J’s observations arose in a different context. Multiplex concerned the New South Wales equivalent of s14(3) of the Act[13] as opposed to s14(2). Palmer J had to decide whether the “payment schedule” before him properly indicated the reasons for which payment was being withheld. Nevertheless, his Honour’s approach to the construction of this legislation is one with which I agree.
[13] Section 14(3) of the New South Wales Act is, for all intents and purposes, in identical terms.
In Built Environs Pty Ltd v Tali Engineering Pty Ltd & Ors,[14] Blue J adopted a similar approach when considering the requirements of a payment claim under s13 of the Act.
It is common ground that, in order to comply with section 13(2)(a), a payment claim must allow a reasonable principal to ascertain with sufficient certainty the basis of the claim so as to be able to provide a meaningful payment schedule. Both parties accepted that the relevant test was identified in Protectavale Pty Ltd v K2K Pty Ltd by Finkelstein J as follows:
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. 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.
The manner in which compliance with s 14 is tested is not overly demanding. ...
Nonetheless a payment claim must be sufficiently detailed to enable the principal to understand the basis of the claim. If a reasonable principal is unable to ascertain with sufficient certainty the work to which the claim relates, he will not be able to provide a meaningful payment schedule. That is to say, a payment claim must put the principal in a position where he is able to decide whether to accept or reject the claim and, if the principal opts for the latter, to respond appropriately in a payment schedule.
(citations omitted)
[14] [2013] SASC 84 at [81].
With respect, I agree with these observations of Palmer J in Multiplex and Finkelstein J as endorsed by Blue J in Built Environs. I find them to be just as apposite to the question whether a payment schedule satisfies the requirements imposed by s14. It will be sufficient if a “payment schedule” in question achieves the basic objective of putting the claiming party on notice as to how much the party making payment intends to pay with reference to the payment claim and the reasons why that amount is lower than that claimed, if that is the case.
In Springs Golf Club Pty Ltd v Profile Golf Pty Ltd,[15] Rein AJ (as his Honour then was) had to decide whether a particular letter provided by Springs Golf Club in response to a payment claim issued by Profile Golf satisfied the elements of a payment schedule pursuant to s14 of the New South Wales legislation. The letter did not expressly stipulate the amount Springs was willing to pay in satisfaction of the payment claim. Instead, it referred to the fact that a specific amount had been offered, at a previous meeting, as a last and final payment. Rein AJ held that this was sufficient to satisfy the requirement under s14(2) that Springs indicate the amount it proposed to pay in response to the payment claim. His Honour said this.[16]
The letter is not explicitly expressed as an offer, nor does it state that the amount previously offered was an offer that went beyond what was accepted by Springs as payable by it. What is important, I think, is that it was a response to a formal payment claim that had been made. A claim having been made pursuant to the Act and expressed to be so made, the letter ought be construed liberally as a response with significance under the Act. The fact that an offer had been made of the same amount previously (whether or not expressed previously to be without prejudice and whether or not expressed previously to be an amount greater than the amount said by Springs to be owing, neither of which appears to be the case) does not preclude the letter meeting the requirements of s 14. The letter considered as a response to the payment claim, which its heading expressed it to be, states the total amount that Springs was, and inferentially, continues to be, prepared to pay. If there is a qualification, it is that the stated amount is all that it is prepared to pay. In my view, the amount that Springs proposes to pay (“the scheduled amount”) is thereby indicated.
[15] [2006] NSWSC 344.
[16] [2006] NSWSC 344 at [37].
Of significance here was his Honour’s acceptance that the letter by Springs indicated the amount it intended to pay in satisfaction of the payment claim by Profile Golf without expressly so stating. Given that the letter was a response to the payment claim issued by Profile Golf, his Honour was prepared to infer that the reference to the previous amount offered was an indication by Springs that it continued to propose that amount in satisfaction of the claim.
Counsel for the appellant in oral submissions contended that Springs Golf Club was of no utility in this matter as it was distinguishable on the facts. That contention was made on the basis that the letter by Springs specifically addressed the payment claim to which it related, whereas the 16 September letter by the respondent in this matter states that the cheque in the amount of $31,966 was in response to Progress Claim 9. That is so. However, it is apparent from the commencement of the letter that it is a response to the 10 September letter. As such, the question arises whether, as in Springs Golf Club, it ought to be inferred that the amount of $31,966 was an offer of payment in satisfaction of the payment claim contained within that letter.
The $88,217.21 sought by the appellant in the payment claim that accompanied its 10 September letter comprised the money certified as being owed to it in satisfaction of Progress Claim 9, further amounts it alleged were owed for the four variation claims the appellant had made and the amount it alleged had been improperly retained by the respondent for rectification work. The respondent’s 16 September letter directly responds to the appellant’s 10 September letter. In so doing, it sets out the respondent’s position with respect to each of the four variation claims, the claim for rectification work and the retention monies. The letter also expressly refers to Progress Claim 9 (that is “Payment Claim No 11”) and encloses a cheque in the amount of $31,966.
It is helpful here to return to the respondent’s earlier letter of 9 August 2013 which sets out its summary of the position between the parties following a face to face meeting on that day. The terms of that letter are summarised earlier in these reasons. The appellant’s 10 September letter (and enclosed payment claim) addressed each of the areas of dispute summarised in the 9 August letter. The respondent in its 16 September letter has simply restated its position on all outstanding issues. Bearing in mind the history of the parties’ dealings with each other concerning this project and, particularly, this run of correspondence, each party, acting reasonably, should have understood the other’s position on all contested items.
In the 16 September letter, the $31,966 is offered by way of reference to Progress Claim 9. However, that claim was incorporated into the sum of $88,217.21 which is now the subject of the appellant’s payment claim enclosed in its 10 September letter. Given that the 16 September letter addresses each of the other bases upon which the appellant claims an entitlement to $88,217.21, the enclosure of the cheque for $31,966 is to be seen as an offer in satisfaction of that payment claim. The 16 September letter is essentially to be understood as saying “notwithstanding your recent payment claim, here are the reasons why we remain of the view that you are only entitled to the amount of $31,966 in satisfaction of that component of the payment claim described in Progress Claim 9 and all other claims are disputed”.
The respondent is required to provide, by way of its responding payment schedule, a sufficient level of particularity so as to enable the appellant to decide whether to pursue its claim in full or not. By addressing all items claimed for in the appellant’s 10 September letter, enclosing a cheque purportedly in satisfaction of the appellant’s claim, and outlining the reasons as to why a lower amount than that sought was being provided, the respondent’s 16 September letter achieved that level of particularity. The 16 September letter met the basic requirements of a payment schedule under s14 of the Act and, in particular, satisfied ss14(2)(a), (2)(b), (3) and (4)(b)(ii).
In these circumstances, the appellant has no entitlement pursuant to s14(4) to be paid the amount of its payment claim enclosed in the letter of 10 September. The Magistrate was correct to refuse the appellant’s claim for summary judgment. Strictly, all this means is that the appellant’s claim in reliance on s14(4) of the Act should now proceed to trial in the ordinary way. However, there would seem little point, as the appellant acknowledged during argument, in re-agitating this particular issue again, other than by way of further appeal. That, of course, does not mean that the appellant cannot continue to pursue and establish a right to full payment either in an action under the contract or pursuant to the adjudication procedure under s17 of the Act.
Should the respondent be allowed to maintain its defence and counterclaim?
The remaining issue to be decided is whether the respondent’s defence and counterclaim should be struck out. The Magistrate found that s15(4)(b) of the Act, which precludes the pleading of a defence or counterclaim in response to proceedings brought to recover the amount of a payment claim, did not operate in the circumstances of this matter. Section 15 has been set out, in full, earlier in these reasons. However, it is one of three sections designed to provide for the consequences that might follow from the provision or purported provision of a payment claim. It will assist to set out s15 again, together with those other two sections.
15—Consequences of not paying claimant where no payment schedule
(1)This section applies if the respondent—
(a) becomes liable to pay the claimed amount to the claimant under section 14(4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section; and
(b) fails to pay the whole or a part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
(2)In those circumstances, the claimant—
(a) may—
(i)recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in a court of competent jurisdiction; or
(ii)make an adjudication application under section 17(1)(b) in relation to the payment claim; and
(b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.
(3)A notice referred to in subsection (2)(b) must state that it is made under this Act.
(4)If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt—
(a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1); and
(b) the respondent is not, in those proceedings, entitled—
(i)to bring a cross-claim against the claimant; or
(ii)to raise a defence in relation to matters arising under the construction contract.
16—Consequences of not paying claimant in accordance with payment schedule
(1)This section applies if—
(a) a claimant serves a payment claim on a respondent; and
(b) the respondent provides a payment schedule to the claimant—
(i)within the time required by the relevant construction contract; or
(ii)within 15 business days after the payment claim is served,
whichever time expires earlier; and
(c) the payment schedule indicates a scheduled amount that the respondent proposes to pay to the claimant; and
(d) the respondent fails to pay the whole or a part of the scheduled amount to the claimant on or before the due date for the progress payment to which the payment claim relates.
(2)In those circumstances, the claimant—
(a) may—
(i)recover the unpaid portion of the scheduled amount from the respondent, as a debt due to the claimant, in a court of competent jurisdiction; or
(ii)make an adjudication application under section 17(1)(a)(ii) in relation to the payment claim; and
(b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.
(3)A notice referred to in subsection (2)(b) must state that it is made under this Act.
(4)If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt—
(a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1); and
(b) the respondent is not, in those proceedings, entitled—
(i)to bring a cross-claim against the claimant; or
(ii)to raise a defence in relation to matters arising under the construction contract.
17—Adjudication applications
(1)A claimant may apply for adjudication of a payment claim (an "adjudication application ) if—
(a) the respondent provides a payment schedule under Division 1 but—
(i)the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim; or
(ii)the respondent fails to pay the whole or a part of the scheduled amount to the claimant by the due date for payment of the amount; or
(b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or a part of the claimed amount by the due date for payment of the amount.
(2)An adjudication application to which subsection (1)(b) applies cannot be made unless—
(a) the claimant has notified the respondent, within the period of 20 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim; and
(b) the respondent has been given an opportunity to provide a payment schedule to the claimant within 5 business days after receiving the claimant's notice.
(3)An adjudication application—
(a) must be in writing; and
(b) must be made to an authorised nominating authority chosen by the claimant; and
(c) in the case of an application under subsection (1)(a)(i)—must be made within 15 business days after the claimant receives the payment schedule; and
(d) in the case of an application under subsection (1)(a)(ii)—must be made within 20 business days after the due date for payment; and
(e) in the case of an application under subsection (1)(b)—must be made within 15 business days after the end of the 5 day period referred to in subsection (2)(b); and
(f) must identify the payment claim and the payment schedule (if any) to which it relates; and
(g) must be accompanied by such application fee (if any) as may be determined by the authorised nominating authority; and
(h) may contain such submissions relevant to the application that the claimant chooses to include.
(4)The amount of any such application fee must not exceed the amount (if any) determined by the Minister.
(5)A copy of an adjudication application must be served on the respondent concerned.
(6)It is the duty of an authorised nominating authority to which an adjudication application is made to refer the application to an adjudicator (being a person who is eligible to be an adjudicator as referred to in section 18) as soon as practicable.
Read literally, s15 and s16 appear internally inconsistent. Similar construction issues arise with both sections. In the discussion that follows I will refer only to s15. Subsection 15(1) provides “this section applies” if (1)(a) and (b) are both made out. Taken in isolation, the inference would appear to be that the section does not apply if either (1)(a) or (1)(b) is not established. If this is the correct inference, then in circumstances where either (1)(a) or (1)(b) is not established, the prohibition in s15(4) will not apply. This is, in essence, the approach the Magistrate adopted. However, there are obvious problems with a literal reading of s15(1) in this respect.
According to subsection (1), s15 applies if a respondent (to a payment claim) “becomes liable to pay the claimed amount” as a consequence of having failed to provide a payment schedule within the time allowed[17] and if they fail to pay the whole or part of the claimed amount on or before the due date. However, the question of a respondent’s liability in this respect is only to be ascertained, finally, following the determination of proceedings in a court of competent jurisdiction[18] or the resolution of an adjudication application pursuant to s17.[19] In other words, and to put it simply, a precondition (if read literally) that must be satisfied before s15 can apply, being that set out in s15(1)(a), can only be satisfied if the rights conferred by s15(2) are first availed of.
[17] See s14(4).
[18] See s15(2)(a)(i).
[19] See s15(2)(a)(ii).
It makes little sense or at the least makes the provision unworkable, if s15(1) is to be read literally. The disjunction in this respect, between s15(1) and s15(2) is highlighted when regard is had to s15(4). This purports to preclude a respondent from pleading a defence or counterclaim to “proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount...” in circumstances where the claimant “commences” such proceedings. In other words, the prohibition with respect to pleadings arises at the commencement of the proceedings envisaged by s15(2) and not upon any ultimate finding of liability upon which the operation of s15 (read literally) is predicated.
The intended operation of the Act is summarised in s3:
3—Object of Act
(1)The object of this Act is to ensure that a person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.
(2)The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.
(3)The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves—
(a) the making of a payment claim by the person claiming payment; and
(b) the provision of a payment schedule by the person by whom the payment is payable; and
(c) the referral of any disputed claim to an adjudicator for determination; and
(d) the payment of the progress payment so determined.
(4)It is intended that this Act does not limit—
(a) any other entitlement that a claimant may have under a construction contract; or
(b) any other remedy that a claimant may have for recovering any such other entitlement.
I agree with the observation of Blue J in Built Environs Pty Ltd v Tali Engineering Pty Ltd & Ors.[20]
[20] [2013] SASC 84 at [50].
Essentially, the Act:
1. gives to a construction contractor (including a subcontractor, sub‑subcontractor, etc) a statutory entitlement to progress payments where there is no contractual right;[21]
2.gives to a construction contractor a statutory entitlement to progress payments in essentially the same terms as and in parallel to a contractual right to a progress payment;[22]
3.creates a statutory procedure for payment claims and responsive payment schedules in respect of progress claims (whether purely statutory or statutory/contractual);[23]
4.provides for the adjudication of disputes in relation to payment claims by qualified adjudicators appointed by authorised nominating authorities;[24]
5.enables recovery in a court of competent jurisdiction by way of debt of the unpaid portion of a payment claim in response to which no payment schedule is served within time or which has been acknowledged by a payment schedule or pursuant to an adjudication;[25]
6.precludes parties contracting to modify rights and obligations created by the Act;[26]
7.does not otherwise take away or affect parties’ contractual rights under a construction contract.[27]
[21] Building and Construction Industry Security of Payment Act 2009 (SA) ss 8, 9(b), 10(1)(b) and (2)(b), 11(1)(b) and (2)(a).
[22] Building and Construction Industry Security of Payment Act 2009 (SA) ss 8, 9(a), 10(1)(a) and (2)(a), 11(1)(a) and (2) and 12.
[23] Building and Construction Industry Security of Payment Act 2009 (SA) ss 13 and 14.
[24] Building and Construction Industry Security of Payment Act 2009 (SA) ss 17-23, 26 and 27.
[25] Building and Construction Industry Security of Payment Act 2009 (SA) ss 15, 16, 24 and 25.
[26] Building and Construction Industry Security of Payment Act 2009 (SA) ss 12 and 33.
[27] Building and Construction Industry Security of Payment Act 2009 (SA) ss 3(4) and 32.
The Act provides for a legislative regime pursuant to which an entitlement to progress claims can be asserted and resolved quickly and efficiently as a stand alone issue. A respondent to a payment claim that complies with the requirements of s13 can protect itself by providing for a payment schedule that complies with the requirements of s14. Provided the statutory processes envisaged by s13 and s14 are complied with, on both sides, no statutory liability in a respondent will arise pursuant to s14(4). However, if a respondent does not comply with the statutory requirements of s14 concerning a valid payment schedule and provided that the applicant has complied with the statutory requirements of s13 for a valid payment claim, certain statutory rights will arise in favour of the applicant in accordance with either s15 or s16, and s17.
Section 15 provides for consequences that will follow where a respondent does not pay in response to a valid payment claim and does not provide a payment schedule as required by s14. Section 16 provides for consequences where a respondent does provide a payment schedule but does not pay the claimant in accordance with that payment schedule.
In the circumstances embraced by s15, the intention is that a claimant’s statutory right to receive part or all of a payment claim can be adjudicated on by a court of competent jurisdiction independently of and without dealing with or disposing of the parties wider contractual or other rights. It is in this context that s15(4)(b) is are intended to operate.
In Project Blue Sky v ABA[28] McHugh, Gummow, Kirby and Hayne JJ said this:
[28] [1998] HCA 28, (1998) 194 CLR 355 at [69]-[71], [78].
The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole". In Commissioner for Railways (NSW) v Agalianos, Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed.
A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other". Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.
Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision. In The Commonwealth v Baume Griffith CJ cited R v Berchet to support the proposition that it was "a known rule in the interpretation of Statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent".
. . . .
However, the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning. In Statutory Interpretation, Mr Francis Bennion points out:
"The distinction between literal and legal meaning lies at the heart of the problem of statutory interpretation. An enactment consists of a verbal formula. Unless defectively worded, this has a grammatical meaning in itself. The unwary reader of this formula (particularly if not a lawyer) may mistakenly conclude that the grammatical meaning is all that is of concern. If that were right, there would be little need for books on statutory interpretation. Indeed, so far as concerns law embodied in statute, there would scarcely be a need for law books of any kind. Unhappily this state of being able to rely on grammatical meaning does not prevail in the realm of statute law; nor is it likely to. In some cases the grammatical meaning, when applied to the facts of the instant case, is ambiguous. Furthermore there needs to be brought to the grammatical meaning of an enactment due consideration of the relevant matters drawn from the context (using that term in its widest sense). Consideration of the enactment in its context may raise factors that pull in different ways. For example the desirability of applying the clear literal meaning may conflict with the fact that this does not remedy the mischief that Parliament intended to deal with."
(footnotes omitted)
In my view, the opening words of s15(1), “this section applies if the respondent...”, ought not to be given its literal meaning. The intent is that the requirements of s15 are to apply and be complied with in circumstances where a claimant elects to take proceedings under s15(1) to enforce a liability in a respondent which the claimant maintains has arisen in reliance on s14(4), rather than electing to pursue an adjudication process under s17. Once a claimant commences proceedings under s15(2)(a)(i) the requirements of s15(4) are to apply. It is to be noted that the prohibition on bringing a cross-claim would seem to be absolute but the prohibition on raising a defence is qualified as only being “in relation to matters arising under the construction contract”. It would seem that a respondent might still be entitled to raise a defence in relation to matters that cannot be said to have arisen under the construction contract, although the phrase “arising under” ordinarily will be construed broadly. Furthermore, it is clear that the Act does not intend to remove any contractual or statutory entitlement be it by way of defence or cross-claim that a respondent might enjoy. What is expected is that any such entitlement will be ventilated in separate proceedings.
However, a difficulty in construing and applying s15(4) arises where a claimant brings one set of proceedings which incorporates both a claim under s15(2)(a)(i) together with, either in addition or in the alternative to, a claim under the contract. This does not appear to be prohibited by the Act. However, the expectation inherent in the scheme of the Act, in this respect, is that a claimant will only use s15 as a stand alone means to obtain a judgment with respect to any statutory entitlement said to have arisen consequent on the provision of a valid payment claim. The incorporation of additional claims is not within the spirit of the legislative regime and would be likely to prove embarrassing for a respondent if s15(4)(b) were to apply.
It is not consistent with the intention underlying s15(4)(b) that, by linking in the one set of proceedings a claim under s15(2)(i) for a statutory entitlement with a more general claim for breach of contract, a claimant would thereby be able to prevent a respondent from defending and cross-claiming with respect to the breach of contract claim.
In this case the appellant’s statement of claim pleads an entitlement of the amount said to be owing in accordance with the payment claim and pursuant to s15(4) of the Act and, in the alternative, an entitlement to recover the amount claimed on the basis that it is an unpaid balance due in respect of the building works performed pursuant to the parties’ contract. The proceedings instituted in the Magistrates Court by the appellant combine both a claim by way of statutory entitlement and a claim by way of entitlement under the parties’ contract.
The pleading is quite brief and is primarily aimed at supporting the statutory claim. However, the prayer for relief asserts an alternative basis in contract for claiming the amount said to be due and the pleading itself is sufficient to support this alternative prayer for relief although it may be said to lack appropriate particularity. The claim is relatively short and, omitting formal parts, is in the following terms.
1.The plaintiff company is a licensed building work contractor holding Licence No. BLD55375 trading as B & V Ceilings (ABN 17 050 294 356).
2.By instrument of agreement dated the 27th of April 2012 (“the contract”), the plaintiff was engaged by the defendant to perform certain building works at the Woodcroft Shopping Centre.
3.Pursuant to the contract, Badge Constructions (SA) Pty. Ltd. (ABN 85 008 015 496) (“Badge”) was appointed by the defendant as construction manager and at all material times acted as the agent of the defendant in dealings with the plaintiff.
4.The plaintiff proceeded to perform the work required by the contract, together with variations thereto as requested and approved by Badge for and on behalf of the defendant.
5.The total value of the work performed by the plaintiff pursuant to the contract was $664,380.00 plus GST.
6. In addition thereto, variations to the value of $152,796.38 plus GST were performed by the plaintiff. The grand total of the value of work completed pursuant to the contract plus variations was $817,176.38 plus GST.
7.Of that sum, $736,978.92 was paid by the defendant to the plaintiff prior to the 10th of September 2013.
8.On the 10th of September 2013, the plaintiff delivered to the defendant a payment claim in accordance with Section 13 of the Building & Construction Industry Security of Payment Act 2009 (“the Act”) in the sum of $80,197.46 plus GST of $8,019.75, a grand total of $88,217.21.
9.A copy of the payment claim with supporting documentation is attached hereto.
10.On the 16th of September 2013, the defendant attended to payment of the sum of $31,966.00, leaving a balance due of $56,251.21, including GST.
11.The defendant failed to respond to the plaintiff’s payment claim by serving a valid payment schedule in reply served in accordance with the provisions of the Act and, in particular, Section 34 thereof.
12.In the premises, the defendant became liable to pay the claimed amount to the plaintiff on the due date for the progress payments pursuant to Section 14(4) of the Act, that is to say, the 2nd of October 2013.
13.As the defendant has become liable to pay to the plaintiff the claimed amount under Section 14(4) of the Act as aforesaid, the plaintiff is entitled to recover the claimed amount from the defendant as a debt in the within Court pursuant to Section 15(2) of the Act.
14.Further, the plaintiff is entitled to and claims interest on the payment claim from the due date for payment as defined in Section 11 of the Act (2nd of October 2013) at the rate prescribed by Section 11(2) of the Act being the rate of interest payable under the Supreme Court Act 1935 in respect of judgment debts which is currently 8.75 per cent per annum.
15Pursuant to Section 15 of the Act, the unpaid amount is recoverable in the within Court and, pursuant to Section 15(4) of the Act, the defendant is not entitled to bring a cross claim or raise a defence in the within proceedings.
AND the plaintiff claims:
(a)Payment of the balance due of $51,137.46 plus GST plus interest at the Supreme Court judgment rate of 8.75 per cent per annum from the 2nd of October 2013 to the 12th of November 2013 (42 days @ $12.26 per day = $514.92)
AND the plaintiff seeks summary judgment in that sum pursuant to Section 15 of the Act upon the filing of a proof of service in the within proceedings, plus costs.
In the alternative, the plaintiff claims the sum of $56,251.21 being the unpaid balance due in respect of the building works referred to in paragraph 2 hereof, plus pre-judgment interest.
Paragraphs 1-15 can be seen as primarily directed to the claim made pursuant to s15 of the Act. However, paragraph 2 identifies the contract between the parties, paragraph 4 identifies work alleged to have been performed, paragraphs 5 and 6 allege the value of the work said to have been performed, paragraph 7 alleges the amount received on account of the work performed and paragraphs 8 to 15 set out the balance alleged to be due and unpaid, albeit described in more elaborate terms necessitated by the claim having also been brought pursuant to the statute. In my view, the alternative prayer for relief which refers specifically to paragraph 2 - the contracted building works - is supported by the pleading.
Once in receipt of such a pleading, the respondent had the alternative of seeking further particulars or responding to it in its then current form. The respondent filed a quite extensive defence and counterclaim following which the appellant filed an extensive reply. It would appear that the contractual issues between the parties are joined although, to some degree, inappropriately so, given that further particularity of the appellant’s contractual claim now appears in the reply rather than in the statement of claim. It was suggested to me during argument that this is not particularly unusual in the Magistrates Court. I do not know whether this is so or not. However, leaving aside for the moment the question I have to decide, that is, whether s15(4)(b) requires that all subsequent pleadings be struck out, there would appear to be an extant contractual claim with respect to which both parties have pleaded, in addition to or over and above the claimed statutory entitlement to recover under s14(4) and s15(2)(a)(i). Nevertheless, any perceived problem concerning the particularity of the appellant’s pleaded contract claim or the structure of the pleadings, in this respect, is a matter for the parties, should the pleadings remain in place, and one to be ventilated, if at all, in the Magistrates Court.
For present purposes, I am satisfied that the prohibition under s15(4)(b) will apply only to the extent that proceedings commenced by an applicant concern its claim to recover pursuant to s15(2)(a)(i). The appellant’s proceedings are not so confined and, accordingly, the subsequent pleadings can stand although, insofar as is necessary, they are to be read down as responding and applying only to the appellant’s alternative claim for recovery pursuant to the parties’ contract.
I agree with the Magistrate, albeit for different reasons, that in the circumstances of this matter, the respondent was not precluded by s15 of the Act from pleading its defence and counterclaim.
The appellant in a supplementary submission argued that the alternative prayer for relief in its statement of claim should be struck out which would then, in effect, clear the way to strike out, pursuant to s15(4), those aspects of the defence not related to the statutory claim and the whole of the cross-claim. There is no basis, demonstrated on this appeal, upon which the alternative prayer for relief, incorporating, as it does, a claim in contract, ought to be struck out. The respondent has not sought either below or on appeal any order to this effect. The appellant has chosen to plead in this way and certain consequences have followed. If the appellant wishes to abandon this aspect of its pleading it may be able to do so but any such abandonment is likely to have costs consequences. These are matters to be dealt with in the Magistrates Court once the matter is returned.
The appellant has appealed against the Magistrate’s refusal to grant summary judgment and refusal to strike out the respondent’s defence and counterclaim. It has failed in both respects and the appeal is dismissed. I will hear the parties as to costs.
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