Liquid Systems Pty Ltd v Future Capital Group Pty Ltd
[2020] VCC 1271
•27 August 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-20-01840
| LIQUID SYSTEMS PTY LTD (ACN 627 294 857) | Plaintiff |
| v | |
| FUTURE CAPITAL GROUP PTY LTD (ABN 35 098 692 369) | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF JUDGMENT: | 27 August 2020 | |
CASE MAY BE CITED AS: | Liquid Systems Pty Ltd v Future Capital Group Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1271 | |
REASONS FOR JUDGMENT
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Subject:Building and Construction Industry Security of Payment Act 2002
Catchwords: Claim said to be justified by s14 of Building and Construction Industry Security of Payment Act 2002 – whether document styled “tax invoice” can constitute payment – whether “reference date” exists as the basis for claim – s9 Building and Construction Industry Security of Payment Act 2002
Legislation Cited: Building and Construction Industry Security of Payment Act 2002
Cases Cited:Cloudcon Carpentry Services Pty Ltd v Future Capital Group Pty Ltd [2020] VCC 1270; Jemzone Pty Ltd v Trytan Pty Ltd [2002] NSWSC 395; Vanguard Development Group Pty Ltd v Promax Building Developments Pty Ltd [2018] VSC 386; Watpac Constructions Pty Ltd v Collins & Graham Mechanical Pty Ltd [2020] VSC 414 [60]; Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pty Ltd (2009) 240 CLR 391; Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 357; Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd [2010] VSC 199; Lewence Construction Pty v Southern Han Breakfast Point Pty Ltd [2015] NSWCA 288.
Judgment: (1) Plaintiff’s claim dismissed
(2) Costs reserved
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | N/A | HFW Australia |
| For the Defendant | N/A | Moray & Agnew Lawyers |
HIS HONOUR:
Background
1 According to its managing director, Mr James Louden, the plaintiff, Liquid Systems Pty Ltd (“Liquid Systems”), entered into a contract “in or during May 2019” with the defendant, Future Capital Group Pty Ltd (“Future Capital”), “for the supply of steel, concrete, boom pump and labour to complete Dinsel Installation at the Parcer Apartments at 137-139 Burwood Highway, Burwood”. (Affidavit, 24 April 2020, paragraph 7)
2 The contract in question, which is Exhibit JL-1 to Mr Louden’s affidavit, is on the stationery of Future Capital. It is characterised on the front sheet as “Subcontract Agreement Dincel Installation”, referring to the address in Burwood. On the face sheet, the heading is “Formal Instrument of Agreement for Subcontract” dated “02/05/2019”. Future Capital is described as “the builder” and Liquid Systems is described as “the sub-contractor”.
3 Perhaps surprisingly, with the agreement in traditional form, including recitals, the recitals contain not merely, as one would suppose, recitation of facts existing as at the date of the agreement setting the background for the arrangement, but also include what seem to be statements of operative obligations. For instance, Recital B states:
“The Builder will pay to the Subcontractor the Subcontract Sum, and any other sums which become payable under the Subcontract, in accordance with the Subcontract and otherwise comply with its obligations under the Subcontract Agreement”.
Added in manuscript is the following ‘- 30 days from invoice. Same as previous’.
The evidence does not disclose what “Dincel Installation” means.
4 According to Mr Louden, Liquid Systems “carried out Works on the Site to and inclusive 2 August 2019. On 4.45pm it was unilaterally barred from access to the Site”. (Louden affidavit, paragraph 9)
5 He continued that, at 7.09pm that evening, he received an email “from Cameron Paice of Ardcon Design and Deliver, communicating FCG’s election to unilaterally terminate the Contract and to take the Works out of Liquid Systems Hands”. (Ibid, paragraph 10)
6 He said the email stated:
“Hi James,
As we spoke about over the phone earlier, we have decided to bring in a different contractor to install the 4F dincel.
Thank you for your time and effort over the previous months at Burwood Hwy.
Let's discuss wrapping up all invoicing and works for Burwood Hwy on Monday.” (Ibid, paragraph 10)
7 Mr Louden said that, in the circumstances, his company “accepted the Contract had been terminated. Discussions began around final resolution of all amounts due to Liquid Systems”. (Ibid, paragraph 11)
8 Mr Constantinos Hatzis, a director of Future Capital Group, swore an affidavit dated 16 June 2020, responding to Mr Louden’s affidavit. He said that the sub-contract was entered into “on or around 17 May 2019”. He exhibited the sub-contract as Exhibit CH-1. The document seems to be the same as the exhibit from Mr Louden’s affidavit. Mr Hatzis’ dating of the sub-contract appears to be correct, despite the date of 2 May 2019 in the heading. Page 5 includes execution by the parties on 14 May 2019 by Liquid Systems and 17 May by Future Capital.
9 According to paragraph 14 of Mr Hatzis’s affidavit, representatives of the parties met on 31 July “to discuss an earlier event where a concrete spill occurred on the Project in relation to the Plaintiff’s works”. (Hatzis affidavit, paragraph 14) Mr Hatzis exhibited Minutes of the meeting with representatives of Liquid Systems as Exhibit CH-2. The spill was described as follows:
“1. L.S. were pouring the upper basement (standing on the ground floor pouring below)
2. The spillage was coming through the lower basement.
3. L.S. had Dan and James on ground floor, 2 guys on upper basement and 2 guys on middle basement.”
10 The Minutes record Mr Hatzis as being in attendance, along with Daniel Pedder, also from Future Capital Group. Presumably he is the “Dan” referred to in the description of the incident. “James” is presumably Mr Louden. Toward the end of the Minutes, it is recorded:
“L.S. says it would not do anything differently.
Dan says we should’ve had more xrays done.”
11 The Minutes conclude:
“James [presumably Louden] has stated that Invoice 26 is no longer required to be paid by FCG. Liquid Systems will bear the cost of the days (sic) work.
The proposed clean up entailed half day w/bobcat (30 buckets).
“We will require a small 1 tonne machine to clean rest of concrete on slab.
Approximate 7m3 of concrete.
Bin will be required.”
12 Mr Hatzis said, “the Contract was terminated when the remaining works under the Contract were taken out of [Liquid System’s] hands”. (Hatzis affidavit, paragraph 16)
13 Mr Hatzis continued:
“The Contract was terminated by [Future Capital Group] because [Liquid Systems] had failed to perform the works under the Contract in a competent manner. More specifically, the concrete spill was caused by [Liquid Systems] and I lost confidence that [Liquid Systems] would be able to complete the works under the Contract, in a competent manner, free from defects and without delay.” (Ibid, paragraph 18)
14 Mr Hatzis said that Future Capital Group then engaged another contractor known as Dincel. Dincel sent an email to Future Capital Group, referring to the concrete overflow and the need “to attend to some reparation works”. The email commented:
“For the record we’re alarmed at the level of finish evident in areas of the construction.
This outcome potentially tarnishes the brand name [presumably Dincel] in the final washup.
And I’ve got to say, we’ve never been involved in any follow-up of this magnitude.” (Ibid, paragraph 20, Exhbit CH-4)
15 According to Mr Louden:
“On 3 September 2019, Liquid Systems issued the payment claim … the subject of this application, claiming the amount of $133,411.04 including GST … to the email address of [Future Capital Group] specified in the Contract.” (Louden affidavit, paragraph 17)
16 Mr Louden said that this claim was to be found together with an email history, as Exhibit JL-3 to his affidavit. This exhibit, however, includes the statement: “Amount Due $81,636”. This seems to be a later version of the document. A number of cents appears to have been cut off in the exhibit. In the exhibit as presented, the claim for $133,411.04 is behind the face sheet “JL-4”. Nevertheless, Mr Hatzis, in his affidavit (paragraph 22), refers to the amount claimed as $133,411.04 (including GST), which he describes as the “Purported Payment Claim”. The claim is Exhibit CH‑5 to his affidavit.
17 According to Mr Louden’s affidavit, this claim included a claim for $51,774.67 “which was subject of a previously unpaid claim dated 31 July 2019”. (Louden affidavit, paragraph 26) Liquid Systems lodged an application for adjudication with the organisation “Adjudicate Today” on 11 September 2019 and the adjudicator found that $40,565.67 plus interest was payable by Future Capital Group to Liquid Systems. (Ibid, paragraphs 27-28, exhibit JL-5) The adjudication was made 10 October 2019 and the relevant amount was paid, according to Mr Louden, between 29 November 2019 and 18 February 2020. (Louden affidavit, paragraph 29) Having credited that amount to Future Capital Group, Liquid Systems claims $81,636.37 in this proceeding. (Louden affidavit, paragraph 31) Exhibit JL-3 includes the statement: “This payment claim is made in accordance with `Building and Construction Industry Security of Payment Act 2002’”. The document produced is incomplete insofar as both edges are cut off. The exhibit is filed in landscape format. The present proceeding is brought pursuant to the Building and Construction Industry Security of Payment Act 2002.
Statutory framework
18 In enacting the Building and Construction Industry Security of Payment Act 2002 (“the Act”), on the basis of which the present proceeding has been brought, the Victorian Parliament stated:
“1The main purpose of this Act is to provide for entitlements to progress payments for persons who carry out construction work or who supply related goods and services under construction contracts.”
19 In establishing its own special regime for the recovery of progress payments, the statute enacts:
“47(2) Nothing done under or for the purposes of this Part affects any proceedings arising under a construction contract (including any arbitration proceedings or other dispute resolution proceedings), whether under this Part or otherwise, except as provided by subsections (3) and (4).”
This section is found within Part 3 of the Act “Procedure for Recovering Progress Payments”. Determinations made under the Act may be revisited in ordinary contractual proceedings between the parties, with amounts awarded under the statute susceptible of restitutionary reversal. The statute establishes a regime of “pay now, litigate later”.
Section 47(3) provides:
“In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal –
(a)must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order, determination or award it makes in those proceedings; and
(b)may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings.”
20 Section 5 of the Act provides a detailed definition by way both of inclusions and exclusions of the phrase “construction work”. Neither party suggested that the work in question here did not fall within that phrase as defined.
21 The entitlement to progress payments referred to in the introductory purpose section of the Act is provided for in s9, which states as follows:
“(1) On and from each reference date under a construction contract, a person—
(a)who has undertaken to carry out construction work under the contract; or
(b) who has undertaken to supply related goods and services under the contract—
is entitled to a progress payment under this Act, calculated by reference to that date.
(2) In this section, "reference date", in relation to a construction contract, means—
(a)a date determined by or in accordance with the terms of the contract as—
(i)a date on which a claim for a progress payment may be made; or
(ii)a date by reference to which the amount of a progress payment is to be calculated—
in relation to a specific item of construction work carried out or to be carried out or a specific item of related goods and services supplied or to be supplied under the contract; or
(b)subject to paragraphs (c) and (d), if the contract makes no express provision with respect to the matter, the date occurring 20 business days after the previous reference date or (in the case of the first reference date) the date occurring 20 business days after—
(i)construction work was first carried out under the contract; or
(ii)related goods and services were first supplied under the contract; or
(c)in the case of a single or one-off payment, if the contract makes no express provision with respect to the matter, the date immediately following the day that—
(i)construction work was last carried out under the contract; or
(ii)related goods and services were last supplied under the contract; or
(d)in the case of a final payment, if the contract makes no express provision with respect to the matter, the date immediately following—
(i)the expiry of any period provided in the contract for the rectification of defects or omissions in the construction work carried out under the contract or in related goods and services supplied under the contract, unless subparagraph (ii) applies; or
(ii)the issue under the contract of a certificate specifying the final amount payable under the contract a final certificate; or
(iii)if neither subparagraph (i) nor subparagraph (ii) applies, the day that—
(A)construction work was last carried out under the contract; or
(B)related goods and services were last supplied under the contract.”
22 Section 10 headed “Amount of progress payment” provides inter alia:
“(1) The amount of a progress payment to which a person is entitled in respect of a construction contract is to be—
(a)the amount calculated in accordance with the terms of the contract; or
(b)if the contract makes no express provision with respect to the matter, the amount calculated on the basis of the value of—
(i)construction work carried out or undertaken to be carried out by the person under the contract; or
(ii)related goods and services supplied or undertaken to be supplied by the person under the contract—
as the case requires.
…”
23 As to the valuation of construction work, s11 provides inter alia:
“(1) Construction work carried out or undertaken to be carried out under a construction contract is to be valued—
(a)in accordance with the terms of the contract; or
(b)if the contract makes no express provision with respect to the matter, having regard to—
(i)the contract price for the work; and
(ii)any other rates or prices set out in the contract; and
(iii)if there is a claimable variation, any amount by which the contract price or other rate or price set out in the contract, is to be adjusted as a result of the variation; and
(iv)if any of the work is defective, the estimated cost of rectifying the defect.
…”
24 As to the date when such progress payments are due, s12 provides:
“(1) A progress payment under a construction contract becomes due and payable—
(a)on the date on which the payment becomes due and payable in accordance with the terms of the contract; or
(b)if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made under Part 3 in relation to the payment.
…”
25 The statute contemplates that building contractors and others claiming to be remunerated for construction work may serve payment claims which, if served in accordance with the statute, create a liability to pay the amount claimed in the absence of service of, what the statute describes as, a “payment schedule”. Sections 14 and 15 provide:
“14 Payment claims
(1)A person referred to in section 9(1) 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 construction contract concerned, is or may be liable to make the payment.
(2)A payment claim—
(a)must be in the relevant prescribed form (if any); and
(b)must contain the prescribed information (if any); and
(c)must identify the construction work or related goods and services to which the progress payment relates; and
(d)must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount); and
(e)must state that it is made under this Act.
(3)The claimed amount—
(a)may include any amount that the respondent is liable to pay the claimant under section 29(4);
(b)must not include any excluded amount.
(4)A payment claim in respect of a progress payment (other than a payment claim in respect of a progress payment that is a final, single or one-off payment) may be served only within—
(a)the period determined by or in accordance with the terms of the construction contract in respect of the carrying out of the item of construction work or the supply of the item of related goods and services to which the claim relates; or
(b)the period of 3 months after the reference date referred to in section 9(2) that relates to that progress payment—
whichever is the later.
(5)A payment claim in respect of a progress payment that is a final, single or one-off payment may be served only within—
(a)the period determined by or in accordance with the terms of the construction contract; or
(b)if no such period applies, within 3 months after the reference date referred to in section 9(2) that relates to that progress payment.
(6)Subject to subsection (7), once a payment claim for a claimed amount in respect of a final, single or one-off payment has been served under this Act, no further payment claim can be served under this Act in respect of the construction contract to which the payment claim relates.
(7)Nothing in subsection (6) prevents a payment claim for a claimed amount in respect of a final, single or one-off payment being served under this Act in respect of a construction contract if—
(a)a claim for the payment of that amount has been made in respect of that payment under the contract; and
(b)that amount was not paid by the due date under the contract for the payment to which the claim relates.
(8)A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
(9)However, subsection (8) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim if the amount has not been paid.
15 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); and
(c)must identify any amount of the claim that the respondent alleges is an excluded amount; and
(d)must be in the relevant prescribed form (if any); and
(e)must contain the prescribed information (if any).
(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 10 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.”
26 Section 16 provides that when a payment schedule has been served and payment is not made, the claimant may recover the amount claimed from the respondent “as a debt due to the claimant, in any court of competent jurisdiction”. It is this jurisdiction which Liquid Systems invokes, or purports to invoke, in this proceeding.
27 Section 17 says that if payment is not made by a respondent in accordance with the terms of the payment schedule, the unpaid portion may similarly be recovered “in any court of competent jurisdiction”.
28 Where a payment schedule indicates a payment less than the amount claimed, the claimant may seek an adjudication from an adjudicator under s18 of the statute. Section 28M and the following sections, make provision for payment by the respondent to the adjudication application of the amount determined by the adjudicator.
Plaintiff’s claim
29 The solicitors acting for Liquid Systems Pty Ltd have commenced this proceeding by Originating Motion, dated 24 April 2020, seeking payment of “the Claimed Amount, being the sum of $81,636.37 (including GST)”. This amount is said to be payable under s16(2(a)(i) of the Building and Construction Industry Security of Payment Act 2002. A Summons for the same relief has been referred to me for hearing.
Defence
30 The defendant’s solicitors deny any liability in this proceeding on behalf of the client on two bases:
“(a)the Purported Payment Claim has not been made on or from a valid reference date under the Act;
(b)furthermore and/or alternatively, the Purported Payment Claim is not a ‘payment claim’ made under the Act but rather a ‘tax invoice’ and therefore does not satisfy the requirements under s14(2)(e) of the Act.” (Defendant’s Outline of Submissions, paragraph 3)
Conclusions
31 I propose dealing with these matters in reverse order. According to the defendant’s solicitors, the document in question “is an ‘invoice’ and not a payment claim ‘made under’ the Act.”
32 In the proceeding, Cloudcon Carpentry Services Pty Ltd v Future Capital Group Pty Ltd [2020] VCC 1270 I considered the same argument pressed by Future Capital Group against a claim by Cloudcon explaining why, in my view, there was no reason why a document could not be both a “tax invoice” and a payment claim under the Act. Further, whether the contract distinguished between tax invoices and payment claims for the purposes of the statute, a document otherwise complying with the requirements of s14(2) would not cease to be a payment claim based on a contractual provision. An attempt to modify the operation of the statute would be invalid by force of s48(2)(a) of the Act. My reasoning on these matters is to be found in paragraphs [21] and [22]. I incorporate those paragraphs by reference into these reasons.
33 The solicitors for the defendant also contended that the tax invoice did not comply with s14(2)(e) of the Act. According to them, the only statement or endorsement which could constitute purported compliance with this requirement was the statement, “Invoices are to be paid in accordance with ‘Building and Construction Industry Security of Payment Act 2002’.” They failed to note the further statement toward the beginning of the invoice which says, “This payment claim is made in accordance with ‘Building and Construction Industry Security of Payment Act 2002’.” That statement or endorsement might also be thought to be relevant to the argument that the document in question was a tax invoice and not a payment claim. The endorsement clearly asserts that it is a payment claim. More pertinently, it constitutes a direct statement that it is made under the Act. Section 14(2)(e) is satisfied.
34 Once again, in the Cloudcon case, I considered a similar argument based on s14(2) readvanced by the same solicitors based upon the decision of Austin J in Jemzone Pty Ltd v Trytan Pty Ltd [2002] NSWSC 395. I dealt with this argument in Cloudcon in paragraphs [23]-[32]. These considerations, which I incorporate by reference in these reasons, reinforce my conclusion that s14(2)(a) has been complied with here.
35 I turn, finally, to the argument on behalf of Future Capital Group that the claim by Liquid Systems has not been made “on and from a valid reference date under the Act”. The entitlement to payment of what purports to be a payment claim depends crucially upon the claim being made “on and from” a reference date, as defined in the Act – see s9(1) The concept of “reference date” is defined in s9(2), which is quoted above. According to the submissions of Future Capital Group, these provisions remitted one to clause 8.3 of the contract, which provides inter alia:
“On successful completion of all things required by clause 8.1, the Sub‑contractor may submit to the Builder one claim for a progress payment on the 25th day of each month, unless different arrangements are made in writing between the Sub-contractor and Builder.”
36 According to Future Capital Group, a reasonable business person “would construe clause 8.3 of the Contract as applying to both monthly progress plans and the final claim.” According to their submission:
“the Contract does not make a distinction between monthly claims and the final claim, other than including the additional pre-conditions under clause 8.2 which must be satisfied for the final claim to become due.”
37 Accordingly, it was said, a payment claim for a final payment would have as its reference day the 25th day of the month. The solicitors for Future Capital Group referred to the decision of Kennedy J in Vanguard Development Group Pty Ltd v Promax Building Developments Pty Ltd [2018] VSC 386. They said that s9(2)(d) of the Act “may only create a freestanding reference date for the making of the claim where the contract in question contains no express provision for ‘determining’ a date for making the final claim.” They said that in the present case clause 8.3 of the contract provided for “an express reference date for the making of the final claim.”
38 Even if that were wrong, they said, no final claim could be made until the various pre-conditions under clause 8.2 of the contract were satisfied, including the expiry of the Defects Liability Period, the provision of as built joints and certificates and written certification “by the relevant discipline consultant” that all works had been executed in accordance with the contract. The defendant’s solicitors said that clause 8.2 and 8.3 of the contract provided “a mechanism of determining the relevant reference date for the making of a final payment claim and section 9(d) of the Act does not operate to create a freestanding reference date”. (Submissions of Defendant, paragraph 15) They said that even if clause 8.2(a) of the contract was found to be void, this would “not automatically invalidate the remaining limbs under clause 8.2”. (Ibid, paragraph 16) They referred to Watpac Constructions Pty Ltd v Collins & Graham Mechanical Pty Ltd [2020] VSC 414 [60]; Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pty Ltd (2009) 240 CLR 391. This, they said, was an example where the High Court acted to save non-infringing parts of a provision of a contract:
“… notwithstanding that it contained multiple legal or formal statements (that is, legal propositions which would ideally be set out in separate clauses, but which, as a product of the drafting of the relevant contract, were contained in the same numbered clause”. (Ibid, paragraph 17)
39 The present case, they said, was “far more delineated than the infringing provision in Zurich”. (Ibid, paragraph 18) This approach, they said, was given effect to in the Supreme Court decision in the Watpac Constructions case. They said:
“Subclauses 8.2(b) and 8.2(c) of the Contract which do not rely upon the operation of another contract are not ‘pay when paid’ provisions and therefore are not void by operation of section 48 of the Act”. (Ibid, paragraph 20)
40 Therefore, Future Capital Group was not “liable for the final payment claim until the conditions under clause 8.2 of the Contract are satisfied”. (Ibid, paragraph 21)
41 In submissions in reply, the plaintiff’s solicitors said that section 9(2)(d) of the Act:
“… provides a mechanism that allows a claimant to make a payment claim after the termination of a contract, provided that the claim in question is a final payment claim and provided a reference date has accrued.” (Plaintiff’s Outline of Submissions in Reply, paragraph 4)
42 They referred to Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 357 [57] per Kiefel, Bell, Gageler, Keane and Gordon JJ. They conceded that s9 of the Act may give rise to a freestanding reference date, but only if the contract makes no express provision with respect to the matter. They said clause 8.2 of the contract distinguishes between progress claims and final claims. The effect of the conditions precedent in clause 8.2 were, they said, “not preconditions to the existence of a reference date. They were simply preconditions which suspend Liquid Systems’ right to receive payment.” Clause 8.3, they said, contemplated progress claims on a monthly basis on the 25th of the month, “being a reference date”. They contrasted clause 8.1 of the contract, which provides “the Subcontractor may submit to the Builder one claim for a progress claim on the 25th day of each month” (their highlighting), with clause 8.2, which provides “The Builder shall not be liable for the final claim”.
43 The contract, they said, only made express provision for when monthly claims would be submitted. It was silent on when final claims might be submitted. Clause 8.3, they said, should not be regarded as implying “a singlular reference date for all types of claims”. This was an example, they said, of the “dual system” provided for by the Act. They referred to Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd [2010] VSC 199 [18]. They said, “…the reference date accrued prior to the termination which occurred after hours”. Speaking of the New South Wales statute corresponding to the Victorian Building and Construction IndustrySecurity of Payment Act 2002, a unanimous High Court (Kiefel, Bell, Gageler, Keane and Gordon JJ) said:
“… the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim … .” (Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340, 345 [2])
44 By virtue of an amendment made in 2006, s9(2)(d) makes clear that payment claims under the Act may be made for payment, not merely a progress payment, thereby reversing the effect of the decision of Austin J in Jemzone Pty Ltd v Trytan Pty Ltd (2002) 42 ACSR, 42, 49 [37]; Southern Han (2016) 260 CLR 340, 361 [64]. Reliance on s9(2)(d) to recover a final payment raises two significant issues. First, such reliance, according to the paragraph itself, may only be made “if the contract makes no express provision with respect to the matter”. The second issue is as to the application of the various options in paragraphs (i)–(iii). In the present case, it is paragraph (iii) which is relied upon on the fact that no rectification period had expired, nor had any final certificate been issued.
45 In Southern Han itself, the High Court held that the New South Wales equivalent of s9(2)(d) did not apply because the contract had “made express provision in Cl 37.1 fixing the date for progress payments under the contract”. This is consistent with the views expressed by Kennedy J in Vanguard Development Group Pty Ltd v Promax Building Developments Pty Ltd [2018] VSC 386 quoted at [36] above. The High Court’s judgment in Southern Han does not directly quote clause 37.1, which subclause is crucial to the Court’s reason. Their Honours summarised the clause as follows:
“Clause 37 of the Contract dealt with payment. Clause 37.1, read with Item 28 of Annexure Part A to the Contract, made provision for Lewence to ‘claim payment progressively’ from Southern Han by making a ‘progress claim’ on the 8th day of each calendar month for work under the Contract done to the 7th day of that month. Clause 37.2 then made provision for a progress certificate evidencing the Superintendent’s opinion of the moneys due from Southern Han to Lewence pursuant to the progress claim and for Southern Han to pay the amount certified.” (2016) 260 CLR 340, 351 [21]
46 Their Honours do not quote or summarise any equivalent to clause 8.2 of the contract in the present case dealing with final claims, which provides:
“8.2The Builder shall not be liable for the final claim otherwise due to the Subcontractor until the following conditions precedent are fulfilled.
(a) the Defects Liability Period in has expired [sic];
(b)As-built joins, operation and maintenance manuals and all other documentation and certificates required under the Subcontract and Specification have been provided; and
(c)written certification has been provided by the relevant discipline Consultant that all works have been executed in accordance with the Subcontract.” (Exhibit JL-1 to the affidavit of Mr Louden)
47 In Southern Han, the Court concluded that clause 37.1, having fixed the time for progress claims, the equivalent of s9(2)(d) “could have no application”. (2016) 260 CLR, 340, 364 [73])
48 The case for the plaintiff is that clause 8.1 dealt with progress claims other than final claims which were dealt with by clause 8.2. Clause 8.2 established conditions precedent for liability on Future Capital Group’s part, not precedent to the making of a final claim. Hence, s9(2)(d) could be and should be resorted to.
49 Acceptance of the plaintiff’s contention, whilst retaining conformity with the analysis adopted by the High Court in Southern Han, must proceed upon the footing that the contract in Southern Han contained no provision dealing with final claims and rendering them subject to the expiry of a defects rectification period, the provision of final certificates et cetera, or that there was such a clause in the contract in Southern Han, but rather than establishing conditions precedent to Southern Han’s liability for final payment, the conditions precedent, such as expiry of defect rectification period, provision of final certificates, et cetera, were said to suspend the entitlement of Lewence to make a claim at all.
50 It appears from the judgment of the New South Wales Court of Appeal, from which the matter was taken to the High Court, that the clause in the contract dealing with final payment was clause 37.4 (Lewence Construction Pty v Southern Han Breakfast Point Pty Ltd [2015] NSWCA 288), though the judgment does not quote the terms of that sub-clause. We cannot be certain that it is materially to the same effect as clause 8.2 of the contract in this case.
51 Nevertheless, the fact that the High Court was prepared to treat a clause apparently similar to clause 8.1 in the present contract as “making express provision with respect to the matter [viz progress payment]” requires rejection of the plaintiff’s contention that a “freestanding reference date” can be regarded as existing on the basis of s9(1)(d) of the Act. The plaintiff’s claim must therefore fail.
Disposition
52 The plaintiff’s claim is dismissed.
53 I have heard no submissions on the question of costs and so I will reserve them.
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