LSR Construction Group Pty Ltd v Big West Garden & Building Supplies Pty Ltd & Anor
[2024] VCC 277
•15 March 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-23-05270
| LSR CONSTRUCTION GROUP PTY LTD (ACN 633 632 381) | Plaintiff |
| v | |
| BIG WEST GARDEN & BUILDING SUPPLIES PTY LTD (ACN 602 696 079) | First Defendant |
| 1195 BOUNDARY ROAD PTY LTD as Trustee for the 1195 BOUNDARY ROAD UNIT TRUST (ACN 605 691 718) | Second Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF JUDGMENT: | 15 March 2024 | |
CASE MAY BE CITED AS: | LSR Construction Group Pty Ltd v Big West Garden & Building Supplies Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 277 | |
REASONS FOR JUDGMENT
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Subject:BUILDING AND CONSTRUCTION INDUSTRY SECURITY OF PAYMENT ACT 2002 (VIC)
Catchwords: Building and Construction Industry Security of Payment Act 2002, s14 – two payment claims, allegation that payment claims withdrawn and resubmitted – no statutory authority for unilateral withdrawal of payment claims – no agreement between parties for claims to be withdrawn – no estoppel binding on plaintiff to treat claims as withdrawn
Legislation Cited: Building and Construction Industry Security of Payment Act 2002 (Vic)
Cases Cited:NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842; Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602; Veer Build Pty Limited v TCA Electrical and Communication Pty Ltd [2015] NSWSC 864; Reitsma Constructions Pty Ltd v Davies Engineering Pty Ltd t/as In City Steel [2015] NSWSC 343; Rodrigues v customOz Services Pty Ltd [2023] NSWSC 379; John Lyng Commercial Builders Pty Ltd v Carrington International Pty Ltd [2014] VCC 1635; Promax Building Developments Pty Ltd v 167 Lower Heidelberg Road Pty Ltd [2016] VCC 1960; Citi-Con v Punton’s Shoes [2020] VCC 804; Arc3 Pty Ltd v Gold Road No 2 Pty Ltd [2021] VCC 390; Valeo Construction v Pentas [2018] VSC 243; Spirito Development Pty Ltd v Sinjen Group Pty Ltd [2020] VCC 1368; Western Australian Insurance Co Ltd v Dayton [1925] VLR 533; Ling Chan v Stuart Wood and Kai Design & Construction Pty Ltd [2013] ACTSC 228; Argyle Building Services Pty Ltd v Dalanex Pty Ltd (No 2) [2022] VSC 452; Goodman Glass and Trade Pty Ltd v VK Homes [2020] VCC 1689; Peet v Richmond (No 2) [2009] VSC 585; Cloudcon Carpentry Services Pty Ltd v Future Capital Group Pty Ltd [2020] VCC 1270; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Judgment: (1) within 14 days of this day, the parties must bring in short limits to give effect to these reasons;
(2)costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C J Hender | Kalus Kenny Intelex Lawyers |
| For the Defendants | Mr A R Morrison | KCL Law |
HIS HONOUR:
Background
1The plaintiff, LSR Construction Group Pty Ltd (“LSR”), entered into two construction contracts in the form of AS 4902-2000 for work by way of site establishment, base building, and fit-out, being respectively stages 1, 2 and 3 of construction work at 1195 Boundary Road, Tarneit. The contracts provided a lump-sum price of $3,396,058 for stages 1 and 2, and $1,576,272 for stage 3 (Affidavit of Branislav Suboticki, 25 September 2023, paragraph 4, exhibit BSU-1, pages 7-206). These contracts appear to arise out of acceptance of a quotation given by LSR dated 6 June 2022 (BSU-1 77-83).
2Mr Nick Lobley of LSR sent an email dated 28 June 2023 to the superintendent under the contracts, Mr Daniel Hogan of Themeski Design and Build (Suboticki Affidavit, [7]). The email said:
“See attached Head Contract Progress Claims #11 & #5 for 1195 boundary Road Tarneit.
Please review and respond by the 5th of July.” (BSU-1, 207)
3The document included a statement:
“This is a payment claim under the Building and Construction Industry Security Payment Act 2002”. (Ibid, 208)
4The document included as item 8:
“Current payment due: $334,236.44”. (Ibid)
5This payment claim was said to relate to stage 3 and was described as “Claim No: 5”. A second payment claim described as “Claim No: 11” and said to relate to “Stage 1 & 2 (Combined)” included paragraph 8:
“Current payment due: $42,958.30”. (Ibid, 211)
6These payment claims include references to variations and to the history of the contract (previous claims made and so forth). Mr Hogan sent an email dated 4 July 2023 to Mr Lobley of LSR:
“Hello Nick
Please remove the variations and resend so we can start the assessment with the qs on site
Kind regards”. (Ibid, 216)
7This email was transmitted at 4.43pm. At 4.45pm on the same day, Mr Suboticki sent a response on behalf of LSR to Mr Hogan stating:
“Hi Dan
We haven’t claimed for any variations and as per previously advised we cannot remove the variations from the schedule.
Regards” (Ibid, 216-7)
8At 4.49pm Mr Hogan sent a copy of progress claim 5 to Mr Suboticki (Ibid, 217-220). Mr Suboticki said he then, in company with Mr Lobley, had a telephone conversation with Mr Hogan in which Mr Hogan:
“…said words to the effect that he needed a copy of PC5 with all references to variations removed to submit to the principal’s quantity surveyor, as the principal’s bank wasn’t funding any variations for the S3 Contract [viz the stage 3 contract].” (Suboticki Affidavit, [16])
9Mr Suboticki said he then told Mr Lobley to send PC11 unaltered and a revised version of PC5, which he said did not change the amount claimed to be due, and:
“(b)did not have any changes to the contract works schedule that appeared on page 2 with the claimed “works completed” under “this period” that are set out under Column E – these were the only items of work that were claimed under PC5; and
(c) did not change the variations that were claimed (as there were no claims for variations in PC5).” (Ibid, [17])
10Mr Hogan sent an email at 7.45am on 13 July 2023 stating as follows:
“Hello Bane
Nick initially sent through incorrect claims that showed clear errors by lsr, until these claims were corrected & resent on the 4/7/23, myself and the quantity surveyor were not able to start our reviews.
Please withdraw invoices as the correct 10 business days is 18/7/23.
Kind regards”. (BSU-1, 230)
11In his affidavit, Mr Suboticki said:
“I do not know what “clear errors” Daniel Hogan was referring to in that email. There were no errors in PC5 and it did not need to be corrected. An amended form of it was sent to Daniel Hogan at his request after LSR had served PC5, purely for the convenience of the principal and its quantity surveyor. LSR did not abandon, withdraw or re-submit PC5 after it was originally issued on 28 June 2023.” (Suboticki Affidavit, [19])
12In this proceeding, said to be brought under the Building and Construction Industry Security of Payment Act 2002, LSR claims an entitlement under that statute to payment of the amount of the claims on the basis that “[n]o payment schedule was issued by Daniel Hogan by 12 July 2023 in response to either PC5 or PC11.” (Suboticki Affidavit, [10])
13In an affidavit affirmed 8 November 2023, Mr Hogan said that:
“[T]he parties frequently followed a procedure in practice where:
a. LSR would issue a payment claim under each of the Stage 3 and Stage 1 & 2 Contracts;
b. I would either make comments and / or request revised payment claims;
c. The revised / re-issued payment claims would be issued by LSR to me; and
d. I would complete my assessment of the revised payment claim and issue the respective payment schedules within 10 Business Days of receipt of the revised payment claim.” (Hogan Affidavit, [8])
14As a result, he said, this process entailed revised payment schedules being issued more than 10 business days after the service of the original payment claim, and less than 10 business days after service of the revised payment claim (Ibid, [9]). He said in paragraph 10, on none of these occasions did LSR:
“…seek to make an argument that time began to run for the purposes of the security of payment act from service of the first payment claim.” (Ibid, [10])
15He continued:
“If it had, then I would have changed the procedure so as to ensure that progress certificates would have been issued within 10 business days of the initial progress claims. I confirm that I would have done this for the Payment Claims 5 and 11.” (Ibid, [11])
16Mr Hogan’s affidavit then set out a detailed description of the manner in which earlier progress claims had been dealt with, generally consistent with the overall description which he had made earlier in his affidavit. As to the progress claim in question here, namely number 5 for the stage 3 contract and number 11 for the stage 1 and 2 contracts, Mr Hogan noted the covering email requested a response by 5 July 2023. He said that the claims were dated 30 June 2023 but were issued on 28 June 2023:
“Moreover, the request for a response by 5 July only amounted to 5 Business Days which further perplexed me as this time period was different to what had been followed in practice for previous progress claims and also under the Contracts.” (Ibid, [39]-[40])
17Mr Hogan said he emailed Mr Lobley on 29 June 2023 stating:
“I don’t believe you can issue the progress claims prior to the time period end.
Also the contract states 10 business days for review.” (Ibid, [41])
18He said, receiving no response, he sent the email to Mr Lobley dated 4 July 2023 already quoted, receiving the response already quoted. He described a telephone conversation with Mr Suboticki advising that he “required a revised version of payment claim 5 with all references to variations removed so that there was no ambiguity, and [he] could forward it onto the QS for assessment.” (Ibid, [46]) He said he received the same version of progress claim 11 and a revised version of progress claim 5, stating “[t]he progress certificates were due by 18 July 2023.” (Ibid, [47]) He said on 5 July 2023 he “forwarded the revised progress claim 5 and initial version of progress claim 11 to the QS for assessment” (Ibid, [48]). He said that, receiving further emails from Mr Suboticki enclosing tax invoices relative to progress claims 5 and 11, he responded:
“Nick [Lobley] initially sent through incorrect claims that showed clear errors by LSR, until these claims were corrected & resent on the brill’s, myself and the quantity surveyor were not able to start our reviews.” (Ibid, [50])
19The email concluded:
“Please withdraw invoices as the correct 10 business days is 18/7/23.”
20Mr Suboticki sent a response stating that Mr Hogan “had to assess the claims regardless of any errors within 10 business days from receipt of the initial claims” (Ibid, 51). He said he forwarded an email on 17 July 2023 to Mr Suboticki stating:
“Hello LSR/Bane
Please see reviewed progress claim certificates attached.
Nil claim certificates have been issued, as we believe there are ample works yet to be completed that are not reflected in your progress claim amounts and that we require further information of cost breakdowns that will satisfy the remaining works, which we estimate beyond the balance to finish. Please provide asap so we can issue the claims with revised amounts reflected to achieve all the works set out in the contract, as required to complete the entire project.
I note that part or all of the retention may be required for rectification works to cracking concrete. The cost of repairing this defect has not yet been determined.” (Ibid, [54])
21In a supplementary affidavit dated 17 November 2023, Mr Suboticki said that at no time prior to the issue of the progress claims here in question did he “have a discussion or exchange with Daniel Hogan or anyone on behalf of the principal regarding the ‘procedure in practice’” that was alleged by Mr Hogan (Supplementary Suboticki Affidavit, [4]). He said he had made enquiries with his “team” at LSR and his co‑director in particular, Mr Nick Lobley, and believed “that no one else on behalf of LSR had such a discussion or exchange with Daniel Hogan or anyone else on behalf of the principal regarding the alleged ‘procedure in practice’.” (Ibid, [5]) He said until claims 5 and 11 his exchanges with Mr Hogan “were always cooperative, and so there was no good reason to challenge Daniel Hogan’s certifications.” (Ibid, [8])
22Mr Suboticki said that on 5 April 2023 he sent an email relative to progress claim 2 from the stage 3 contract, and progress claim 8 from the stage 1 and 2 contract, on about 31 March 2023 (Hogan Affidavit, [17]). According to Mr Suboticki, on 5 April 2023 he sent an email stating:
“Hi Dan,
Following up again, can you please advise how you wish for the variation to be presented?
Conscious there is 5 days left in the review period as per the payment and securities act”. (Supplementary Suboticki Affidavit, [12])
23Mr Suboticki said the reference to five days left was erroneous because he had been counting calendar days rather than business days (Ibid, [13]). He said the progress certificates were issued with “only 2 days late when the Easter public holidays was [sic] taken into account” (Ibid, [13]-[14]).
24Mr Suboticki referred to an email which he sent dated 16 June 2023 with respect to progress claims 10 and 4, stating as follows:
“My next email on 16 June 2023 appears at paragraph 36 of Daniel Hogan’s email [sic affidavit]. The content of that email is also included in Daniel Hogan’s affidavit, however, my original email also contained a link to the security of payment legislation, as underlined below:
‘Good morning Dan
Please find attached the signed statutory declarations along with the accompanying invoices.
As per clause 37.2 of the executed contract and the Building and Construction Industry Security of Payment Act 2002 both claims are approved.
Please see below extract from the signed subcontract agreement for reference.
The Superintendent shall, within 10 Business Days after receiving such a progress claim, issue to the Principal and the Contractor a progress certificate evidencing the Superintendent’s opinion of the moneys due from the Principal to the Contractor pursuant to the progress claim and reasons for any difference (‘progress certificate’), including the Superintendent’s assessment of retention moneys and moneys due from the Contractor to the Principal pursuant to the Contract.
If the Superintendent does not issue the progress certificate within 10 Business Days of receiving a progress claim in accordance with subclause 37.1, that progress claim shall be deemed to be the relevant approved progress certificate’.” (Supplementary Suboticki Affidavit, [18]-[19])
25The same email is quoted in the Hogan affidavit at paragraph 36. According to Mr Suboticki’s supplementary affidavit, his “original email also contained a link to the security of payment legislation”. In his affidavit, Mr Hogan said:
“I did not think much of Bane’s email at the time given that he was merely referring to a clause of the Contracts and I was in the process of finalising the progress certificates at the time and that I was within the 10 Business Days timeframe from the dates the revised progress claims had been issued.” (Hogan Affidavit, [37])
26The standard provisions in contracts as published by Standards Australia provided as to progress claims and certificates as follows:
“37.1 Progress claims
The Contractor shall claim payment progressively in accordance with Item 33.
An early progress claim shall be deemed to have been made on the date for making that claim.
Each progress claim shall be given in writing to the Superintendent and shall include details of the value of WUC done and may include details of other moneys then due to the Contractor pursuant to provisions of the Contract.
37.2 Certificates
The Superintendent shall, within 10 Business Days after receiving such a progress claim, issue to the Principal and the Contractor a progress certificate evidencing the Superintendent’s opinion of the moneys due from the Principal to the Contractor pursuant to the progress claim and reasons for any difference (‘progress certificate’), including the Superintendent’s assessment of retention moneys and moneys due from the Contractor to the Principal pursuant to the Contract.
If the Contractor does not make a progress claim in accordance with Item 33, the Superintendent may issue the progress certificate with details of the calculations.
If the Superintendent does not issue the progress certificate within 10 Business Days of receiving a progress claim in accordance with subclause 37.1, that progress claim shall be deemed to be the relevant approved progress certificate.
The Principal shall within the earlier of 15 days after receiving the progress certificate and 28 days after the Superintendent receives the progress claim, pay to the Contractor the amount of the progress certificate after setting off (where applicable) such of the retention moneys and moneys due from the Contractor to the Principal pursuant to the Contract as the Principal elects to set off. If that setting off produces a negative balance, the Contractor shall pay that balance to the Principal within 7 days of receiving written notice thereof.
Neither a progress certificate nor a payment of moneys shall be evidence that the subject WUC has been carried out satisfactorily. Payment other than final payment shall be payment on account only.” (BSU-1, 150)
Statutory framework
27In 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.”
28In 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).”
29This 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”.
30Section 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.”
31Section 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.
32The 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.”
33Section 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.
…”
34As 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.
…”
35As 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.
…”
36The 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.”
37Section 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 the plaintiff invokes, or purports to invoke, in this proceeding.
38Section 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”.
39Where 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.
40Section 48 of the Act provides:
“48No contracting out
(1)The provisions of this Act have effect despite any provision to the contrary in any contract.
(2)A provision of any agreement, whether in writing or not—
(a) under which the operation of this Act is, or is purported to be, excluded, modified or restricted, or that has the effect of excluding, modifying or restricting the operation of this Act; or
(b) that may reasonably be construed as an attempt to deter a person from taking action under this Act—
is void.”
This proceeding
41Solicitors acting for LSR commenced this proceeding by originating motion dated 25 September 2023, claiming judgment for LSR in the sum of $377,194.74. An amended originating motion dated 4 December 2023 sought judgment for $377,194.74 exclusive of GST “pursuant to section 16(2)(a)(i) of the Building and Construction Industry Security of Payment Act2002 (Vic)” together with “$37,719.47, representing the GST payable in respect of” the other sum, together with costs and further or other relief. The plaintiff also filed a summons dated 25 September 2023 seeking that the matter be heard on 20 October 2023.
42This matter was referred to me for determination “on the papers” on 5 March 2024.
The Defendant’s contentions
43In an outline of submissions dated 4 December 2023, Mr A R Morrison, counsel for the defendants, said:
“It is evident that the parties intended by this process [viz the process under the Building and Construction Industry Security of Payment Act] to start time running only from the date of the revised or re-issued payment claim.” (Defendant’s Submissions, [9])
44He said with respect to payment claims 2, 3, 4, 8, 9 and 10:
“…the defendants’ schedules [viz payment schedules under the Act] were served more than 10 business days after service of the original claim but within 10 business days of the revised claim”. (Ibid)
45He continued:
“If there were no agreement as to this process of withdrawal and re-issue, it can be expected that [LSR] would have argued that it was entitled to judgment on those 6 earlier payment claims (each of which was purportedly served under the Act as well).” (Ibid, [10])
46He said that according to Mr Hogan’s affidavit, if LSR “had earlier purported to resile from this arrangement” he would have changed the procedure “so as to ensure that progress certificates would have been issued within 10 business days of the initial progress claims.” (Ibid)
47According to Mr Morrison:
“A payment claim under the Act may be withdrawn and replaced by a later payment claim where it occurs with both parties’ consent.” (Ibid, [3])
48He referred to NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842 [39] per Hammerschlag J; Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 [17]; Veer Build Pty Limited v TCA Electrical and Communication Pty Ltd [2015] NSWSC 864 [32]; Reitsma Constructions Pty Ltd v Davies Engineering Pty Ltd t/as In City Steel [2015] NSWSC 343 [21]; Rodrigues v customOz Services Pty Ltd [2023] NSWSC 379 [37]; John Lyng Commercial Builders Pty Ltd v Carrington International Pty Ltd [2014] VCC 1635 [3]; Promax Building Developments Pty Ltd v 167 Lower Heidelberg Road Pty Ltd [2016] VCC 1960 [14]; Citi-Con v Punton’s Shoes [2020] VCC 804 [58]; and Arc3 Pty Ltd v Gold Road No 2 Pty Ltd [2021] VCC 390 [45] (Ibid, [4]).
49Mr Morrison said that McDougall J in Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 at 17:
“…expressed a tentative but not final view that withdrawal could occur unilaterally” (Defendant’s Submissions, [5])
50Mr Morrison said:
“in Valeo Construction v Pentas, Digby J held that unilateral withdrawal could occur if the abandonment were communicated ‘clearly and unequivocally’”. (Ibid)
51He noted that Judge Woodward, as he then was, in Spirito Development Pty Ltd v Sinjen Group Pty Ltd [2020] VCC 1368 [19], had “accepted that a payment claim had been withdrawn unilaterally and was therefore replaced by a later claim”. Mr Morrison noted a contrary view expressed by Judge Marks in Punton’s Shoes, but said that this “appears to be something of an outlier”.
52Mr Morrison’s primary contention was that there had been a consensual withdrawal and reissue of the relevant claim, where he said the parties’ agreement was “implicit from their earlier conduct and the absence of any indication by [LSR] that their earlier arrangements would not continue to apply.” (Defendant’s Submissions, [14]-[15]) He said that such an arrangement was not precluded by s48 of the Act (Ibid, [16]).
53As a “fallback”, Mr Morrison said that if the withdrawal were to be regarded as unilateral, it had been clearly and unequivocally communicated, and this was sufficient (Ibid, [17]).
54As a further “fallback”, he relied on “estoppel in pais”. He said that the requirement for a representation as part of the creation of such an estoppel “ought not to be understood in any rigid sense and may include an inference from conduct”. He referred to Western Australian Insurance Co Ltd v Dayton [1925] VLR 533, 556. In the context of the security of payment legislation, he referred to the statements of Master Mossop in Ling Chan v Stuart Wood and Kai Design & Construction Pty Ltd [2013] ACTSC 228 [61].
55He said I should find:
(a) a representation by conduct of the plaintiff as to the legal effect of re-issuing the payment claims;
(b) reliance by the defendants on that course of conduct; and
(c) the substantial detriment that the defendants will suffer if the plaintiff is permitted to resile from that representation.
56Finally, Mr Morrison contended there was no justification for seeking to increase the claim by adding goods and services tax. He said:
“It is anathema to the tight timelines and summary nature of rights under the Act that a claimant might be entitled to recover a sum under its payment claim that it did not state in the Payment Claim was due to the [sic] paid by the respondent. Whether it was, in fact, entitled to such a payment is not a relevant matter.” (Ibid, [25])
The Plaintiff’s contentions
57The plaintiff’s primary submissions, dated 1 December 2023 and authored by its counsel, Mr C J Hender, deal generally with the background of the proceeding and the operation of the relevant statute. Mr Hender did not have the benefit of the contentions by his opponent, Mr Morrison. He only came to engage with those contentions in his submissions in reply dated 6 December 2023. According to these submissions, the evidence did not establish any mutual agreement between the parties for the withdrawal of the initial progress claims (Plaintiff’s Reply Submissions, [7]).
58He referred to a decision of Argyle Building Services Pty Ltd v Dalanex Pty Ltd (No 2) [2022] VSC 452 [97] where, he said, Delany J concluded that there was no power conferred by the Act for a claimant unilaterally to withdraw a payment claim. The defendant’s solicitors, by email dated 22 December 2023, drew the Court’s attention to this decision, noting “[i]t is binding authority which is against the defendant’s argument on that point [viz unilateral withdrawal].”
59Mr Hender denied that there was any estoppel which would preclude the plaintiff from denying it had withdrawn the initial payment claim (Plaintiff’s Reply Submissions, [16]-[20]). He referred to Goodman Glass and Trade Pty Ltd v VK Homes [2020] VCC 1689 where he said this Court “considered a similar estoppel argument and rejected it on the basis that it was void and of no effect as it seeks to exclude modify or restrict the operation” of the Act, referring to s48 (Ibid, [18]).
60As to goods and services tax, he referred to clause 48 of both contracts, “which relevantly provides that unless expressly stated otherwise, any consideration or amounts have been determined without regard to GST and must be increased on account of any GST payable.” (Ibid, [23]) He said the liability for goods and services tax was plainly acknowledged by Mr Hogan in the payment certificate/schedules issued out of time on 17 July (Ibid, 24). He noted that the GST was sought “on an alternative and standalone basis” as stated in the amended originating motion (Ibid, 27). He said it was open to the Court to “gross up” the judgment. He referred to Peet v Richmond (No 2) [2009] VSC 585 [75]−[76]. He noted that in its tax invoice issued 13 July 2023 it sought the goods and services tax (CD 1 to Affidavit of Chenzi Dong, page 5).
Conclusions
61No suggestion has been made that the documents relied on by LSR do not, as a matter of form, meet the requirement to be payment plans under s14 of the Act.
62Insofar as the defendants contend that the progress claims relied on by the plaintiff ceased to be effective for s14 purposes because of unilateral withdrawal, the decision of Delany J in Argyle Building Services Pty Ltd v Dalanex Pty Ltd (No 2) [2022] VSC 452 (Argyle Building Services Pty Ltd case) would seem to be conclusive in requiring this contention to be rejected. His Honour specifically approved the conclusion reached by Judge Marks in Citi-Con v Punton’s Shoes [2020] VCC 804, where at [57] her Honour said that the statutory provision did not allow for “unilateral purported withdrawal of a payment claim which has been served, and service of another payment claim using the same reference date.”
63Insofar as some interstate authority may have suggested otherwise, none of the cases cited on behalf of the defendants is a decision of the High Court or an intermediate Court of Appeal. As I remarked in Cloudcon Carpentry Services Pty Ltd v Future Capital Group Pty Ltd [2020] VCC 1270 [31]:
“The High Court of Australia has stressed the need for courts throughout Australia to follow determinations of intermediate Courts of Appeal unless such decisions are considered to be ‘plainly wrong’. This admonition does not apply to first instance determinations from other states.”
64In the Argyle Building Services Pty Ltd case, Delany J said at [97] in endorsing Judge Marks’ analysis:
“…leaving agreement between the parties to one side, the statutory scheme does not contemplate the unilateral withdrawal or abandonment of a payment claim and the resubmission of a fresh claim…”
The emphasised portion of his Honour’s dictum indicates acceptance by his Honour that the parties may agree to the withdrawal of a payment claim and its later resubmission. This view is in line with the several authorities cited on behalf of the defendants in this regard.
65The defendants say that this is what happened in the present instance. As I would understand the contention, it is that there was a particular agreement relative to these progress claims to be inferred by a course of dealing in the past said to represent an uninterrupted acceptance by both parties of this scenario as being acceptable both contractually between them and for the purposes of the statute.
66On at least one occasion quoted by Mr Suboticki in email traffic relative to the making and processing of progress claims, LSR specifically referred to the statutory deadlines. This is not consistent with a course of conduct whereby, as a matter of practice and without law, both parties, in particular the plaintiff LSR, agree invariably to countenance a withdrawal and resubmission scenario.
67It is instructive to consider why the progress claims in the present instance were resubmitted. The rationale, according to Mr Hogan, was that, as a matter of form, one of the two payment claims under consideration was unacceptable to the defendants’ financier’s quantity surveyor. Mr Hogan seems to have taken the position that unless and until the form was acceptable to the quantity surveyor, he, as superintendent, was disabled from processing it. Given that the formal objection applied to one only of the progress claims, this is difficult to fathom. On any view, he could have processed the claim which was not formally objectionable to the quantity surveyor. It was not suggested, for instance, that the quantity surveyor would demand at least two progress payments to consider as it were to make the task worth its while. More pertinently, the quantity surveyor had no contractual standing as between the parties to this proceeding. The approving authority for the purposes of the contract was the superintendent, viz Mr Hogan. LSR no doubt had an overriding desire to be paid. The best means of achieving that result, no doubt, would be to facilitate the defendants in achieving a drawdown from their finance facility to meet the progress payment. Therefore it was only sensible for Mr Suboticki and his colleague to reformat one of the progress claims to comply with these requirements as to formality. To do this, however, in no way entails an admission that the documents as originally submitted in apparent conformity with s14 of the statute should now be treated as nullities and of no effect. Further, the revisions in no way affected the claims status as a payment claim under s 14. In particular, it has not been suggested that the claim was invalid as being in breach of s10A or s10B of the Act by reason of the references to variations.
68Given that the previous claims were apparently met within a relatively short timeframe, there was no occasion to put the s14 issue to the test relative to those.
69I reject the contention that there was an agreement between the parties for the two progress claims to be withdrawn.
70I will now turn to the contention based on estoppel. As Mr Hender correctly observed, the classic modern statement of the law as to estoppel by conduct or “in pais” comes from the judgment of Brennan J, as he then was, in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (Waltons Stores case), 428‑9, where his Honour said:
“ In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.”
71According to this formulation, both a representation and a reliance to detriment thereon are necessary ingredients of an effective estoppel. In the present instance, what is the relevant representation?
72Mr Morrison, on behalf of the defendants, has submitted that a representation may include an inference from conduct. According to the formulation by Brennan J (as he then was) in the Waltons Stores case, the representation may be constituted by silence. Making all just allowances for these considerations I am not persuaded that anything along the lines of a representation according to these principles was made by LSR. All that it did was to comply with a request by the superintendent, Mr Hogan, to do something which, as a matter of practicality, would be likely to facilitate a drawdown of funds by the defendants to meet the progress claims. This would be sufficient to negative any estoppel.
73There is, however, a further issue, namely, one as to detriment, which I mention without the necessity to analyse or to rely upon in making my determination. Payments which are made under the compulsion created by the Building and Construction Industry Security of Payment Act 2002 in pursuance of a full-scale formal building contract are provisional only. They may be “relitigated” thereafter, according to normal contractual principles. See s47 of the Act. Under the General Law Contract, a debtor or alleged debtor would take the position – when in doubt, decline to pay and leave the matter to be resolved by legal action. This leaves the creditor with a credit risk, a cash flow problem and the problem of having to undertake the litigation. Parliament has been persuaded that in the construction industry, the just outcome is to reverse this general law situation. The debtor is required to pay first and litigate later. Subject to the credit risk, it is not evident that making a payment now, which may be reversed in later litigation, is a full-blooded detriment of the type required for there to be an estoppel.
74I turn finally to the issue of goods and services tax. Since the payment claim did not include any amount for goods and services tax, it cannot form part of the amounts that might be recoverable under the statute. Nevertheless, there was no suggestion that if the face value of the claim is payable, the goods and services tax would not be, albeit pursuant to the terms of the building contracts rather than the statute. The amended originating motion claims not only the amount said to be payable under the statute, but also the goods and services tax. In those circumstances, there should be judgment not only for the amounts payable under the statute but also for the goods and services tax.
Disposition
75I will direct that within 14 days the parties bring in short notes to give effect to these reasons. This might accommodate inter alia a calculation of any statutory interest which the plaintiff may seek.
Costs
76I have heard no submissions on the question of costs and so they will be reserved.
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