Maxcon Constructions Pty Ltd v Ily Australia Pty Ltd
[2017] VCC 1382
•28 September 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-17-03580
| Maxcon Constructions Pty Ltd (ACN 152 259 820) | Plaintiff |
| v | |
| Ily Australia Pty Ltd (ACN 160 833 769) AS TRUSTEE FOR THE 381 TRUST | Defendant |
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JUDGE: | Judicial Registrar Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14 September 2017 (written submissions 19, 22 and 25 September 2017) | |
DATE OF JUDGMENT: | 28 September 2017 | |
CASE MAY BE CITED AS: | Maxcon Constructions Pty Ltd v Ily Australia Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 1382 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Buildingand Construction Industry Security of Payment Act 2002 (Vic) – Whether the Act applies – whether the defendant “in the business of building residences” in the terms of section 7(2)(b) of the Act – whether the payment claim was served on the defendant – whether final payment claim served on the Superintendent
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | M Whitten, one of her Majesty’s counsel with M Sharkey | Diakou Faigen Lawyers |
| For the Defendant | B Reid | Colin Biggers & Paisley |
JUDICIAL REGISTRAR:
Introduction
By summons, amended on 23 August 2017, the plaintiff sought judgment on behalf of Maxcon Constructions in the sum of $559,022.20 plus interest pursuant to section 17(2)(a)(i), alternatively, section 16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 (“the Act”) and that the said sum held in the joint account in the name of the parties be released to the plaintiff forthwith.
This proceeding involves a claim by Maxcon Constructions as the “builder” pursuant to a design and construct contract involving a mixed residential and commercial development located at 381 Punt Road, Cremorne, 3121 (“the Property”) for the contract price of $20,031,141.07.
The parties agreed to vary the manner in which the security monies was to be provided. In lieu of the 5% of the contract sum being in the form of two unconditional bank guarantees at 2.5% each, as provided pursuant to clause 5 of the Contract, the retention monies were deposited into a joint bank account held at the Bank of Queensland. In around August 2015, half of the retention monies (2.5% of the amount held in the joint account) was paid to the plaintiff. The plaintiff now seeks the balance of the monies.
The defendant submitted that it had good defences to the claims being made by the plaintiff as follows:
(a) the Act did not apply because Ily Australia was not “in the business of building residences”;
(b) no reference date was available at the time the payment claim was made;
(c) the payment claim is erroneous on its face;
(d) the payment claim was not served on the defendant;
(e) the payment claim was the second final payment claim, which is prohibited; and
(f) the plaintiff has already been paid the balance of the retention sum.
It was common ground between the parties that the defendant had to show that at least one of the abovementioned permitted limited defences under the Act had a “real prospect of success” in order for the Court to dismiss the plaintiff’s summons and allow the defendant to defend the claim. This procedure was sufficient to determine the application: Fulconstruction Pty Ltd v ABP Consultants Pty Ltd [2016] VCC 1732 at [8]-[11] per Judge Anderson.
The plaintiff bears the onus of proving that it has complied with all of the jurisdictional requirements under the Act in order for it to be successful in its application to recover the unpaid portion of the claimed amount.
I deal with each of the six grounds in turn below.
Ground (a) - the Act did not apply because Ily Australia was not “in the business of building residences”
Part 3 of the Act sets out the process through which the right to progress payments may be realised by a claimant. However, section 7(2) of the Act prevents it from applying with respect to a “domestic building contract”, as that term is defined in the Domestic Building Contracts Act 1995 (Vic), except where the building owner “is in the business of building residences”. In Director of Housing of the State of Victoria v Strutx Pty Ltd [2011] VSC 410 at [28], [39]-[41], it was held that the contractor could not apply the Act’s process because it had not established that the Director was engaged in “the construction of dwelling houses as a commercial enterprise on the basis of a going concern, that is, an enterprise engaged in for the purpose of profit on a continuous and repetitive basis”; see also Vinson v Neerim Properties Developments Pty Ltd [2016] VSC 321 per Vickery J.
In Australian Competition and Consumer Commission v Yazaki Corporation (No 2) [2015] FCA 1304 at [344]-[359], in dealing with the phrase “carrying on business”, Justice Besanko J observed:
“Business” has been said to mean a commercial enterprise in the nature of a going concern, that is to say, activities engaged in for the purpose of profit on a continuous and repetitive basis (Hope v The Council of the City of Bathurst (1980) 144 CLR 1 at 8-9 per Mason J).
It was common ground between the parties at the oral hearing that Ily Australia was the “building owner” as defined by section 3 of the Domestic Building Contracts Act as the named Principal under the Contract between the parties. The dispute was confined to whether the defendant was in the “business of building residences”. This is a threshold question for the plaintiff’s application.
In post hearing submissions, the plaintiff sought to resile from the admission that Ily Australia was the “building owner” for the purposes of the Domestic Building Contracts Act and section 7(2)(b) of the Act because Crestall Nominees Pty Ltd was the ultimate registered proprietor of both 375-377 Punt Road and 381 Punt Road. The plaintiff referred to the ASIC historical searches which showed common directors, secretaries and shareholders of the relevant members of the Genser Family for each of Ily Australia, Crestall Nominees and the 375 Trust.
The definition of “building owner” under section 3 of the Domestic Building Act means the person for whom “domestic building work” is being carried out. Ily was the entity for whom the works were being undertaken. The works concerned the construction of multi storey apartments which has been found to fall within the purview of the construction of homes: Burbank Australia Pty Ltd v Owners Corporation PS447493 [2015] VSC 160 at [30] per Justice McDonald. It is not necessary that the registered proprietor of the land on which the works are being undertaken be the building owner, that is, Crestall Nominees. The building owner is the person for whom the domestic building work is being undertaken, that is Ily Australia.
The plaintiff further submitted that when read as a whole, the Contract referred to the Act, for example at clauses 37.2A and 37.8, and therefore, it was the parties’ common intention that the Act apply.
The defendant contended that Ily Australia was a separate legal entity from the actual land owners of the Property, being Crestall Nominees. It was incorporated for the sole purpose of improving the site located at 379-387 Punt Road, Cremorne, 3121. (The defendant clarified that the 379-387 Punt Road Site, being five parcels of land, incorporated the Property at 381 Punt Road).
The defendant submitted that, other than implementing the resolution to improve the family’s land holding at 379-387 Punt Road, it was not engaged in the construction of dwelling houses on a continuous and repetitive basis and had not done anything else.
Judge Anderson’s decision in Promax Building Developments Pty Ltd v PCarol & Co Pty Ltd [2017] VCC 495 provides guidance on the application of Justice Vickery’s decision in the Director of Housing v Strutx as to when a building owner is “in the business of building residences” for the purposes of section 7(2)(b) of the Act when it constructs residences “for the purpose of profit on a continuous and repetitive basis”: cf Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196 at [197] per Edelman J in relation to section 5 of the Australian Consumer Law which mentions “carrying on business”:
… the ordinary meaning of “carrying on business” usually involves (by the words “carrying on”) a series or repetition of acts. Those acts will commonly involve “activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis”: see Thiel v Federal Commissioner of Taxation [1990] HCA 37; (1990) 171 CLR 338, 350 (Dawson J); Pioneer Concrete Services Ltd v Galli [1985] VicRp 68; [1985] VR 675, 705 (the Court); Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1, 8-9 (Mason J; Gibbs, Stephen and Aickin JJ agreeing). [Emphasis added]
In Promax v PCarol, PCarol & Co was the trustee of the PCarol & Co Trust. Between 2009 and 2011, PCarol & Co undertook building work for three units in Reservoir. It then purchased property in Bellfield in 2013, which it rented out between 2013 and 2015. In January 2016, PCarol and Promax entered into a domestic building contract for the construction of 12 apartments in Bellfield, which was subject to finance. PCarol subsequently terminated the contract because financier’s approval had not been obtained. The claimant issued a payment claim under the Act and PCarol did not serve a payment schedule in reply. Promax commenced proceedings under the Act to seek judgment for the payment claim. His Honour held that PCarol was, for the purpose of section 7(2)(b) of the Act, “in the business of building residences”.
Judge Anderson at [27] found that whether a “building owner is in the business of building residences” did not depend on the scale of the business, the success of the business, the number of projects undertaken either in the past or at any one time, or as contemplated for the future. Instead, his Honour focused on the purpose of the trust and its activities. Accordingly, because his Honour identified at [25] that the purpose of the trust was to make investments in the property market and its sole activity had been the purchase and development of two properties, PCarol was held to be “in the business of building residences”.
The defendant sought to distinguish Promax v PCarol on the basis of the trust deed. Unlike PCarol’s specific purpose trust for investments in the property market, the Ily Australia trust deed conferred general powers. In my view, this does not assist the defendant in the present case. The sole activity of Ily Australia as the trustee of the 381 Trust was to improve the family land holdings and, even on the defendant’s case, it was the Principal under the Contract and the “building owner” under the Domestic Building Contracts Act. The defendant was the party for whom the plaintiff carried out the works and the defendant was the party responsible for paying the plaintiff for works done.
In the present case, the Contract between the parties comprises the construction of the following:
(a) 5 individual townhouses;
(b) 70 residential apartments;
(c) A ground floor commercial office;
(d) 2 levels of basement residential parking and commercial parking.
This is development on a commercial scale for a contractual price of over $20 million: cf Director of Housing of the State of Victoria at [39]-[40] involving the exercise of powers under the Housing Act for the provision and promotion of affordable housing to Victorians and JG King at [8] and [25] in relation to a leasing entity providing affordable housing.
In addition to entering into the Contract with the plaintiff for the development at 381 Punt Road, there was evidence before me that Ily Australia successfully applied to the VCAT on 5 December 2014 for a permit for construction of a six-storey residential building at 375-377 Punt Road, Cremorne, 3121. This permit was for the construction of a six-storey residential building, comprising 17 apartments. The defendant’s counsel submitted that Ily Australia acted as agent for the purposes of the VCAT application and, although the presiding member at [2] referred to Ily Australia as “[t]he owner of the review site”, this was incorrect. Again, the ultimate owner of the review site was Crestall Nominees.
By post hearing affidavit, the defendant’s director deposed that on 16 April 2014, the town planning firm engaged to prepare the planning documents sent a letter to the Yarra City Council attaching the planning permit application naming Ily Australia in the section numbered 6 under the hold heading “Applicant”. The separate legal entity, 375-377 Punt Pty Ltd as trustee of the 375 Trust was not created until 24 September 2014. As the planning permit application named Ily Australia as the applicant, it became the party entitled under section 79 of the Planning and Environment Act 1987 to commence the VCAT proceeding. The VCAT application was evidence of Ily Australia undertaking activities other than solely improving the site at 379-387 Punt Road.
What constitutes being “in the business” is determined by examining the circumstances of each activity on a case by case basis.
The courts have, in the context of Consumer Law and Taxation Law, explained that there are a number of factors which must be considered when determining whether an entity is “carrying on a business”. The most commonly cited example is the decision of the High Court of Australia (Gibbs, Stephen, Mason, Murphy and Aiken JJ) in Hope v Bathurst City Council(1980) 144 CLR 1. The issue in that case was whether land owned and occupied by the appellant was wholly or mainly used by him for “carrying on the business” or industry of grazing. Mason J, after referring to the dictionary meaning of the word “business”, said, at 8-9:
In truth it is the popular meaning of the word as used in the expression “carrying on a business”, rather than the popular meaning of the word [business] itself, that is enshrined in the statutory definition. It is the words “carrying on” which imply the repetition of acts … and activities which possess something of a permanent character.
...
It denotes grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis. [Emphasis added]
The Oxford Dictionary defines “in the business” to mean “engaged in or prepared to engage in … any activity, or enterprise, entered into for profit”. In the present case, Ily Australia is facilitating a related party, Crestall Nominees, in making a profit.
Even when applying the phrase “carrying on a business” (which suggests an element of continuity) as opposed to “in the business of”, it has been recognised by the Courts that it is possible that a single joint venture will suffice: see Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd(1974) 3 ALR 409; 131 CLR 321 and United Dominions Corp Ltd v Brian Pty Ltd(1985) 60 ALR 741 ; 157 CLR 1 at 15, in which Justice Dawson said.
A single adventure under our law may or may not, depending upon its scope, amount to the carrying on of a business: Smith v Anderson (1880) 15 Ch D 247 at 277–8 ; Re Griffin; Ex parte Board of Trade (1890) 60 LJQB 235 at 237 ; Ballantyne v Raphael (1889) 15 VLR 538 . Whilst the phrase “carrying on a business” contains an element of continuity or repetition in contrast with an isolated transaction which is not to be repeated, the decision of this court in Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 ; 3 ALR 409 , suggests that the emphasis which will be placed upon continuity may not be heavy. Certainly each of the enterprises which were to be undertaken and the enterprise which was finally undertaken in this case, was to have an operation which was sufficiently extended to amount to the carrying on of a business … [Emphasis added]
One single venture has also been found to constitute the “carrying on of a business” in the context of Taxation Cases in R & D Holdings Pty Ltd v Deputy Commissioner of Taxation [2006] FCA 981 per Justice Finn at [33], [39] and [42] and the Federal Commissioner of Taxation v McDonald (1987) 78 ALR 588 per Justice Beaumont at 599.
In my view, in the circumstances of this case, Ily Australia entered into the Contract with the plaintiff for the carrying out of domestic building work where Ily Australia was in the business of building residences. The activity that it undertook pursuant to a $20 million Contract involved the construction of 70 apartments, 5 town houses, 2 levels of basement residential and commercial parking and a ground floor commercial office which comprises potentially over one hundred assets being divisible in the one development. Therefore, the defendant was “in the business of building residences” and there is no real prospect that Ily Australia would succeed in showing that it was not involved in the business of building residences: cf JG King Pty Ltd v Adiel Property Holdings Pty Ltd [2015] VCC 1600 per Judge Anderson at [5], [7], [8], [14], [23], [24] and [27].
Ground (b) - no reference date was available at the time the payment claim was made
A Notice of Practical Completion dated 5 August 2015 was issued by the Superintendent.
The plaintiff contended that on 5 August 2016, the defects liability period concluded pursuant to the Notice of Practical Completion. On 28 August 2016, the plaintiff served on the Superintendent the final payment claim. Therefore, on either 6 August 2016 or 25 August 2016, a reference date arose for the issue of the final payment claim pursuant to clause 37.4 of the Contract (read together with item 32 to the Annexure Part A of the Contract) and section 9(2)(a) or 9(2)(d) of the Act.
The defendant contended that there was a question as to whether the works reached practical completion as contemplated by the Contract and, as such, whether the last defects liability period had expired.
Practical completion is defined in the contract to mean, inter alia:
that stage in the carrying out and completion of WUC when:
(a) the Works are complete except for minor defects determined by the Superintendent to be minor; and
(e) the Contractor has obtained all permits, approvals, certificates and other authorisations required under relevant laws from any authority; …
The defendant submitted that the works are not practically completed as contemplated by the Contract because of the operation of clause 4 of the Contract and the creation of separable portions (however, I note that the final payment claim does not engage separable portions). Further, the “purported notice of practical completion” only certified for “63no, Residential apartments, common area corridors, ground floor entry lobby and basement car parking” (it was conceded by the defendant that on a design and construct, the plans were varied from 70 apartments to 63 apartments). This description was not consistent with the description of works in the contract. It was contended that there was no evidence that the 5 town houses or ground floor commercial office spaces has been completed. Further, the defendant claimed that the plaintiff had not obtained all relevant approvals from the City of Yarra in relation to the windows installed by the plaintiff and whether they met acoustic requirements under the planning permit.
The difficulty for the defendant in seeking to raise the matters set out in the preceding paragraph, is that, in proceedings for judgment under sections 16(2)(a) or 17(2)(a), Ily Australia by reason of sections 16(4)(b) and 17(4)(b) is not entitled to bring any cross-claim against the claimant, or to raise any defence in relation to matters arising under the construction contract.
Further, in the recent decision in Abergeldie Contractors Pty Ltd v Fairfield City Council [2017] NSWCA 113, the Court of Appeal held at [40]-[46] that whether practical completion has been achieved is a question of fact to be determined by the Superintendent, and that the date of practical completion is taken to be the date on which the certificate is issued. This provides parties with certainty which is essential for making payment claims.
Basten JA, at [46], considered whether Courts should determine the issue in question as a matter of fact (that is, inquiring as to whether a state of affairs of practical completion existed) or as a matter of law (by construing the contract and as such giving credence only to whether the superintendent was satisfied and issued a valid certificate). His Honour found that Courts should accept the Superintendent’s satisfaction as to practical completion.
Therefore, the date of practical completion was the date on which the certificate of practical completion was issued. As such, there was the existence of a valid reference date which is a necessary precondition for the service of the final payment claim.
The defendant claimed that clause 37.4 of the Contract provided for the issuing of a final certificate and that the reference date under section 9(2)(d)(ii) of the Act was the date immediately following the issue of such a final certificate. The Superintendent issued a final certificate on 8 September 2016. Therefore, the defendant contended that the reference date was 9 September 2016. In circumstances where the final payment claim was served on 28 August 2016, the defendant submitted that the issuing of the final payment claim was premature and, therefore, invalid: Southern Han Breakfast Point Pty Ltd (In liquidation) v Lewence Construction Pty Ltd (2016) 340 ALR 193 at [1]-[2].
In my view, on a proper construction of section 9(2)(d)(ii) of the Act, this provision is only engaged if the Contract “makes no express provision with respect to the matter”. That is, if the Contract is silent as to the reference date. In this case, the Contract does specify the reference date pursuant to clause 37.4. Therefore, section 9(2)(d)(ii) is not relevant to the present case.
Ground (c) - the payment claim is erroneous on its face
A progress claim must sufficiently identify the “construction work” or “related goods and services” to which it relates and “must indicate the amount of the progress payment that the claimant claims to be due” pursuant to section 14(2) of the Act. However, Justice Vickery in Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [49] and [51] held that this need not be “an overly exacting exercise” or involve “an artificial degree of precision and particularity”. Instead:
It is to be tempered by what is reasonably necessary to be comprehensible to the recipient party when considered objectively, that is from the perspective of a reasonable party who is in the position of then recipient. In evaluating the sufficiency of the identification of the work, it is appropriate to take into account the background knowledge of the parties derived from their past dealings and exchanges of information. [emphasis added]
In Mackie Pty Ltd v Counahan & Anor [2013] VSC 694 at [65]-[68], [70]-[71] and [74]-[75], Justice Vickery dealt with the description requirements for final payment claims, being a statement (express or implied) that the claim is a final payment claim, that the works under the contract are complete and a statement of account which sets out with sufficient clarity precisely what is claimed, and how the claim has been calculated or arrived at. This is in contrast to what is required for progress payment claims: Seabay Properties Pty Ltd v Galvin Constructions Pty Ltd [2011] VSC 183 at [148]; Brookhollow Pty Ltd v R & R Consultants Pty Ltd & Anor [2006] NSWSC 1 at [33].
The defendant submitted that the final payment claim on its face does not purport in a reasonable way to indicate the amount claimed in breach of section 14(2)(d) of the Act. It was claimed that there are at least four different amounts apparently claimed ranging between $105,337.47 and $20,508,730.89.
In my view, there are no real prospects of success that it was unclear from the final payment claim what amount was being sought. The document stated that:
(a) it is a “Final Payment Claim”;
(b) “This is a payment claim under the Building & Construction Industry Security of Payment Act 2002”;
(c) under item 5 “Payment Type” a “final payment retention 559,002.20 + interest”.
The plaintiff argues that the defendant, with its background knowledge derived from past dealings and exchanges of information, including the balance held in the joint account by the parties, would have been able to identify the amount sought by the final payment claim: Hawkins Constructions (Aust) Pty Ltd v Mac’s Industrial Pipework Pty Ltd [2002] NSWCA 136 at [20]; Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248 at [10]-[15].
The background knowledge between the parties in this case included that:
(a) the contract at clause 2.2 of the Formal Instrument of Agreement provided for a contract sum of $20,031,141.07;
(b) the balance of the retention monies was held in a joint bank account number 22381923 at the Bank of Queensland in the sum of $559,022.20;
(c) the evidence of the director of the defendant was that the account was opened in about September 2015, in the joint names of the parties and with the directors of the parties as signatories, and Ily Australia paid the sum of $559,022.20 into that joint bank account on 25 September 2015;
(d) by progress payment certificate dated 8 September 2016, the superintendent issued a final certificate certifying the sum of $559,022.20 as payable to the plaintiff;
(e) by notice of dispute dated 14 September 2016, the defendant noted at paragraph 4 of the details of dispute “the purported final certificate is incorrect for showing the cash retention to date as nil when in fact it is $559,022.20”;
(f) The contract specified at clause 37.5 and item 35 the rate of interest on overdue payments.
There is no real prospect of success on ground (c).
Ground (d) - the payment claim was not served on the defendant
Pursuant to clause 20 of the Contract, Ily Australia appointed First Urban Pty Ltd as the Superintendent to administer the Contract on its behalf. It, relevantly, provides:
Except where the Superintendent is required to act as valuer, assessor or certifier by the Contract, the Superintendent acts as agent of the Principal. In acting as agent of the Principal, the Superintendent is not required to act independently or reasonably and in good faith. (…)
All notices and other documents required to be given by the Principal may be given by the Superintendent. [Emphasis added]
Further, the Superintendent can issue a payment schedule as agent of the principal: Bucklands Convalescent Hospital v Taylor Projects Group (2007) NSWSC 1514.
Clause 7 of the Contract provides for the “service of notices and provisions of documents”. It stated, relevantly, that:
All notices shall be in writing.
A notice (and other documents) shall be deemed given and received:
(a) if addresses or delivered to the relevant address in the Contract or last communicated in writing; (…)
(b) on the earliest date of:
(i) actual receipt;
(ii) confirmation of correct transmission of fax; or
3 days after posting.
Progress claims were dealt with under clause 37.1 of the Contract, and, relevantly, stated that “[e]ach progress claim shall be given in writing to the Superintendent …”
Clause 37.2 of the Contract provided for certificates and that:
[t]he Superintendent shall, within 10 business days after receiving such a progress claim, issue to the Principal and the Contractor:
(a) 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”) being the Superintendent’s assessment of the contract sum to the date of the progress claim up to a maximum of such proportion of the guaranteed maximum price as equals the percentage of the WUC completed to that date; and ….
Within 5 business days after the issue of a progress certificate by the Superintendent, the Contractor will issue a tax invoice to the Principal for the amount of the progress certificate.
Under clause 37.2A of the Contract:
The Superintendent may issue payment schedules pursuant to [the Act] as agent of the Principal on the reference dates set out in subclauses 37.1 and 37.2.
The Principal’s address in Part A of the Annexure to the Contract in item 2 provides for 381 Punt Road, Richmond, Victoria, 3121.
Clause 37.4 process for the issue of the final payment claim and final certificate, relevantly, as follows:
Within 28 days after the expiry of the last defects liability period, the Contractor shall give the Superintendent a written final payment claim endorsed “Final Payment Claim” being a progress claim together with all other claims whatsoever in connection with the subject matter of the Contract.
Within 42 days after the expiry of the last defects period, the Superintendent shall issue to both the Contractor and the Principal a final certificate evidencing the moneys finally due and payable between the Contractor and the Principal on any account whatsoever in connection with the subject matter of the Contract including to correct, vary, alter or amend (by way of deduction, addition or adjustment) any certification by the Superintendent under clause 37.3A.
First, the defendant claimed that the plaintiff has not proven service of the final payment claim on the Superintendent. This is a jurisdictional fact required under section 14(1) of the Act: Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSW 903 at [59] per Einstein J. The plaintiff’s evidence was that:
On 28 August 2016, Maxcon served on the Superintendent, on behalf of Ily, the final payment claim in respect of the Works at the Site in the sum of $559.002.20 inclusive of GST …
Although, the plaintiff’s evidence amounted to a legal conclusion as to service and was not strictly evidence as to how service was effected on the Superintendent, under clause 37.4 of the Contract, where the claimant makes a final payment claim in the manner and timeframe prescribed by the Contract, a final certificate is then issued by the Superintendent certifying that defects ascertained during the defects liability period have been rectified.
The final payment claim for the sum $559,002.20 was dated 28 August 2016 and the final payment certificate from the Superintendent was dated 8 September 2016 in the amount of $559,022.20, within the appropriate time frame under the Act. Given that there cannot be a final certificate without a final payment claim, the final payment claim dated 28 August 2016 must have been received by the Superintendent: cf Dial D Pty Ltd as Trustee for the Smith Street Unit Trust v Kingston Building (Australia) Pty Ltd [2013] NSWCA 277 at [51]-[69]. As a matter of law, a person who is a Superintendent and who has the certifying powers under the Contract is also appointed an agent to respond to payment claims under the Act. A final payment claim is defined as a "final balancing of account between the contracting parties" (Jemzone Pty Ltd v Tryton Pty Ltd (2002) 42 ACSR 49, 49) or "simply the last of the payment claims" (Southern Region Pty Ltd v State of Victoria (No 3) [2001] VSC 436 at [32]), see also Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248 at [17].
A Superintendent’s final certificate is referred to as a “final payment schedule” which should be conclusive evidence of the final amount owing by one party to another (until the contrary is proven): John Holland Pty Ltd v Traffic Authority NSW [2006] NSWSC 567.
Second, the defendant contended that the defendant was not served with the purported final payment claim at the address and/or facsimile number nominated for service under the Contract.
Clause 7 of the Contract provides for service of notices and the nominated address was 381 Punt Road. However, the defendant noted that previous payment claims 1, 2, 4, 5, 9, 10, 11 and 13 issued between 9 May 2014 and 10 June 2015 had been billed to 51 Huckerby Street, Richmond. There was no dispute that the previous payment claims had been received by the defendant and paid.
The plaintiff submitted that the alleged previous payment claims referred to by the defendant were headed “Tax Invoice”. Under clause 37.2 of the Contract it provides, inter alia, that:
Within 5 business days after the issue of a progress certificate by the Superintendent, the Contractor shall issue a tax invoice to the Principal in the amount of the progress certificate.
Pursuant to clauses 37.1 and 37.4 of the Contract, the progress claims and final payment claim shall be given to the Superintendent. Under clause 20, the Superintendent was the agent of the Principal for the purposes of giving and receiving notices and documents. Clause 7 is a permissive provision (and not mandatory) and a deeming provision, that is, if a notice has been given to the Principal’s address in Part A of the Annexure to the Contract in item 2 provides for 381 Punt Road, Richmond, Victoria, 3121, or its facsimile number, then service is deemed to have been received at the earliest date of actual receipt, confirmation of correct transmission of fax, or 3 days after posting.
Further, in Metacorp Pty Ltd v Andeco Constructions [2010] VSC 199, it was held that service on the Superintendent rather than the party “liable to make payment” under the Act was valid as the Superintendent has actual or ostensible authority to receive the payment claim as all previous payment claims had been submitted to the Superintendent.
In the circumstances of the present case, the final payment claim issued on 28 August 2016 evoked the dual procedure of progress claims under the Contract and the Act.
Ground (e) - the payment claim was the second final payment claim, which is prohibited;
The defendant contended that on 12 August 2015, the plaintiff issued a tax invoice marked “final claim” and described itself as the “Final Progress claim for works completed at 379-387 Punt Road Cremorne” in the sum of $687,689.20. This amount was paid in full to the plaintiff.
The defendant seeks to rely on this “final claim” to vitiate the final payment claim dated 28 August 2016 pursuant to section 14(8) of the Act. This provision states that:
A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
The final claim was issued 7 days after practical completion. The Final Payment Claim was issued on 28 August 2016 in a different amount of $559,002.20, 12 months after the defects liability period. The two payment claims are clearly for different claims and are different figures.
There is no real prospect of success on ground (e).
Ground (f) - the plaintiff has already been paid the balance of the retention sum
Finally, the defendant claimed that by reason of the joint ownership of the joint bank account held with the Bank of Queensland, the plaintiff has already been paid the balance of the sum of $559,022.20.
The joint bank account was established in lieu of the provision of the two unconditional bank guarantees by way of security arrangement provided under clause 5 of the Contract. Although the bank account is in the parties’ joint names, the signatories are the directors of the parties. The defendant relied on authority that joint account holders are regarded as together making up the “owner” and that until the funds are released, each person “holds the whole and holds nothing”: Fadden v Deputy Federal Commissioner of Taxation (1949) 68 CLR 76 at 85.
In Dura (Australia) Constructions Pty Ltd (in liquidation) (receivers and managers appointed) v Hue Boutique Living Pty Ltd [2014] VSCA 326, in relation to funds set aside as security in a joint account set up by each of the parties’ solicitors, the interest acquired by the plaintiff was an equitable charge over the retention monies. There is no payment to the plaintiff until there is agreement that the retention monies be released to the plaintiff, or legal right to the monies by survivorship; neither of which has occurred in the present case: Russell v Scott (1936) 55 CLR 440 at 448.
There is no real prospect of success on ground (f).
The Plaintiff’s application
The defendant contended that the Final Certificate issued by the Superintendent pursuant to the Contract was not a payment schedule within the meaning of the Act. The evidence of the defendant was that the Superintendent had not asked the director of the defendant about whether he should issue the document, and the defendant had not seen the document until it was sent by the plaintiff on 9 September 2017.
Even if I accept the defendant’s contention that there is an arguable case that the Superintendent acted without authority or outside of the contract by issuing the final certificate (despite what appears at clauses 20, 37.2, 37.2A, and 37.4 of the Contract, including that the Superintendent may issue payment claims as an agent of the Principal and that “all notices and other documents required to be given by the Principal may be given by the Superintendent”), the plaintiff may nevertheless apply for judgment pursuant to section 16(2)(a)(i) absent this controversy (and not under section 17(2)(a)(i) of the Act).
Therefore, if no payment schedule has been issued in reply to the Final Payment claim, under section 16(2)(a)(i) of the Act, the plaintiff may recover the unpaid portion of the claimed amount from the defendant as a debt due to it in any court of competent jurisdiction.
Pursuant to section 16(4)(a) of the Act, I am satisfied that there be judgment in favour of the plaintiff in the amount of $559,022.20 plus interest.
I will hear the parties as to the form of final orders and submissions as to costs.
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Certificate
I certify that these 18 pages are a true copy of the reasons for judgment of Judicial Registrar Burchell delivered on 28 September 2017.
Dated: 28 September 2017.
Shannon Finegan
Associate to Judicial Registrar Burchell
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