Newearth Constructions Pty Ltd v Scrohn Pty Ltd

[2014] VCC 1735

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL LIST
GENERAL DIVISION

Case No. CI-14-03223

NEWEARTH CONSTRUCTIONS PTY LTD	Plaintiff
v.
SCROHN PTY LTD	Defendant

---

JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	24 October 2014
DATE OF JUDGMENT:	24 October 2014 (revised 27 October 2014)
CASE MAY BE CITED AS:	Newearth Constructions Pty Ltd v. Scrohn Pty Ltd
MEDIUM NEUTRAL CITATION:	[2014] VCC 1735

REASONS FOR JUDGMENT

---

Catchwords: Building contract – Progress claim – Claim including variations certified for payment by Superintendent’s representative – Contractual provision entitling principal to suspend payments if contractor behind schedule – Principal alleged the contractor was behind schedule and payments were thereby suspended – Whether variations thereby not agreed and not claimable as ‘second class’ variations – s.17 Building and Construction Industry Security of Payment Act 2002 (Vic).

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R. Andrew	Donaldson, Whiting & Grindal
For the Defendant	Mr J. McKay	Beck Legal

HIS HONOUR:

1Newearth Constructions Pty Ltd (“Newearth”) seeks judgment again Scrohn Pty Ltd (“Scrohn’) for $110,000 as the balance of a progress claim pursuant to s.17(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (“the Act”).

2The payment claim is dated 28 June 2013 and was for $150,318.49. There was a progress certificate in response from the superintendant’s representative dated 16 July 2013 certifying $150,318.49 as “now due”. This progress certificate should be regarded as a payment schedule pursuant to s.17(1) of the Act.

3The affidavit upon which the plaintiff relies in support of the application states that the payment claim was served on the date it bears namely 28 June 2013. Plaintiff’s counsel, Mr Andrew informed the Court that this was an error and that in fact the payment claim was served on the superintendant (as required by the contract), on 10 July 2013.

4This is confirmed by the progress certificate of the superintendant’s representative dated 16 July 2013 which commences with the words, “This is to certify that in respect of a claim by the contractor dated 28/06/2013 received 12/07/13…”. In these circumstances, I indicated that if I were otherwise pursuaded that judgment should be entered, it should be subject to the filing of a supplementary affidavit correcting the error in the filed affidavit.

5Mr McKay, defendant’s counsel, conceded that the plaintiff was entitled to judgment for $9,330.50 but that it was not so entitled in relation to the balance of the unpaid amount being $114,770.46 for contract variations. He submitted that:

a.the claim for variations was an excluded amount pursuant to s.10(3) and s.14(3)(b) of the Act;

b.the variations were an excluded amount because they were not first class variations under s.10A(2), as there was no agreement as to the entitlement of the plaintiff to claim the variations (ss.(2)(d)) or the time for payment (ss.(2)(f));

c.there was no agreement about these variations because pursuant to general clause 1.10 of the contract, Newearth had failed “to carry out works as per the approved program”, which had the consequence that without prejudice to any other rights Scrohn had under clause 44 of the general conditions of the contract, it “shall…suspend payment of the contract”;

d.the variations were therefore of the second class of variations by operation of s.10A(3)(d) and ss(4) of the Act. The variations were not claimable variations capable of being included in a progress claim.

6I am not satisfied that the defendant can rely upon general clause 1.10 of the contract in this way for the following reasons:

a.the clause confers a right and does not automatically suspend payments;

b.Scrohn did not purport to “invoke” the operation of the clause until its letter to Newearth on 26 August 2013. This was after the progress certificate dated 16 July 2013;

c.until the filing of the defendant’s affidavit material in this proceeding, there was otherwise no dispute as to Scrohn’s agreement to the contract variations. The progress certificate dated 16 July 2013 confirmed that payment was owing for the variations;

d.reliance upon clause 1.10 would, in my view, be an attempt to “raise any defence in relation to matters arising under the construction contract”, which is not permitted under s.17(4);

e.the courts have regularly rejected defences based on claims of lack of progress of the works as being a contractual defence, as compared with defences arising directly from a failure by a claimant to comply with the provisions of the Act;

f.a comparison of s.16(4)(a) (which applies where a payment schedule is not served) and s.17(4)(a) (where, as in the present case, a payment schedule was served) shows the lack of an equivalent to s.16(4)(a)(ii) in s.17. This absence may entitle the Court, in any event, to give judgment for an excluded amount.

g.s.48 of the Act prevents parties contracting out of the provisions of the Act. If clause 1.10 of the contract had the operation suggested by Mr McKay it is likely, in my view, that it would be void by reason of s.48.

7In the circumstances, I do not consider that it is appropriate in this case to adopt the approach of Vickery J in Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183 where it was necessary to sever a portion of a payment claim that was void by reason of s.23(2B) of the Act.

8Accordingly, I consider that Scrohn has not shown that it has a real prospect of succeeding in its defence to the claim. Newearth is therefore entitled to judgment for $110,000 together with interest.

- - -

Certificate

I certify that these 3 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 24 October 2014 and revised on 27 October 2014

Dated: 27 October 2014

Olivia Bramwell    

Associate to His Honour Judge Anderson