Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 3)

Case •

[2021] NSWSC 464

•

03 May 2021

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 3) [2021] NSWSC 464
Decision date: 03 May 2021
Jurisdiction:Equity - Technology and Construction List
Before: Stevenson J
Decision:

Parties to confer and agree on final orders in accordance with these reasons

Catchwords:

JUDGMENTS AND ORDERS – plaintiff to be awarded damages – interest to judgment – method of calculating plaintiff’s margin

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999

Cases Cited:

Payce Communities Pty Ltd v Canterbury-Bankstown Council [2021] NSWSC 331

Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 2) [2021] NSWSC 404

Category:Consequential orders
Parties: Payce Communities Pty Ltd (Plaintiff)
Canterbury-Bankstown Council (Defendant)
Representation:

Counsel:
Mr M Sheldon (Plaintiff)
Mr B DeBuse (Defendant)

Solicitors:
Vincent Young Lawyers (Plaintiff)
Marsdens Law Group (Defendant
File Number(s): 2019/133490

Judgment

  1. I gave judgment in this matter on 6 April 2021. [1]

    1. Payce Communities Pty Ltd v Canterbury-Bankstown Council [2021] NSWSC 331.

  2. I resolved a number of disputes in relation to the arithmetical consequence of those reasons in a further judgment of 20 April 2021. [2]

    2. Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 2) [2021] NSWSC 404.

  3. A number of further issues have arisen.

  4. I shall use the same abbreviations as in the previous judgments.

Interest to judgment

  1. Payce seeks pre-judgment interest from 1 November 2018 to 28 November 2019.

  2. Payce does not seek interest beyond 28 November 2019 because, on that day, the Council paid Payce the amount of the adjudication determination to which I referred at [12] of my 6 April 2021 judgment.

  3. Practical completion of the Fit-Out Works occurred on 24 August 2018.

  4. On 11 October 2018, Payce sent the Council what purported to be a payment claim under the Building and Construction Industry Security of Payment Act 1999 (“the Act”) in the sum of $1,881,543.78.

  5. Payce claims pre-judgment interest at the contractual rate of 12% on the part of that amount that reflects its success in these proceedings; namely $854,500.09 plus the amount to be allowed in respect of the Payce margin, which I discuss further below.

  6. Payce should be allowed this interest. Whether or not the 11 October 2018 payment claim was valid for the purposes of the Act, it was a demand for payment and, to the extent that Payce has achieved success in these proceedings, it was held out of its money during the relevant period.

The Payce Margin

  1. Before me, it was common ground that Payce was entitled to charge a margin of 10% on top of the cost of variations. [3]

    3. See [213] – [216] of my 6 April 2021 judgment.

  2. An issue has arisen as to the figure by reference to which that margin should be calculated.

  3. My judgments deal with the variations that were disputed.

  4. However, a number of other variations sought by Payce were agreed.

  5. The only evidence to which my attention has been drawn concerning that agreement is in the affidavit of Mr Naidoo who was, as I reported at [148] of my 6 April 2021 judgment, the Council’s Manager of the Works and Projects Unit at the time.

  6. In his affidavit, Mr Naidoo said:[4]

“…the following variations were accepted by myself or Matt Tran during 2018 once a dispute had arisen. Payce had presented … me with a list of variations and exercising my discretion, I caused [the Council] to concede to these as being reasonable with respect to the Fit Out Works undertaken at the Project.”

4. At [98].

  1. Mr Naidoo then listed 19 variations, including five totalling $312,580, which he described as follows:

“Variation Item 45 – Loose Furniture in the sum of minus $90,550.00 was accepted;

Variation Item 46 – Directional Signage in the sum of minus $15,000.00 was accepted;

Variation Item 48 – Security Gates in the sum of minus $160,000.00 was accepted;

Variation Item 49 – Sprinklers in the sum of minus $43,030.00 was accepted;

Variation Item 50 – Returns Shute in the sum of minus $4,000.00 was accepted;”

  1. In closing submissions, Mr Miller handed up a schedule, which I marked as MFI16. This schedule summarised the manner in which Payce put its case and listed, under the heading “Payce Final Claim”, the amounts Payce claimed for each variation.

  2. The schedule also included, as a credit, the five items referred to at [17] together with another item, Variation 47, listed as a credit for “Commercial Kitchen” in the sum of $30,508.00. The total of the six credit items was $343,088.00.

  3. The total amount of the “Payce Final Claim” was stated to be $1,254,224.04. This was the amount of the claims for variation, less those credit items. That is, the total amount claimed was net of the credit items.

  4. At the time, Mr Miller said that so far as concerns Payce’s margin:

“It’s just the 10% margin on cost that we claim … 10% of the costs that Payce claims, which are the final right-hand column, those costs when the Court goes to them will see have been grossed up with the Payce margin …”

  1. In written submissions on this point, Mr Sheldon said:

“MFI #16 contains an unfortunate error made in the haste of getting Payce’s Closing Submissions finalised. Payce mistakenly inserted the agreed credits and debits into MFI #1 and applied margin to both the disputed variations and the agreed credits and debits. The MFI #16 spreadsheet should have been differently configured so that margin was applied only to the dispute variations.

In Payce’s submission that was an obvious error. The case was opened on the basis that margin applied only to disputed variations. Mr Daubney’s evidence supported that. It would not be appropriate under clause 36.4d) to apply a margin of 10% to deductions. The margin is described differently in clause 36.4(d) for positive and negative variations. Payce says that emphasises the error in MFI #16.”

  1. Mr Sheldon referred to cl 36.4 of the Fit Out Agreement.

  2. That clause read, relevantly:

“36.4 Pricing

The Superintendent shall, as soon as possible, price each variation using the following order of precedence:

…

d) reasonable rates or prices, which shall include a reasonable amount for profit and overheads,

and any deductions shall include a reasonable amount for profit but not overheads.

That price shall be added to or deducted from the contract sum.”

(Emphasis in original)

  1. As Mr Sheldon submitted, that clause entitled Payce to “a reasonable amount for … overheads” on variations, but provided that any “deductions” would include a reasonable amount for profit “but not overheads”.

  2. In light of those provisions, I accept Mr Sheldon’s submission that MFI-16 was prepared erroneously.

  3. Mr DeBuse drew attention to a table in the Joint Expert Report which Mr DeBuse submitted showed that Mr Daubney agreed that the Payce Margin was calculated on the claimed variations net of the credit amounts to which I have referred.

  4. That table recorded the competing opinions of Mr Berson, Mr Daubney and Mr Brewster.

  5. It is true that the table was drawn so that the Payce margin was applied to the “Total”.

  6. However, although Mr Berson’s and Mr Brewster’s opinions were expressed to take into account the six credit items to which I have referred, Mr Daubney’s opinion was not.

  7. In the column summarising Mr Daubney’s opinion, the six credit items are said to be “NA”.

  8. In my opinion, Mr Sheldon was correct to submit, bearing in mind the provisions of cl 36.4 of the Fit Out Agreement, that the correct way to calculate Payce’s damages is to apply the 10% margin to disputed variations only, and thereafter deduct the net of the agreed credits and debits.

  9. Payce’s damages should be calculated accordingly.

The Council’s claim for interest

  1. The amount that the Council paid Payce pursuant to the adjudication determination under the Act exceeds the damages to which Payce will be entitled in these proceedings.

  2. In those circumstances, it is common ground that Payce must submit to an order that it repay the Council an amount pursuant to s 32(3)(b) of the Act. The question arises as to the interest Payce should pay the Council on that amount.

  3. Payce contended that the Council is not entitled to the contractual rate of 12% because its obligation of repayment arose under the Act and not under the Fit Out Agreement.

  4. That may technically be so, but the substance of the matter is that the Council’s entitlement to repayment of part of the amount it paid following the adjudication determination under the Act, arises from its contractual relationship with Payce under the Fit Out Agreement.

  5. Therefore, as a matter of discretion, I propose to order that Payce pay the Council interest at the contractual rate of 12% on the relevant amount.

Costs of the proceedings

  1. The parties have agreed on a timetable for the exchange of written submissions as to the costs of the proceedings.

  2. Mr DeBuse informed me that the Council undertakes not to enforce its entitlement to payment under s 32(3)(b) of the Act until such time as those costs are determined and assessed.

Conclusion

  1. I trust that these reasons resolve the final outstanding issues necessary to be determined in order that final orders can be made, other than as to costs.

  2. I invite the parties to confer and agree on what those final orders should be.

**********

Endnotes

Decision last updated: 03 May 2021

Actions
Download as PDF Download as Word Document