Pelligra Build Pty Ltd v Australian Crane and Machinery Pty Ltd
[2020] VCC 545
•5 May 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-20-00134
| PELLIGRA BUILD PTY LTD (ACN 611 248 778) | Plaintiff |
| v | |
| AUSTRALIAN CRANE & MACHINERY PTY LTD (ACN 111 382 784) | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the Papers | |
DATE OF JUDGMENT: | 5 May 2020 | |
CASE MAY BE CITED AS: | Pelligra Build Pty Ltd v Australian Crane & Machinery Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 545 | |
REASONS FOR JUDGMENT
Subject:Claim under Building and Construction Industry Security of Payment Act 2002
Catchwords: Claim for recovery of outstanding balance of payment claims allegedly served pursuant to s14 of the Building and Construction Industry Security of Payment Act 2002 – no payment schedule or schedules provided in accordance with s15 of that Act – whether invoices valid – payment claims when served by email in violation of terms of contract – receipt of emails by respondent proprietor admitted – claims duly served – whether provisions as to progress payments in printed contract form or those appearing in attached typed schedule established relevant reference dates for the purposes of s9 of the Act – typed schedule overrides reference in schedule to various stages or milestones to be taken as reference to date of completion of those stages – proprietor precluded by s16(4) of the Act from relying on contentions that stages were incomplete – proprietor entitled to rely on defence of payment based on allocation of payments made to earliest liability – judgment otherwise for the plaintiff with interest at the rate fixed under s2 of the Penalty Interest Rates Act 1983.
Legislation Cited: Building and Construction Industry Security of Payment Act 2002; Electronic Transactions (Victoria) Act 2000; Interpretation of Legislation Act 1984; Penalty Interest Rates Act 1983.
Cases Cited:Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd (2009) 26 VR 112; Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd (2010) 30 VR 141, [2010] VSC 199; Emag Constructions Pty Ltd v High Rise Contractors (Aust) Pty Ltd [2003] NSWSC 903; Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd (No 2) [2015] VSC 500; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; Dura (Australia) Constructions Pty Ltd v Hue Boutique Linen Pty Ltd [2012] VSC 99; Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; Forbes v Git [1922] 1 AC 256; Thomson v Thomson [2008] VSC 375; Brentworth Partners Estate Agents Pty Ltd v Gordon [2007] NSWSC 1135; Karagulaski v Vasil Bros & Co Pty Ltd (1981) 1 NSWLR 267; Sibbles v Highferm Pty Ltd (1987) 164 CLR 214 and Re Walsh ex parte Deputy Commissioner of Taxation (1982) 42 ALR 727.
Judgment: Orders: (1) Within 14 days of the date of these reasons the parties must bring in short Minutes to give effect to these reasons. (2) Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A.J. Ritchie | Rigby Cooke Lawyers |
| For the Defendant | Mr A. R. Morrison (12 March 2020) and Mr B. Stephenson (thereafter) | Cornwalls |
HIS HONOUR:
Background
1 The plaintiff, Pelligra Build Pty Ltd (Pelligra), carries on business as a builder. The defendant, Australian Crane & Machinery Pty Ltd (Australian Crane) is a manufacturer and distributor of cranes. (Affidavit of Paul Anthony Kellock dated 23 December 2019, paragraphs 4 and 5, hereafter referred to as “first Kellock affidavit”)
2 The parties executed a contract in the Master Builders Association GCC-5 form dated 15 December 2016 providing for the erection of a warehouse and office development at Lot 113, Hunter Road, Derrimut, with Pelligra described as “Contractor” and Australian Crane described as “Proprietor”. (Exhibit PK3)
3 The contract provided for a lump sum payment to Pelligra for its work in the sum of $4,417,600 inclusive of GST. (Page 3) It stipulated for commencement “within 30 days of receipt of building permit” with the date for practical completion fixed as “240 working days”. (Page 5)
4 Clause 25.1(a) and (b) provided:
“25.1 Subject to the work done and materials used being in accordance with Contract, the Contract Sum shall be paid by the Proprietor to the Contractor as follows:
(a) On the dates or at the intervals specified in Sub-clause 1.11 the Contractor may make claims for Progress Payment for the value of materials supplied and work done by the Contractor under this Contract.
(b) The Proprietor shall pay to the Contractor the amounts claimed or invoiced by the Contractor within the period or by the date specified in Sub-clause 1.12.”
5 Clause 1.12 was in tabular form and stated:
“No later than … business days following service of the relevant Payment Claim.”
6 It included a note which stated, “If nothing is stated seven (7) calendar days”.
7 Clause 4 was headed “Contract Documents”, stating that the phrase “Contract Document” comprised:
“(a) these General Conditions of Contract and any Special Conditions that may be included herein, and
(b) the Drawings, Specifications and any other documents which have been approved and signed by the parties for identification as forming part of this Contract and which are:
·listed in the Second Schedule, and
·attached hereto.”
8 The next clause, clause 5, was headed “Errors and Discrepancies”. Surprisingly, there is no provision designating an order of precedence between different Contract Documents as is customarily to be found in building contracts.
9 The Second Schedule referred to architectural drawings and “scope of works” document dated 15 December 2016 which, according to the schedule, was to serve as the “specifications”. Under the heading “Other Documents” appears, in manuscript, “Pelligra Build ‘progress claims schedule’ dated 15 December 2016”. This document was the last in the compilation and was dated 15 December 2016 and signed on behalf of both Pelligra and Australian Crane. It included the heading “Progress Payments Schedule” and divided the project into some seven stages as follows:
Deposit (5%) $220,880.00 incl GST Ground Work, Site Works, Drainage, Footings (20%) $883,520.00 incl GST Slab Works (20%) $883,520.00 incl GST Panels Erection (15%) $662,640.00 incl GST Structural Steel Roof Works (15%) $662,640.00 incl GST Lock Up (15%) $662,640.00 incl GST Completion (10%) $441,760.00 incl GST
10 There was one special condition designated SC1, stating “all costings are subject to planning approvals and conditions”.
11 Clause 33.4 of the general conditions headed “Methods of Service” provided inter alia:
“(a) Unless otherwise stated elsewhere in the Contract all written notices, reports, orders or other documents required or permitted by the Contract to be given to or served on the other party may, and may only, be given or served.
·by hand (which may include messenger delivery) to the person to whom it is required to be given; or
·by pre-paid or registered post to the address (stated in the Form of Agreement) of the person to whom it is required to be given; or
·by facsimile to the facsimile number stated (stated in the Form of Agreement) of the person to whom it is required to be given.
(b) Service of notices by email, SMS or any similar electronic method is not acceptable for the purposes of this Contract.”
12 Clause 32.2, headed “Security of Payment Legislation” provided inter alia:
“(a) Despite any other provision in this Contract, the Contractor is entitled, if elected, to make and pursue payment claims under and in accordance with the provisions of the Building and Construction Industry Security of Payment Act 2002 [“the SOP Act”].
(b) The exercise of this right is optional, additional and separate to any other legal or contractual rights the Contractor may have to make ordinary payment claims; and to the rights and obligations that parties otherwise have to deal with those claims.
(c) Whenever this right is exercised by the Contractor, the parties become subject to the applicable provisions of the SOP Act with respect to that claim …”
13 On a series of dates commencing 23 August 2017 and concluding 22 December 2017, Pelligra rendered some nine invoices stated to be pursuant to the building contract and totalling $2,486,296.62. (first Kellock affidavit, paragraph 8)
14 According to Mr Kellock’s affidavit, there was a partial payment for the first invoice designated 107, which had an outstanding balance of $183,520, but the amounts claimed remained otherwise outstanding in full. Each invoice included the statement, “this is a payment claim under the Building and Construction Industry Security of Payment Act” (the Act).
15 Pelligra’s solicitors sent a letter of demand dated 9 December 2019 (Exhibit PK5), which elicited an emailed response on behalf of Pelligra (Exhibit PK6), which stated, inter alia, by reference to an attached quantity surveyor’s report dated 24 August 2018:
“We believe that the amount of payment claims both on works completed to date and interest (should be calculated based on $1,376,348.28) are not correct as per your Appendix of the letter.
We cannot yet proceed the payment until it has resolved with this discrepancy.”
16 Solicitors acting for Pelligra filed an Originating Motion commencing this proceeding dated 23 December 2019. That Originating Motion sought judgment in favour of Pelligra for $2,486,296.62 “pursuant to s16(2)(a) of the Building and Construction Industry Security of Payment Act 2002, together with interest pursuant to s.12(2) of that Act and costs.
17 A Summons of the same date sought the entry of judgment accordingly.
18 The matter came on for hearing before his Honour Judge Woodward on 7 February 2020, where he made a series of orders for the filing and service of affidavit material and submissions by the parties, modifying those directions by further orders made 12 March 2020.
19 In light of the coronavirus emergency, this matter has been referred to me for determination “on the papers”.
The Building and Construction Industry Security of Payment Act 2002
20 The Building and Construction Industry Security of Payment Act establishes in broad terms a regime of “pay now, argue later” with respect to payment claims for construction work. The phrase, “Construction Work”, is defined at some length in s5 of the Act, and the scheme of the statute extends also to what are defined as “Related Goods and Services” in s6.
21 Section 14 provides for the service by a claimant under construction contracts of what are described as “payment claims”. Section 15 provides for respondents to these claims to reply with what are described as “payment schedules”, which, to be effective, must be served within the time required by the relevant construction contract or within 10 business days after the payment claim is served. Failure to respond or reply with a payment schedule creates a statutory entitlement on the part of the claimant to recover the unpaid amount claimed or serve notice of intention to suspend carrying out work or supplying related goods or services.
22 Section 17 provides a remedy against a party failing to pay in accordance with the payment schedule. Disputes emerging from the service of payment claims and payment schedules may be referred by the claimant for adjudication under s18. Attempts to contract out of this payment regime are prohibited and rendered ineffective by s48 of the statute.
23 The parties remain entitled to have their rights and obligations determined under traditional contractual dispute regimes in court. An obligation to pay the amount of the payment claim is without prejudice to the ability in subsequent litigation to contend that some or all of the amount was not due because, for instance, of defective or incomplete work. A court determining matters on the traditional contractual basis is required to make allowance for the payments which have been made under the summary procedures of the Act: s47.
24 In Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd (2009) 26 VR 112, Vickery J undertook a survey of the history of the Act and its interstate analogues, the original model for this legislation coming from NSW. His Honour said:
“The principle that the respondent to a payment claim for a progress payment ‘should pay now and argue later’ is given full effect under the Act: Multiplex Constructions Pty Ltd v Luikens and Anor. This regime promotes the object of the Act, being to facilitate timely payments between the parties to a construction contract and to provide for the rapid resolution of disputes arising in respect of progress claims under construction contracts.”
25 Section 14 makes detailed provision for payment claims. Most pertinently, sub-s(2) provides:
“(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.”
26 Vickery J remarked in Schiavello’s case, speaking in 2009, “there has not, to date, been any prescription of the form under para (a) or of the information under para (b).” (2009) 26 VR 112, 123 [52] This apparently remains the case.
Parties’ Submissions
27 There were three sets of submissions filed on behalf of each of the parties successively over the period 12 March to 7 April. The initial submissions on behalf of Australian Crane were signed by Mr A R Morrison, but the remaining two were over the signature of Mr B Stephenson of counsel. Mr A Ritchie of counsel authored all three sets of submissions on behalf of Pelligra.
28 The broad outline of Pelligra’s case was that it had served a series of payment claims in accordance with s16 of the Act, which remained unpaid and to which there had been no response by way of the service of any payment schedule. If these broad allegations are made out, Pelligra would appear to be entitled to judgment for the amounts claimed.
29 According to Australian Crane, however, for a variety of reasons, the invoices in question did not enjoy the status of payment claims pursuant to the Act and therefore the claim should fail. I turn, therefore, to the various matters urged on behalf of Australian Crane which are said to controvert Pelligra’s case.
30 By its primary submissions dated 25 March 2020, Pelligra restricted its claim to the following:
(a) invoice 107, 23 August 2017, balance $183,520;
(b) invoice 110, 25 September 2017, $883,520;
(c) invoice 125, 12 October 2017, $662,640.
31 In his submissions in reply on behalf of Australian Crane, Mr B Stephenson of counsel summarised the grounds of his client’s resistance to the plaintiff’s claim:
(i) Pelligra failed to serve the payment claims in accordance with the Act or Contract;
(ii) no reference date for the amounts claimed.
Conclusions
Service of Invoices – Claims
32 In its primary submissions, Australian Crane said that the invoices/claims were served by email which was common ground. Such service was, it was said, invalid. Mr A R Morrison conceded that the decision of Vickery J in Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd (2010) 30 VR 141 established that the provisions as to service of “notices or documents” in s50 of the Act were “facultative and not mandatory, and that service by email in that case was good service”. (Defendant’s Submissions 12 March 2020, paragraph 14)
33 Section 50 provides inter alia as follows:
“(1) Any notice or document that by or under this Act is authorised or required to be given to or served on a person may be given to or served on the person—
(a)by delivering it to the person personally; or
(b)by lodging it during normal office hours at the person's ordinary place of business; or
(c)by sending it by post or facsimile addressed to the person's ordinary place of business; or
(d)in such manner as may be prescribed for the purposes of this section; or
(e)in any other manner specified in the relevant construction contract. …”
34 The situation, here, he said was different because “clause 33.4(b) specifically provides that service of notices by email, SMS or any similar electronic method is not acceptable for the purposes of the Contract”. (Paragraph 15)
35 He said that service of a payment claim triggered powerful statutory rights. This process should not be taken lightly, and where service by email was prohibited by the contract and not authorised by the statute, it should be found that the email despatch of the notice was not good service. (Paragraph 16)
36 In further submissions on behalf of Australian Crane, Mr Stephenson referred to the judgment of Einstein J in Emag Constructions Pty Ltd v High Rise Contractors (Aust) Pty Ltd [2003] NSWSC 903 [59] as to the need for strict proof on this point of service. (Defendant’s Further Submissions 26 March 2020, paragraph 5)
37 Mr Stephenson said that, given the “powerful rights” which were triggered by the service of payment claims, it was significant that Victoria, in contrast to other states, had not broadened the modes of service authorised by s50 of the Act. This, he said, “suggests that valid service in Victoria can only be achieved in one of the ways specifically set out in section 50(a)-(c) of the Act”. (Paragraph 7)
38 He said the regulations actually prohibited certain modes of service. More particularly, he noted the prohibition of service by email by clause 33.4(b) of the contract. (Paragraph (a))
39 As to the Metacorp case, he said the present situation was distinguishable because receipt of the payment claim had not been admitted and there was no prohibition on service by email in the contract in the Metacorp case.
40 He referred to another decision of Vickery J in Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd (No 2) [2015] VSC 500. He conceded that Vickery J had treated as validly served a payment schedule pursuant to s15 of the Act sent by email. He noted that his Honour there dealt with the validity of service of the payment schedule, not a payment claim. There was a material distinction he said because, whilst s14, dealing with payment claims, required that they be “served”, “s15 is more lenient and provides that a respondent need only ‘provide’ a claimant with a payment schedule …”. (Defendant’s Reply Submissions 3 April 2020, paragraph 16)
41 Further, he noted the absence of the prohibition of email service contained in clause 33.4 of the Contract in the present case, which was absent in Amasya’s case. He said the true relevance of Amasya’s case was that it applied to this question the principle laid down by the High Court of Australia in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, where the majority of their Honours said the better test for determining whether an act done in breach of a provision of legislation should be regarded as invalid was to consider the language of the provision, its scope and object.
42 Applying that test, according to Mr Stephenson, whilst s50 specifies certain modes of service, “by implication [it] prohibits service by other means”. He said the requirement for “serving” payment claims rather than “providing” them, as with the requirement for payment schedules, required a higher standard of proof. He said s47 of the Act provided that nothing in Part 3 of the Act affects rights that a party to a construction contract may have under the contract. It thereby acknowledged that it was not intended to cut across the parties’ contractual rights and “strongly suggests that service contrary to the contractually agreed process is invalid”.
43 The structure of ss16 and 50 “suggests that valid service is an essential pre-condition for a Respondent to become liable to make a payment under the Act”. (Paragraph 19(d)) Therefore, he said “no liability under s 15(4) and no judgment can be entered pursuant to s16 of the Act”. (Paragraph 20)
44 Mr Ritchie, in Pelligra’s primary submissions, contended that service of the claim by email was valid under s8(2) of the Electronic Transactions (Victoria) Act 2000 (ETA). (Paragraphs 30-33)
45 Mr Stephenson, on behalf of Australian Crane, said:
“With respect, this argument overstates the scope of the ETA, which addresses the process of providing information in writing. It is not intended to regulate the process of commencing legal proceedings, or quasi-legal proceedings, such as payment claims and adjudication application, in Victoria. It would be absurd, for example, to suggest that the ETA authorised a party to ‘serve’ a writ or a statement of claim in this court via email, even though a writ may answer the description of information ‘permitted to be given in writing’.” (Paragraph 22)
46 In any event, he said s8(2)(b) of the “ETA” requires that the person to whom the information is given must consent to its being given electronically. Proof that the parties corresponded by email is not sufficient, “Rather, Pelligra must show that ACM consented to the service of payment claims specifically by electronic means”. (Paragraph 24)
47 In the present case, he said Australian Crane disputes proper service receipt by Australian Crane of unilateral communications from Pelligra as is evidenced by the affidavit of Mr Potter sworn 20 March, filed on behalf of Australian Crane, does not establish the necessary consent. (Paragraph 25)
48 He referred to the explanatory statement accompanying the ETA, stating:
“It is not intended that consent should be inferred from an electronic communication that contains an express refusal to deal by electronic means. If a person sent an electronic communication containing a message in which the person explicitly stated that they did not want to receive any or all information in the form of any electronic communication, then that express withdrawal of consent must be accepted.” (Paragraph 26)
49 Once it is accepted, as Mr A R Morrison quite correctly did on behalf of Australian Crane, that s50 of the Act is facultative and not mandatory, it cannot be said that s50 includes any implicit prohibition. Section 50 cannot be prayed in aid by Pelligra. It remains for Pelligra by some other means to establish service of the invoices as “payment claims” under the Act.
50 In Amasya’s case, Vickery J said at [121]:
“There is no mandatory requirement expressed in s 15 of the Act for payment schedules to be served exclusively by the methods set out in s 50.”
51 By equality of logic, there is no mandatory requirement expressed in s14 of the Act for payment claims to be served exclusively by the methods set out in s50.
52 I am unable to detect any significance in the distinction in language in s14, requiring service of a payment claim, and s15, requiring the provision of a payment schedule.
53 Section 49 of the Interpretation of Legislation Act 1984 deals with the proper construction of provisions for postal service in statutes and subordinate instruments. These provisions apply whether the word “serve” or “give” or “send” or “deliver” or “any other expression” is used. This provision has no direct application in the present dispute. It indicates, however, a legal predilection not to draw distinctions between various verbs having similar purport relative to the service or giving of notices or documents. In my view, the reasoning of Vickery J in Amasya’s case applies alike to ss14 and 15 of the Act.
54 Section 48 of the Act prohibits contracting out. It would seem, therefore, that a building contract to which the Act applies could not validly prohibit any of the modes of service provided for in s50. Here, however, as previously noted, s50 has no application and so the issue of “contracting out” does not arise since it neither authorises nor prohibits service by email.
55 In his submissions in reply on behalf of Pelligra, Mr Ritchie contended that the situation as to receipt of the invoice claim was the same as in Amasya’s case. He referred to paragraphs 17-21 of the affidavit of Mr Potter sworn 6 February 2020 and filed on behalf of Australian Crane, which he said entailed admission of receipt of the various invoice/claims, referring variously to claims having been “sent”. I accept that submission.
56 He said that paragraph 4 of Pelligra’s Further Submissions in Reply:
“admissions of Mr Potter about the payment claims being ‘issued’, ‘made’ and ‘sent’ coupled with no denial of receipt, is sufficient to establish, on the balance of probability, that the payment claims were received by the defendant and came to its attention.” (Paragraph 4)
57 Given the provisions of the contract, whilst the rendering of the invoices might be regarded as “making or lodging a claim” for the purposes of s8(5) of the Electronic Transactions (Victoria) Act 2000, I cannot accept that, upon the evidence, a finding could be made that Australian Crane had consented to the information being given by means of an electronic communication. (s8(1)(b))
58 Ultimately, the question of whether there has been valid service turns upon the significance of the contractual provision excluding service by email. In Amasya’s case, Vickery J said the approach of:
“recognising that documents to be served under the Act may be served by email, unless expressly required otherwise by the statute, is consistent with contemporary practice to facilitate electronic transactions in business and a recognition, in the context of the importance of electronic communications to the economy as a whole …” [122]
59 It seems surprising to say the least that standard contractual terms drawn by a builders’ trade association should prohibit the giving of notices by email.
60 I cannot accept the submission on behalf of Australian Crane that s47 of the Act is supportive of its position. That section provides:
“(1) Subject to section 48, nothing in this Part affects any right that a party to a construction contract—
(a)may have under the contract; or
(b)may have under Part 2 in respect of the contract; or
(c)may have apart from this Act in respect of anything done or omitted to be done under the contract.
(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).
(3) 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.
(4) In any arbitration proceedings or other dispute resolution proceedings under the construction contract, the person determining the arbitration or dispute must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order or determination or award the person makes in those proceedings.
(5) Nothing in this Part affects any right that a principal may have under any contract except as expressly provided for in this Act.”
61 The effect is to render determination, judgments and adjudications under the Act provisional, only, and capable of being revisited in ordinary contractual proceedings as between the parties thereafter. This capacity to revisit in due course constitutes the justification for the overriding of contractual arrangements between the parties as provided for in the statute on a purely interim basis.
62 On behalf of Pelligra, Mr Ritchie contended that clause 33.4 of the contract prohibiting service by email had no application to proceedings under the Act because it applied only to notices, et cetera, “required or permitted to be served by the contract”. The authority or requirement for the service of payment claims was, he said, to be found in the Act, not the contract. (Plaintiff’s Primary Submissions 25 March, paragraphs 18-20)
63 Clause 32.2(a) of the contract, which is quoted above, states that Pelligra “is entitled, if elected, to make and pursue payment claims under and in accordance with the provisions of [the Act]”. In my view, therefore, it can be said that the service of payment claims is “permitted by the contract”.
64 The primary source of authority which would be sufficient in itself is the statute, but the contract also provides its own express permission. I therefore reject the contention that clause 33.4 has no application to the service of payment claims under the Act.
65 The final question, therefore, as to this issue is whether the contractual prohibition on service by email, which is not excluded in any way by any provision of the Act, cuts across any approach along the lines of “once it is proven that the document was in fact received and came to the attention of the relevant part, the issue of service is resolved”.
66 In Metacorp’s case, Vickery J said:
“189.Harking back to the observations of McInerney J in Pino v Prosser, it would, in my opinion, be remarkable to the point of seeming absurdity, that a respondent who, on his own evidence admits that he was able to respond to the payment claim, have it assessed within the statutory time and have a payment schedule prepared and served so as to fully protect his interests, should later be in a position to have a Court declare that the payment claim was invalid because of improper service at the outset of the process.
190.As I observed in Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd in relation to the submissions advanced by the plaintiff Hickory in that case:
The submissions made by Hickory to which I have referred, smack of excessive technicality. The legislature did not intend, in my view, that precise compliance with all of the more detailed requirements of the Act is essential to the existence of a valid determination. To approach the matter in the manner suggested by Hickory would not accord with the legislative intention disclosed in the Act that adjudication determinations should be made and given effect to with minimum delay and therefore should be approached with minimal technicality and court involvement.
True it is that the Act places the claimant in a privileged position in the sense that it acquires rights that go beyond its contractual rights. However, it is artificial to elevate this consideration to the point where it operates to insist on strict compliance with every procedural requirement with the attendant risk of the process being declared a nullity in the event of non-compliance, as the price for the privilege. In my view, it is not of sufficient weight to displace the legislative intention which I have described.” ([2010] VSC 199]
67 The crucial distinction between that case and the one before me is the express prohibition on email service. I was referred to no authority touching on this point. With utmost hesitation, and in accordance with the reliance placed by Vickery J upon the “Project Blue” principle in his decision in Amasya’s case, I conclude that there is no reason to suppose that Parliament intended that a boilerplate clause in a building contract could baffle and frustrate the crucial rights given to building contractors under the Act in circumstances where the relevant payment claim had come to the attention of the respondent to the claim even if not by an authorised means of service.
No reference date for the amounts claimed
68 Mr A R Morrison, on behalf of Australian Crane, noted that the entitlement to make a payment claim for a “progress payment”, as is made by Pelligra here, depends upon s9 of the Act. That section provides inter alia:
“(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
…”
69 He said resort could be had to sub-s(2) of that section to find a reference date only if the contract was silent on the issue of progress payments that sub-s(2) could be resorted to. (Defendant’s Primary Submissions 12 March 2020, paragraph 3) He said that clauses 1.11 and 25.1(a) of the contract provided for periodic entitlements for Pelligra to claim progress payments every 10 days, but an attached document to the contract, referred to in the Second Schedule as “progress claims schedule”,[1] set out a series of “milestones”. He said that the contract needed to be read as a whole and the schedule of “milestones” should prevail, on the basis of the principle “generalia specialibus non derogant”. (paragraphs 4-6)
[1]This is the same document as the document attached to the contract, entitled “Progress Payments Schedule”
70 Therefore, the reference dates arose only on the conclusion of each of the “milestone” stages. He said by reference to the affidavit of Mr Potter, and the affidavit and report of Mr Tom O’Dowd, building consultant, it could be seen that the only completed stage was for Panel Erection work. (Ibid, paragraphs 6-10)
71 Mr Ritchie contended, however, that a reference date “accrued every 10 business days from the start of work on 7 April 2017”. (Plaintiff’s Primary Submissions 25 March 2020, paragraph 5) As to the payments schedule, he said that it was “unclear” and not referred to in any of the other terms of the contract. He said this “contrasted with the clear provisions that provide for payment claims to be made every 10 business days from the commencement”. (Ibid, paragraph 13)
72 Secondly, he said that the schedule did not specify a date nor did it specify a date by reference to which the amount of a progress claim could be calculated. Rather, it “simply allocated parts of the Price to components of the Works”. (Ibid, paragraph 14)
73 In any event, he said the evidence in various affidavits by Mr Kellock and the report by Mr O’Dowd established that the relevant works had been completed by the time the payment claims were made. He referred to evidence as to ground, site work, drainage and fittings, slab works and panel erection. As to the last of these, it is to be noted that the primary submissions on behalf of Australian Crane concede that this work had been completed.
74 On behalf of Australian Crane, Mr Stephenson reiterated Mr Morrison’s contention as to the “progress claims schedule” being the overriding provision. He referred to the entitlement of the document as “Progress Payments Schedule”. He said that the Progress Payments Schedule was subscribed to by both parties and identified the specific items of construction work to which each payment relates. Given clause 25.1(a) overriding effect would leave the schedule “redundant or of no practical effect”, a construction which should be avoided. He said that invoices 107, 110 and 125 “purport to claim payment in accordance with the progress claims schedule, in that they seek payment for an entire stage of work under the Contract”. (Defendant’s Further Submissions 26 March 2020, paragraph 15)
75 Then, Mr Stephenson stepped back from the concession made by Mr Morrison as to the completion of the panel erection stage, saying “ACM’s evidence establishes that none of the relevant stages of the Works are complete, or were complete at the time the payment claims are alleged to have been served”. (Ibid, paragraph 17) Contrary evidence from Mr Kellock should not, he said, be accepted because Mr Kellock was not an independent expert like Mr O’Dowd. He referred to Dura (Australia) Constructions Pty Ltd v Hue Boutique Linen Pty Ltd [2012] VSC 99. He referred to Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340 [62], contending that completion of the relevant work was a precondition to making a valid payment claim. (Ibid, paragraphs 19-22)
76 The result, he said, was that “the only amounts claimed by Pelligra for which there are a valid reference date are those claimed pursuant to invoices 148, 149, 150, 158, and 159, which relate to works outside the scope of each of the stages set out in the progress claims schedule. Given that, at its highest, Pelligra is only entitled to payment of $312,647.82 pursuant to section 16 of the Act, being the total amount claimed pursuant those invoices. (sic)” (Ibid, paragraph 22)
77 In my view, the boilerplate provisions in the standard printed contract on the one hand, and the Progress Payments Schedule on the other hand, are fundamentally inconsistent. I do not accept Mr Ritchie’s contention that the schedule can be regarded as merely an allocation of percentages as to various stages of the work. That view of it gives no operation at all to the word “payments” in the heading, and the nomination of particular sums of money inclusive of GST relative to each nominated stage. The schedule and the boilerplate provisions cannot live together. The conflict must be resolved.
78 In their work, The Interpretation of Contracts in Australia [(2012)], Sir Kim Lewison and Mr David Hughes state the following rule to resolve internal inconsistencies in a written contract.
“If a clause in a contract is followed by a later clause which destroys the effect of the first clause, the later clause is to be rejected as repugnant and the earlier clause prevails. If, however, the later clause can be read as qualifying rather than destroying the effect of the earlier clause, then the two are to be read together, and effect given to both.” [9.08] page 431
79 This formulation derives from the opinion of the Judicial Committee of the Privy Council delivered by Lord Wrendury in Forbes v Git [1922] 1 AC 256, 259.
80 The present case is an instance of a later clause or provision, viz the Progress Payments Schedule, destroying the effect of the earlier provision in clause 25.1(a) dealing with progress payments. One cannot be seen as qualifying the other. If the rule is of universal effect, it would resolve the present issue in favour of Mr Ritchie’s contention.
81 Further analysis and references to authority later in the paragraph and in pages 432-435 of Lewison and Hughes indicate that the rule in Forbes v Git is a rule of last resort. Certainly it was treated as such by Vickery J in Thomson v Thomson [2008] VSC 375 [14]-[16] quoted at pages 433-4 of Lewison and Hughes. His Honour said at the end of the passage: “This highly technical rule, which smacks of the days when legal fictions once flourished, has been severely criticised, and is never applied, it seems, except as a last resort ”.
82 At paragraph [9.10], 437-441, Lewison and Hughes state a further rule:
“In the case of inconsistency between written (or typed) clauses in a contract specially negotiated by the parties and printed clauses forming part of the standard form, the written clauses will prevail.”
83 The learned authors note that this statement of principle was approved by the Supreme Court of New South Wales in Brentworth Partners Estate Agents Pty Ltd v Gordon [2007] NSWSC 1135 [53]. The authors refer to a wide range of authority both in England and Australia supportive of the principle. In particular, they refer to a decision of Powell J, Karagulaski v Vasil Bros & Co Pty Ltd (1981) 1 NSWLR 267, 272, where his Honour resolved an inconsistency in the terms of an option agreement upon the following basis:
“It is legitimate to give to the words typed in a greater weight or effect [than the printed text], for they represent the immediate words selected for the expression of the plaintiff’s intention: …”
84 His Honour referred to a number of authorities.
85 Here, the schedule which is typed, represents a more immediate expression of the parties’ intention than does the printed boilerplate from a standard form provided by the Master Builders Association.
86 The next question to consider is what significance I should attach to the competing evidence as to completion of various stages of the works expressed, on the one hand by Mr Kellock, on behalf of Pelligra, in a number of affidavits, and the views expressed by Mr Potter and building consultant, Mr Tom O’Dowd, in their affidavits on the other.
87 Both Mr Ritchie and Mr Stephenson invited me to make findings based on acceptance of the one view or the other as to completion. Mr Kellock sought to explain apparent incompleteness by references to issues such as “sequencing”. Mr Stephenson referred to the decision of the High Court in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340 in support of his contention that the evidence demonstrated the stages were incomplete and therefore no entitlement to make a payment claim arose because the reference date had not arisen. In Southern Han, the High Court unanimously reversed a holding by the New South Wales Court of Appeal that a reference date could arise in accordance with the terms of the relevant written contract despite the proprietor’s having exercised a right to take the whole of the remaining work under the contract out of the hands of the contractor, viz to terminate the contract prospectively.
88 The Court held that the exercise of power by the proprietor suspended any further reference dates and that the occurrence of a reference date was a precondition to the making of a valid payment claim. The effect of the proprietor’s exercise of power was to suspend further reference dates not only for work yet to be completed, but also for work already completed but not paid for at the time of the works being taken out of the hands of the contractor. (2016) 260 CLR 340, 364 [76]
89 The present dispute offers no analogy with the one considered by the Court in Southern Han. It will be recalled that s16(4) of the Act, pursuant to which the present application may be brought, a proprietor is specifically precluded from bringing a cross-claim against the builder or from raising any defence in relation to matters arising under the construction contract. The apparent injustice in this prohibition is largely mitigated by the fact that:
(a) as previously explained, determinations under the Act are provisional only and may be revisited in a subsequent orthodox piece of building contract litigation; and
(b) a proprietor aggrieved by incomplete or defective work has its remedy by serving a payment schedule explaining why some or all of the amounts claimed are not payable.
leaving the matter to be taken to adjudication by the proprietor under s18 of the Act if it wishes.
90 Here, Australian Crane failed to protect its position by serving any payment schedules.
91 Proceedings under the Act are typically dealt with in a relatively summary manner and upon affidavit material. Certainly, there is no expectation of the sort of lengthy, elaborate and highly costly process involved in a traditional building case with Scott schedules, duelling experts, et cetera.
92 Here, by reference to the concept of the “reference date”, Australian Cranes’ contentions seek, by a sidewind, to introduce all those matters into a process which does not even involve cross-examination, much less attendance on site for views, et cetera.
93 In my opinion, Parliament did not intend that these sorts of issues should be ventilated in proceedings under the Act. To take a hypothetical, a builder authorised by a relevant contract to make a progress claim at the “fixing” stage of the contract and rendering a progress claim for that stage, would, on the face of it, appear to answer the description of a person “who is, or who claims to be entitled to a progress payment …”. (s14(1)
94 If some of the work relative to that stage were incomplete or defective, the payment claim, for that reason alone, would not be invalid. The proprietor would be expected to serve a payment schedule in accordance with s15, identifying an appropriate “excluded amount” as reflecting the incomplete or defective nature of any of the work. At the builder’s election, the appropriateness of the exclusions could be the subject of an adjudication under s18. In any event, the whole matter could be revisited under orthodox contractual litigation afterwards.
95 Given that Australian Crane passed on its opportunity to place in issue the completeness of various stages of work by service of one or more payment schedules, I do not regard it as appropriate to go into that issue in this proceeding.
96 Mr Ritchie contended that, were the Progress Payments Schedule to be given effect to the exclusion of clause 25.1 of the contract conditions, contrary to his primary submission, the schedule nevertheless did not make contractual provision for reference dates. (Primary Submissions 25 March 2020, paragraph 14) The schedule did not identify any “dates”.
97 Mr Stephenson rejected this view, analysing the existence of a reference date by resort to what he said were proven instances of failure to complete relevant stages. Mr Ritchie cited no authority.
98 Reference to the entries for the word “date” in Stroud Judicial Dictionary Words and Phrases (6th ed) 601-3 includes the following:
“‘Date’, though sometimes used as the shortened form of ‘day of the date’, is not its synonym; but means the particular time on which an instrument is given, executed, or delivered. (Howard’s Case, 1 Raym. Ld 480; Armitt v Breame, 2 Raym. Ld 1076; Pewtress v Annan, 9 Dowl 828, at pp 834, 835). …
The word ‘date’ is much more commonly descriptive of a day than of any smaller division of time.” (per Stormonth Darling L.O., Simpson v Marshall 37 SLR 316).
99 These entries shed little or no light on the present question. However, what follows is a list of various statutory expressions such as “date of the withdrawal”, “date on which … the action is taken”, “date of dismissal”, “date on which proceedings were commenced”, and so on. These usages demonstrate that, whilst the word “date” frequently refers to a particular day on a particular month of a particular year, it also comprehends, in appropriate contexts, a reference to a day on which a particular event occurred, a period of time elapses, et cetera.
100 In the present context, the relevant dates which can be regarded in accordance with the terms of the Act as reference dates, are the dates of completion of the several stages. For reasons already explained, a reference date could be regarded as having arisen, under this contract, on the day on which groundwork, site work, drainage and footings were completed or on which Pelligra claimed completion of those items.
101 I turn, therefore, to consider the invoices now pressed as payment claims on behalf of Pelligra.
102 Invoice 125 was dated 12 October 2017 and forwarded under an email of that date. It sought payment for “panel erection”, which constitutes one of the progress payment dates or “milestones”, as Mr Stephenson’s contentions describes them. The plaintiff should succeed for the amount claimed of $662,640 inclusive of GST.
103 Invoice 110 dated 25 September 2017 sought payment of $883,520 inclusive of GST. It was said to relate to “slab works”, which again is one of the stages or “milestones” in the Progress Payments Schedule. The plaintiff should succeed with respect to its payment claim constituted by this invoice.
104 Invoice 107 seeking payment of $883,520 relative to “underground, site works and footings” corresponds substantially to the second stage or “milestone” in the Progress Payments Schedule, “groundwork, site works, drainage, footings”, and represents 20 per cent of the lump sum contract price of $883,520.
105 Whilst it is well-established by the highest authority that the actions of parties in performance or purported performance of a written contract are not admissible as to the true construction of that contract, it is nevertheless noteworthy that reference to the invoices in Exhibit PK4, leaving aside those that are described as “contract adjustments”, can be seen to be referrable to the stages or “milestones” in the Progress Payments Schedule.
Treatment of Part Payments
106 As a fallback position, Australian Crane alleges a failure on the part of Pelligra properly to account for the payments which Australian Crane has already made. Mr Morrison, in his contentions dated 12 March paragraphs 17-21, said that a payment which it is common ground was made by Australian Crane of $441,760 towards the deposit, represented an overpayment of $220,880. He said, and I do not understand this to be disputed, that further payments of $790,000 were made by way of payments of $250,000, $200,000, $250,000 and $90,000.
107 Mr Morrison said that, in the absence of an appropriation by either debtor or creditor, these amounts should be allocated to the earliest debt. He referred to Sibbles v Highferm Pty Ltd (1987) 164 CLR 214 and Re Walsh ex parte Deputy Commissioner of Taxation (1982) 42 ALR 727, 728-9. These considerations led Mr Stephenson, (Defendant’s Further Submissions 26 March 2020) to say, “Pelligra is only entitled to payment of the sum of $1,254,536.62 (inclusive of GST)”. (Paragraph 27)
108 Mr Ritchie responded, contending that Australian Crane was precluded from raising these matters in proceedings under s16 of the Act because s16(4)(b)(ii) precluded Australian Crane from raising “any defence in relation to matters arising under the construction contract”.
109 In my view, there clearly is a relationship between the argument raised by Australian Crane in reliance on the “first in first out” or the rule in Clayton’s case and the contract. Nevertheless, it would seem bizarre to find that a defence of payment could not be raised under the statute in response to an action based on a payment claim under the Act.
110 The payments made by Australian Crane should be allocated in the manner contended for by Messrs Morrison and Stephenson.
Interest
111 Section 12(2) of the Act provides that interest is payable on the unpaid amount of progress payments at the greater of the rate prescribed under s2 of the Penalty Interest Rates Act 1983 or the rate specified under the construction contract.
112 Clause 1.13 of the contract designated “Interest on late payments” nominates no percentage rate with the effect that “if nothing is stated it shall be the rate fixed pursuant to s2 of the Penalty Interest Rates Act”. The judgment should include interest accordingly at the relevant rate fixed under the Penalty Interest Rates Act.
Costs
113 I have heard no submissions on the question of costs and so I will reserve them.
Disposition
114 I will direct the parties within 14 days of the date of these reasons to bring in short Minutes to give effect to them.
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