Promax Building Developments Pty Ltd v 167 Lower Heidelberg Road Pty Ltd

[2016] VCC 1960

IN THE COUNTY COURT OF VICTORIA Revised
Not Restricted
Suitable for publication

AT MELBOURNE

COMMERCIAL DIVISION
BUILDING CASES LIST

Case No. CI-16-05354

PROMAX BUILDING DEVELOPMENTS PTY LTD	Plaintiff
v.
167 LOWER HEIDELBERG ROAD PTY LTD	Defendant

---

JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	16 December 2016
DATE OF JUDGMENT:	16 December 2016
CASE MAY BE CITED AS:	Promax Building Developments Pty Ltd v. 167 Lower Heidelberg Road Pty Ltd
MEDIUM NEUTRAL CITATION:	[2016] VCC 1960

REASONS FOR JUDGMENT

---

Catchwords:             Building contract – Payment claim under the Building and Construction Industry Security of Payment Act 2002 (Vic) – Invoice comprising payment claim replaced by later “revised” invoice – Whether original payment claim withdrawn – Parties following established practice of progress claims being discussed between the contractor and a quantity surveyor appointed by the owner’s financier, and revised invoices being issued by the contractor to reflect the result of those discussions – Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 applied.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N. Phillpott of Counsel	Brixton Legal
For the Defendant	Mr R. Boadle of Counsel	Grindall + Patrick

HIS HONOUR:

1Promax Building Development Pty Ltd (“the Contractor”) is the contractor for a building development in Ivanhoe. 167 Lower Heidelberg Road Pty Ltd (“the Owner”) is the owner/developer.

2The Contractor seeks judgment against the Owner in respect of a progress claim in the sum of $299,028.83, pursuant to section 16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 (Vic).

3The disputed progress claim is the tenth claim made by the Contractor pursuant to a written building contract with the Owner. On 15 November 2016, progress claim no. 10 was sent to the Owner. The claim documents included an invoice for $310,469.50, a trade breakdown and separate invoices relating to an extension of time claim and a variation.

4Over the following days, the parties followed a practice which had been generally adopted by the parties in relation to the previous 9 progress claims. That practice was not strictly in accordance with the process laid down in the contract for the making of progress claims.

5The contract process anticipated the appointment of an independent superintendent; usually the architect. The Owner was substituted in the contract as the superintendent. The practice adopted by the parties, and generally followed in relation to the previous claims was that:

a.the Contractor submitted a monthly progress claim in accordance with the building contract;

b.the works completed were assessed by a quantity surveyor who was appointed essentially to satisfy the Owner’s financier that there was appropriate value in the works claimed for payment;

c.discussions occurred between the quantity surveyor and the Contractor;

d.the Contractor issued a revised invoice reflecting the results of the quantity surveyor’s discussion with the Contractor;

e.on occasions (but not on each occasion) a determination was made by the Owner as superintendent as anticipated by the contract process;

f.payment was made to the Contractor; the GST component by the Owner and the balance of the revised invoice by the financier.

6In relation to progress claim no.10, after the quantity surveyor had investigated the matter and discussed the works completed with the Contractor, an email dated 22 November 2016 was sent by the Contractor to the Owner.

7The relevant parts of the email are as follows:

“Please find attached revised trade breakdown & tax invoice for claim #10 as per QS recommendation.

Can you please send through your superintendent certificate.

Furthermore, can you please attend to the GST payment as soon as possible along with forwarding all relevant documentation to the banker”.

The email attached, “Claim No.10 Revised.pdf; Claim No.10 – Tax Invoice – Revised.pdf”.

8The attached tax invoice was still dated 15 November 2016 although, rather than claiming a total (including GST) of $310,469.50, the revised invoice claimed $250,195 as the “10th monthly progress payment”, which with GST of $25,019.50, totalled $275,214.50. The quantity surveyor’s report to the financier had assessed the sum of $250,195 as the “amount recommended for payment (excluding GST)”.

9In response to the revised invoice, the Owner, on 2 December 2016, served a payment schedule on the Contractor in accordance with section 16 of the Act. The letter enclosing the payment schedule noted as follows:

“We confirm receipt of your email of 22 November 2016, together with the attached revised progress claim 10 and the revised trade breakdown (Revised Progress Claim 10) replacing in full the original payment claim No.10 dated 15 November 2016.

For the avoidance of any doubt, 167 Lower Heidelberg Road Pty Ltd consented to the withdrawal of the original payment claim no. 10. That first version of payment claim no. 10 was quite clearly withdrawn and replaced by the Revised Payment Claim 10 to incorporate the input of the quantity surveyor”.

10The issues for determination in the proceeding are:

a.whether the original progress claim served on 15 November 2016 was withdrawn by the Contractor when it served the revised invoice;

b.alternatively, whether the original progress claim remained valid, as the revised claim served on 22 November 2016 is a nullity as it breaches section 14(8) of the Act which provides that, “A claimant cannot serve more than one payment claim in respect of each [monthly] reference date under the construction contract”;

c.whether the payment schedule served on 2 December 2016 is within time or out of time.

11In my view, the Contractor must be taken to have withdrawn the original progress claim served on 15 November 2016 when it served the revised claim on 22 November 2016. Hayrettin Girgin, the sole director of the Contractor, has stated in an affidavit that, “Promax did not, at any time, withdraw the payment claim served on the Developer on 15 November 2016, nor did it replace that first in time payment claim with the revised tax invoice”.

12I consider, however, that Mr Girgin’s statement cannot be accepted for the following reasons:

a.the revised invoice would not be a valid progress claim under the Act unless the earlier claim was withdrawn;

b.the intention of the Contractor was clearly that the revised claim was to effect a withdrawal of the earlier claim;

c.the replacement of the earlier claim by a revised claim was precisely the process that the parties had followed for the earlier progress claims.

13The Contractor’s counsel, Mr Phillpott, relied upon the decision of McDougall J in the Supreme Court of New South Wales in Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 (“Kitchen Xchange”).

14In my view, the reasoning of McDougall J in Kitchen Xchange supports the conclusions I have reached in this case. I rely upon the following statements in the judgment:

a.at paragraph [17], McDougall J accepted that, “it is at least open to a claimant, with the consent of the respondent, to withdraw a payment claim and to substitute for it another one, relating to the same reference date, without contravening s.13(5)”. This is the equivalent of section 14(8) in the Act;

b.at paragraph [26], McDougall J said that, “The concept of withdrawal of a payment claim must include, at least, that something is said or done from which the respondent, the recipient of the payment claim should understand that the claimant is not relying upon it but instead relying on some different payment claim”;

c.at paragraph [27], McDougall J said that, “whether or not implied unilateral withdrawal is sufficient if is a difficult question. It seems to me, in particular given the serious consequences that follow if a respondent does not reply to a payment claim by providing a payment schedule, that the circumstances must make it very clear to the respondent that a payment claim is to be withdrawn, if it intended that withdrawal should occur”.

15In Kitchen Xchange, McDougall J was not satisfied that the claimant (Contractor) had withdrawn its original claim. The facts were very different than the present case. In Kitchen Xchange, the claimant, after submitting a claim, received a response “which in my view was a payment schedule and [having] considered what it said the [claimant] decided, as it were, to up the ante and put in a payment claim which not only reinstated the hitherto conceded amounts, but also introduced a totally new and hitherto unheralded claim” (para. [28]).

16In the present case, the Owner was fully involved in the process by which the revised invoice was submitted; it being the process which had been followed for the course of the project in relation to all progress claims. In the circumstances, the Owner was entitled to assume that the revised claim served upon it was intended as a valid replacement claim, in respect of which the Owner had the right to respond with a payment schedule in accordance with the Act.

17Accordingly, the Contractor’s appropriate course was then to pursue the dispute by the adjudication processes under the Act and not to seek judgment pursuant to section 16. The proceeding must therefore be dismissed.

- - -

Certificate

I certify that these 4 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 16 December 2016.

Dated:       16 December 2016

Mi-Lin Chen Yi Mei 

Associate to His Honour Judge Anderson