Simtec Group Pty Ltd v Ascot Building Pty Ltd

[2016] VCC 1127

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

AT MELBOURNE

COMMERCIAL DIVISON
BUILDING CASES LIST

Case No. CI-16-03149

SIMTEC GROUP PTY LTD	Plaintiff
v.
ASCOT BUILDING PTY LTD	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	5 August 2016
DATE OF JUDGMENT:	10 August 2016
CASE MAY BE CITED AS:	Simtec Group Pty Ltd v. Ascot Building Pty Ltd
MEDIUM NEUTRAL CITATION:	[2016] VCC 1127

REASONS FOR JUDGMENT

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Catchwords:              Building contract – Payment claims served pursuant to the Building and Construction Industry Security of Payment Act 2002 (Vic) – Alleged that settlement agreement reached – Whether settlement agreement breached section 48 by restricting the operation of the Act.                  

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N. Phillpott of Counsel	Ward & Co Legal Consultants
For the Defendant	Mr R. Andrew of Counsel	Giannakopoulos Solicitors

HIS HONOUR:

1Simtec Group Pty Ltd (“Simtec”) is an electrical contractor. Mr Simon Papasavvas is the sole director and shareholder of Simtec. In 2015 and 2016, Simtec performed electrical work at a number of building sites around Melbourne for Ascot Building Pty Ltd (“Ascot”). During this period, Ascot was constructing two townhouses for Mr Papasavvas and his wife at Box Hill North.

2Simtec has brought an action against Ascot to recover the sum of $91,638.35, being the total of seven payment claims for electrical work it performed. The proceeding, commenced by Originating Motion, seeks judgment pursuant to section 16(2) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (“the Act”).    

3Simtec’s counsel, Mr Phillpott, withdrew two claims relating to the Yeneda and Carbine projects as the payment claims served on Ascot failed to note that the claims were made under the Act.

4The principal matter raised by Ascot’s counsel, Mr Andrew, in relation to the remaining claims was that in a meeting on 6 June 2016 between Mr John Toumazou (a director of Ascot) and Mr Papasavvas, Simtec and Ascot agreed to the settlement of:

a.all claims by Simtec against Ascot for electrical work, including the seven payment claims the subject of the proceeding and any further claims in relation to projects at Balwyn North and Moonee Ponds;

b.a claim by Ascot against Mr and Mrs Papasavvas for payment of $258,213 in respect of the construction of the town houses at Box Hill North.

5Mr Andrew also raised a number of further defences in relation to the five payment claims, relating to:

a.whether the claims were made before the relevant reference date;

b.whether the works, for which payment was claimed, were incomplete;

c.whether the payment claims adequately detailed the work claimed, and/or included “excluded” amounts.

The alleged settlement agreement

6On 23 April 2016, Ascot served on Mr and Mrs Papasavvas a claim of $258,213.03 for the lock up stage of the town houses contract. Mr Toumazou stated in an affidavit filed in the proceeding that in early May 2016, Mr Papasavvas agreed that he and his wife would pay the claim for $258,213.03 “less an amount of $50,000 (including GST) which was to be applied towards payment by Ascot in respect of invoices that had been issued by Simtec to Ascot”.

7Email correspondence between 15 and 27 May 2016 suggests that Mr Papasavvas and Mr Toumazou had negotiated an arrangement along the lines stated by Mr Toumazou in his affidavit. However, at that stage, no final agreement had been reached.

8Mr Papasavvas wanted the invoice from Ascot to state, “Deduction of $50,000 for items that have already been paid directly by client”. In response, Mr Toumazou sent a revised invoice which noted, “Deduction OC $50,000 inc GST”. The email attaching the invoice stated, “we are giving the deduction for amounts you have instructed us to take off for what is owed to you by Ascot”. Mr Toumazou stated in his affidavit, “I did not agree to amend the lock up claim in the manner requested by Mr Papasavvas”.

9Simtec’s solicitors sent a letter of demand to Ascot on 3 June 2016. Mr Toumazou said that in a meeting with Mr Papasavvas on 6 June 2016, they “reached a three way agreement between Mr Papasavvas and his wife, Simtec and Ascot, to settle the disputes about our respective payment claims”.

10Mr Toumazou said that the settlement agreement was as follows:

“(a)      Mr & Mrs Papasavvas would pay Ascot the sum of $258,213.00 (including GST) for all works which had been performed at that time at 129 Dorking Road, Box Hill North, and not claim for variations and additional works past lock up; and

(b)Ascot would not perform any further work under the Dorking Contract, which was mutually ended. Mr and Mrs Papasavvas were going to complete it themselves and I agreed to assist with passing over the relevant trades;

(c)Ascot would pay Simtec the sum of $85,140.00 (including GST) in full settlement of all claims that Simtec had in relation to Electrical Works which it had performed at that time. This was to be paid by $35,000 first, then the balance was to be paid after Ascot received the Lock Up payment;

(d)Simtec would not issue any further claims to Ascot in relation [to] works which had been performed by Simtec including the Electrical Works at 17 Cumberland Avenue, Balwyn North, and 102 Park Street, Moonee Ponds”.

11In an answering affidavit, Mr Papasavvas said that, “while I admit that discussions occurred in an attempt to resolve all of the disputes between Ascot, Simtec and my wife and I, and that a ‘contra agreement’ had been proposed, I deny that any ‘settlement agreement’ was reached”.

12Mr Phillpott submitted that the defence based upon a “settlement agreement” should fail because:

a.there was no evidence that a concluded agreement had been reached, particularly as no time for the making of payments had been agreed;

b.if there had been a concluded agreement reached, the failure by Ascot to make the payment of $35,000 brought the agreement to an end;

c.section 48 of the Act prevented such an agreement having any effect.

13In response, Mr Andrew submitted that:

a.Mr Toumazou’s affidavit has raised a substantive issue in relation to the “settlement agreement” which should be determined at trial, after hearing oral evidence including cross-examination, rather than being determined upon the hearing of a summons where there were conflicting affidavits;

b.Mr Toumazou’s evidence establishes that there was to a sequence of payments. In the absence of specific agreement as to the time for payments, the law would construe the agreement as requiring payment to be made within a reasonable period. Alternatively, Simtec could have made time of the essence by the service of a notice requiring payment by a particular date;

c.in the absence of the service of such a notice, the fact that Ascot did not make the initial payment of $35,000 was not a sufficient basis to effect the termination of the agreement.

14Section 48 of the Act provides as follows:

“(1)      The provisions of this Act have effect despite any provision to the contrary in any contract.

(2)      A provision of any agreement, whether in writing or not –

(a)under which the operation of this Act is, or is purported to be, excluded, modified or restricted, or that has the effect of excluding, modifying or restricting the operation of this Act; or

(b)that may reasonably be construed as an attempt to deter a person from taking action under this Act – is void”.

15The terms of the section appear clear and unambiguous. They are consistent with the intended purpose of the Act which has been expressed to be as follows:

“The Building and Construction Industry Security of Payment Act 2002 was introduced in Victoria to allow for the rapid determination of progress claims under construction contracts or sub-contracts, and contracts for the supply of goods or services in the building industry. The process was designed to ensure cash flow to businesses in the building industry, without parties getting tied up in lengthy and expensive litigation or arbitration. It was intended to establish a process for the fast recovery of progress payments payable under a construction contract. This was to be achieved by a novel procedure which provided for the rapid adjudication of payment disputes at a low cost to the parties” (Grocon Constructors v Planit Cocciardi Joint Venture (No. 2) [2009] VSC 426, per Vickery J at para. 33).

16If a broad interpretation of the Act were to be applied, it may have the effect of preventing parties from compromising a proceeding brought under the Act. Such a result would appear to be inconsistent with the provisions of the Civil Procedure Act 2010 which encourages parties to resolve their disputes at the earliest possible stage.

17It is useful to consider the likely consequences if the facts of the present case had been slightly different. There may have been no dispute or ambiguity in the terms as to payment in the agreement, and Ascot might have actually performed its obligations under the agreement, for example by making the first payment of $35,000 it says was required of it. In those circumstances, it would be surprising, if a court were not to uphold the agreement and prevent the action proceeding. In such circumstances, that result might be achieved by a party making an application for the proceeding to be dismissed as an abuse of process.

18However, the critical matters to consider in the present case are as follows:

a.in his affidavit, Mr Toumazou simply sets out conclusions and not the detail of what he says was discussed with Mr Papasavvas on 6 June 2016;

b.the operative part of the “settlement agreement”, that “Simtec would not issue any further claims to Ascot in relation [to] works which had been performed by Simtec”, included claims previously served concerning six projects, and further claims in relation to those and another project, which may have already been served or which may be served in the future;

c.this provision would have the effect of restricting Simtec’s rights under the Act;

d.the “settlement agreement” appears to be primarily concerned with the town houses contract with Mr and Mrs Papasavvas; both in providing for the payment of the outstanding claim of $258,213 and for the release of Ascot from any further obligations under that contract;

e.the “settlement agreement” provided, in relation to the projects in which Simtec had performed work;

i.for payment of the whole of the sum previously claimed of $85,140, although by two payments, and;

ii.that Simtec would not “issue any further claims” for those projects and for a further project;

f.the “settlement agreement” made no specific provision for the timing of those two payments, save that the making of the second, larger payment, of $50,140, was to be conditional upon Mr and Mrs Papasavvas paying to Ascot the sum of $258,213 in respect of an unrelated personal liability;

g.between 6 June 2016, when the alleged “settlement agreement” was concluded, and the hearing on 6 August 2016, no payment had been made by Ascot to Simtec.

19In the circumstances, it would be a surprising, particularly on the present state of the evidence, if Simtec’s rights under the Act were to be curtailed. No substantial argument was advanced by Mr Andrew as to why the clear words of section 48 should not exclude a defence based on the alleged settlement agreement.

20Further, Ascot had had the opportunity to place evidence before the Court to establish the factual basis upon which Simtec had released Ascot from its obligation to pay for the electrical work it had performed. It is insufficient, in the circumstances, for Mr Andrew to simply rely on Mr Toumazou’s affidavit as having established more than a “fanciful” prospect of the defence succeeding at trial.

21I consider that, in the context of an application for judgment pursuant to section 16 of the Act, the submissions based on the alleged settlement agreement must be rejected.

Sufficiency of the payment claims

22College Place Kew project: Simtec seeks to recover for two payment claims made in respect of this project:

a.on 4 December 2015, in the sum of $3,440.80 for a number of variations specified in the invoice constituting the payment claim;

b.on 3 March 2016, in the sum of $18,200.20 for “fit off and commission”.

23Mr Andrew relied upon evidence by Mr Toumazou that, in respect of the electrical work performed in each of the projects, the parties had agreed that payment would be made by two payments, the first for 50% of the quoted price accepted by Ascot upon the completion of “rough-in”, and the remaining 50% on the completion of the work. The evidence confirms that this was the process established by the parties as the standard basis for the payment of claims.

24In these circumstance, in the absence of written agreements, the relevant reference date for payment would be governed by section 9(2)(c) for a progress claim, and section 9(2)(d)(i) for a final claim. Section 9(1) of the Act provides that the entitlement to a progress payment arises in the present case, “on and from…the date immediately following… the day that…construction work was last carried out under the contract”.

25Mr Andrew submitted that, for electrical work, the work was not complete until the electrical contractor had provided a “certificate of electrical safety” as required by the Electrical Safety Act 1998 and the Electricity Safety (Installation) Regulations 2009.

26In respect of the College Place project, and for some other projects, Simtec had not provided the appropriate certificate. In those circumstance, Mr Andrew contended, the final payment claim for $18,200.20 had not been made “on and from” the appropriate reference date.

27Mr Phillipott submitted that:

a.“construction work”, as it was defined in section 5 of the Act, did not include the provision of a safety certificate, as it was confined to the physical work involved;

b.there was no requirement to provide a certificate before a final claim was made  because, as Mr Papasavvas had said in his answering affidavit, “in all of Simtec’s previous dealings with Ascot, Simtec was only ever asked for the electrical certificate when Ascot was applying for the occupancy permit”;

c.Vickery J in Metacorp Australia Pty Ltd v. Andreco Construction Group Pty Ltd (2010) 30 VR 141 at paragraph 109 said that, “… even if the Act could be construed to require service of a payment claim on or after the passing of the relevant reference date, I do not consider that a payment claim which happened to be served prior to a reference date would constitute a breach of one of the basic and essentially requirements of the Act such as to give rise to an invalidity in the payment claim”.

28I consider that the statement of principle by Vickery J is a sufficient basis to deal with the submission of Mr Andrew. I do not necessarily accept the first two submissions of Mr Phillipott.

29In relation to the final claim for $18,200.20, Mr Andrew referred to the following matters, which were not contested by Mr Papasavvas in his answering affidavit:

a.Simtec’s revised quotation for the College Place project was $32,252;

b.Simtec claimed and was paid a progress claim of $16,126 (50% of the quoted price);

c.the final claim of $18,200.20 for the project was simply described as being for “fit off and commission”;

d.the final claim did not specify in respect of what matters the additional sum of $2,074.20 was claimed. This was referred to in Mr Toumazou’s affidavit as a claim for “excluded amounts”.

30It is clear in my view that, without further explanation in the document, the final claim should have been restricted to 50% of the quoted price, or $16,126. In the circumstances, I cannot enter judgment for more than that sum in respect of the payment claim made on 3 March 2016. Simtec is entitled to judgment in respect of the College Place project final claim for $16,126 and $3,440.80 for the earlier variations, a total of $19,566.80.

31Nungerner Street Balwyn project: Mr Toumazou deposed to the following matters:

a.Simtec’s quotation for the project was to complete the works for a price of $48,961;

b.a progress claim of 50%, or $24,480.50, on 3 November 2015 for the rough-in work was made by Simtec and paid by Ascot;

c.the final claim made by Simtec on 17 April 2016 was for $24,480.50, expressed simply to be for “nungerner unit 1 and 2 fit off;

d.however, on 23 March 2016, certain agreed omissions were made from the scope of the quoted works. The details of the omitted work, comprising “electrical points” not required to be installed, was emailed by Ascot to Simtec that day;

e.after receiving the final claim, Mr Toumazou on 14 May 2016, made a request for a “breakdown of the final claim as there were several electrical points that were removed or not fitted off”. He said that although Mr Papasaavas had stated in a responding email that Simtec had charged “at half of the agreed rate” for certain “points that Simtec had wired and then removed” (presumably at Ascot’s request), Mr Papasaavas had not provided a “breakdown” of the final claim;

f.Mr Toumazou had prepared a schedule of costings for the works actually completed by Simtec, using the rates in the original quotation of $48,961. This showed that only work to the value of $16,489 had been performed, and the final claim was inflated by the sum of $7,991.50;

g.Simtec had failed to complete “the installation of 3 way switch in unit 1… and dimmer light in kitchen of unit 2”.

32It was not submitted by Mr Andrew that the request for a “breakdown” in the email dated 14 May 2016 constituted a valid payment schedule under the Act by Ascot in respect of the payment claim made by Simtec on 17 April 2016. Section 15 of the Act would require service of the payment schedule within 10 business days of service of the payment claim.

33It is difficult to make any independent assessment of Mr Toumazou’s assertions because the exhibit to Mr Toumazou’s affidavit containing the original quotation only includes one of the units (apparently unit 2 as the original price is shown as $24,832.50 on the schedule prepared by Mr Toumazou).

34I consider that these alleged omissions and any appropriate deduction for them, and the alleged incomplete work (the 3 way switch and dimmer light), are all matters which should have been raised in a payment schedule. At this stage, these matters cannot be relied upon to prevent the entry of judgment for the total claim of $24,480.50.

35Hope Street Footscray project: Mr Toumazou asserts in his affidavit that, “Simtec has not completed all of the works that it had been contracted to perform at the Hope Project as it has not completed the installation [of] the smoke detector on the ground floor and the hallway pendant”.

36In the absence of the service of a payment schedule, Ascot cannot “raise any defence in relation to matters arising under the construction contract”, including the alleged failure to perform works under the contract. Other matters raised by way of defence in relation to this claim have already been dealt with in these reasons. Accordingly, Simtec is entitled to judgment for $18,216 on the payment claim.

37Park Street Mooney Ponds project: Mr Toumazou asserts in his affidavit that, “Simtec has not completed the installation of entry pendant and the patching of the ceiling cut out in first floor ensuite that was incorrectly cut out by Simtec”.

38This is not a matter that Ascot can raise at this stage in the absence of a payment schedule. Other matters raised by way of defence have already been dealt with in these reasons. Simtec is entitled to judgment for $7,213.25 on its payment claim.

Proposed orders

39By reason of the analysis of each of the projects, I consider that Simtec is entitled to judgment against Ascot for a total of $69,476.55 as follows:

College Place Project	$19,566.80
Nungerner Street Project	$24,480.50
Hope Street Project	$18,216.00
Park Street project	$7,213.25

40I will enter judgment for $69,476.55 and will hear further from the parties on the questions of interest and costs.

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Certificate

I certify that these 10 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 10 August 2016.

Dated: 10 August 2016

Carla Cianfaglione    

Associate to His Honour Judge Anderson