SJ Higgins v The Bays Healthcare Group Inc
[2018] VCC 805
•15 June 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-18-01109
| SJ Higgins Pty Ltd | Plaintiff |
| v | |
| The Bays Healthcare Group Inc | Defendant |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 May 2018 | |
DATE OF JUDGMENT: | 15 June 2018 | |
CASE MAY BE CITED AS: | SJ Higgins Pty Ltd v The Bays Healthcare Group Inc | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 805 | |
REASONS FOR JUDGMENT
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Subject:CONTRACTS
Catchwords: Building contract – payment claim under the Building and Construction Industry Security of Payment Act 2002 (Vic) (“Act”) – speedy resolution of progress claims – claims should not be approached in an unduly technical manner – what test applies when brought as an application for summary judgment – service of payment claims on superintendent not permitted under contract – cross reference to other documents in possession of principal is sufficient for the purpose of s14 of the Act
Legislation Cited: Building and Construction Industry Security of Payment Act 2002 (Vic) ss14 – 17 and s47; Civil Procedure Act 2010 (Vic) ss61 and 63; County Court General Civil Procedure Rules 2008 (Vic) rr4.05 and 4.07
Cases Cited:3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674; AMD Formwork Pty Ltd v Yarraman Construction Group Pty Ltd [2004] VCC 17; Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391; Fulconstructions v ABP Consultants Pty Ltd [2016] VCC 1732; Hickory Developments v Schiavello (2009) 26 VR 112; John Holland Pty Ltd v Roads & Traffic Authority (NSW) (2006) 66 NSWLR 624; Krongold Constructions (Aust) v SR & RS Wales [2016] VSC 94; Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | R Andrew | Noble Lawyers |
| For the Defendant | A Rollnik | Macpherson Kelley Lawyers |
HIS HONOUR:
Summary and decision
1 The plaintiff (“SJ Higgins”) is a construction company. By a contract dated 12 August 2016 (“contract”), SJ Higgins agreed with the defendant (“Bays”) to design and construct the Bays Hospital’s post-natal and birthing suites at Main Street in Mornington for $3,894,257.00 (ex-GST) (“Project”). SJ Higgins brought proceedings in March this year to recover $175,387.54 which it alleges is still owing by Bays under the contract, plus interest and costs. It relies for that purpose on payment claims made under the Building and Construction Industry Security of Payment Act 2002 (Vic) (“SOP Act”). It has since issued a summons dated 3 April 2018 seeking summary judgment pursuant to s61 of the Civil Procedure Act 2010 (Vic) (“CPA”) on its claims in the proceeding.
2 SJ Higgins applied during submissions to amend its summons by substituting “section 16(2) of the Building and Construction Industry Security of Payment Act 2002 (Vic)” for “section 61 of the Civil Procedure Act 2010 (Vic)” in paragraph 1 of the summons. The amendment was sought in response to Bays’ submission that, by reason of SJ Higgins’ reliance on s61 of the CPA, I could only give judgment in favour of SJ Higgins if I considered that Bays’ defence had “no real prospect of success”, within the meaning of that section. Bays opposed the application to amend. I indicated that I would rule on the application as part of my reasons on the substantive issues in the case.
3 The issues in this case that I need to determine can be summarised as follows:
· What is the test to be applied?
· Should I accede to SJ Higgins’ application to amend its summons?
· Were payment claims 14 and 15 validly served on Bays for the purposes of s14 of the SOP Act?
· Did payment claim 16 adequately identify the construction work or related goods and services to which it related?
· Was there a reference date available in respect of payment claim 16?
· Does the claim include excluded amounts?
Because of my findings in response to the issues above, it is not necessary for me to consider the issues raised in respect of the Bays’ counterclaim. I also note that during oral submissions, counsel for SJ Higgins confirmed that it was not pressing the contract claim set out in the ASOC.
4 In my view, SJ Higgins is entitled to the orders it seeks by reason of its payment claim 16 served on Bays as required by the contract on 1 September 2017, but less the contentious excluded amounts. I will therefore order that Bays pay to SJ Higgins the sum of $167,957.54 (inc GST) as a debt due to SJ Higgins pursuant to s16(2)(a)(i) of the SOP Act, plus interest pursuant to clause 37.5 of the contract at the rate of 18% per annum on and from 17 September 2017 to the date of order, and costs. My view is that those costs should be on the standard basis in default of agreement, unless the parties are able to bring to my attention any matters that might justify a departure from the usual order on costs. I will hear further from the parties on the final form of the orders, including the calculation of the interest figure and on costs. Those orders will also need to address whether and in what form this proceeding will continue in respect of Bays’ counterclaim and any claim SJ Higgins may wish to make for the excluded amounts and, if so, timetabling orders.
Evidence and background
5 SJ Higgins relies on three affidavits. Two affidavits of Kenneth Ross De Souza-Bingham, a director and construction director with SJ Higgins, sworn 3 April 2018 and 22 May 2018 and an affidavit of Carl Anthony Scavo, a director of SJ Higgins, sworn 15 May 2018. Bays relies on an affidavit of its CEO Allan Harold Boston sworn 18 May 2018. The parties also relied on their pleadings, comprising an amended statement of claim dated 3 April 2018 (“ASOC”) and a defence and counterclaim dated 10 May 2018 (“defence and counterclaim”).
6 The essential facts are not relevantly in dispute. The contract incorporated a Formal Instrument of Agreement and Amended General Conditions of Contract AS4000-1997 and drawings, specifications and other documents. Connect PM Pty Ltd was appointed as Superintendent under the terms of the contract and remains in that role. Clause 37.1 provides for payment claims by SJ Higgins under the contract. It includes provisions as follows:
“An early payment claim shall be deemed to have been made on the date for making that claim in accordance with Item 28.
Each payment claim shall be given in writing to the Superintendent and shall include details of [Work Under the Contract] done and may include details of other moneys then due to the Contractor pursuant to the provisions of the Contract.”
The times for payment claims pursuant to Item 28 were (relevantly) the “25th…day of each month for [Work Under the Contract] done to the 25th…of that month”.
7 The contract also includes at clause 45 the following:
“The Contractor shall ensure that a copy of any written communication it delivers or arranges to deliver to the Principal of whatever nature in relation to the Security of Payment Act (including, without limitation, a payment claim under the Security of Payment Act), is provided to the Principal... For the avoidance of any doubt, the Superintendent is not authorised and does not receive claims under the Security of Payment Act on behalf of the Principal”
8 On 31 May 2017, Gus Haddad of SJ Higgins emailed Michael Germano of the Superintendent a payment claim with a claimed amount of $292,693.30 (“payment claim 14”). The claimed amount included a sum of $55,870.40 unpaid from an earlier payment claim. On 23 June 2017 (long after the 14 day period prescribed under the contract), Mr Germano of the Superintendent emailed a payment schedule to SJ Higgins and Bays, certifying that $130,798.91 was payable by Bays to SJ Higgins under payment claim 14. The amount certified did not include the $55,870.40 referred to above. On about 30 June 2017, Bays paid the $55,870.40 to SJ Higgins.
9 On 17 August 2017, Mr Haddad of SJ Higgins emailed a further payment claim to Mr Germano of the Superintendent with a claimed amount of $175,387.54 (“payment claim 15”). The claimed amount comprised the $130,798.91 belatedly certified by the Superintendent in respect of payment claim 14, and $44,489.60 for amounts not previously certified. On 25 August 2017, Mr Germano of the Superintendent emailed a payment schedule to SJ Higgins and Bays, certifying that $175,387.54 was payable by Bays to SJ Higgins under payment claim 15. Bays does not dispute that payment claims 14 and 15 met all the requirements of the SOP Act, except in one respect.
10 As explained further below, Bays argues that the payment claims were not served on the correct party (namely, Bays) relying, in particular, on clause 45 of the contract set out above. Mr Boston of Bays has nevertheless deposed that payment claim 14 “came to his attention” on 23 June 2017, when it was emailed to him by Mr Germano of the Superintendent. Similarly, Mr Boston has deposed that payment claim 15 was “brought to his attention” on 25 August 2017, when it was sent to him by Mr Germano of the Superintendent as an attachment to an email. Thus, Bays does not dispute that it was aware of and had in its possession both payment claim 14 and payment claim 15 by no later than 25 August 2017.
11 On 1 September 2017, Quin Chong of SJ Higgins emailed Mr Boston of Bays the payment schedules issued by the Superintendent for each of payment claims 14 and 15 (but not the payment claims themselves), a tax invoice for $236,885.90 and a credit note for $61,497. The tax invoice stated that it was a “payment claim made under the Building and Construction Industry Security of Payment Act 2002”. The amount of the tax invoice less the credit note is $175,387.54 (“payment claim 16”). Bays has not paid SJ Higgins any of this sum, nor has it provided a payment schedule to SJ Higgins in respect of payment claim 16 within the 14 days allowed under the contract, or at all. The amount claimed in payment claim 16 (being, incidentally, also the amount claimed in payment claim 15) is the sum SJ Higgins seeks to recover in this proceeding.
Legislative framework
12 The object of the SOP Act is to ensure that anyone who undertakes to carry out construction work, or to supply goods and services under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the performance of that work and the supply of those goods and services (SOP Act s3). A construction contract is defined by s4 of the SOP Act to mean a “contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services for another party”. Subject to s7 of the SOP Act, the Act applies to any construction contract, whether written or oral, or partly written and partly oral, and applies even if the contract is expressed to be governed by the law of a jurisdiction other than Victoria. There is no dispute that the contract is a construction contract within the meaning of the SOP Act nor that the work, the subject of the proceeding, fell within the definition of “construction work” in s5 of the SOP Act.
13 This proceeding did not involve an adjudication (dealt with in Part 3, Division 2 of the SOP Act), so the rights of the parties are governed by Part 3, Division 1, “Payment claims and payment schedules”, comprising ss14 to 17 of the SOP Act. These provisions relevantly provide as follows:
14 Payment claims
(1)A person…who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.
(2) A payment claim—
…
(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.
(3)The claimed amount—
…
(b)must not include any excluded amount.
(4)A payment claim in respect of a progress payment (other than a payment claim in respect of a progress payment that is a final, single or one-off payment) may be served only within—
(a)the period determined by or in accordance with the terms of the construction contract in respect of the carrying out of the item of construction work or the supply of the item of related goods and services to which the claim relates; or
(b)the period of 3 months after the reference date referred to in section 9(2) that relates to that progress payment—
whichever is the later.
…
(8)A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
15 Payment Schedules
(1)A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.
…
(4)If—
(a)a claimant serves a payment claim on a respondent; and
(b)the respondent does not provide a payment schedule to the claimant—
(i)within the time required by the relevant construction contract; or
(ii)within 10 business days after the payment claim is served;
whichever time expires earlier—
the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.
16Consequences of not paying claimant where no payment schedule
(1) This section applies if the respondent —
(a)becomes liable to pay the claimed amount to the claimant under section 15(4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section; and
(b)fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
(2) In those circumstances, the claimant—
(a) may—
(i)recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction; or
…
(4)If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt—
(a)judgment in favour of the claimant is not to be given unless the court is satisfied—
(i)of the existence of the circumstances referred to in subsection (1); and
(ii)that the claimed amount does not include any excluded amount; and
(b)the respondent is not, in those proceedings, entitled—
(i)to bring any cross-claim against the claimant; or
(ii)to raise any defence in relation to matters arising under the construction contract.
14 Reference should also be made to s47 in Part 3 of the SOP Act. Section 47(1) provides in effect that nothing in the provisions of the SOP Act concerning the procedure for recovering payments under a construction contract in Part 2 (including the recovery provisions at ss14 to 16, set out above):
“…affects any right that a party to a construction contract:
(a) may have under the contract; or
(b) may have under Part 2 [rights to progress payments]; or
(c)may have apart from this Act in respect of anything done or omitted to be done under the contract.
15 Sub-sections 47(2) to (4) preserve rights in any proceeding arising under a construction contract and provide that in any such proceedings, the court or tribunal must make allowances (and, where appropriate, restitution) for any amount paid to a party to the construction contract under the recovery provisions of the SOP Act. The place of s47 in the scheme of the SOP Act has been said to be “to reinforce the interim nature” of determinations under Part 2 of the SOP Act:[1]
“The legislature intended the process of dealing with progress claims to be speedy. In many human activities, speed and error are natural companions. Section 32 [the NSW equivalent of s47 under the SOP Act] is the legislative recognition of the potential application of that truism to the scheme of adjudication of disputes.”[2]
[1]John Holland Pty Ltd v Roads & Traffic Authority (NSW) (2006) 66 NSWLR 624, per McDougall J at [33]
[2]Ibid at [37]
16 Thus a judgment entered under s16 of the SOP Act is, by reason of s47, effectively a provisional judgment, both in what it grants and what it refuses. The specific statutory context is one in which inconsistent judgments are contemplated and allowed.[3]
[3]Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385, per Handley JA (with whom Santow JA and Pearlman AJA agreed) at [22]
17 In Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor,[4] Vickery J made a number of important findings concerning the effect of the SOP Act, many of which are directly relevant to, and indeed determinative of, the issues in this case. It is therefore appropriate that I set them out in full, as follows (citations omitted):
[4](2009) 26 VR 112 at [2] and [43]-[46]
The Act has had a substantial effect in shifting the power balance between principals and subcontractors in construction contracts in Victoria and in other States and Territories where legislation in similar terms and with the same objects has been enacted. Subcontractors are now in a position to promptly secure payments of progress claims with the aid of a statutory mechanism which compliments the provisions of the construction contract. Outstanding claims of the principal under the contract, arising for example from poor workmanship or delay, are preserved as future enforceable claims, but cannot stand in the way of prompt payment of a progress claim found to be due under the expeditious process provided for in the Act.
The Victorian Act also preserves a claimant’s right to commence proceedings under the relevant construction contract, including proceedings in a court, and any arbitration proceedings or other dispute resolution proceedings: s48 [sic - s47]. Further, in any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal is required to make allowance for any sum paid pursuant to the Act in any order which is made: s 48(3) [sic – s47(3)].
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. 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.
From this analysis, I readily accept the observation made in a number of recent authorities that the Act places the claimant in a privileged position in the sense that it acquires rights that go beyond its contractual rights.
The Act also manifests another central aspiration, that of freedom from excessive legal formality. The provisions demonstrate a pragmatic concern to provide a dispute resolution process which is not bedevilled with unnecessary technicality. The Building and Construction Industry Security of Payment Act 1999 (NSW) has led to a spate of litigation in its relatively short life. If the Victorian Act became prone to challenges founded on fine legal points, an important object of the Act would be defeated by the twin adversaries of cost and time.
18 This last paragraph was cited with approval by the Court of Appeal in Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd.[5]
[5][2011] VSCA 99 at [11]
19 When the Victorian SOP Act was amended with effect from 30 March 2007, the Minister for Planning made clear in the Second Reading speech that:
The main purpose of this bill is to amend the Building and Construction Industry Security of Payment Act 2002 to make it more effective in enabling any person who carries out building or construction work to promptly recover progress payments.
…
Cash flow is the lifeblood of the construction industry. It is critical that industry participants obtain prompt interim payment, pending a final determination of the matters in dispute.[6]
[6] Victoria, Parliamentary Debates, Legislative Assembly, 9 February 2006, 220 (Rob Hulls, Minister for Planning)
What is the test to be applied?
20 There appear to be two limbs to Bays’ submissions on this issue. The first is that this in truth is not an application under the SOP Act, but a proceeding commenced by writ together with an application under s61 of the CPA for summary judgment. Thus, ss16(4)(b) and 17(4)(b) of the SOP Act do not apply to this proceeding and Bays is free to press its counterclaim in reply to the application. The second limb is that, when considering Bays’ defences generally to SJ Higgins claims in the application, I should apply the “no reasonable prospects of success test” applicable to summary judgment applications. I will deal with each of these in turn.
21 In my view, the first limb is without foundation. It is clear from the ASOC that SJ Higgins has brought this proceeding in two distinct (and alternative) parts. The first, comprising paragraphs 9 to 16, is under the heading “Amounts payable under the terms of the Contract”. And the second, comprising paragraphs 17 to 30, is under the heading “Amounts payable pursuant to the SOP Act” and “Further claim in the alternative pursuant to the SOP Act”. The latter part is accurately described by the headings and includes numerous reference to the applicable sections of the SOP Act including (contrary to Bays’ counsel’s oral submissions) s17.
22 I accept that there is no express reference to s16(2)(a) of the SOP Act in paragraph 29, which might have been desirable, and the first part of the ASOC comprising the contract claim is probably an unnecessary distraction. However, these drafting infelicities do not gainsay that the ASOC expressly pleads a claim under the SOP Act, including sufficient material facts to support claims under s17 of the SOP Act in respect of payment claims 13 and 14 and s16 of the SOP Act in respect of payment claim 16.
23 Thus in my view it cannot reasonably be argued that Bays was taken by surprise by SJ Higgins seeking in this application to press its claim under the SOP Act and rely on that Act to exclude consideration of Bays’ counterclaim. This is reinforced by the terms of Bays’ defence which includes substantive defences to each of the SOP Act claims (and, I note in passing, admits paragraph 26 of the ASOC) and its comprehensive written and oral submissions before me. Bays’ focus in defending this application may have been on pressing its counterclaim in answer to SJ Higgins’ claim, but I am satisfied that it was nevertheless very much alive to the risk that it may be denied that opportunity by operation of s16 or s17 of the SOP Act.
24 Turning to the second limb, I dealt with at some length in my reasons for decision earlier this month in 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd (“3D Flow”)[7] a submission that the court should apply the summary judgment test in a proceeding under the SOP Act brought by originating motion. Relevantly for present purposes, in rejecting that submission, I referred to the decision of Anderson J of this court in Fulconstructions v ABP Consultants Pty Ltd (“Fulconstructions”)[8], where His Honour said:
“Occasionally, the process has been described as a “summary judgment” application… It is apparent, however, that this is not the standard summary judgment process governed by section 62 of Civil Procedure Act 2010 where the “real prospect of test” is applied. In those circumstances, if the affidavit material raised a defence which was not “fanciful”, the proceeding could not be determined summarily but must go to trial… Such an approach would appear to cut across the whole purpose of the legislation. Usually, the applications permit only limited defences to be raised under the Act.”[9]
[7][2018] VCC 674 at [39] to [54]
[8][2016] VCC 1732 at [3] to [11]
[9]At [7] and [8]
25 His Honour then postulated options for the process to follow in bringing an application to recover a payment claim under s16 of the SOP Act. Namely, first, an ordinary summary judgment application or, second, as a proceeding commenced by originating motion seeking statutory relief. In relation to the former, His Honour suggests that the “real prospect of success test” would appear to be inappropriate unless the test was somehow applied as if it were a final hearing rather than a summary application, with the court being able to apply the purpose of the legislation to determine whether any defence should succeed. His Honour noted that it remained an open question as to which of the two options was more appropriate.
26 While I agreed in 3D Flow with His Honour’s observations above, I confessed less reticence on the question of which procedural option to use in applications under the SOP Act. In my view, the more appropriate option in proceedings seeking summary determination under the SOP Act, is to make application by originating motion supported by affidavit relying on r4.05(1)(b) of the Rules. To the extent that there are issues that may survive the application (or where the application is unsuccessful), the parties can avoid the expense of commencing a fresh proceeding by seeking orders under r4.07 that all or part of the originating motion proceed as if commenced by writ and, if appropriate, that affidavits stand as pleadings. However, I should not be taken here to be saying that proceeding by way of a writ and an application for summary judgment (as in this proceeding) is somehow, for that reason, misconceived or unsustainable. Clearly it is an option. Just not, in my view, the preferred one.
27 Having said that, there can be no doubt that seeking relief under the SOP Act by means of a summary judgment application adds an additional layer of complexity to determining the appropriate test to be applied. In 3D Flow I expressed the preliminary view conformably with Anderson J, that even where this mechanism is selected by an applicant, the “no real prospects of success” test under s63 of the CPA should not be permitted to trump the clear purpose of the SOP Act. However, I noted that because that proceeding was brought by originating motion, that more difficult issue did not arise for determination. It does now.
28 Counsel for SJ Higgins suggested in oral submissions that the appropriate approach was for the court to look first to the applicable provisions of the SOP Act and ask whether a valid payment claim was served (SOP Act s14) and whether there was a payment schedule (SOP Act s15). If the answers to those questions are (respectively) yes and no, there is by operation of s16(2)(a)(i) of the SOP Act a present right to recover the unpaid portion of the payment claim as a debt due. Thus the only defences the court should be considering before giving judgment on that debt (whether in the form of summary judgment on a writ or as judgment on originating motion), is one that may undermine either or both of the statutory pre-requisites identified in ss14 and 15 of the SOP Act.
29 I agree. Clearly the whole purpose of the SOP Act as discussed above would be undermined if the position were otherwise. This is essentially what Anderson J found in Fulconstructions in the passage extracted above. Put another way, the SOP Act sets the parameters for the issues that can by agitated by both parties, whether on the summary judgment application or on originating motion. I therefore reject Bays’ submission to the effect that the choice of application for summary judgment under s61 of the CPA opens up consideration of its counterclaim. In my view, the only thing standing in the way of judgment against Bays are the arguments based on the payment claims discussed below.
30 However, that still leaves open the question of what test should be applied in examining those arguments where summary judgment under s61 of the CPA is sought. Does the interposition of the summary judgment application set a lower threshold for a defendant in making out those defences? I have been unable to find any authorities dealing directly with this issue, apart from Anderson J’s discussion in Fulconstructions referred to above. However, there are many examples in the authorities of courts applying the summary judgment test to defences raised in applications of this kind. In Victoria, that test is whether the respondent to the application has a real as opposed to a fanciful prospect of success. The power is to be exercised with caution and only when it is clear that there is no real question to be tried.[10]
[10]Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd (2013) 42 VR 27, at [27] – [35]
31 Despite some reluctance, I am unable to avoid the conclusion that this test must be imposed on the examination of whatever limited defences the SOP Act allows, where judgment is sought by application for summary judgment. To do otherwise would amount to ignoring a key aspect of the clear statutory regime created by Part 4.4 of the CPA. There is no express provision of the SOP Act permitting that course and, in my view, it cannot be justified by reliance only on the broad purposes of the SOP Act. This is particularly so where, for the reasons discussed in 3D Flow, the problem can be avoided altogether by a claimant selecting the originating motion option. In those circumstances, I will consider Bays’ defences applying the summary judgment test.
Should I accede to SJ Higgins’ application to amend its summons?
32 While I am satisfied that Bays would suffer no real detriment by me doing so, I do not propose to accede to SJ Higgins’ application to amend its summons. In my view, the proposed amendment is unnecessary. For the reasons discussed above, I have rejected Bays’ submission to the effect that this was not an application brought in reliance on the SOP Act. Clearly it was. Thus any amendment to overcome that potential obstacle to SJ Higgins’ claim is redundant.
33 The only other reason to make the amendment is to overcome the summary judgment application issue discussed in the previous section of these reasons. However, in my view, the amendment proposed does not have this effect. This proceeding was commenced by writ and statement of claim. The only mechanisms available to enable a final determination on the merits of the issues in the proceeding,[11] is by application for summary judgment or trial. Whether s61 of the CPA is expressly referred to or not, this would remain in substance an application for summary judgment. Making the amendment sought would have the effect of simply converting the application from one under the CPA to an application under O22 of the Rules. And as the authorities make clear, the test is the same under both.
[11]That is, not including judgment in default of a step in the proceeding (r21), summary dismissal (r23) or dismissal for want of prosecution (r24)
Were payment claims 14 and 15 validly served on Bays for the purposes of s14 of the SOP Act?
34 In its written submissions, Bays submitted that:
“In the face clause 45 of the Contract, it cannot sensibly be argued that service on the Superintendent was service on the Principal [defendant]. Because, simply, the Contract says that such service under the SOP Act is not permitted. Put differently, the question whether or not the Superintendent is the agent of the principal in relation to any other aspect of the Superintendent’s functions under the Contract is not germane to the issue, because the parties have agreed, in writing, pursuant to the Contract, that service under the SOP Act cannot be effected by service on the Superintendent (because the Superintendent is not authorised to accept such service).”
35 Accordingly, Bays further submitted, payment claims 14 and 15 were not payment claims made under the SOP Act because s14(1) of the SOP Act was not satisfied. In its written submissions, SJ Higgins did not seek to maintain the claim based on these payment claims, relying instead only on payment claim 16. In oral submissions, counsel for SJ Higgins argued that service of payment claims 14 and 15 was effected on the Superintendent in accordance with the contract and it could not be said that Bays was unaware of them. Thus, a common sense approach would require that service on the Superintendent is sufficient for the purposes of the SOP Act.
36 In my view, Bays submissions on this issue are to be preferred. Service on the Superintendent was indeed the method prescribed to engage the payment obligations under the contract. But the contract could hardly have been clearer in requiring that SJ Higgins ensure that any document in relation to the SOP Act is provided to Bays, and: “[f]or the avoidance of any doubt, the Superintendent is not authorised and does not receive claims under the Security of Payment Act on behalf of the Principal”. I also accept Bays submission that this position is reinforced by the decision of the Court of Appeal of the NSW Supreme Court in Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd,[12] where the court held:
“The authorities referred to … are not altogether clear as to whether a person in the position of a superintendent of a building contract is the owner’s agent in exercising all the functions of the superintendent. However, in my opinion the better view … is that the superintendent is the owner’s agent in all matters only in a very loose sense, and that, when exercising certifying functions in respect of which the superintendent must act honestly and impartially, the superintendent is not acting as the owner’s agent, in the strict legal sense.”[13]
[12][2002] NSWCA 211
[13][2002] NSWCA 211 at [50]
37 Finally, Bays relied on a series of authorities[14] that have emphasised the critical importance of service in accordance with s14 of the SOP Act, as it governs the commencement of the time limitations. The consequences of non-compliance with these time limitations is harsh. Indeed, it may well be that it was these very consequences that led Bays to include clause 45 in the contract, thereby avoiding the risk that a payment claim under the SOP Act served on the Superintendent was not passed on in time. In those circumstances, I am satisfied that Bays has at least reasonable prospects of success on its defence that payment claims 14 and 15 were not payment claims made under the SOP Act.
Did payment claim 16 adequately identify the construction work or related goods and services to which it related?
[14]Metacorp Pty Ltd v Andeco Construction Group Pty Ltd [2010] VSC 199; (2010) VR 141 at [123]-[125] and Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSWSC 903 at [38]
38 This issue is critical and turns on the question of whether payment claim 16 can be read in the context of payment claim 14. It was not relevantly in dispute that:
· payment claims 14 and 15 sufficiently identified the construction work and related goods and services to which it related, but that payment claim 16 read in isolation did not;
· payment claim 16 was a valid payment claim under the SOP Act except for this question of the description of the construction work and the reference date issue discussed below (in particular, it was common ground that payment claim 16 was served on Bays and otherwise met the requirements of s14 of the SOP Act); and
· payment claim 16 made express cross-reference under the heading “Description of Supply” to payment claims 14 and 15.
39 In its submissions, Bays relied on the decision of Vickery J in Krongold Constructions (Aust) v SR & RS Wales (“Krongold”),[15] and, in particular, the following passage from His Honour’s reasons (full citations omitted):
“In Protectavale, Finkelstein J observed that, while the requirements of the Act are not overly demanding and should not be approached in an unduly technical manner: [footnotes omitted]
[N]onetheless a payment claim must be sufficiently detailed to enable the principal to understand the basis of the claim. If a reasonable principal is unable to ascertain with sufficient certainty the work to which the claim relates, he will not be able to provide a meaningful payment schedule. That is to say, a payment claim must put the principal in a position where he is able to decide whether to accept or reject the claim and, if the principal opts for the latter, to respond appropriately in a payment schedule[.]
Protectavale was cited with approval by this Court in Gantley Pty Ltd v Phoenix International Group Pty Ltd (‘Gantley’) where it was added: [footnotes omitted]
What is necessary is an identification of the work which is sufficient to enable a respondent to understand the basis of the claim and provide a considered response to it. The test of identification is not an overly exacting exercise. It is to be tempered by what is reasonable necessary to be comprehensible to the recipient party when considered objectively, that is from the perspective of a reasonable party who is in the position of the recipient. In evaluating the sufficiency of the identification of the work, it is appropriate to take into account the background knowledge of the parties derived from their past dealings and exchanges of information.”
[15][2016] VSC 94
40 Bays then submits that there is no evidence that payment claims 14 and 15 as referred to in the two invoices comprising payment claim 16, were served on Bays and that a cross-reference in the invoices to a document not served on Bays cannot be a sufficient description of the work undertaken for the purposes of s14(2)(c) of the SOP Act. It adds “further and in the alternative”, that even if payment claims 14 and 15 were provided to Bays, a mere cross-reference to these within the invoices is not enough. As discussed in the background section above, Bays does not dispute that it was aware of and had in its possession both payment claim 14 and payment claim 15 by no later than 25 August 2017. So much is deposed to by Mr Boston.
41 As there is therefore no question that payment claims 14 and 15 were in fact provided to Bays before payment claim 16 was served on it, Bays appears to concede that the only issue remaining is whether a “mere cross-reference” is enough. In particular, it does not contend that the failure by SJ Higgins itself to serve payment claims 14 and 15 directly on Bays can defeat the validity of payment claim 16, if the earlier payment claims were otherwise in Bays’ possession when payment claim 16 was served on Bays. Such a contention would in any event be unsustainable. Clause 45 of the contract does not require that every document relating to SOP Act claims be “served” by SJ Higgins on Bays, merely that it “ensure that [such documents are] provided to” Bays. In my view, evidence that Bays in fact had the documents at the relevant time satisfies that requirement.
42 SJ Higgins has submitted that a cross-reference is enough. It cites the NSW Court of Appeal in Clarence Street Pty Ltd v Isis Projects Pty Ltd (“Clarence Street”),[16] where the court held:
[16][2005] NSWCA 391
“The payment claims are to be read in context, including the context of industry conventions and the usage adopted by the parties in their earlier contractual dealings. Construction work for which a claim is made may be identified by reference to earlier documents such as variation claims and other documents capable of being identified by reference to the contract or the earlier dealings of the parties. This list is not intended to be exhaustive.”[17]
It also refers to the decision of Judge Shelton of this court in AMD Formwork Pty Ltd v Yarraman Construction Group Pty Ltd.[18]
[17][2005] NSWCA 391 at [40]
[18][2004] VCC 17 at [12] ff.
43 In my view, the prospects of success of an argument that a mere cross-reference is not enough for the purposes of s14 of the SOP Act, are fanciful. It flies in the face of clear authority of an intermediate appellate court in Clarence Street and transgresses the many admonitions in leading cases in the area about avoiding technicality. I set out above the passage from the decision of Vickery J in Hickory Developments v Schiavello,[19] where His Honour referred to freedom from excessive legal formality as being a central aspiration of the SOP Act.
[19](2009) 26 VR 112 at [2] and [43]-[46]
44 The decision in Krongold does not assist Bays. The passage from that decision above reiterates the importance of ensuring that the requirements of the SOP Act should not be approached in an unduly technical manner. The focus is on ensuring that the recipient is given what is reasonably necessary to be comprehensible to the recipient party when considered objectively. Further, in evaluating the sufficiency of the identification of the work, “it is appropriate to take into account the background knowledge of the parties derived from their past dealings and exchanges of information” (emphasis added).
45 I also agree with SJ Higgins’ submission that the facts of the case are distinguishable from the present. It too involved invoices and supporting documents, but there were significant and material omissions in the supporting material provided to the adjudicator in Krongold. Accepting (as I do) that payment claim 14 and payment claim 15 are earlier documents in the possession of Bays on which SJ Higgins can rely in supporting payment claim 16, there is no suggestion of any such omissions in that material taken as a whole.
Was there a reference date available in respect of payment claim 16?
46 I have accepted that payment claim 15 was not a payment claim under the SOP Act. Thus, when payment claim 16 was served, the 25 August 2017 reference date had not ceased to be available by reference to payment claim 15. SJ Higgins confirmed in submissions that this is the reference date on which it relies for the purposes of payment claim 16. Bays nevertheless submitted that it is for SJ Higgins to prove that a reference date was available under the contract on 25 August 2017. It further submitted that “there is no evidence before the court in relation to other reference dates under the Contract that were “used up” by previous payment claims” and that:
“In the circumstances, absence evidence about which reference dates were used in prior payment claims, it would be unsafe for the Court to make a determination on this issue on a summary judgment application. Put simply, the argument on reference dates cannot be said to have “no real prospects of success”. In other words, the defendant’s argument has a real as opposed to a fanciful chance of success.”
47 I disagree. Bays accepted in its written submissions that payment claim 15 “must use the reference date of 25 August 2017”. It also submitted (and I agree) that payment claim 15 is invalid. It follows that the reference date payment claim 15 had purported to rely on, became available for the next payment date in time, namely, payment claim 16. There is no evidence of any other payment claims between payment claims 15 and 16. In the absence of such evidence, the overwhelming inference available simply from the numbering of the claims, is that no such other payment claims exist. I so infer.
Does the claim include excluded amounts?
48 This issue did not feature in Bays’ submissions. However, SJ Higgins has noted that it is raised in paragraph 18(c) of the defence where Bays pleads that variations numbered 83, 89, 90 and 99, claimed in payment claim 14, are excluded amounts. It also refers to paragraph 9 of the defence where Bays pleaded that variations 83, 89 and 99 (although not variation 90) were either not directed to be carried out or were not carried out. In answer to these matters SJ Higgins has submitted that:
“(a)There is no claim for any amount in Progress Claim 14 with respect to variations 89 and 99 (see right-hand column of the variation schedule accompanying Progress Claim 14). There is therefore no dispute about these variations for the purposes of this application;
(b)That leaves variations 83 and 90, $5,285.00 and $2,145.00 respectively (a total of $7,430.00). If there is an issue with these two amounts, they can be severed from the claim: Judge Anderson in Constructpro Pty Ltd v Maicome Pty Ltd [2014] VCC 1719 at [55] to [59], which applied the findings in Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [114] to [116] to section 16(4)(a)(ii) of the Act.”
49 It is clear that a payment claim under the SOP Act must not include an excluded amount (SOP Act s14(3)(b)). And having regard to the test applicable to the maintainable defences in this proceeding and the dearth of evidence on this particular defence, I am not satisfied that Bays’ defence on this issue has no reasonable prospects of success. On the other hand, I agree that I can sever these amounts from the claim. I will therefore follow the course proposed by SJ Higgins in its submissions and enter judgment for the amount claimed less these two contentious variations (which I assume are, like the payment claims, GST inclusive figures).
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Certificate
I certify that these 23 pages are a true copy of the judgment of His Honour Judge Woodward delivered on 15 June 2018.
Dated: 15 June 2018
Simone Karmis
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