Sought After Investments Pty Ltd v Unicus Homes Pty Ltd

[2019] NSWSC 600

Supreme Court

New South Wales

Medium Neutral Citation:

Sought After Investments Pty Ltd v Unicus Homes Pty Ltd [2019] NSWSC 600

Hearing dates:

16 May 2019

Decision date:

23 May 2019

Jurisdiction:

Equity - Technology and Construction List

Before:

Ball J

Decision:

(1)   The proceedings be dismissed.

 

(2)   The sum of $226,038.99 paid into Court on 8 May 2019 be paid to the first defendant.

 (3)   The plaintiff pay the first defendant’s costs of the proceedings.

Catchwords:

BUILDING AND CONSTRUCTION – payment claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) – adjudication determination – whether multiple payment claims served in respect of one reference date – whether multiple supporting statements issued in respect of one payment claim – whether more than one supporting statement could be provided in respect of a single payment claim

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW)
Interpretation Act 1987 (NSW)

Cases Cited:

Alan Conolly & Co v Commercial Indemnity Pty Limited [2005] NSWSC 339
Fernandes Construction Pty Ltd v Tahmoor Coal Pty Ltd (t/as Centennial Coal) [2007] NSWSC 381
Central Projects Pty Ltd v Davidson [2018] NSWSC 523
Duffy Kennedy Pty Ltd v Lainson Holdings Pty Ltd [2016] NSWSC 371
Greenwood Futures Pty Ltd v DSD Builders Pty Ltd [2018] NSWSC 1407
Hill as Trustee for the Ashmore Superannuation Benefit Fund v Halo Architectural Design Services Pty Ltd [2013] NSWSC 865
Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602
Kyle Bay Removals Pty Ltd v Dynabuild Project Services Pty Ltd [2016] NSWSC 334
Leighton v Arogen [2012] NSWSC 1323

Category:

Principal judgment

Parties:

Sought After Investments Pty Ltd (ABN 21 103 221 745) (Plaintiff)
Unicus Homes Pty Ltd (ABN 33 105 814 631) (First Defendant)
Kevin Moore (Second Defendant) (Submitting Appearance)

Representation:

Counsel:
GA Sirtes SC with B Le Plastrier (Plaintiff)
DP O’Connor (First Defendant)

  Solicitors:
Mills Oakley (Plaintiff)
Adams Partners Lawyers (First Defendant)

File Number(s):

2019/131929

Judgment

Introduction

1. By a summons filed on 29 April 2019, the plaintiff, Sought After Investments Pty Limited, seeks a declaration that an adjudication determination of the second defendant (the Adjudicator) made under s 22 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOPAct) and dated 26 March 2019 is void, together with ancillary relief.

2. The determination relates to what were described as four payment claims totalling $234,267.20 made by the first defendant, Unicus Homes Pty Ltd, under a contract dated 29 September 2016 (the Contract) for the construction by Unicus of a childcare centre in Bong Bong Road, Horsley, New South Wales, for the sum of $2,318,740 (including GST). The amount allowed by the Adjudicator was $213,277.60. On 8 May 2019, Sought After Investments paid that amount together with interest (totalling $226,038.99) into Court as security for the adjudicated amount pending determination of these proceedings.

3. As is usual, the Adjudicator did not appear at the hearing and has filed a submitting appearance.

Background

4. Clause 21.1 of the Contract provided that “The Builder must claim progressively in accordance with Item 16 and Clause 27, as the case may be.” Clause 27 provided for a final payment claim 14 days after the expiration of a defects liability period. Item 16 stated in effect that progress claims were to be made by reference to stages of the work set out in an attached schedule. Relevantly, that schedule provided for the following progress payments:

Progress Payment 6

Completion of carpark

$190,000.00

Progress Payment 7

Completion fencing

$115,000.00

Progress Payment 8

Practical completion

$80,740.00

5. On 15 February 2019, Unicus served on Sought After Investments a letter dated 14 February 2019 which said:

We attach four (4) payment claims issued pursuant to the Building and Construction Industry Security of Payment Act 1999.

1.   Payment Claim 0642 Together with supporting documents and supporting statements.

2.   Payment Claim 0645 Together with supporting documents and supporting statement.

3.   Payment Claim 701 Together with supporting statement.

4.   Final claim 705 Together with supporting statement.

The first three (3) invoices were previously issued to you on the date shown on the invoice. As they were not payment claims as defined by the act, we reissue those invoices using the same dates however now they are payment claims under the act.

The due date for payment will be calculated from the date of this letter not the date of the original invoice.

We await receipt of payment in full or your payment schedule pursuant to section 14 of the act.

6. Included with the letter were the four “payment claims”. Payment claim No 0642 is dated 22 October 2018. It states:

This invoice is for the progress payment 7 fence and variation money from carpark and progress 6 as per document attached and dated 20.8.18.

7. The invoice claimed the following amounts:

Service Provided

Amount

Progress payment 7 fences

Remaining amount outstanding $12,188.00

Due when SAI completes driveway

Progress 6 moneys left over from refund as per variations

$102,812.00

$7,000.00

Practical completion as per contract final

Less credits $15,200 and $10,600

Variation documents dated 20.8.18

$ 80,740.00

-$25,800.00

GST included

Total: $164,752.00

The invoice was stated to be a payment claim made under the Act and stated that “Payment is due within 7 days”.

8. Accompanying the payment claim was a supporting statement required by s 13(7) of the SOP Act. That section provides that:

A head contractor must not serve a payment claim on the principal unless the claim is accompanied by a supporting statement that indicates that it relates to that payment claim.

Maximum penalty: 200 penalty units.

9. The statement was in the prescribed form and signed by Mr Luke Smith, the director of Unicus. As required by the form, it attached a schedule setting out a list of subcontractors whose work was covered by the claim and whether or not they had been paid. The schedule contained the following entries (among others) in the table relating to subcontractors who had been paid:

Schedule of subcontractors paid all amounts due and payable
Subcontractor	ABN	Contract number/identifier	Date of works (period)	Date of payment claim (head contractor claim)
Arnold Scott	87868379756	00001149	13/4/18 to 12/10/18	1/11/18
S & K Air	84160986023	00001538	1/10/18 to 2/11/18	21/11/18
AI silicone	93607013730	00001622	1/11/18 to 10/11/18	16/11/18
Starbright cleaning	5311736468	00001513	15/10/18 to 29/10/18	29/10/18

10. Payment claim No 0645 is dated 21 November 2018 and is in a similar form to payment claim No 0642. It claimed $18,040 (including GST) in respect of “Upgrades to the air conditioning system” which was said to be “requested and agreed 7.2.18”. It was expressed to be a payment claim under the Act and stated that payment was due within 7 days.

11. Again, the invoice was accompanied by a supporting statement signed by Mr Smith. It included a schedule of subcontractors paid showing the same information as the previous schedule in relation to S & K Air.

12. Payment claim No 0701 is dated 3 December 2018 and again was in a similar form. It claimed an amount of half the retention amount totalling $25,737.60. It was expressed to be a payment claim under the Act and stated that payment was due within 14 days. Again, it was accompanied by a supporting statement. No contractors were shown in the schedule of subcontractors.

13. Payment claim No 0705 was expressed to be the final payment claim. It was dated 3 February 2019 and was for the balance of the retention moneys. Again, the payment claim was accompanied by a supporting statement showing no unpaid subcontractors. Again, it stated that it was a payment claim under the Act and that payment was due within 14 days.

14. In response to the payment claims, Sought After Investments served four payment schedules, each dated 22 February 2019. Each certified the amount payable in respect of the relevant payment claim as zero. Each stated that “the Builder is not entitled to submit more than 1 payment claim per reference period”. Each also stated that there was no reference date because the relevant milestone had not been reached.

15. On 7 March 2019, Unicus lodged an Adjudication Application with Adjudicate Today, following which the Adjudicator was appointed to adjudicate the application.

16. The submission filed in support of the Adjudication Application contended the reference date for claim No 0642 to be 31 October 2018, for claim No 0645 to be 30 November 2018, for claim No 0701 to be 31 December 2018 and for claim No 0705 to be 28 February 2019.

17. The Adjudicator took the position that Unicus had served only one payment claim and proceeded to deal with that claim.

18. Sought After Investments contends that the adjudication determination is void on three grounds:

1. Unicus served four payment claims in respect of one reference date, contrary to s 13(5) of the SOP Act, which provides:

A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.

2. If Unicus did serve one payment claim, it did not comply with s 13(7) because it issued multiple supporting statements in respect of that claim.

3. If the documents served by Unicus did constitute four separate payment claims, but were nonetheless valid, the first claim did not comply with s 13(7) of the SOP Act because the supporting statement in respect of that claim was not a valid supporting statement.

Was there more than one payment claim?

19. Before addressing the question whether there was more than one payment claim directly, it is necessary to make some preliminary observations.

20. Section 8 of the SOP Act provides:

Rights to Progress Payments

(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.

(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 the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or

(b)   if the contract makes no express provision with respect to the matter—the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month.

21. Unicus’s case before the Adjudicator and before this Court was that, in accordance with s 8(2)(b), a “reference date” in respect of construction work performed under the Contract arose on the last day of each month in which the construction work was first carried out, since the Contract itself did not specify a date or dates in respect of which Unicus was entitled to make progress payments. Sought After Investments took issue with that contention in its payment schedules, but it did not do so in these proceedings. Consequently, a reference date arose on 31 January 2019 in respect of work performed before that date. Leaving aside the letter dated 14 February 2019 and its enclosures, it was not suggested that some other payment claim had been served in respect of that reference date.

22. Second, it was common ground that Unicus was entitled to include in the amount the subject of a payment claim amounts that had been the subject of previous claims: see s 13(6), which states that “subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim”.

23. Third, Sought After Investments properly conceded that the question whether there was more than one payment claim was a question of substance to be resolved objectively. The question is whether in substance Unicus served more than one payment claim in respect of the same reference date. That question is to be resolved objectively taking into account all relevant matters, including the terms of the document, any covering letter and the surrounding circumstances known to both parties: Fernandes Construction Pty Ltd v Tahmoor Coal Pty Ltd (t/as Centennial Coal) [2007] NSWSC 381 (dealing with the question whether a single document was properly characterised as a payment claim); Leighton v Arogen [2012] NSWSC 1323. If Unicus did serve more than one payment claim in respect of the same reference date, it is common ground that the Adjudicator exceeded his jurisdiction by dealing with those claims. Unicus, however, contends that in that case the Court should refuse the relief claimed by Sought After Investments in the exercise of its discretion.

24. Fourth, the form in which the claim or claims are made is relevant to the question whether there is one or more claims, but it is not determinative: see Alan Conolly & Co v Commercial Indemnity Pty Limited [2005] NSWSC 339. Also relevant to the question whether there is one or more payment claims is the purpose of the prohibition in s 13(5) of the Act. It is evident that the purpose of that provision is to prevent a principal from being vexed by having to deal with more than one progress claim (including any associated adjudication application) during the period between reference dates. Consequently, it is relevant to ask whether that policy will be subverted if multiple “claims” are characterised as a single payment claim for the purposes of the Act.

25. Against that background, it is possible to turn to the question whether Unicus served more than one payment claim in respect of a reference date. In its submissions before the Adjudicator, it sought to characterise each of its four claims as having been served in respect of different reference dates. In submissions before this Court, it sought to characterise the four claims as a single payment claim made in respect of the reference date arising on 31 January 2019. Sought After Investments, on the other hand, submits that on the face of it, there were four payment claims. The letter dated 14 February 2019 states that four payment claims under the Act were attached. Each of the attached documents is expressed to be a payment claim. And each is accompanied by a supporting statement, as required by s 13(7) of the SOP Act.

26. In my opinion, there was only one payment claim; and it is reasonable to infer that that claim was made in respect of the reference date that arose on 31 January 2019. As the Adjudicator observed, Unicus, particularly in its letter dated 14 February 2019, appears to have used “payment claim” and “invoice” interchangeably. The effect of the letter, though, is to enclose four invoices. Those invoices were reissued as payment claims, presumably in relation to a reference date that had arisen recently. Although expressed in the plural (“claims”), the letter states that the due date for payment, despite what is said in the claims, is to be calculated from the date of the letter. Consequently, by its letter dated 14 February 2019, Unicus made a single demand for payment of the amounts stated in the enclosed invoices. The letter explained why four invoices or claims were included. The letter also it stated that Unicus awaited receipt of “payment in full” or “your payment schedule” (singular). Objectively, a recipient of that material must have understood that a single claim was being made for payment of the full amount of the four invoices, all of which were presented at the same time.

27. In my opinion, that characterisation is consistent with the purpose of s 13(5) of the SOP Act. Sought After Investments was not being vexed by multiple claims served at different times. From its point of view, there was no difference between receiving a single letter enclosing four invoices and a single document consolidating the four invoices or claims.

28. The fact that Sought After Investments chose to serve four documents each expressed to be a payment schedule in response to the claims does not alter the position. The objective character of the claims cannot be altered by Sought After Investments’ response to them. Sought After Investments’ response may provide some evidence of how a reasonable person would have understood the claims that were served on it. But in considering the weight to be attached to that evidence, it is necessary to bear in mind that Sought After Investments was plainly alert to the significance of there being four payment claims and it was in its interests to characterise the letter dated 14 February 2019 and its enclosures in that way. Given that, in my opinion little weight can be attached to its conduct.

29. Sought After Investments placed considerable reliance on the decision of Stevenson J in Hill as Trustee for the Ashmore Superannuation Benefit Fund v Halo Architectural Design Services Pty Ltd [2013] NSWSC 865. However, the facts in that case are clearly distinguishable. In that case the builder (Halo) issued 10 payment claims on 10 different dates. The question in that case was whether each claim could be regarded as having been issued in respect of 10 earlier reference dates. Stevenson J held that they could not. That finding is clearly relevant to the argument advanced by Unicus before the Adjudicator that the payment claims were issued in respect of four reference dates. But it is not relevant to the question whether there was a single payment claim.

Section 13(7) of the SOP Act

30. Section 13(7) of the SOP Act raises two issues. One is whether Unicus complied with the requirements of that section. The other is the consequences if it did not.

31. In my opinion, Unicus did comply with the requirements of the section.

32. Sought After Investments submits that s 13(7) only permits the service of one supporting statement. That submission depends largely on the fact that the subsection refers to “a supporting statement” (emphasis added). I do not accept that submission. Section 8(b) of the Interpretation Act 1987 (NSW) provides that in any Act “a reference to a word or expression in the singular form includes a reference to the word or expression in the plural form”. Section 5(2) of the Interpretation Act provides that the Act “applies to an Act or instrument except in so far as the contrary intention appears in this Act or in the Act or instrument concerned”. Consequently, the reference to “a supporting statement” includes a reference to supporting statements unless a contrary intention appears from the SOP Act. No such contrary intention appears. Section 13(5) specifically states that a claimant cannot serve more than one payment claim in respect of each reference date. In contrast, s 13 does not state that a claimant can only serve one supporting statement in respect of each payment claim. The service of more than one supporting statement in respect of a payment claim does not undermine the policy of the SOP Act or the requirement to serve a supporting statement imposed by s 13(7). On the contrary, the prescribed form of the supporting statement requires the person who signs it to state that the person is “in a position to know the truth of the matters that are contained in this supporting statement”. It is quite possible that in some cases a single person will not be in a position to make that statement in respect of all subcontractors, in which case it would be necessary to serve more than one supporting statement in order to meet the requirements of the prescribed form.

33. Sought After Investments also submitted that the supporting statement in respect of payment claim or invoice No 0642 is not a supporting statement that complied with the requirements of the SOP Act and the prescribed form because it does not indicate that it relates to the payment claim accompanying it. It is not easy to understand this submission. The supporting statement states that the “Contract number/identifier” is “0642”. That is a clear indication that the supporting statement relates to the invoice bearing that number.

30. Sought After Investments points out that a number of the dates in the column headed “Date of payment claim (head contractor claim)” which forms part of the Schedule attached to the supporting statement postdate the date of the invoice. The explanation for that is unclear, although the likely explanation is that, as the covering letter explains, the original date of the invoice was retained although it was issued on 14 February 2019. The supporting statement itself is dated 14 February 2019, and the likelihood is that the information it contains was updated to reflect the information known at the date the supporting statement was signed. In any event, that alone cannot mean that the document is not a supporting statement for the purposes of the SOP Act. The Act requires a supporting statement to adopt a certain form and a certificate to be given that it is accurate. The supporting statement issued in respect of “Payment Claim” No 0642 does those things.

31. Having regard to the conclusions I have reached, it is unnecessary to deal with the consequences of a failure to comply with s 13(7). Different views have been expressed on that question. The balance of authority is in favour of the view that a failure to comply with s 13(7) means that there is no payment claim that satisfies the requirements of the SOP Act, with the consequence that an adjudicator does not have jurisdiction to deal with the claim: see Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602; Duffy Kennedy Pty Ltd v Lainson Holdings Pty Ltd [2016] NSWSC 371; Kyle Bay Removals Pty Ltd v Dynabuild Project Services Pty Ltd [2016] NSWSC 334; Greenwood Futures Pty Ltd v DSD Builders Pty Ltd [2018] NSWSC 1407. However, I expressed a different view in Central Projects Pty Ltd v Davidson [2018] NSWSC 523, without deciding the question whether I should follow the earlier authorities. I should only express an opinion on that question in a case that requires it.

Was the supporting statement in respect of the first claim valid?

36. This issue is only said to arise if the Court concludes that there was more than one valid payment claim. In any event, I have already dealt with it.

Orders

37. The orders of the Court are:

1. The proceedings be dismissed.

2. The sum of $226,038.99 paid into Court on 8 May 2019 be paid to the first defendant.

3. The plaintiff pay the first defendant’s costs of the proceedings.

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Decision last updated: 23 May 2019