Style Timber Floor Pty Ltd v Krivosudsky

[2019] NSWCA 171

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Style Timber Floor Pty Ltd v Krivosudsky [2019] NSWCA 171

Hearing dates:

4 July 2019

Decision date:

16 July 2019

Before:

Bell P at [1];
Leeming JA at [8];
Simpson AJA at [82]

Decision:

1.   Extend the time within which to apply for leave to appeal to 20 February 2019.

 

2.   Grant leave to appeal, and direct that the draft notice of appeal stand as a notice of appeal.

 3.   Appeal dismissed, with costs.

Catchwords:

BUILDING AND CONSTRUCTION – payment claim under Building and Construction Industry Security of Payment Act 1999 (NSW) – payment schedule – claim related to seven invoices and five sites – email in response proposed a meeting and referred to many emails, photos, back charges and complaints – email said claimant would understand why he couldn’t be paid and that the damages done were more than had been claimed – whether email in response was a payment schedule – whether email indicated reasons for withholding payment within meaning of s 14(3) – no particular site indicated – scope of dispute unable to be determined – court at first instance correct to conclude email not a payment schedule – appeal dismissed

Legislation Cited:

Building and Construction Industry Payment Act 2004 (Qld), s 18
Building and Construction Industry Security of Payment Act 1999 (NSW), ss 4, 8, 11, 13, 14, 15, 16, 20, 21, 22, 32
Building and Construction Industry Security of Payment Act 2002 (Vic), s 15
District Court Act 1973 (NSW), s 127
Supreme Court Act 1970 (NSW), ss 48, 51

Cases Cited:

3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674
Barclay Mowlem v Tesrol Walsh Bay [2004] NSWSC 1232
Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394
Clarence Street Pty Ltd v Isis Projects Pty Ltd (2005) 64 NSWLR 448; [2005] NSWCA 391
Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247; 337 ALR 452
Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333
Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140
Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2019] NSWCA 11; 365 ALR 345

Category:

Principal judgment

Parties:

Style Timber Floor Pty Ltd (Applicant)
Rastislav Krivosudsky (Respondent)

Representation:

Counsel:
Dr A J Greinke (Applicant)
E P Anderson (Respondent)

  Solicitors:
Auyeung Hencent & Day Lawyers (Applicant)
Knap Lawyers (Respondent)

File Number(s):

2018/369039

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

District Court of New South Wales

Jurisdiction:

Civil

Date of Decision:

02 November 2018

Before:

Judicial Registrar Howard

File Number(s):

2018/00316853

HEADNOTE

[This headnote is not to be read as part of the judgment]

Style Timber Floor Pty Ltd engaged Mr Krivosudsky to perform floor grinding and topping work at various sites in Sydney. A dispute arose as to the quality of the work, and Style Timber refused to pay certain invoices.

Mr Krivosudsky served a “payment claim” under s 13 of the Building and Construction Industry Security of Payment Act 1999 (NSW) for $106,166.50. Section 14 of the Act provided that Style Timber then had 10 business days to serve a “payment schedule” indicating its position. Failure to serve a valid payment schedule in time would result in Style Timber’s becoming liable to pay the full claimed amount, albeit without prejudice to the parties’ rights at law. If Style Timber served a valid payment schedule, Mr Krivosudsky could then elect (within 10 business days) to have statutory adjudication, in which Style Timber would not be permitted to rely on any reasons for withholding payment which were not included in the payment schedule: s 20(2B).

Section 14(3) of the Act relevantly provided that a valid payment schedule had to “indicate why the scheduled amount is less [than the claimed amount] and … the respondent’s reasons for withholding payment”.

Style Timber’s email responding to the payment claim invited Mr Krivosudsky to come to Style Timber’s office, where “I will show you the working agreement …, many emails, photos, videos, back charges from builders and other trades, complains from my clients. You will understand why I can’t pay you. The damages you done is more than what you claimed. Then, it’s up to you want you want to do next.”

Mr Krivosudsky filed a statement of claim in the District Court seeking the claimed amount, accompanied by a notice of motion seeking summary judgment. In evidence on the application was a body of email correspondence between the parties from the months preceding service of the payment claim ventilating disputes relating to the various work sites. Style Timber contended that the email responding to the payment claim, when read with the totality of the correspondence, satisfied the requirements in s 14(3) for a valid payment schedule.

The notice of motion came before a Judicial Registrar, who gave summary judgment for Mr Krivosudsky. Style Timber sought leave to appeal to the Court of Appeal.

Held, by the Court, granting leave to appeal but dismissing the appeal:

1. Section 14 is to be construed as an important constituent part of a narrowly circumscribed statutory regime in legislation with a particular purpose, namely to achieve a prompt pro tem resolution of payment disputes without prejudice to the parties’ rights at law: at [1] (Bell P), [20]-[21], [25] (Leeming JA), [82] (Simpson AJA).

Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2019] NSWCA 11; 365 ALR 345; Brodyn Pty Ltd t/as Time Cost and Quality Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394, referred to.

2.   While an abbreviated description of the dispute falling short of a pleading will satisfy s 14(3), a payment schedule must sufficiently describe the dispute to apprise the recipient of the case it would have to meet in an adjudication: at [1], [3] (Bell P), [47] (Leeming JA), [82] (Simpson AJA).

Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140; Clarence Street Pty Ltd v Isis Projects Pty Ltd (2005) 64 NSWLR 448; [2005] NSWCA 391, applied.

3.   Section 14(3) may be satisfied by serving a document incorporating other documents by reference, provided such documents are identified with sufficient particularity to enable the recipient to know what is being incorporated: at [1], [3], [6] (Bell P), [76] (Leeming JA), [82] (Simpson AJA).

4.   The generality of the matters raised in Style Timber’s email rendered it impossible to determine the scope of the dispute, thus failing to satisfy the requirements for a valid payment schedule in s 14(3): at [1], [4]-[5] (Bell P), [73]-[75] (Leeming JA), [82] (Simpson AJA).

Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140; Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333; Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247; 337 ALR 452; 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674, considered.

Judgment

1. BELL P: I have had the benefit of reading in draft the reasons for judgment of Leeming JA. I agree with his Honour’s reasons for judgment and the orders he proposes. What follows assumes a familiarity with his Honour’s reasons.

2. Whilst it is correct that the valuable observations of Palmer J in Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140, as endorsed by this Court in Clarence Street Pty Ltd v Isis ProjectsPty Ltd (2005) 64 NSWLR 448; [2005] NSWCA 391 at [31], indicate that the payment schedule provided for in s 14 of the Building and Construction Industry Security of Payment Act1999 (NSW) need not be attended with the same degree of formality that might be required in other areas or other legal contexts, his Honour’s judgment is not a licence for informality or an excuse for vague, generalised objections to payment.

3. Whilst I agree with the observation of Leeming JA in [76] of his Honour’s reasons that the requirements of s 14(3) of the Act may be satisfied by incorporating another document by reference, any document or documents to be so incorporated would need to be identified with sufficient particularity so that the recipient of the schedule knew what was being incorporated. Further the incorporated document or documents would need to be of the requisite specificity mandated by s 14(3). Obviously, the more details supplied, the less the prospect that the payment schedule will be subject to an objection that it lacks that character.

4. In the present case, the purported incorporation of emails in what was claimed to be a “payment schedule” was inadequate: the emails referred to in Mr Wang’s response of 30 November 2017 which is set out in [10] of Leeming JA’s judgment were not identified with any specificity in that response but were simply described as “many emails”.

5. The “many emails” to which Mr Wang referred were not put in evidence by him before the Judicial Registrar but, rather, were put in evidence by Mr Krivosudsky. Whether or not these emails represented the totality of the emails to which Mr Wang intended to refer in his response of 30 November 2017 was unclear. Similarly left wholly unclear was whether or not the “photos, videos, back charges from builders and other trades [and] complaints from [his] clients” referred to in the response were all contained in or were all attached to the emails to which Mr Wang had referred and which Mr Krivosudsky had put into evidence. This only serves to illustrate the fact that Mr Wang’s response of 30 November 2017 could not fairly be characterised as a payment schedule within the meaning of the Act.

6. When documents are referred to in a payment schedule, its recipient should not be left to guess what documents are being referred to nor should a recipient be expected to guess, from a universe of multiple documents or, to use the language of the purported payment schedule in the current case, “many emails”, which aspects of those documents or emails set out the respondent’s reasons for withholding payment, as required by s 14(3) of the Act.

7. In the course of a building project, emails or other communications are frequently sent raising difficulties or supposed difficulties with works. Frequently, those difficulties will be promptly addressed and resolved; others will be subject to discussion and may turn out not to be difficulties at all and still others may remain disputed. This, too, highlights the fact that reference in a payment schedule to the documentation that has passed between the parties in the course of the project may not satisfactorily disclose “the respondent’s reasons” for withholding payment, to use the language of s 14(3).

8. LEEMING JA: This appeal concerns an exchange of emails on 28 and 30 November 2017 between Mr Jack Wang, the sole director of Style Timber Floor Pty Ltd, and Mr Rastislav Krivosudsky, who traded as RK Grinding. Mr Krivosudsky’s email of 28 November was as follows (it and others are reproduced as tendered, including obvious imperfections):

“Hi Jack ,

Have a look on overdue invoices which are made under the Building and Construction Industry Security of Payment Act 1999 (NSW) and pay it in 14 days or my lawyer will be in touch.

Kind regards,

Rastislav Krivosudsky”

9. The subject of the email was “Over due invoices has to be paid in 14 days”. The email attached seven tax invoices for work done at projects located in Pymble, Neutral Bay, North Sydney, Erskineville and Freshwater. Each invoice concluded with the statement, “This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW).”

10. The entirety of Mr Wang’s response, which is the critical document in this appeal, was:

“Rasti

Sorry, I was in the hospital in the past few days for my family, so couldn’t reply your email.

If you want, make a appointment with me, come to my office. I will show you the working agreement between Style timber and Rk grinding, many emails, photos, videos, back charges from builders and other trades, complains from my clients. You will understand why I can’t pay you. The damages you done is more than what you claimed.

Then, it’s up to you want you want to do next.

Best regards

Jack Wang”

11. It was accepted that Mr Krivosudsky’s email was a “payment claim” within the meaning of the Building and Construction Industry Security of Payment Act 1999 (NSW). The substantive issue arising in this appeal is whether Mr Wang’s response was a “payment schedule” for the purposes of that Act.

12. Strictly speaking, the issues extend to whether there should be a grant of leave, and whether there was appellable error in summary judgment being entered on the basis that there was no triable issue that Mr Wang’s response was a payment schedule. However, there is limited utility in attending separately to those issues if the ultimate question of whether Mr Wang’s email engages the statute can satisfactorily be resolved, one way or the other.

Proceedings in the District Court

13. Mr Krivosudsky commenced proceedings in the District Court by Statement of Claim on 17 October 2018 — nearly a year after the email exchange — alleging that Style Timber Floor had failed to pay the amount claimed in his payment claim, and had failed to provide any payment schedule pursuant to s 14(4) of the Act, and that by reason of ss 14(4), 15(1) and 15(2)(a)(i), he was entitled to the amount of $106,166.50. Mr Krivosudsky also filed a notice of motion seeking summary judgment in the amount of his claim.

14. The notice of motion came before Judicial Registrar Howard on 2 November 2018, who delivered ex tempore reasons for entering summary judgment against Style Timber Floor. The Judicial Registrar said that the real issue arose under s 14(3) of the Act and relied upon what had been said in Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [78] as whether “the essence of ‘the reason’ for withholding the payment is made known sufficiently to enable the claimant to make a decision whether or not to pursue the claim and to understand the nature of the case it will have to meet in an adjudication.” The Judicial Registrar identified the absence of reasons as the difficulty confronting Style Timber Floor. He said:

“The nature of the case as his Honour says in Multiplex v Luiken – what is the damage? What are the complaints? What are the back charges? It is set out globally and by reference to ‘You need to come to me, to see what I have.’ I note that I was taken through RK1, the plaintiff’s exhibit to his affidavit, and that there is material available to be put forward. There are numerous photographs and emails about the various jobs performed by the plaintiff for the defendant and there were defects and things identified, and that is something that may well be known to the parties but I was taken to them in submissions and it is difficult to then reconcile it back to these three sentences.

It is, as I said earlier, a very fine distinction, but ‘If you want, make an appointment with me’ and so on is the indication of outline of reasons but not sufficient in my view to establish what the kind of issues will be that could be dealt with in the nature of the case that parties would have to meet in any dispute or adjudication onwards. Indeed, there would have to be, I would suspect, at least a brief statement in relation to the kind of damages that were incurred. A brief statement of some sort for instance as I was shown in RK1; along those lines.

There needs to be some connection in my view to allowing the plaintiff when they receive a payment schedule of this nature to have not a full understanding, but an understanding of what the extent and the outline is of what damage was done, what further invoices and delays, charges and other things happened, what kind of a complaint, although a complaint from the client is not necessarily essential, but the substance of that could be put into the schedule.

For those reasons, I think the schedule does not comply with subs 14(3) of the Act ….”

15. Judgment in the amount of $106,166.50 plus interest was entered in favour of Mr Krivosudsky accordingly.

Proceedings in this Court

16. Style Timber Floor sought leave to appeal directly to the Court of Appeal. That was irregular. While it is true that the right of appeal to the Supreme Court conferred by s 127(1) of the District Court Act 1973 (NSW) extends to judgments of the District Court constituted by a Judicial Registrar, such appeals are not assigned to this Court. This is because of the restriction on the definition of “specified tribunal” in s 48(1)(a)(iv) of the Supreme Court Act 1970 (NSW), which relevantly provides that a specified tribunal means “the District Court or a Judge of the District Court (but not a Judicial Registrar of that Court)”. This irregularity was detected by the Registrar of the Court of Appeal on 1 April 2019, who, noting that the amount involved was some $106,000, made a direction without opposition that the matter remain in this Court. That was an exercise of power pursuant to s 51(2) of the Supreme Court Act, which authorises proceedings commenced in the Court of Appeal which have been assigned to a Division to be continued and disposed of in the Court of Appeal.

17. Because the judgment entered by the Judicial Registrar was on an application for summary judgment, an appeal lay only by leave: District Court Act, s 127(2)(d). There was a concurrent hearing of the application for leave and the appeal, with the opportunity for full submissions on the substance of the appeal.

18. Style Timber Floor’s summons seeking leave was only filed on 20 February 2019, and thus required an extension of time, which was (appropriately) not opposed having regard to evidence about delay in obtaining the transcript of the Judicial Registrar’s reasons.

Part 3 of the Act

19. Part 3 of the Act concerns the procedure for recovering progress payments. As Sackville AJA observed, with the agreement of Payne JA, White JA, Emmett AJA and me in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2019] NSWCA 11; 365 ALR 345 at [71], the Act was enacted in 1999 and has been adopted with variations in other Australian jurisdictions and has given rise to numerous questions of construction. Although many authorities have explained the legislative scheme, it is desirable once again to do so in these reasons, just as it was in Seymour Whyte Constructions. It is as well to explain immediately why that is so.

20. The question of construction is not, despite the emphasis in Style Timber Floor’s submissions, merely whether Mr Wang’s email “indicated” his company’s “reasons for withholding payment”, considered in isolation. It is necessary to construe s 14 as an important constituent part of a narrowly circumscribed statutory regime, serving a particular function in legislation with a particular purpose.

21. Although it may be superficially attractive merely to consider whether Mr Wang’s email “indicated” his “reasons for withholding payment”, that would not, in my respectful view, be sufficient to determine whether there is compliance with s 14(3). Nor would such an approach accord with the authorities on that section and its materially identical counterparts in other jurisdictions.

Legislative purpose

22. I quote from Sackville AJA’s judgment in Seymour Whyte Constructions at [72]-[74], omitting citations:

“The High Court has on two occasions quoted the explanation of the original design of the Security of Payment Act given by the responsible Minister when introducing amending legislation in 2002:

‘The Act was designed to ensure prompt payment and, for that purpose, the Act set up a unique form of adjudication of disputes over the amount due for payment. Parliament intended that a progress payment, on account, should be made promptly and that any disputes over the amount finally due should be decided separately. The final determination could be by a court or by an agreed alternative dispute resolution procedure. But meanwhile the claimant’s entitlement, if in dispute, would be decided on an interim basis by an adjudicator, and that interim entitlement would be paid.’

The Minister went on to say that cash flow was the ‘lifeblood of the construction industry’ and that the Government was:

‘determined that, pending final determination of all disputes, contractors and subcontractors should be able to obtain a prompt interim payment on account, as always intended under the Act.’

Section 3(1) of the Security of Payment Act states that the object of the legislation is:

‘to ensure that any person who undertakes to carry out construction work … under a construction contract is entitled to receive and is able to recover, progress payments in relation to the carrying out of that work…’

The means by which the Act ensures that a person is entitled to receive a progress payment ‘is by granting a statutory entitlement to such a payment regardless of whether the relevant contract makes provision for progress payments’ (s 3(2)).

Section 3(3) provides as follows:

‘The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves:

(a)   the making of a payment claim by the person claiming payment, and

(b)   the provision of a payment schedule by the person by whom the payment is payable, and

(c)   the referral of any disputed claim to an adjudicator for determination, and

(d)   the payment of the progress payment so determined.’”

Legislative provisions

23. Section 4(1) defines “progress payment” to mean, relevantly, “a payment to which a person is entitled under section 8”. Section 8, which is within Part 2 of the Act creating “Rights to progress payments”, provides:

“(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 ...

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 ...”

24. Section 11(1) provides that, subject to s 11 and any other law, a progress payment is to be made in accordance with the applicable terms of the contract. “Due date” in relation to a progress payment is defined in s 4(1) to mean "the due date for the progress payment as referred to in s 11.”

25. Part 3 specifies how the legislative purpose of achieving a prompt pro tem resolution of disputes and payment of monies, all without prejudice to the parties’ rights at law, is to be effected. This reflects what Hodgson JA said (with the agreement of Mason P and Giles JA) in Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394 at [51]:

“The Act discloses a legislative intention to give an entitlement to progress payments, and to provide a mechanism to ensure that disputes concerning the amount of such payments are resolved with the minimum of delay. The payments themselves are only payments on account of a liability that will be finally determined otherwise: ss.3(4), 32.”

26. The provisions are characterised by strict fast-paced time constraints, and a deal of informality. It is to be borne steadily in mind that enforceable (albeit not conclusive) determinations for hundreds of thousands or millions of dollars result from the fast-paced regime for non-curial adjudication.

27. By way of overview, a person upon whom a payment claim is served must serve a “payment schedule” within 10 business days or else there is a statutory debt for the entirety of the payment claim. If a payment schedule is served, then the claimant may choose, within 10 business days, to engage the adjudication procedures under Part 3 of the Act, which will result in a determination within a matter of days, which determination may be enforced as if it was a judgment, albeit without prejudice to the parties’ rights at law. Importantly, as explained below, the submissions which may be made to an adjudicator, and thus the metes and bounds of the dispute which the adjudicator will determine, are delineated by the payment schedule.

28. A payment claim must satisfy the criteria of s 13, including identifying the construction work and indicating the amount of the progress payment that is claimed. There are other requirements in some cases, but none is presently relevant. It was accepted that Mr Krivosudsky’s email of 28 November 2017 attaching the overdue invoices was a valid payment claim.

Payment schedules

29. The reference to paying within 14 days in Mr Krivosudsky’s email picks up the timing restriction imposed by s 14 if Style Timber Floor was to provide a payment schedule. Section 14 provides as follows:

“(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.

(2)   A payment schedule:

(a)   must identify the payment claim to which it relates, and

(b)   must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).

(3)   If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent’s reasons for withholding payment.

(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.”

30. It was not suggested that the construction contract provided a lesser time for a payment schedule to be served. Accordingly, s 14(4)(b) required any payment schedule from Style Timber Floor to be served within ten business days.

31. At that stage, the legislation confers important rights upon the claimant which are novel and beneficial.

32. On the one hand, if no payment schedule is received within ten business days after the payment claim is served, then the claimant is entitled to enforce the statutory debt which is created by s 15(1)(a) and in recovery proceedings, the respondent is not permitted to bring any cross-claim or raise any defence in relation to matters arising under the construction contract: s 15(4).

33. If a payment schedule has been served within (relevantly) ten business days after the payment claim is served, and satisfies the requirements in s 14(2) and (3), then, the elaborate provisions of Division 2 — titled “Adjudication of disputes” — are available. These include a statutory right of suspension, which for present purposes need not be elaborated. There are also two further rights.

34. First, if the respondent fails to pay the whole or part of a scheduled amount in accordance with the schedule, then the claimant may recover the unpaid portion of the scheduled amount as a statutory debt in any court of competent jurisdiction. In recovery proceedings, the only issues are the making of the payment claim and the payment schedule, and the respondent is not permitted to bring any cross-claim or to raise any defence in relation to matters arising under the construction contract: s 16(2)(a)(i) and (4)(b).

35. Secondly, the claimant may make an adjudication application in relation to the payment claim: s 16(2)(a)(ii).

Adjudication under the Act

36. Any adjudication application must be made within ten business days after receiving the payment schedule, must be in writing and may contain such submissions relevant to the application as the claimant chooses to include. Thereafter, the respondent within five business days is entitled to lodge a response with the adjudicator, including such submissions as it chooses to include (s 20(1) and (2)(c)). Importantly, sub-s 20(2B) curtails the scope of the respondent’s adjudication response:

“(2B)   The respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant.”

37. Thus in that statutory sense, the reasons which are an element of a valid payment schedule circumscribe the matters which a respondent may put to the adjudicator.

38. The adjudicator is then required to determine the adjudication application “as expeditiously as possible” and, subject to the parties’ agreement, “in any case within ten business days after the date on which the adjudicator notified the claimant and the respondent as to his or her acceptance of the application”: s 21(3).

39. It is quite plain that not only are the statutory mandated timing requirements prescriptive and onerous, but also the entirety of the dispute is ordinarily required to be determined within some 15 business days of the adjudication application being made.

40. Sub-section 22(2) delineates what the adjudicator may consider:

(2)   In determining an adjudication application, the adjudicator is to consider the following matters only:

(a)   the provisions of this Act,

(b)   the provisions of the construction contract from which the application arose,

(c)   the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim,

(d)   the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule,

(e)   the results of any inspection carried out by the adjudicator of any matter to which the claim relates.”

41. Importantly, the entirety of Part 3 has no effect upon civil proceedings arising under a construction contract, except insofar as allowance must be made for the payments made pursuant to the expedited and non-curial procedures contained within it: s 32(2) and (3).

Consequences of the statutory regime as relevant to this appeal

42. First, the “trial” which was denied to Style Timber Floor following the entry of summary judgment would be a very narrow one. The only issue at that trial would be whether or not it had served a valid payment schedule. If not, it was indebted to Mr Krivosudsky. If it had, then Mr Krivosudsky had no claim for statutory debt, and his proceedings had to be dismissed. All of this was without prejudice to Mr Krivosudsky’s claims in contract, and any counter-claims by Style Timber Floor, based on the actual performance, or defective performance, of work by Mr Krivosudsky.

43. Secondly, in many and perhaps most cases, there will be no distinction between a summary and a final determination of whether or not a document is a payment schedule.

44. Thirdly, whether or not a compliant “payment schedule” has been provided in response to a payment claim falls to be determined in the context of the statutory provisions consequent upon doing so. Whether or not a document is a payment schedule must be something which is capable of ascertainment readily, and (at least ordinarily) without the assistance of a lawyer. The large majority of the cases which have arisen under this Act have not involved dispute as to whether a response was or was not a compliant payment schedule.

45. Fourthly, and perhaps most importantly for present purposes, the payment schedule serves two important functions under the Act. The first is to inform the claimant as to the metes and bounds of its dispute with the respondent, so that it can make an informed choice as to whether to engage the expedited pro tem adjudication procedures under Division 2. The second is to articulate the respondent’s case which will then be determined by the adjudicator. It will also enable adjudicators to assess whether to accept appointment as an adjudicator to a dispute. At the time an adjudication application is made, all that the claimant and the prospective adjudicator will know of the nature of the respondent’s side of the case is what is contained in its payment schedule.

Authorities on s 14(3) and its counterparts

46. Both parties relied on what Palmer J had said in Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140. Palmer J was dealing with a dispute arising under s 20(2B), rather than s 14(3), in turn arising out of a formal payment schedule issued by Multiplex which was accepted to constitute a payment schedule. The question was whether an adjudication response fell within what had been indicated by the payment schedule. It was in that context that Palmer J said at [70], and [76]-[78]:

“70   For a respondent merely to state in its payment schedule that a claim is rejected is no more informative than to say merely that payment of the claim is “withheld”: the result is stated but not the reason for arriving at the result. Section 14(3) requires that reasons for withholding payment of a claim be indicated in the payment schedule with sufficient particularity to enable the claimant to understand, at least in broad outline, what is the issue between it and the respondent. This understanding is necessary so that the claimant may decide whether to pursue the claim and may know what is the nature of the respondent’s case which it will have to meet if it decides to pursue the claim by referring it to adjudication.

...

76   A payment claim and a payment schedule are, in many cases, given and received by parties who are experienced in the building industry and are familiar with the particular building contract, the history of construction of the project and the broad issues which have produced the dispute as to the claimant’s payment claim. a payment claim and a payment schedule must be produced quickly; much that is contained therein in an abbreviated form which would be meaningless to the uninformed reader will be understood readily by the parties themselves. [A] payment claim and a payment schedule should not, therefore, be required to be as precise and as particularised as a pleading in the Supreme Court. Nevertheless, precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in the dispute.

77   A respondent to a payment claim cannot always content itself with cryptic or vague statements in its payment schedule as to its reasons for withholding payment on the assumption that the claimant will know what issue is sought to be raised. Sometimes the issue is so straightforward or has been so expansively agitated in prior correspondence that the briefest reference in the payment schedule will suffice to identify it clearly. More often than not, however, parties to a building dispute see the issues only from their own viewpoint: they may not be equally in possession of all of the facts and they may not equally appreciate the significance of what facts are known to them. This will be so especially where, for instance, the contract is for the construction of a dwelling house and the parties are the owner and a small builder. In such cases, the parties are liable to misunderstand the issues between them unless those issues emerge with sufficient clarity from the payment schedule read in conjunction with the payment claim.

78   Section 14(3) of the Act, in requiring a respondent to “indicate” its reasons for withholding payment, does not require that a payment schedule give full particulars of those reasons. The use of the word “indicate” rather than “state”, “specify” or “set out”, conveys an impression that some want of precision and particularity is permissible as long as the essence of “the reason” for withholding payment is made known sufficiently to enable the claimant to make a decision whether or not to pursue the claim and to understand the nature of the case it will have to meet in an adjudication.” [emphasis added]

47. When dealing with the requirements of a payment claim, Palmer J’s analysis was endorsed by this Court in Clarence Street Pty Ltd v Isis Projects Pty Ltd (2005) 64 NSWLR 448; [2005] NSWCA 391 at [31]. While it is clear that an abbreviated description, falling short of a pleading, will suffice, the passages emphasised indicate that the payment schedule must sufficiently describe the dispute so as to enable the claimant to determine whether to proceed in the knowledge of the nature of the case it will have to meet.

48. It is established that even where a respondent proposes to pay no part of a payment claim, it is still required to indicate reasons in accordance with s 14(3): Barclay Mowlem v Tesrol Walsh Bay [2004] NSWSC 1232 at [15]-[16]; Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333 at [24]. That, with respect, must be so having regard to, inter alia, the limiting effect of s 20(2B). It was not suggested in this Court that s 14(3) did not apply to Style Timber Floor on the basis that it refused to pay the entirety of the claim.

49. In most of the litigation arising under the Act, there has been no dispute that a payment schedule has been provided. The requirements are undemanding, and it is of the nature of things that the recipients of payment claims are apt to have better systems in place to comply with the prescriptive regime put in place by the legislation. Indeed, there are very few cases where an issue has arisen as to whether a document as informal as Mr Wang’s email constituted a payment schedule.

50. In Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333 the same issue arose, in responding to a claim seeking a payment of $462,147.22 comprising three components for work at the same site: additional labour expended on original works $332,279.10, correct overtime rate charge of $4,045.50 and a refund of 10.50% Discount for prompt payment $83,809.24: see at [7]. It is helpful to reproduce the entirety of the applicant’s email dated 14 December 2006 which was contended to be a payment schedule:

“Regarding your invoice 1282, we confirm that we received the invoice on 14 December 2006.

For the indicated extension of the installation time, please note our statement for the main reasons which are influenced by the site-management from your site as follows:

- The most pipefitter and installation personal are unskilled and they have no experience with installation of pipework and fire fighting systems (Some of them are hairdresser and barkeepers). For this reason you have lost a lot of time and money, because the installation progress and the quality of installation was not so effective as required

- No suitable tools and not the required quantity of tools on site. For this reason the progress of installation and the quality could not be so effective as required

Moreover you have spend too much money for rented tools, equipment and storage containers etc.

It would be cheaper for you to buy the tools for this project

- The conditions on site with storage of the material as on the laydown area and also at the installation areas was a big chaos (problem of housekeeping). Your people have lost a lot of time to search for the material what they need for installation.

This are only a few short items to explain the reasons for extension of the installation time from our side

For this reasons we accept not your invoice but we suggest to have a meeting on site next year to clarify the situation and to find a solution for both sides.”

51. Section 18 of the Building and Construction Industry Payment Act 2004 (Qld) was identical to the current form of s 14 of the NSW statute. Chesterman J considered that the first and second criteria — identification of the invoice and the fact that the applicant proposed to pay nothing — were satisfied. His Honour stated at [22] that:

“The important thing to note about invoice 1282 is that it claims three separate amounts. The first is for the cost of labour expended on the contract works, which was additional to amounts included in previous claims for payment. The second item was an adjustment of an overtime rate which had been wrongly charged in previous claims. The third item was of the same type. It was to recover the amount by which previous invoices have been reduced when the reason for the discount had not eventuated.”

52. His Honour rejected the submission that the email was a payment schedule at [25]-[30]:

“[25]   Some reasons were given. They were:

The first respondent’s pipefitters and installers were unskilled and inexperienced and the installation work was ineffective.

The installers were not supplied with suitable tools and thereby experienced delay.

The construction site was poorly organised with inefficiencies in finding and moving materials.

These contentions amount to sufficient reasons for the applicant’s stated refusal to pay item 1 on invoice 1282. That claim was for the cost of labour over and above the labour charges that had been made in respect of the same work in earlier claims. The applicant made it sufficiently clear that it thought no additional labour charges were justified because the additional costs were occasioned by the first respondent’s inefficiencies and ineptitudes.

[26]   Significantly, the email does not deal at all with the claims for almost $88,000, seeking adjustments for overtime underpaid and a refund of discounts allowed for prompt payment which was not made. Mr Knop made it clear that the applicant would pay nothing in response to the invoice. He explained why it would pay nothing with respect to claim 1 but said nothing at all about claims 2 and 3. The reason may well be that Mr Knop was addressing the claim he considered contentious and was not, in his mind, compiling a payment schedule. His email is, however, the document on which the applicant is forced to rely and the only question is whether it satisfies the statutory definition.

[27]   If the applicant had no objection to paying those amounts the Act required it to say so in its payment schedule. The whole purpose of such a document is to identify what amounts are in dispute and why. The delivery of a payment claim and a payment schedule is meant to identify, at an early stage, the parameters of a dispute about payment for the quick and informal adjudication process for which the Act provides. If a builder wishes to take advantage of the Act to dispute the claim it must comply with its provisions and must, relevantly, take the trouble to respond to a payment claim in the manner required by the Act. The process is not difficult. The applicant was required to identify those parts of the claim which it objected to paying and to say what the grounds of its objection were.

[28]   There are two possible constructions of the 14 December email. The first is that the applicant did, in fact, object to paying anything for items 2 and 3, and proposed to pay nothing in respect of them. In that case for the document to be a payment schedule the applicant had to give reasons for its objection. The email is silent on this point. The second, more likely, construction is that the email does not address that part of the payment claim at all. It did not state the amount of the payment which the applicant proposed to make. If this be the true construction the email did not satisfy the second criterion in s 18 of the Act. On either view the 14 December email did not comply with the definition. The email is incomplete if it is intended to be a payment schedule. It had to address the claim made and not only a part of it. I think this is clear.

[29] A payment schedule which complies with the Act will set out the amount it proposes to pay in response to a claim. By s 20 a respondent who does not pay the amount its payment schedule proposes to pay can suffer summary judgment in a court of competent jurisdiction and enforce the amount as a judgment debt. The machinery for prompt payment and enforcement of payment would break down if a document, said to be a payment schedule, took issue with part only of a claim but was silent as to what it proposed to pay in respect of the balance. The contractor could not enter judgment. The respondent’s reticence could frustrate the operation of the Act.

[30]   This conclusion has the consequence that the second respondent was correct in his approach to the adjudication.”

53. In Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247; 337 ALR 452, the same question arose, in connection with an email sent by an employee of Multiplex. The substance of the email is reproduced at [14] of the judgment of Warren CJ, Tate and McLeish JJA:

“We advise that we cannot reasonably consider the submitted Progress Claim 19 as valid on the following grounds:

— Pursuant to Subcontract Clause 42.1A(a) – BMC has reason to believe that the submitted Statutory Declaration is inaccurate with regard to item 3, please resubmit.

— BMC is unable to ascertain the extent to which items being claimed are for materials that are unfixed, including details of security provided if required under the Subcontract – values attached to certain items would suggest that they do include amounts for unfixed materials.

We also note the requirements for payment claims requested in the attached correspondence of 18th September (attached) and the subject of RCTI #26 have yet to be provided by FTE and as such Progress Claim 18 remains invalid.

Upon FTE remedy of the above and attached Brookfield Multiplex will be in a position to issue FTE with a payment schedule.”

54. The Court of Appeal considered the requirement of the Victorian counterpart to s 14(3) (s 15(3) of the Building and Construction Industry Security of Payment Act 2002 (Vic), which is in identical terms) extensively at [234]-[263], commencing with Luikens and addressing Clarence St and Barclay Mowlem v Tesrol Walsh Bay at [235]-[248], and then Minimax at [249]-[251]. The Court of Appeal then reproduced an obiter passage in a decision of Finkelstein J in Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248 as follows:

“Finkelstein J found that the subcontractor’s invoice did not constitute a valid payment claim. In obiter, he also considered whether, if his conclusion about the validity of the payment claim was incorrect, the principal had served a valid payment schedule. The principal had sought to rely on its various communications in aggregate to constitute a payment schedule. Finkelstein J rejected this approach, stating:

One purpose of a payment schedule is to articulate the reasons for withholding payment or offering to pay less than the claimed amount with a degree of precision and particularity to apprise the contractor of the case it will have to meet if it decides to pursue an adjudication: Multiplex Constructions [2003] NSWSC 1140 at [69]-[70]. Another purpose is to set the limits for an adjudicator if there is to be a dispute about the claim. In my view a payment schedule cannot artificially be constructed out of a series of documents by showing that those documents in combination contain all the necessary information required of a payment schedule. It also should be evident that, viewing the matter objectively, it was intended that the documents constitute a payment schedule. That is not the position here.”

55. The Court of Appeal then applied the equivalent of s 14(3) to the email sent by the Multiplex employee at [256]-[260] (citations omitted):

“Next, it is necessary to consider whether the 5 October 2012 email satisfied the requirement in s 15(3) that it indicate Multiplex’s reasons for withholding payment from Façade. We adopt the observations of Palmer J in Luikens that s 15(3) requires reasons to be indicated ‘with sufficient particularity to enable the claimant to understand, at least in broad outline, what is the issue between it and the respondent’. Absolute precision is not required, and cannot be expected given the reasonably short period within which a respondent is required to prepare a payment schedule (being at most 10 days). Previous dealings between the parties form part of the context relevant to deciding whether the reasons have been indicated with sufficient particularity. The concern is to ensure that the claimant has sufficient information to make a decision whether or not to pursue the claim.

In this case, the 5 October 2012 email gave two bases on which Multiplex did not consider Payment Claim 19 to be valid (and thus did not propose to pay Façade). The first was that Multiplex regarded Façade’s statutory declaration, submitted with the payment claim, to be inaccurate with respect to the third item, which was a declaration that all consultants, suppliers and secondary subcontractors engaged by Façade on the works had been paid in full. The second was that Multiplex was unable to ascertain the extent to which items being claimed for were for materials that were unfixed. Façade submits that these two complaints are inadequate reasons for the purposes of s 15(3) of the BCISP Act. Façade notes that the reasons are ones that Multiplex regarded as going to the validity of the payment claim, which Multiplex now no longer contests. The 5 October 2012 email, Façade argues, is merely a ‘holding position’. This is evident from the conclusion of the email, which states that upon Façade remedying the defects identified in the email, Multiplex ‘will be in a position to issue [Façade] with a payment schedule’.

It is important to note that reasons for withholding payment do not need to be ultimately vindicated to constitute adequate reasons for the purposes of a payment schedule; so much so is evident from the presence of s 21(2B), which permits respondents to add additional reasons for withholding payment at the adjudication stage. As observed in Luikens and Barclay, given the speed with which payment schedules are expected to be produced, the reasons contained within them should not be over-scrutinised.

Nevertheless, the reasons do need to give the claimant an indication of the objections taken to the claims made in the payment claim. In this case, the 5 October 2012 email raised two complaints relating to the general conduct of the Subcontract by Façade, but neither went to any of the particular items claimed in Payment Claim 19. This distinguishes the circumstances of the present case from the payment schedules in Luikens, Barclay and Springs Golf Club, which were all responsive to the particular claims that had been made, albeit to varying degrees.

There is a stark contrast between the reasons given in the 5 October 2012 email and the itemised markdowns on the ‘Subcontractor Payment Schedule’ sent by Multiplex to Façade on 12 October 2012. Further, the complaints raised in the 5 October 2012 email are procedural hurdles rather than concerns about the substance of the payment claim. They were not reasons for denying the substance of the claims made in the payment claim, but reasons why Multiplex did not intend to pay at that moment. In our view, reasons of this nature do not satisfy the requirement in s 15(3) of the BCISP Act. It would be contrary to the intention of the BCISP Act, which sets short time periods for the issuing of payment claims, payment schedules, adjudication applications, and the like, to allow a respondent to effectively seek to extend the statutory time period under the BCISP Act by raising procedural, but not substantive, reasons for withholding payment.”

56. The Court of Appeal went on to doubt the formulation by Finkelstein J in Protectavale of the test, namely, that “viewing the matter objectively, it was intended that the documents constitute a payment schedule”. Their Honours stated that while the objective intention of the document might be relevant, the focus of assessment must be on whether the document meets the requirements of [s 14(3)]: at [262].

57. There is one further decision which bears some similarities with the facts of the present case. In 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674, his Honour Judge Woodward considered the effect of an email dated 4 December 2017, which is partly reproduced at [29]:

“On 4 December 2017, Mr O’Connor sent an email to 3D raising concerns about aspects of 3D’s workmanship. The email relevantly includes the following sentence:

‘Given the serious nature of the concerns expressed above and in discussions over the last week we have withheld payment of 3D’s most recent progress claim until such time as the Civil engineers (sic) statement has been receipted and 3D Flow is able to provide all information requested such as images of open trenches as installed and certainty to MOC that 3D Flow is willing, ready and able to return to site without delay and complete rectification works and contract works before the end of December 2017.’”

58. His Honour applied Façade to conclude that that email did not indicate the reasons for the non-payment of the progress claim, stating at [75]:

“... the 4 December 2017 email also articulates no more than a ‘holding position’ pending the provision of further information and ‘certainty to MOC that 3D Flow is willing, ready and able to return to site without delay and complete rectification works’. There is nothing in the email that goes to any of the particular items claimed in Payment Claim 245 or that would otherwise enable 3D to make a decision whether or not to pursue the claim by referring it to adjudication.”

The emails preceding Mr Wang’s 30 November 2017 email

59. Style Timber Floor placed emphasis on the uncontroversial propositions that the statute contemplated a deal of informality, and Palmer J’s observation in Luikens that what might “be meaningless to the uninformed reader will be understood readily by the parties themselves”. The bulk of Style Timber Floor’s submissions, both written and oral, were directed to the emails and photographs to which reference was made in Mr Wang’s 30 November 2017 email. These had been put into evidence before the Judicial Registrar.

60. I summarise them below, and in slightly greater detail than appeared in the written or oral submissions.

1. First, there were two complaints from customers conveyed by Mr Wang to RK Grinding by emails both dated 10 October 2017. The first, which concerned Neutral Bay, was a complaint that the concrete levelling was behind program, and would be further delayed if, as presumably had been suggested, Mr Krivosudsky would complete by next Monday. Mr Wang asked “Please put one more team to grinding the concrete, otherwise, I have to let other people do it and back charge you.”

2. The second also concerned Neutral Bay, and stated:

“Your boys grinding the levelled floor down due to a miscalibrated laser being utilised initially during floor levelling are creating a mess to the rooms with all the dust.

Please ensure all dust control measures or machines are being utilised when this works are taking place. There is other trades working in the units and OH&S to other trades needs to be considered from your end. I believe all items that are installed in the units also need to be protected by Style Timber and if there’s any damage to fixtures, fittings or joinery in the units to grinding works will have to be passed on to you.”

3. Secondly, some emails sent on 13 October 2017, concerning Neutral Bay, contain a complaint from the developer to Mr Wang regarding the failure to put in place dust control measures or to cover finished areas with plastic drop sheets, and that “the grinding crew leaves all the silica dust lying around”. The developer advised that “I regret to say that any damage or rework to finished surfaces in the units will have to be charged back to Style Timber”. Mr Wang passed on the photographs of the interiors of the development to Mr Krivosudsky, and said:

“You need to use a vacuum dust bag for your grinding machine! Let your boys collect the dust straight away after they finish grinding, check the floor it’s ok!

I told you onsite to use drop sheet to protection other items, see the email builder sent to me.

This is the second time they give me warning, if I receive this complain again, you will be out. They already been upset, hope you understand the situation.”

4. Thirdly, on Tuesday 17 October, Mr Wang forwarded a delay notice to Mr Krivosudsky and advised that “if you can’t get floor ready for level 2 by this Friday, I will let other levelling people fix the problem and all cost associate with it will be back charged on you”. That was followed by a further email on 19 October setting out a program for work in the next seven days at Neutral Bay to finish the floor levelling.

5. Fourthly, on 21 October 2017, another email was forwarded by Mr Wang to Mr Krivosudsky concerning Neutral Bay as follows:

“Jack,

Kitchens will be delivered level 3 Tuesday morning. Please make sure all grinding rectification works are finished prior to the delivery. We have had over 2 weeks of floor rectifications and it is still not complete therefore I am not stopping these deliveries.

Thanks

Andrew”

6. Fifthly, on 26 October, Mr Krivosudsky sent overdue invoices 69 and 71 and requested that they be paid. These were for works in Pitt Street and the ground floor of Erskineville. The reply was that Style Timber had paid one invoice and the other would be paid tomorrow.

7. Sixthly, on 2 November 2017, there was a complaint to Mr Wang from the developer at Ridge Street North Sydney in the following terms:

“Dear Jack,

We were at Ridge St yesterday and noticed that whoever did the floor levelling had been mixing the concrete in the back yard of the premises.

•   The back yard tiles are now covered with concrete and dust. This needs to be swept up and removed completely before it gets wet and solidifies in the drains.

•   Two garden beds are now full of concrete and it needs to be jack hammered out.

•   The tracks of the sliding doors contain concrete and dust and needs to be removed so that the doors slide properly.

The workmanship of the contractor is unsatisfactory and we have now incurred costs to have this cleaned up back to a satisfactory condition. We will advise you of these costs shortly and shall seek reimbursement for these.”

8. Mr Wang forwarded that email to Mr Krivosudsky saying:

“Rasti

I already warned you for this, but look at what the client sent to me.

This could be a big bill back charge to you.”

9. This was the only email which concerned the North Sydney development site.

10. Seventhly, On 3 November 2017, Mr Krivosudsky wrote to Mr Wang:

“Hi Jack,

As long as we fix all defacts in Neutral bay job and we finished your program according fixing of problems on 24th of October and all it was checked by quality control Johnson from Style Timber Flooring i would really appreciate if you pay overdue invoice no. 70.”

11. Mr Wang responded that another team was still fixing the defects and added “check the photos I texted to your mobile”. He said, “Again, you should check your job, make sure it’s done properly. Not my guy, he is the coordinator arrange material and delivery and communication”.

12. Eighthly, later on 3 November 2017, Mr Krivosudsky, referring to overdue invoices numbers 70, 75 and 76 said, “i have to stop work on job sites Pymble Project …, Erskineville”.

13. Mr Wang responded concerning both Pymble and Erskineville as follows:

“Rasti

First, I let you level timber floor area only, you working for Pymble project for corridor and carpet areas without my permission. it breach out working ethics and agreement.

Second, you have so many defects works for Erskinville, I leave you the opportunity to rectify your work, but after few times, it still not be successful and floor layer won’t accept the condition to receive timber floor. It not in the tolerance neither, I already text you the photos. I have to let other teams to rectify your defects and all costs will back charge to you.

We won’t pay you for defects work, neither pay you for the jobs I didn’t let you to do it in Pymble.”

14. On 10 November 2017, Mr Krivosudsky provided an invoice for a job at Freshwater, saying that the sheets were signed by the site manager. The response from Mr Wang the following day was “they are all defected by builder”. Mr Krivosudsky responded:

“Hi Jack,

I had a conversation with builder yesterday and they are happy with it..”

15. Mr Wang responded:

“Rasti

They happy with what? Site manager Luke and Travis let me to fix them! It’s definitely not ready to receive timber floor. Can you promise they are ready now to receive timber?

Have you checked it? it’s terrible. The Italian boys are fixing your defects in Erskineville for nearly a week, they are still fixing your defect. I don’t mind you come over have a look!”

16. Later that day, Mr Krivosudsky responded:

“Listen..

Site managers at fresh water like the floor.. that’s why they gave their signature.. Erskineville i told yoy i have stop working because you not paying on the time…”

17. There was a response from Mr Wang later that day:

“You bullshit, such a lier!

You will lose all your business.”

18. Mr Krivosudsky responded:

“I inspected all sites yesterday.. your timber floor has been layd almost everywhere!!! You are the one who not paying!!! I have signatures from every single site managers!!! Pay invoices!!!”

19. Finally, there was a series of emails exchanged on 17 November. Mr Wang wrote:

“Rasti

I hope you have evidence when you put something in writing, such as emails.

I am telling you now, we haven’t deliver timber floor to Freshwater, so it’s impossible that timber floor is been installed!

I still give you the chance to go back and fix your defects from tomorrow 18th of Nov to next Sat 25th of Nov. If those defects are been fixed, I will let other people fix them and back charge you.”

20. Mr Krivosudsky replied 13 minutes later:

“Hi Jack ,

If you pay me overdue invoices ill send boys to fresh water. Invoice no.70 its overdue 40 days, your timver is layed and you didnt pay. Fix me up all overdue invoices and by Monday will be team in Fresh water for fixing issues if there are any.”

21. Mr Wang’s response, of the same day, was as follows:

“Rasti

I just had a meeting with builder in Neutral bay and other trades today for floor levelling issues there.

If you want, come to my office, I will list all the back charges they gave to me because your defects, job delay to other trades and builder, ruin other trades work, painting, doors, kitchens, pluming, tiling, water proofing. Plus back charge from Mitch who fixed 3 units for you, back charge from floor layers Andrea and Simone, and Style timber site people and admin cost, material lost because your delay. The total amount are far more than all your bills.

I am open and willing talk to you regarding all these issues.”

61. The following matters may be drawn from this material.

62. First, there is a single complaint about the Pymble invoice. This was the smallest of the seven invoices: 213 hours of work “Levelling bedrooms block B and Block A” and “Levelling lobbies block C”, totalling $7,029. I understand Mr Wang to have complained that more or different work had been done than had been undertaken (“you working for Pymble project for corridor and carpet area is without my permission”). Assuming, favourably to Mr Wang, that the invoice, which was sent 3 days after Mr Wang’s 3 November 2017 email, included work which was unauthorised, there is no indication of any defective work in the areas to which it related.

63. Secondly, there is a single complaint about the North Sydney development. Mr Wang indicated that reimbursement would be sought by the client. However, Mr Wang appears not to have said that such a claim had been received, let alone its amount. The North Sydney invoice was the second largest (it was $19,250).

64. Thirdly, the emails express directly contradictory statements about the Freshwater development. Either the timber floor had been laid or it had not.

65. Fourthly, a recurring theme of Mr Krivosudsky’s emails is that the site supervisors had approved the work done by him.

66. Fifthly, the large majority of emails concern the Neutral Bay and Erskineville developments.

67. Sixthly, the last email in the sequence is revealing. It alone of the emails identifies “back charge from Mitch who fixed 3 units for you”, “back charge from floor layers Andrew and Simone”. Even then, the amount of those back charges was not identified. Those three items are relatively specific, but Mr Wang also identifies delay, defects and “ruin” other trades listed as “painting, doors, kitchens, pluming, tiling, water proofing”. Mr Wang goes on to identify other costs for “Style timber site people and admin cost” and to assert that “the total amount are far more than all your bills”. However, that email, no differently from the critical email of 30 November 2017, concludes with an invitation to talk about all the issues, which is a little difficult to reconcile with an offsetting claim exceeding the unpaid $106,000, not a single aspect of which was, according to the evidence, ever quantified in what was conveyed to Mr Krivosudsky, even after he had suspended work.

The character of Mr Wang’s 30 November 2017 email

68. The Judicial Registrar, with respect correctly, held that Mr Wang’s email identified the invoices and conveyed that he proposed to pay none of them. The email therefore satisfied s 14(2).

69. However, if Mr Wang’s email was to amount to a payment schedule, it was required also to indicate Mr Wang’s reasons for withholding payment. It asserted that Mr Krivosudsky “will understand why I can’t pay you”, and said, by way of explanation, “the damages you done is more than what you claimed”.

70. I mean to convey no criticism of Mr Wang. However, if his response is to constitute a payment schedule complying with s 14(3), then it must be said that it would be difficult to exclude any claim whatsoever from the ambit of the dispute between Mr Krivosudsky and Style Timber Floor. Delay on any site, defects on any site, and unspecified amounts for the time of “Style timber site people and admin cost” on any site are mentioned in the previous email.

71. There was nothing in Mr Wang’s response which was directed to any particular invoice. Indeed, there was nothing in Mr Wang’s response which was directed to any particular project.

72. Was the dispute about Neutral Bay and Erskineville? Did it extend to North Sydney, Pymble and Freshwater? Was part of the Pymble invoice disputed, or was it accepted that it was all required to be paid, but was absorbed by the offsetting claim? The same questions may be asked of the North Sydney invoice. The email is opaque as to the number of sites which were said to contribute to the damages Mr Wang’s company had suffered. The email is opaque as to whether any (and, if so, to what extent) of the actual entries in the invoices were disputed, as opposed to the claim for back charges, delay, wasted materials and defective work on which Mr Wang relied.

73. It is to be borne in mind that Mr Krivosudsky had supplied unpaid invoices from five separate sites, and Mr Wang’s response identified no site whatsoever. One point of the provision of a payment schedule is to permit the statutory mechanism of adjudication to take place. It is impossible to express any views as to the limits of the adjudication if the 30 November email is to amount to reasons which engage s 20(2B).

74. These concerns may be tested practically. What was the scope of the dispute which might be adjudicated in December 2017? Was there a dispute about all five of the properties throughout Sydney? Or just one property? Or a number of properties? What material would Mr Krivosudsky have to supply to an adjudicator if this email were a valid payment schedule? Would Mr Krivosudsky have to make submissions about the condition of the concrete floors at Freshwater? About what had occurred at the North Sydney property? How many of the matters raised in October and November had been resolved by 30 November?

75. The email amounts to less by way of reasons than the emails held not to satisfy s 14(3) in Minimax Fire Fighting Systems and Façade and 3D Flow Solutions. True it is that the substance of the email is that Style Timber Floors had incurred more actual costs which it claimed to be able to deploy by way of set-off to enable it to deny any obligation to pay any of the payment claim. But save for the assertion that they exceeded the payment claim, no information was given about those actual costs, or the properties to which they related. I do not consider that that sufficiently satisfies the obligation to indicate the reasons for the purpose of s 14(3).

76. Style Timber Floor at one stage submitted that the matter should have been left to go to trial on the basis that there might be conversations which bore on whether or not there was a sufficient indication of Mr Wang’s reasons. I do not accept that submission. First, Mr Wang supplied an affidavit in response to the summary judgment application. He did not in that affidavit suggest that there was some material conversation, nor was there other evidence which suggested that there had been. It follows that the submission lacks any evidentiary foundation. Secondly, it is to be doubted that save in exceptional cases such evidence would be relevant. Payment claims and payment schedules must be served. They must be in writing. It may be accepted that the requirement under s 14(3) may be satisfied by incorporating another document by reference. It is perhaps arguable that a payment schedule could incorporate a conversation by reference. But in the present case, the submission lacks any evidentiary foundation.

77. It was not suggested that the fact that Mr Krivosudsky delayed almost a year before exercising his rights under s 14 made any difference. I cannot see how it does.

78. Further, it would have been open to Mr Krivosudsky to ask for further information about Mr Wang’s email, or indeed to meet with him in accordance with his invitation. There is nothing in the evidence to suggest that occurred. However, the failure to do so is irrelevant to the parties’ rights under the Act, which turn on whether or not the 30 November 2017 email amounts to a payment schedule. On one view, the gravamen of Mr Wang’s email was an invitation to come to his office, so that he could then explain his reasons, which Mr Krivosudsky would understand. If that is how the email is to be understood, it cannot be a payment schedule. Section 14(3) requires an actual disclosure of reasons, not an offer to do so in the future.

79. Finally, it is to be firmly borne in mind that the litigation merely determines whether or not Mr Krivosudsky is entitled to a statutory debt against Style Timber Floor. It says nothing of the underlying dispute between them.

80. The foregoing focusses upon the ultimate question, whether the 30 November 2017 email is a payment schedule. That question is binary. The wholly documentary nature of the question in the present case means that there is no difference between its determination on a final basis or on a summary basis. Conversely, and contrary to Mr Krivosudsky’s submissions, nothing turns on the separate requirement for leave. In a case such as the present, the most significant factor relevant to the grant of leave is the correctness of the outcome.

Orders

81. For those reasons, while there should be the requisite extension of time and grant of leave, the appeal must be dismissed. I propose the following orders:

1.   Extend the time within which to apply for leave to appeal to 20 February 2019.

2.   Grant leave to appeal, and direct that the draft notice of appeal stand as a notice of appeal.

3.   Appeal dismissed, with costs.

82. SIMPSON AJA: I agree with the orders proposed by Leeming JA and with his Honour’s reasons therefor.  I also agree with the additional observations of Bell P.

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Amendments

21 February 2020 - [14] - "to enable to claimant" replaced by "to enable the claimant"

[24] - quotation marks inserted before "the due date"

[39] - "but also that the" replaced by "but also the"

[46] - "A payment claim" replaced by "[A] payment claim"

[55] - duplicate of [258] beginning "It is important" and ending "over-scrutinised" deleted.

[59] - quotation marks moved to precede "be" rather than "what"

[60] - at point (19), "were a series" replaced by "was a series"

Decision last updated: 21 February 2020