Virtus Art Pty Ltd v EC Group Pty Ltd
[2021] VCC 1542
•15 October 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-21-03675
| Virtus Art Pty Ltd (ACN 611 616 178) | Plaintiff |
| v | |
| EC Group Pty Ltd (ACN 639 692 318) | Defendant |
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JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF JUDGMENT: | 15 October 2021 | |
CASE MAY BE CITED AS: | Virtus Art Pty Ltd v EC Group Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 1542 | |
REASONS FOR JUDGMENT
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Subject: CONTRACTS
Catchwords: Building contract – payment claim – undefended application
Legislation Cited: Building and Construction Industry Security of Payment Act2002 (Vic) ss4, 9, 10A, 10B, 12, 14(2), 15, 16(2) and 48; Civil Procedure Act 2010 (Vic) ss61 and 63
Cases Cited:3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674; SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805; Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr L M Stanistreet | Hall Partners Lawyers |
| For the Defendant | - | Lennon Lawyers |
HER HONOUR:
1 In this proceeding, the plaintiff (“Virtus”) applies for judgment against the defendant (“EC”) pursuant to s16(2) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (“SOP Act”). Virtus makes the application by summons on originating motion dated 27 August 2021. The application arises out of construction works that Virtus performed at the Continental Hotel, Sorrento; the Allison Parkside Apartments at 1032 Mt Alexander Road, Essendon; and Jasper Road, McKinnon.
2 Virtus submits that it is entitled to judgment because EC failed to issue a payment schedule in response to its payment claims.
3 Although EC filed a notice of appearance on 17 September 2021 and timetabling orders were made for the filing of affidavits and written submissions, EC did not file any material in opposition to the claim.
4 In my view, the payment claims comply with the provisions of the SOP Act, and EC has failed to serve a payment schedule in response to the payment claims. Therefore, EC is liable for the balance owing on the claims as a debt due.
5 Accordingly, I order that there be judgment for Virtus in the sum of $267,174.63 (the amount due of $271,174.63 less the $4,000.00 received), together with interest. I order that EC pay Virtus’ costs of and incidental to the proceeding on the standard basis, in default of agreement (unless either party has a basis for a different costs order).
The Facts
6 Virtus relies upon an affidavit of Stefan-Octav Florea, one of its directors, sworn 21 July 2021. The proceeding concerns three contracts – the Continental Hotel contract; the Essendon contract; and the McKinnon contract.
The Continental Hotel Contract
7 By correspondence dated December 2020, EC engaged Virtus to perform concreting works at the Continental Hotel, Sorrento.
8 On or about 8 December 2020, George Ionescu of Virtus emailed Matthew Sultana of EC an estimated price list, with a breakdown of the works and estimated costs.
9 On 10 December 2020, Mr Blackmore sent a text message to Mr Ionescu asking: “Hi mate. We would like to proceed with works from you. Can I please get you onsite tomorrow?” Mr Ionescu responded: “Hi Matt will be a patcher in site starting from 11.00. George”.
10 On 14 December 2020, Mr Ionescu emailed Mr Sultana an updated price list, saying: “Please let me know if you are ok with one of the options and also a starting date”.
11 On or about 16 December 2020, Mr Sultana sent an email to Virtus stating: “If we can please proceed as discussed with the supply of material by Virtus, that would be great. Can we please have the appropriate labour starting from tomorrow on site to achieve works”.
12 On or about 17 December 2020, Virtus commenced the Continental Hotel works. Virtus last carried out works on the site on 31 March 2021.
13 On 18 June 2021, Virtus served a purported payment claim upon EC by email, in the sum of $106,935.63 (including GST). Relevantly:
(a) The alleged payment claim comprised invoice no. 1350, and a bundle of timesheets.
(b) The invoice contained a highly detailed breakdown of the works, including their date, description, quantity, rates, and amount.
(c) The timesheets provided further details of the works, their date, their start and end times, and hours of work.
(d) The invoice was endorsed: “This is a payment claim made under the Building and Construction Industry Security of Payment Act 2002”.
14 Virtus has not received a payment schedule in response to the payment claim.
The Essendon Contract
15 By correspondence dated January 2021, EC engaged YC to perform concreting works at the Allison Parkside Apartments, Essendon.
16 On 6 January 2021, Mr Ionescu emailed Mr Sultana an estimated price list, with a breakdown of the works and estimated costs. On 17 January 2021, Mr Ionescu emailed Mr Sultana an updated price list.
17 It is not apparent when the works commenced. However, Virtus last carried out works on the site on 9 April 2021.
18 On 18 June 2021, Virtus emailed an alleged payment claim to EC in the sum of $65,452.92 (including GST). The alleged payment claim comprised invoice no. 1351, and a bundle of timesheets, which were in the same form as the Continental Hotel payment claim.
19 Virtus has not received a payment schedule in response to the payment claim.
The McKinnon Contract
20 On 20 January 2021, Mr Sultana requested that Virtus perform patching and liquid filling works at Jasper Road, McKinnon. The arrangement arose by the following text messages from Mr Sultana to Mr Ionescu:
(a) “Do you guys do dry packing/liquid fill panels? Patching prop holes and grout tube holes?”;
(b) “Can I please lock in the 2x patchers on Monday moving forward at 236 Jasper Rd, McKinnon”; and
(c) “Ideally, I’d like 2x blokes on liquid fill and 2x blokes on the patching”.
21 Mr Ionescu responded: “No options for Essendon, Sorry. But I’ll keep looking for alternatives, I’ll let you know. Thanks”.
22 Mr Sultana later confirmed the arrangement: “… Jasper is ok for tomorrow 2 men as discussed [by call] but Essendon can be thursday”.
23 On or about 23 January 2021, Virtus commenced the McKinnon project works. Virtus last carried out works on the site on or about 10 April 2021.
24 On 18 June 2021, Virtus emailed an alleged payment claim to EC in the sum of $98,786.60 (including GST). The alleged payment claim comprised invoice no. 1351 and a bundle of timesheets, which were in the same form as the Essendon and Continental Hotel payment claims.
25 Virtus has not received a payment schedule in response to the payment claim.
26 On or about 1 July 2021, EC paid the sum of $4,000.00 to Virtus. EC did not specify the payment claim to which the sum related.
27 In those circumstances, Virtus claims the sum of $267,174.63 (including GST) under s16 of the SOP Act.
The legal context
28 The SOP Act seeks to ensure that people who undertake to carry out construction work can recover progress payments for the performance of that work.[1] Section 4 defines construction contract as a “contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services for another party”. The SOP Act applies to any construction contract whether written or oral, or partly written and partly oral.[2] “Construction work” is defined by s5. There is no dispute that the works the subject of this proceeding is “construction work” within the meaning of s5.
[1]SOP Act s3.
[2]Ibid s7.
29 Section 16(2)(a) of the SOP Act provides that a claimant may recover from a respondent any unpaid portion of an amount claimed in a payment claim where the respondent fails to submit a payment schedule within time (or at all) in response to the payment claim. Section 17(2)(a) provides that where a respondent provides a payment schedule within time, a claimant may recover from the respondent any unpaid portion of the amount which the payment schedule states the respondent proposes to pay to the claimant.
30 Section 14 of the SOP Act concerns the form and content of payment claims. Sections 14(2) and (3) relevantly provide that a payment claim:
(a) must be in the prescribed form (if any) and contain the prescribed information (if any) – neither is prescribed;
(b) must identify the construction work or related goods and services to which it relates;
(c) must indicate the amount of progress payment that the claimant claims to be due;
(d) must state that it is made under the SOP Act; and
(e) must not include any “excluded amounts” (being amounts referable to particular categories of variations).
31 Section 14(4) of the SOP Act addresses when a payment claim can be served, where it is not a payment claim in respect of a final, single or one-off progress payment. It provides that such a payment claim may only be served within:
(a) the period determined in accordance with the construction contract “in respect of the carrying out of the item of construction work or the supply of the item of related goods and services to which the claim relates”; or
(b) the period of 3 months after the “reference date referred to in s9(2) that relates to the progress payment”.
32 Section 14(5), (6) and (7) of the SOP Act concern payment claims claim in respect of a final, single or one-off progress payment and are not relevant for present purposes. Section 14(8) provides that a claimant “cannot serve more than one payment claim in respect of each reference date under the construction contract”. Section 14(9) provides that this limitation does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous payment claim if the amount has not yet been paid.
33 Another important provision informing the formal requirements for payment claims under the SOP Act is s9. Section 9(1) provides that “on and from each reference date under a construction contract” a claimant is “entitled to a progress payment under this Act calculated by reference to that date”.
34 Section 9(2)(a) of the SOP Act provides that a reference date is a date determined by or in accordance with the construction contract as:
(a) a date on which a claim for a progress payment may be made; or
(b) a date by reference to which the amount of a progress payment is to be calculated,
in relation to a specific item of construction work “carried out or to be carried out” or a specific item of related goods and services “supplied or to be supplied” under the contract. The rest of s9 concerns situations where the contract makes no express provision for reference dates.
35 It is now well established in Victoria that unless a payment claim answering the description in s14(1) of the SOP Act is served, there can be no application to a court under s16(2)(a)(i). Although dealing with the alternative option of an adjudication application referred to in the New South Wales equivalent of s16(2)(a)(ii), this follows inexorably from the decision of the High Court in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd[3] (“Southern Han”). On the other hand, the available defences to a payment claim are very limited.
[3](2016) 260 CLR 340 [44].
36 Generally speaking, the available defences concern either the nature of the underlying contract or the form and service of the purported payment claim, and thus whether the payment claim is effective to trigger the procedures established by Part 3 of the SOP Act.[4] More particularly, the defences to a payment claim enlivened by the formal requirements of the SOP Act are, in substance, that the payment claim:
[4]Southern Han [62].
(a) does not relate to a “construction contract” (including because it does not involve carrying out “construction work”), or it relates to a construction contract excluded from the operation of the SOP Act under s7 (for example, a construction contract that forms part of a loan agreement, or one that is a domestic building contract under the Domestic Building Contracts Act1995 (Vic));
(b) fails to satisfy the formal requirements of s14(2) (for example, by failing to identify the construction work or failing to state that it is made under the SOP Act);
(c) was made when no valid reference date existed,[5] including where it is served before an applicable reference date or relies on a reference date that has already been used up by an earlier payment claim;[6]
(d) includes variations that are “excluded amounts” under s10B; and
(e) was not validly served on the respondent under either the terms of the contract or under s50.
[5]Southern Han [61]-[62]; Vanguard Developments v Promax [2018] VSC 386 [121] (Kennedy J).
[6]SOP Act s14(8).
37 Under s47 of the SOP Act, nothing in Part 3 of the SOP Act precludes bringing or continuing proceedings under the construction contract, including where those proceedings deal with the same issues in dispute in the proceeding relying on Part 3. Thus, a judgment under ss16 and 17 is a provisional judgment in what it grants and what it refuses.[7] The statutory context both contemplates and permits inconsistent judgments.[8] This section is, in effect, the statutory manifestation of the “pay now, argue later” description often given to the policy behind the SOP Act and its counterparts in other states.[9]
[7]Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 [2] and [43]-[46] (Vickery J), cited with approval in Pearl Hill Pty Ltd v Concorp Construction Group (Vic)Pty Ltd [2011] VSCA 99 [11].
[8]Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385 [22] (Handley JA, with whom Santow JA and Pearlman AJA agreed).
[9]Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 [2] and [43]-[46].
38 Further, in considering any purported defences to a payment claim, it is important to be mindful of s48 of the SOP Act. This section provides that the provisions of the SOP Act have effect despite any contractual provision to the contrary. It further provides that any provision in any contract purporting to exclude, restrict or modify the operation of the SOP Act or that may reasonably be construed as an attempt to deter a person from taking action under the SOP Act, is void.
39 This court has endorsed the hearing of applications under the SOP Act on a summary basis by summons on originating motion with affidavit evidence.[10] Such claims are properly assessed on the balance of probabilities,[11] with the quality of the evidence weighed having regard to the fact that the legislation seeks to facilitate a swift but temporary remedy.[12] Occasionally, a plaintiff nevertheless applies for relief under s16 by bringing a proceeding commenced by writ and statement of claim, then issuing a summons seeking summary judgment pursuant to s61 of the Civil Procedure Act 2010 (Vic) (“CPA”).[13] This can add an additional layer of complexity in determining the test to be applied to any defences raised.[14] However, the present proceeding was commenced by summons on originating motion, so questions of the application of the test under CPA ss61 and 63 do not arise.
[10]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 [39]-[54]. See also SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 [26].
[11]Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 449-450 (Mason CJ, Brennan, Deane and Gaudron JJ).
[12]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 [51]-[54].
[13]John Beever v Roads Corporation [2018] VSC 635; see also Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053.
[14]SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 [31].
Are the requirements of the SOP Act satisfied?
Construction contract
40 The contracts in issue are construction contracts because they are contracts under which Virtus undertook to carry out construction work for EC (ss4 and 5).
Reference dates
41 Virtus submits that each of the payment claims have a reference date. Since the contracts do not provide a reference date, Virtus relies upon the reference dates in the Act. Virtus relies upon s9(2)(d)(iii) of the SOP Act, which provides that a reference date for a final payment may arise the day immediately following the day on which works were last carried out under the contract.
42 Virtus notes that:
(a) For the Continental Hotel Contract, works were last carried out of 31 March 2021. Therefore, the reference date is 1 April 2021. The payment claim was issued on 18 June 2021.
(b) For the Essendon Contract, the works were last carried out on 9 April 2021. Therefore, the reference date is 10 April 2021. The payment claim was issued on 18 June 2021.
(c) For the McKinnon Road Contract, the works were last carried out on or about 10 April. Therefore, the reference date is on or about 11 April 2021. The payment claim was issued on 18 June 2021.
43 I accept the analysis of Virtus. In this proceeding, the contracts did not outline reference dates. Accordingly, the reference dates revert to the Act.
44 The payment claims are in respect of final payment – they are the only evident payment in respect of the works. Accordingly, s9(2)(d) of the SOP Act establishes the reference dates as follows:
(d)in the case of a final payment, if the contract makes no express provision with respect to the matter, the date immediately following—
(i) the expiry of any period provided in the contract for the rectification of defects or omissions in the construction work carried out under the contract or in related goods and services supplied under the contract, unless subparagraph (ii) applies; or
(ii) the issue under the contract of a certificate specifying the final amount payable under the contract a final certificate; or
(iii) if neither subparagraph (i) nor subparagraph (ii) applies, the day that—
(A) construction work was last carried out under the contract; or
(B) related goods and services were last supplied under the contract.”
45 Since neither subparagraph (i) or (ii) apply, the reference date is the day immediately following the day that the construction works were last carried out under the contracts.
46 As Virtus observes above, each of the payment claims was served after the day following the last day on which construction works were carried out.
47 Accordingly, each payment claim was issued on or after its reference date. Each claim has a reference date.
Identification requirement
48 Virtus submits that each payment claim satisfies the identification requirement. It refers to the fact each payment claim consists of an invoice describing the work done or materials provided and attaches the relevant time sheets for labour. I accept that submission.
49 Whether a payment claim adequately identifies the construction work is an objective test.[15] The question is whether a reasonable person in the position of the respondent would understand the basis of the claim.[16] The test is not overly strict; the court must not adopt an unduly technical approach.[17]
[15]John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126 [83].
[16]Ibid.
[17]Ibid; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 [51].
50 The context of the payment claim is relevant, including industry conventions and earlier contractual dealings.[18] The background knowledge of the parties from their past dealings and prior exchanges of information (including correspondence) are also relevant.[19] Thus, the court may look beyond the face of the payment claim.
[18]Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391 [40].
[19]John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126 [83]; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 [51].
51 In my view, each of the payment claims adequately identifies the construction work to which it relates. Each invoice and timesheet provide a highly detailed breakdown of the works (including precise descriptions and hours of work). A reasonable person in the position of EC would readily comprehend the works to which they relate.
Excluded amounts
52 Virtus submits that no excluded amounts are evident in the payment claims. I accept that submission. There is no evidence of any excluded amounts within the payment claims – such as variations (ss10A and 10B of the SOP Act).
Other formal requirements
53 Each payment claim indicates the amount of the progress payment which Virtus claims is due (s14(2)(d) of the SOP Act). The due date for each of the three payments was 29 June 2021.
54 Each claim indicates that it is a claim made under the SOP Act in terms: “This is a payment claim under the Building and Construction Industry Security of Payment Act 2002” (s14(2)(e) of the SOP Act).
55 Each payment claim was validly served by email to EC.
Failure to issue payment schedule
56 Mr Florea confirms that EC failed to serve a payment schedule in response to the payment claims. Accordingly, Virtus may recover the unpaid portion of the amount claimed as a debt due (s16(2)(a)) together with interest pursuant to s12(2)(a) of the SOP Act.
Conclusion
57 For the foregoing reasons, there is judgment for Virtus in the sum of $267,174.63 (the amount due of $271,174.63 less the $4,000.00 received), together with interest in the sum of $7,832.24 and costs of and incidental to the proceeding.
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Certificate
I certify that these 11 pages are a true copy of the judgment of Her Honour Judge Burchell on 15 October 2021.
Dated: 15 October 2021
Andrea Ko
Associate to Her Honour Judge Burchell
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