W H Amad Pty Ltd v Interstudio Pty Ltd
[2023] VCC 1395
•14 August 2023
refere
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-23-02120
| W H Amad Pty Ltd (ACN 088 227 065) | Plaintiff |
| v | |
| Interstudio Pty Ltd (ACN 611 488 889) | Defendant |
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JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers, written submissions dated 29 and 30 June 2023, 17 and 24 July 2023 | |
DATE OF RULING: | 14 August 2023 | |
CASE MAY BE CITED AS: | W H Amad Pty Ltd v Interstudio Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 1395 | |
RULING
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Subject:CONTRACTS
Catchwords: Building contract – payment claim – entitlement to unpaid amounts – failure to issue payment schedule – construction work – reference dates – excluded amounts
Legislation Cited: Building and Construction Industry Security of Payment Act 2002 (Vic) ss3–7, 9, 12, 14–17, 47, 48; Electronic Transaction (Victoria) Act 2000 (Vic) ss8, 13A; Evidence Act 2008 ss56, 59 and 76.
Cases Cited:Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; Shells Venture Management v Agresta [2019] VSC 863; Baron Forge Contractors Pty Ltd v Vaughan Constructions Pty Ltd [2015] VCC 1424; Grave v Blazevic Holdings Pty Ltd (2010) 79 NSWLR 132; Collective Crane Hire Pty Ltd v ICR Steel Pty Ltd [2021] VCC 132; 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674; Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112; Pearl Hill Pty Ltd v Concorp Construction Group (Vic)Pty Ltd [2011] VSCA 99; Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385; SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2021] VSCA 44; Subramanian v Public Prosector [1956] 1 WLR 965; CNC Kitchens Melbourne Pty Ltd v Markscon Pty Ltd [2021] VCC 2072; APR Structural Steel Pty Ltd v Devco Project & Construction Management Pty Ltd [2021] VCC 1048; Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183; John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106; Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391; Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) [2005] NSWCA 409 at [76]. Brookhollow Pty Ltd v R&R Consultants Pty Ltd [2006] NSWSC 1; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; Downer Construction (Aust) Pty Ltd v Energy Australia [2007] NSWCA 49; Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248; McCarthy v State of Queensland [2013] QCA 268; Isis Projects v Clarence Street [2004] NSWSC 714; Ampcontrol SWG Pty Ltd v Gujarat NRE Wonga Pty Ltd [2013] NSWSC 707; Vanguard Developments v Promax [2018] VSC 386; Rail Corporation of NSW v Nebax Constructions [2012] NSWSC 6
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | B Reid | Giannakopoulos Solicitors |
| For the Defendant | B Mason | Boutique Lawyers |
HER HONOUR:
Introduction
1In this proceeding, the plaintiff (“Amad”) applies for judgment against the defendant (“Interstudio”) pursuant to s16(2) of the Building and Construction Industry Security of Payment Act2002 (Vic) (“SOP Act”).Amad makes the application by summons on originating motion dated 27 April 2023. The application arises out of works that Amad performed at Eden Oak Conference Centre at 20 Adams Court, East Geelong and Marriot Hotel Melbourne, corner Exhibition and Lonsdale Street, Melbourne.
2 Amad submits that it is entitled to judgment because Interstudio failed to issue a payment schedule in response to its payment claims.
3In opposing the claim, Interstudio relies on three grounds, namely:
(a) the payment claims are not in respect of construction works or related goods and services as defined under the SOP Act;
(b) Amad has failed to establish that the payment claims do not contain excluded amounts; and
(c) the payment claims lack a reference date.
4 In my view, Amad has failed to satisfy the preconditions to judgment under s16(2) in relation to its payment claims and ground (b) relied on by Interstudio has been made out. Due to appellate authority, I will not sever the impugned portion of the payment claims.
5Accordingly, Amad’s summons is dismissed. I will also order that Amad pay Interstudio’s costs of and incidental to the proceeding, to be taxed on the standard basis in default of agreement, unless either party can rely on an offer of compromise or other grounds for a different costs order. I invite the parties to prepare draft orders to give effect to these reasons. I will determine any costs issues on the papers.
The relevant facts
East Geelong Project
6On or around 28 October 2021, Interstudio and Amad entered into a sub-subcontract for the Amad to supply and install various cabinetry and related construction materials for the renovation and refurbishment of the Eden Oak Conference.
7The renovation of the Eden Oak Conference Centre is referred to in Amad and Interstudio’s affidavits and submissions as The East Geelong Project.
8The contractual chain for the East Geelong Project was as follows:
(a) Geelong Bayside Resort Pty Ltd (ACN 639 876 252) is the owner of the Eden Oak Conference Centre (the “Principal”);
(b) In 2021, the East Geelong Principal engaged Chroma Group Pty Ltd (ACN 614 704 193) under a head contract to carry out the renovation and refurbishment of the Eden Oak Conference Centre (the “Head Contract”);
(c) Chroma Group Pty Ltd in turn engaged Interstudio in this proceeding to supply and install all joinery for the East Geelong Project;
(d) Interstudio in turn engaged Amad under the East Geelong sub-subcontract to supply and install the cabinetry and related works;
(e) Mark Amad (“Mark”), being the director of Amad, then engaged with Designbuilt Industries Pty Ltd (“Designbuilt Industries”) and requested Designbuilt Industries prepare a tender to supply and install all of the fit out associated with the East Geelong sub-subcontract;
(f) On or around 14 November 2021, Martin Cumberlidge (“Martin”), the project manager of Designbuilt Industries, provided Mark with a quotation to supply and install all of the goods under the East Geelong sub-subcontract. Mark accepted on behalf of Amad (the “East Geelong Designbuilt Industries Contract”).
9Designbuilt Industries’ scope of works under East Geelong Designbuilt Industries Contract was in all material respects identical to Amad’s scope of works under the East Geelong sub-subcontract.
10Mark authorised Martin to manage the works in relation to both the East Geelong Designbuilt Industries Contract and the East Geelong sub-subcontract on behalf of Amad, and to liaise with Michele Kearney of Interstudio (“Michele”).
11Amad’s purchase order dated 28 October 2021 issued to Interstudio under the East Geelong sub-subcontract stated that Amad be entitled to payment as follows:
(a) 50% deposit is to be paid with placement of this order and receipt of deposit invoice.
(b) 20% to be paid once the items have been docked in Melbourne and have been photographed for submission to the Head Contractor.
(c) Balance to be paid upon completion of the installation. Retention 10% to 5% (5% being held for 12 months from Practical Completion). Defect Period of 12 months.
12Amad’s purchase order dated 28 October 2021 listed the total for the East Geelong sub-subcontract as being $433,160.20 including GST. This is identical to Interstudio’s purchase order dated 27 October 2021.
13On or around 14 November 2021, Interstudio paid the sum of $216,580.21 including GST to Amad, being a deposit of 50% in accordance with the terms of the East Geelong sub-subcontract.
14On or around 14 November 2021 Designbuilt Industries commenced its works under the East Geelong Designbuilt Industries Contract, and, correspondingly, Amad commenced its works under the East Geelong sub-subcontract.
15On or around 8 April 2022, Designbuilt Industries completed its works under the East Geelong Designbuilt Industries Contract and, correspondingly, Amad completed the supply and installation of all construction materials under the East Geelong sub-subcontract.
16Amad carried out various defect rectification works after practical completion. These rectification works related to the following defects:
(a) 44 desktops which Amad had supplied and installed at the East Geelong Project were inconsistent with shop drawings; and
(b) 3 stone tops supplied by Amad and installed at the East Geelong Project have been damaged with visible marks.
17Mark recognised that the above defects needed to be replaced, and on or around 12 August 2022, Mark had Martin communicate with Michele to the effect that Amad would replace the 44 desktops and 3 stone bench tops (the “East Geelong Replacement Materials”).
18In or around mid-August 2022, Designbuilt Industries ordered the East Geelong Replacement Materials from China, and on or around 4 December 2022, the East Geelong Replacement Materials arrived in Australia.
19On or around 9 December 2022, Designbuilt Industries installed the East Geelong Replacement Materials at the Eden Oak Conference Centre.
20On 9 January 2023, Mark asked the office manager of Amad, Liz Dempsey (“Liz”), to email Interstudio a payment claim which sought the sum of $219,317.07 including GST under the East Geelong sub-subcontract (the “East Geelong Payment Claim”).
21On the third page of the East Geelong Payment Claim Mark listed three variations which total the sum of $78,151.15 excluding GST ($85,966.27 including GST).
22Mark’s affidavit of 28 June 2023 seeks to cross-reference the variations contained in the Payment Claim with an excel spreadsheet that had been previously emailed to Interstudio on 29 April 2022.[1] The excel spreadsheet itemised each of the three variations listed 6 items for variation 1, 12 items for variation 2, and 1 item for variation 3.
[1] Paragraph 7.
23While the total of three listed variations were listed alongside the other expenses outlined in the payment claim, the payment claim also acknowledged that the sum of $72,728.00 excluding GST ($80,000.08 including GST) as having already been paid by Interstudio. The sum of $72,728.00 was described as “less payment made direct”.
24The payment “made direct” relates to the sum of $72,728.00 that was transferred from Interstudio “directly” to Designbuilt Industries on 3 January 2023. Amad says that this direct payment was made by Interstudo in an effort to pay for some of the three variations outlined by Amad. Interstudio disputes that this direct payment was made for the purposes of satisfying the amount requested for the variations.
25On Amad’s view that the “direct payment” was paying for the three variations, the outstanding amount in respect of the variations was reduced to $5,423.81 excluding GST ($5,966.19 including GST).
26On 16 February 2023, Interstudio made a payment to Amad for the sum of $38,102.65 including GST. This payment was taken by Amad to reduce the claim for variations to $0.00 and the overall amount outstanding under the payment claim to $181,214.42 including GST. However, it must be noted that whether or not this payment was for the purposes of variations is disputed.
27On 24 January 2023, Michele sent an email within which she outlines how Designbuilt Industries were prevented from completing their defect rectification because they took longer than their allocated 3 weeks to complete the defect rectification. Michele had organised with the Chroma Group that rectifications would take 3 weeks, but as they were not completed within 6 weeks, Chroma Group decided to appoint an alternate subcontractor and charge back Interstudio, who in turn would charge back Amad.
28The cost of these defect rectifications undertaken by Chroma Group’s appointed subcontractor as listed in the email from Michele dated 24 January 2023 was $37,643.10.
29In the 24 January 2023 email, Michele also outlined that the amount owing to Amad would be reduced by $10,120.00 because the nightstands provided were not manufactured as approved, and a further $2,750.00 because the footers provided were not as per drawings, melamine footers had been provided instead of metal footers.
30In relation to the variations, there is a discrepancy in the amount that Michele believed to have been requested by Amad and that which Amad requested in the East Geelong Payment Claim. Michele listed Variation 2 as being $23,381.40 GST inclusive, and not $25,381.40 excluding GST as outlined in the East Geelong Payment Claim. Michele recorded the amount that Amad had alleged to have been owed under the defects at $76,151.15 GST inclusive, not $85,966.27 GST inclusive as outlined by Mark in the email dated. Michele noted that items 7, 8, 9, 10 and 12 listed in variation 2 were “not agreed to”.
31Michele has deducted a further $6,957.50 from the amount owed for the variations, because of the dispute over items 7, 8, 9, 10 and 12 in variation 2. Considering this deduction and the above miscalculations, Michele’s email lists the amount owing for the variations as $69,193.65.
32Michele has also deducted $5,500.00 for her onsite assistance, and a further 5% fee for retention of the contract to be paid end of April 2023 ($21,658.01). In Michele’s email, she listed the final amount due under the Ease Geelong Project was listed as $128,102.65.
33In her email, Michele states that Chroma Group proposed, and Interstudio agreed to, two payments for $128,102.65, with the first payment due on 1 February 2023 and the second payment due on 1 March 2023. Amad was to be paid immediately upon Interstudio being paid.
The Melbourne Project
34The Melbourne Project was for the renovation and refurbishment of the Marriot Hotel Melbourne.
35On or around 16 February 2022, Interstudio and Amad entered into a sub-subcontract for Amad to supply and install various cabinetry and related construction materials to the Melbourne Project for the sum of $101,479.40 including GST. The Melbourne sub-subcontract was recorded in a purchase order issued by Amad dated 16 February 2022.
36Prior to Amad issuing the Melbourne purchase order, Interstudio had on 4 March 2022 paid the deposit to Amad in the sum of $48,749.25 including GST.
37The deposit payment is recorded on the third page of the Melbourne purchase order and reduced the balance remaining in the Melbourne purchase order to $52,730.15 including GST.
38Around late February 2022, Amad provided Martin with a copy of the Melbourne sub-subcontract.
39On 4 March 2022, Martin (on behalf of Designbuilt Industries) provided Mark with a quotation by way of purchase order dated 4 March 2022. Mark accepted the purchase order on 4 March 2022, and therefore from this date Amad engaged Designbuilt Industries to supply and install all cabinetry and related works to enable Amad to fulfil its obligations under the Melbourne sub-subcontract.
40On 4 March 2022, Designbuilt Industries commenced its works under the Melbourne Designbuilt Industries Contract and, correspondingly, Amad commenced its works under the Melbourne sub-subcontract.
41On 7 June 2022, Designbuilt Industries completed its works under the Melbourne Designbuilt Industries Contract and, correspondingly, Amad completed the supply and installation of all construction materials under the Melbourne sub-subcontract.
42Amad’s purchase order under the Melbourne sub-subcontract does not address the dates when Amad could issue progress claims.
43On 9 January 2023, Mark asked Liz to email the Melbourne payment claim to Michele. The Melbourne payment claim sought the sum of $26,226.35, including GST, which takes into account the $26,153.80 paid by Interstudio on 13 December 2022. This total owing under the payment claim also includes “Variation MM1” for $3,619.00.
44Variation MM1 was detailed in an email from Liz to Michele dated 7 July 2022, which included an excel spreadsheet outlining the three items that constituted the variation.
45In her email dated 24 January 2023, Michele states that the amount owed under Variation MM1 was $1,010.00 plus GST, because the remade bedside tables had not been supplied as requested, and therefore, the variation was limited to the new vanity mirror of $380.00 plus GST and the scribes to robes of $630.00 plus GST.
46In her email dated 24 January 2023, Michele states that the amount owed in relation to the remainder of the Melbourne payment claim be reduced by a further $6,400.40 plus GST for the fabric sourced from China due to lockdown-based supply issues in Melbourne, as well as a further $250.00 plus GST for the fabric purchased and supplied to Designbuilt for the remake of a sofa bed.
47Michele also deducted $8,240.00 plus GST for back charges from Chroma group in relation to post completion administration and supervisions for rectification works, $1,550.00 plus GST for a building survey charge and $767.77 plus GST for replaceable mirrors, in addition to 2.5% for contract retention being $2,215.88 plus GST.
48Michele outlines in her email that the grand total payable is $26,153.45 plus GST, and that this amount had been paid on 13 December 2022 (although Amad notes the amount paid as being $26,153.80).
49Pursuant to the payment claim, Mark says that Amad is still owed $26,226.35 including GST under the Melbourne sub-subcontract.
The legal context
50The SOP Act seeks to ensure that people who undertake to carry out construction work can recover progress payments for the performance of that work.[2] It applies to any construction contract whether written or oral, or partly written and partly oral.[3]
[2] SOP Act s3.
[3] Ibid s7.
51The following terms are defined under the SOP Act:
(a) “construction contract” is 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;[4]
[4] Ibid s4.
(b) “construction work” is defined under s5;
(c) “related goods and services” is defined under s6.
52Section 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.
53Section 14 of the SOP Act concerns the form and content of payment claims. Section 14(1) reflects that, if entitled to a progress payment, a claimant may issue a payment claim to a respondent who is liable to make payment. The payment claim must identify the construction work to which the progress payment relates; must indicate the amount of the progress payment that the claimant claims to be due; and must state that it is made under the SOP Act.
54Sections 14(2) and (3) of the SOP Act 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).
55Section 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”.
56Sections 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.
57Under s15 of the SOP Act, a person on whom a payment claim is served (the respondent) may reply to the claim with a payment schedule. Section 15(2) requires that a payment schedule must identify payment the claim to which it relates, schedule the amount of the payment that the respondent proposes to make and must identify any excluded amounts.
58Another important provision informing the formal requirements for payment claims under the 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”.
59Section 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,
(c) 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.
60The rest of s9 concerns situations where the contract makes no express provision for reference dates.
61It 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[5] (“Southern Han”). On the other hand, the available defences to a payment claim are limited.
[5] (2016) 260 CLR 340 at [44].
62The 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.[6] More particularly, the defences to a payment claim enlivened by the formal requirements of the SOP Act are, in substance, that the payment claim:
[6] Southern Han at [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 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 Act 1995);
(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,[7] 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;[8]
[7] Southern Han at [61]– [62]; Vanguard Developments v Promax [2018] VSC 386 per Kennedy J at [121].
[8] SOP Act s14(8).
(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.
63Another issue that may arise, in rare circumstances, is where a defendant alleges that they are not party to or are not liable under the contract. This usually arises where multiple subcontractors are involved in the works. Applicable authorities addressing this issue include Shells Venture Management v Agresta[9] (“Shells”), Baron Forge Contractors Pty Ltd v Vaughan Constructions Pty Ltd[10] (“Baron Forge”) andGrave v Blazevic Holdings Pty Ltd[11] (“Grave”), Collective Crane Hire Pty Ltd v ICR Steel Pty Ltd;[12] and 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd[13] (“3D Flow”).
[9] [2019] VSC 863 (“Shells”).
[10] [2015] VCC 1424 (“Baron Forge”).
[11] (2010) 79 NSWLR 132 (“Grave”).
[12] [2021] VCC 132.
[13] [2018] VCC 674 (“3D Flow”).
64Under s47, 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.[14] The statutory context both contemplates and permits inconsistent judgments.[15] 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.[16]
[14] Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 at [2] and [43]–[46] per Vickery J, cited with approval in Pearl Hill Pty Ltd v Concorp Construction Group (Vic)Pty Ltd [2011] VSCA 99 [11].
[15] Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385 [22] per Handley JA, with whom Santow JA and Pearlman AJA agreed.
[16] Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 [2] and [43]–[46].
65Further, 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 Act, is void.
66This court has endorsed the hearing of applications under the SOP Act on a summary basis by summons on originating motion with affidavit evidence.[17] Such claims are properly assessed on the balance of probabilities,[18] with the quality of the evidence weighed having regard to the fact that the legislation seeks to facilitate a swift but temporary remedy.[19]
[17] 3D Flow at [39]– [54]. See also SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 at [26].
[18] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 449-450 per Mason CJ, Brennan, Deane and Gaudron JJ.
[19] 3D Flow at [51]–[54].
Objections to evidence
Cumberlidge Affidavit dated 7 July 2023
67Interstudio objects to the entirety of paragraph 7 of the Third Cumberlidge Affidavit dated 7 July 2023 on the bases of hearsay,[20] opinion,[21] conclusion,[22] and argument.[23] This paragraph provides:
“On or around 27 August 2022, Mark Amad (director of the Plaintiff) advised me that an arrangement had been reached between the Plaintiff and the Defendant, whereby the Plaintiff would not be entitled to claim payment under the East Geelong Sub-Subcontract (and the Defendant would not be required to make payment) until after the Plaintiff had installed the East Geelong Replacement Materials”.
68Amad contends that, properly considered, the only relevant objection to this paragraph is that it contains hearsay - the deponent is giving evidence of the substance of what was advised. The substance of this evidence is contained in paragraphs 5 and 6 of the Third Amad Affidavit dated 7 July 2023, in which Mark deposes as follows:
“5. Following Kearney sending the email to Cumberlidge at 4.59 pm on 26 August 2022, Kearney called me in the evening on 26 August 2022. In that conversation, Kearney stated that Defendant’s position was that it would not make payment to the Plaintiff until after the East Geelong Replacement Materials were supplied and installed.
6. Whilst I believed the Plaintiff was entitled to payment at that time (because practical completion had been achieved in April 2022), I communicated to Kearney that I agreed to her amended payment terms. The conversation ended on the understanding that:
(a) the Plaintiff would not be allowed to seek payment at that time;
(b)the Plaintiff would be entitled to claim payment for the works after the Plaintiff had supplied and installed the East Geelong Replacement Materials…”
[20] See Evidence Act 2008 s59.
[21] Evidence Act 2008 s76.
[22] Or an assertion of fact based on unproved primary facts or hearsay: Evidence Act 2008 ss56, 59 and 76.
[23] Statement which is argument, speculation or submission and not a statement of primary facts: Evidence Act 2008 ss56, 59 and 76.
69Amad submits that paragraph 7 is not hearsay as it is relevant for the fact that it was said by Mark to Martin.[24] It is relevant as it informs the Court as it is part of the basis of Martin's subsequent actions consisting of:
(a) refraining from pressing Interstudio for payment;
(b) supplying and installing the Melbourne Replacement Materials on 8 December 2022 (deposed at paragraph 24 of Cumberlidge Affidavit dated 26 April 2023);
(c) supplying and installing the East Geelong Replacement Materials on 9 December 2022 (deposed at paragraph 14 of Cumberlidge Affidavit dated 26 April 2023);
(d) re-addressing the issue of payment with Interstudio after supplying and installing the Melbourne Replacement Materials/East Geelong Replacement Materials as follows:
(i)on 21 December 2022 at a meeting with Interstudio and Amad (deposed at paragraph 9 of Cumberlidge Affidavit dated 7 July 2023); and
(ii)on 22 December 2022 via an email to Interstudio and Amad (deposed at paragraph 10 of Cumberlidge Affidavit dated 7 July 2023).
[24] Subramanian v Public Prosector [1956] 1 WLR 965 at 969.
70In my view, I accept Amad’s submissions that the Court may allow paragraph 7 into evidence on the basis that it is a contemporaneous narrative statement (being an exception to the hearsay rule at common law).
Amad Affidavit 7 July 2023
71Interstudio objects to the entirety of paragraphs 6, 7 and 11 on the basis of relevance,[25] opinion, conclusion and argument and the entirety of subparagraphs 9(a) and (b) on the grounds of opinion, conclusion and argument.
[25] Evidence Act 2008 ss55 and 56.
72Amad rejects Interstudio’s categorisation of Mark's evidence contained in paragraphs 6, 7, 9(a) and 9(b) and 11.
73I accept Amad’s submissions that paragraph 6 articulates Mark's understanding at the time based upon his direct communications with Interstudio. This paragraph is not objectionable.
74Similarly, paragraph 7, properly considered, is Mark's belief, the state of his mind, after the conversation as deposed to at paragraph 5. I accept that this is the evidence of his understanding, which is not objectionable.
75Paragraph 9(a) is Mark’s direct evidence of the acknowledgement by Michele at the 21 December 2022 meeting that the replacement materials had been supplied and installed by Amad. It is noted that this is a matter that is conceded by Interstudio, however, it seeks to characterise this work as defect rectification work.[26] The objection is without merit.
[26] Paragraph 14 of Kearney Affidavit dated 16 June 2023.
76In my view, subparagraph 9(b) is Mark's direct evidence of the acknowledgement by Michele that Amad could now make its claim to payment. This is what Mark saw and heard at the meeting of 21 December 2022. The only criticism is perhaps whether the word "acknowledgement" was a verbal or physical acknowledgement. Irrespective of how the acknowledgement was communicated by Michele, Amad can give direct evidence of seeing and/or hearing this.
77I agree with Amad’s submissions that paragraph 11 of the Amad Affidavit provides Mark's understanding of his actions and state of mind on 9 January 2023. Properly considered, it is a lay person’s understanding, and the Court can give it the weight it sees fit and the same point has been made in Amad’s written submissions. The objection is not made out.
Construction contract
Amad’s submissions
78Amad says that both the East Geelong sub-subcontract and the Melbourne sub-subcontract amount to “construction contracts” as defined under s4 of the SOP Act.
79In both sub-subcontracts, Amad supplied and installed various cabinetry and undertook related works, in what has been described as “part of a large renovation and refurbishment”.
80Amad says that under the SOP Act, construction work can be “permanent or not” (see s5(1)(a)), and, therefore, the fact that installing furniture is lacking “permanence” does not preclude it from amounting to construction work.
81In Amad’s view, the renovation and refurbishment either amounts to “construction work” as defined under sub-ss5(1)(a), (b) and/or (f) of the SOP Act.
82These provisions under s5(1) of SOP Act define “construction work” to mean:
“(a) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not);
(b) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, power‑lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for the purposes of land drainage or coast protection;
…
(f) the painting or decorating of the internal or external surfaces of any building, structure or works”.
83Amad argues that the renovation and refurbishment could also be described as “related goods and services” as defined under sub-ss6(1)(a), (b) and/or (f)(iv) of the SOP Act.
84Amad here erroneously refers to a sub-s6(1)(f)(iv), no such subsection exists in the SOP Act. However, the quotation provided for sub-s6(1)(f)(iv) in Amad’s submissions match those of the s5 definition for “construction work”, particularly sub-s5(1)(e)(iv), which refers to “the prefabrication of components to form part of any building, structure or works, whether carried out on‑site or off‑site”.
85The other provisions under s6(1) of the SOP Act define “related goods and services” to mean:
“(a) goods of the following kind—
(i) materials and components to form part of any building, structure or work arising from construction work;
(ii) plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work;
(b) services of the following kind—
(i) the provision of labour to carry out construction work;
(ii)architectural, design, surveying or quantity surveying services in relation to construction work;
(iii)building, engineering, interior or exterior decoration or landscape advisory or technical services in relation to construction work” …
86Amad says that their work refurbishing under the Melbourne and East Geelong sub-subcontract is clearly captured by operation of s6(b)(ii), as the installing and supplying of cabinetry and furniture amounts to “interior decoration”.
Interstudio’s submissions
87Interstudio submits that Amad’s work in supplying and installing furniture — such as nightstands, wardrobes, bedheads, desks, tables and chairs — does not amount to “construction work” for the purposes of s5(1) of the Act.
88Interstudio says that Amad’s works do not have the character of the structures listed in s5 of the SOP Act and argues that furniture both does not form part of the land and also does not possess the degree of permanence commonly associated with building and structures.
89Interstudio says that in applying the principles of statutory interpretation, the “species” inform the meaning of the “genus” disclosed by the general words to which they relate, and on this basis the supply of furniture cannot be aligned with the structures listed in sub-ss5(b) and (c), and is therefore outside the scope of the SOP Act.
90Interstudio also argues that the works are also outside the scope of the s6 “related goods and services”, as in their view, “placing goods in a completed building” is not captured by this provision.
Analysis
91In my view, for the following reasons, Amad’s works providing “renovation and refurbishment” of the Eden Oak Conference Centre and the Marriot Hotel Melbourne amounts to “construction work” for the purposes of s4 of the SOP Act.
92First, it does not matter that the supplying and installing furniture — such as nightstands, wardrobes, bedheads, desks, tables and chairs — does not involve permanent structural changes to the building, as permanence is not a mandated requirement for works to be considered “construction” works. This is explicitly outlined in s5(1)(a) of the SOP Act, where it is mentioned that construction works can be “permanent or not”.
93Second, it does not matter that the refurbishment was not listed as one of the possible construction jobs in s5 of the SOP Act, nor does it matter that refurbishment does not share the “character” of those jobs listed in the SOP Act. The lists provided in s5 are illustrative and not exhaustive and are not intended to limit subsequent provisions of the SOP Act which contemplate entirely different methods of “construction” work, such as decorating.
94Therefore, I am satisfied that the refurbishment works undertaken by Amad are “related goods and services” as provided for under sub-s6(1)(b)(iii), as even on the most simplistic view advanced by Interstudio, that is, “placing” furniture in a building, will still amount to “interior decoration” as provided for by the Act.
Reference date
East Geelong Contract
Amad’s submissions
95The East Geelong contract states that: “(b) 20% to be paid once the items have been docked in Melbourne and have been photographed for submission to the Head Contractor” and “(c) Balance to be paid upon completion of the installation. Retention 10% to 5% (5% being held for 12 months from Practical Completion). Defect Period of 12 months”.
96Amad submits that the East Geelong sub-subcontract provides a reference date, this being the date upon which all relevant works have been completed. Therefore, pursuant to sub-s9(2)(a)(i) of the SOP Act, once all relevant works have been completed, a reference date arises.
97In the alternative, Amad says that pursuant to sub-s9(2)(d)(i), the reference date will be the date “immediately following” the completion of the construction work under the contract. The arguments around sub-ss9(2)(a)(i) and 9(2)(d)(i) are, therefore, substantially the same.
98Amad sets out that practical completion of the East Geelong sub-subcontract occurred on 8 April 2022, and Interstudio withheld payment. Amad notes that further works were carried out by Amad on 9 December 2022 at the direction of Interstudio, and when no payment occurred after these further works had been completed, Amad served the East Geelong Payment claim on 9 January 2023.
99Amad says they it accrued a further reference date under the East Geelong sub-subcontract on 10 December 2022 after completion of the rectification works, and it served the payment claim within 3 months of that reference date.
100Amad says that in a conversation on 26 August 2022 Michele told Mark that Amad would be entitled to payment after the East Geelong replacement materials and Melbourne replacement materials were installed, thus acknowledging that a reference date only arose after rectification. The nature of this conversation and any promises made are disputed by Michele in her affidavit affirmed 17 July 2023.
101Amad submits that Interstudio ignores the “further reference date” outlined by Amad (10 December 2022), and only seems to acknowledge the previous reference date when works were originally declared complete, being 8 April 2022.
Interstudio’s submissions
102Interstudio takes issue with Amad’s claim that the “East Geelong sub-subcontract” was varied by a conversation on 26 August 2022 between Michelle and Mark, a conversation which Amad asserts signified that the payment would not fall due until replacement materials were supplied and installed. In her affidavit affirmed 17 July 2023, Michele denies that she made any promises on 26 August 2022 that Amad would be entitled to payments after rectification of the East Geelong sub-subcontract and Melbourne sub-subcontract were completed.
103Interstudio says that the rectification works conducted in December 2022 did not give rise to a separate reference day, instead, the rectification works was satisfaction of the 12-month defects liability period stipulated in the contract. On their interpretation, practical completion still occurred on 8 April 2022.
104Interstudio also says that any conversation which may have occurred between the parties do not have any material contractual significance, because no additional consideration was provided.
105Interstudio says that because the purchase order did not specifically set out the time by which Amad was to issue a payment claim, pursuant to sub-ss14(4)(b) or 14(5)(b) of the SOP Act, any payment claim must be issued within 3 months of the reference date (which, in their view, was 8 April 2022).
106Interstudio says that because the payment claim was only issued on 9 January 2023, this was 9 months after the reference date and outside the 3-month window.
Melbourne Project
Amad’s submissions
107Amad notes that the Melbourne sub-subcontract is silent as to when Amad may issue progress claims.
108Amad said that there is a rolling reference date pursuant to s9(2)(b) of the SOP Act a reference date may arise on 3 January 2023, this being the date the Mark prepared the payment claim.
109In the alternative, Amad says that a reference date occurred under s9(d)(i) of the SOP Act (incorrectly referred to as s9(d)(A)), this being a date that is immediately after the day of construction was last carried out on site — which was 8 December 2022.
110Amad says that they reached practical completion on 7 June 2022 and that Interstudio withheld payment after that date. On or around 8 December 2022 Amad completed further works under the sub-subcontract, and served payment claim on 9 January 2023. Amad says that a further reference date occurred on 9 December 2022, and therefore the payment claim occurred within 3 months of this reference date.
111Amad contends that Interstudio approaches the issue of reference date in the same way as under the East Geelong project, ignoring any reference dates which are said to have occurred after the practical completion date — 7 June 2022.
Interstudio’s submissions
112Interstudio submits that, in the case of the Melbourne Project, the purchase order makes no provision for progress payments, rectification of defects or the issuing of a final certificate. In those circumstances, Interstudio contends that by reason of s9(2)(d)(iii) of the SOP Act, the relevant reference date is accrued when Amad last carried out its construction work. It contends that this date is 7 June 2022 as set out in Mark’s affidavit. Interstudio says that any work performed after 7 June 2022 was for the purposes of rectifying defects, and not substantive ‘construction work’. Interstudio contends that Amad then had 3 months to issue its payment claim pursuant to s14(5)(b) of the SOP Act.
113Given Amad did not issue a payment claim until 9 January 2023, it was issued out of time.
114Finally, Interstudio submits that the payment claim is in breach of s14 of the SOP Act because there is service of more than one payment claim per reference date per construction contract.[27] It relies on the email of 9 January 2023 in which Amad issued the invoices of both the East Geelong Project and the Melbourne Project. Interstudio claims that Amad submitted a single claim for a progress payment which covers amounts payable under two construction contracts.
[27] Rail Corporation of NSW v Nebax Constructions [2012] NSWSC 6 at [44].
Analysis
115The starting point for an analysis of reference dates is s9 of the SOP Act. Section 9(1) stipulates that on or from a reference date, the claimant is entitled to a progress payment calculated by reference to that date. Section 9(2)(a)(i) provides that the reference date is a date on which a claim for a progress payment may be made in relation to a specific item of construction work or related goods and services and which is determined by or in accordance with the terms of the contract.
116In Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd, the High Court held that a reference date is a “precondition” to a valid payment claim.[28]
[28] (2016) 260 CLR 340 [61]–[62].
117In relation to the East Geelong sub-subcontract, the arguments advanced by Amad under sub-ss9(2)(a)(i) and s9(2)(d)(i) of the SOP Act are substantially the same, in that under either interpretation the reference date will be when satisfactory completion of the works occurred.
118Although practical completion of the East Geelong sub-subcontract occurred on 8 April 2022, there remained issues with the works that required rectification. Rectification works were ultimately completed by Amad on 9 December 2022; therefore, the construction can only be taken to have been satisfactorily completed at the later date of 9 December 2022. As a result, the appropriate reference date for the East Geelong sub-subcontract is 10 December 2022.
119I do not accept Interstudio’s argument that the rectification works finishing up on 9 December did not signify “completion” triggering a reference date, and that these subsequent works were just Amad meeting their obligations under the 12-month defects period. The fact that Interstudio withheld payment after the practical completion on 8 April 2022 suggests that they were not satisfied that that the requirements in subsection (c) of the sub-subcontract had been met. Subsection (c) provides for the “balance to be paid upon completion of the installation”. The contract provides that only 5% of the payment can be retained for the defect period of 12 months. If all that remained to be paid was the 5% for defect retention, then Interstudio could credibly argue that the works on 9 December 2022 were “defect rectifications” under this period. However, because the entire completion payment has been withheld, Interstudio on the balance of probabilities was under the impression that practical completion had not occurred and, therefore, subsection (c) had not been met as of 8 April 2022.
120A similar line of reasoning can be taken in relation to the Melbourne sub-subcontract. Although in that case there was no specified progress payment date, and, therefore, s9(2)(a)(i) of the SOP Act is not relevant, Amad can rely on s9(2)(d)(i). As such, a reference date occurred after the rectification works were completed on 8 December 2022. The rectification works can be taken to be substantive construction works.
121Although Interstudio again argues that because practical completion occurred earlier, on 7 June 2022, I am satisfied that in line with s9(2)(d)(i) of the SOP Act, the relevant reference date can be taken to be 9 December 2022, being that date after rectification works were completed.
122In relation to the Interstudio’s argument that Amad’s payment claim impermissibly gives rise to a single payment covering more than one construction contract I do not accept this submission for the following reasons.
123Although Judge Woodward (as his Honour then was) observed in Spirito Development Pty Ltd v Sinjen Group Pty Ltd[29] that two invoices sent in the same email will often (but not necessarily always) be considered a single payment claim, in my view, the facts of the present case are different to those contemplated by his Honour and dealt with by the NSW Supreme Court in Rail Corporation.
[29] [2020] VCC 1368.
124One must consider the email itself which shows that Amad was serving two separate and discrete invoices constituting two payment claims for two different projects. The email from Liz states, “Please find attached copies of your invoices for the Marriott and Geelong Conference Centre”. There is nothing to confirm on the face of the email or the invoices that they constituted a single payment claim. I, therefore, consider that they must be viewed as separate payment claims for separate construction contracts with separate reference dates.
125Accordingly, the payment claims have a reference date, and this ground fails.
Compliance with s14 of the SOP Act
East Geelong Payment Claim
Amad’s submissions
126Amad says that the East Geelong Payment Claim is a valid payment claim pursuant to ss14(2) and 14(3) of the SOP Act.
127Amad notes that they included the words “this is a payment claim made under the Building and Construction Industry Security of Payment Act 2002
in compliance with section 14(2)(e)”.128The East Geelong Payment claim outlined three variations. The works which constitute each of these three variations is outlined in the spreadsheets which was emailed by Amad on 29 April 2022 to Michele. Amad notes that Variation 1 describes 6 variation items, Variation 2 describes 12 variation items, and variation 3 describes 12 variation items.
129As the works that make up each variation were clearly accounted for in the Excel spreadsheet, Amad says that upon receiving the payment claim, Interstudio should have been able to understand, assess and respond to all variations.
130Amad argues that Interstudio’s ability to comprehend the payment claim was evidenced by the response sent from, Michele, the director of Interstudio on 24 January 2023. This response is contained in exhibit “MA-12” of the Second Amad Affidavit (“Defendant’s Reconciliation of Geelong Project”), in which Michele disputes items 7, 8, 9, 19 and 12 in variation 2. Amad goes further and points out that in the 24 January 2023 email, Michele:
(i)refers to Variation 1, 2 and 3;
(ii)acknowledges a total Variation claim of $76,151.15; and
(iii)approves the sum of $69,193.65.
131Regarding the Melbourne Payment Claim, in her email dated 24 January 2023, Michele assessed the variation for the Melbourne Payment claim as $1,010.00 plus GST. Amad says that in light of the above email, Interstudio cannot credibly argue that the payment claims lack sufficient information to enable Interstudio to understand, and assess the variations as claimed.
132Amad says that Interstudio has submitted affidavit material which contradicts the position of their Defence. On the one hand, the defence states that under Interstudio’s Reconciliation of the Geelong Project, the sum of $69,193.65 is owing, with certain items in variation 2 being rejected. On the other hand, in paragraph 18 of Michele’s affidavit, it is deposed that,
“the payment claim includes three items on page 3 described as ‘variations 1 to 3’. Save for ‘Item 1’ and ‘Item 6’ in variation 1, I neither requested nor directed the work or the supply of goods and services with respect to variations 1 to 3”.
Considering this contradictory evidence, it is difficult to ascertain which of the variations Interstudio rejects, and what the basis for these rejections is.
133Amad says that variations 1, 2 and 3 do not constitute “excluded amounts” for the purposes of s10B(2)(a) of the SOP Act, an argument that has been advanced by Interstudio. Amad says that the variations are “second class” variations as outlined in s10A(3) of the SOP Act.
134Amad draws upon the case of Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd[30] (“Yuanda”) in arguing that a full investigation of the facts and circumstances of the variation claim is not required in order to request a variation payment under the SOP Act. Given that a “full investigation” is not required, in determining whether a payment claim includes an excluded amount, it is sufficient to examine the face of the ayment claim including any supporting documents.
[30] [2021] VSCA 44.
135Amad says Interstudio’s affidavit of Michele is “plainly wrong” at paragraph 18, where Michele claims that aside from items 1 and 6 in variation 1, Michele “neither requested nor directed” variation 1 to 3. In support of its argument that Michele’s assertions are “plainly wrong”, Amad draws upon the Second Cumberlidge Affidavit, which sets out correspondence from Interstudio (through Michelle) requesting works which correspond with the itemised variations. Amad also reiterates that in Interstudio’s Reconciliation of Geelong Project, Michelle conceded that variation works to the value of $69,193.65 were completed (i.e. approx. 90.7% of the amounts claimed in variations 1, 2 and 3). Amad also highlights that the East Geelong sub-subcontract does not have a “method of resolving disputes under the contract” (referred to in s10A(3)(d)(ii) of the SOP Act), and accordingly there is no limit on the quantum of variations which Amad may claim.
Interstudio’s submissions
136Interstudio says that the court cannot be satisfied that Amad’s variations do not include “excluded amounts”. This, Interstudio says, is because Amad has not provided the court with sufficient information needed for the court to determine whether the variations are in fact legitimate “claimable variations”. Interstudio says that none of Amad’s supporting information, including any information “in the lead up to the payment claim”, is sufficient to enable the court to determine a “claimable variation”.[31]
[31] CNC Kitchens Melbourne Pty Ltd v Markscon Pty Ltd [2021] VCC 2072 at [114].
137Interstudio says the spreadsheets provided by Amad do not go far enough to explicitly identify the work in which the claimable variations relate to. The payment claim does not refer to any spreadsheet. The email issued with the payment claim also does not refer to any such spreadsheet. The invoice merely identifies amounts and the following:
(a) VARIATION 1 – 21.03.22
(b) VARIATION 2 – 21.04.22
(c) VARIATION 3 – 26.04.22
138Interstudio also draws upon Yuanda and says that the test from Yuanda “does not contemplate judicial ‘digging’ to identify necessary information”. The implication here is that it would require a degree inappropriate “judicial digging” in order to ascertain whether or not the variations include an excluded amount, as insufficient corroborating documents have been provided. Interstudio says that this is contrary to the purposes of the SOP Act which provides that claimable variation must be evident “on the face” of payment claims, in order to minimise the adjudicating task of the court (Yuanda).
139Interstudio says that forcing the Court to consult spreadsheets that were sent to Interstudio 8 months prior to the payment claim being issued amounts to “digging around”, which the Court of Appeal in Yuanda states is impressible. Interstudio goes on to suggest that providing over 100 pages of exhibits is also “going behind the claim” and “digging” pursuant to Yuanda.
140Interstudio submits that it is impossible to discern from the payment claim if the statutory criteria under s10A(2) of the SOP Act has been satisfied such as any agreement between the parties, that the work has been performed, that the work is free of defects or that Amad is otherwise entitled to a progress payment including an amount in respect of that work, as to the amounts claim or as to the time for paying these amounts.
141Similarly, the statutory criteria for the purposes of s10A(3) of the SOP Act has not been satisfied because the documents relied on by Amad do not disclose that the work has been carried out or that Interstudio requested or directed that the work be performed.
Melbourne Payment Claim
Amad’s submissions
142Much like the East Geelong Payment Claim, Amad submits the Melbourne payment Claim is a valid payment claim under s14 of the SOP Act. The Melbourne Payment claim is endorsed with the words “this is a payment claim made under the Building and Construction Industry Security of Payment Act 2002”[32] and has line-item description for each item of work claim, with a claimed amount.
[32] SOP Act s14(2)(e).
143As for the variations outlined in the Melbourne Payment Claim, being “MM1”, Amad argues that Interstudio does not allege the variation MM1 is an excluded amount, but instead argues pursuant to Michele’s affidavit that “variation MM1 was not completed”. On this basis, Amad is implying that there is no question as to whether (if completed) variation MM1 is an excluded amount, and as such s14 of the SOP Act has been complied with.
Interstudio’s submissions
144Interstudio argues that variation MM1 for the Melbourne Project included an “excluded amount”. It submits that nothing on the face of the payment claim establishes that the work comprising “variation MM1” has been carried out or that Interstudio requested or directed that the work be performed.
145Interstudio points out that Amad lists two items in MA-10 (J10A and J110B Cupboards for rooms) in its payment claim that were not specified in the original Melbourne sub-subcontract. Interstudio says that this furniture was not addressed in Amad’s evidence and Interstudio has no way to ascertain whether these pieces are part of a “claimable variations”.
Excluded amounts
146The plaintiff bears the onus, under s16 of the SOP Act, of establishing the absence of excluded amounts “on the face of the payment claim”.[33] Before the decision in Yuanda,[34] there was some dispute as to whether the court:
(a) must only consider the “face of the payment claim,” or whether it can consider extrinsic evidence of the claim item; and
(b) whether the impugned portion of a payment claim can be severed.
[33] SOP Act s16(4)(a)(ii); John Beever at [44], [131] and [132].
[34] [2021] VSCA 44.
147In Yuanda, McLeish and Niall JJA held that the court must only examine the “face of the payment claim”.[35] Their honours reasoned that:
“…the interpretation which best accords with the policy of the Act should be preferred. In our opinion, that is the more limited construction on which the primary judge relied. The enforcement process is not intended to be an inquiry into the merits of the claim. That is obvious from the prohibition on the respondent advancing a cross-claim or raising a defence. It is also apparent more generally from the ‘pay now, argue later’ scheme of the Act as a whole and, within that scheme, the provision for adjudication (and adjudication review) in respect of disputed excluded amounts. An interpretation which gives the Court a limited role is to be encouraged as consistent with the Act’s preference for adjudication to resolve disputes about the contents of a payment claim”.
[35] Ibid at [44].
148Sifris JA agreed, holding that that the contrary interpretation is antithetical to the purpose of the Act (the timely resolution of payment disputes).[36] His Honour reasoned that:
“The structure, intent and purpose of the Act and the procedure for payment and objections to payment in relation to excluded amounts are predicated on a relatively quick summary procedure for allocation of risk pending any final determination. A full investigation of alleged excluded amount or the suggested digging exercise are entirely contrary to the intended purpose. Rather, it is up to the respondent to identify, in the manner provided for, the excluded amount and set in train the adjudication process. If the respondent fails to do so, it is not open to the respondent to later contest and request a full investigation or digging exercise (a suggested lesser review) in relation to an alleged excluded amount that it should have raised earlier, particularly in circumstances where the enquiry is not directed to a final determination of the rights of the parties, but rather what interim accommodation is appropriate and indeed required based on a face of the claim consideration”.
[36] Ibid at [120].
149Accordingly, I must consider whether, “on the face of the payment claim”, Amad has established the absence of excluded amounts.
150In relation to the East Geelong sub-subcontract, Amad claims that the revision was only required because Interstudio requested them. Further, Amad says that all three variations for the East Geelong Project have been clearly itemised in the spreadsheet that was emailed from Amad to the director of Interstudio on 29 April 2022. However, there is nothing on the face of the payment claim to that effect. The payment claim does not refer to supporting documents or make any references to those documents such as the spreadsheet or the documents exhibited to Cambridge’s affidavit of 28 June 2023. It is thus not apparent on the face of the payment claim that:
(a) the parties agreed that the doing of the work constituted a variation (s10A(2)(c) of the SOP Act — first class variation); or
(b) that Interstudio requested or directed the works (s10A(3)(b) — second class variation).
151Interstudio submits that the East Geelong payment claim contains excluded amounts as it refers to three variations that are not claimable under ss10A(2) or (3) of the SOP Act. Interstudio claims that it is not apparent on the face of the payment claimthat it requested or directed the carrying out of the work and says Amad has not provided any further evidence of such a direction.
152This position is to be contrasted with my findings in APR Structural Steel,[37] in which the payment claim in that case did not contain an excluded amount as it referred to an alleged direction on the fact of the payment claim. The works were described as “Trimming support angles as requested by TENY”, a clear direction by Mr Teny of Devco in that case. According to the reasoning in Yuanda, all the claim required was that the payment claim stipulate, on its face, that there was a direction. There need not be corroborative evidence. Accordingly, the work in the case of Devco was a claimable variation under s10A of the SOP Act.[38]
[37]APR Structural Steel Pty Ltd v Devco Project & Construction Management Pty Ltd [2021] VCC 1048.
[38] Ibid at [72].
153I do not cavil with the proposition that payment claims should not be approached in an unduly technical manner. However, accepting Amad’s submissions requires much more than avoiding mere technicalities. In my view, it requires precisely the full investigation and digging exercise that the Court of Appeal in Yuanda has soundly rejected.
154The matters set out in Cumberlidge’s affidavit of 28 June 2023 meticulously analysing emails and alleged conversations for each and every item claimed in the claimed variations would need to be thoroughly investigated and findings of fact made before the court could be satisfied that the payment claim did not include excluded amounts. It would be necessary to “go digging” into the spreadsheet, emails, contested conversations and other extrinsic evidence (such as what Michele and Martin allegedly said or did). That kind of digging or investigation is contrary to Yuanda, and inimical to the purpose of the SOP Act. As the Court of Appeal emphasised, the scheme of the SOP Act is that those investigations into excluded amounts are reserved for the adjudication process, not the more limited role envisaged for the court.
155Previous authorities have held that an impugned amount is severable if it can be “blue-pencilled” or “cleanly excised” from the balance of the claim.[39] However, Yuanda has altered that position.
[39] Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183 at [65]–[74] (Vickery J).
156Yuanda concerned a payment claim which allegedly contained excluded amounts. Before the Court of Appeal, the respondent submitted that any excluded amounts were severable from the payment claim. McLeish and Niall JJA rejected that contention.[40] In so doing, their Honours adopted a pragmatic approach to the doctrine of severance:
“[The doctrine of severance] applies where part of an instrument is invalid and, in limited circumstances, the remainder may be preserved by severing that part. The respondent does not identify an instrument to which the doctrine might apply. It cannot be the Act itself, because no question of its validity arises. Nor can it be the payment claim. That is not simply because treating the claimed amount as something less than that which is indicated in the payment claim would fly in the face of the construction of ‘claimed amount’ which has been identified above. It is also because a payment claim which contains an excluded amount within the claimed amount is still a valid payment claim. That is evident from the requirement that the respondent’s payment schedule identify alleged excluded amounts, and the obligations on the Court and an adjudicator in respect of excluded amounts. If the payment claim were simply invalid, these provisions would have no foundation upon which to operate. Since no question of validity of the payment claim arises, severance is not an issue”.[41]
[40] Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2021] VSCA 44 at [30] (McLeish and Niall JJA).
[41] Ibid at [31].
157Their honours held that three authorities commonly relied upon in support of severance do not apply to excluded amounts. The first was Gantley Pty Ltd v Phoenix International Group Pty Ltd.[42] In Gantley, Vickery J held that the SOP Act does not exclude the common law doctrine of severance.[43] The issue in that case was whether the payment claim sufficiently identified the construction work.
[42] [2010] VSC 106.
[43] Ibid at [115].
158Their Honours distinguished Gantley on two bases. First, the SOP Act differed when Gantley was determined. Before the 2006 amendments, the Act lacked the excluded amounts provisions. Secondly, unlike Gantley, Yuanda did not concern the validity of a payment claim (at [33]).
159The next authority was Seabay Properties Pty Ltd v Galvin Construction Pty Ltd.[44] In Seabay, Vickery J held that while the Act permits a respondent to identify excluded amounts, that respondent cannot avoid paying the entire claim.[45] Their Honours held that Seabay was irrelevant in circumstances where:
(a) the dicta did not discuss the availability of severance, or the construction of s16(4)(a)(ii) (which is only one means of recovering the claimed amount);
(b) Seabay involved an adjudication. Section 23(2B) stipulates that an adjudicator’s determination is void to the extent that it considers an excluded amount (which constitutes a ‘statutory scheme of severance’ in that context);[46] and
(c) Vickery J referred to the comments about severance in Gantley, yet held that the Act did not invalidate a payment claim containing an excluded amount (at [34]).[47]
[44] [2011] VSC 183.
[45] Ibid at [71].
[46] Ibid at [63]–[64].
[47] Ibid at [65]–[69].
160The final authority was John Beever (Aust) Pty Ltd v Roads Corporation.[48] In John Beever, Digby J held that s16(4)(a)(ii) of the SOP Act “precludes the Court from giving judgment for the claimant in respect of’ any excluded amount”.[49] Their Honours held that John Beever did not assist because:
(a) the excerpt merely paraphrased s16(4)(a)(ii);
(b) latter excerpts of the judgment evince that an excluded amount invalidates a claim;
(c) Digby J did not purport to determine the question of severance; and
(d) it was unnecessary for Digby J to determine the issue of severance because the claim was for summary judgment (at [35]).
[48] [2018] VSC 635.
[49] Ibid at [44].
161Their Honours concluded that none of the authorities supported the doctrine of severance (at [36]). Sifris JA held that it was unnecessary to determine the issue of severance but agreed that the doctrine of severance did not apply, for the reasons of McLeish and Niall JJ (at [143]).
162Accordingly, if a payment claim contains an excluded amount, the amount cannot be severed. The Court cannot award judgment on the payment claim even if I accept that Michele acknowledged the total variation claim of $76,151.15, and approved an amended sum of $69,193.65 as satisfactory payment for the variations. The appropriate forum for excluded amounts disputes is adjudication. Therefore, I cannot award judgment on part of the payment claim in which there has been acknowledgement by Michele that Interstudio requested or directed, for example, Variation 1 items 1, and 6.
163Therefore, even if I accepted the spreadsheet did sufficiently explain the nature of each variation, as background knowledge known by the parties, and as such Interstudio was to comprehend each variation, there is still the issue of a lack of evidence indicated that Interstudio requested or directed the carrying out of those works and in particular in relation to items 7, 8, 9, 19 and 12 in variation 2 as set out in Michele’s 24 January 2023 email.
164Further, although Amad has also provided the court with correspondence from Michele throughout 2021 and 2022 with Amad’s subcontractor, Designbuilt, as well with the Chroma (the party engaged by the Principal under the head contract) where Michele requests several variations, many of which align with the variations ultimately itemised in the spreadsheets, none of this material was referred to in the progress claim itself. Further, some of the items are said to be verbal direction which are disputed by Michele (e.g., Variation 1 item 4 and 5, Variation 2 items 7, 8 and 9 and Variation 3 item 1).
165I do not accept that Amad has applied Yuanda in a more satisfactory manner, arguing that pursuant to Yaunda a “full investigation” is not required to determine whether excluded amounts have been included. I do not accept that the exercise simply requires an assessment of the spreadsheets (sent some 8 months prior to the payment claims) to identify variations. The assessment involves a “full” detailed investigation of the emails, verbal discussions and evidence of Mark and Michele in respect of each item.
166In the circumstances, Amad has failed to satisfy me that the East Gelong payment claim does not include any excluded amount. Further, as Yuanda has also made clear, I cannot sever the impugned invoice from the payment claim as a whole,[50] and Amad did not seek to contend otherwise. It follows that Amad has failed to establish that the payment claim as a whole does not include any excluded amounts as required by s14(3)(b) of the SOP Act, and its claim under s16(2) also fails on that ground.
[50] Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2021] VSCA 44 at [36] (McLeish and Niall JJA); at [143] (Sifris JA).
167In relation to the Melbourne Payment Claim, Amad submits that Interstudio does not argue that variation MM1 (003) includes an excluded amount, only that (pursuant to Michele’s affidavit), variation MM1 (003) “was not completed”.
168However, Interstudio does argue that, on the face of the payment claim, there is nothing that establishes that the work comprising “variation MM1” has been carried out or that Interstudio requested or directed that the work be performed pursuant to s10A(3) of the SOP Act. Michele gives evidence that the work was not complete.
169It is noted that the analysis in relation to excluded amounts is different to the test for the statutory requirements of sub-ss14(2)(c) and (d) of the SOP Act to identify with the necessary precision the construction work or related goods and services to which the progress payment relates and does not indicate the amount of the progress payment that the claimant claims to be due.
170Whether a payment claim sufficiently identifies the construction work is an objective test.[51] The test is whether a reasonable person in the position of the defendant can comprehend the basis of the claim.[52] The test is not overly stringent; the Court must not adopt an unduly technical or pedantic approach.[53] The context of the payment claim is relevant, including industry conventions and earlier contractual dealings.[54] The background knowledge of the parties from their past dealings and prior exchanges of information (including correspondence) are also relevant.[55] Thus, the Court may look beyond the face of the payment claim for this purpose. Amad appears to rely on this type of analysis for the variations ground.
[51] John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126, Lyons J at [83].
[52] Ibid.
[53] Ibid; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [51] per Vickery J.
[54] Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391 at [40].
[55] John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126 at [83] per Lyons J; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [51] per Vickery J.
171Amad argues that Michele was able to assess the variation in the sum of $1,010,00.00 plus GST in her 24 January 2023 email and, therefore, cannot credibly argue that the payment claim lacks sufficient information to enable Interstudio to understand and assess the variations as claimed.
172This is not to the point in a s10A SOP Act assessment. Yuanda does not allow the Court to assess the payment claim together with context that is not referred to in the payment claim or served with it nor the merits of the claim. The resort to the Court under s16(2) is an option only in a clear case.[56] The appellate Court has construed the Act against the backdrop of its policy of encouraging resort to adjudication for the resolution of disputes (particularly those concerning potentially excluded amounts).
[56] Yuanda at [24].
173For similar reasons as the East Geelong payment claim, the Court cannot be satisfied that the amounts claimed do not include excluded amounts.
Service
174Amad submits that service of both the East Geelong payment claimand the Melbourne payment claim was made by email to Interstudio’s email address, [email protected]. The sending of these email was deposed in the Amad Affidavit sworn 26 April 2023, and Amad notes Interstudio acknowledged receipt of the payment claim when it responded on 23 January 2023.
175Amad says that each of the construction contracts are silent regarding the service of notices or payment claims, and thus contain no provision prohibiting service by email.
176Amad says that although s50 of the SOP Act does not provide for service by email, Vickery J in Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd[57] establishes that the provision as to service of “notice of documents” in s50 of the SOP Act were “facultative and not mandatory, and that service by email in that case was good service”. Amad says that Vickery J’s comments regarding s50 service can be applied the present case and support the view that Amad effectively served the payment claim on Interstudio.
[57] [2010] VSC 199.
177Amad also relies on the Electronic Transaction (Victoria) Act 2000 (Vic) which operates to authorise service by email in certain circumstances. Relevantly, s8(2) authorises service in this context via email due to the fact that:
(a) the making of a claim view email is something that is permitted to be done, and
(b) at the time the claims were made it was reasonable to expect that:
(i)the text of the claims would be readily accessible by the person who made and who was accessing the claim, and
(ii)communication would be sent via email.
178Interstudio’s response to Amad’s email confirm that service occurred via email pursuant to s13A of the Electronic Transaction (Victoria) Act 2000 (Vic).
179I am satisfied that the payment claims were validly served on Interstudio.
No Payment Schedule
180Amad says that Interstudio has not served a payment schedule to either the East Geelong payment claim or Melbourne payment claim.
181Amad says that due to Interstudio’s failure to respond with a payment schedule within 10 days, Interstudio is now liable to pay the claimed amount under each payment claim (s15(4) of the SOP Act), and Amad is entitled to recover the amount due under the payment claim as a debt (s 16(2)(a)(i)).
182Amad says that Interstudio is now limited in their ability to contest Amad’s application in the following ways:
(a) Interstudio cannot allege the payment claim is invalid by reason of non-compliance with s14 of the SOP Act;[58]
(b) The question as to whether the payment claim complies with s14 is a matter for adjudication and not a ground for resisting judgment.[59] Compliance with s14 and the existence of essential preconditions to a valid claim are matters for an adjudicator and not for objective determination by the Court;[60]
(c) if the Principal does not provide a payment schedule, whether intentionally or unintentionally he becomes liable to pay the claimed amount;[61] and
(d) Interstudio is unable to rely on any counterclaim or on any defence in relation to matters arising under the construction contract to resist the claim.[62]
[58] Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) [2005] NSWCA 409 at [76]. Brookhollow Pty Ltd v R&R Consultants Pty Ltd [2006] NSWSC 1 at [41].
[59]Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) [2005] NSWCA 409 at [76].
[60] Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238 at [71]; Downer Construction (Aust) Pty Ltd v Energy Australia [2007] NSWCA 49.
[61]Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248 at [5].
[62]McCarthy v State of Queensland [2013] QCA 268.
183By operation of sub-ss16(4)(b)(i) and (ii) of the SOP Act, Interstudio is prevented from bringing any cross claim against Amad or raising any defence in relation to matters arising under the construction contract. The statutory scheme does not permit Interstudio to refrain, upon some contractual basis, from providing a payment schedule, but to retain the right in subsequent proceedings to rely upon whatever the contractual issue was.[63]
[63] See Isis Projects v Clarence Street [2004] NSWSC 714 at [65] and Ampcontrol SWG Pty Ltd v Gujarat NRE Wonga Pty Ltd [2013] NSWSC 707 at [24].
184As set out in the legal framework above:
(a) 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); and
(b) there are available (limited) defences to a summary judgment application. They concern either the nature of the underlying contract or the form and service of the purported payment claim and whether the payment claim triggers the procedures in Part 3 of the SOP Act.
185It was common ground that there was no payment schedule served by Interstudio, however, given my anterior reasons, for the purposes of this proceeding, Amad’s payment claims contain excluded amounts that cannot be severed. The appropriate forum for excluded amounts disputes is adjudication. Therefore, I cannot award judgment on the payment claims.
Compliance with formal requirements of s14 of the SOP Act
186In my view, although the payment claims satisfy the following formal and procedural requirements of s14 of the SOP Act, given that they:
(a) were issued on Interstudio, and indicate the amount for construction work due;
(b) adequately identify the works to which the payment claims relate;
(c) state that they are made under the SOP Act;
(d) have a valid reference date (discussed above);
(e) were validly served on Interstudio; and
(f) were made within three months of the relevant reference dates accruing,
the application fails because the payment claims include excluded amounts (discussed above).
The credit issues
187For completeness, I note that Amad sought a finding that Michele was not a credible witness and in written submissions asserts that Michele’s evidence at paragraph 18 of her first affidavit is “misconceived and of recent invention”. I decline to make such a finding. First, it is unnecessary to do so. None of the relevant factual findings supporting my conclusions above turn on issues of credit. Second, without full argument and (possibly) cross-examination, there is an insufficient basis for me to make any adverse findings about any of the deponents, including Michele.
Conclusion
188For the foregoing reasons, for the purposes of this proceeding, Amad’s payment claims do not constitute valid payment claims and thus do not fall within the scope of the SOP Act. Amad’s summons on originating motion is dismissed.
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Certificate
I certify that these 44 pages are a true copy of the ruling of Her Honour Judge Burchell delivered on 14 August 2023.
Dated: 14 August 2023
Gideon Lipinski
Associate to her Honour Judge Burchell
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