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RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd & Ors[2021] QCA 117

RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd & Ors[2021] QCA 117

SUPREME COURT OF QUEENSLAND

CITATION:

RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd & Ors [2021] QCA 117

PARTIES:

RHG CONSTRUCTION FITOUT AND MAINTENANCE PTY LTD

ABN 67 159 703 349

(appellant)

v

KANGAROO POINT DEVELOPMENTS MP PROPERTY PTY LTD ATF KANGAROO POINT DEVELOPMENTS

MP PROPERTY UNIT TRUST

ABN 80 283 808 292

(first respondent)

CHERIDEN FARTHING (ADJUDICATION REGISTRAR)

(second respondent)

NOEL EVAN JENSEN (ADJUDICATOR J1057076)

(third respondent)

FILE NO/S:

Appeal No 2738 of 2021
SC No 13394 of 2020

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane – [2021] QSC 30 (Dalton J)

DELIVERED ON:

28 May 2021

DELIVERED AT:

Brisbane

HEARING DATE:

12 April 2021

JUDGES:

Sofronoff P and McMurdo and Mullins JJA

ORDER:

Appeal allowed.

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – RECOVERY ON QUANTUM MERUIT – CERTIFICATES – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where the appellant was a contractor builder who served a payment claim for a progress payment upon the first respondent principal under a standard form “AS 4902-2000” Contract – where the appellant also submitted a payment claim to the Superintendent under the Contract – where the Superintendent issued a payment schedule and certificate evidencing their assessment of the moneys due to the appellant and first respondent – where the first respondent’s solicitors disputed the Superintendent’s issued payment schedule as a valid “payment schedule” under the Building Industry Fairness (Security of Payment) Act 2017 (the Act) – where the first respondent’s solicitors issued a second payment schedule outlining that they did not owe any moneys to the appellant – where the appellant elected to begin an adjudication under the Act where the adjudicator accepted that the appellant rightly identified the Superintendent’s payment schedule as a valid payment schedule under s 69 of the Act and concluded that the first respondent owed moneys to the appellant with interest – where the first respondent originated proceedings in the Supreme Court which declared the adjudication decision void on the basis that it lacked jurisdiction as the appellant did not identify the relevant payment schedule as required by s 79(2)(c) of the Act – whether the appellant properly identified the Superintendent’s payment schedule instead of the first respondent’s solicitors’ payment schedule as the relevant “payment schedule” for adjudication under the Act – whether the second payment schedule issued by the first respondent’s solicitors was served within the statutory delivery period under s 76 of the Act

Building and Construction Industry Payments Act 2004 (Qld) (repealed)
Building Industry Fairness (Security of Payment) Act 2017 (Qld), s 69, s 75, s 76, s 78, s 79, s 200

COUNSEL:

D Clothier QC, with F J Chen, for the appellant
M H Hindman QC, with M J Steele, for the respondent

SOLICITORS:

CDI Lawyers as town agent for Jackson McDonald for the appellant
McInnes Wilson Lawyers for the first respondent

  1. [1]
    SOFRONOFF P:  The appellant was the builder of a development for the respondent.  The parties entered into a building contract which incorporated, as the general conditions of the contract, the “AS 4902-2000 General conditions of contract for design and construct”.  Relevantly, these provided:

Clause 1 Interpretation and construction of Contract

... payment schedule has the meaning in subclause 37.2;…

37.1. Payment claims

The Contractor shall submit payment claims:

  1. (a)
    progressively in accordance with Item 33;

37.2 Certificates

The Superintendent shall, within 10 business days after receiving such a payment claim, issue to the Principal and the Contractor:

  1. (a)
    a payment schedule evidencing the Superintendent's opinion of the moneys due from the Principal to the Contractor pursuant to the payment claim and reasons for any difference ('payment schedule'); and
  1. (b)
    a certificate evidencing the Superintendent's assessment of retention moneys and moneys due from the Contractor to the Principal pursuant to the Contract.

If the Contractor does not make a payment claim in accordance with clause 37.1, the Superintendent may issue the payment schedule with details of the calculations and shall issue the certificate in paragraph (b).

If the Superintendent does not issue the payment schedule within 10 business days of receiving a payment claim in accordance with subclause 37.1, that payment claim shall be deemed to be the relevant payment schedule.

The Principal shall within 5 business days after receiving both such certificates, or within 15 business days after the Superintendent receives the payment claim (whichever occurs first), pay to the Contractor the balance of the payment schedule after setting off such of the certificate in paragraph (b) as the Principal elects to set offIf that setting off produces a negative balance, the Contractor shall pay that balance to the Principal within 5 business days of receiving written notice thereof.

Neither a payment schedule nor a payment of moneys shall be evidence that the subject WUC has been carried out satisfactorily. Payment other than final payment shall be payment on account only.

In so far as necessary to ensure compliance with the Security of Payment Act, the Superintendent is deemed to issue any payment schedule under clause 37.2 or final payment schedule under clause 37.4 as the agent of the Principal and each such schedule shall constitute a payment schedule for the purposes of the Security of Payment Act.

For the purposes of and where permitted by the Security of Payment Act, each of the dates for delivery of a payment claim in subclause 37.1 constitutes a reference date.

  1. [2]
    The “Security for Payment Act” which is referred to in clause 37.2 was defined in clause 1 as “the Building and Construction Industry Payments Act 2004 (Qld).  That Act was repealed by the Building Industry Fairness (Security of Payment) Act 2017.[1]
  2. [3]
    On 27 July 2020 the appellant builder served a payment claim upon the respondent owner.  By that document the appellant claimed payment of the sum of $2,013,528.98.  On 6 August 2020 the respondent’s solicitors, Messrs McInnes Wilson Lawyers, sent a letter to the appellant’s solicitors saying, relevantly:

“… we hold instructions to respond, on behalf of our client, to your client’s [payment claim] by giving you, on behalf of our client, our client’s ‘payment schedule’ for the purposes of section 76 of the BIFA within the requisite 15 business day time period.

To avoid doubt, on this occasion anything issued to your client by the Superintendent in respect of [the payment claim] is not to be construed as a ‘payment schedule’ for the purposes of the BIFA as our client will be providing its own response as foreshadowed above.”

  1. [4]
    Acting under clause 37.2, the Superintendent responded by delivering a “Payment Schedule”.  The first part of that document said:

“This Payment Schedule has been produced pursuant to the Works Contract for the residential flat building being constructed at 98 River Terrace, Kangaroo Point, between the Principal “Kangaroo Point Developments MP Property Pty Ltd” and the Contractor “RHG Contractors Pty Ltd”.  This Payment Schedule confirms that the Superintendant [sic] has assessed, calculated and certified the proper value of Work Under the Contract.”

  1. [5]
    There followed several pages containing the Superintendent’s “Reasons for [the] difference” between his assessment of the amount due and the amount claimed by the appellant.  The Superintendent’s assessment was that nothing was due.  On 17 August 2020 the respondent’s solicitors, wrote to the appellant’s solicitors saying, relevantly:

“Our client disputes RHG's position as set out in your correspondence to us of 13 August 2020 that the payment schedule issued by the Superintendent to RHG under the Contract on 10 August 2020 is the "payment schedule" for the purposes of section 76 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld)(‘BIF Act’) on the basis that such position is incorrect because to the extent that section 76 of the BIF Act has any applicability, section 76(1)(b) would apply (but concedes that should our client be incorrect, RHG's position would be correct if, and only if, RHG was entitled to give, and did give, a "payment claim" in accordance with sections 68 and 75 of the BIF Act – which is also disputed by our client).

Our client has considered the purported payment claim and assessed that it is not liable to pay to RHG the whole of the “2,013,528,98” stated as “THIS ACCOUNT” in the purported payment claim:

a) on the basis that the purported payment claim does not amount to a "payment claim" within the meaning of that term in, and for the purposes of, the BIF Act; and/or

b) for the reasons set out below.

Accordingly, on that basis and for the reasons set out below, our client proposes to pay to RHG $0.00 in respect of the purported payment claim, and is withholding the whole of the “2,013,528,98” stated as “THIS ACCOUNT” in the purported payment claim.”

  1. [6]
    There then followed several pages setting out the reasons why the respondent asserted that no moneys were payable.
  2. [7]
    In response to this attitude, the appellant elected to begin an adjudication under the Building Industry Fairness (Security of Payment) Act.  The Act makes provision for the delivery by a builder to a principal of written claims for payment under a contract for construction work and for the delivery by the principal of a written response to such claims.  The Act establishes a system for the adjudication of disputes over claims.  The parties agree that the Act applies to the contract between the parties to this appeal.
  3. [8]
    Section 75(1) provides:

“A person (the claimant) who is, or who claims to be, entitled to a progress payment may give a payment claim to the person (the respondent) who, under the relevant construction contract, is or may be liable to make the payment.”

  1. [9]
    It was common ground between the parties that the claim served by the appellant was a valid “payment claim” under the Act.  Section 76 requires a respondent who has been served with a payment claim to “respond to the payment claim by giving the claimant a payment schedule” within a certain time.  Section 69 defines the expression “payment schedule” as follows:

“A payment schedule, responding to a payment claim, is a written document that–

  1. (a)
    identifies the payment claim to which it responds, and
  1. (b)
    states the amount of the payment, if any, that the respondent proposes to make; and
  1. (c)
    if the amount proposed to be paid is less than the amount stated in the payment claim – states why the amount proposed to be paid is less, including the respondent’s reasons for withholding any payment; and
  1. (d)
    includes the other information prescribed by regulation.”
  1. [10]
    Section 77(2) provides a sanction for a respondent’s failure to serve a payment schedule.  The sanction is that the respondent is “liable to pay the amount claimed under the payment claim”.  Section 78 confers rights upon a claimant to whom a respondent fails to pay the “amount owed”.  The latter expression is defined to mean:

78(5) In this section–

amount owed, to a claimant for a payment claim, means –

  1. (a)
    if the respondent did not respond to the payment claim with a payment schedule as required under section 76 – the amount claimed under the payment claim; or
  1. (b)
    if the respondent did respond to the payment claim with a payment schedule as required to do so under section 76 – the amount proposed to be paid under the payment schedule.”
  1. [11]
    Section 79(1) confers further rights upon a claimant:

“A claimant may apply to the registrar for adjudication of a payment claim (an adjudication application) if–

  1. (a)
    the claimant is entitled to apply for adjudication under section 78(2)(b) because of a failure by the respondent to pay an amount owed to the claimant by the due date for the payment; or
  1. (b)
    the amount stated in the payment schedule, given in response to the payment claim, is less than the amount stated in the payment claim.”
  1. [12]
    Section 79(2) specifies the content of an “adjudication application” as follows:

“An adjudication application–

  1. (a)
    must be in the approved form; and
  2. (b)
    must be made within–
    1. for an application relating to a failure to give a payment schedule and pay the full amount stated in the payment claim – 30 business days after the later of the following days–
      1. (A)the day of the due date for the progress payment to which the claim relates;
      2. (B)the last day the respondent could have given the payment schedule under section 76; or
    2. for an application relating to a failure to pay the full amount stated in the payment schedule – 20 business days after the due date for the progress payment to which the claim relates; or
    3. for an application relating to the amount stated in the payment schedule being less than the amount stated in the payment claim – 30 business days after the claimant receives the payment schedule; and
  3. (c)
    must identify the payment claim and the payment schedule, if any, to which it relates; and
  4. (d)
    must be accompanied by the fee prescribed by regulation for the application; and
  5. (e)
    may include the submissions relevant to the application the claimant chooses to include.”
  1. [13]
    The form of application for the commencement of an adjudication contained a question, “Has the respondent given you a payment schedule?” to which the appellant answered, “Yes, attach copy”.  The attached document was the Superintendent’s assessment of 10 August 2020.
  2. [14]
    The parties then participated in the adjudication by making written submissions.  One of the arguments put forward by the respondent was that the adjudicator lacked jurisdiction to determine the dispute because the appellant claimant had “failed to identify the payment schedule” to which the adjudication related in its written application, as required by s 79(2)(c).
  3. [15]
    The adjudicator considered the status of the two documents which had been suggested as payment schedules, namely the Superintendent’s schedule and the letter sent by McInnes Wilson.  He found:

“The superintendent gave a payment schedule on the 10th August 2020 (the "first payment schedule"). The respondent's solicitors then gave a payment schedule on 17th August 2020 (the "second payment schedule").  It is not disputed that both payment schedules satisfy the matters which must be incorporated in a payment schedule and on my review of those documents I am satisfied that they do.”

  1. [16]
    There was then a dispute about the time limit within which such a document had to be served.  The Act provides:

76(1) If given a payment claim, a respondent must respond to the payment claim by giving the claimant a payment schedule within whichever of the following periods ends first –

  1. (a)
    the period, if any, within which the respondent must give the payment schedule under the relevant construction contract;
  2. (b)
    15 business days after the payment claim is given to the respondent.

Maximum penalty – 100 penalty units.

Note

A failure to give a payment schedule as required under this section is also grounds for taking disciplinary action under the Queensland Building and Construction Commission Act 1991.”

  1. [17]
    The appellant argued before the adjudicator that the document served by McInnes Wilson was served late.  The respondent argued that on the correct interpretation of the contract the statutory period for service of 15 business days applied.  In the result, the adjudicator accepted that the Superintendent’s document had been rightly identified by the claimant in the applications as the relevant payment schedule.[2]
  2. [18]
    Having then considered the matter on the merits, the adjudicator concluded that the respondent had to pay the appellant $788,439.54 with interest.[3]
  3. [19]
    On 15 December 2020 the respondent commenced proceedings in the Supreme Court seeking a declaration that the adjudication decision was void because, inter alia, the adjudicator lacked jurisdiction.  Its point was a simple one.  It was submitted that the Superintendent’s assessment of 10 August 2020 was not a payment schedule of the kind required by s 76 of the Act and, if that was so, it followed that the adjudication application which the appellant had made was invalid because it did not refer to a valid payment schedule as the Act required.  It followed that the adjudicator had no jurisdiction to decide anything.[4]
  4. [20]
    Dalton J accepted that submission and declared the adjudication decision to be void.  Her Honour was of the view that the language in s 79(c), that an adjudication application “must identify … the payment schedule”, was mandatory.  Her Honour found that the document served by the Superintendent was not a payment schedule as defined in the Act because it did not state “the amount of the payment, if any, that the respondent [proposed] to make”.  Rather, it was a document “evidencing the Superintendent’s opinion of the money due from the Principal to the Contractor”.
  5. [21]
    The repealed Building and Construction Industry Payments Act 2004 was still in force when the contract was made.  That Act contained a regime for dealing with payment claims that is remarkably similar to the regime established under the 2017 Act.  It provided in s 17 for the making of “payment claims” in terms similar to those employed by s 68 of the current Act.  The repealed Act also provided for a response by way of a payment schedule, which was defined in terms that are almost identical to the definition in s 69 of the current Act.  Section 18A of the repealed Act made provision for the time limits for the delivery of a payment schedule in the same way as s 76 of the current Act except that the statutory period for the delivery of a payment schedule under the repealed Act was 10 business days, which the contract reflected in clause 37.2, while the new Act allows 15 days.
  6. [22]
    The repealed Act was enacted following the publication in 2003 of the report of the Royal Commission into the Building and Construction Industry.  As the Explanatory Memorandum explained, the Royal Commissioner had identified security of payment to contractors as a matter requiring reform. The Commissioner observed that the building and construction industry was particularly vulnerable to security of payment issues because it typically operates under a hierarchical chain of contracts with inherent imbalances in bargaining power.  The response of the Queensland Parliament to this recommendation was to enact the 2004 Act.  This Act was novel for establishing a speedy system of adjudication to deal with disputed progress claims but it was not novel in the regime for the making of, and responding to, claims.  For many decades in Australia the building and construction industry had used a system whereby a third party, appointed by the principal, was to certify the amount due and, upon such certification, the principal became liable to pay the amount certified.[5]
  7. [23]
    For many years now, those engaged in construction have employed the standard form contracts drafted by a committee of Standards Australia, a not-for-profit company which, among other things, prepares draft general conditions of contract for various kinds of commercial building transactions.  The general conditions of contract in the present case is such a document.  It is in the form of general conditions drafted by Standards Australia and designated “AS 4902-2000”.  Clause 37, which deals with progress claims, has been in its current form since 2004 when the Act of that year was passed.  It has been the subject of much academic analysis and has doubtless been relied upon by commercial parties thousands of times since then.  The effectiveness of clause 37.2 to engage the adjudication provisions of the 2004 Act, and now the current Act, has never been called into question.
  8. [24]
    The repeal of the Building and Construction Industry Payments Act 2004 does not matter for this case because s 206 of the Building Industry Fairness (Security of Payment) Act 2017 provides that a reference in a document to the repealed Act may, if the context permits, be taken to be a reference to the new Act.
  9. [25]
    The similarity of the two statutory regimes in relevant respects means that the reference in clause 37.2 of the contract to the repealed legislation can be taken to be a reference to the current legislation.
  10. [26]
    It will be recalled that the penultimate paragraph of clause 37.2 of the contract read as follows:

“In so far as necessary to ensure compliance with the Security of Payment Act, the Superintendent is deemed to issue any payment schedule under clause 37.2 or final payment schedule under clause 37.4 as the agent of the Principal and each such schedule shall constitute a payment schedule for the purposes of the Security of Payment Act.”

  1. [27]
    This “deeming” was neither artificial nor contrived.  As appears from the fourth sub-clause of clause 37.2, the amount stated as due, in the opinion of the Superintendent, from the Principal to the Contractor is the amount which the Principal “shall … pay to the Contractor”.  The effect of the Superintendent’s schedule, in triggering the Principal’s liability to the Contractor, read with the content of the payment schedule issued by the Superintendent, is that the Superintendent’s document “states the amount of the payment, if any, that the respondent proposes to make”, as required by s 69(b).
  2. [28]
    The contract does not provide otherwise for the provision by the respondent of a payment schedule.  Of course it does not have to for the statute to be effective, but if the respondent’s construction of the 10 August 2020 document is right, then it would follow that, although the Superintendent had a duty to prepare and serve a schedule containing all of the information relevant to a response to a claim, and although the Superintendent had to do this within 10 business days, the respondent had a corresponding and collateral statutory duty to prepare and deliver a payment schedule containing yet another response to the claim within exactly the same time period under the old Act.  Conceivably, the two documents, both being prepared promptly within 10 days, might differ in the result and how would that conflict be resolved?  What would be the legal effect of the Superintendent’s assessment if the Principal disagreed?
  3. [29]
    There is no reason why the parties could not agree in the way they did about the meaning to be attributed to the words used in a contractual instrument.  Section 200 of the Act provides:

“(1) The provisions of this Act have effect despite any provision to the contrary in any contract, agreement or arrangement.

  1. (2)
    A provision of a contract, agreement or arrangement is of no effect to the extent to which it –
  1. (a)
    is contrary to this Act; or
  1. (b)
    purports to exclude, limit or change the operation of this Act; or
  1. (c)
    has the effect of excluding, limiting or changing the operation of this Act; or
  1. (d)
    may reasonably be construed as an attempt to deter a person from taking action under this Act.”
  1. [30]
    The deeming provision in clause 37.2 does not offend against any of the strictures in s 200 and there is no reason not to regard it as having its evidently intended effect.  Indeed, in my respectful opinion, it would constitute a failure to give the contract a business-like interpretation to ignore the parties’ use of statutory terms of long standing.[6]
  2. [31]
    The respondent’s submissions cannot be accepted and, for the foregoing reasons, I respectfully disagree with Dalton J’s conclusions.
  3. [32]
    The argument that the Superintendent’s authority to issue the document had been revoked can be disposed of shortly.  There is no power under the contract to revoke that authority and the deeming provision binds the respondent to accept that agency.  The respondent might be free to remove the Superintendent, but in that case clause 20.1 would have required the immediate appointment of another Superintendent to perform the same duties.
  4. [33]
    It is not necessary to consider the appellant’s other grounds of appeal.  The appeal should be allowed.
  5. [34]
    McMURDO JA:  I agree with Sofronoff P.
  6. [35]
    MULLINS JA:  I agree with the President.

Footnotes

[1] The contract is dated 17 September 2018; the previous Act was repealed on 17 December 2018.

[2] See paragraph [70] of the Adjudicator’s reasons.

[3] Paragraph [225] of the Adjudicator’s reasons.

[4] See reasons of Dalton J at paragraph [9].

[5] See eg. Plucis v Fryer (1967) 126 CLR 17 at 20 per Barwick CJ, McTiernan, Kitto, Taylor and Owen JJ; and, more recently, Jones v Dalcon Construction Pty Ltd [2006] WASCA 205.

[6] cf. International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at [8] per Gleeson CJ.

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Editorial Notes

  • Published Case Name:

    RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd & Ors

  • Shortened Case Name:

    RHG Construction Fitout and Maintenance Pty Ltd v Kangaroo Point Developments MP Property Pty Ltd & Ors

  • MNC:

    [2021] QCA 117

  • Court:

    QCA

  • Judge(s):

    Sofronoff P, McMurdo, Mullins JJA

  • Date:

    28 May 2021

  • Selected for Reporting:

    Editor's Note

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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