Veolia Energy Technical Services Pty Ltd v FKP Hayman Pty Ltd
[2014] QDC 267
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- Unreported Judgment
- Veolia Energy Technical Services Pty Ltd v FKP Hayman Pty Ltd[2014] QDC 267
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Veolia Energy Technical Services Pty Ltd v FKP Hayman Pty Ltd[2014] QDC 267
Veolia Energy Technical Services Pty Ltd v FKP Hayman Pty Ltd[2014] QDC 267
DISTRICT COURT OF QUEENSLAND
CITATION: | Veolia Energy Technical Services Pty Ltd v FKP Hayman Pty Ltd [2014] QDC 267 |
PARTIES: | Veolia Energy Technical Services Pty Ltd [Applicant] And FKP Hayman Pty Ltd [Respondent] |
FILE NO/S: | BD 4066/14 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court at Brisbane |
DELIVERED ON: | 02 December 2014 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 07 November 2014 |
JUDGE: | Clare SC DCJ |
ORDER: | The application is allowed |
CATCHWORDS: | CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – STATUTORY REGULATION OF ENTITLEMENT TO RECOVERY OF PROGRESS PAYMENTS – PAYMENT CLAIMS – Recovery of debt – Application under s 19 of Building Construction Industry Payments Act – Whether valid payment claims were made under s 17 of the Act – Whether valid payment schedules were served. |
COUNSEL: | E. Bird for the Applicant (Solcitor, McInnes Wilson Lawyers) S. Seefeld for the Respondent |
SOLICITORS: | McInnes Wilson Lawyers for the Applicant Minter Ellison for the Respondent |
- [1]This is an application under s 19(2)(a)(i) of the Building and Construction Industry Payments Act 2004 (the Act), for recovery of the unpaid portions of debts claimed to be owing by the respondent to the applicant under payment claims.
Background
- [2]The applicant was a subcontractor engaged in the refurbishment of the Hayman Island Resort. It seeks payment from the contractor for work including air-conditioning mechanical services, demolition work, and the supply of goods and other services in four tranches. The application concerns seven invoices sent to the respondent totalling $1.1 million. About $200,000 remains unpaid. The application is opposed on the basis that a valid progress claim either was not served, or, if served, was answered by a valid payment schedule.
- [3]The parties executed a Subcontract for the Lagoon Wing on 20 November 2013. It is common ground that works and goods were also provided outside of the written Subcontract, pursuant to various separate “contracts, agreements or arrangements” for construction work and related goods and services made between the parties before and after the subcontract.
The Legislation
- [4]The object of the Payments Act, as identified in sections 7 and 8, is to ensure that all parties in the contractual chain are given sufficient protection to receive payment for work undertaken. Entitlement to make a progress claim derives from s 12 of the Act. The requirements for a payment claim are set out in s 17. It must contain the three things listed in subsection (2), namely: identification of the work to which the claim relates, the amount claimed, and notice that it is claimed under the Act.
- [5]Under s 18, the respondent must either serve a payment schedule in reply to the claim, or pay the claim by the due date. In the present matter, none of the purported claims have been paid in full, although the due date for payment has expired. In each instance, the applicable payment period was 10 business days pursuant to s 15(1)(b) of the Act. (In so far as cl 14 (i), and Annexure J of the Subcontract had purported to extend the time to pay, that provision was void by virtue of s 67U of the Queensland Building and Construction Commission Act 1991).
- [6]The respondent could avoid the obligation to pay the full claim within 10 days by serving a payment schedule. Section 18 requires any payment schedule to be served with 10 business days of the claim.[1] It must identify three things; the payment claim to which it relates, the amount of payment proposed, and if money is to be withheld, the reason why the scheduled amount is less.[2]
- [7]The basis of an application under s 19 is the respondent’s liability to pay the amount claimed because the respondent failed to serve a payment schedule and failed to pay the full amount by the due time.[3] The respondent is precluded from raising any defence under the contract in response to the s 19 application.[4] It follows that the success of the present application for each invoice hinges upon whether the court is satisfied that:
- A valid payment claim was made under s 17; and
- The respondent did not serve a payment schedule for that claim within 10 business days.[5]
- [8]Section 12 confers a right to a progress payment upon a person who has undertaken to carry out construction work, or supply related goods and services, under a “construction contract”. The entitlement to the payment is from “each reference date” under the contract. It does not require a contract in writing. The Dictionary in Schedule 2 of the Act identifies a “construction contract” to be a “contract, agreement or arrangement under which one party undertakes to carry out construction work for, or to supply related goods and services to another party.” It follows that the parties had multiple construction contracts within the meaning of the Act, covering all four tranches of goods and services provided by the applicant. Applying s 12, the applicant had an entitlement to make one progress payment claim under each construction contract in respect of each reference date, “from each reference date”, for each of the applicable contracts, agreements or arrangements.
- [9]The respondent contends that three of the present invoices, even if properly made payment claims, were duly answered by a payment schedule, and thus protected from the s 19 (2) application. The dispute in respect of the remaining claims is whether they meet the requirements of ss 12 and 17. The respondent does not take issue with the contents of the claims forwarded, but challenges the availability of reference dates to sustain them.
- [10]It is necessary to consider the entitlement under s 12 to make a claim “(f)rom each reference date”.[6] That cannot mean the subcontractor has only one day to serve its claim. On its face, the term “(f)rom each reference date” means that the entitlement is from that reference date onwards.[7] Furthermore, by virtue of s 17(4), the time for service of a payment claim will endure for at least 12 months after the provision of goods or services in the claim. The parties may contract to extend, but not shorten, that time period. While s 17(5) prevents more than one claim in respect of each reference date, that does not mean that eligibility to claim under a reference date is lost when a new reference date is reached. The ability to accrue reference dates is a necessary implication of the express provision in s 17(4) for claims up to a year after the work was done.[8] The entitlement to make a payment claim arises once the reference date is reached and persists until expiration of the time limit in s 17(4). The respondent’s submissions to the contrary effect are misconceived. They refer to the decision in Tailored Projects Pty Ltd v Jedfire Pty Ltd,[9] where only one final reference date was unused but two claims were attempted. The extended time for service of a claim under s 17(4) can only apply to an unused reference date. A claim cannot be made unless there is a surviving reference date.
- [11]A “reference date” is defined as either the date under the contract on which a progress claim may be made, or otherwise the last day of each month, from the first provision of the work or services and the last day of each named month.[10]
Lagoon Wing PC1 & Lagoon Wing PC2
- [12]The first two claims for work on the Lagoon Wing were posted in the one envelope and served on, or just before, 12 November 2013. It is common ground that by 23 September 2013 a construction contract within the meaning of the Act was in existence for preliminary work on the Lagoon Wing.[11] The work under that agreement was completed by early November 2013, which was before the execution of the Subcontract. [12]
- [13]As no specific reference dates were agreed under the preliminary arrangement, the dates fell to be determined under the default rule in schedule 2 of the Act. Work commenced in September 2013,[13] and continued into October. Accordingly, there were reference dates of 30 September 2013 and 31 October 2013. The claims headed “Lagoon Wing PC1” & “Lagoon Wing PC2” were the only claims made under the 23 September arrangement. Therefore, by the time the claims were served in November, the applicant had accrued an entitlement to progress claims for September and October.
- [14]The two separate invoices were sent together. Although they bore the same date, they had two different invoice numbers. I am satisfied both claims were supported by a reference date and validly made.
- [15]The respondent responded to them within 10 business days. It was a single response to the two claims, proposing part payment of the total amount, without expressly identifying what part of each invoice was to be withheld. The applicant submitted that the reply was not a payment schedule under s 18 of the Act.
- [16]While the Act does not expressly prohibit one schedule for multiple claims, it consistently refers to a payment claim and a payment schedule in the singular. Nonetheless, Mr. Bird for the applicant conceded that, in some circumstances, separate treatments of various claims in the one document might be an effective schedule. He argued that the real deficiency in this instance was the absence of any breakdown of the total.
- [17]A payment schedule can be an informal document and the requirements of s 18 of the Act should not be approached from an unduly critical viewpoint.[14] There could be no doubt that the respondent’s document was addressed to the two claims served on the same day. It set out the invoice numbers. The combined value of those two invoices was $760,752. The respondent’s document undertook to pay $728,000, and noted $38,038 would be retained. It further advised “Maximum Retention – 5% of $760,752.14 = 38.038”. One might then infer 5 percent was withheld from each claim. However, s 18(3) requires a schedule to state the reasons for withholding payment. Mr. Seefeld for the respondent argued that the reason was sufficiently identified by the reference to 5%, because the respondent had an entitlement under the Subcontract to retain up to 5% of the Subcontract sum in a retention fund until expiry of the defects liability period.[15] However, these two payment claims were not made under the Subcontract, but the prior arrangement. The claims were made before the Subcontract was executed.[16] The terms of the Subcontract therefore did not apply. The respondent’s document did not provide any reason why 5% was to be withheld. It did not comply with s 18(3), and was not a payment schedule within the meaning of the Act.
- [18]I am satisfied that both circumstances required by s 19(1) exist in relation to Lagoon PC1 and Lagoon Wing PC 2.
Lagoon Wing Final PC and Lagoon Wing PC 4
- [19]These were the only two invoices for work under the written Subcontract. The respondent conceded no payment schedule was served, but challenged the status of both claims. The argument is that the two claims were made against a single reference date and therefore fell foul of s 17(5). Only one claim could be valid, but the court could not determine which one without a trial.
- [20]The Subcontract was executed on 20 November 2013.[17] Annexure J to the Subcontract provided the monthly reference dates. Annexure J and cl 14(c) purported to prevent the accrual of reference dates. A claim could only be delivered by the monthly reference date, but not after it. The last specific reference date under the Subcontract was 16 December 2013. There was provision for one further reference date “if there is a termination, cessation or completion of work”. In that event, one further payment claim could be lodged and it could only be a “final payment claim”. Clause 15 purported to shorten the time in which the final claim could be made after practical completion and would simultaneously extinguish the entitlement to any other unmade claims.
- [21]Lagoon Wing Final Claim was delivered on or about 24 December 2013. While submitting uncertainty in the evidence as to the date of completion of the works under the Subcontract, Mr. Seefeld appeared to concede that this first invoice was sent before practical completion. It does seem clear that work under the subcontract continued into 2014. There had not been “a termination, cessation or completion of work”. Consequently, at the time of Lagoon Wing Final Claim the applicant was not yet entitled to make a “final payment claim” (as defined in Annexure J). The applicant relies upon the earlier reference date of 16 December 2013. The respondent submitted that as 16 December had passed, the December reference date had already expired under cl 14(c). As cl 14(c) deems a claim made after one reference date to be made on the following reference date, the Lagoon Wing Final Claim might be deemed to be the “final payment claim”. However, Mr Seefeld questioned whether this might be so when the conditions under the subcontract for the final claim had not yet arisen.
- [22]It is apparent that the contract seeks to remove the applicant’s statutory entitlement under ss 12 and 17 to make a claim “from” the reference date up to 12 months after the completion of the work. A contract cannot narrow the statutory entitlement to make a claim. To the extent that the Subcontract would modify or restrict any provision of the Act, it is void under s 99. Section 17 of the Act only permits a contract to extend, not shorten, the 12-month period for service. Accordingly, notwithstanding cl 14 and 15, the applicant had 12 months to serve the claim under the December reference date. It had not made such a claim before serving the Lagoon Wing Final Claim on 24 December. The claim styled “Lagoon Wing Final PC” was therefore supported by the December reference date.
- [23]The heading of “Final PC” did not make it the final claim under the Subcontract. It did not disqualify the claim under the December reference date, because such description was surplus to the Act’s requirements and irrelevant. Section 17 did not require identification of the reference date in the claim. The respondent could not be reasonably misled by the term “final” because it must have known at the time of receiving the claim, that work under the Subcontract continued. The claim itself identified construction work already done. Notwithstanding the need for strict compliance with the Act, form ought not defeat substance.[18] The substance of “Lagoon Wing Final PC” satisfied the requirements of s 17(2). I am satisfied that the circumstances required by s 19(1) exist for Lagoon Wing PC4.
- [24]The final reference date under the Subcontract was practical completion of the works. The final claim, “Lagoon Wing PC4” was served on 1 April 2014. It seems common ground that this was after practical completion. The Certificate of Practical Completion,[19] offered two dates: 9 December 2013 for some rooms, and 6 March 2014 for other rooms. The effect must be that practical completion for the whole Subcontract was reached on the last of those dates, 6 March 2014. This was the uncontradicted evidence of the applicant’s project manager, Hamish Rowley. Mr. Seefeld did not dispute that Lagoon Wing PC4 was served after Practical Completion. Clause 15 of the subcontract stated the practical completion reference date would expire after 20 working days, but the attempt to shorten the statutory claim period was again void under s 99 of the Act. I am satisfied Lagoon Wing PC4 was served under the reference date of Practical Completion. It did not identify itself as the final claim, but again, it was not necessary to do so. The Subcontract purported to place extra conditions upon the statutory entitlement of the subcontractor to make the final payment claim, including an endorsement of “Final Payment Claim”. The attempt to narrow the entitlement under the Act was void under s 99 of the Act. Payment Claim 4 did not adopt the word “Final”, but it did comply with the statutory requirements for a claim.
- [25]The work was identified in Lagoon wing PC4 in the same terms as Lagoon wing Final PC, but with the addition of a list of “approved variations”, and a substantially less claimed amount. The uncontradicted evidence of Mr. Rowley is that the subcontract was varied orally on 27 November 2013 and by emails up to March 2014.[20] Although the respondent did offer a belated response in relation to Lagoon Wing PC4, there is no suggestion that the respondent ever queried the reference in the claim to “approved variations”. The respondent contends the quality of the evidence is not clear enough. In my view it is.
- [26]The claim Lagoon Wing PC 4 satisfied the requirements of s 17. It was supported by the practical completion reference date, and therefore the payment claim was validly made. The time for service of any payment schedule expired 10 business days from 1 April, which was 15 April 2015. The respondent did not respond until July, so there was no applicable payment schedule. I am satisfied that the circumstances required by s 19(1) exist for Lagoon Wing PC 4.
Pool Wing Goods Claim 1 & Pool Wing Goods Claim 2
- [27]It is common ground that the supply of goods, the subject of Pool Wing Goods Claim 1 and Pool Wing Goods Claim 2, was outside of the Subcontract and delivered under a separate contract, arrangement or agreement amounting to a construction contract.[21] Two claims were made. The respondent submits there was only one available reference date.
- [28]The reference dates fell for determination under the Act as the last day of each month, from the commencement of the supply of the goods, until the last named month. The evidence is that the supply of hardware under the agreement commenced no later than 20 March 2014,[22] and continued into April 2014. That means that at least two reference dates were available for payment claims: 31 March 2014 and 30 April 2014.
- [29]Pool Wing Goods Claim 1 was served on 10 April 2014. It was therefore supported by the reference date of 31 March. An invoice marked Pool Wing Goods Claim 2 was sent on 23 April 2014. As it preceded the reference date of 30 April, it could not rely upon that date for validity. However, on 7 May 2014, the same invoice was resent, with a different issue date.[23] As service was after 30 April, it was supported by the 30 April reference date. Each claim satisfied the requirements of s 17(2) of the Act.
- [30]The respondent did not respond to either claim until 17 July 2014, which was much too late to qualify as a payment schedule. I am satisfied of the existence of the necessary circumstances set out in s 19(1) for both claims.
Pool Wing Demolition Claim
- [31]The Pool Wing demolition was a separate engagement. Site instructions were given to the applicant to provide the goods and services for demolition of the pool wing. It was a contractual arrangement separate and distinct from the earlier works and goods supplied.[24] The evidence is that these works began in February 2014 and were completed on 3 March 2014.[25] Without a specific contractual provision, the first reference date was 28 February 2014 and the second 31 March 2014. The respondent did not dispute that the Pool Wing Demolition Claim was a properly formulated payment claim duly served in compliance with s 12 and 17. Rather, the respondent submitted a payment schedule was served.
- [32]The issue is the time of service of the Pool Wing Demolition Claim. On its face the respondent’s document referred to multiple payment claims. It is common ground that service of the document was too late for any such claims, other than this claim for the demolition work. While the time for service of a schedule in relation to the demolition claim had not expired, the applicant contends that such service was premature because the respondent’s document preceded the demotion claim. Section 18 identifies that a payment schedule is the reply to a payment claim. The right to serve a payment claim only emerges after service of the payment claim. A document delivered before the payment claim is not a payment schedule.
- [33]The direct evidence puts the time of service of the claim about 2 hours after the delivery of the “schedule”.[26] The respondent submitted such evidence could not be accepted without a trial because it conflicts with dates written on the documents.
- [34]The date typed on the invoice constituting the payment claim was 7 July 2014. The respondent’s document was emailed by its construction manager, Neil Denton, at 2:32 pm on 17 July, which would obviously bring it within time if the date on the claim was the date of service. However, Mr. Rowley, the applicant’s project manager, attested that the invoice constituting this claim was in fact not sent to the respondent until 5.13 pm on 17 July. Previously, Mr. Rowley had sent a letter referring to the costs of the demolition work, but it is accepted that earlier letter did not constitute a payment claim.
- [35]The purported payment schedule, with its amalgamated responses to claims, did not specially identify the claims to which it referred. Written under the heading “date of payment claim (date when claim was served)”, was only this: “multiple tax invoices/ claims and letter not in line with purchase order issued by FKP.” By return email, Mr. Rowley asked Mr. Denton to reconcile the approved amounts against “our invoices”. The attachments to Mr. Rowley’s email included letters and invoices, including the invoice for the demolition work marked “Pool wing demolition claim”. While the date typed on the invoice was 7 July 2014, Mr. Rowley’s direct evidence was that the invoice was not been sent to the respondent until 17 July 2014, in response to the respondent’s schedule. Mr. Rowley’s account is not contradicted by Neil Denton or any other witness. It is credible.
- [36]Notwithstanding the date on the claim, I am satisfied on the evidence that the claim was not served until 5.13 pm on 17 July 2014, that no payment schedule was sent in reply, that the full claim has not been paid and is now due. The application in respect of the demolition claim will be allowed.
Conclusion
- [37]For the reasons given, I am satisfied that the necessary matters in s 19(1) exist in relation to all 7 payment claims. The application is allowed.
- [38]I shall hear submissions as to costs.
Footnotes
[1] Or earlier, if the contract so provides: s 18( 4) of the Act.
[2] Building and Construction Industry Payments Act 2004 (Qld) s 18(2),(3).
[3] Building and Construction Industry Payments Act 2004 (Qld) s 19(1),(4).
[4] Building and Construction Industry Payments Act 2004 (Qld) s 19(4).
[5] Building and Construction Industry Payments Act 2004 (Qld) s 19(1),(4).
[6] Emphasis added
[7] See Tenix Alliance Pty Ltd v Magaldi Power Pty Ltd [2010] QSC7, p 10 per Fryberg J; cf Reed Constructions (qld) pty Ltd v Martinek Holdings Pty Ltd [2009] QSC 145.
[8] See also John Holland Pty Ltd v Coastal Dredging & Construction Pty Ltd [2012] QCA 150.
[9] [2009] QSC 32.
[10] Building and Construction Industry Payments Act 2004 (Qld) Schedule 2 Dictionary, ‘reference date”.
[11] Greenland affidavit, at 10. The agreement was evidenced by letter of intent from FKP to Dalkia on 13 September 2013, a letter from Dalkia dated 23 September acknowledging a contract for the purposes of ensuring payment prior to the execution of the subcontract, subsequent purchase orders and the commencement of work.
[12] The subcontract was executed for other work on the Lagoon Wing.
[13] Greenland affidavit, at 10.
[14] Minimax Fire fighting systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333 at 21.
[15] Cl 16 and Schedule 1 of the subcontract.
[16] Greenland affidavit at 15, 22.
[17] Greenland affidavit at 15.
[18] Tailored Projects Pty Ltd v Jedfire Pty Ltd [2009] QSC 32 at [18] per Douglas J.
[19] Rowley Affidavit, sworn 31 October 2014 at 12.
[20] Rowley Affidavit, sworn 31 October 2014 at 9.
[21] An oral agreement supplemented was by purchase orders etc. Evidence of the arrangement comes from the site instructions between December 2013 and February 2014, correspondence beginning 29 December 2013, the work done and goods supplied, as well as the purchases orders .
[22] Rowley Affidavit sworn 31 October 2014 at 24.
[23] Bearing the date of 30 April 2014.
[24] Rowley Affidavit sworn 31 October 2014 at 22, 26.
[25] Rowley Affidavit sworn 31 October 2014 at 23.
[26] Rowley affidavit sworn 31 October 2014 at 39.