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CKP Constructions Pty Ltd v Gabba Holdings Pty Ltd[2016] QDC 356

CKP Constructions Pty Ltd v Gabba Holdings Pty Ltd[2016] QDC 356

DISTRICT COURT OF QUEENSLAND

CITATION:

CKP Constructions Pty Ltd v Gabba Holdings Pty Ltd [2016] QDC 356

PARTIES:

CKP CONSTRUCTIONS PTY LTD

(applicant)

v

GABBA HOLDINGS PTY LTD

(first respondent)

and

SIMON ASHLEIGH McGUIRE

(second respondent)

and

AURORA PACIFIC PROJECTS PTY LTD

(third respondent)

FILE NO/S:

D4055/2016

DIVISION:

PROCEEDING:

Originating application

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

22 December 2016

DELIVERED AT:

Brisbane

HEARING DATE:

8 December 2016

JUDGE:

McGill SC DCJ

ORDER:

Judgment that the first respondent pay the applicant $701,321.17, including interest of $32,331.45. 

CATCHWORDS:

BUILDING AND ENGINEERING CONTRACTS – Recovery of monies – whether progress claim validly made, and when – whether principal entitled to withhold payment under the contract. 

BUILDING AND ENGINEERING CONTRACTS – Payment claim under statute – whether payment schedule served within time – effect of email to employee – whether employee agent to receive communications – when “served”.

Building and Construction Industry Payment Act 2004 s 103.

Electronic Transactions (Queensland) Act 2001 s 24(1)(a).

Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215 – considered.

Brewarrina Shire Council v Beckhaus Civil Pty Ltd (2003) 56 NSWLR 576 – considered.

Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2014] QSC 30 – considered.

Daysea Pty Ltd v Watpac Aust Pty Ltd [2001] QCA 49 – cited.

John Holland Pty Ltd v Coastal Dredging and Construction Pty Ltd [2012] 2 Qd R 435 – considered.

Kane Constructions Pty Ltd v Sopov [2005] VSC 237, (2006) 22 BCL 92 – considered.

Reed Constructions (Qld) Pty Ltd v Martinek Holdings Pty Ltd [2009] QSC 345 – not followed.

Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd [2016] HCA 52 – considered.

Tenix Alliance Pty Ltd v Magaldi Power Pty Ltd [2010] QSC 7 – cited.

COUNSEL:

B E Codd for the applicant

M S Trim for the first respondent

SOLICITORS:

Batch Mewing Lawyers for the applicant

McCullough Robertson Lawyers for the first respondent

  1. [1]
    By this application the applicant seeks payment of money said to be owing under a contract, specifically, under a progress payment clause in a building contract, or in the alternative, by statute pursuant to s 19 of the Building and Construction Industry Payment Act 2004 (“the Act”).  There was little factual dispute between the parties, although there was some cross-examination on two of the affidavits read before me, and overall I consider the matter was properly brought by originating application, particularly in the context of a progress payment under a building contract.
  1. [2]
    Both claims are resisted by the first respondent, the other party of the contract, the contractual claim on the basis that the amount payable is limited by the amount certified by the superintendent, and that amount is not payable, pursuant to another clause in the contract, because the applicant has not shown that subcontractors and others have been paid amounts owing for work done, or as the case may be. The claim under the Act is resisted on the basis that a payment schedule was provided with time administered under the act, so that no amount came to be payable under s 19. The second and third respondents were made parties to the proceeding only so that they would be bound by the decision, though no relief was claimed specifically against them. They did not appear at the hearing.

Background

  1. [3]
    The applicant was the head contractor and the respondent,[1] the principal, under a contract in writing dated 5 September 2014 for the applicant to construct an apartment building on a site owned by the respondent in Brisbane.[2]  The contract comprised a formal instrument of agreement actually signed by the parties, the AS4902-2000 General Conditions of Contract, the Annexures to the general conditions and a document described as the Principles of Project Requirements, to which reference was not made during the hearing.  The contract was for a lump sum of $8.9 million, subject to adjustment in accordance with the contract.  Progress claims were dealt with in cl. 37.1 which provided as follows: 

“The contractor shall claim payment progressively in accordance with Item 33. 

An early progress claim shall be deemed to have been made on the date for making that claim. 

Each progress claim shall be given in writing to the superintendent and shall include details of the value of WUC done and may include details of other monies then due to the contractor pursuant to the provisions of the contract.”

  1. [4]
    The expression “WUC” was defined in cl. 1 as meaning:  

“The work which the contractor is or may be required to carry out and complete under the contract and includes variations, remedial work, construction plant and temporary works, and like words have a corresponding meaning.”[3]

Item 33 in the Annexure Part A to the General Conditions of Contract provided relevantly:

“Times for progress claims: 25th day of each month for WUC done to the [blank] day of that month”. 

  1. [12]
    The respondent alleged that there have been, during the progress of the contract works, a history of progress claims being submitted late; in particular, progress claim number 22 had been submitted on 27 July 2016.[4]  It was further alleged that that claim related, in part, to work done after 25 July 2016.  The respondent and the superintendent had previously written, asserting that under the contract, claims had to be made by the 25th of each month, and only for work to that point and not later.[5]
  1. [13]
    The claim submitted on 27 July did lead to a certificate being issued by the superintendent on 11 August 2016,[6] despite his assertion that he would treat this claim as having been made on 25 August.[7]  I do not know whether payment was subsequently made by the principal in accordance with that certificate.[8]  Progress claim 23 for $608,172.47 was then made on 25 August 2016, the due date.[9]  That the claim was made that day was not disputed before me by the respondent;[10] rather, the respondent’s argument was that the claim then made was to be treated as an early claim in respect of 25 September 2016, pursuant to the second sentence of cl. 37.1, on the basis that the claim which had previously been made on 27 July 2016, was itself an early progress claim taken to have been made on 25 August.  The respondent submitted that under the contract only one claim could be made in respect of the 25th day of each month. 
  1. [14]
    The contract provided that in response to a claim the superintendent was to issue a certificate. This was dealt with in cl. 37.2 which provided:

“The superintendent shall, within 10 business days after receiving such a progress claim, issue to the principal and the contractor: 

  1. (a)
    A progress certificate evidencing the superintendent’s opinion of the monies due from the principal to the contractor pursuant to the progress claim and reasons for any difference (progress certificate); and
  1. (b)
    A certificate evidencing the superintendent’s assessment of retention monies and monies due from the contractor to the principal pursuant to the contract.

If the contractor does not make a progress claim in accordance with Item 33, the superintendent may issue the progress certificate with details of the calculations and shall issue the certificate in paragraph (b). 

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

The principal shall within 5 business days after receiving both such certificates, or within 15 business days after the superintendent receives the progress claim, pay to the contractor the balance of the progress certificate after setting off such of the certificate in paragraph (b) as the principal elects to set off.  If that setting off produces a negative balance, the contractor shall pay that balance to the principal within 5 days of receiving written notice thereof. 

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

At any time and from time to time, the superintendent may, by a further certificate, correct any error which has been discovered in any previous progress certificate other than in a certificate of practical completion or final certificate.”

  1. [15]
    It follows therefore that, in response to a progress claim under cl. 37.1, if the superintendent does not issue a progress certificate under cl. 37.2(a), the progress claim shall be deemed to be the relevant progress certificate. If the superintendent has issued a certificate under cl. 37.2(b), something which the superintendent is required to do under the contract whether or not a progress claim has been made in accordance with Item 33, the principal may then set off the amount of that certificate against the progress certificate or deemed progress certificate and pay the balance, or pay the amount of the progress certificate or deemed progress certificate.
  1. [16]
    In the present case it is not disputed that the superintendent did not issue a progress certificate within 10 business days of receiving the progress claim of 25 August, so that, if that claim was validly made under cl. 37.1, the claim became a deemed progress certificate. It also does not appear that the certificate under cl. 37.2(b) was issued by the superintendent within 10 business days of 25 August. On the face of it, therefore, the progress claim stands as the progress certificate and, more than 15 business days having elapsed since it was received by the superintendent, the amount of that progress claim is payable under cl. 37.2 of the contract.

Was Progress Claim valid?

  1. [17]
    The respondent’s defence depends on the proposition that the right to give a progress claim on 25 August had already been exercised by the claim made on 27 July, so that the claim purportedly made on 25 August was not valid, or at least was not a valid claim for that day, but was properly addressed as an early claim for 25 September. For that argument to succeed, it is necessary for the respondent to show that, on the true construction of the contract, if a claim is made after the 25th of a particular month, it takes effect as an early claim for the 25th of the following month, and that only one claim can be made in respect of the 25th of each month.  The argument on the first point can be put on the general basis, that the claim on 27 July stood as an early claim for 25 August, or on the more limited basis that, because the claim of 27 July included work done after 25 July, to that extent at least it cannot stand as an exercise of the right to claim in respect of 25 July, and therefore must amount to an early exercise of the right to claim arising on 25 August. 
  1. [18]
    In construing the contract, I think it is important to bear in mind two factors in relation to Item 33. The first is that the standard form which was used on this occasion clearly contemplated that a progress claim made on the specified day of a particular month would be for work under the contract done to a particular specified day of that month. One would expect that there would be an interpretation of cl. 37.1 which would make sense if the blank had been filled in. The second is that this particular contract did not have Item 33(a) fully completed, and what matters in this dispute is the correct interpretation of this contract in that state. I consider that the question of interpretation is best analysed by starting with the general, that is, the ordinary operation with the clause assuming Item 33 is fully completed, and then moving to the particular, that is, what effect on the operation of the clause did the failure to complete Item 33 have.
  1. [19]
    In general, Item 33, provides for progress claims to be made: “X day of each month for WUC done to the Y day of that month.” The first thing that is apparent from this expression is that a claim can only be made for work under the contract which has actually been done; that follows from the use of the word “done”. The second is the item provides a cut off date in respect of the work done, which logically must be at least not later in the same month than the date specified for progress claims; the clause does not contemplate, for example, that a claim can be made on a particular day one month, say the 1st of the month, in respect of work done up to a particular day of the previous month, nor could it sensibly provide for a progress claim being made for work done up to a later date in the month. 
  1. [20]
    There is nothing cl. 37 or, for that matter, in Item 33 in the Annexure which unambiguously indicates that only one progress claim can be made on each date of making a claim. It is true that the system laid out by the contract would function well if the contractor did make one claim on the specified day in each month, but I do not think it follows that the contract requires that or permits only that. Item 33 does not say that each progress claim must be for all work under the contract up to the specified date; if it did that would indicate clearly that only one claim could be made.  I note that in Tenix Alliance Pty Ltd v Magaldi Power Pty Ltd [2010] QSC 7, Fryberg J expressed the view that a contractual entitlement to claim for payment up to a particular date did not imply that the claim had to include all work done up to that date.  I think the position is the same here.
  1. [21]
    It is true that cl. 37.1 speaks of a progress claim in the singular, but the contract expressly provides in cl. 1 that words in the singular include the plural and words in the plural include the singular.[11]  If this provision is applied to cl. 37.2, it seems to me that the provision would work quite satisfactorily, whether the superintendent issued “a progress certificate” in respect to two or more progress claims, or issued a separate progress certificate in respect of each progress claim.
  1. [22]
    There is, in my opinion, nothing in the contract which would exclude the making of more than one such claim, and on the face of it if the relevant parts of cl. 37, and Item 33, are read with the singular including the plural as required by cl. 1, more than one progress claim can be made on or in respect of a particular day. There is no equivalent of s 17(4) of the Act, which does clearly indicate that only one payment claim can be made in respect of each reference date. I do not consider that it is appropriate to imply restrictions on the right to claim progress payments which the contract does not contain expressly, in view of the importance of progress payments to the smooth operation of the construction industry. As there is nothing in the contract which would exclude that interpretation, prima facie it is the correct interpretation, bearing in mind the terms of the interpretation clause of the contract itself.
  1. [23]
    I do not consider that the contract would become unworkable or impractical or uncommercial by such an interpretation. Indeed, it seems to me that the interpretation sought to be placed on the provisions by the respondent could easily operate in at least an impractical if not uncommercial way. If the arguments advanced for the respondent are correct, and for whatever reason a contractor fails to get a progress claim in on the specified day of the month, it means not only that that progress claim will be delayed for a further month, but that every succeeding progress claim will also be delayed for a further month, even if each payment to claim is thereafter made properly in accordance with the contract.[12]   That strikes me as producing an unreasonable and uncommercial interpretation of the contract.
  1. [24]
    Overall, I am not persuaded that the true interpretation of cl. 37.1 and Item 33 is that only one progress claim can be made in respect of any particular month. Such an interpretation is contrary to the specific provision in cl. 1, the interpretation section of the contract that the singular includes the plural, and there is nothing specific in the contract which would exclude the operation of that provision, or which otherwise indicates that only one progress claim can be made per month. That interpretation is not affected by the fact that, in this contract, the provision in item 33 specifying that day of the month to which work under the contract could be claimed for was left blank. I therefore reject the submission advanced on behalf of the respondent.
  1. [25]
    It follows that the respondent’s argument for the invalidity of the progress claim must fail, and it is strictly unnecessary for me to consider the alternative point, as to whether the late claim in the previous month stands as an early claim for 25 August. However, I should on a precautionary basis say something about it.
  1. [26]
    Although it is true that cl. 37.1 does not expressly deal with the concept of a late payment claim, the conclusion that any progress claim which is late therefore stands as an early claim for the following month is, in my view, inconsistent with the standard form, since such an interpretation would not make sense if Item 33 in the Schedule had been fully completed. There are, I think, two ways which cl. 37.1 and Item 33 can be interpreted: that a progress claim must be made on the date specified in the Item, or that a right to make a progress claim accrues to the contractor on the date specified in the Item. On the latter interpretation, the right can be exercised on that day, or on a later day. There is nothing in cl. 37.1 or Item 33 which is the equivalent of the express statement found in the clause considered by the Court of Appeal in John Holland Pty Ltd v Coastal Dredging and Construction Pty Ltd [2012] 2 Qd R 435 to the effect that the claim could be submitted “only on each reference date”. 
  1. [27]
    There is also the consideration that a contractor claims payment under cl. 37 by giving a progress claim in writing to the superintendent. However, it does not follow that the progress claim will necessarily be received by the superintendent on the day on which it is “given”. Clause 7.2 of the contract contemplates, among other things, that a notice or other document under the contract may be given and received by mail, and if mailed to an address not in the city of dispatch, is taken to have been received “on the date which is five days after the date of dispatch”. Indeed, cl. 7.2, if it applies to a progress claim, provides that the claim is to be deemed to be given and received five days after it is posted, which may mean that, if a contractor is giving the notice by post to a superintendent with a postal address in a different city the claim on the respondent’s interpretation of the contract, it would have to be posted five days before the specified date.  That strikes me as an unrealistic and uncommercial interpretation of the contract.  That particular issue does not arise with this claim, which was sent by email, but in terms of the general operation of the contract, it could easily arise. 
  1. [28]
    It was submitted on behalf of the respondent that the effect of cl. 37.1 meant that a late progress claim was not something recognised under the contract, so that a claim that was not made in accordance with Item 33, that is on the date specified in Item 33, counted as an early progress claim for the following month. The difficulty with this submission is that it does not work if Item 33 is properly completed. That is because a claim made in a particular month for work done to the specified date in that month would not be a claim in respect of the following month, because the claim for the following month is for work done to the specified date in that following month. Of course, if work done in the earlier month was not included in the claim for that month, it could be included in the claim for the following month; neither cl 37.1 not item 33 provides that a progress claim may be only for work done in the relevant month. 
  1. [29]
    Consider a contract where Item 33 specified a progress claim being made on the 14th day of each month for WUC done to the 10th day of that month.  A claim made on the 15th day of February for work under the contract to the 10th February could not be treated as an early claim in respect of 14th March, because the claim on 14 March would be for work under the contract to 10 March.  In my view, an early claim in the second sentence obviously applies to a situation where, in the example I have just given, a progress claim is made on 13 February for work done to 10 February.  In those circumstances the claim is treated as having been made on 14 February.
  1. [30]
    In my view, the true position is that cl. 37 simply does not deal with the situation where a progress claim is made late, that is, after the day specified in Item 33. I expect the practical reason for this is that there would ordinarily be a considerable economic incentive on a contractor to claim a progress payment as soon as possible, since a contractor who claims late is keeping himself out of money he would otherwise be entitled to recover under the contract; on the other hand, there is no obvious prejudice to the principal in being left in possession of more of its money for longer.
  1. [31]
    Counsel for the respondent relied on the decision in Reed Constructions (Qld) Pty Ltd v Martinek Holdings Pty Ltd [2009] QSC 345, where it was held for the purposes of a claim under the Act that the effect of cl. 37.1 of apparently the same standard form contract (see [9]) was that a progress claim could be made only on the particular dates specified in the Item in the Schedule, so that a claim which was made after that date was to be treated as an early claim in respect of the following date for making a progress claim: [27].  The difficulty I find with that reasoning, however, was that in that contract the Item in the Schedule had been completed: progress claims were to be made on the first day of each month for work up to the last day of the previous month.  Accordingly a claim lodged after the first day, in fact on the third day, was on its face not an early claim in respect of the first day of the following month, because it was not a claim for work done up to the last day of that month; it was a claim for work done up to the last day of the previous month.  With respect, the reasoning seems to me to be wrong.
  1. [32]
    I am comforted in drawing that conclusion by the fact that other judges have expressed disagreement with at least the actual conclusion of His Honour, in relation to the operation of the Act. In Tenix Alliance Pty Ltd v Magaldi Power Pty Ltd [2010] QSC 7 it was held that the correct interpretation of s 12 is that a right to claim arises on the reference date under the contract, but neither that section nor s 15 requires that the payment claim under the Act be made only on that particular date.  The proposition that the effect of the Act is to give rise to an entitlement to make a progress claim, but that that entitlement is not confined by a requirement in the contract that a progress claim be made on a particular day, was confirmed by the decision of the Court of Appeal in John Holland Pty Ltd v Coastal Dredging and Construction Pty Ltd [2012] 2 Qd R 435, at [20], [21].   I acknowledge that this is, strictly speaking, a different point from the question of whether the effect of cl. 37.1 of the contract is that a valid progress claim can be made only on a specified day of each month, and that any late claim stands as an early claim for the following month, but it seems to me that, in circumstances where other aspects of His Honour’s reasoning have been rejected by later decisions, that aspect of His Honour’s decision is also doubtful.
  1. [33]
    On the other hand, the applicant relied on the decision in Kane Constructions Pty Ltd v Sopov [2005] VSC 237, (2006) 22 BCL 92.  This case involved a building contract in the form AS2124/1992, which contains the provisions for payment claims and certificates in cl. 42 in somewhat different terms.  One of the issues that arose in that case was as to the validity of a particular progress claim which had been submitted at least four days after the date on which, under the contract, a progress claim was to be submitted; it was argued on behalf of the principal that as a result the progress claim was invalid.  The Chief Justice referred to the decision of the Queensland Court of Appeal in Daysea Pty Ltd v Watpac Aust Pty Ltd [2001] QCA 49, concerning the same cl. 42.1, but in that case the position seems to have been assumed that a late progress claim stood as an early claim for the following month, under the terms of that contract.  Her Honour then continued at [763]:

“Daysea is in harmony with a long line of authorities suggesting that it is not important for the contractor to submit the claims on time,provided they are submitted around the time they are due. What has been made clear in these cases is that it is necessary for the contractor to receive prompt payment of claims so that it is able to fulfil its obligations to progress the works and pay its sub-contractors. Thus late submission of claims seems to some extent to be acceptable; while late certification is less so, except where the issue of a condition precedent in cl.42.1 arises (for example the need for further evidence and information).”

  1. [34]
    In relation to the long line of authorities referred to in that quote, Her Honour referred by way of example to Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215.  That case involved standard form AS2545-1993.  A progress claim had been made, and no certificate had been issued by the main contractor’s representative, so that in terms of the contract the defendant was bound to pay the amount of the progress claim, without recourse to an equitable set off.  That conclusion was upheld, on the basis that the subcontract on its proper construction required the contractor to pay the amount of the progress claim without any deductions for amounts claimed by way of set off or cross-claim.  It does not, with respect, seem to me to contain any detailed consideration of the effect of a progress claim which was made other than strictly at the time for claim stated in the Annexure to the contract, as required by cl. 42.1.  These circumstances affect the persuasive force of the decision in Kane Constructions.  The position overall is that there are two decisions relied on, one of which has been contradicted on a different point by higher authority and contains a factual proposition which I find unconvincing, and one of which is said to be based on authority which has not been clearly identified. 
  1. [35]
    My conclusion is that the correct interpretation of the contract is that a right to make a claim arose on the 25th of each month, but that there was nothing in the contract which provided that that right had to be exercised, if at all, only on that day, or that if a claim in respect of that month was submitted after that day, it stood as an early claim for the following month.  In effect, I am being asked to imply such a restriction into the contract, and I consider there are no grounds for doing so.  In my opinion, the right to make a claim under cl. 37.1 does not have to be exercised on the day specified, so long as it is clear that what is being claimed involves an exercise of the right in relation to the particular specified day for a month. 
  1. [36]
    I do not consider that the failure to complete the particular day of the month up to which work under the contract might be covered by the progress claim affects the interpretation of the contract in this respect. The position is simply that there was no requirement or limitation that the work extend up to a particular date, or that work after a particular date could not be claimed, except in the sense that work after the time the claim was made would not, I think, be validly claimed.

Payment of workers, consultants and subcontractors

  1. [37]
    It was submitted on behalf of the respondent that, if there were otherwise money payable under the contract, there was an entitlement under cl. 38.2 to withhold payment until the contractor complied with cl. 38.1. Clause 38 provides relevantly as follows:

“38.1 Workers, consultants and subcontractors

The contractor shall give in respect of a progress claim documentary evidence of the payment of money due and payable to:

  (a) workers of the contractor and of the subcontractors;

  (b) consultants; and

  (c) subcontractors,

   in respect of WUC the subject of that claim.

If the contractor is unable to give such documentary evidence, the contractor shall give other documentary evidence of the monies so due and payable to workers, consultants and subcontractors.

Documentary evidence, except where the contract otherwise provides, shall be to the superintendent’s satisfaction.

38.2 Withholding payment

Subject to the next paragraph, the principal may withhold monies certified due and payable in respect of the progress claim until the contractor complies with subclause 38.1.

The principal shall not withhold payment of such monies in excess of the monies evidenced pursuant to subclause 38.1 as due and payable to workers, consultants and subcontractors.”

  1. [38]
    Clause 38.3 then commits the principal, in certain circumstances, to pay unpaid monies subject to subclause 38.1 directly to a worker, consultant or subcontractor where permitted by law, required by a court order or requested in writing by the contractor. The effect of subclause 38.1 is to require the contractor to give, in respect of a progress claim, documentary evidence that it has paid, presumably at the time of making the claim, all amounts then due and payable to the workers etc. in respect of work under the contract, the subject of the claim. On the other hand, if not all monies due and payable to such persons in respect of such work has been paid, the contractor shall give other documentary evidence of the monies due and payable, and presumably unpaid to such persons.
  1. [39]
    It occurs to me that the scope of cl. 38.1 is potentially very narrow. In my opinion, because the clause is given “in respect of a progress claim”, it applies only to the payment of money due and payable as at the date of the claim to workers etc in respect of work under the contract the subject of the claim. Depending on the terms of payment of consultants and subcontractors, there may well easily be no amount due and payable to them at the date of the progress claim in respect of that work, and in those circumstances there may be no amount which a contractor would have to certify as having paid.  
  1. [40]
    It would only be where a subcontractor or consultant has done the work included in the progress claim in respect of which an entitlement to be paid has already arisen at the date of the progress claim, the payment or non-payment of which the contractor has to evidence. There is simply no evidence before me that there existed anyone who fell into that category in respect of this payment claim. If, for example, there is a subcontract in terms similar to this contract, it is difficult to see how a progress claim by the subcontractor could have given rise to an entitlement to be paid within the same month. I think another simple answer to this defence is that there is no evidence that there was anybody who fell within cl. 38.1 in respect of whom the contractor had to certify.
  1. [41]
    In any case, I think it is clear from the terms of cl. 38.2 that the obligation in cl. 38.1 is not exhausted if whatever is certifiable is not certified at the time of making the progress claim, or indeed the time a progress certificate is given by the superintendent. It also follows from the first paragraph of cl. 38.2 that it operates to modify the obligation in cl. 37.2 to pay on a progress certificate, subject only to an entitlement to set off all or part of an amount certified as due from the contractor to the principal, pursuant to cl. 37.2(b). Nevertheless, the entitlement to withhold payment in the first sentence at cl. 38.2 is expressly made subject to the second sentence, “the next paragraph”, which prevents the principal from withholding payment of “such monies in excess of the monies evidenced pursuant to subclause 38.1 as due and payable to workers, consultants and subcontractors.”
  1. [42]
    Money is evidenced pursuant to subclause 38.1 as so due and payable if the contractor has under that subclause given documentary evidence “of the monies so due and payable to workers, consultants and sub-contractors”, that is, if there was a situation where the contractor is unable to give the documentary evidence first specified in the sub-clause, and the contractor has given documentary evidence of the existence of money due and payable to workers, consultants and subcontractors in respect of work under the contract the subject of the particular payment claim. In that situation, the principal is entitled under cl. 38.2 to withhold monies certified due and payable except to the extent that it exceeds the amount so evidenced as due and payable to workers, consultants and subcontractors. In other words, if the contractor says there was money due and payable to these people in respect of work under the contract the subject of the progress claim, that amount can be withheld by the principal, but the balance of the certified amount cannot be withheld. On its face therefore, the clause produces the result that it is only an amount which has been evidenced by the contractor as being due and payable but unpaid which the principal is entitled to withhold.
  1. [43]
    In the present case there was some criticism on the part of the respondent of the material provided on behalf of the applicant in relation to certification. The material in evidence, however, does not reveal that at any time the contractor has given documentary evidence of money due and payable in respect of such work under the contract but unpaid. It follows on the face of the clause that there is no right to withhold payment under cl. 38.2, because there is no amount in respect of which there is a right to withhold payment. Since no amount has been evidenced as due and payable to workers etc. the whole amount certified is in excess of monies so evidenced, so there is no entitlement to retain it.
  1. [44]
    I do not consider that clause 38.2 provides any entitlement to withhold payment merely because of an absence of the superintendent’s satisfaction about whether cl. 38.1 has been complied with. That is because the right given by the first sentence of cl 38.2 is expressly made subject to the limitation in the second sentence. It may be thought that this produces an unsatisfactory situation from the point of view of the principal, in that there could be no effective means of enforcing the entitlement in cl. 38.1. Nevertheless, the contract does not thereby become unworkable. There is also the consideration that there are a number of decisions of courts emphasising the importance of the prompt payment of progress payments, and the proposition that an entitlement to be paid in accordance with progress certificates issued under a contract under provisions such as cl. 37.2 are not readily to be impaired. This is given additional force when it is borne in mind that any such payment is only a payment on account, as stated expressly in cl. 37.2.
  1. [45]
    In Brewarrina Shire Council v Beckhaus Civil Pty Ltd (2003) 56 NSWLR 576, the relevant clause of the relevant contract, AS2124-1992, provided that a claim for payment delivered to the superintendent be “supported by evidence of the amount due to the contractor and such information as the superintendent may reasonably require…” In that case it was held that the requirement, that the claim for payment be supported by evidence of the amount due and such information as the superintendent may reasonably require, was a condition precedent to the obligation of the superintendent to issue a certificate in respect of that progress claim, and in circumstances where it was not complied with there was no obligation to issue the certificate, and no entitlement to be paid in default of the certificate.  The operation of this requirement however was said to be modified by the consideration that it had to be provided with the progress claim, so that any reasonable requirement of the superintendent had to be one required prior to the delivery of the relevant claim for payment and not thereafter: p 586. 
  1. [46]
    In other words, the superintendent can say before the time for making a progress claim, I require information about X, Y and Z, but if a progress claim has been made, the superintendent cannot then decide to require information about X, Y and Z.  If the requirement for X, Y and Z was made before the progress claim was made, and was reasonable, a failure to provide that information will mean that there is no valid progress claim.  The majority appear to have been conscious of a desire not to permit these provisions to be used as a stalling tactic to delay payment after a progress claim had been made.  That decision however is distinguishable, because there is nothing in cl. 37.1 which makes the provision of the information referred to in cl. 38.1 a condition precedent to a valid progress claim; indeed, as I have pointed out, the terms of cl. 38.2 are inconsistent with the proposition that cl. 38.1 must be complied with at or before the time the progress claim is made. 
  1. [47]
    It follows that any degree of dissatisfaction on the part of the superintendent with the material provided does not provide a defence to the applicant’s claim. Apart from this, I think there are difficulties with the material relied on by the respondent as showing dissatisfaction on the part of the superintendent. The only material that I have which actually came from the superintendent is an email to the applicant dated 20 October 2016[13] which, among other things, states:

“I have become aware that you have not paid all of your subcontractors.  Please confirm you have paid all of your subcontractors before any payments can be released.  I hope you appreciate my concern, as you are obliged under the contract to ensure all subcontractors have been paid and can be liable for trading insolvent and could lead to insolvent trading claims with dire consequences [sic].  I note that the amount on the statutory declaration is an in dispute amount and needs to be reissued with no amount.  Please confirm by issuing a new statutory declaration.”

  1. [48]
    This is a very odd communication. Clause 38 does not require payment of all subcontractors before any payment can be released; on the contrary, it expressly contemplates that a payment can be withheld only if there are unpaid subcontractors (or workers or consultants) and only if, in respect of work included in the progress claim, there is money owing which has become due and payable, but has not been paid. There is an important difference between money owing and money which is due and payable. The proposition that under the contract the applicant was obliged to ensure that all subcontractors had been paid would have to depend on some provision other than cl. 38, which certainly does not have that effect; my attention was not directed to any relevant provision of the contract, but there may well be one. What this has to do with insolvent trading, or what business that is of the superintendent, is something I cannot understand.
  1. [49]
    In the same way, I do not understand the assertion that “the amount on the statutory declaration is an in dispute amount.” Perhaps this was intended to be a reference to that statement in a statutory declaration made by Mr Petersen of 20 October 2016[14] that progress claim 23 remains outstanding in the amount of $608,172.47 excluding GST.  Given that I agree with that proposition, I am unlikely to be persuaded that the superintendent was entitled under cl. 38.1 to require a different statutory declaration to be provided.  In short, I do not consider that this email provides any evidence that there has been any legitimate basis for any failure of satisfaction on the part of the superintendent.  On the contrary, it provides compelling evidence that the superintendent has completely misunderstood the function of cl. 38. 
  1. [50]
    In my opinion, it has not been shown that any right to withhold payment in respect of the deemed payment certificate has arisen under cl 38. In those circumstances, it is unnecessary to consider whether such an obligation would be void as inconsistent with the Queensland Building and Construction Commission Act 1991 s 67W.  In those circumstances, the plaintiff is entitled to be paid the amount of the deemed progress certificate, $608,172.47. 

Claim under the Act

  1. [51]
    The progress claim given on 25 August 2016 was also given to the respondent, and contained what was necessary to make it a payment claim for the purposes of the Act; so much was not in dispute before me. There was no argument before me that 25 August was not a reference date for the purposes of the Act, or that there had already been a payment claim in respect of that date. Accordingly, under s 17 the applicant was entitled to serve a payment claim. The respondent did not, in response to that claim, serve a payment schedule on the applicant under s 18. In such a situation, if the applicant wants to take matters further it is necessary first to serve a notice under s 20A of the act, referred to in argument as a “Second Chance Notice”.[15]  The effect of the section is that the respondent is given a further 5 business days after receiving that notice to serve a payment schedule before the claimant can start proceedings to recover an unpaid portion of the claimed amount as a debt under s 19 of the Act. 
  1. [52]
    21 September 2016 was a Wednesday, and accordingly the fifth business day after that date was 28 September 2016. At 11.45 pm on that day the respondent sent an email to an employee of the applicant, Mr Ilic, which attached a document which, the applicant accepts, amounted to a payment schedule for the purposes of the Act. The email became available in Mr Ilic’s inbox at that time, but on his evidence was not actually read by him until the following morning. He then drew the email to the attention of the managing director of the applicant.
  1. [53]
    There was no dispute that a payment schedule can be given to a claimant at any time on the last day on which such a schedule may be given before the time limited under the Act expires. The issue ventilated before me was whether sending an email to Mr Ilic’s email address amounted to giving the schedule to the applicant for the purposes of the Act. I should say that the email address was an email address associated with the applicant, but it was one which was specific to Mr Ilic. There was no evidence that anyone else on behalf of the applicant was sent the email on 28 September. The issue in my opinion therefore comes down to the question of whether sending the document to Mr Ilic in this way amounted to serving the payment schedule on the applicant company.
  1. [54]
    Although a company has legal personality, it is an abstraction and can only act through its agents. There are various provisions, for example, the Corporations Act (Cth) which provide a statutory mechanism by which something like a payment schedule can be given to a company, and there is a mechanism under the contract by which documents can be given to the contractor. The Act provides that documents may be given in a way permitted by the contract, but this is in addition to and does not limit or exclude the Acts Interpretation Act 1954 s 39 or the provisions of any other law about the service of notices:  s 103.  That in my opinion picks up the principles of the general law, that one way to give a document to a company is to give it to a person who is the agent of the company for the purpose of receiving communications on behalf of the company.[16]  Such a person is, for that purpose, the company. 
  1. [55]
    Mr Ilic was at the relevant time the project manager for the applicant for this project. It was submitted for the applicant that Mr Ilic did not have the authority of the applicant to receive communications on its behalf, though there was evidence that he had, in respect of this project at least, frequently been sending emails on behalf of the applicant, and receiving emails sent to the applicant with respect of this project, to many of which the managing director of the applicant was copied in. In these circumstances there may well be grounds for a finding that Mr Ilic had ostensible authority to receive communications on behalf of the company, but it emerged during the hearing that there was in existence at the relevant time a statement of duties in writing associated with his position as project manager for the applicant (Exhibit 2), and that statement specified that one of his functions was to communicate with clients. In this context, the respondent was a client, and I consider that giving him authority to communicate with clients involved giving him authority to engage in communications both ways. It follows in my opinion that he had actual authority as agent for the applicant to receive communications from the respondent, and a communication to him was therefore a communication to the applicant. It follows that sending to him an email with the payment schedule attached was in effect serving the payment schedule on the applicant.
  1. [56]
    The time when the schedule was given was a time when the email became capable of being retrieved by Mr Ilic at his email address. This follows from the terms of the Electronic Transactions (Queensland) Act 2001 s 24(1)(a), which provides: 

“24 Time of receipt

  1. (1)
    Unless otherwise agreed between the originator and the addressee of an electronic communication—
  1. (a)
    the time of receipt of the electronic communication is the time the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee.”

Paragraph subsection 2 goes on to make it clear that in the absence of an agreement between the parties to the contrary it is to be assumed that an electronic address is capable of being retrieved by the addressee “when it reaches the addressee’s electronic address.”  In these circumstances, so long as the email was available in Mr Ilic’s inbox at some time on 28 September, it was received by him on that day pursuant to the Electronic Transactions (Queensland) Act 2001, and therefore received by him for the purposes of the Act. 

  1. [57]
    Reference was made to the decision in Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2014] QSC 30 as showing that service was not effective until the payment schedule attached to the email was accessed on the computer at the premises of the applicant.  There was however a material difference between the situation in that case and the situation in the present.  On that occasion what was sent was an email which included a means of accessing the payment schedule by reference to a computerised facility “Dropbox” and the material within Dropbox was characterised as not part of the electronic communication itself: [28].  There was said to have been “an electronic communication of the means by which other information in electronic form could be found, read and downloaded out and from the Dropbox website.”  That was not the position here, where the payment schedule was an attachment to the email itself. 
  1. [58]
    It is true that in that case the payment schedule was also held not to have been received when the email arrived in the inbox because it was held that the applicant had not agreed to be electronically served, as required by s 11(2)(b) of the Electronic Transactions (Queensland) Act 2001.  In the present case, that difficultly does not arise because in my opinion an agreement on the part of the applicant to be electronically served may be found in cls. 7.1(d) and 7.2(e) of the contract.  In any case, there had been a course of conduct pursuant to the building contract under which email communications were exchanged routinely between the applicant and the respondent, and in those circumstances, if the applicant had not agreed to receive emailed communications in the building contract, such an agreement was to be implied from the course of conduct thereafter. 
  1. [59]
    I accept that there is this difficulty with cl. 7.1 of the contract: on its face it only applies to notices sent electronically to an email address set out for the contractor in Annexure A, and annexure A does not contain an email address for the applicant.  In these circumstances, it is arguable that this clause did not amount to an agreement to receive communications electronically.  There was also the consideration that cl. 7.1 on its face is limited to the communication of notices under the contract, and a payment schedule is a document under the Act, not a notice under the contract.  The other consideration is that the argument advanced for the applicant in relation to this aspect of the case was limited to the proposition that Mr Ilic was not the agent of the company for the purpose of receiving communications and therefore sending the payment schedule by email to him was not giving the payment schedule to the company.  On that point, I am against the applicant. 
  1. [60]
    I conclude therefore that for the purposes of the act the payment schedule was given to the applicant on 28 September 2016. The applicant’s claim under the Act was advanced in this proceeding under s 19, on the basis that no payment schedule was given by the respondent within the time limited under the Act. In the circumstances, that claim is not made out, and the applicant’s claim under the Act fails.
  1. [61]
    I should also mention that the parties helpfully drew to my attention the recent decision of the High Court in Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd [2016] HCA 52.  I have read that decision, which contains a detailed and thorough exposition of the Building and Construction Industry Security of Payment Act 1999 (NSW), legislation which has much in common with the Act, and no doubt much of what their Honours said about the New South Wales Act applies equally to the Queensland Act.  The particular point in issue in that case however, does not arise in the present case: the issue was whether a payment claim could be made in circumstances where either the contract had been validly terminated for breach or the right to receive payment under the contract had been suspended because the principal had taken the works out of the hands of the contractor.  The High Court held that in such circumstances no payment claim under the Act could be given, because there was no “reference day” to trigger the entitlement to give such a claim. 
  1. [62]
    Apart from confirming that under the New South Wales act, and therefore by inference under the Queensland act, a payment claim can validly be given under the Act after the reference date in respect of which the right to make the claim arose, I do not think that anything decided there is relevant to the present case. The significance really is that it contains an exposition of the purpose of such legislation, in a way which can inform the interpretation of the Act if a situation arises where it is necessary to give a purposive interpretation of a provision of the Act. There was however in the matter before me no particular debate about the correct interpretation of any provision of the Act.
  1. [63]
    There will therefore be judgment that the first respondent pay the plaintiff $608,172.47 plus GST, $668,989.72. On the publication of these reasons, I shall hear submissions about a claim for interest on this sum, and as to costs, although I assume that costs will follow the event.

Footnotes

[1]  I shall refer to the first respondent as “the respondent”.

[2]  Affidavit of Petersen filed 10 October 2016 (“first Petersen affidavit”) Exhibit CP1.

[3]  The included items were all themselves defined in cl 1.

[4]  Affidavit of Crisp filed 16 November 2016 paras 32 – 34, 57, 67, 69, Exhibit DC-25; first Petersen affidavit para 19.

[5]  Affidavit of Crisp para 58, 61, 63.

[6]  First Petersen affidavit para 30, Exhibit CP8; Affidavit of Crisp para 72. 

[7]  First Petersen affidavit para 30, Exhibit CP8 p 234.

[8]  A payment schedule served on 21 September 2016 by the respondent asserted that nothing was payable: First Petersen affidavit, Exhibit CP9. 

[9]  First Petersen affidavit para 22, Exhibit CP10; affidavit of Crisp para 78. 

[10]  The applicant anticipated a submission, not advanced, that it was to be taken to have been made the next day.

[11]  This point may receive added emphasis from the fact that such a provision appears in the interpretation clause twice: cl. 1, p 13, paras (d), (j).  I suppose the real point of this is that the contract has not been drafted with the care and precision one might expect from Standards Australia.

[12]  At least unless the contractor waits two months before making another claim.  That seems inconsistent with an entitlement to claim monthly, and the importance of progress payments generally. 

[13]  Affidavit of Crisp filed 16 November 2016 Exhibit DC48. 

[14]  Affidavit of Crisp filed 16 November 2016 Exhibit DC47 p 330.

[15]  This section was inserted by amended act No. 50 of 2014, commencing on 15 December 2014. 

[16] Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd (2010) 30 VR 141 at [142] – [143].

Close

Editorial Notes

  • Published Case Name:

    CKP Constructions Pty Ltd v Gabba Holdings Pty Ltd

  • Shortened Case Name:

    CKP Constructions Pty Ltd v Gabba Holdings Pty Ltd

  • MNC:

    [2016] QDC 356

  • Court:

    QDC

  • Judge(s):

    McGill DCJ

  • Date:

    22 Dec 2016

Appeal Status

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

Cases Cited

Case NameFull CitationFrequency
Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215
2 citations
Jump To
Cite 1 - (1997) 14 BCL 215
Cite 2 - (1997) 14 BCL 215
Brewarrina Shire Council v Beckhaus Civil Pty Ltd (2003) 56 NSWLR 576
2 citations
Jump To
Cite 1 - (2003) 56 NSWLR 576
Cite 2 - (2003) 56 NSWLR 576
Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd[2015] 1 Qd R 265; [2014] QSC 30
2 citations
Jump To
Cite 1 - [2014] QSC 30
Cite 2 - [2014] QSC 30
Daysea P/L v Watpac Aust P/L [2001] QCA 49
2 citations
Jump To
Cite 1 - [2001] QCA 49
Cite 2 - [2001] QCA 49
John Holland Pty Ltd v Coastal Dredging & Construction Pty Limited[2012] 2 Qd R 435; [2012] QCA 150
3 citations
Jump To
Cite 1 - [2012] 2 Qd R 435
Cite 2 - [2012] 2 Qd R 435
Cite 3 - [2012] 2 Qd R 435
Kane Constructions Pty Ltd v Sopov [2005] VSC 237
2 citations
Jump To
Cite 1 - [2005] VSC 237
Cite 2 - [2005] VSC 237
Kane Constructions Pty Ltd v Sopov (2006) 22 BCL 92
2 citations
Jump To
Cite 1 - (2006) 22 BCL 92
Cite 2 - (2006) 22 BCL 92
Metacorp Pty Ltd v Andeco Construction Group Pty Ltd (2010) 30 VR 141
1 citation
Jump To
Cite 1 - (2010) 30 VR 141
Reed Constructions (Qld) Pty Ltd v Martinek Holdings Pty Ltd[2011] 1 Qd R 28; [2009] QSC 345
2 citations
Jump To
Cite 1 - [2009] QSC 345
Cite 2 - [2009] QSC 345
Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd [2016] HCA 52
2 citations
Jump To
Cite 1 - [2016] HCA 52
Cite 2 - [2016] HCA 52
Tenix Alliance Pty Ltd v Magaldi Power Pty Ltd [2010] QSC 7
3 citations
Jump To
Cite 1 - [2010] QSC 7
Cite 2 - [2010] QSC 7
Cite 3 - [2010] QSC 7

Cases Citing

Case NameFull CitationFrequency
The Trust Company (Australia) Ltd v Icon Co (Qld) Pty Ltd [2019] QSC 87 2 citations
1

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