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  4. Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd - [2022] QDC 184

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Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd[2022] QDC 184

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd[2022] QDC 184

DISTRICT COURT OF QUEENSLAND

CITATION:

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184

PARTIES:

DENBROOK CONSTRUCTIONS PTY LTD ACN 109 582 122

(Plaintiff)

v

CBO DEVELOPMENTS PTY LTD ACN 628 135 768

(Defendant)

FILE NO:

823/21

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

16 August 2022

DELIVERED AT:

Brisbane

HEARING DATE:

20 April 2022

JUDGE:

Porter QC DCJ

ORDER:

  1. The claim is dismissed.
  2. Plaintiff pay the defendant’s costs of the proceeding on the standard basis.

CATCHWORDS:

CONTRACTS – BUILDING AND CONSTRUCTION CONTRACTS – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – PAYMENT CLAIMS – Where the plaintiff seeks judgment against the defendant for the payment of the amount claimed in a payment claim pursuant to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) – Whether the payment claim was a valid payment claim for the purposes of the Act – Whether the payment claim sufficiently met the requirement under s. 68(1)(a) of the Act by identifying the works to which it related – Where the test to determine whether a payment claim meets the statutory condition is an objective one – Where a reasonable recipient of the payment claim in the position of the defendant would not have been able to identify the work to which the claim related – whether a payment schedule delivered after the statutory period is relevant to identifying the objective meaning of the payment claim.

LEGISLATION:

Building Industry Fairness (Security of Payment) Act 2017 (Qld), ss. 61, 67, 68, 69, 75, 100

CASES:

Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391

KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd [2019] QSC 178

T & M Buckley P/L v 57 Moss Road P/L [2010] QCA 381

COUNSEL:

M. Steele for the plaintiff

W. Thomas for the defendant

SOLICITORS:

Rose Litigation Lawyers for the plaintiff

ABKJ Lawyers for the defendant  

Summary

  1. [1]
    The plaintiff (Denbrook) seeks judgment against the defendant (CBO) for $582,015.68 pursuant to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (the Act).  The document relied upon is headed ‘Payment Claim 26’ (PC 26).  Denbrook contends that PC 26 is a valid payment claim served in accordance with the Act, that no payment schedule was delivered within the period required under the Act, that it had given the relevant pre-litigation notice, and accordingly, it is entitled to judgment for the amount claimed in PC 26 pursuant to s. 100 of the Act. 
  2. [2]
    The only defence advanced by CBO at trial was that PC 26 was not a valid payment claim under the Act because it failed to identify the construction work or related goods and services to which it related as required by s. 68(1)(a) of the Act.  For the reasons that follow, that defence has succeeded.  The claim is dismissed. 

The facts

The contract

  1. [3]
    CBO entered a contract styled “Construction Management Contract” with Denbrook on 11 December 2019 (the contract).  The contract was a standard form Master Builders Australia contract.  Consistent with its title, the contract provided for Denbrook to perform construction management work for the construction of three single-floor apartments at Sovereign Shores.  The works are described in the contract as follows: 

Construction Management of three one per floor apartments 2 covered roof decks, basement, car park at 2 Havana Way Sovereign Shores, Paradise Point in accordance with the “Construction Managers Budget Sheet 9 December 2019 Version 1 Revision 0 prepared by CBO/Denbrook in budget meeting 9 December 2019”

Refer appendix

(All design documentation by Principal)

  1. [4]
    The contract relevantly provided:
    1. (a)
      By the front sheet:

PROJECT Construction of three one per floor apartments, two roof decks & basement car parking on Lot 1 SP30118 Sovereign Shores to be known as Marquis

AGREEMENT dated 11 December 2019

Between CBO Developments Pty Ltd, PO Box 366 Paradise Point QLD 4216 (Principal) and Denbrook Constructions Pty Ltd 11 Huntingdale crescent, Robina (Construction Manager)

  1. (b)
    By clause 1:

DEFINITIONS AND INTERPRETATION

  1. (a)
    In the Contract, except where the context otherwise requires:

…

“Construction Manager” means the person retained by the Principal to provide construction management services.

…

“Costs of the Works” means costs and expenses incurred by the Construction Manager and by the Principal in connection with the construction of the Works.

…

“Estimated Total Cost of the Works” means the estimate of the final cost of the Works provided to the Principal by the Construction Manager pursuant to sub-clause 3(e).

…

“Project Team” means the persons engaged by the Principal to provide management and design services in connection with the Works and includes the Principal, Consultants, the Construction Manager and other persons engaged by the Principal to be members of the Project Team.

  1. (c)
    By clause 2:
  1. (a)
    The Construction Manager acts as the agent of the Principal in providing the construction management services stated in the Contract.
  1. (b)
    The Principal must pay the Construction Manager in accordance with the Contract.
  1. (d)
    Clauses 3 and 5 provide for the Pre-Construction and Construction Duties of the Construction Manager.  Clause 3 casts on Denbrook broad responsibility for the pre-construction stage of the works, including planning the works with the Project Team and developing and monitoring budgets and construction programs.  Clause 5 casts on Denbrook the full range of responsibilities for the day to day conduct of the building work.   Clause 5 also provides for Denbrook to enter into supply and trade services contracts on behalf of CBO.[1]  While Denbrook is not obliged to so, nor to pay for those goods and services, the possibility of it doing so was contemplated in various other clauses.[2]
  1. [5]
    Clause 14 provides for a specific fee for pre-construction work.  It is deleted. Clause 15 deals with Denbrook’s fee.  It provides:

Clause 15 Construction Managers Fee for Construction Management Duties

In consideration of the performance of the Construction Manager’s management services during the construction stage, the Principal must pay the Construction Manager…the fees set out in clause 15(a)…:

  1. (a)
    A lump sum fee as set out in Schedule 6 which must be paid by monthly instalments in the same proportion to the progressive monthly payment of the Cost of the Works which that Cost of the Works bears to the Estimated Total Cost of the Works and any final balance of the fee is to be paid at the time of final payment.

The Construction Manager may, from time to time at the discretion of the Construction Manager or when reasonably directed by the Principal, provide the Principal with a revised Estimated Total Cost of the Work for the purpose of progress payments.

  1. [6]
    Schedule 6 provides, relevantly:

SCHEDULE 6 Applicable, GST is to be added to amounts below

The fee to be paid to the Construction Manager for management services during the construction stage: (refer to clause 15)

…

1.1 Option [refer clause 15(a)]: plus GST

Lump Sum  Site Works Preliminaries (refer CM Budget 9/12/19)    $485,976

& Construction Managers Margin (refer CM Budget 9/12/19)          $245,000.

…

  1. [7]
    Clause 16 deals with progress payments: 
    1. (a)
      The Construction Manager must during the construction stage, submit to the Principal, each calendar month on the date stated in Schedule 7 a statement showing:
      1. all Costs of the Works incurred during that period; and
      2. its estimate of the fees then due to the Construction Manager for management services provided during the construction stage in accordance with Clause 15.
    2. (b)
      The Principal must pay for the Costs of the Works and the Costs of the Works includes those items listed in Schedule 9.
    3. (c)
      After the Construction Manager has submitted its statement pursuant to Clause 16(a), the Principal must within the time stated in Schedule 8 pay the Construction Manager:
      1. for any Costs of the Works that have been incurred by and for which the Construction manager its liable to pay or has paid; and
      2. its fee as calculated in accordance with Clause 15.
    4. (d)
      Should the Principal fail to pay the Construction Manager within the time provided for in Clause 14 or subclause 16(c), as the case may be, then the Construction Manager is entitled to interest on the unpaid monies at the rate of two percent (2%) per month calculated from the time of default in payment until payment is made.
  2. [8]
    Schedule 7 provides:

The date in each calendar month on which the Construction Manager is to submit a statement of the Cost of Works and its estimate of fees: (refer to clause 16(a)).

Two Claims per month 1st Day of Month & 14th Day of Month

  1. [9]
    Schedule 9 relevantly provides:
    1. Wages and all allowances paid for labour in the direct employment of the Construction Manager for the performance of the Works.
    2. Salaries of employees of the Construction Manager who are stationed at the Site Office.
    3. Salaries of employees of the Construction Manager who are stationed at its main or branch office and who will be employed in providing management services to the Works [and therefore not covered in clause 16(a)] and whose functions and classifications are listed in Schedule 10.
    4. The cost of any consultations employed by the Construction Manager for the purpose of providing services to the Works.
    5. Costs of Workers’ Compensation insurance, long service leave, annual leave, superannuation, public holidays, sick leave, social security, payroll tax, public risk insurance, and any other statutory prescriptions insofar as all of these above items are payable to, or in respect of, the employees of the Construction Manager.
    6. Reasonable transport and away-from-home expenses of the Construction Manager and of its representatives and employees incurred in discharge of duties connected with the Works.
    7. Actual cost of all materials, supplies and equipment incorporated in the Works including cost of transportation, and storage thereof.
    8. Costs of temporary materials.
    9. All payments made by the Principal to Trade Contractors.
    10. Costs (including transport, maintenance, replacement, erection and dismantling) of all supplies, machinery, equipment, temporary facilities, power tools, and hand tools (not required to be part of the kit of tools used in the computation of the tool allowance under the relevant award) which are employed or consumed in performance of the Works.
    11. Hire charged for machinery, plant, scaffold and equipment used in the Works and including incidental charged all at current rates.

…

  1. Cost of installation and running costs of telephone, electricity and water.
  1. [10]
    Clause 17 confirms certain amounts are included in the Construction Manager’s Fee as follows:

The following items are deemed to be included in the Construction Manager’s fee under Clause 14 and 15, as the case may be:

  1. (a)
    The remuneration of its employees at its Principal or any branch office (not being a Site office), except as is provided in Schedule 9(3).
  2. (b)
    Other usual overhead expenses such as directors’ fees, rents, rates or other “off-the-job” costs.
  3. (c)
    The cost of making good defective work carried out pursuant to Clause 5(k) by labour directly employed by the Construction Manager
  1. [11]
    Clause 18 deals with delay.  It relevantly provides:

(a) The Construction Manager is entitled to a reasonable extension of time for carrying out and completing the Construction Manager’s management services if such services are delayed by:

  1. (i)
    Any act, default or omission of the Principal, Consultations, agents or Separate Contractors (not being employed by the Construction Manager); or
  2. (ii)
    Any other cause of delay (including delay caused by a Trade Contractor or supplier) beyond the reasonable control of the Construction Manager.

And the Construction Manager notifies the Principal in writing within 28 7 days of the cause of such delay and the delay to the management services.

(b) If the carrying out and completing of the Construction Manager’s management services are delayed by a cause of delay set out in Clause 18(a)(i) and the Construction Manager’s fees are payable by a lump sum or as a percentage of the Cost of the Works then to the extent that:

  1. (iii)
    Deleted in original
  2. (iv)
    The Construction Manager’s construction duties are delayed, the Construction Manager is entitled to such extra costs as the incurred by the Construction Manager due to the delay in carrying out and completing such duties.

(c) Such extra costs so incurred by the Construction Manager may be claimed as part of the appropriate fee payment method under Clause 14 or 15, as the case may be.[3]

  1. [12]
    Clause 27 provides:

27.1 Contract commencement date is 12 December 2019 and practical completion date is 30 November 2020 but adjusted for extensions Cl 18

27.2 The Construction Manager is to have no defects list at handover all defects must be complete at handover (practical completion)

  1. [13]
    Clause (3)(e) required Denbrook to prepare an Estimated Total Cost of the Works for approval by CBO.  There is a Construction Managers Budget Sheet included in the contract (the contract budget)[4] estimating the cost of the works at $3.67 million.  It is reasonable to infer that the contract budget was the approved Estimated Total Cost of the Works under clause 3(e) or that the parties would be taken to have adopted it as such.  There is no other document in evidence which answers that description.  It also appears to be the “CM Budget” referred to in Schedule 6.

Denbrook’s payment claims prior to PC 26

  1. [14]
    Denbrook delivered its first payment claim on 11 December 2019.  PC 26 was its last payment claim, delivered on 19 February 2021.  PC 26 was exceptional when compared to all the previous claims.  All the claims except PC 26 were in the same form.  Each comprised a tax invoice with a supporting spreadsheet in the same format and using the same approach to identification and calculation of the claim. All payment claims up to and including PC 21 were paid in full and no payment schedules were delivered.  
  2. [15]
    It is sufficient by way of example to set out PC 25.  The tax invoice provided:

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184

  1. [16]
    The relevant parts of the supporting spreadsheet[5] were in the following form.  

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184

  1. [17]
    All of the payment claims except PC 26 were in this format, with only the figures varying between claims.  I make the following observations about the form of the claims before PC 26.
  2. [18]
    First, the boxes in row C relate to both components of the Schedule 6 sums: the site works and preliminaries component and the margin component.  It identifies the former by reference to 15 cost centres, nominated as SW1 to SW15.  Those items and the totals allocated to them are the same as the site works and preliminaries items set out in the contract budget.
  3. [19]
    Second, the last pair of boxes relates to ‘variations’.  There was no general provision for variations in the contract, only a specific provision for an increase in the Schedule 6 sum for delay.  However, the content of the spreadsheets appear to show that these boxes were used to list claims by Denbrook to recover the cost of goods purchased or services contracted for the building works and paid for by Denbrook on behalf of CBO. 
  4. [20]
    Third, the summary box in the top right corner of each spreadsheet includes the value of the whole of the work to the date of the claim, including the work for which payment is claimed under the specific claim, under the heading “Value of Work Completed”.  The entries under the heading “This Claim” relate to the value of the work included in the total which is the subject of the specific claim.
  5. [21]
    Fourth, the amount claimed for site works and preliminaries appears to be claimed as costs of the budget items SW1 to SW15 were being expended.  That pattern is consistent over the various spreadsheets.   That is not how clause 15 provides for payment of the lump sum, but the site works/preliminaries were claimed by Denbrook consistently on that basis, and consistently paid by CBO for claims up to and including PC 21 without complaint.  The parties were not following the contractual mechanism for apportioning the lump sum set out in paragraph [5] above, but appear to have acquiesced in the claiming and paying for instalments of the lump sum in this alternative manner.
  6. [22]
    Fifth, it is not demonstrated on the face of the spreadsheet how the percentage claimed of the ‘Builder’s Margin’ component of the lump sum is determined.  Looking at the succession of spreadsheets from payment claim 1 to payment claim 21, it appears a component of the margin has been claimed related proportionally to the expenditure of the site works/preliminaries budget.   It is not evident that the claim for this part of the lump sum was claimed in the method provided in the contract either.
  7. [23]
    As will be seen, the arguments by Denbrook on the proper construction of PC 26 requires an understanding of the figures in the spreadsheet used for PC 25.  That spreadsheet relevantly shows (interpreted consistently with the above observations) that as at the delivery of PC 25:
    1. (a)
      Denbrook alleged that the Total (construction management) Contract Sum including the variations was $909,285.19;
    2. (b)
      Denbrook alleged the value of work done up to and including the work claimed in PC 25 $795,617.19;
    3. (c)
      Denbrook claimed the amount of $14,2621 in PC 25;
    4. (d)
      The construction work to which the claim related is identified in the centre column on the right hand side box in row C.  It identifies the work by linking specific items of work done over the claim period to the cost items SW1 to SW15 in the contract budget and claiming a related component of the Margin amount.

Denbrook’s PC 26

  1. [24]
    PC 26 adopts a different format from the other claims.   It comprised the following:
    1. (a)
      By the front page, the summary claim schedule:[6]

19 February 2021

Payment Claim 26 [handwritten]

Progress Payment

Total to Date

This Claim

Cost of Works

$                                 909,285.19

$                                 119,364.89

Construction Manager’s Margin

$                                 180,000.00

$                                   51,808.27

Subtotal

$                              1,089,285.19

$                                 171,173.16

Plus GST

$                                 108,928.52

$                                   17,117.31

Plus 18(b)(ii) amount

$                                   11,000.00

$                                   11,000.00

Subtotal

$                              1,209,213.71

$                                 199,290.48

Less paid to date

$                                 826,488.51

$                                              0.00

Total

$                                 382,725.20

$                                 199,290.48

BALANCE DUE (382,726.20 + 199,290.48):

$                                 582,015.68

Due date: 5 March 2021 [handwritten]

  1. (b)
    By the second page, a schedule headed ‘Costs of Work- This Claim’ (the Cost Schedule) as follows:

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184

  1. (c)
    By the third and fourth pages, a schedule with supplier invoice numbers and amount of all the individual sums said to comprise the subtotals in the Costs Schedule (the Invoice Schedule);
  2. (d)
     By the fifth page, the following schedule (the Margin Schedule):[7] 

CONSTRUCTION MANAGER’S MARGIN – THIS CLAIM

Cost of Works (actually spent)

$909,285.19

$1,028,650.08 ex GST

Estimated Cost of Works (budgeted)

$730,976.00

$730,976.00 ex GST

Value Of Works In Payment Claim 21

76%

$735,353.19 ex GST

Value Of Works In This Payment Claim 26

97%

$885,293.48 ex GST

Difference (claims 22-26)

17%

$149,940.30 ex GST

Construction Manager’s Margin

$ 304754.54

 

Margin Claimed in This Payment Claim

($304754.54 x 17)

= $ 51,808.27

 

[B]

TOTAL CONSTRUCTION MANAGER’S MARGIN

$51,808.27

  1. (e)
    By pages 6 to 8 of PC 26, a claim related to delay which seeks an indemnity against liquidated damages in the amount of $11,000; and  
  2. (f)
    The remaining page of PC 26 is irrelevant.
  1. [25]
    Further, those pages were served together with a copy of the invoices listed in the Invoice Schedule.  Those invoices were not included in the affidavits filed and read at the start of the trial but were tendered with leave at trial.[8]  CBO subsequently filed a schedule identifying those individual items in the Invoice Schedule for which it contended the invoice provided did not identify the work to which that particular item of work related.[9]

Payment schedule responding to PC 26

  1. [26]
    CBO delivered a payment schedule in response to PC 26 (PS 26).  It was delivered outside the time provided in the Act for delivery of a valid payment schedule.  However, Denbrook relies upon it as evidence to make good the proposition that PC 26 identified the construction work to which it relates sufficiently to meet the requirements of s. 68(1)(a) of the Act.  Briefly, Denbrook’s submission is that PS 26 is relevant evidence that a reasonable recipient of the PC 26 in the position of CBO would have been able to identify the work to which each claim relates.
  2. [27]
    PS 26 commences with a summary schedule responding to the individual claims for amounts in PC 26.  It begins as follows:

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184

  1. [28]
    It can be seen that PS 26 responds in a single line to the Cost of Works, Margin and prolongation claims and then to individual invoices included in the Invoice Schedule.  It continues to do so for all of the individual invoices, approving some and rejecting others.  It is unnecessary to set them all out.
  2. [29]
    PS 26 then sets out a schedule providing a reason for withholding each payment not refused in the summary schedule.  It is enough to set out that part of that schedule which correlates to the above extract from the summary schedule:

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184

  1. [30]
    PS 26 next provides reasons for its assessment of PC 26 (the Assessment Report).  It is convenient to deal with those reasons below when considering Denbrook’s submissions on the line items in PC 26.

relevant principles

  1. [31]
    In KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd [2019] QSC 178, Justice Brown summarised the principles applicable to assessing whether a payment claim met the requirements of the predecessor provision to s. 68(1)(a) of the Act as follows: 
  1. [10]
    KDV contends the payment claim did not satisfy the requirements of s 17(2)(a) of the Payments Act, such that there was no payment claim to enliven the jurisdiction of the adjudicator under the adjudication scheme provided for by the Payments Act.
  1. [11]
    Section 17(2)(a) of the Payments Act provides:

“(2) A payment claim—

(a) must identify the construction work or related goods and services to which the progress payment relates; …”

  1. [12]
    There is no jurisdiction for an adjudicator to consider a purported payment claim which does not comply with s 17(2)(a) of the Payments Act.
  1. [13]
    In T & M Buckley P/L v 57 Moss Road P/L, Philippides J (as her Honour then was)               stated at [38] that the Judge had erred in adopting the approach that he did and had               set too high a bar in respect of what was required by s 17(2)(a) of the Payments               Act:

“The issue for determination was not whether the payment claim explained in every respect the means by which a particular claim item had been calculated, but whether the relevant construction work or related goods and services was sufficiently identified as explained above. That is, whether the payment claim reasonably identified the construction work to which it related such that the basis of the claim was reasonably comprehensible to the applicant.”

  1. [14]
    Her Honour had regard to the comments of Mason P in Clarence Street Pty Ltd v               Isis Projects Pty Ltd and to both the judgments of Hodgson and Santow JJA               in Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) and stated               at [36]:

“Santow JA (at [47]-[48]) expressed the view that, in respect of the minimum necessary to satisfy the identification requirement that the payment claim “purport in a reasonable way to identify the work” there must be “sufficient specificity in the payment claim for its recipient actually to be able to identify a ‘payment claim’ for the purpose of determining whether to pay, or to respond by way of a payment schedule indicating the extent of payment, if any.” But having said that, his Honour stated his agreement with what Hodgson JA said in Climatech Pty Ltd that what was required was sufficient identification “to enable the respondent to understand the basis of the claim” and disavowed the notion that there was a legal necessity to include any material directed merely to persuading a respondent to accept a payment claim (at [25]).”

  1. [15]
    The test to determine whether the payment claim sufficiently identifies the  construction work the subject of the claim is an objective one. The assessment is               not made only by reference to the terms of the claim itself. As White J commented               in Neumann Contractors Pty Ltd v Peet Beachton Syndicate Ltd, “[t]he evaluation               of the sufficiency of the identification takes into account the background knowledge               of each of the parties derived from their past dealings and exchanges of               documentation”. McDougall J in Leighton v Arogen relevantly stated that:

“It may be accepted that payment claims and payment schedules are to be understood as the parties to the relevant construction contract would have understood them. Thus, documents which appear to be extremely summary, or to the uniformed but not unintelligent observer brief to the point of incomprehensibility, may be sufficiently meaningful to the parties to enable them to know, respectively, the bases on which a particular payment claim is advanced and the bases on which it is opposed.

In this context, it may well be appropriate to take into account, in particular factual circumstances, the background knowledge of the parties (for example) by correspondence passing between them before and at the time the payment claim and payment schedule were exchanged. That material might enable the Court to have a more informed understanding of the way that the parties would have perceived, and understood, the real issues sought to be raised…”

  1. [16]
    The focus must remain on the objective circumstances, not on the subjective  intentions of the parties, although it is not wrong to examine the issue from the               vantage point of the parties to the particular contract.
  1. [17]
    The test for whether the payment claim complies with s 17(2) of the Payments Act               does not direct the inquiry to whether or not, in hindsight, there has been a               successful articulation of the work in the claim: “a document ...does not fail to be a               payment claim, within the meaning of the Act, merely because it can be seen, after               a full investigation of all the facts and circumstances, not to successfully identify all               the construction work for which payment is claimed.” As was stated by the Court of               Appeal in T & M Buckley, the test is whether “the claim purports in a reasonable               way to identify the particular work in respect of which the claim is made”. Errors or               inaccuracies in the payment claim will rarely, if ever, provide a basis for concluding               that it is not made in accordance with s 17(2)(a) of the Payments Act.
  1. [18]
    The above approach accords with the overall purpose of the Act, which was said by               Basten JA in Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd               to be:

“…to provide a speedy and effective means of ensuring that progress payments are made during the court of the administration of a construction contract, without undue formality or resort to the law.”

  1. [32]
    There are two points particularly to note in her Honour’s summary. 
  2. [33]
    The first is that, as identified in T & M Buckley P/L v 57 Moss Road P/L [2010] QCA 381, in approaching the test for validity in respect of compliance with s. 68(1)(a):

The issue for determination [is] not whether the payment claim explained in every respect the means by which a particular claim item had been calculated, but whether the relevant construction work…was sufficiently identified as explained above.  That is, whether the payment claim reasonably identified the construction work to which it related such that the basis of the claim was reasonably comprehensible to the applicant.

  1. [34]
    That passage from T & M Buckley, refers to Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391, and a number of other New South Wales authorities.  Those cases, dealt with in T & M Buckley at [30] to [38], make clear that a payment claim, unlike a payment schedule, is not a document which is to apprise the parties of the real issues that are likely to be in dispute.  The purpose and necessary requirement of the payment claim is merely to identify the work to which the claim relates, sufficiently to allow the other side to make its own assessment as to what to pay.  It does not have to go any further than that.
  2. [35]
    It is the application of that proposition that is difficult in these cases, not the stating of it. 
  3. [36]
    The second point to note is that the test to determine whether a payment claim meets the statutory condition is an objective one, but that relevant extrinsic facts can be taken into account in determining that matter.  The question is what a reasonable recipient in the position of the principal would understand the payment claim to communicate.  Accordingly, facts extrinsic to the content of the payment claims that are rationally probative of what a reasonable person in the position of the recipient of the payment claim would interpret the content of the payment claim to mean can be considered.  In this case, that means that probative extrinsic facts can be taken into account in determining whether a reasonable recipient in the position of CBO could have identified the work, goods or services to which the claim for payment related.

comments on PC 26

  1. [37]
    As shown in paragraph [24](a) above, PC 26 claims two distinct amounts:
    1. (a)
      The claim for $382,725.20 based on the summary calculation in the “Total to Date” column (the TTD column); and
    2. (b)
      The claim for $199,290.48 based on the summary calculation in the “This Claim” column (the TC column).  

It was not contended that PC 26 can be found to be partially valid.  Accordingly, Denbrook must establish that PC 26 identified the construction work to which it related in respect of each of the two distinct amounts if it is to be a valid payment claim under the Act.

  1. [38]
    The key line items in each case are the Cost of Works and the Construction Manager’s Margin (the clause 18(b)(ii) line items do not play a part in the resolution of these proceedings).  These are the key items because they identify the specific amounts which are claimed for work done and goods supplied under the contract.   The balance of the line items are subtotals, GST and credit for payments made.
  2. [39]
    There is an important distinction between the way these two line items are dealt with in PC 26:    
    1. (a)
      In the TTD column, there is no explanation of the work to which the Cost of Works and the Construction Manager’s Margin amounts relate, nor any supporting documents;   
    2. (b)
      By contrast, for those items in the TC column, PC 26 contains the explanations and supporting documents set out in paragraphs [24] and [25] above.
  3. [40]
    Denbrook therefore faces the initial difficulty that on its face, PC 26 does not contain any information which identifies the work to which the claims for Cost of Works and Construction Manager’s Margin in the TTD column relate.   Further Denbrook’s task in identifying the work to which the final amount claimed in the TTD column relates is, strictly speaking, limited to identifying the work to which the amount claimed of $382,725.5 relates.  However, the calculation in the TTD column is determined by deducting from the total Cost of Works and total Margin claims the amount credited to CBO for those amounts.  PC 26 does not identify any specific part of the work relating to those two sums as paid, so the claimed amount could relate to any part of the work to which those two items relate.  Denbrook therefore must identify all the work which relates to the Cost of Works and Margin claims in the TTD column if it is to sustain its final figure in that column.  I did not understand Denbrook to contend to the contrary.

Denbrook’s submissions

  1. [41]
    Despite the lack of explanation or supporting material, Denbrook submitted that, properly construed, PC 26 sufficiently identified the work to which the Cost of Works and Construction Manager’s Margin claims in the TTD column related when regard was had to PC 25, the terms of the contract and the terms of PS 26.  
  2. [42]
    As to the former, Denbrook submitted that a reasonable recipient in the position of CBO would interpret the amount of $909,285.19 in the Cost of Works row in the TTD column as being a claim for the value of all of Denbrook’s work under the contract.  It submits this meaning would be communicated because the spreadsheets attached to PC 22 to PC 25 show exactly that sum as the value of the ‘Total Contract Sum’ in the spreadsheet which accompanied those claims.  (I will focus on the spreadsheet to PC 25.)
  3. [43]
    Even if it was accepted as correct that the amount of $909,285.19 comprised Denbrook’s claim for the value of all of Denbrook’s work under the contract, there are two obvious shortcomings in the PC 25 spreadsheet as identifying the work to which that claim relates:
    1. (a)
      The PC 25 spreadsheet does not purport to provide information to identify all the work to which the Total Contract Sum related. It only provided details of the specific work claimed in PC 25 valued at $11,737.00; and
    2. (b)
      PC 25 gave no particulars at all identifying the work yet to be done to earn the Total Contract Sum (being the work relating to the difference between the Total Contract Sum and the total sum identified up to PC 25 for the work done to that time, shown as $747,809.19.)

So at first blush, reference to the Total Contract Sum to construe the work to which the claim for $909,285.19 relates does not identify the work to which that claim relates, it merely asserts a contractual characteristic of that sum.

  1. [44]
    Mr Steele (who appeared for Denbrook) sought to address those problems by contending that the claim for the Total Contract Sum was necessarily a claim for all Denbrook’s work under the contract.  Therefore, it impliedly identified the work to which that claim related because that work was the whole of the scope of work identified in the contract.  In effect, he contended that the Cost of Works claim was an assertion by Denbrook that it had done everything it was required to do under the contract and that CBO could identify that work simply by referring to the contract to see what the whole of the work comprised.
  2. [45]
    That proposition might have been unsustainable in a building contract which required the performance of a wide range of complex obligations to earn the consideration promised under the contract.  However, Mr Steele submitted that the contract on its proper construction entitled the Construction Manager to the Construction Manager’s Fee as a lump sum.  That lump sum was not “for” any particular work.  Rather, it was payable as the underlying construction work on the units progressed.  Thus, the entitlement was not linked to any particular work of the Construction Manager but rather to the progress of the construction work.  This is reflected in the entitlement to the Construction Manager’s Fee in instalments by reference to the cost of the work on the units, as provided for in clause 15(a) (see paragraph [5] above). It was submitted that the claim for $909,285.19, looked at objectively, was an implied assertion that the conditions of that clause had been met and there was therefore an entitlement to the whole sum for the whole of the Construction Manager’s work under the contract.  In short, the work identified was necessarily all the Construction Manager’s work under the contract. 
  3. [46]
    This submission runs into the reality that PC 25, and all previous spreadsheets, did not claim for the Construction Manager’s Fee in the way specified under the contract.   Rather, the approach adopted by Denbrook to claiming that fee was to claim the Preliminaries and Site Works costs as incurred by reference to the budget and then to claim the margin based on the percentage of the Preliminaries and Site Works costs incurred.  Denbrook’s response would seem to be that once the whole amount is claimed, a reasonable recipient would (despite the prior practice) assume that it communicated that reliance was based on the language of the contract to justify an entitlement to all of the fee.
  4. [47]
    Mr Thomas (who appeared for CBO) riposted (amongst other things) that even if that was all correct, the variations in PC 25 were not within the scope of the Construction Manager’s Fee and PC 25 contained nothing by way of identification of the work or related goods and services to which that part of the total sum related.   Mr Steele submitted that this did not matter because those variations had been included consistently in spreadsheets leading up to PC 25 and had never been disputed. 
  5. [48]
    Mr Thomas also submitted that interpreting the claim for $909,285.19 in the manner contended for by Denbrook was inconsistent with the plain meaning of the Cost of Works claimed in the TC column.  He submitted that that sum of $119,364.89 (at least to the extent it related to the costs centres SW1 to SW15) were self-evidently claims for part of the Preliminaries and Site Works component of the Construction Manager’s Fee.  Mr Steele did not dispute that PC 26 could be read that way.  Rather he submitted that all that demonstrated was that it was clear what work the $119,364.89 related to.  He also accepted that claiming that part of the fee twice was erroneous and not open under the contract.  But he submitted that it did not matter that PC 26 was wrong, just that a reasonable recipient could identify the work to which it related.
  6. [49]
    As to the Construction Manager’s Margin item in the TTD column, Denbrook submitted that a reasonable recipient would interpret the amount of $180,000 as being a claim for construction management by Denbrook because the phrase ‘Construction Manager’s Margin’ is used in Schedule 6 as a component of the Construction Manager’s Fee.  Mr Steele submitted that it did not matter that that claim appears to be a claim for a further amount by way of margin without justification because it does not matter if the claim is erroneous.  It is sufficient that CBO knew what was being claimed.
  7. [50]
    As to the Cost of Works item in the TC column, Denbrook submitted that the particulars of the work for the claim for $119,364.89 were sufficient to identify the work to which those claims related.
  8. [51]
    As to the Construction Manager’s Margin item in the TC column, Denbrook submitted that the work to which the $51,808.27 amount claimed as the Construction Manager’s Margin related was adequately identified by the Margin schedule in paragraph [24](d) above.  Mr Steele explained the entries in that schedule in submissions.  The gravamen of that explanation was that the effect of the schedule was to gross up the margin payable under the contract to take account of the Cost of Works actually spent and then to claim a portion of that revised total based on the percentage of that total Construction Manager’s work done as at PC 26. 
  9. [52]
    Denbrook submits that it does not matter that no basis in the contract is shown for that increase in the margin claim, nor that it is difficult to reconcile it with the claim for the whole of the Total Contract Sum (including contractual margin) and additional $180,000 in margin in the TTD column.  It does not matter if the claim is wrong, just that the work to which it relates is identified.
  10. [53]
    Finally, Mr Steele submitted that PS 26, though too late to be effective under the Act as a payment schedule, did contain evidence which was relevant to identifying what a reasonable recipient in the position of CBO would have taken PC 26 to mean.  Mr Thomas objected to the tender of PS 26.  He submitted that no evidence of the interpretation of PC 26 by CBO after the expiry of the period in the Act could be rationally probative of how a reasonable recipient in the position of CBO would interpret PC 26.  As a broad evidential objection, I do not think Mr Thomas’ submission is correct.  It is possible that conduct after receipt of a payment claim by the recipient of that claim, might be probative of what a reasonable person would have thought at an earlier time.  I admitted PS 26 on that basis.  Whether it does not or not, in any particular respect, depends on the characteristics of that evidence and the particular use to which the parties seek to put that evidence.
  11. [54]
    Mr Steele submitted that PS 26 demonstrated that the Court could infer that CBO in fact understood PC 26 in the way that Denbrook contends it would be objectively interpreted.  

CBO’s submissions

  1. [55]
    Further to the submissions already stated above, CBO’s arguments can be summarised as follows.
  2. [56]
    First, CBO rejected the suggestion that Cost of Works in PC 26 invoked to a reasonable recipient the figure in the PC 25 spreadsheet because that phrase is not used in PC 25 (which uses the description Total Contract Sum) and the phrase Cost of Works used in PC 26 is not used anywhere in the contract.
  3. [57]
    Second, CBO submitted that even if a reasonable recipient would have assumed that the $909,285.19 was a claim for the Total Contract Sum identified in PC 26, the difficulty arises as to what work the Cost of Works in the TC column relates to, as explained in paragraph [50] above.   CBO submits that if the Cost of Works in the TC column is on its face for work under the contract but there is already a claim in the TTD column for the same work, what work is being claimed in the TC column.
  4. [58]
    Third, CBO contended that even if a reasonable recipient would have assumed that the $909,285.19 was a claim for the total contract sum identified in PC 26, then a further difficulty arises as to the identification of the work to which PC 25 relates for the specific amounts claimed.  CBO contends that there are no invoices nor any particulars of the work to which the SW1 to SW15 claims relate.  Further, there is no identification of the work to which the variation claims relate: see paragraph [49] above.
  5. [59]
    Fourth, CBO submitted that there was on no identification of the work to which the claim for $180,000 in the TTD column related, particularly if I accepted Denbrook’s contention that $909,285.19 was a claim for the Total Contract Sum identified in PC 25.[10]  In that case, the whole of the margin component of the lump sum under the contract had been claimed as part of that Cost of Works figure.
  6. [60]
    Fifth, CBO contended that the provision of invoices for the purpose of identifying the work to which the claimed Cost of Works in the TC column related was not adequate to identify that work.  Mr Thomas accepted that there was no absolute rule that provision of an invoice is inadequate to identify work, but contended that in the respects identified in Exhibit 2, the invoices together with the information in the attachments to PC 26 (especially on pages 2, 3 and 4) were inadequate to identify the work. 
  7. [61]
    Sixth, Mr Thomas submitted that PC 26, whether read with the contract or without it, failed to communicate to a reasonable recipient what work the $51,808.27 related to.  He submitted that the explanation given by Mr Steele was a reconstruction which a reasonable recipient would not have been able to reach.  
  8. [62]
    He further submitted that that conclusion is reinforced because of the claims under clause 18(b)(ii).   He submitted that a claim for further margin is only intelligible under the contract by reference to clause 18(b)(ii) and that the difficulty in understanding what work the $51,808.27 related to is increased by the fact that there is a claim under that clause in both columns.
  9. [63]
    Finally, Mr Thomas submitted that PS 26 was irrelevant and even if it was considered, it did not assist in identifying the work to which the claims related.
  10. [64]
    Mr Thomas’ overall submission was that it was irrelevant whether PC 26 was in error or not.  He accepted that it could be in error and still be valid.  His point was that PC 26 was unable to be construed in a manner which identified the work to which the claims it advanced were related.  

Analysis 

  1. [65]
    In my opinion, PC 26 is invalid because a reasonable recipient could not have identified the work to which it related.  
  2. [66]
    I accept that validity under s. 68(1)(b) is not determined by reference to whether the payment claim is factually correct nor by whether the work identified can be shown to fall within the scope of the contract works nor by whether the claim for that work is calculated in accordance with the contract.  Validity turns on whether the payment claim sufficiently identifies the work or related goods and services to which the claim for payment relates.  If the identified work was not in fact done, or was done but is not work for which a claim under the contract arises, that is a matter which can be raised in a payment schedule and determined in an adjudication.  However, where a payment claim fails to include a clear identification of the work and is ambiguous as to how the claim relates to the work under the contract, it can make the task of objectively identifying the work to which it relates more difficult.  That is especially so where the claimant asserts that the recipient should be taken to have construed the payment claim according to inferences flowing from the terms of the contract read with the payment claim.
  3. [67]
    Bearing those observations in mind, I have concluded that PC 26 fails to identify the work or related goods and services to which the claim for payment relates to for the following reasons.
  4. [68]
    First, I accept on balance that a reasonable recipient in the position of CBO would be taken to have assumed that the sum of $909,285.19 in PC 26 was a reference to the Total Contract Sum identified under PC 25.  The co-incidence in the two numbers is so precise as to make that inference a reasonable one.  That is also supported by the description ‘Cost of Works’ in PC 26, which not inconsistent with the meaning “Cost of all the Work under the contract”, a meaning analogous to Total Contract Sum as that phrase is used in PC 25.  I reach that conclusion even though the apparent claiming of part of the Total Contract Sum again as part of the Cost of Works claimed in the TC column, (at least to the extent it relates to payment for work claimed as part of the SW1 to SW15 cost centres) might seem inconsistent with that inference. 
  5. [69]
    However, I reject the proposition that the making of that assumption means that PC 26 identifies the work to which the claim for $909,285.19 relates.   Reference to the PC 25 spreadsheet is justified by its relevance as an extrinsic fact known to both parties which assists in identifying in broad terms what the $909,285.19 claim is for.  It permits the Court to conclude that the reasonable recipient would construe that claim as a claim for the Total Contract Sum set out in PC 25.   However, that does not have the effect of incorporating the whole of PC 25 into PC 26 by reference.  There are no words in PC 26 which could be construed to achieve that consequence.  Construction must be text based.[11]
  6. [70]
    Once that is recognised, the spreadsheet in PC 25 is no more than a document amongst many delivered by Denbrook before delivery of PC 26.  The documents relied upon to sustain a payment claim must be included in that payment claim.[12]  It is not up to the recipient to sort through previous payment claims to work out the work to which a new payment claim relates.[13]  PC 26 itself contains no particulars identifying the work relating to the claim for $909,285.19.  For that reason alone, PC 26 is invalid for failing to identify the work to which the claim for $909,285.19 relates (bearing in mind the point in paragraph [41] above).
  7. [71]
    Second, even if one treated the PC 25 spreadsheet as being incorporated by reference into PC 26, PC 26 would still fail to identify the work to which the $909,285.19 claim relates.    There are two deficiencies.
  8. [72]
    The first deficiency is identified in paragraph [44] above:  PC 25 does not identify any of the work which relates $909,285.19 claim.  Even if were thought that it sufficiently identifies the work done up to PC 25, it says nothing at all about the work which remained undone as at PC 25. 
  9. [73]
    Denbrook’s argument in paragraphs [46] and [47] above fails to answer that deficiency.   If Denbrook is going to rely on the terms of the contract to cover up the shortfall in identification of work in PC 26, it must also accept the framework for entitlement to the whole of the lump payment under the contract.  Clause 15(a), on its proper construction, conditions entitlement to the whole of the lump sum on, effectively:
    1. (a)
      The Cost of Works reaching the Estimated Cost of Works; or
    2. (b)
      The works being completed for a sum less than the Estimated Cost of Works.
  10. [74]
    In my view, therefore, the work to which the entitlement to the lump sum relates is the completion of work on the project up to the value of the Estimated Cost of Works.  That is the work which must be identified.  It is not identified in PC 26, even reading it as incorporating PC 25 by reference.   Attention must be given to the word “relates” in this respect.  While the lump sum does not directly require particular work to be done to become entitled to it under the contract, the entitlement to it requires work up to the value of the Estimated Costs of Works to be done.  That is the work to which the claim for the lump sum for under the contract relates.  That work is not identified. 
  11. [75]
    Alternatively, the work to which the lump sum relates is all the tasks in clauses 3 and 5 of the contract required for the completion of the whole of the works.  That is the work that the lump sum fee is for, under the contract.  There is nothing in the PC 25 spreadsheet that identifies all that work.  Denbrook’s argument amounts to no more than an assertion that it has done all the work, but that is no substitute for identifying what work is. If it were otherwise, a builder in large and complex lump sum construction project could deliver a payment claim at the end of the work (at least in the builder’s view) that claimed the whole of the lump sum with no other particulars.  That could not meet the minimum requirements of a payment claim to communicate the basis of the claim to the principal.  Such a situation would invite abuse of the payment claim system.
  12. [76]
    Further, for the reasons given in paragraph [48], a reasonable recipient in the position of CBO would not assume that Denbrook was seeking to claim the whole lump sum on the basis that all the work under the contract was impliedly identified.  That is because the manner in which Denbrook had previously claimed the lump sum in instalments was not claimed in that manner.  Rather, it was claimed in the progressive manner shown in the PC 25 spreadsheet.  The assumption which Denbrook contends for is inconsistent with the previous dealings of the parties.    
  13. [77]
    The second deficiency is that, even if Denbrook’s argument about the lump sum component of the Cost of Works items articulated in paragraphs [46] and [47] above was correct, that argument is inapplicable to the work to which the claimed variations in PC 25 relates.   The variations listed in PC 25 have nothing to do with the lump sum Construction Management Fee.  Further, even if the PC 25 spreadsheet is incorporated by reference into PC 26, the work to which the variations relate is not identified in that spreadsheet.
  14. [78]
    I refer to paragraph [16] above, which shows that there is no identification of the work to which the variation claims relate in the PC 25 spreadsheet.  The only information about those claims is the amount and the identity of the issuer of the invoice.  Those descriptions are not apt to identify whether the invoice was for work done or goods supplied.  Nor are they apt to identify what work was done or what goods were supplied.  It can be accepted that for relatively small outlays, a sense of proportion must be maintained in the detail required to identify the work or goods to which an invoice relates.  However, there is no information at all about the variations claims.  Further, not all these claims are small.  They include a number of large claims (in the context of the overall claimed amount), including two variations described only as Bradnams Windows together totalling $100,000.  The submission by Denbrook recorded at paragraph [49] above that CBO had paid the variation claims is no answer in law to this deficiency.  There was no case advanced that somehow CBO had misled Denbrook into believing it did not have to identify the work to which the variations related.  Nor is there any suggestion that an estoppel arose.  
  15. [79]
    The problem for Denbrook arises from the way it chose to structure PC 26.  Its choice to assert in PC 26 a claim for $909,285.19 without particulars of the work identified meant that it had to identify the work to which that claim related.   It failed to do that for any of the components of that sum.
  16. [80]
    Third, PC 26 fails to identify any work to which the claim for $180,000 for ‘Construction Manager’s Margin’ in the TTD column relates.  PC 26 says nothing about the work to which this sum relates.  It is not sufficient just to claim it was ‘Margin’.  Margin can have different meanings depending on its context.  It is ordinarily a sum added to the cost of works done (or in this case supervised) by way of profit.  But what work was done or supervised which related to this claim?  PC 26 does not identify that work. PC 26 is invalid for failing to meet the requirements of s. 68(1)(a) in this respect as well. 
  17. [81]
    The contrary argument of Denbrook set out in paragraph [51] does not address this defect. It can be accepted that a reasonable recipient would assume that the claim was for an additional sum on account of margin, but for what work?  PC 26 does not say.  All the reasonable recipient could know (and this is only by referring to PC 25) is that it is not a claim for the Construction Manager’s Margin component of the lump sum because that is being claimed in the $909,285.19.  Further, there is nothing else in the contract which explains what work was done by Denbrook (or supervised by Denbrook) to earn this additional claim for margin. 
  18. [82]
    Fourth, PC 26 fails to identify the work to which the further claim for $51,808.27 described as Construction Manager’s Margin in the TC column relates.  As I noted in paragraph [53] above, Mr Steele explained what the numbers in the table at paragraph [24] were supposed to mean.  However, no such explanation appeared in PC 26 itself and without that explanation, the meaning of the schedule could only have been guessed at.  Further, as with the claim for $180,000, what the schedule fails to do is to identify the work to which that claim related.  I repeat the point made in paragraph [82] above that it is not sufficient just to claim it was ‘Margin’.
  19. [83]
    The fact that CBO in PS 26 had an attempt at understanding what was meant by the claim for $51,808.27 and appears to have been able to construct an intelligible meaning for it does not mean that the schedule communicated objectively what it meant, even to a reasonable recipient in CBO’s position.  Indeed, when one looks at the CBO payment schedule, CBO simplifies the claim for further margin in a manner which is not stated in the Margin Schedule.[14] 
  20. [84]
    Denbrook contends that the contents of PS 26 support its contentions that PC 26 identifies the work to which the various specific claims relate.  I disagree.  The reliance on PS 26 by Denbrook raises the question of whether, and to what extent, regard can be had to the content of a payment schedule delivered by the principal in response to a payment claim, but outside the time limited for delivery of the payment schedule in the Act, in construing the payment claim.  Counsel found no authority on the point.  My brief research also produced no such authority. 
  21. [85]
    It is tempting to assume that the content of a payment schedule which manages to respond to claims in a payment claim is evidence that, looked at objectively, a reasonable recipient in the position of the principal should be taken to have understood the payment claim in that manner.  However, there are dangers in this approach.
  22. [86]
    If a principal receives a vague, incomplete or uncertain payment claim, the principal must nonetheless endeavour quickly to give it meaning and articulate that meaning in a payment schedule, along with reasons why (on that constructed meaning), payment is to be withheld.  The Act compels that course because:
    1. (a)
      Failure to deliver a payment schedule within the short time period applicable under s. 76(1) of the Act is an offence[15];
    2. (b)
      Failure to deliver a payment schedule within that period results in the principal becoming liable to pay the amount claimed[16] under s. 77(2) of the Act; and
    3. (c)
      The principal will be unable to raise reasons for withholding payment in any subsequent adjudication that were not included in a payment schedule.[17]
  23. [87]
    It is entirely possible, therefore, that the construction put on the various parts of the payment claim will not be based on anything more than a guess by the recipient as to what the claim might mean, based on inference, speculation and hope rather than on any objectively clear meaning in the text in the payment claim.  Further, to jump on the meaning adopted in the payment schedule as being the objective meaning of the payment claim skips a step in the process of construction.  All construction must be text based.  While that proposition is articulated in the statutory construction context[18], it must surely also apply where one is construing a payment claim.  The construction adopted in the payment schedule will be irrelevant if it is not open on the text of the payment claim.
  24. [88]
    Further, relying on the payment schedule to give meaning to ambiguous or incomplete payment claims is an invitation to gratuitous ex post facto adoption by the claimant of a meaning which was neither subjectively intended nor, more relevantly, capable of being objectively construed from the payment claim read in the context of relevant facts known to both parties prior to delivery of the payment claim. 
  25. [89]
    It is theoretically possible that a specific statement contained in a payment schedule delivered too late to be effective under the Act might be relevant to identifying how a reasonable recipient in the position of the principal would have interpreted a payment claim.  Such a statement might comprise evidence, for example, that a specific fact or document had been communicated to the principal before the delivery of the payment claim.   However, I do not accept that a payment schedule can be treated for all purposes as evidence of how a reasonable recipient in the position of the principal claim would have construed that claim.
  26. [90]
    Bearing those considerations in mind, I now turn to Denbrook’s specific submissions in reliance on the payment schedule.
  27. [91]
    Starting with the $909,285.19 claim, Denbrook submitted that the response to that claim in the payment schedule, set out in paragraphs [27] and [29] above demonstrated that CBO understood that claim.   The payment schedule responds to the net sum claimed in the TTD column but states only that “the amount is incorrect and does not correlate to the contract or project budget”.  This broad statement says nothing of substance.  It certainly does not assist in identifying the work to which the various components of that total claim related.  The details in the Assessment Report do not take the matter much further.   The Assessment Report responds to the $909,285.19 claim in this way:
    1. Costs of Works - $909,285.19 is not correct.
      1. This number is not the cost of works to date but is the Total Contract Sum Excluding GST at the time of progress claim #21.
      2. The current Total Contract Sum Excluding GST at time of Progress Claim #26 is $957,148.13.
      3. The current Cost of works to date excluding GST is $793,453.13.
      4. The above values do not take into account Contract Variations, Site works preliminary fees deductions as per VO2 and Liquidated Damages.
  28. [92]
    They disclose that CBO subjectively understood that the $909,285.19 claim was an attempt to claim for the Total Contract Sum.  I have already found so much could be inferred in any event from PC 25.  It does not address the shortfalls in the identification of the work under PC 26 set out above.
  29. [93]
    As to the claim for $180,000, the Assessment Report shows that Denbrook assumed that the $180,000 was an error and an attempt to claim the Construction Manager’s Margin component of the lump sum fee twice.[19]  However, that is not a construction which arises from the text of PC 26.  That is a guess by CBO as to what the number might signify.  As I explain in paragraphs [82] and [83] above, CBO had to make that guess because PC 26 does not identify any work to which that claim for additional margin payment relates.
  30. [94]
    As to the claim for $51,808.27, I refer to the observation in paragraph [85] above.  This item is an example of the problems which arise from relying on a subsequent payment schedule to give meaning to ambiguous text in a payment claim.  In the Assessment Report dealing with this sum, CBO creates a simplified explanation of the meaning of the schedule by reference to a notional delay in the works by 12.2 weeks.[20]  That explanation is not communicated in the text of the schedule in PC 26.  There was nothing in any preceding dealings or documents which support the construction inventively developed by CBO. The fact that CBO was capable of guessing what was meant (and had to have a guess because of the consequences of not doing so) does not mean that the text of the schedule in PC 26 identified the work to which this claim related in any manner which a reasonable recipient in the position of CBO could determine.   It did not.

For these reasons, PC 26 is not a valid payment claim because it does not identify the work, goods or services to which the claims for $909,285.19, $180,000 and $51, 808.27 relate, nor therefore did it identify the work to which the ultimate sum claimed related.  The claim is dismissed.

The Cost of WorkS claim: TC column

  1. [95]
    I should briefly express my view on the remaining disputed item, the claim for $119,364.89 described as the Costs of Works in the TC column.  In my opinion, PC 26 does identify the work to which that claim relates.  
  2. [96]
    I refer to the material from PC 26 set out in paragraphs [24](b), [24](c) and [25] above.  Although that material does not directly identify the work to which each item relates, it does communicate considerable information about that matter.
  3. [97]
    For the items in cost centres SW1 to SW15, the description of the cost centre communicates information about the likely the character of the work, good or service involved.  Similarly, the amounts claimed under Schedule 9 are each identified by reference to the item number in Schedule 9 which supports that claim. Items 1, 7, 8, 10, 11 and 24 are identified.  Their description appears in paragraph [9] above.
  4. [98]
    The invoices referred to in the relevant schedules were provided with PC 26.  They contain further information about the identity of the work related to the invoices, particularly when the invoice descriptions are read with the descriptive item numbers referred to in the previous paragraph.
  5. [99]
    Whether the information provided about each of those claimed amounts, considered as a whole, identifies sufficiently the work to which each invoice related depends on each particular invoice.  CBO produced a schedule after trial which identified the invoices in respect of which it contended that the work was not sufficiently identified to meet the minimum requirements of s. 68(1)(a) (the CBO schedule).[21]
  6. [100]
    There are twelve items challenged in the CBO schedule which involve claims for amounts between $2.19 and $527.70.  The total of those twelve items is about $3500.00.  There is information provided about the work to which those small sums relate in the invoices.  CBO’s contention is that there is not enough information.  Even if there were not, there must be some proportionality between the value of the work said to be insufficiently identified and the consequence of invalidity for the whole of the payment claim.  In my view, even if there is insufficient identification of the work to which these twelve small items relate, the value of those claims in the context of the payment claim as a whole would not be sufficient material to permit the conclusion that the payment claim as a whole failed to identify the work to which it relates.   I do not propose to consider those further.
  7. [101]
    There are three items identified in the CBO schedule which involve claims for a total of about $40,000 which are all claims for payments made in the SW13 “Scaffolding Access” cost centre.  This amount is material.  The complaint about the adequacy of the information in the invoices is in the same form in each case.  An example of that format of the complaint is as follows:

SW13

Source Scaffold

C2101012

$27,220.75

“9th and final Contract Invoice” does not identify the construction work [though the “21/12/20 Dkt 00669 4.5hrs @70.00” component is identified].  If this is a “good”, there is no explanation of how it is related to the construction work.

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184

  1. [102]
    The relevant part of the invoice for that claim states as follows:
  2. [103]
    In my opinion, the work to which these claims relate is sufficiently identified.  It is self evident what scaffolding is, particularly when it is kept in mind that this is a multistorey apartment building.  The invoice shows that the sum claimed is a component of the total sum for scaffolding for the works along with other hire and work relating to the scaffolding.  CBO is in a good position to identify if scaffolding remained on site or not as required for the work.  To my mind, in all those circumstances, PC 26 sufficiently identifies the work to which those claims relate.
  3. [104]
    There is one item for $1707. 50 challenged.  It relates to an invoice issued by Affordable Doors and is identified as falling under Item 7.  It is obvious from the invoice[22] that the descriptions relate to multiple items, almost certainly doors or items related to doors.  I consider this is sufficient identification of the goods to which the claim relates.
  4. [105]
    Finally, CBO challenges the nine invoices issued by Mr Vine and Mr McAuley totalling $14,113.75.   These are identified in PC 26 as claimed under Schedule 9 Item 1.  That item provides as follows: “Wages and all allowances paid for labour in the direct employment of the Construction Manager for the performance of the Works.”
  5. [106]
    It is convenient to set out the last invoice from Mr McAuley for $2905.  It provides:

Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd [2022] QDC 184

  1. [107]
    The other invoices from Mr Vine and Mr McAuley are in similar form.  CBO’s complaints are in the same form for each invoice.  The complaint for this invoice is typical[23]:

Invoice states date, times and amounts but does not identify the construction work being performed.  If this is a service, then it is unclear what that service was or how it related to the construction work.

  1. [108]
    This complaint takes too narrow a view of the information provided.  Read with Schedule 9 Item 1, this invoice informs CBO that a particular person worked all day on the works for each of the five days identified.  They were unlikely engaged on offsite work because that is not recoverable under the contract (see clause 17).  CBO was able to understand that Denbrook contended Mr McAuley was working all day on supervision works for Denbrook.  It was in a position to dispute this occurred.  

Conclusion

  1. [109]
    PC 26 is invalid because it failed to identify the work to which it related.  I dismiss the proceedings.  I will hear the parties as to costs.

Footnotes

[1] See clause 5(b)

[2] See also clause 11(c) and clause 16(c)

[3] Note that only clause 15 is applicable in this contract

[4] CD 6 exhibits p. 38

[5] The row marked B is omitted because it was not utilised in any payment claim.

[6] Page 50 of Mr Denley’s affidavit filed 6 December 2021 (CD 6)

[7] Ibid at page 54

[8] Exhibit 1

[9] Exhibit 2

[10] TS1-53 to 54.15

[11] See footnote 18 below

[12] Baxbex Pty Ltd v Bickle [2009] QSC 194 at [18] to [19]

[13] Neumann Contractors Pty Ltd v Peet Beachton Syndicate Pty Ltd [2011] 1 Qd R 17 at [29]

[14] CD 15 exhibits pages 13 to 14

[15] Section 76(1)

[16] Section 77(2)

[17] Section 82(4)

[18] Witheyman v Simpson [2011] 1 Qd R 170 at [40] to [52]

[19] CD 15 exhibits page 11 Item 2

[20] CD 15 Exhibits pages 13 to 14

[21] Exhibit 2

[22] Exhibit 1 page 72 of 92 in the .pdf document

[23] Exhibit 2 last item

Close

Editorial Notes

  • Published Case Name:

    Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd

  • Shortened Case Name:

    Denbrook Constructions Pty Ltd v CBO Developments Pty Ltd

  • MNC:

    [2022] QDC 184

  • Court:

    QDC

  • Judge(s):

    Porter QC DCJ

  • Date:

    16 Aug 2022

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
Baxbex Pty Ltd v Bickle [2009] QSC 194
1 citation
Jump To
Cite 1 - [2009] QSC 194
KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd [2019] QSC 178
2 citations
Jump To
Cite 1 - [2019] QSC 178
Cite 2 - [2019] QSC 178
Neumann Contractors Pty Ltd v Peet Beachton Syndicate Ltd[2011] 1 Qd R 17; [2009] QSC 376
1 citation
Jump To
Cite 1 - [2011] 1 Qd R 17
NSWSC 1 Clarence Street Pty Ltd v Isis Projects Pty Ltd (2005) NSWCA 391
2 citations
Jump To
Cite 1 - (2005) NSWCA 391
Cite 2 - (2005) NSWCA 391
T & M Buckley Pty Ltd v 57 Moss Rd Pty Ltd [2010] QCA 381
2 citations
Jump To
Cite 1 - [2010] QCA 381
Cite 2 - [2010] QCA 381
Witheyman v Simpson[2011] 1 Qd R 170; [2009] QCA 388
1 citation
Jump To
Cite 1 - [2011] 1 Qd R 170

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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