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

This case considered whether a document issued by a superintendent could properly be described as a “payment schedule” under the Building Industry Fairness (Security of Payment) Act 2017. The primary judge had concluded that it could not be, because it did not state “the amount of the payment … that the respondent [proposed] to make”. However, the Court of Appeal unanimously concluded that it could be, because a clause in the construction contract deemed that the superintendent issued any payment schedule as the agent of the principal and there was no reason not to give clause its intended effect.

Sofronoff P and McMurdo and Mullins JJA

28 May 2021

Background

The appellant was the builder of a development for the respondent. [1]. The parties entered into a contract that incorporates the Australian Standard 4902-2000 General conditions of contract for design and construct. [1]. Relevantly, those conditions included that, within 10 business days after receiving a payment claim, the superintendent would issue a payment schedule evidencing the superintendent’s opinion of moneys due. [1].

In July 2020, the appellant builder served a payment claim upon the respondent. [3]. In reply, the respondent’s solicitors said that they held instructions to provide the respondent’s payment schedule (for the purposes of s 76 Building Industry Fairness (Security of Payment) Act 2017), and that “[t]o avoid doubt … anything issued to your client by the Superintendent … is not to be construed as a ‘payment schedule’”. [3]. Subsequently there were two documents provided which were described as a ‘payment schedule’ – a document from the superintendent, and a document from the respondent’s solicitors. Both concluded that no monies were due. [5].

The appellant elected to begin an adjudication under the Act. [7]. In the course of the adjudication, the adjudicator accepted that the superintendent’s document had been “rightly identified by the claimant in the applications as the relevant payment schedule”. [17]. After considering the matter on its merits, the adjudicator awarded the appellant $788,439.54 with interest. [18].

The respondent commenced proceedings in the Supreme Court alleging that the adjudication decision was void. The argument was that the superintendent’s document was “not a payment schedule of the kind required by s 76 of the Act” and therefore the decision made was “invalid because it did not refer to a valid payment schedule as the Act required”. [19]. At first instance, Dalton J accepted this submission and declared that the adjudication decision was void. [20]. Her Honour reasoned that the superintendent’s document was not a payment schedule as defined by the Act because it did not state “the amount of the payment, if any, that the respondent [proposed] to make”. [20]. Instead, it only evidenced “the Superintendent’s opinion of the money due from the Principal to the Contractor”. [21].

The appellant appealed against those orders of Justice Dalton.

Why the appeal was allowed

President Sofronoff (with whom McMurdo JA and Mullins JA agreed) concluded that Justice Dalton had erred in concluding that the adjudicator’s decision was void.

In particular, President Sofronoff noted that cl 37.2 of the contract between the parties provided that (at [26]):

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

His Honour considered that, given this context, the effect of the superintendent’s document was that it stated the amount of the payment the respondent proposed to make, as required by the Act. [27]. There was “no reason why the parties could not agree in the way they did” and “no reason not to regard [the clause] … as having its evidently intended effect”. [29]–[30]. Further, as to any argument that the respondent had revoked the superintendent’s authority to issue the document, there was “no power under the contract to revoke that authority and the deeming provision binds the respondent to accept that agency”. [32].

Accordingly, the appeal was allowed. [33].

W Isdale