Exit Distraction Free Reading Mode
- Selected for Reporting
[2021] QCA 223
In this significant case, the Court of Appeal provided helpful guidance on how payment claims in respect of both a subcontract agreement and a variation to the subcontract agreement should be dealt with, and the circumstances in which they will be treated as nullities. In particular, the Court held that whether a payment claim complies with s 75(1) of the Building Industry Fairness (Security of Payment) Act 2017 is a matter for adjudication and a recipient of a payment claim cannot raise that point later if it has not put it in a payment schedule in response.
Fraser and Morrison JJA and North J
15 October 2021
Bothar was engaged to design and install a pipe from Biggera Waters on the Gold Coast to South Stradbroke Island. [2]. It entered into a written subcontract agreement with Ausipile for the construction of a retaining wall which would enable Bothar to excavate a shaft without it being flooded by water. [3]. Ausipile made six payment claims. [7]. While some of these claims were paid in full, claim 6 incorporated the outstanding amounts from the previous claims, as well as an additional amount for the hire of a crawler crane. [7]. Ausipile commenced proceedings, seeking payment of claim 6. [8]. It was unsuccessful at first instance, with the primary judge concluding that claim 6 concerned two separate contracts and so was void. [8]. Ausipile appealed that decision. [9].
In considering the appeal, Morrison JA, with whom Fraser JA and North J agreed, first considered whether the crawler crane hire was a variation of the original subcontract agreement between the parties. [27]. To do this, his Honour observed that the hire amount for the crane was “not an insignificant amount” but there would have been no mechanism agreed by the parties by which it could be invoiced and paid, and no provision made as to insurance, workers’ compensation and indemnities covering damage without the crane hire being incorporated into the original subcontract agreement. [33]. A point made even more acute by the fact the crane hire amount included provision of an operator for the crane and a party in the respondent’s position would “plainly be concerned” about the terms on which an operator was engaged. [35]. Morrison JA concluded that the primary judge had erred in finding that the crane hire was a separate contract. [40].
Next, his Honour considered a notice of contention issued by Bothar in which it alleged that the primary judge had erred in not finding that Ausipile had engaged in misleading or deceptive conduct. [41]. In short, Bothar alleged that, prior to claims 5 and 6 being made, one of its employees had had a conversation with an Ausipile representative. [47]. In the course of this conversation, Bothar made it clear that it would be withholding payments because of issues it perceived with Ausipile’s work, and that the Ausipile representative had said words to the effect of “Ok I understand, I know where you are coming from”. [50], [51]. Bothar also sent a letter reiterating its position “[a]s discussed” to Ausipile. [54].
Morrison JA did not consider that Ausipile’s conduct rose to the level of misleading or deceptive conduct. His Honour found that, in the context of the conversation, the use of the word “okay” could not have conveyed acceptance of Bothar’s decision not to make any further payments. [65]. Similarly, the letter could not reasonably convey a representation that Bothar believed that Ausipile had represented that it would not make any payment claims. [69]. Accordingly, the primary judge was upheld on this issue. [70].
Finally, Morrison JA turned to the question of whether payment claim 6 was invalid in light of the scheme of the Building Industry Fairness (Security of Payment) Act 2017 (“the Act”). As to this, his Honour observed that it comprised two components: a claim for $596,777.73 contained in the first schedule to the payment claim, and a claim for $81,500 claimed under two schedules entitled “Variation Worksheet”. [73]. On its face, claim 6 purported to be made under a single contract – the subcontract agreement. [101].
To determine whether claim 6 was invalid, Morrison JA stepped through the relevant provisions of the Act. His Honour observed that s 70 entitles a party to a “progress payment” under a construction contract. [90]. Under s 75, a person may make a payment claim if they are entitled, or claim to be entitled, to a progress payment. [92]. Further, s 67 defines a “payment claim” as a document setting out the amount “that the claimant claims is payable”, rather than that is in fact payable. [91].
Accordingly, his Honour considered that the terms of s 75 are inconsistent with the proposition that the making of a payment claim establishes an absolute entitlement to payment. [93]. Rather, s 76 requires that a response to a payment claim be given in the form of a payment schedule. [95]. The payment schedule is required to identify the payment claim to which it responds, as well as the payment the respondent proposes to make and, if the proposed payment is less than the amount claimed, the reasons why. [96]–[97]. Morrison JA considered that this legislative scheme tells against resolution of a payment claim prior to arbitration. [98]. Further, under s 77(2) of the Act, the failure to give a payment schedule crystallises the payment claim and entitles the claimant to bring proceedings to recover it as a debt under s 78. [99].
Turning back to the terms of claim 6, Morrison JA observed that on its face it complies with the requirements for a payment claim under s 75(1) of the Act. [102]. Accordingly, even if it were held that the variation in respect of the crane hire were not a true variation, that would not have the effect of rendering the entire payment claim invalid. [102]. Rather, it is something which Bothar was entitled to bring up in its payment schedule as a reason for withholding payment in respect of that element of the claim. [102]. His Honour distinguished the authorities which held that a single payment claim in respect of payments under multiple contracts was invalid, because they involved payment claims which expressly identified more than one contract as the basis for the claim. [104]–[112].
Ultimately, Morrison JA considered that a “payment claim should not be treated as a nullity for failure to comply with s 75(1) of the Act, unless that failure is patent on its face”. [120]. As a corollary of this, where the payment claim purports to be made under one contract, it is not invalid simply because part of the claim is subsequently found to be made in respect of a different contract. [120]. So long as it is made in good faith and complies with the legislative requirements, Morrison JA considered that the merits of a payment claim are a matter for adjudication after having been raised in a payment schedule. [120].
In the event, the Court upheld the appeal and entered judgment for Ausipile. [123].
M Paterson