470 St Kilda Road Pty Ltd v Reed Constructions Australia Pty Ltd & Anor [2012] VSC 235

470 St Kilda Road Pty Ltd v Reed Constructions Australia Pty Ltd & Anor [2012] VSC 235 - VSC 2012 case summary — Zoe

[79]

(1) A claimant may apply for adjudication of a payment claim (an adjudication application) if-

(a) the respondent provides a payment schedule under Division 1 but-

(i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim; or

(ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount; or

(b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount.

(2) An adjudication application to which subsection (1)(b) applies cannot be made unless-

(a) the claimant has notified the respondent, within the period of 10 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim; and

(b) the respondent has been given an opportunity to provide a payment schedule to the claimant within 2 business days after receiving the claimant's notice.

(3) An adjudication application-

(a) must be in writing; and

(b) subject to subsection (4), must be made to an authorised nominating authority chosen by the claimant; and

(c) in the case of an application under subsection (1)(a)(i), must be made within 10 business days after the claimant receives the payment schedule; and

(d) in the case of an application under subsection (1)(a)(ii), must be made within 10 business days after the due date for payment; and

(e) in the case of an application under subsection (1)(b), must be made within 5 business days after the end of the 2 day period referred to in subsection (2)(b); and

(f) must identify the payment claim and the payment schedule (if any) to which it relates; and

(g) must be accompanied by the application fee (if any) determined by the authorised nominating authority; and

(h) may contain any submissions relevant to the application that the claimant chooses to include.

(4) If the construction contract to which the payment claim relates lists 3 or more authorised nominating authorities, the application must be made to one of those authorities chosen by the claimant.

(5) Copy of the adjudication application must be served on the respondent.

[96]

5.2 Validity of adjudication application

The Respondent submits that the adjudication application has not be submitted within the 10 business days after the Claimant received the payment schedule.

The Respondent submits that the scheduled amount is less than the claimed amount as provided in section 18(1)(a)(i) of the Act so that an adjudication application must be made in accordance with section 18(3)(c) of the Act, that is within 10 business days after the Claimant receives the payment schedule.

The Claimant submits that the scheduled amount is the same amount as the claimed amount so that section 18(1)(a)(ii) applies with section 18(3)(d) requiring the adjudication application be made within 10 business days after the due date for payment.

The Act provides at section 15(2)(b),

A payment schedule must indicate the amount of payment (if any) that the Respondent proposes to make (the scheduled amount).

The Act also provides at section 15(3),

If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the Respondent is withholding payment for any reason) the Respondent's reason for withholding payment.

The Respondent submits in the payment schedule that the assessment of the amount payable with respect to the payment claim is $760,698 (inclusive of GST). The Respondent also notes that no adjustment has been made to the payment claim in the assessment. The wording in the payment schedule makes it clear that the amount that the Respondent proposes to make, but is withholding, is equal to the claimed amount.

The Respondent submits in the reply to the adjudicator's request for further submissions that the amount that the Respondent agreed to pay was "nil" however this is not stated in the payment schedule. The payment schedule states that the assessed amount is $760,698 (inclusive of GST).

I determine that the scheduled amount is the same as the claimed amount. In that case section 18(1)(a)(ii) and section 18(3)(d) apply so that the adjudication application is to be made within 10 business days after the due date for payment.

The contract provides at clause 37.2, The Principal must within the earlier of 21 days of the Contractor receiving the payment schedule, or 35 days after the Principal's Representative receives the payment claim, pay to the Contractor the amount shown in the payment schedule. The due date for payment is calculated as 5 March 2012. The Act requires that the adjudication application is to be made on or before 20 March 2012.

I determine that the adjudication application has been made within the time limit provided in the Act.

[110]

1.1 470 submits that the Adjudicator should determine the amount of the Payment Claim to be paid by 470 to Reed as nil.

1.2 The Payment Claim is invalid or unenforceable as it does not comply with the Contract.

1.3 Pursuant to its obligations under clause 38.1, Reed was obliged to a provide statutory declaration (documentary evidence) of payment of moneys due and payable to subcontractors in respect of the works the subject of the payment claim. The statutory declaration dated 31 January 2012 (annexured to this Adjudication Application Response as Annexure 6 and to the Adjudication Application as Annexure 2) stated that:

"all subcontractors or suppliers of material who are or at any time have been engaged on the work under the Contract have been paid in full all monies which have become payable to the sub-contractor under terms of the sub-contractor or to the supplier of materials under the terms of agreement for supply".

1.4 The statutory declaration (documentary evidence) required to satisfy clause 38.1 must be true. The provision of a false/wrong statutory declaration as part of the Payment Claim obviously does not satisfy clause 38.1 of the Contract. See FPM Constructions Pty Ltd v Council of the City of Blue Mountains[38] ("FPM"), where the Court of Appeal of the New South Wales Supreme Court held that:

"A declaration which is, in fact untrue will justify the withholding of a payment".[39]

"If a statutory declaration was not provided, or the statutory declaration which was provided was ineffective because false, the Principal was entitled to withhold payment and in its discretion could make direction payment pursuant to cl 34.3".[40]

1.5 Reed provided to Reshape Development Pty Ltd ("Reshape Development"), the principal's representative, on 3 February 2012 a creditor's list dated 1 February 2012. This creditor's list stated an outstanding amount of between 60-90 days totalling $2,760,755.21 payable to subcontractors and suppliers. This, inter alia, establishes the falsity of the statutory declaration.

1.6 In fact, 470 and Reshape Developments ascertained through direct communication from certain subcontractors and/or suppliers that their invoices had not been paid in accordance with the terms of their respective subcontracts and had "walked off the job" and refused to return to the project site until payment was received. 470 has had to make payment to subcontractors and/or suppliers to keep the works under the Contract progressing and to avoid the subcontractors and/or suppliers from permanently "walking off the job". 470 has entered into subcontract completion agreements and paid in accordance with the subcontract completion agreements in excess of $1.7 million to Reed's subcontractors in lieu of part of the amounts owed by Reed. The balance of money owed by Reed to these subcontractors and/or suppliers will be paid by 470 upon completion of their works.

[126]

The question as to whether the evidence before a tribunal may be examined on judicial review on the ground of error of law on the face of the record has received judicial attention in Australia. It is settled that the question as to whether there is any evidence of a fact is a question of law. Thus, in the context of judicial review, it has been accepted that the question whether there is any evidence of a particular fact is a question of law, as is the question whether a particular inference can be drawn from the facts. However, it is also the position that "(t)here is no error of law simply in making a wrong finding of fact." In Bond, Mason CJ, in the course of considering the issue, made reference to the observations of Menzies J in Reg v The District Court; Ex parte White:

Even if the reasoning whereby the Court reached its conclusion of fact were demonstrably unsound, this would not amount to an error of law on the face of the record. To establish some faulty (e.g. illogical) inference of fact would not disclose an error of law.

Mason CJ in Bond went on to conclude that:

Thus at common law, according to the Australian authorities, want of logic is not synonymous with error of law. So long as there is some basis for an inference - in other words, the particular inference is reasonably open - even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place.

Batt J in Road Corporation v Dacakis cited these observations of Mason CJ in Bond with approval. Having reviewed the current state of the authorities on the point, Batt J concluded:

For the foregoing reasons, I think that I should proceed on the basis that a finding of fact will only be open to challenge as erroneous in law if there is no probative evidence to support it (and not also if it is not reasonably open on the evidence), whilst an inference will be open the challenge as being erroneous in law if it was not reasonably open on the facts. [41]

[Footnotes omitted]

[136]

5.8 Payments outstanding to Claimant's subcontractors

The Respondent submits that there are outstanding payments owed to the Claimant's subcontractors. The Claimant has issued a statutory declaration by Glenn Robinson dated 31 January 2012 stating that all subcontractors or suppliers of materials have been paid all monies that has become due and payable under the subcontract agreement. The Claimant issued a list showing outstanding payments to creditors for October, November and December 2011. The Claimant issued a letter dated 23 February 2012 explaining the Claimant's position.

The Claimant is entitled to payment for construction work undertaken by the Claimant under the contract. The Respondent is entitled to withhold payment for work not undertaken or not completed under the Contract.

The Respondent submits that it has made payments to a number of the Claimant's subcontractors in lieu of money owed by the Claimant to these subcontractors. The Respondent has included a number of statutory declarations from subcontractors in the adjudication response to support that submission. The Respondent has submitted in broad terms that it has made payments to the Claimant's subcontractors but has not shown that these payments correspond to the items in the payment claim.

The Respondent accepts the value of the work as calculated by the Claimant and included in the payment claim. The Respondent has not established a contractual entitlement or agreement from the Claimant to directly pay the Claimant's subcontractors instead of paying the Claimant for work. The Claimant has complied with clause 38.1 even though the Respondent questions the veracity of the Claimant's documents.

...

6 Determination

The parties agree on the value of the work included in the payment claim. The Respondent has withheld payment of the claimed amount on the grounds that there are outstanding payments due to the Claimant's subcontractors and the Respondent has issued a notice for the Claimant to show cause why work should not be taken out of the hands of the Claimant or the contract terminated.

The Respondent has questioned the statutory declaration issued by the Claimant with the payment claim regarding payment to the Claimant subcontractors and the workers but has not shown that this entitles it to withhold payment to the Claimant.

The Respondent has not established that it is entitled to withhold the payment on the grounds that the Claimant has not paid all of the Claimant's subcontractors the money owed to them. The Respondent has not established an entitlement to pay money directly to the Claimant's subcontractors and then withhold money from the Claimant.

I determine that the Claimant is entitled to a progress payment for the work that it has carried out.

At a glance

Court

Decision date

Before

Source

Judgment (197 paragraphs)

Parties

Legislation Cited (8)

Cases Cited (11)