Ausipile Pty Ltd v Bothar Boring and Tunnelling

SUPREME COURT OF QUEENSLAND

CITATION: Ausipile Pty Ltd v Bothar Boring and Tunnelling (Australia) Pty Ltd [2021] QCA 223

PARTIES: AUSIPILE PTY LTD ACN 101 402 322 (appellant) v BOTHAR BORING AND TUNNELLING (AUSTRALIA) PTY LTD ACN 622 309 264 (respondent)

FILE NO/S: Appeal No 3642 of 2021 SC No 8953 of 2019

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane – [2021] QSC 39 (Wilson J)

DELIVERED ON: 15 October 2021

DELIVERED AT: Brisbane

HEARING DATE: 19 August 2021

JUDGES: Fraser and Morrison JJA and North J

ORDERS: Appeal allowed.Set aside the orders made on 5 March 2021.Pursuant to s 78(2)(a) of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) judgment be entered for the appellant against the respondent in the amount of $761,296.75.The parties have leave to make such submissions as they are advised on the question of interest as follows:by the appellant, within 14 days of the publication of these reasons;by the respondent, within 14 days thereafter; andin each case, limited to four pages.The respondent pay the appellant’s costs of and incidental to the appeal, and the costs of proceeding BS 8953 of 2019.

CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – PAYMENT CLAIMS – where the appellant and respondent entered a subcontract agreement to design and construct a secant pile launch shaft – where the respondent hired a crawler crane from the appellant to complete works under the head contract – where the appellant applied for judgment pursuant to s 78(2)(a) of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) to recover amounts owing under a payment claim but the application was dismissed – whether the variation in relation to the hire of the crawler crane related to a contract other than the subcontract – whether the payment claim contained claims in relation to two contracts – whether the payment claim was void for the purpose of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) / CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – CHARACTER OR ATTRIBUTES OF CONDUCT OR REPRESENTATION – SILENCE AND NON-DISCLOSURE – where the respondent sent the appellant a letter stating that it would withhold further payment claims “as discussed” – where the appellant did not respond to the letter – whether the appellant’s silence was misleading or deceptive or likely to mislead or deceive / Building Industry Fairness (Security of Payment) Act 2017 (Qld), s 67, s 68, s 69, s 70, s 75, s 76, s 77, s 78, s 100 / Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd [2020] NSWSC 1330, considered Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41, applied Class Electrical Services Pty Ltd v Go Electrical Pty Ltd [2013] NSWSC 363, distinguished Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; [1992] FCA 557, cited Matrix Projects (Qld) Pty Ltd v Luscombe [2013] QSC 4, considered Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31, applied Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (In liq) (2005) 64 NSWLR 462; [2005] NSWCA 409, considered Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28, applied Rail Corporation of NSW v Nebax Constructions [2012] NSWSC 6, distinguished TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 93, followed Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd [2018] NSWSC 239, distinguished

COUNSEL: M H Hindman QC, with M J Steele, for the appellant T P Sullivan QC, with J Mitchenson, for the respondent

SOLICITORS: McInnes Wilson Lawyers for the appellant Thomson Geer Lawyers for the respondent

1. FRASER JA: I agree with the reasons for judgment of Morrison JA and the orders proposed by his Honour.

2. MORRISON JA: On 9 September 2018 Bothar Boring and Tunnelling (Australia) Pty Ltd¹ was engaged to design and install a pipe from Biggera Waters on the Gold Coast to South Stradbroke Island.

3. On 14 November 2018 Bothar engaged Ausipile Pty Ltd² as a subcontractor under a written subcontract agreement. Ausipile’s work was to design and construct a secant pile launch shaft. Secant pile walls are a type of retaining wall used to retain water and soil so that a shaft may be excavated to enable tunnelling without the area inside the secant pile wall being flooded by water.

4. The written subcontract agreement stipulated a subcontract price of $1,380,000 (plus GST) with 30 day terms, and that payment claims were to be submitted on the twenty-second day of each month to which the claim related.

5. The usual process of issuing payment claims under the subcontract was to prepare a monthly payment tax invoice together with a payment claim report particularising the amount of each claim. That would be emailed to Mr O'Connor, Bothar’s project manager, before the end of the month in which the relevant works were carried out by Ausipile. On occasion other representatives of each party would be copied in on the emails.

6. In breach of the Building Industry Fairness (Security of Payment) Act 2017 (Qld), Bothar did not respond to any payment claim by giving Ausipile a payment schedule.

7. The payment claims made, and the payments under them were as follows:(a)claim 1 was issued on 21 December 2018 in the sum of $61,380 (including GST); it was paid in full by Bothar on 1 February 2019;(b)claim 2 was issued on 22 January 2019 in the sum of $32,620.50 (including GST); it was paid in full by Bothar on 1 March 2019;(c)claim 3 was issued by Ausipile on 26 February 2019 for $663,344.50 (including GST); it was paid in full by Bothar, in two equal shares on 3 April 2019 and 17 April 2019;(d)claim 4 was issued by Ausipile on 25 March 2019 in the sum of $463,936 (including GST); Bothar only paid $25,000 of that sum, on 17 May 2019;(e)payment claim 5 was issued on 30 April 2019 in the sum of $268,972 (including GST); it was not paid;(f)payment claim 6 included the unpaid component of payment claim 4 ($438,936), the unpaid amount of payment claim 5 ($268,972) as well as an amount for a hire by Bothar of Ausipile’s crawler crane.

8. Ausipile applied for judgment pursuant to s 78(2)(a) of the Act seeking to recover the total amount outstanding under payment claim 6. Bothar resisted that application on a number of grounds, the only one of which that is relevant to the present appeal was that payment claim 6 concerned two separate contracts and was therefore void. The learned primary judge accepted that argument, dismissing the application for judgment.

The legislative provisions

11. There are a number of relevant provisions of the Building Industry Fairness (Security of Payment) Act which are relevant to the issue on this appeal.

12. Section 68 of the Act sets out the meaning of the term “payment claim”:

“68 Meaning of payment claim

(1)A payment claim, for a progress payment, is a written document that—

(a)identifies the construction work or related goods and services to which the progress payment relates; and

(b)states the amount (the claimed amount) of the progress payment that the claimant claims is payable by the respondent; and

(c)requests payment of the claimed amount; and

(d)includes the other information prescribed by regulation.

(2)The amount claimed in the payment claim may include an amount that—

(a)the respondent is liable to pay the claimant under section 98(3); or

(b)is held under the construction contract by the respondent and that the claimant claims is due for release.

(3)A written document bearing the word ‘invoice’ is taken to satisfy subsection (1)(c).”

13. Of the total amount claimed in payment claim 6, issued on 24 May 2019, $761,296.75 remains unpaid. The recovery of that sum was sought under s 78 of the Act which relevantly provides:

“78 Consequences of failing to pay claimant

(1)This section applies if a respondent given a payment claim for a progress payment does not pay the amount owed to the claimant in full on or before the due date for the progress payment.

(2)The claimant may either—

(a)recover the unpaid portion of the amount owed from the respondent, as a debt owing to the claimant, in a court of competent jurisdiction; or

…”

14. Proceedings to recover an unpaid amount by way of a debt are governed by s 100 of the Act, which relevantly provides:

“100 Proceedings to recover unpaid amount as debt

(1)This section applies if a claimant starts proceedings in a court under section 78(2)(a) to recover an unpaid amount from a respondent as a debt owing to the claimant.

(2)Judgment in favour of the claimant is not to be given by a court unless the court is satisfied that—

(a)the respondent did not pay the amount to the claimant on or before the due date for the progress payment to which the payment claim relates; and

(b)if the respondent’s liability to pay the amount arises because of a failure to give a payment schedule—the respondent did not give the claimant a payment schedule within the time required to do so under this Act.

(3)The respondent is not, in those proceedings, entitled—

(a)to bring any counterclaim against the claimant; or

(b)to raise any defence in relation to matters arising under the construction contract.”

Background to the crane hire agreement

15. Ausipile used a crawler crane to lift steel reinforcing cages off the piles, as well as to service other equipment.

16. On 30 April 2019 Ausipile started to demobilise its onsite equipment as the principal work under the subcontract had been completed. Because the crawler crane had completed its task of lifting the steel reinforcing cages, and was no longer needed for the subcontract works, it was to be demobilised and removed from site.

17. Bothar required a crawler crane for the excavation of the launch shaft. This was work which Bothar was required to perform under its head contract with John Holland.

18. Mr O'Connor (from Bothar) contacted Mr Godden (of Ausipile) to see whether Ausipile would agree to hire the crawler crane to Bothar, as it was already onsite.

19. Mr O'Connor gave evidence that some time prior to 30 April 2019 he called Mr Godden about the hire of the crane. He could not recall exactly what was said to Mr Godden, but the effect of the conversation was as follows:(a)Mr O'Connor asked whether Bothar would be able to hire a crawler crane from Ausipile, to use for works they needed to do for John Holland;(b)Mr Godden said that Ausipile would be able to do this; and(c)Mr O'Connor asked if Mr Godden could send him the hire rates for the crawler crane.

20. On 30 April 2019 Mr O'Connor received an email from Mr Godden providing hire rates for a “crawler crane”. The email stated:

“Kieran,

Hire rate for the Crawler Crane as follows.

$4800 pw Dry Hire.

$2150 per day wet hire with Operator.

Any queries please give me a call.”

21. Each party understood the reference to “dry hire” and “wet hire”. The difference is that wet hire includes the cost of providing an operator for the crane.

22. Mr O'Connor gave evidence that he did not send a reply email, but instead he assumed that he called Mr Godden. He could not recall what was said in the conversation, but believed it was most likely that he called and confirmed that Bothar agreed to hire the crawler crane at a wet hire rate.

23. On 1 May 2019 Ausipile finished demobilising from the site. The crane and an operator remained onsite. Between 9 May 2019 and early June 2019, Bothar hired and utilised Ausipile’s crawler crane and operator to perform its work under the head contract.

24. On 17 June 2019 Mr O'Connor notified Mr Godden that the crawler crane needed repairs. They could not be carried out onsite, and Ausipile de-rigged the crawler crane and removed it.

25. Mr Godden’s evidence in cross-examination was that the crawler crane stayed onsite not just for the excavation of the launch shaft:⁴

“It wasn’t just – I don’t think it was just particularly for the excavation for whatever purpose Bothar wished to use it to undergo their works, you know what I mean? It was – yes, it was no longer required by us, so it had been requested if we could just – if it could remain for the purpose of their concrete works, so.”

26. Mr O'Connor agreed that the price for the hire of the crane and operator had been agreed before Bothar’s use of the crane commenced.⁵ The following exchange occurred in cross-examination:⁶

“No. Okay. Now, at the time that Bothar asked to hire the crawler crane and Ausipile agreed to that, there was no formal subcontract provided?---For the hire of the crane?

Yes?---No.

No indication that it would be a separate contract?---No.

No indication that it would be subject to terms different from those in the subcontract?---No.

No indication that it would be a different subcontractor at all?---There was no different subcontract.

And because there was no different subcontract, … Bothar didn’t complain when it got payment claim 6 and saw that the claim for a variation for the crawler crane was included?---No.”

Consideration – crawler crane hire a variation?

27. Bothar’s contention was that the crane hire was a separate contract, quite distinct from the subcontract between Bothar and Ausipile. For that reason it argued that payment claim 6 was not a valid payment claim because it related to two different contracts.

28. In determining the nature of the agreement made between Ausipile and Bothar in respect of the crawler crane, the court seeks to determine in an objective way the presumed intention of the contracting parties. The court examines all the relevant indicia, including the communications and the context in which they occurred.

29. The context in which the exchange concerning the hire of the crawler crane can be summarised as follows. Ausipile and Bothar were commercial contracting parties in the construction industry. On 14 November 2018 they entered into a formalised subcontract agreement.⁷ That subcontract contained detailed provisions governing matters relevant to the relationship between the two parties, including:(a)a stipulation as to when payment claims would be made, and paid; payment claims had to be submitted on the twenty-second day of the month to which the claim related, to be paid within 30 days;⁸(b)insurance was specified in respect of workers compensation, public liability, professional indemnity and subcontractors’ plant and machinery;⁹ for subcontractors’ plant and machinery the limit of cover was $9,785,000 under an identified policy with an expiry date of 8 July 2019;(c)all other expiry dates for insurance were 8 July or 30 September 2019;(d)Ausipile was responsible for the provision of piling rig, plant and specialist crew for the drilling work;¹⁰(e)by clause 1.1, Ausipile’s work was to be carried out in accordance with the provisions of the subcontract agreement, and the provisions of Bothar’s head contract, to the extent they were relevant to the performance of the subcontract work and were incorporated by reference;¹¹(f)by clause 3.1, Ausipile was required to vary the work as required by Bothar, but would not be entitled to claim extra payment for any variation not authorised in writing;¹² clause 5.2 obliged Ausipile to ensure that the persons engaged by it were to be “careful, skilled and experienced in their respective trades and calling”;¹³(g)clause 6 obliged Ausipile and its employees and subcontractors to be familiar with and comply with all rules and regulations in force at the worksite, and Ausipile had to provide equipment required in accordance with those rules and regulation;(h)clause 7 obliged Bothar to make payment in accordance with the terms of the subcontract, and required Ausipile to provide Bothar with evidence that wages owing to employees engaged in the work had been paid, and that all statutory and insurance obligations had been met;(i)clause 8.1 contained an indemnity by Ausipile in favour of Bothar, against all losses, liabilities, claims and expenses which might arise from the death of or injury to any person, and the loss or damage to the property of any person, arising out of or in connection with the performance of the work;(j)under clause 8.3, Ausipile had to maintain employer’s indemnity and workers compensation insurance covering liability, including common law liability, to employees of Ausipile, as well as public liability insurance covering liability to any third party for death, bodily injury, loss of or damage to property arising out of any act or omission in the performance of the work;(k)clause 8.3(d) obliged Ausipile, at its own cost, to insure its plant and equipment;(l)clause 8.7 contained a separate indemnity from Ausipile to Bothar in respect of liability, loss or expense arising out of a failure on Ausipile’s part to comply with its obligations under clause 8.

“[T]he correct approach is to consider the nature of the work to be performed and whether the agreement constituted a separate agreement or a variation.”²⁰

39. The nature of the work to be done had to be seen in light of the ability of Bothar to unilaterally vary the work under clause 3.1. Whether the agreement constituted a separate agreement or a variation merely states the question to be answered rather than providing the answer itself.

40. In my respectful view, the parties contracted on the basis that the crane hire was a variation to the existing subcontract. The conclusion that it was a separate contract was, therefore, in error.

Notice of contention – misleading or deceptive conduct

41. Before the learned primary judge Bothar contended that Ausipile engaged in misleading or deceptive conduct causing Bothar to not submit its payment schedule in response to payment claim 6. That defence failed, and Bothar seeks to uphold the decision below on that ground, which is the subject of its notice of contention.

42. The issue as framed below was whether Ausipile, by its conduct between 26 April 2019 and 14 June 2019, represented to Bothar that:(a)Bothar was not required to deliver a payment schedule in response to payment claim 5 or payment claim 6 as required by s 76 of the Act; and(b)Bothar was not required to assess or pay payment claim 5 or payment claim 6 until the completion of the excavation of the shaft; and(c)Ausipile would not enforce its rights in respect of payment claim 5 or payment claim 6 under the Act.

43. The second issue was that if that representation was made, did Bothar rely upon it in failing to deliver a payment schedule in response to payment claims 5 and 6.

44. The background to this issue arises under s 75 and s 76 of the Act. Section 75 provides how a payment claim must be made and, relevantly, it must be given before the end of whichever of the following periods is longest, namely:(a)the period worked out under the construction contract; and(b)six months after the construction work to which the claim relates was last carried out.

45. Section 76 of the Act makes provision in respect of a response to a payment claim, by the giving of a payment schedule:

“76 Responding to payment claim

(1)If given a payment claim, a respondent must respond to the payment claim by giving the claimant a payment schedule within whichever of the following periods ends first—

(a)the period, if any, within which the respondent must give the payment schedule under the relevant construction contract;

(b)15 business days after the payment claim is given to the respondent.

...

(2)However, the respondent is not required to give the claimant the payment schedule if the amount claimed in the payment claim is paid in full on or before the due date for the progress payment to which the payment claim relates.”

46. The consequences for failing to give a payment schedule are set out in s 77 of the Act:

“77 Consequences of failing to give payment schedule

(1)This section applies if a respondent given a payment claim does not respond to the claim by giving the claimant a payment schedule as required under section 76.

(2)The respondent is liable to pay the amount claimed under the payment claim to the claimant on the due date for the progress payment to which the payment claim relates.”

The relevant conduct

47. On 26 April 2019 Mr Godden and Mr O'Connor had a conversation. At that point progress claim 5 had not been received, but both parties knew it shortly would be.

48. Mr O'Connor gave evidence that Bothar had no confidence, at that point, that the secant pile wall would be able to retain soil and water once excavation began. According to him, Bothar expected that there would be significant defects in the secant pile launch shaft which would require rectification once excavation started.²¹ Mr O'Connor said that because of the defective state of the launch shaft, Bothar formed the view that it should not have to undertake any further assessment or payment of the next progress claim (progress claim 5) or any future progress claims pending excavation of the launch shaft and resolution of the issues that were currently onsite.²²

49. On 26 April Mr O'Connor called Mr Godden. He could not recall the exact words of what was said, but only had a recollection of the substance and effect of what was said.²³ During the conversation Mr O'Connor said words to this effect:²⁴(a)that Bothar urgently required a defects response plan so that any defects encountered during the excavation could be rectified as swiftly as possible; and(b)that Bothar would hold Ausipile’s progress claim 5 and future progress claims pending completion of the excavation of the shaft.

50. According to Mr O'Connor, he could recall telling Mr Godden (in words to this effect) that Bothar holding progress claim 5 and future progress claims “was due to our expectation that there would be significant and extensive defects in the secant pile launch shaft once excavation began and which would require significant remedial action”. He told Mr Godden that Bothar would not assess any claims made by Ausipile, or pay any claims, until the issues had been resolved.²⁵

51. According to Mr O'Connor Mr Godden responded with words to this effect: “Ok I understand, I know where you are coming from”.²⁶

52. Mr O'Connor said Mr Godden did not disagree with Bothar’s position, and said that Ausipile agreed to provide a defects response plan. Mr O'Connor said he would be sending a letter to Mr Godden to confirm Bothar’s position.

“As discussed between Mr Kieran O'Connor and Mr Matt Godden, Bothar will hold Ausipile’s Progress Claims 5 and 6 pending the satisfactory completion of the shaft excavation.”

55. Progress claim 5 was sent to Mr O'Connor on 30 April 2019.

56. Mr Godden’s response, in affidavit form contained these components:³⁰(a)Mr O'Connor did not mention any specific amount of money or make reference to any specific payment claim in the course of the telephone conversation;(b)Mr O'Connor mentioned that Bothar felt they needed to withhold some money from upcoming progress claims for potential rectification works if required during the excavation process; however, at no time did Mr O'Connor mention any specific amounts of money to be withheld, nor was the withholding of the entire progress claim 5 ever referred to;(c)at no time did he (Mr Godden) ever accept or agree or say anything to the effect of agreeing to the withholding of any payment, as he was not authorised to make such decisions;(d)he could not recall the exact words he used to respond, but it was to the effect of: “Ok. I hear what you are saying”.

57. In his next affidavit Mr O'Connor disagreed with Mr Godden’s account,³¹ and referred to his letter which, he said, “set out the position which in my view had been accepted during the conversation”.³²

Legal principles – misleading or deceptive conduct

58. Bothar bore the onus of establishing the defence based on misleading or deceptive conduct, and the entitlement to relief under s 238 of the Australian Consumer Law in schedule 2 of the Competition and Consumer Act 2010 (Cth). Section 18 of the ACL prohibits misleading or deceptive conduct:

“18 Misleading or deceptive conduct

(1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

59. It is possible that silence can constitute misleading or deceptive conduct, when assessed in the context of other relevant circumstances. As was said in Demagogue Pty Ltd v Ramensky³³ where, having noted that if silence would be misleading or deceptive then s 18 obliged disclosure, Black CJ said:

“To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of ‘mere silence’ or of a duty of disclosure can divert attention from that primary question. Although ‘mere silence’ is a convenient way of describing some fact situations, there is in truth no such things as ‘mere silence’ because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.”

60. In Demagogue similar comments were made by Gummow J³⁴ when his Honour referred to the limitation that:³⁵

“Unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.”

61. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd³⁶ the High Court observed that the language of a “reasonable expectation of disclosure” was not statutory but indicated an approach to the characterisation of conduct consisting of or including non-disclosure of information.³⁷ That characterisation of conduct, in commercial dealings, will be undertaken by reference to its circumstances and context:³⁸

“Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52.”

The conversation between O'Connor and Godden

62. The learned trial judge found that even on Mr O'Connor’s evidence the response by Mr Godden of, “Ok I understand, I know where you are coming from”, could not be seen as an acceptance of Bothar’s position.³⁹ Mr Sullivan QC, appearing with Mr Mitchenson for Bothar, contested that finding, submitting that this Court is in as good a position as the trial judge in assessing the findings as those findings “are not likely to have been affected by impressions about credibility or reliability”.⁴⁰ He submitted that it was reasonable for Mr O'Connor to construe the response as agreeing with his position, and that the word “okay” had a natural meaning as an exclamation which communicates agreement.

63. The two versions of what were said were accompanied by natural difficulties. Neither Mr O'Connor nor Mr Godden could remember the exact words that were said, and each describe the response “with words to the effect”. Mr O'Connor had it as, “Ok I understand, I know where you are coming from”. Mr Godden had it as, “Ok. I hear what you are saying”.

64. The context in which the response was made tells heavily against it being a communication of acceptance of Bothar’s position or being understood by Mr O'Connor as a communication of acceptance of that position. According to Mr O'Connor he told Mr Godden that Bothar:(a)would hold Ausipile’s progress claim 5 and future progress claims pending completion of the excavation of the shaft, which was work that Bothar had to perform under its head contract;(b)that was because of Bothar’s expectation that there would be significant and extensive defects in the secant pile launch shaft once excavation began; and(c)as a consequence Bothar would neither assess any claims or pay any claims made by Ausipile until the defects issues were resolved. In other words, according to Mr O'Connor Bothar was announcing that it would cut off all payments immediately, and no such payments would be made until an indeterminant time in the future when anticipated defects were resolved. Given that Bothar and Ausipile were commercially contracting parties, involved in a substantial construction contract in which there were issues between them, and there is no suggestion that Ausipile was acting other than in its own interests, it beggars belief that Mr Godden would signify acceptance of a proposition that no payments at all would be made until an indeterminant time in the future.

65. In context, on either version of the conversation, the word “okay” could not have conveyed acceptance. The compelling finding is to the contrary, that all it signified was that Mr Godden understood what was being said even though he did not agree to it.

66. The second finding challenged was her Honour’s finding that Mr O'Connor’s letter of 1 May 2019 did not convey that Bothar believed that the parties had agreed that Bothar was not required to serve a payments schedule. In this respect several points were made. The first was that the letter reflected Mr O'Connor’s subjective understanding that an agreement had been reached in the 29 April 2019 conversation. This was said to be drawn from the ordinary text of the letter in context (a letter from one builder to another) as well as deriving some support from a conversation between Mr Yoon (Ausipile’s commercial manager) and Mr Godden in the aftermath of having received the letter. Having received the letter Mr Yoon questioned Mr Godden who “denied that there was any such discussion or arrangement with Mr O'Connor”. It was submitted that Mr Godden (and Mr Yoon, if that mattered) substantially treated the letter as communicating that Mr O'Connor believed there was an agreement or arrangement for Bothar to hold the payment claims.

Was the payment claim invalid?

73. I have earlier determined that the hire of the crane was under an arrangement that constituted a variation to the building contract. That being so, payment claim 6 was a claim, which on its face, included two distinct components, each made under the same contract. The first component was the amount of $596,777.73 contained in the first schedule to the payment claim.⁴⁵ The second component was the sum $81,500 claimed under the two schedules entitled “Variation Worksheet”.⁴⁶

74. However, Bothar contended that if the crane hire was not, in fact, a variation to the construction contract, but a second contract between it and Ausipile, payment claim 6 was invalid because it related to more than one contract. The parties joined issue on this contention, both below and before this Court.

75. Before turning to authority concerning this issue, it is necessary to consider the legislative provisions that are relevant.

76. Section 70 of the Act provides for the right to a progress payment in these terms:

“70 Right to progress payments

From each reference date under a construction contract, a person is entitled to a progress payment if the person has carried out construction work, or supplied related goods and services, under the contract.”

77. The term “reference date” is defined in s 67 of the Act, relevantly as follows:

“67 Meaning of reference date

(1)A reference date, for a construction contract, means—

(a)a date stated in, or worked out under, the contract as the date on which a claim for a progress payment may be made for construction work carried out, or related goods and services supplied, under the contract; or

(b)if the contract does not provide for the matter—

(i)the last day of the month in which the construction work was first carried out, or the related goods and services were first supplied, under the contract; and

(ii)the last day of each later month.”

78. In the present subcontract between Bothar and Ausipile, the reference date was the twenty-second day of the month to which the claim relates.⁴⁷

79. The Act also defines what a payment claim is, see paragraph [12] above.

80. The Act contains provisions which define the amount of a progress payment (s 71) and the due date for payment (s 73). Section 75 then governs the making of a payment claim. It relevantly provides:

“75 Making payment claim

(1)A person (the claimant) who is, or who claims to be, entitled to a progress payment may give a payment claim to the person (the respondent) who, under the relevant construction contract, is or may be liable to make the payment.

…

(4)The claimant can not make more than 1 payment claim for each reference date under the construction contract.

(5)A payment claim may include an amount that was included in a previous payment claim.”

81. Bothar’s contention starts by accepting that on its face payment claim 6 referred to one subcontract. That was a pragmatic acceptance because nothing in payment claim 6 suggests that the $81,500 claimed for crane hire was otherwise than under a variation to the subcontract. However, Bothar contended, both at first instance and before this Court, that if in reality the reference to a variation was wrong, and the crane hire was a separate contract, then payment claim 6 was invalid because it related to two contracts and not one.

82. Implicit in Bothar’s contention is the proposition that the parties on either side of a payment claim can litigate the issue of whether part of the payment claim is, as a matter of fact, under a different contract and do so before the matter reaches adjudication. On Bothar’s contention, because the payment claim would be invalid, it does not matter that there is no response to it by way of a payment schedule under s 76, and no consequences under s 77 if no such response is given.

Construction of the provisions

83. At the heart of the parties’ contentions is the proper construction of s 68 and s 75(1) of the Act, which govern what a payment claim is and how a payment claim is made. Resolution of that issue impacted on the essential point of departure between the parties, namely whether the payment claim was invalid because it referred to more than one construction contract.

84. The objects and purposes of the legislation must be considered when construing those provisions. The proper approach has been often reinforced by the High Court in cases such as Project Blue Sky Inc v Australian Broadcasting Authority.⁴⁸ It requires that consideration focus on the text of the provision, in context.

85. It is well established by Project Blue Sky that:⁴⁹

“The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined ‘by reference to the language of the instrument viewed as a whole’.”

86. Further, as was said in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue:⁵⁰

“This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. ... The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.”

87. The main purpose of the Act is to help people working in the building and construction industry in being paid for the work they do: s 3(1). That purpose is to be achieved by: (i) granting an entitlement to progress payments even if the contract does not do so, and (ii) establishing a procedure for making payment claims, responding to payment claims, adjudication of disputed claims, and recovery of the amounts claimed: s 3(b) and (c).

88. Chapter 3 of the Act contains a set of provisions governing progress payments and their recovery. Within that Chapter Division 2 contains the suite of provisions relating to making and responding to a payment claim, and the consequences which follow if a response is not made under the Act.

89. There are a number of matters to note about the provisions which I have set out above.

90. Section 70 makes provision for the entitlement to a “progress payment” under a construction contract. It does not deal with payment claims as such. All it provides is that from each reference date (that being a date stated or worked out under the contract, or the last day of each month) someone who has done construction work under a construction contract is entitled to a progress payment.

91. The term “payment claim” is relevantly defined in s 68 as being a written document which identifies the construction work to which the progress payment relates and states the amount of the progress payment “that the claimant claims is payable”. Notable in those words is the fact that a payment claim merely sets out the amount that is claimed to be payable.

92. The making of a payment claim is governed by s 75 of the Act. Notably, it provides that a person may give a payment claim not only if they are entitled to a progress payment, but also as if they claim to be entitled to a progress payment. Were that not self-evident on the face of its own terms, it is reinforced by the concluding words of s 75(1), which enable a payment claim to be given to somebody who, under the relevant construction contract, is liable to make to the payment or may be liable to make the payment.

93. The terms of s 75(1) are inconsistent with absolute entitlements being established the moment the payment claim is given. It comprehends someone who claims to be entitled to a progress payment and who gives the payment claim to someone who may be liable to make the payment.

94. Section 75(4) provides that claimant cannot make more than one payment claim for each reference date under the construction contract. But this says nothing about the validity of a payment claim which is actually made, except if the payment claim under consideration is not the first payment claim for that reference date.

95. The Act requires that someone who receives a payment claim give a response to it in a particular way (see section 76 extracted above at paragraph [45]).

“69 Meaning of payment schedule

A payment schedule, responding to a payment claim, is a written document that—

(a)identifies the payment claim to which it responds; and

(b)states the amount of the payment, if any, that the respondent proposes to make; and

(c)if the amount proposed to be paid is less than the amount stated in the payment claim—states why the amount proposed to be paid is less, including the respondent’s reasons for withholding any payment; and

(d)includes the other information prescribed by regulation.”

97. When the definition of “payment schedule” is read into s 76(1)⁵¹ it becomes evident that a person who receives a payment claim is obliged to respond to it, within the relevant time frames, by giving a document that identifies the payment claim, states what payment is proposed to be made, and why if it is less than the amount claimed.

98. The mandatory obligation to respond to a payment claim identifying the basis upon which it is proposed to make a payment less than the amount claimed, tells against the proposition that the Act comprehends the resolution of issues such as Bothar would suggest, at a stage earlier than arbitration.

99. The consequences of failing to give a payment schedule in response are set out in s 77(2). It makes the respondent “liable to pay the amount claimed under the payment claim”. And, s 68 defines the “claimed amount” as the amount in the payment claim which “the claimant claims is payable”. Further, if a payment schedule is not given and the amount is not paid,⁵² the claimant can sue for the amount claimed under the payment claim and recover it as a debt: s 78(2) and (5)(a). Finally, in the proceedings to recover the claimed amount as a debt, the respondent is not entitled to bring a counterclaim or “raise any defence in relation to matters arising under the construction contract”: s 100(3).

100. Nothing in s 75(1) suggests that the respondent to a payment claim can simply ignore the payment claim or the statutory obligation to respond under s 76(1), by contending that issues such as whether the payment claim is truly under one contract should be first litigated to finality. The whole scheme of the Act is designed to enable compulsory and fast payment to subcontractors, with issues to be determined at a adjudication rather than by traditional litigation.⁵³

101. With those provisions in mind, one can direct attention again to payment claim.⁵⁴ On its face, it asserts that it is a payment claim in respect of the project entitled “1520-001 Quota Park Launch Shaft Secant Piling”, and identifying the job number as “J18-39”. It then lists the original contract sum plus approved variations, the amount claimed to date and the amount of “This Claim” which, in turn, itemises the two components of payment claim 6. The second of those components is claimed as “Variations as per Register (Attached)”. The attached registers deal with two sets of variations, each claimed under the same project name and job number and described as “VA No 1” and “VA No 2”. Variation 2 consists of the wet hire of the crawler crane. That schedule concludes with the description “Value of Variation Submitted” in the sum of $21,500.

“Therefore she characterised the payment claim as comprising at least three distinct claims based on at least three different ‘contracts’ covering the work performed pursuant to the accepted work orders under the Period Subcontract, the ‘do and charge’ work and the claim for the soccer sponsorship. She submitted that the conjunction of s 12 and s 17 had the effect that a payment claim must relate to only one construction contract in reliance on a decision of McDougall J in Rail Corporation of NSW v Nebax Constructions. His Honour’s conclusion is as follows:

‘It seems to me that, because s 13(5)6 prevents (with a presently irrelevant exception for which subs (6) provides) the service of more than one payment claim per reference date per construction contract, and because the right to adjudication “of a payment claim” is clearly referable to a payment claim that complies with the various requirements of s 13, there can only be one adjudication application for any particular payment claim for any particular contract.’”

106. Douglas J reached the conclusion that the payment claim could not be described as one being made under a single construction contract and adopted the passage in Rail Corporation of NSW v Nebax Constructions.⁵⁷ However, it must be noted that in doing so there was no examination of the proper construction of the then applicable section governing a payment claim.⁵⁸ Further, Matrix Projects involved a payment claim, which on its face, made claims under three distinct contracts. Because the payment claim covered more than one contract or arrangement it was held that it did not satisfy s 17, and as a consequence the adjudicator’s decision was void on the basis that the payment claim itself was invalid.⁵⁹

107. It is of interest to note that in respect of the claim for the soccer sponsorship, Douglas J held that its inclusion in the payment claim did not deprive the adjudicator of jurisdiction. His Honour said:⁶⁰

“The argument for the first respondent was that all that was necessary was that the party undertake to carry out ‘some’ construction work and that the inclusion of the claim for the soccer sponsorship did not deprive the adjudicator of jurisdiction. I am inclined to accept that submission on the basis that it should be possible to treat the inclusion of such an obviously erroneous item in a payment claim as not depriving an adjudicator of jurisdiction. The jurisdiction is to determine the extent and value of the construction work under s 26 and the inclusion of a claim for an obviously irrelevant item for what is not construction work does not deprive the adjudicator of that jurisdiction.”

108. The construction adopted in Matrix Projects has been followed in NSW in a number of decisions,⁶¹ and most recently in Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd.⁶²

109. In Acciona, an adjudicator’s decision was challenged on a number of grounds, one of which was that the payment claim was invalid because it covered work under more than one contract. The parties had entered into a written goods supply agreement (GSA) for the supply and delivery of concrete. After the substantive works for which that concrete was required had been completed, Acciona continued to be engaged in the project, remedying defects, and continued to buy concrete from Holcim but in limited quantities. The GSA contained terms requiring the issue of purchase order for each order of concrete. Clause 2(c) of the GSA provided that “Upon the issue of a Purchase Order a separate contract will come into existence between the D&C Contractor and the Supplier on the terms set out in this Agreement”. Over the life of the GSA, Acciona issued some 12,500 purchase orders and Holcim directed 36 payment claims to Acciona.

110. The challenged payment claim contained two components. The first was just over $1m for newly claimed measured works over two separate periods, at least one of which had not been previously charged. The second was about $1.7m for works in five previous payment claims. A payment schedule was delivered in response and Holcim lodged its adjudication application. In its adjudication response, Acciona raised a jurisdictional issue, contending that the adjudicator did not have jurisdiction because the payment claim was for multiple purchase orders, which consisted of separate contracts. That contention was upheld by Hammerschlag J:⁶³

“The Adjudicator had no jurisdiction because the Payment Claim was invalid and ineffective to engage the operation of the Act. By the parties’ express agreement in cl 2 of the Agreed Terms, each time a purchase order was issued, a separate contract came into existence between Acciona and Holcim on the terms set out in the GSA. Each such contract was governed by terms contained in the overarching GSA instrument, which terms became incorporate in every subsequent separate contract, but each time Acciona placed a purchase order, a separate contract for discrete work with a separate payment date came into existence.”

111. In Acciona, Hammerschlag J relied upon the conclusion in Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd⁶⁴ where McDougall J dealt with a payment claim which relied upon a “variety of different types of contract for construction work”, holding that it was invalid for that reason.⁶⁵

112. Two things should be noted about Acciona. The first is that there was no contention in that case that Nebax, Matrix or Trinco were wrongly decided. The second is that Acciona involved a payment claim which, on its face, identified more than one contract as the basis for the claim.

113. In TFM Epping Land Pty Ltd v Decon Australia Pty Ltd,⁶⁶ the NSW Court of Appeal recently considered questions arising about a payment claim, where claims within it were not claims under the construction contract, but quantum meruit claims. The payment claim stated that it was a claim for “works completed in the Project performed in accordance with the building and construction contract”.⁶⁷ The amount claimed was broken down in to a “Contract Sum” and an amount for “Variations”, the latter being set out in a table to the payment claim.

114. Basten JA⁶⁸ held that a payment claim in those terms was “a claim for works completed under the contract”.⁶⁹ His Honour continued:⁷⁰

“[20] It is possible that the amounts claimed for variations did not properly arise under the contract because, for example, relevant procedural steps had not been followed. However, to pursue that issue would involve raising a defence in relation to matters arising under the construction contract, a course prohibited by s 15(4) of the Security of Payment Act. Had the principals wished to challenge the claim on that basis, they could have done so by way of a payment schedule provided pursuant to s 14, indicating the claimed items intended to be paid and the reason for non-payment of any item not accepted. Such an issue would then have been addressed by the adjudicator appointed to determine any dispute thus arising. However, that course was not taken.

[21] As the primary judge noted, this has long been the accepted understanding of the operation of the Security of Payment Act. In addressing an issue as to the sufficiency of the description of ‘the construction work … to which the progress payment relates’ under to s 13(2)(a), Hodgson JA stated in Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (In liq):

‘[35] It is true that, if a payment claim does not identify the work in a way comprehensible to the respondent to the claim, the respondent will be in difficulty in formulating a payment schedule, and this may give rise to further difficulty in any adjudication proceedings …. But in my opinion, if a respondent is unable to identify some of the work in respect of which a payment claim is made, it can in the payment schedule say it does not propose to make any payment in respect of that work because it cannot identify the work, and because for that reason it disputes that the work was done or done to a standard justifying payment, or was within the contract or within any variation of it, and that any pre-condition to payment was satisfied. If an adjudicator then determined that the work was not identified in the payment claim, presumably he or she would not award any payment in respect of that work; and if the adjudicator determined that it was identified, the adjudicator could address matters put in issue in that general way by the respondent.

[36] That is, I do not think a payment claim can be treated as a nullity for failure to comply with s 13(2)(a) of the Act, unless the failure is patent on its face; and this will not be the case if the claim purports in a reasonable way to identify the particular work in respect of which the claim is made.’”

115. Basten JA also noted that in Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (In liq)⁷¹ a similar conclusion was reached by Ipp JA who stated:⁷²

“… Provided that a payment claim is made in good faith and purports to comply with s 13(2) of the Act, the merits of that claim, including the question whether the claim complies with s 13(2), is a matter for adjudication under s 17 and not a ground for resisting summary judgment in proceedings under s 15. In particular, if no adjudication is sought summary judgment cannot be resisted on grounds that could have been raised by way of a payment schedule leading to adjudication.”

116. In a separate judgment in TFM, Emmett AJA noted that the payment claim included a breakdown of the amount claimed between the “contract sum” and “variations”, each with a different figure. His Honour also noted that the payment claim “stated that it was made for works completed in the Project performed in accordance with the Contract”.⁷³ Then, having noted the contention that the word “variation” could be understood as referring to a quantum meruit claim, which is not recoverable under the Payment Act, his Honour continued:⁷⁴

“There is nothing in the Progress Claim to suggest that the claim for variations was made otherwise than under the Contract. Indeed, the Progress Claim states specifically that they are made under the Contract. Had the Principal filed a payment schedule, which it failed to do, it would have been a matter for an adjudicator to determine whether the amounts claimed were payable under the Contract. There is no evidence to suggest that the claims for ‘variations’ were in respect of work done otherwise than pursuant to the Contract.”

117. The decision in Nebax is, in my view, of no assistance in the present case. Nebax concerned a construction contract where a progress claim was made in the form of attached invoices, each of which said that it was “a payment claim made under the [Act]”. In response Rail Corporation served a separate payment schedule in respect of each of the invoices. Then, Nebax made five adjudications applications, one in respect of each tax invoice and its appropriate payment schedule. An issue arose as to whether there was a jurisdictional issue because there were five separate payment claims and five adjudications applications. McDougall J considered that the structure of the Act made it clear that there should only one application for adjudication of any one payment claim.⁷⁵ The question addressed in that case is therefore well removed from the issue in the present case.

118. Equally, the decision in Trinco is of no utility. At issue in that case, was whether an underlying payment claim was made on or from a reference date under a construction contract. McDougall J determined that issue, which he observed, was “sufficient to dispose of the matter”.⁷⁶ It was only in that context that his Honour then dealt with an alternative argument, namely that the Act did not authorise for a payment claim to be made for work performed under more than one construction contract. However, the payment claim in that case, on its face, made claims under separate subcontracts.⁷⁷ Trinco therefore did not address the issue in the present case, where the payment claim is, on its face, referable to just the one contract.

119. Class Electrical Services Pty Ltd v Go Electrical Pty Ltd⁷⁸ is also of no assistance. The issue there was whether there was one contract the subject of the payment claim or a multitude of contracts, it being accepted that if there were more than one that was fatal. And, no issue was taken as to whether Matrix Projects was correctly decided.⁷⁹

120. In my respectful view, the reasoning in TFM is correct and should be followed. 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. Where a payment claim purports to be made under one contract, it is not rendered invalid simply because at a later time (either during the adjudication or otherwise) it is determined that part of the claim was, in fact, a claim under a different contract. Provided a payment claim is made in good faith and purports to comply with s 75(1) of the Act, the merits of that claim, including questions as to whether it complies with s 75(1), is a matter for adjudication after having been raised in a payment schedule. A recipient of a payment claim cannot simply sit by and raise that point later, if it is not put in a payment schedule in response.

Other contentions

122. In the course of the appeal, there were competing contentions as to whether severance might be available in respect of that part of the payment claim which related to the crawler crane component. In light of the findings made above, it is unnecessary to deal with this issue.

Disposition

123. For the reasons which I expressed above, the appeal should be allowed, the decision below set aside, and judgment entered for the appellant, with interest and costs. There were no separate submissions made as to the question of interest and therefore the parties should be given an opportunity to agree that issue or make submissions on it.

124. I propose the following orders:

Appeal allowed.

Set aside the orders made on 5 March 2021.

Pursuant to s 78(2)(a) of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) judgment be entered for the appellant against the respondent in the amount of $761,296.75.

The parties have leave to make such submissions as they are advised on the question of interest as follows: by the appellant, within 14 days of the publication of these reasons;by the respondent, within 14 days thereafter; andin each case, limited to four pages.

The respondent pay the appellant’s costs of and incidental to the appeal, and the costs of proceeding BS 8953 of 2019.

125. NORTH J: I agree with the reasons for judgment of Morrison JA and the orders proposed by his Honour.

Footnotes

1. To which I will refer as Bothar. ↩

2. To which I will refer as Ausipile. ↩

3. Ausipile Pty Ltd v Bothar Boring and Tunnelling (Australia) Pty Ltd [2021] QSC 39. ↩

4. AB 570 lines 34-37. ↩

5. AB 596 lines 33-37. ↩

6. AB 598 lines 4-19. ↩

7. AB 150. ↩

8. AB 151. ↩

9. AB 152. ↩

10. AB 160. ↩

11. AB 154. ↩

12. AB 154. ↩

13. AB 155. ↩

14. AB 156. ↩

15. AB 156. ↩