Basetec Services Pty Ltd v Leighton Contractors Pty Ltd - [2016] FCA 1587 - FCA 2016 case summary — Zoe

Basetec Services Pty Ltd v Leighton Contractors Pty Ltd - [2016] FCA 1587 - FCA 2016 case summary — Zoe

BESANKO J: 1 Basetec Services Pty Ltd ("Basetec") brought a claim against Leighton Contractors Pty Ltd ("Leighton"). Leighton defended the claim and brought a cross-claim against Basetec. There was a trial of the claim and cross-claim and on 19 December 2016, I delivered reasons for judgment: Basetec Services Pty Ltd v Leighton Contractors Pty Ltd (No 6) [2016] FCA 1534. I directed that the parties be heard as to the form of the orders, interest, GST and costs. Leaving aside the issue of costs, the parties remain in dispute about two issues, one relating to whether interest on GST may be recovered and the other as to the date from which interest is to be calculated. The issue of costs is to be the subject of submissions by the parties on 2 February 2017. 2 Basetec submitted that it was entitled to GST on the judgment sum of $676,211.36, being an amount of $67,621.11. That is not in dispute, but Basetec's entitlement to interest "on GST" is in dispute. I have already decided the issue in favour of Basetec and my reasons for that decision follow. 3 In its claim made at the trial, Basetec subtracted GST from various expenses it claimed, but indicated in its final submissions that, in addition to the claim, it claimed GST. 4 Clause 35.7 of the Works Contract deals with Goods and Services Tax. It is a sub-clause of Clause 35 which deals with Progress Claims and Payments. Clause 35.7 relevantly provides: Terms used in this Clause 35.7 which are defined in the GST Act have the same meaning in this Clause 35.7. Each party acknowledges and agrees that: (a) at the time of entering into the Works Contract, it is registered for GST; (b) it shall promptly provide written evidence of its GST registration if so requested by the other party; (c) it shall indemnify the other party against any loss that may arise from it not being registered for GST; and (d) it shall promptly notify the other party in writing if it ceases to be registered for GST. In respect of payments to be calculated under or in connection with the Works Contract: (e) when calculating the amount payable or other consideration to be provided for a supply, the amounts used in the calculation shall exclude any GST component; and (f) if the Contract Sum is increased or reduced by an amount calculated by reference to a loss, cost or expense incurred by a party, then the amount will be reduced by any input tax credit to which that party is entitled in respect of that loss, cost or expense. For each supply made by a party (Supplier) under or in connection with the Works Contract on which GST is imposed: (g) the consideration payable or to be provided for that supply under the Works Contract but for the application of this Clause 35.7 (GST exclusive consideration) shall be increased by, and the recipient of the supply (Recipient) must also pay to the Supplier, an amount equal to the GST exclusive consideration multiplied by the prevailing rate of GST; and (h) the amount by which the GST exclusive consideration is increased must be paid to the Supplier by the Recipient without set off, deduction or requirement for demand, at the same time as the GST exclusive consideration is payable or to be provided, subject to a valid tax invoice (Tax Invoice) being provided in respect of the GST exclusive consideration. … 5 Leighton submitted that there was no evidence that Basetec had paid the GST and, in any event, it was never entitled to keep it because it would have to account for it. I think the terms of clause 35.7 provide the answer to this argument. Basetec's entitlement is to recover "an amount equal to the GST exclusive consideration multiplied by the prevailing rate of GST". The entitlement to GST is, therefore, not in fact an entitlement to the collection of GST, but rather a contractual entitlement to the sum equivalent to GST. In this case, the GST exclusive consideration is $676,211.36 and, in addition to that amount, Basetec is entitled to recover $676,211.36 x 10%. That is the amount to which interest should be applied. Subject to what I say next, that entitlement arose on the date of termination by reason of the terms of the Works Contract. 6 Basetec claimed interest from the date Leighton terminated the Works Contract which was 20 May 2013. Leighton claimed that interest only became payable from the date the various amounts comprising the total amount of $676,211.36 became due and payable and those dates were fixed by the Works Contract. Again, I have I decided the issue in favour of Basetec and my reasons for that decision follow. 7 Leighton's submission was that, although the amounts do not correspond exactly, amounts which make up the amount of $676,211.36 were the subject of invoices rendered by Basetec and the Works Contract specified the dates upon which the amounts in those invoices were payable (see my earlier reasons at [320]). I reject that submission because the amount of $676,211.36 (and the amount identified in clause 35.7) was due and payable on the date of termination. That follows, in my opinion, from the terms of clause 43 which provide that "upon such termination the Contractor shall be paid …". The liability to pay arose on the date of termination. This approach to the interpretation of clause 43.1 is consistent with the approach I discussed in my earlier reasons (at [349]). I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.