D.R. Design (NSW) Pty Ltd t/as Dickson Rothschild v DK Heathcote Pty Ltd

Category: Principal judgment

Parties: D.R. Design (NSW) Pty Ltd t/as Dickson Rothschild (Plaintiff)
DK Heathcote Pty Ltd (Defendant)

Representation: Counsel:
Mr ARR Vincent (Plaintiff)
Mr SC Ipp (Defendant)
Solicitors:
C J Boyd Solicitors (Plaintiff)
Corrs Chambers Westgarth (Defendant)

File Number(s): 2025/00221073

Publication restriction: None

JUDGMENT

Introduction

1. The plaintiff (“DR”) provided architectural, design, urban planning, and related services to the defendant (“DK”). The services involved the making of two development applications for a large mixed development at 1 Veno Street, Heathcote. This occurred between 8 March 2024 and 23 May 2025.

2. On 14 May 2025, DR served on DK a ‘payment claim’ within the meaning of s 13 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOPA”). The payment claim was in the sum of $237,745.89 (“the Payment Claim”). The Payment Claim was comprised of the outstanding amounts from previously submitted but unpaid invoices, being invoices numbered 4762, 4763, 4788, 4836, 4879 and 4911.

3. It was common ground that the Payment Claim is a valid payment claim under SOPA.

4. Pursuant to s 14 of SOPA, DK was required to serve a ‘payment schedule’ within 10 business days after the Payment Claim was served.

5. DR alleges that DK did not do so.

The Sole Issue for Resolution

6. The only issue in dispute is whether DK can rely on a response which it sent on 21 May 2025 as constituting its ‘payment schedule’. DR says that this document was not served in response to the Payment Claim itself but rather was a document which was only provided in response to Invoice 4911. DR says that, as a consequence, it is entitled to judgment in the sum of $237,745.89.

DR’s Submissions

7. Put simply, DR’s case is that DK’s email of 21 May 2025 replied to a previous email from DR serving Invoice 4911, which was dated 7 May 2025 (and thus was a document which predated the Payment Claim). It says that this is clear as the email only addressed Invoice 4911 and, as such, DR says DK’s response was not a payment schedule for the purposes of s 14 SOPA.

8. More specifically, DR said that the response to Invoice 4911 is not a payment schedule in reply to the Payment Claim, inter alia, as:

(a) The email was not sent in “reply” to the email of 14 May 2025 which provided the Payment Claim (see PX-1 86-87). This, it said, was contrary to s 14(1) SOPA; (b) It does not “identify the payment claim to which it relates” contrary to s 14(2)(a) SOPA. Rather, DR says that it specifically and expressly identifies Invoice 4911 as being the claim to which it related. DR points to the document’s heading which states “This Payment Schedule relates to the Payment Claim Invoice 4911 dated 30 April 2025 and the overall Account of the Claimant pertaining to the 1 Veno St, Heathcote project”; (c) It does not “indicate the amount of the payment (if any) that the respondent [DK] proposes to make” contrary to s 14(2)(b) SOPA. DR notes that the email only states that the claim is for “$47,975.00 (exclusive of GST)” [$52,772.50 including GST] of which it proposed to pay “$0.00”. DR submitted that this makes plain that the response was not identifying the Payment Claim to which DK claims it relates, but rather only identifies Invoice 4911. The submission continues that the email fails to indicate the amount of the payment to be made in answer to the remaining $184,973.39 claimed in the Payment Claim; (d) As no indication is given of the amount of the payment to be made in answer to the remaining $184,973.39 of the Payment Claim, DR said that the response cannot and does not “indicate why the scheduled amount is less” than “the claimed amount”, contrary to s 14(3) SOPA, which is also a necessary consequence of “the claimed amount” being erroneously based upon the single Invoice 4911.

Principles – Payment Schedules under SOPA

9. I did not understand the parties to be in dispute concerning the legal principles which underlie the dispute before me.

10. SOPA must be interpreted consistently with its stated object, which is contained in s 3 of the Act. In Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 (“Probuild*”*), the High Court of Australia explained that:

“[4] The object of the Security of Payment Act is “to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services”.

[5] The means by which the Security of Payment Act ensures that a person is entitled to a progress payment is by ‘granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments’.”

11. The object of the Act is to redress the imbalance between upstream and downstream contracting parties in the construction industry, which industry was known to be rife with poor payment practices and insolvencies. The High Court in Probuild acknowledged that "[c]ash flow is the lifeblood of the construction industry"**, and that “any interruption to the cash flow of a person carrying out construction work is apt to create the risk of financial failure” (at [40]). The Act was “designed to ‘stamp out the practice of developers and contractors delaying payment to subcontractors and suppliers*’”* (at [36]).

12. The Act, the High Court said, is intended to put some of the risk back on the respondent party, in what has been referred to as a “pay now, fight later” type of approach (see Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd [2025] NSWCA 49 per Payne JA at [8]).

13. In Probuild, the High Court confirmed the interim nature of determinations and payments under SOPA at [36]-[44] in the following terms:

“[T]he Security of Payment Act was enacted “to reform payment behaviour in the construction industry” by seeking to ensure that a person who undertakes to carry out construction work under a construction contract is entitled to receive, and is able to recover, progress payments promptly in relation to the carrying out of that work” (at [36]);

“The Security of Payment Act is not concerned with finally and conclusively determining the entitlements of parties to a construction contract” (at [37]);

“The statutory entitlement to a progress payment and the procedure for recovery of a progress payment are separate from, and in addition to, a contractor's entitlement under a construction contract to receive payment for completed work” (at [38]);

“The Security of Payment Act does not speak of "interim" entitlements and payments, but the label aptly reflects how the statutory entitlement interacts with any underlying contractual liability” (at [39]);

“[U]nderpinning the “interim” statutory entitlement is an understanding that “[c]ash flow is the lifeblood of the construction industry”. Put another way, any interruption to the cash flow of a person carrying out construction work is apt to create the risk of financial failure. Consistent with that understanding, the procedure in Pt 3 is designed to operate quickly. So much is apparent from the detailed time limits that apply at each stage and have been described earlier in these reasons. These time limits are “carefully calibrated”. The time limits have been rightly described as imposing “brutally fast” deadlines on the claimant, the respondent and the adjudicator to ensure the prompt resolution of payment disputes” (at [40]);

“[T]he Security of Payment Act creates an entitlement that is "determined informally, summarily and quickly, and then summarily enforced without prejudice to the common law rights of both parties which can be determined in the normal manner" (at [44]).

The Requirements of s 14

14. Against this background, SOPA prescribes the requirements of a payment schedule in s 14. It does so in the following terms:

14 Payment schedules

(1) A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.

(2) A payment schedule—

(a) must identify the payment claim to which it relates, and

(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).

(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 reasons for withholding payment.

(4) If—

(a) a claimant serves a payment claim on a respondent, and

(b) the respondent does not provide a payment schedule to the claimant—

(i) within the time required by the relevant construction contract, or

(ii) within 10 business days after the payment claim is served,

whichever time expires earlier,

the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.

15. DR placed emphasis on the clear and mandatory language used in s 14(2) which states that a payment schedule “must identify” the payment claim to which it relates and “must indicate” the amount of the payment (if any) that the respondent proposes to make. Any failure to comply with these mandatory requirements renders a purported payment schedule invalid.

16. DR said that it is plain from the mandatory language of the statute in s 14(2) that the intention of Parliament is clearly to render generalised non-specific responses nugatory. DR went on to submit that, in the present case, as the wrong payment claim is identified, the response is not a payment schedule.

17. DR further submitted that the reason for the mandatory requirements to which I have referred is plain in light of the “*‘*brutally fast’ deadlines on the claimant” (see Probuild [40]). The legislative regime is designed to ensure that a claimant is absolutely certain as to whether it has received a valid payment schedule. DR contended that if the requisite certainty is not achieved, the procedures under the Act would fail.

18. DR further said that if the respondent can in any way confuse or obfuscate a document so that it can be determined to be either referring to a particular payment claim or to some other payment claim, then the respondent could later seek to defeat the claimant whichever way the claimant elects to proceed.

19. DR explained that the reason for this is that, after 10 business days, the claimant must make an election based on whether it has or has not received a payment schedule. If the claimant has received a payment schedule and wishes to dispute it, then it must apply for adjudication of that claim within 10 business days of receiving the payment schedule (see s 17(3)(c) SOPA), but if it has not received a payment schedule, then it must wait until the due date of that payment claim passes, then issue a notice under s 17(2) SOPA, and only then proceed to adjudication.

20. The claimant also has the option (if a payment schedule is not received) to enforce the claimed amount as a debt in court. An election to do so understandably sacrifices the other options.

21. DR submitted that it is for these reasons that the legislature used the words “must identify the payment claim to which it relates” in the section. It argued that, without the requisite level of clarity, the scheme designed under the Act, would fail. DR submitted that while some lack of formality is permitted in the drafting of the payment schedule, the criteria in the statutory definition of a payment schedule must be satisfied.

22. In Witron Australia Pty Ltd v Turnkey Innovative Engineering Pty Ltd [2023] NSWCA 305 (“Witron”), Kirk JA, with whom Leeming and Payne JJA agreed, held:

“[21] There are thus three criteria for a document to be characterised as a payment schedule:

(1) that it identifies the payment claim to which it relates;

(2) that it indicates the amount of the payment (if any) that the respondent proposes to make;

(3) that it indicates why the payment that the respondent proposes to make is less than the amount claimed, that is, the reason or reasons for the amount claimed not being payable in whole or in part.

[22] The significance of these requirements must be understood in the context of the statutory scheme. If a response to a payment claim does not satisfy the requirements then it is not a payment schedule within the meaning of the Act (which in some cases has been described as not being a “valid” payment schedule). A failure to provide a payment schedule in response to a payment claim within the requisite time means that the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment: s 14(4). The claimant may take steps to recover the amount claimed in a court of competent jurisdiction without the need to go to adjudication: s 15. The claimant may also take steps to suspend carrying out construction work or the provision of related goods and services if the amount claimed is not paid: ss 15(2)(b) and 27.” [Emphasis added]

23. In Style Timber Floor Pty Ltd v Krivosudsky (2019) 100 NSWLR 133; [2019] NSWCA 171 at [45], [47], [48], Leeming JA held:

“[45] [T]he payment schedule serves two important functions under the Act. The first is to inform the claimant as to the metes and bounds of its dispute with the respondent, so that it can make an informed choice as to whether to engage the expedited pro tem adjudication procedures under Division 2. The second is to articulate the respondent’s case which will then be determined by the adjudicator. It will also enable adjudicators to assess whether to accept appointment as an adjudicator to a dispute. At the time an adjudication application is made, all that the claimant and the prospective adjudicator will know of the nature of the respondent’s side of the case is what is contained in its payment schedule.

….

[47] … While it is clear that an abbreviated description, falling short of a pleading, will suffice, the passages emphasised indicate that the payment schedule must sufficiently describe the dispute so as to enable the claimant to determine whether to proceed in the knowledge of the nature of the case it will have to meet.

[48] It is established that even where a respondent proposes to pay no part of a payment claim, it is still required to indicate reasons in accordance with s 14(3): Barclay Mowlem v Tesrol Walsh Bay [2004] NSWSC 1232 at [15]–[16]; Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333 at [24]. That, with respect, must be so having regard to, inter alia, the limiting effect of s 20(2B). It was not suggested in this Court that s 14(3) did not apply to Style Timber Floor on the basis that it refused to pay the entirety of the claim.”

24. Having made the submissions to which I have referred with a degree of generality, DR then made further detailed submissions as to the requirements required of a payment schedule pursuant to s 14 SOPA by reference to the facts of this case. It did so in the following manner.

25. DR pointed out that DK relied upon a document as constituting its payment schedule as being that found at PX-1 68-81 (“Invoice 4911 Response”). DR submitted that, on its face, the Invoice 4911 Response is not a payment schedule in reply to the Payment Claim. This, it said, is apparent from the following:

(a) The “Contract Details” specify:

“PROJECT: 1 Veno St, Heathcote NSW 2233

DATE OF CLAIM: 30/04/2025

RECEIVED DATE OF CLAIM: 07/05/2025 via email from a*******@dicksonrothschild.com.au at approximately 9:30am, as sent to Gavin Duffy and Anthony Vitale

CLAIMED AMOUNT: $47,975.00 (exclusive of GST)

SCHEDULED AMOUNT: $ 0.00 (exclusive of GST)”

DR submitted there can be no doubt from the Contract Details portion of the document that it is not identifying the Payment Claim as being the one to which it relates. Rather the document only refers to the earlier Invoice 4911, as indicated by the “received date of claim” and the “claimed amount”.

(b) In addition, DR submitted that the “Reasons for Withholding Payment” portion of the document also makes plain that the document is only a response relating to Invoice 4911 as the first dot point of the Reasons states, “The issued Invoice 4911 received on 7**th May 2025, is a claim for alleged works between 01/04/2025 and 30/04/2025” (see PX-1 72). Whereas the Payment Claim:

(i) was received on 14 May 2025; (ii) is for invoices for work from 1 October 2024 onwards (see PX-1 88-9).

(c) The “Assessment” portion of the document (see PX-1 80) states unequivocally:

“With the reasoning provided, Invoice 4911 cannot be paid by the Respondent.

The Respondent, DK Heathcote, assesses a scheduled amount of $0.00 pursuant to the above.”

26. In Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333, Chesterman J considered that the express identification of the invoice number was sufficient to identify the payment claim to which it related. DR contends that this analysis leads to a conclusion that DK’s Response is a response only to Invoice 4911, as it is the only invoice identified.

27. For these reasons, DR submitted that DK’s document identifies Invoice 4911 as the claim to which it relates.

28. DR went on to say that where the amount claimed in a Payment Claim is not correctly specified in a document purporting to be a payment schedule, then by definition it follows that no reasons could ever be properly provided for not paying the amount claimed, pursuant to s 14(3) SOPA.

29. DR went on to submit that the Invoice 4911 Response is clearly incomplete as a payment schedule because it does not address the five other invoices comprised in the Payment Claim for work performed from 1 October 2024. It said that, as a consequence, it has no way to understand the nature of the dispute as concerns these parts of the Payment Claim. It is not a proper payment schedule under s 14 SOPA.

30. In that regard, DR referred to the Court of Appeal in Witron*,* which held at [35]:

“[I]n general a failure to provide any reason or reasons directed to a distinct and substantial component of a payment claim will constitute a failure sufficiently to indicate why the scheduled amount is less than the amount claimed for the purposes of s 14(3) of the Act. Such an omission would fail to identify the parameters of the dispute, impeding the claimant being able to make an informed decision as to how to proceed, and impeding the adjudicator in being able to identify what reasons could be raised in the adjudication response.”

DK’s Submissions

31. DK argued that DR’s interpretation of what DK claims to be its payment schedule was unnecessarily restrictive.

32. DK placed emphasis on the fact that its purported payment schedule (“the purported Payment Schedule”) does not refer to Invoice 4911 in isolation. This, it said, is made clear by the words “and the overall Account of the Claimant pertaining to the 1 Veno St, Heathcote project” which appears in the heading of the DK document (see PX-1 71). These words, it said, explicitly expand the purported Payment Schedule’s response to something broader than Invoice 4911. The expanded reference is to “the overall Account of the Claimant pertaining to the 1 Veno St, Heathcote project” (“the Heading Submission”).

33. Secondly, DK argued that the documents which it said comprise the purported Payment Schedule must be viewed as a whole, and not in isolation, and not by ignoring key documents that collectively form the purported Payment Schedule. In particular, it submitted that DR’s submission overlooks the impact of the spreadsheet provided with the purported Payment Schedule which DK submitted formed part of its purported Payment Schedule (“the Spreadsheet Submission”).

Consideration

34. In the Heading Submission, DK places emphasis on the phrase “and the overall Account of the Claimant pertaining to the 1 Veno St, Heathcote project” as effectively incorporating, by reference to the Payment Claim, each of the invoices which constitute the overall account between the parties. I do not accept this submission for at least the following reasons:

35. The use of the word “and” to my mind imports conjunction with Invoice 4911, not a distinction from it.

36. Under SOPA, it is not possible for a payment schedule to identify more than one payment claim. This is so as the legislative language speaks in the singular, not the plural, and it does so in a mandatory manner; that is to say, the payment schedule “must identify the payment claim to which it relates”. The legislation does not permit a payment schedule to identify more than one payment claim “to which it relates”, it must identify “the payment claim” (singular).

37. Further, in my view, the use of the phrase “and the overall Account of the Claimant pertaining to the 1 Veno St, Heathcote project” which appears in the document’s heading is so vague and uncertain that it could never identify any specific payment claim to which it relates. The document does not refer to Invoice 4911 in isolation, rather it is used in conjunction with the opening phrase “This Payment Schedule relates to the Payment Claim Invoice 4911 dated 30 April 2025”**. The effect of this to my mind is a clear indication that the purported Payment Schedule is only identifying that claim in Invoice 4911, and the account pertaining to the project in the context of that claim alone.

38. It seems to me that while Invoice 4911 dated 30 April 2025 is one of the invoices contained in the Payment Claim, it is not of itself the Payment Claim; rather it is a separate and distinct invoice. The Invoice 4911 Response is obviously a response to that invoice and is not intended to be a payment schedule in reply to the Payment Claim. To my mind, it does not identify the Payment Claim in any way.

39. In Denham Constructions Pty Ltd v Islamic Republic of Pakistan (No 2) (2016) 311 FLR 187; [2016] ACTSC 215 (“Denham Constructions”), Mossop AsJ reiterates the importance of the requirement for a valid payment schedule to clearly identify the payment claim to which it relates. In that case, the purported ‘payment schedule’ comprised of an email which stated:

“Under clause H1 of the contract, time for making a claim to adjust the contract, has expired in every instance claimed (20 working days). Therefore your claim to adjust the contract cannot be considered.”

40. Mossop AsJ held at [34]-[35]:

“[34] In my opinion the email does not identify the payment claim to which it relates. That is because it is not directed to the payment claim at all. Rather, it is directed to the claim for a variation which forms one component of the amounts claimed as part of Payment Claim 26. Unlike Minimax, there is no coincidence between the document which is referred to and the contents of the claim. While the amounts claimed as part of DCV075 form a significant component of the amounts claimed as part of Progress Claim 26, that is not sufficient to make it clear that it is a response to the payment claim as opposed to being a communication in relation to another document generated for the purposes of the underlying contract which happened to relate to one component of the payment claim.

[35] While that conclusion is sufficient to dispose of the defendant’s argument I will also deal with the other elements required by ss 16(2) and (3). I do not consider that the document states the amount of the payment, if any, that the respondent proposes to make. Having regard to the terms of the email it would appear that the defendant proposed to make no payment. On the other hand, having regard to the fact that only part of the amounts claimed in the payment claim were addressed, it could be that only those portions of the amount claimed that were based upon DCV075 were refused. In my view, the uncertainty as to what the document was responding to means that it is not possible to draw an inference that the amounts to be paid is nil because significant aspects of the payment claim are not addressed at all, either expressly or by implication.”

41. I gratefully adopt the reasoning of Mossop AsJ in Denham Constructions from which the following emerges:

(a) The Invoice 4911 Response is not directed to the Payment Claim at all, rather it is directed to Invoice 4911 which forms but one component of the amounts claimed as part of the Payment Claim; (b) There is no coincidence between the Invoice 4911 Response and the Payment Claim other than in relation to Invoice 4911 – no other of the invoices comprised in the Payment Claim for work from 1 October 2024 onwards are addressed. (c) The amount claimed in Invoice 4911 does not form a significant component of the Payment Claim. (d) To adopt the words of Mossop AsJ, it is not clear that the Invoice 4911 Response is a response to the Payment Claim “as opposed to being a communication in relation to another document … which happened to relate to one component of the payment claim.”

42. In my view, the words “…and the overall Account of the Claimant…**” are so vague and uncertain they could never identify any specific payment claim*.* In an attempt to meet this argument, DK submitted that the Payment Claim/Statement of Account lists each of the outstanding six invoices by number, date and amount. The reference to the “overall account of the Claimant”, DK submitted, should be understood as a reference to each of the six outstanding invoices listed in the Payment Claim/Statement of Account. Contrary to DR’s submissions, DK argues, the meaning of the reference to the “overall account of the Claimant” is clear and certain.

43. To my mind, the reference to other invoices only serves to confuse the reader. I do not accept this argument, and as such conclude that it does not comply with s 14 SOPA.

The Spreadsheet Argument

44. DK places significant emphasis on the Spreadsheet which was provided at the same time as the purported Payment Schedule. Mr Ipp of Counsel, who appeared for DK, said that the Spreadsheet was incorporated by reference to what he considered was the Payment Schedule. As I understood the argument, it was that DK relied on the Spreadsheet to provide the requisite certainty to the vague words “and the overall Account of the Claimant*”**,* in the heading where these words appear.

45. Mr Ipp conceded that his analysis of the Spreadsheet was fundamental to his case. I do not accept Mr Ipp’s arguments with respect to the Spreadsheet.

46. More specifically, I do not accept that the Spreadsheet is in fact incorporated by reference into the purported Payment Schedule. I believe this is clear from the fact that the author of the purported Payment Schedule complains about paying DR “to fix their own errors” (see PX-1 205). He states:

“The Respondent has not received any value of the monies paid to date, let alone the ludicrous fees being charged from the Claimant to fix their own errors in their submission, being this Invoice, as well as those identified within the attached spreadsheet of account.”

47. To my mind, this is not incorporating the Spreadsheet by reference for the purpose of it being a payment schedule, rather it is saying that the Spreadsheet illustrates DK’s complaints about DR’s errors which go beyond the complaints referrable to Invoice 4911, and the references to the other invoices in the Spreadsheet is indicative of the same problem as the author considers besets Invoice 4911. It is thus my view that the Spreadsheet is not incorporated by reference into the purported Payment Schedule thus drawing all of the other unpaid invoices into the orbit of the purported Payment Schedule.

48. In my view, the conclusion that the Spreadsheet was not incorporated by reference into the purported Payment Schedule is fatal to DK’s case. In that regard, I also note that the author of the DK response does not say that DK cannot pay all of the outstanding invoices referred to in the Spreadsheet, rather he says in a most unequivocal way: “with the reasoning provided, Invoice 4911 cannot be paid by the Respondent” (see PX-1 206).

49. Mr Ipp patiently took me through the Spreadsheet to show that it was capable of being understood as referring to unpaid invoices other than Invoice 4911. Without Mr Ipp’s assistance, I would have been incapable of coming to that conclusion myself. Mr Ipp, however, said the Spreadsheet would be readily understood by a building industry professional. There was no evidence adduced to that effect and I doubt the relevance of the assertion in any event.

50. In my view, much intellectual effort would be required to understand the purported import of the Spreadsheet. As I have indicated, the authorities have made clear that a valid payment schedule must identify the matters with a degree of readily accessible clarity. The Spreadsheet does not do this.

51. Thus, in my view, the Spreadsheet even if it is incorporated in the payment schedule (which I do not find) would not have the requisite clarity to satisfy the requirements of s 14 SOPA.

Conclusion

52. I thus accept DR’s submissions and reject those of DK. As a consequence of the foregoing, there should be Judgment and verdict for the plaintiff against the defendant.

53. Costs should follow the event.

Orders

54. The Court orders:

55. That there be Judgment and verdict for the plaintiff against the defendant in the sum of $237,745.89.

56. Interest thereon at the rates pertaining from time to time pursuant to s 100 of the Civil Procedure Act 2005 (NSW).

57. That the defendant pay the plaintiff’s costs.

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