Infinity Formwork Group Pty Ltd v Adobe Construction Group Pty Ltd

District Court of NSW|2023-06-20|Before: Mr J

JUDGMENT

This is an application for summary judgment under r 13.1 of the Uniform Civil Procedure Rules 2005 (UCPR). The application is in respect of part only of a liquidated claim brought by the plaintiff for work performed between February and December 2022. The entire claim is in the sum of $454,496.58; the summary judgment application is in respect of a single payment claim constituted by an invoice in the sum of $94,235.24.
The plaintiff contends that its Invoice No. 60, dated 25 August 2022, in the sum of $94,235.24 (the payment claim), constituted a valid payment claim under s 13(1) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act) in respect of a progress payment to which it was entitled under s 8 of that Act. As no payment schedule was served, and no payment in respect of the payment claim was made, the plaintiff says that the defendant became liable to pay the claimed amount pursuant to s 14(4) of the SOP Act.
The defendant denies the plaintiff is entitled to summary judgment for two reasons: first, it says the payment claim is a nullity because it was served at a time when the plaintiff's entitlement to serve a payment claim had been temporarily exhausted. Secondly, it says that it is entitled to an equitable set-off, on which it is entitled to rely in defence inter alia to that part of the plaintiff's claim comprised in the payment claim.

Relevant principles

The principles relevant to the exercise of the discretion to order summary judgment are not controversial. The discretion of the Court to summarily dismiss a claim is to be sparingly invoked: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 (per Barwick CJ); [1964] HCA 69. Put another way, it must be clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99; [1983] HCA 25, or "the case … is so clearly untenable that it cannot possibly succeed": General Steel Industries Inc at 129-130 (per Barwick CJ).
There must be a high degree of certainty about the ultimate outcome of the proceedings if it were to go to trial: Agar v Hyde (2000) 201 CLR 552 at 575-576; [2000] HCA 41 at [57] (per Gaudron, McHugh, Gummow and Hayne JJ). The Court must form a view that the claim would fail if permitted to go to trial, such that it would be an abuse of process for the Court to allow the proceedings to continue: Ke Qin Ren v Hong Jiang (2014) 104 ACSR 149 at 158; [2014] NSWCA 388 at [49] (Barrett, Gleeson and Leeming JJA).
Summary judgment may be obtained for part of a claim: Ottavio v Hayvio Pty Ltd [2011] NSWSC 1125.
Where the application concerns payment claims and payment schedules served under the SOP Act, short points of law or construction may be determined on a final basis: Vannella Pty Limited v TFM Epping Land Pty Ltd [2019] NSWSC 1379 at [60] (Henry J); upheld on appeal in TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 93 (Basten, Meagher JJA and Emmett AJA).
Relevantly, the SOP Act provides as follows.
The definitions in s 4(1) include the following definition: construction contract means a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party
Section 8 provides: A person who, under a construction contract, has undertaken to carry out construction work or to supply related goods and services is entitled to receive a progress payment.
Section 13 relevantly provides: 13 Payment claims (1) A person referred to in section 8 who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (1A) A payment claim may be served on and from the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and on and from the last day of each subsequent named month. (1B) However, if the construction contract concerned makes provision for an earlier date for the serving of a payment claim in any particular named month, the claim may be served on and from that date instead of on and from the last day of that month. … (2) A payment claim - (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and (c) must state that it is made under this Act. … (5) Except as otherwise provided for in the construction contract, a claimant may only serve one payment claim in any particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in that month.
Section 14 relevantly provides: 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.
Section 15 relevantly provides: 15 Consequences of not paying claimant where no payment schedule (1) This section applies if the respondent - (a) becomes liable to pay the claimed amount to the claimant under section 14(4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and (b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates. (2) In those circumstances, the claimant - (a) may - (i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii) make an adjudication application under section 17(1)(b) in relation to the payment claim, and …. (4) If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt - (a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and (b) the respondent is not, in those proceedings, entitled - (i) to bring any cross-claim against the claimant, or (ii) to raise any defence in relation to matters arising under the construction contract.

Facts

The evidence before me establishes the following: 1. On 1 February 2022, the parties entered into a written construction contract with respect to a project at Alexander Avenue, Taren Point, NSW (the Site). 2. The terms of the contract included the following: A. Payment terms are 14 weekdays from the date of invoices issued. Invoices to be submitted by the 25th of every month with 30 payment terms [sic] B. All Payment claims will be made in accordance with the Building and Construction Industry Security of Payment Act 1999 NSW. C. Invoices will be issued for Each level /Stages completed according to the Break Down in this fee proposal. 1. The plaintiff commenced work on the Site by about 2 February 2022. 2. The plaintiff issued a number of invoices to the defendant in connection with its work on the Site. Relevant to the present application are the following invoices: 1. On 25 July 2022, the plaintiff issued Invoice 49 of that date to the defendant by email, in the sum of $17,130.30. 2. On 28 July 2022 at 11.28 am, Mr Stavros sent an email to Mr Yousif in which he stated: Roni, As per my trailing email can you please amend tax invoice 43 to reflect the last payment of $202,719.00 that was made, also please issue a tax invoice of $55,000.00 + GST today for immediate payment. 1. On 28 July 2022 at 12:20pm, Jinan, from the plaintiff, emailed to Mr Stavros three pdfs described as INV00000043Amnded.pdf, INV00000056.pdf and INV00000057.pdf. In the covering email, she stated: As agreed with Roni, below I have attached an amended invoice #43 to reflect the amount paid and I have created an invoice #56 amount of $55,000+ GST to be paid today. As agreed with Roni over the phone the balance of level 2 has been claimed on invoice #57 to be paid by the first week of August. The attached invoices were: 1. Amended Invoice 43 which bore the date 25/05/2022 and was in the sum of $202,719.00 (including GST). 2. Invoice 56 which was dated 28/7/2022 and was in the sum of $60,500 (including GST). 3. Invoice 49 which was dated 25/7/2022 and was in the sum of $17,130.30 (including GST). 1. On 25 August 2022 at 3:21pm, Jinan, from the plaintiff, sent Mr Stavros Invoice 60, which was dated 25 August 2022, and was in the sum of $94,235.24. A Subcontractor Statement was sent under cover of the same email. 1. Each of the above invoices was endorsed with the words: This payment claim is made under the Building and Construction Industry Security of Payment Act 1999 NSW. Please respond to payment claim within 10 business days of issue date. If there is no response, payment for the whole claim is required. 1. The defendant did not serve a payment schedule in relation to any of the above invoices. Relevant to the present application, the defendant has not paid any moneys on account of Invoice 60, in respect of which the plaintiff says the whole amount is due and owing.
The plaintiff commenced the current proceedings on 18 January 2023, and filed an amended statement of claim without leave pursuant to r 19.1 UCPR on 30 January 2023. In the amended statement of claim. the plaintiff seeks payment of the liquidated sums pursuant to several invoices, including those referred to above, as well as separate claims for contract variations the subject of Invoice 76. The plaintiff also advances an alternative claim in respect of variations based on a quantum meruit.
The defendant denies liability, and filed a cross-claim on 11 April 2023. In the cross claim, the defendant advances claims for damages for unrectified defects and repudiation, and seeks restitution for unjust enrichment in respect of payment for a working platform it alleges was never supplied by the plaintiff. It is an unliquidated claim. At paragraph 29 of its defence, the defendant relies on the above matters as establishing an entitlement to a set-off. The set-off is pleaded as a mutual debt (paragraph 29(a)) and under s 21 of the Civil Procedure Act 2005 (NSW) (the "CPA") (paragraph 29(b)).

Issues

There is no dispute that the parties entered into a construction contract. Other than with respect to the contentions raised at paragraph 20(1) below, the defendant does not contest the plaintiff's contention that each of the formal requirements for payment claims under s 13(2) of the SOP Act have been complied with.
The only question before me is whether the plaintiff is entitled to succeed on its application for summary judgment in respect of Invoice 60. The defendant raises two arguments: 1. First, it relies on the fact that Invoice 60, having been issued on 25 August 2022, was within one month of the issue of Invoices 56 and 49 and amended Invoice 43, each of which was issued on 28 July 2022. Accordingly, it says more than one invoice was issued within the one-month period identified in s 13(5) of the SOP Act and Invoice 60 is a nullity. 2. Secondly, it says that its defence of equitable set-off does not fall within the exclusions in ss 15 and 16 of the SOP Act and may be raised in defence to a payment claim. Accordingly, summary judgment is not available as there is a triable issue in respect of liability on the payment claim.

Consideration

As to the first defence raised by the defendant, it encounters an insuperable difficulty in the language of s 13(5) of the SOP Act. As set out above, s 13(5) provides that a claimant may only serve one payment claim in any particular named month.
Section 21 of the Interpretation Act 1987 (NSW) relevantly provides: named month means January, February, March, April, May, June, July, August, September, October, November or December.
The only payment claim served in the named month of August 2022 was Invoice 60. The fact that only 28 - as opposed to 30 or 31 - days had elapsed since the previous payment claims were served is immaterial. It follows that Invoice 60 cannot be a nullity on this basis.
Accordingly, I reject the defendant's first argument.
The second argument relates to set-off. The defence raises set-off in equity and under s 21 of the CPA. As the cross-claim in these proceedings is for unliquidated damages, set-off under s 21 of the CPA, which is only available in respect of liquidated sums, is unavailable: s 21(6). The defendant, therefore, only relies on set-off in equity in opposing in this application.
Equitable set-off exists when a defendant can establish a countervailing claim that absolves it from liability to the plaintiff. It may be distinguished from a counter claim in that it must operate to preclude the plaintiff from enforcing its claim. In HP Mercantile Pty Ltd v Dierckx (2013) 306 ALR 53; [2013] NSWCA 479, Emmett JA, which whom Beazley P (as her Excellency then was) and Meagher JA agreed, considered: 136 For there to be an equitable set-off, the set-off must essentially be bound up with and go to the root of, challenge, call in question, or impeach the title of the claimant. Equitable set-off is available where the party seeking it can show a recognised equitable ground for being, to the relevant extent, protected from its adversary's demand. The mere existence of a cross-claim is not sufficient. There must be some ground for equitable intervention beyond the mere existence of a cross-claim, such that it can be said that the equity of the defendant impeaches the claimant's title to the legal demand being enforced (James v Commonwealth Bank of Australia (1992) 37 FCR 445 at 457 - 458). 137 For example, where a mortgage is granted to a solicitor as security for costs and the mortgagor client has a cross-claim against the solicitor asserting that the costs would not have been incurred had the solicitor conducted himself with integrity, skill and attention, there will be a clear case of equitable set-off. Similarly, a court of equity may recognise a set-off of an unliquidated claim for damages for breach of a building contract against claims for money due under the contract. Again, where a lender promises to provide further advances for a development project and the borrower is unable to complete the development project and repay the advances actually made, equity would allow a set-off of the borrower's damages caused by the lender's failure to make the further advances before the lender would be permitted to enforce its security against the borrower (see James v Commonwealth Bank at 458 - 459). 138 It is not, of itself, an objection to the availability of equitable set-off that either or both of the legal demands is made pursuant to a statute that creates new obligations and rights that give rise to debts or liabilities in unliquidated damages. The question is whether the statute excludes what otherwise would be the operation of equitable set-off upon those statutory debts and liabilities. The claim to set-off must involve an impeachment of the title to the claimant's demand, and not merely the right to obtain judgment on the demand. It is sufficient that the existence of the claimant's demand would not have come about but for the claimant's breaches of duty. It is sufficient if the defendant's set-off complaint against the claimant goes directly to impeach the claimant's demand (see James v Commonwealth Bank at 459). [Emphasis added]
The claimed set-off must, therefore, impeach the claim against which it is raised; it must go to the basis of the plaintiff's right to relief.
The defendant asserts that its equitable set-off defence falls within this formulation. The plaintiff does not dispute this contention. Rather, it says, the fact that it would impeach the right of the plaintiff to relief means that it is a "claim under the construction contract" and must be raised in a payment schedule in order to be relied on by way of defence in these proceedings. As there was no payment schedule served, it says the defence is unavailable.
Mr Adamopoulos, for the defendant, quite properly drew the Court's attention to the decision of Abadee DCJ in Cosmo Cranes & Rigging Pty Ltd v EQ Constructions Pty Ltd [2022] NSWDC 6. That decision also concerned an application for summary judgment on a payment claim where statutory rights and common law claims were both advanced. His Honour dismissed the application for summary judgment on the basis that the proceedings raised a disputed question of fact, which was not capable of determination to the standard necessary for summary judgment to be entered.
Nevertheless, as a matter of completeness, Abadee DCJ went on to consider whether summary judgment on the statutory claim was inapposite on the basis of the defendant's plea of set-off. His Honour said (at [39] to [41]): [39] … points of construction of s 15(4) potentially may arise. The respondent's argument elides consideration of whether properly construed the Act, as a whole, excludes a defence of equitable set-off. With respect, neither party advanced very developed submissions as to whether or not it had that effect. There may be a forceful view that, given the objects of the Act generally, the text and its context, the ouster of defences under s 15(4)(b)(ii) is confined only to a proceeding to the extent that the proceeding concerns the claim based on a statutory debt; but would permit a respondent to run defences to the common law claims. This might be considered more consistent with the objects and purposes of the Act, in context, that a respondent should be required to pay the debt whilst retaining the opportunity, subsequently, to seek the effective recoupment of such payment, along with the opportunity to agitate its own claim for damages in proceeding. [40] Ordinarily, for the purpose of dealing with a novel point in an application of this kind, it would be inappropriate to preclude the respondent from raising contrary arguments to the constructional matters I have raised (especially where they were not argued at length). The constructional point raised by the respondent would not be so groundless that it should be precluded from running it in the trial of this matter. I am especially mindful, in this regard, of the principle alluded to earlier in these reasons about a court's need for caution before peremptorily terminating a proceeding involving novel points of law. [41] Nevertheless, even if there was arguable merit in the respondent's constructional argument whether an equitable set-off could be invoked against a debt sourced in the Act, it remains the position that the respondent did not serve a payment schedule asserting it. On the basis of s 15(4)(b)(ii) of the Act, I accept the applicant's argument that summary judgment would have been available on the debt claim having regard to this point; leaving the respondent with the defence of a set-off (and its cross-claim) in a proceeding which finally determines the parties' rights. In short, it is arguable that a defence of equitable set-off may be raised to absolve the respondent of liability for a valid payment claim, but it must be raised in a payment schedule.
It should be noted that the formulation of the claims in Cosmo Cranes was not before me. It appears from the judgment that the amended statement of claim in those proceedings sought statutory relief under the SOP Act, and in the alternative, contractual damages and restitution on a quantum meruit in respect of the same alleged circumstances.
The defendant in the present proceedings contends that, as payments under the SOP Act are on account only, two related issues arise, which were not debated before his Honour in Cosmo Cranes. First, the statutory purpose of the regimen of payment claims under the SOP Act is to ensure cashflow and not to determine rights on a final basis. The determination of rights under ss 15 and 16 of the SOP Act is provisional, and subject to s 32 of the SOP Act, which provides that nothing in Pt 3 of the SOP Act affects any rights which a party to a construction contract has under that contract.
I do not see any reason to read down the plain words of s 15 of the SOP Act. Judgment on the payment claim does not preclude the defendant from advancing its cross-claim as part of the final determination of the respective rights and liabilities of the parties.
Further, counsel for the defendant relies on the proposition that where a court grants judgment, the cause of action giving rise to the judgment merges with the judgment. From this uncontroversial proposition, it is submitted that an order for summary judgment on the payment claim in respect of Invoice 60: means that at the point of judgment, Infinity's sole cause of action is the judgment itself. Given that Infinity has chosen to mix its claims in one proceeding, Adobe submits that infinity cannot rely on s 15(4)(b) in respect of any of its claims. Accordingly, the equitable set-off applies to this claim.
I do not accept this submission. The claim in respect of Invoice 60 is independent of the claim for variations, which is the sole basis for the plaintiff's quantum meruit claim, and claim in respect of Invoice 76 in the sum of $198,624.80. The claims in respect of each of the other invoices identified in the amended statement of claim, being Invoice 57, in respect of which a liquidated sum of $144,554.30 is sought, and Invoice 66, in respect of which a liquidated sum of $14,320.24 is sought, are factually and legally distinct.
Moreover, r 13.3 UCPR expressly contemplates the continuation of proceedings in respect of any part of the proceedings not disposed of by an order for summary judgment. It provides: If, in any proceedings: (a) a party applies for judgment, and (b) the proceedings are not wholly disposed of by the judgment, the proceedings may be continued as regards any claim or part of a claim not disposed of by the judgment.
In Ottavio v Hayvio, Ward J (as her Honour then was) stated at [8]: Pursuant to Part 13 rule 1 of the Uniform Civil Procedure Rules , the court may give judgment for the plaintiff on its claim or part of its claim where there is evidence on the facts on which the claim or part of the claim is based and there is evidence that there is no defence as to the claim or part thereof (or no defence except as to the amount of any damages claim). Summary judgment may therefore be obtained for part of a claim ( Costain Australia Ltd v State Superannuation Board (unreported Brownie J, 22 February 1991). Of course, a party will not be denied a hearing on the merits unless the absence of a defence is clearly demonstrated, having regard to the tests application in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 and Dey v Victorian Railways Commissioners (1949) 78 CLR 62).
Section 15(4) of the SOP Act precludes reliance on any defence arising "under the construction contract" where a payment schedule has not been served. In my view, the nature of an equitable set-off, which requires the impeachment of the plaintiff's right to relief, will fall within this formulation. In this respect, see Chan v Cresden Pty Ltd (1989) 168 CLR 242 at 249. In my view, the equitable set-off defence arises under the construction contract and, in the absence of being raised in a payment schedule, is not available to the defendant in these proceedings.
Ultimately, the question is whether, as a matter of statutory construction, the set-off claim is a matter "arising under the construction contract" within the meaning of s 15(4). I consider the claimed set-off is a matter arising "under the construction contract" in the sense that the claims arise in accordance with, pursuant to, or by virtue of, the construction contract. Accordingly, it was incumbent on the defendant, if it wished to rely on the defence, to raise it in a payment schedule in accordance with s 14(3) of the SOP Act.
On the basis of the above, I find that the plaintiff has made out its claim for summary judgment in respect of the payment claim constituted by Invoice 60 in the sum of $94,235.24. I will order judgment be entered in that sum on that payment claim.

Costs

As the plaintiff has succeeded, it should be entitled to its costs of the motion, assessed on the ordinary basis. Mr Adamopoulos asked me to reserve on costs and has foreshadowed an application for costs thrown away by reason of the amendment of the motion to reduce the amount sought from $253,109.78 to $94,235.24, and in respect of an adjournment on 13 April 2023. I will, therefore, hear the parties on costs.

Orders

The orders of the Court therefore are: 1. Amended notice of motion dated 1 March 2023 granted. 2. Judgment for the plaintiff in the sum of $94,235.24 in respect of the payment claim constituted by Invoice 60, issued by it to the defendant on 25 August 2022.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 June 2023

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (8 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (16)