Isis Projects v Clarence Street

Supreme Court of NSW|2013-05-29|Before: Hammerschlag J

Introduction 1HIS HONOUR: On 30 June 2011 the plaintiff as Contractor and the defendant as Principal entered into a written construction contract ("the contract") under which the plaintiff agreed to design, supply and commission certain High Voltage Infrastructure at the defendant's mine site at Wongawilli, New South Wales. 2The plaintiff agreed to supply equipment described in a schedule to the contract, identified as Schedule 2. Clause 5.3 of the contract provides that "[t]he price of the Equipment will be the price specified in Schedule 2 and will be payable by the Principal in accordance with clauses 26 and 27." 3Schedule 2 is in the following form: SCHEDULE 2 Pricing and Payment Schedule ITEM DESCRIPTION COST 1 Manufacture, supply and installation of Ampcontrol Supplied Equipment as per Schedule 2: Scope of Work of this contract. The major component break-up as follows: 1a 33kV 25MVA Isolation Substation (1 off) $1,698,129 1b 33/6.6kV 10MVA transportable substation (1 off) MCSet 6.6kV Switchgear (Note that this unit incorporates two (2) separate skid sections) $1,749,390 1c 33/11kV 15MVA transportable substation (1 off) MCSet 11kV Switchgear $1,583,182 1d 6.6kV 3500KVar 3 Step Power Factor Correction Units (1 off). Note that site assembly by others will be required. $254,902 1e 11kV 3500kVar 3 Step Power Factor Correction Units (1 off). Note that site assembly by others will be required. $254,902 1f Transport to site and Unloading of Substation (item 1a) $28,604 1g Transport to site and Unloading of Substation (item 1b) $28,604 1h Transport to site and Unloading of Substation (item 1c) $28,604 1i NER's and Monitors for Auxiliary Transformers (3 sets) $18,000 1j Network Switch and Fibre Termination Panel (item 1a) $8,325 1k Network Switch and Fibre Termination Panel (item 1b) $8,325 1l Network Switch and Fibre Termination Panel (item 1c) $8,325 TOTAL: $5,669,292.00

Note: The above pricing and payment schedule are GST exclusive. Milestone based progress claims for Ampcontrol equipment ($5,669,292.00) only: Concept Design Package 10% Submission of Detailed Design (Sufficient for Fabrication to Commence) 10% Major Fabrication Complete (Switch room structure and Transformers) (Prorata) 30% Factory acceptance testing (Prorata) 20% Delivery to site (Prorata) 20% Mechanical Practical Completion 5% Electrical Practical Completion including final documentation 5% 4Clause 27 of the contract is entitled Invoices. It contains provisions to the effect that the Contractor must deliver invoices to the Principal's representative calculated in accordance with the contract, that invoices must not be issued for supply of the Equipment until it has been delivered, that not more than one invoice is to be issued in any calendar month, that invoices must have supporting documents and that the Principal must refuse or approve an invoice within 14 days. 5On 20 December 2012 the plaintiff rendered an invoice to the defendant for $1,437,445.82 ("the payment claim"). The body of the invoice appears as a schedule to these reasons. 6It is common cause that the defendant failed to provide a payment schedule within the time allowed by s 14(4)(b) of the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"). 7It is also common cause that the defendant subsequently made payments and that the unpaid portion of the plaintiff's claim is $562,390.91 although there is no evidence as to how these payments were appropriated to the payment claim. 8By motion filed on 3 May 2013 the plaintiff seeks under s 15(2)(a) of the Act to recover the unpaid portion of the claim as a debt due to it and moves for judgment against the defendant accordingly.

The relevant sections of the Act 9Section 4 provides that: progress payment means a payment to which a person is entitled under section 8, and includes (without affecting any such entitlement): (a) the final payment for construction work carried out (or for related goods and services supplied) under a construction contract, or (b) a single or one-off payment for carrying out construction work (or for supplying related goods and services) under a construction contract, or (c) a payment that is based on an event or date (known in the building and construction industry as a "milestone payment"). 10Section 8 provides: (1) On and from each reference date under a construction contract, a person: (a) who has undertaken to carry out construction work under the contract, or (b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment. (2) In this section, reference date, in relation to a construction contract, means: (a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or (b) if the contract makes no express provision with respect to the matter-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 the last day of each subsequent named month. 11Sections 13(1) and (2) provide: (1) A person referred to in section 8 (1) 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. (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. 12Section 14(1) provides: (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. 13Section 14(4)(b) provides: (4) If: (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. 14Section 15 provides: (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 (b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract. (3) A notice referred to in subsection (2) (b) must state that it is made under this Act. (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.

The parties' contentions 15Mr Weinberger of counsel appeared for the plaintiff. He submitted that: (a)the plaintiff (the claimant referred to in the Act) had served a payment claim for a progress payment as contemplated by s 13(1); (b)the defendant (the respondent referred to in the Act) failed to provide a payment schedule; (c)under s 14(4)(b) the defendant became liable to pay the claimed amount on the due date for the progress payment for which the payment claim relates; (d)section 15 applies, entitling the plaintiff to recover the unpaid portion of the amount from the defendant as a debt due; (e)these are proceedings under s 15(2)(a)(i) to recover the unpaid portion of the claimed amount; (f)the circumstances referred to in s 15(1) exist, that is the defendant had failed to provide a payment schedule within the time allowed by s 14(4); and (g)the plaintiff is entitled to judgment for the unpaid portion of the claimed amount. 16Mr Gillard, solicitor, appeared for the defendant. During submissions he refined the position taken by the defendant. He submitted that: (a)under s 15(4)(a), judgment in favour of the plaintiff is not to be given unless the Court is satisfied of the existence of the circumstances referred to s 15(1); (b)those circumstances included the serving by the plaintiff of a payment claim as contemplated by s 13(1) and the failure of the defendant to provide a payment schedule; (c)the contract in this case, by way of Schedule 2, specifies events upon which entitlement to payment is based; (d)by dint of s 13, read with the definition of progress payment in s 4 and with s 8, the payment claim had to be for a progress payment, the entitlement to which arose only, on and from one of those contractually specified events; (e)on its face, the payment claim here does not disclose any relationship between the payment sought and any event or date (milestone) described in Schedule 2 of the contract; and (f)thus the Court could and should not be satisfied that the plaintiff had made a payment claim under the Act (to which the defendant had failed to respond). 17Mr Gillard also put that if the Court could not be satisfied of the existence of the circumstance referred to in s 15(1), it followed that the option of recovery under s 15(2)(a)(i) was not available to the plaintiff.

Consideration 18The defendant's submissions cannot be accepted. 19Section 13 applies when a person who claims to be entitled to a progress payment serves a payment claim. Correspondingly he may serve on the person who is or may be liable to make the payment. The express words of the section make it clear that the assertion of entitlement is sufficient to enliven the operation of the Act. 20The plaintiff - whether rightly or wrongly from a contractual point of view - claims such an entitlement. Whilst the payment claim does not reveal the relationship between the amount claimed and any particular provision of the contract, it describes the two components of the claim as Progressive Billing and identifies as the event giving rise to the payment obligation, provision of items of Equipment described in Schedule 2 of the contract. 21Having regard to the defendant's failure to respond, the Court is able to be, and is, satisfied that the circumstances described in s 15(1) have arisen. 22One of the principal underlying philosophies of the statutory scheme is to provide a swift remedy to a claimant who invokes it. 23The defendant had the option of serving a payment schedule, and if ultimately appropriate, an adjudication response raising the contractual issue which it now seeks to raise. But it did not do so. 24Section 15(4)(b)(ii) now precludes it from doing so. The statutory scheme does not permit the respondent to refrain, upon some contractual basis, from providing a payment schedule, but to retain the right in subsequent proceedings to rely upon whatever the contractual issue was: see Isis Projects v Clarence Street [2004] NSWSC 714 at [65]. 25It would be inimical to this philosophy and out of step with the express wording of s 13 for the Court to be required at this stage to become enmeshed in a determination of the contractual efficacy of the plaintiff's claim (or the defendant's response to it): see Consolidated Constructions v Ettamogah Pub [2004] NSWSC 110 at [58] and following.

Conclusion 26The plaintiff is entitled to, and there will be, judgment in its favour for $562,390.91. 27The defendant is to pay the plaintiff's costs of the proceedings. 28The exhibits are to be returned. 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: 04 June 2013

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