Kennedy Civil Contracting Pty Ltd (subject to a Deed of Company Arrangement) v Total Construction Pty Ltd

District Court of NSW|2023-08-10

Pty Ltd [2010] NSWSC 1246 Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd [2023] NSWSC 309 Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1 Seymour White Constructions Pty Ltd v Ostwald Bros Pty Ltd (2019) 99 NSWLR 317 Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340 Style Timber Floor Pty Ltd v Krivosudsky [2019] NSWCA 171 Thiess Pty Ltd & Anor v Lane Cove Tunnel Nominee Company Pty Ltd [2009] NSWSC 53 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 Veolia Water Solutions v Kruger Engineering (No.3) [2007] NSWSC 459 Texts Cited: Nil Category: Principal judgment Parties: Kennedy Civil Contracting Pty Ltd (subject to a Deed of Company Arrangement) (plaintiff) Total Construction Pty Ltd (defendant) Representation: Counsel: Dr AJ Greinke with Mr P Hick for the plaintiff Mr D Weinberger for the defendant

Solicitors: Chamberlains Law Firm for the plaintiff Crisp Law for the defendant File Number(s): 2022/00353359 Publication restriction: Nil

The facts

The following facts1 are not disputed: 1. on 22 February 2022, Total as contractor and Kennedy as sub- contractor entered into a contract (Contract) to carry out construction works at 25 Holbeche Road, Arndell Park (Project); and 2. Kennedy carried out construction works from about February 2022 to August 2022. 3. Kennedy was placed into administration on 1 August 2022. The administrators are Trent Devine and Bradd Morelli. 4. Kennedy entered into a DOCA on 21 November 2022; 5. The Contract (Exhibit A, 1 CB 123) contains the following relevant terms and conditions for the purposes of Kennedy's claim: 1. payment claims must be in a particular form (cl 12.2(a)) 2. payment claims must be submitted to claims@totalconstruction.com.au (cl 12.2(b)); 3. [Kennedy] may submit a payment claim on the 25th day of each calendar month (cl 12.3(a)); and 4. no reference date will arise under the Act following termination of the Contract (cl 12.4(c)). 1. In relation to 'payment claims', cl 12A(f) of the subcontract indicated that Kennedy was obliged to use the 'EPC system' to submit payment claims to Total. The 'EPC System' was defined in the 'Sub-Contract Particulars' to mean a 'PayApps AU' (1 CB 126). In his first affidavit (at paragraph 44), Mr Francois deposed to receiving all of Kennedy's payment claims in respect to the subcontract via PayApps. Copies of the (5) the payment claims in issue in this proceeding which were submitted via PayApps were exhibited to the first of Mr Francois' affidavits (2 CB 428-556). 2. An example of a notice (for the purposes of the email address set out in paragraph 5 above) is a "Default Notice" contemplated by cl 13.1(a) (1 CB 154); see also clauses 13.2(a), 13.6(a), 14.1(a), 15.1 and 15.3 for further examples of "notices." 3. The sub-contract relevantly also provided (clause 12.2(a)): 12.2 Content of Payment Claims/Submissions by the Sub-Contractor a. A claim for payment must set out the details and value of the work completed in performance of the Sub-Contract up to that time, in accordance with the Sub-Contract Sum Breakdown, together with any other amounts due to the Sub-Contractor under the Sub-Contract and must include: i. a completed Sub-Contractor's Statement in the form set out at Schedule 1; ii. any requirement set out in the Trade Package (inclusive of certificates, reports, ITPs and / or 'as-builts'); iii. evidence of currency of all insurance policies required by clause 3.8 of the Sub-Contract; iv. the amount currently claimed by the Sub-Contractor in respect of the performance of this Sub-Contract and since the last Payment Claim; v. the total of all amounts certified in progress certificates issued to the date of the Payment Claim; vi. any other claim in respect of the Sub-Contract Sum or in connection with the Sub-Contract Works or the Sib-Contract; vii. a breakdown of costs into each trade or service covered by the Payment Claim, identifying the items in the Schedule of Rates and the percentage completed of each trade or service covered by the Payment Claim; viii. an estimate of the percentage of the Sub-Contract Works yet to be completed; ix. a statement of the Sub-Contractor in the form of Schedule 1 together with any other information Total may require; x. in addition to the material at subclause 12.2(a)(ix) above, satisfactory evidence which in Total's opinion is sufficient that the Sub-Contractor has paid every person, contractor, employee, consultant, supplier employed or engaged in anyway by the Sub-Contractor on the Sub-Contract Works all amounts that the Sub-Contractor is legally required to pay in respect of persons, contractors, employees, consultants and/or suppliers; xi. amounts previously deducted for retention monies (if any) pursuant to the Sub-Contract; ….. 1. By cl 13.1, the subcontract provided: 13.1 Default or insolvency a. If the Sub-Contractor commits an Event of Default Total may give the Sub-Contractor a written notice setting out: i. details of the Event of Default; and ii. the date by which the Event of Default must be cured, ("Default Notice") b. If the Event of Default is not remedied by the time specified In the Default Notice Total may do one of the following: i. terminate the Sub-Contract; or ii. take over a part or all of the Sub-Contract Works ("Step-In"). 1. On 7 June 2022, Mr Francois asserts (in his first affidavit) that he had a conversation with Mr Kennedy in which the latter verbally indicated that Kennedy could not progress works until its subbies and suppliers were paid. This was the provenance of what became known as the "Direct Payment Agreement". Mr Devine did not respond to this evidence in his supplementary affidavit. Under cross-examination, he indicated that he had not read this evidence and said he was unaware whether or not Total made payments in accordance with it. Nor was Mr Francois challenged about the making of or content of this asserted agreement. 2. On 1 July 2022, Total had approved (and paid to Kennedy) a sum of $106,062.37 being a payment claim by Kennedy made on 28 June 2022 (covering the period 25 May to 28 June 2022). 3. On 1 August 2022, Total exercised contractual rights under cl 13.1 to 'step in'. 4. In his first affidavit (at paragraph 76), Mr Francois deposed to tallying payments that Total had made to Kennedy prior to 1 August 2022, when it 'stepped in' to an aggregate amount of $699,165.75. Mr Devine admitted that he had not ascertained whether such payments were made prior to his appointment. 5. At 12:40pm on 25 October 2022, firstly, an email was sent by Timoclea Alexandratos, a lawyer with Chamberlains Law Firm, Kennedy's solicitors, to no less than 4 email addresses, including, but not limited to claims@totalconstruction.com.au and peterw@totalconstruction.com.au. The content of the email was as follows: "… Subject: Letter of Demand | Kennedy Civil Contracting Pty Ltd Dear Sir/Madam We confirm we act on behalf of Kennedy Civil Contracting Pty Ltd (Administrators Appointed). Please see attached our correspondence, dated 25 October 2022. If you have any queries, please do not hesitate to contact our office directly. Kind regards Timoclea …" 1. Attached to this email was a letter, on the letterhead of Kennedy's lawyers, addressed to Total. Its content was materially as follows: "… 1. We act for the Administrators Trent Andrew Devine and Bradd William Morrelli, who were appointed as Joint and Several Administrators of the company on 1 August 2022. 2. The books and recovers of the Company indicate that you are indebted to the Company in the amount of $545,353.18. A copy of the relevant documents are attached. 3. Acordingly, we demand that you forward to our office the sum of $545,353.18 being the total outstanding amount owing to the Company, by 5:00PM on 1 November 2022 (Deadline). 4. Payment can be made into our trust account, details are as follows: [REDACTED] 5. Please note the above outstanding amount is required to be paid to the Company only and may be utilised to pay any third-party debt(s) previously outstanding and/or to be incurred in the future. 6. If we do not receive payment before the Deadline, we anticipate being instructed to commence proceedings without further notice to recover the outstanding as well as seek costs and interest, by way of statutory debt pursuant to section 15 or 16 of the Building and Construction Security of Payment ACT 1999 (NSW) and an application for summary judgment. 7. It is our client's goal to obtain a commercial resolution in the matter for the benefit of the creditors of the Company. Our client accordingly urges you to consider the benefits of any early resolution of the matter without the need for any further recovery action. 8. Should you require any further information in this regard, please contact uur office directly. …" 1. Mr Devine was cross-examined on this letter and pressed on what information he relied upon to assert that Total was indebted to Kennedy for the claimed amount. His answer was that: he looked at the company's books and records. He rejected the proposition that the intention in sending the letter was to convey a demand; in distinction from a payment claim under s 13 of the Act. 2. Attached to this covering letter were: 1. Tax invoice (Exhibit A, 1 CB 106). On its face, the invoice was dated 25 February 2022 and a due date of 28 March 2022 was stipulated. The description was "February Claim 001- Contract Civil Works Package". The invoice made allowance for a sum that Total had paid to Kennedy ($167,946.14) and what was claimed in this invoice was the sum of $18,660.69. 2. Tax invoice (Exhibit A, 1 CB 107): On its face, the invoice was dated 31 March 2022 and a due date of 30 April 2022 was stipulated. The description was "Works for March - Payapps". The invoice made allowance for a sum that Total had paid Kennedy ($26,732.40) and what was claimed in this invoice was the sum of $2,973.24. 3. Tax invoice (Exhibit A, 1 CB 108): On its face, the invoice was dated 29 April 2022 and a due date of 27 May 2022 was stipulated. The description was "Preliminaries". The invoice made allowance for a sum that Total had paid Kennedy ($75,687.21) and what was claimed in this invoice was the sum of $8,409.69 4. Tax Invoice (Exhibit A, 1 CB 109): On its face, the invoice was dated 28 June 2022 and a due date of 28 July 2022 was stipulated. The description was "Contract Works carried out to Date". The amount claimed in this invoice was the sum of $621,371.93. I interpolate that unlike the earlier three invoices, there was no reference in this particular invoice to any payment by Total. Mr Devine was cross-examined on this document and acknowledged that he could not work out, by reference to the invoice alone, what work had previously been completed or previously the subject of a claim; 5. Tax Invoice (Exhibit A, 1 CB 110-121): there were multiple documents attached in relation to this claim. The first was a tax invoice dated 4 August 2022 and a due date of 3 September 2022 was stipulated. The amount claimed in this invoice was the sum of $147,644.73. Underneath the invoice was a detailed (10 page) document, apparently replicating what was evident in Payapps about this claim. It may be observed that each tax invoice bore the notation "This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 NSW" 1. Each of these tax invoices had been previously submitted by Kennedy as payment claims under the Act. 2. Total had assessed each of these claims and issued payment schedules in response to each of them. 3. Further, on 25 October 2022, Mr Luigi Giordando for Total sent an email to Samantha Nagul. With reference to the documents sent to Total on 25 October, he stated: ".. basically most will be covered by the previous payment schedule. We also have to table all the incurred costs from Kennedy and make ourselves a creditor." 1. Kennedy's covering letter of 25 October 2022 was referred to Mr Francois on that same day. Samantha Nagul instructed him to assess the amount claimed in the letter. 2. At 12:50pm on 25 October 2022, Mr Francois emailed Mary Duran and Amy McConnell (copying Samantha Nagul, Total's NSW Commercial Manager) asking either of them to send him remittance advices that Kennedy had received in the past; as well as a bank statement for all invoices paid (by Total) to Kennedy. He asked for that information by the end of the week (which, for a Friday, would have been 28 October 2022). 3. At paragraph 9 of his third affidavit, Mr Francois set out his analysis of Kennedy's claim. In cross-examination, Mr Francois accepted that his object was not only to assess the invoices but also to indicate what Total had paid to Kennedy. 4. When he gave evidence Mr Francois was taken through each of the invoices (which he confirmed that he had read) attached to the covering letter and he accepted (T 40 - 45) that he appreciated that: 1. INV-1123 {1 CB 106} was for Payment Claim 1 dated 25 February 2022 claiming release of the $18,660.69 retention; 2. INV-1158 {1 CB 107} was for Payment Claim 2 dated 31 March 2022 claiming release of the $2,973.24 retention; 3. INV-1185 {1 CB 108} was for Payment Claim 3 dated 28 April 2022 claiming release of the $8,409.69 retention; 4. INV-1127 {1 CB 109} was for Payment Claim 4 dated 28 June 2022 for $621,371.93 which had been scheduled for $106,062.37 after retention of $11, 784.71, paid on 21 July 2022; 5. INV-1239 {CB 110} was for Payment Claim 5 dated 4 August 2022, for the net amount of $147,644.73 after retention of $14,913.61, which had been scheduled for negative $323,216.13 (in effect Nil), asserting various setoffs for step-in costs allegedly incurred by Total. 1. Mr Francois also said he appreciated the reference to the Act on the invoices and had also read paragraph 6 of the letter of 25 October 2022. He denied that he understood that the documents Kennedy sent on that day amounted to a payment claim under the Act. 2. It was not Mr Francois' role to approve payment claims. This was the responsibility of Peter Whitten or other officers, including Samantha Nagul. 3. On 28 October 2022, Ms Nagul emailed Mr Francois a draft letter responding to correspondence of 25 October and invited him to let her know if the draft letter required any amendments. The final version of the letter was signed on 31 October 2022. Its content was as follows: "… We refer to the Letter of Demand received by Chamberlains Law Firm on 25 October 2022, relating to an alleged amount owning from Total Construction Pty Ltd ('Total') to Kennedy Civil Contractors Pty Ltd ('Kennedy Civil'). Total refer to the last in time Payment Schedule enclosed (Attachment A) showing that Kennedy Civil is indebted to Total in the amount of $(293,832.84) + GST. The scheduled amount reflects costs incurred by Total in excericising its step=in rights as a result of Kennedy Civil's defaults under Sub-Contract Reference No.1CITYK-2.3 dated 23/12/22. Total continues to incur further costs to complete Sub-Contract obligations on Kennedy Civil's behalf. Please advise how Total can be registered on the creditor list with consideration to the above debt owing. …" 1. The letter was received by Kennedy on or about 9 November 2022. 2. Mr Francois could not explain the delay in sending the letter in the period from 31 October to 9 November 2022.

Requirements for a valid payment claim under the Act and relevant statutory provisions

Section 13(1) of the Act provides: 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.
Section 13(2) of the Act prescribes the required content of a payment claim. The document purporting to be 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.
Section 13(5) provides: 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 13(6) provides: Subsection (5) does not prevent the claimant from - (a) serving a single payment claim in respect of more than one progress payment, or (b) including in a payment claim an amount that has been the subject of a previous claim, or (c) serving a payment claim in a 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 a previous named month.
Section 14(4) provides: (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(1) 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.
Section 15(4) provides: 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' submissions

Prior to the commencement of the hearing, the parties supplied detailed opening submissions (MFI 2 for Kennedy and MFI 3 for Total). Kennedy supplied supplementary closing written submissions (MFI 4), which superseded MFI 2 at the conclusion of evidence. Both parties' Counsel verbally addressed the Court.

Plaintiff's submissions in chief

The plaintiff submitted that all of the requirements for s 13(2) were complied with.
For s 13(2)(a), the tax invoices identified the relevant construction work, either on their face and/or by reference to a Payapps schedule {CB 112-121}.
In particular, and in light of the circumstance that Total had issued payment schedules in response to the invoices as previous payment claims, the invoices identified the relevant construction work: the details had been previously supplied to Total in Payapps.
By his evidence, Mr Francois was well aware of what the payments claims related to. Kennedy was entitled to claim release of retention amounts by s 13(3)(b) of the Act and (by s 13(6)(b)) include amounts that had been the subject of previous claims.
For s 13(2)(b), the covering letter identified the payment amount of $545,353.18. In this regard, it was beside the point that Total could not reconcile the amounts of the individual invoices with the amount claimed in the covering letter. Total knew what each of the individual invoices claimed and any difficulty with reconciliation of the amounts was a matter that could be stipulated in a payment schedule. It would then be for an adjudicator to determine the merits of such objection. Having omitted to issue a payment schedule raising the objection, Total is precluded from raising it in this proceeding.
Kennedy also noted that if anything, the total claimed omitted the invoice of 4 August 2022. The error was favourable to Total.
In anticipation of Total's point that it was unable to identify the matters in s 13(2)(a) or (b) of the Act, Kennedy invoked the principles set out by the Court of Appeal in Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) (2005) 64 NSWLR 462 ("Nepean Engineering") where Hodgson JA explained: "35. … 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."
For s 13(2)(c), each of the tax invoices stated: "This is a payment claim made under the Building and Construction Industry Security of Payment Act 1999 NSW".
It is not the case, and is contrary to authority, that a letter of demand cannot also constitute a payment claim [1] .
On the premise that a valid payment claim was served, Total's failure to serve a payment schedule within time was conclusive of Kennedy's right to judgment.
The balance of Kennedy's submissions were responsive to Total's challenges to the validity of the document, which were advanced in Counsel's oral argument in reply.

Total's submissions

First, the documents, singularly or in combination, sent to Total on 25 October did not satisfy the requirements for s 13(2)(a) of the Act articulated by McDougall J in a single instance decision [2] , namely, that it: (1) gives an item reference, taken to be referring to the contractual or other identification of the work; (2) that item reference being supplemented by a single line description of the work; (3) particulars of the amount (of work) previously completed and complained and the amount now said to be completed; and (4) a summary pulling all the details together and stating the amount claimed. Reliance was also placed upon observations made by Leeming JA (Bell P, as the Chief Justice then was, and Simpson AJA agreeing) in a decision of the Court of Appeal [3] that concerned the construction or application of s 14 and for which, it was said, applied by parity of reasoning (see Style Timber at [47]) to s 13, regarding the functional importance of the supply of sufficient information (the 's 13(2)(a) content requirement point'.
Not all of the invoices attached contained the detail required by s 13(3)(a). Total did not understand what claims were made for at least some of them. A contrast was made with the detail contained in the invoice of 4 August 2022 with other invoices, such as the one dated 28 June 2022. In oral argument, Counsel for Total took the Court threw the process through which payment claims 1 and 5 were made and responded to in payment schedules.
Secondly, Kennedy was asserting a pre-existing indebtedness and demanding that the (aggregate) debt be paid within a time period that was less than that provided for under the Act. In reality, earlier payment claims, which had been responded to by the issue of payment schedules, were being 'recycled'. Construed with s 14 (in particular), s 13 requires that a claim be prospective in character; not historical, contrary to the assertion in paragraph 2 of the letter dated 25 October 2022, it could not be the case that Total was 'indebted'. It could only be indebted if Kennedy had allowed the period of 10 business days to have expired. The 'attachments' (principally earlier invoices) did not sustain a debt (the 'prior indebtedness point').
Thirdly, there were in substance, multiple payment claims. it was not apparent on the face of the letter that Kennedy was treating the collection of invoices as a single composite payment claim. To the extent that Kennedy relied upon a decision of Richmond J [4] , when a subcontractor had relied upon multiple invoices to sustain a single claim, that decision was distinguishable. Each of the invoices attached to the letter contained the statement prescribed by s 13(2)(c). Yet neither the covering letter of 25 October 2022 nor the email which forwarded it, contained the statement required by s 13(2)(c) of the Act. Service of more than one payment claim contravened s 13(1) of the Act (the 'multiple claims point').
Fourthly, when construing the requirements for a valid payment claim under s 13(2), the Court was required to take into account additional contractual requirements for payment claims. Total submitted that the Act recognises a 'dual system', or a framework whereby a statutory system is created alongside a contractual regime. There is only a limited modification of some contractual provisions. A party to a construction contract may only bring a payment claim under s 13 if it is entitled to a progress payment under a construction contract and this means a payment to which the claimant is entitled. Total relied upon the authority of Beckhaus v Brewarrina Council [2002] NSWSC 960 ("Beckhaus") [5] . More specifically, non-compliance with the additional requirements meant that there could be no valid statutory claim.
These additional requirements appeared in cl 12 of the subcontract. Total contended that none of the matters contained in cl 12.2(a)(i)-(xi) of the subcontract were complied with (the 'contractual precondition point')
They should not be avoided under s 34 because they did not conflict with the requirements in s 13(2) or substantially interfere with, or more precisely, 'modify' Kennedy's rights under that statutory provision. It was said that some support for this proposition could be found in a decision of Stevenson J [6] (where an argument of modification of a notice right was rejected) and McDougall J [7] (where it was suggested that there were inconsistent contractual and statutory requirements), and another decision of Richmond J [8] was distinguishable (the 's 34 point').
Fifthly, the covering letter did not contain the notation stipulated by s 13(2)(c) (the labelling point).
Sixthly, Kennedy had engaged in misleading or deceptive conduct by misrepresenting the nature of the demand. This was one, exceptional, defence to Kennedy's claim based on a statutory debt [9] . Whether the demand was misleading was not to be assessed by how a lawyer might read it but rather by how the recipient, Total, might reasonably have understood it. Reliance was placed upon Mr Francois' interpretation of the demand (the 'misleading conduct point').
Paragraph 2 of the letter of 25 October 2022 featured a false assertion of existing indebtedness. This amounted to a reprise of the second point referred to above. A debt arising under the Act had not accrued (under s 15(1)(a) of the Act) since the 10 day period for provision of a payment schedule (under s 14(4)(b)(ii)) had not expired. The invoices attached to the letter established only a pre-existing debt; not a present debt. Paragraph 6 falsely indicated that Kennedy could rely upon Total's failure to pay the sum demanded by 1 November 2022 when Total had a period of 10 days to pay before any statutory debt had crystallised upon the omission to provide a payment schedule.
Seventhly, some, but not all, of the attachments to the 25 October 2022 letter had not previously been served. This rebadging or recycling of old payment claims under the guise of a fresh payment claim concealed their true character. Moreover, at least in one instance (relating to the invoice of 28 June 2022) an amount had previously been paid by Total. Total's Counsel indicated that his argument about abuse of process, although it overlapped with the misleading or deceptive conduct argument, was significant since it could not be defeated by Kennedy's marshalling of argument that any misleading conduct was not relied upon by Total to its detriment (the 'abuse of process point').
Lastly, contrary to Kennedy's closing written submissions, it was not proven that either (a) Total did not provide a payment schedule within 10 business days; or (b) Total failed to pay the amount claimed. The former point turns on characterisation of the documents sent on 25 October. In relation to the latter point, Counsel for Total referred at length to parts of Mr Francois' evidence in his first affidavit. That evidence was to the effect that the sum of $699,165.75 was paid, and so was a discrete amount of approximately $106,000. That evidence, and Mr Francois' evidence about the 'direct payment agreement; was unchallenged. (the 'failure of proof point')
Counsel for Total later argued that the onus of proving non-service of a payment schedule rested upon Kennedy and that Kennedy was in just a good a position as Total to prove whether or not a payment schedule had been supplied within 10 days (on the predicate that it was found that a valid (statutory) payment claim had been served).
Eighthly, Mr Francois' evidence indicated that payments were made by Total, including by reference to the 'Direct payment agreement' or rights exercisable by Total under cl 12.2. (the 'payment point').
Total later argued that it would be a commercial nonsense for Kennedy to insist that payments could not be made at a claimant's direction to some other party. He also argued that if payment of the amount claimed occurred, as Mr Francois said it did, this amounted to a defence.

Kennedy's submissions in reply

As to the 's 13(2)(a) content requirement' point, first, what was said by McDougall J at first instance in Clarence Street, in terms of four 'elements', had to be viewed in the context. His Honour was only indicating what might satisfy the statutory requirement. It was not exhaustive or exclusive. Kennedy referred to a Victorian Supreme Court decision of Lyons J on corresponding statutory provisions [10] emphasising that (the equivalent to) s 13(2), generally, should not be subject to undue technicality, or from an unduly critical point of view. Moreover, it is appropriate to take into account the background knowledge of the parties flowing from their past dealings and prior exchanges of information, including correspondence passing between them before and at the time of the payment claim. To that extent, the Court may go beyond the face of the document itself [11] .
In reply to the last argument, Total's Counsel appeared to doubt whether this statement of principles by Lyons J was correct. At any rate, with reference to the invoice of 28 June 2022 (Exhibit A, CB 53), which was, in terms of the amount claimed, the most significant of the tax invoices, Total did not and could not be taken to have known what work was undertaken. Counsel reiterated the importance of s 14 as informing the content for a payment claim under s 13(2).
Secondly, when objectively determining the adequacy of a payment claim, regard had to be paid to the surrounding context. In this case, this included the circumstance of the payment claim building upon the framework of five earlier payment claims for which the 'Payapps' system was utilised. It included what Total already knew. Mr Francois actually knew and Total would be taken to have known that three of the five invoices (Exhibit A, 1 CB 106-108) were claiming retention amounts from earlier payment claims. For the last of the invoices (in sequence, Exhibit A, 1 CB 110-111), there was a reproduction of what appeared in the Payapps system. If there was doubt about the remaining invoice (which doubt Kennedy did not accept existed), then the proper response was for Total to raise objection in a payment schedule and, inevitably, for the adjudicator to rule on the reasonableness of such objection. On the premise that a single payment claim may contain, or partially rely upon previous invoices, it is inapposite to invalidate the entirety of a payment claim because of uncertainty about one of them.
What Leeming JA said about s 13(2)(a) in Style Timber was obiter since the dispute concerned the requirements (under s 14) of payment schedules and the observations of Mason P in Clarence Street ("Clarence Street") at [31]-[38] about the distinct requirements for payment claims and payment schedules should be preferred.
In reply to this particular argument, Total submitted that Leeming JA's endorsement in Style Timber of Palmer J's analysis of the requirements for s 13(2)(a) reflected the Court of Appeal's prior approval of it in Clarence Street at [31]. To the extent that there was conflict between what Leeming JA said in Style Timber and the views of Mason P in Clarence Street, the observations of Leeming JA are to be preferred.
As to Total's 'prior indebtedness' point, which was also relevant to its misleading or deceptive conduct point, this was a mischaracterisation. It was patent on the face of the invoices relied upon that Kennedy had modified earlier invoices, which had given rise to both payment claims and payment schedules in a manner which updated them to reflect previous payments. Kennedy was not reasserting any claim based on Total's prior indebtedness. There was no historical debt.
Also, although paragraph 6 of the letter erroneously limited Total to a response within 6 days, that circumstance did not invalidate the claim for the purposes of s 13.
Further on Total's 'misleading or deceptive conduct' point, when one viewed the invoices, far from misleading Total, Kennedy was trying to help it to understand what was claimed.
As to Total's 'labelling' point, it was wrong for Total to assert that the letter of 25 October 2022 gave no hint that a payment claim was being relied upon. Paragraph 6 of the letter stated: "If we do not receive payment before the Deadline, we anticipate being instructed to commence proceedings without further notice to recover the outstanding as well as seek costs and interest, by way of a statutory debt pursuant to section 15 or 16 of the Building and Construction Industry Security of Payment Act 1999 (NSW) and an application for summary judgment."
Further, there was nothing in the Act requiring the s 13(2)(c) statement to be expressly contained in the covering letter or email. The question was whether it was conveyed to the recipient that the claimant intended by the document to engage the operation of the Act [12] . The notation on each individual invoice effectively indicated that a proceeding would be brought to enforce rights under the Act. Kennedy's intention was put beyond doubt by paragraph 6 of the overing letter.
As to Total's 'contractual precondition' point, and with reference to cl 12.2(a) in the subcontract, the contractual requirements regarding the content of a payment claim only prescribed requirements for a claim under the contract. It did not, and could not, regulate what Kennedy needed to do to make a progress claim for the purpose of bringing a statutory claim.
In response to Total's reliance on the authority of Beckhaus, Kennedy firstly argued that it could no longer be asserted that a claimant had to prove an entitlement to a progress payment - it was enough, because of amendment to ss 3 and 13 of the Act, to establish it was enough to claim an entitlement, which is what effectively occurred here. Kennedy also referred the Court to subsequent authority from the High Court [13] , which favoured that construction and the High Court's reasoning effectively signalled a disconnection in the requirements for running contractual actions and actions under the Act. Contractual requirements did not dictate the form of a statutory payment claim, which is prescribed by s 13 of the Act [14] .
Kennedy relied on observations by Hodgson JA in Plaza West Pty Ltd v Simon's Earthworks (NSW) Pty Ltd [2008] NSWCA 279 at [54] to argue that the practical operation of concurrent actions under contract and under the Act was such so that if a contractual requirement places a burden upon the claimant, where that did not exist under the Act, it is not binding on the claimant for the purposes of advancing the statutory claim. The flip side of this was that the claimant cannot take advantage of a beneficial contractual right (such as a deeming provision) to aid it in its statutory action.
But in this case, Kennedy submitted that clause 12 regulated a putative contract claim but its provisions may be disregarded when assessing whether there was compliance with the requirements in s 13. It is only if this submission is rejected that consideration of s 34 is necessary.
For that purpose, (in answer to the 's 34 point') Kennedy submitted that the requirement in cl 12.2(a)(iv), in particular, did impose a burden upon it, in the sense of the provision amounting to a contractual precondition to bringing a payment claim. That wrought a 'modification' at least (if not also a 'restriction') under s 34.
As to Total's 'multiple claims' point, the sensible commercial construction, particularly considering the cover letter, is that this was a single payment claim comprising several invoices: Alan Conolly and Co v Commercial Indemnity [2005] NSWSC 339 at [23]; Modog Pty Ltd v ZS Constructions (Queenscliff) Pty Ltd [2019] NSWSC 1743 at [78]-[79]. Past invoices were utilised again, and modified to assert an aggregate amount representing what was claimed on the face of the five invoices.
In reply to Kennedy's reliance upon Modog, Total submitted that what was said by Henry J was beside the point in circumstances where there was no requirement for an endorsement (apparently a reference to s 13(2)(c)) at that point.
As to Total's 'misleading or deceptive conduct' point, whether conduct was misleading or deceptive or likely to mislead or deceive is a question of fact that the Court must decide objectively for itself. For the purpose of characterisation, it did not matter what Mr Francois subjectively believed.
Each of the tax invoices stated that it was a payment claim under the Act, and paragraph 6 of the cover letter warned Total that, if it did not pay the monies, that Kennedy would pursue summary judgment under the Act. Even if the Court accepted Mr Francois' evidence of his belief, this carried little or no weight in the objective characterisation. Indeed the reasons he gave for the belief under cross-examination amounted to ill-informed opinions as to the legal consequences of the documents supplied.
Further, it was the ill-informed opinions which actuated a false belief; not Kennedy's conduct in sending the documents. No reasonable recipient of the email and attachments could objectively reach the opposite conclusion, that this was not a payment claim or that Kennedy would not pursue its rights under the Act.
In oral argument, Counsel for Kennedy drew the Court's attention to Mr Francois' evidence (in paragraph 121 of his first affidavit and paragraph 13 of his third affidavit). This indicated a disjunction between the way that Total argued that misleading conduct occurred and Mr Francois' beliefs as to why he did not think that the documentation sent to Total on 25 October 2022 constituted a payment claim.
The misleading conduct point would also fail on the ground of causation. It was patently the case that by 31 October 2022, Total was well equipped to provide a payment schedule, but for reasons unexplained, did not do so. Kennedy invited the Court to draw a Jones v Dunkel inference from the unexplained failure to call the apparent decision-makers (Mr Giordando, Mr Whitten or Ms Nagul) within Total, to explain why Total did not send Total's letter of 31 October on that date, but delayed in doing so, until 9 November by which date, the statutory time limit for service of a payment schedule had expired. Any causal connection from misleading conduct was broken.
Total's 'abuse of process' point was no more than an allegation, or substantially similar iteration of its 'misleading or deceptive conduct' point. There was no proof of actual knowledge that Total was being misled which arguably might underscore any contention of an abuse of process. But even in the absence of actual knowledge, there was no misleading of Total and Total was not actually misled. There was no 'effective' concealment of the true nature of the invoices. All of them bore the express statement that payment claims were brought under the Act; a matter which Mr Francois readily conceded.
As to Total's 'failure of proof' point (relating to both the matters of non-service of a payment schedule within the time period and absence of payment of the amount claimed), those matters were proven. As to the matter of non-service of a payment schedule, the correspondence in Exhibit 1 plainly indicated that no response was made to Kennedy's claim until 9 November 2022. Further it would have been expected that Mr Francois or others would have said that it was served, but they did not. As to the asserted absence of proof of non-payment, the tenor of the document (Ex 1, p 174) was indicative of an absence of payment.
As to Total's 'payment point', first, the assertion of payment was not pleaded. Secondly, even if Mr Francois' evidence about a direct payment agreement or the exercise of step in rights was admissible in a final hearing, this would not satisfy the requirement of s 14(4)(b) that payments be made "to" the claimant. Thirdly, in substance the point would establish either or both of a cross-claim or defence' but Total is precluded from raising them in this proceeding because of s 15(4)(b)(i) and (ii), respectively.

Consideration

Whilst not losing sight of the onus of proof that falls upon Kennedy to make out the requirements in s 13(2) of the Act, it is convenient to consider the validity of the payment claim by reference to the arguments for invalidity of the payment claim raised by Total.

Preliminary matters

I start by addressing arguments from the many authorities in this area of the law that address the level of particularity expected from a payment claim under s 13(2). This is not however, done in a vacuum, but by reference to statements of the functional significance of payment claims made under the Act.
First, in Clarence Street, Mason P (Giles JA and Santow JA agreeing) at [31] emphasised that a 'payment claim' is no more than a claim, but in contra-distinction to a payment schedule (whose requirements were prescribed by s 14), although each of the requirements in s 13(2)(a)-(c) (incl) must be satisfied, "it is not its function to identify the scope of the dispute".
At [38], Mason P observed that what was important was to provide sufficient detail of the work the subject of the claim to facilitate identification of the work to which it relates.
In the Court of Appeal's subsequent decision in Climatech, Hodgson JA (at [25]) tied the adequacy of the identification of matters in s 13(2)(a) with reference to what was contained in a respondent's payment schedule. In separate (concurring) reasons, Basten JA said (at [42]): "The term "identify" should be given a purposive construction: what must be done must be sufficient to draw the attention of the principal to the fact that an entitlement to a payment is asserted, arising under the contract to which both the contractor and the principal are parties. In that sense, the claim, to be valid, must be reasonably comprehensible to the other party."
In Clarence Street at [40], Mason P further observed that payment claims are to be read in context, including the context of industry conventions and the usage adopted by the parties in their earlier contractual dealings and, in particular, the construction work to which the claim relates "may be identified by reference to the contract or the earlier dealings of the parties".
I do not discern any rejection of these propositions in the Court of Appeal's judgment in Style Timber. In that decision, Leeming JA (with whom Bell P - as the Chief Justice then was - and Simpson AJA agreed) was focussed upon the required content of a payment schedule under s 14. It was in this context that his Honour referred to a passage from a decision of Palmer J in Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 ("Luikens") ([76]-[78]) (which McDougall J applied at first instance in Clarence Street) and which (as Leeming JA noted) was endorsed by the Court of Appeal in Clarence Street. Palmer J did not differentiate, as between payment claims and payment schedules, as to the requirement for precision and particularity to apprise the parties of the real issues in the dispute.
But that passage, and its subsequent endorsement in later decisions, including those of the Court of Appeal does not, in my view, derogate from Mason P's articulation of the distinctive function of a payment claim; nor the proposition, in effect, that it is the payment schedule (not the payment claim) which crystallises the real issues in dispute. Nor was anything said in Style Timber, or later decisions of the Court of Appeal, which cast doubt upon the correctness of Mason P's observations regarding the significance of context and, in particular, the relevance of past contractual dealings when assessing the adequacy of identification of the matter referred to in s 13(2)(a). Indeed, although the observation was directed to the requirement for payment schedules, arguably, Leeming JA's view that the content for that requirement may be satisfied by incorporation of another document reinforces what Mason P said in Clarence Street about context.
I respectfully accept, at the level of principle, the observations of Lyons J in Beevor at [83] and in particular, the final observation that the Court may go beyond the fact of the document (purporting to constitute the payment claim) with reference to the background knowledge of the parties from their past dealings and prior exchanges of information, including correspondence passing between them before and at the time of the payment claim.
The four matters referred to by McDougall J at first instance in Clarence Street at [37] have been authoritatively endorsed, but it is apparent from what his Honour actually said that he was not attempting to gloss the requirement in s 13(2)(a). So much is apparent from the slightly diffident way in which his Honour expressed his view: "In principle.. the requirement in s 13(2)(a) .. is capable of being satisfied" (emphasis supplied). In particular, his Honour did not say that this was only way the requirement could be satisfied.
With these preliminary observations in mind, I now turn to Total's serial challenges to the payment claim as satisfying the requirements in s 13(2).
It should be apparent from what I have said that I do not accept Total's submission that my assessment of whether s 13(2) is satisfied is exclusively limited to the document(s) purporting to comprise the payment claim itself or themselves. The submission totally ignores the context, including Kennedy's (contractually mandated) deployment of Total's PayApps system and the circumstance that all of the invoices were updated modifications of tax invoices previously supplied to Total (as payment claims) which had prompted Total to serve payment schedules. In particular, three invoices (1CB 106, 107 and 108) were clearly for retention amounts. No real complaint of a lack of appreciation of works covered was made about the invoice at 1 CB 112 - 121.
The reality is that Mr Francois had little real difficulty matching each of the invoices submitted on 25 October 2022 with those that had been previously submitted; even if he said that he had a difficulty in reconciling amounts claimed against amounts which Total had previously paid. All of the invoices submitted under the letter of 25 October 2022 respectively bore the date that the claims relating to construction work had previously been lodged under the PayApps system. It was unnecessary, for the statutory claim, to expound all of the detail of that work again.
In reference to what Kennedy's Counsel accepted was the least informative of the tax invoices, that being invoice 1227 (1 CB 109) bearing the date 28 June 2022, Mr Francois said (T 43.31) that he understood, either on 25 October 2022 or shortly thereafter, that the amount claimed for that invoice ($621,371.93) was the same amount for the earlier payment claim of that date, but had not taken into account the scheduled amount Total had made ($117,847.08) and had not taken into account the amount Total paid ($106,062.37). He also did not disagree that it would have been open to Total to raise in its payment schedule that the sum of approximately $106,000 had been paid as an answer and could have reproduced its earlier payment schedule. I accept Kennedy's submissions, made with reference to what Hodgson JA said in Nepean Engineering, that where some part of the work claimed cannot be identified, the appropriate course is not the invalidation of the claim, but for the respondent to raise the complaint in a payment schedule. By parity of reasoning, where a claim is composite, comprising multiple invoices, any lack of clarity in the work identified in one (or more) invoices should not invalidate the whole claim.

The past indebtedness point

I agree with Total that the linguistic reference to Total being 'indebted' that appeared in the letter of 25 October 2022 was inapt for the purposes of a statutory claim since, as Counsel for Total correctly submitted, statutory indebtedness only arises after: (a) a valid payment claim has been served and the respondent fails to provide a payment schedule within 10 days (s 14); and (b) the time limit expires and the respondent fails to pay the whole or part of the amount claimed (s 15). I refer to this again later when considering the misleading or deceptive conduct point.
But this misdescription or mischaracterisation does not of itself invalidate a claim which satisfies the requirements in s 13(2).
It was, to my mind, obvious that a majority of the invoices submitted on 25 October 2022 were modifications (in terms of the amounts claimed) of earlier invoices that had been submitted, under the PayApps system, with reduced amounts from the earlier invoices claimed; often amounting to retention amounts.
With an exception for the invoice at 1 CB 109, Kennedy was not asserting, again, claims for money that had previously been paid in full. But it was asserting a claim largely centred on amounts the subject of prior claims; as permitted by s 13(6)(b) of the Act. For this invoice, as explained, it was readily comprehended in the light of information Total had previously received, that the amount claimed in that invoice had not factored in the $106,000 payment (approximately) that Total had made.

The multiple claims point

I reject Total's submission in this regard as well. Had Kennedy simply lodged the invoices, without further explanation, there may have been some merit to Total's argument.
But Kennedy did not do so. Whatever other deficiencies existed in the covering letter, it was plainly apparent that it was bringing a single claim for money, comprising (or purporting to comprise) an aggregate total derived from the combination of the sums in the individual invoices. The covering letter expressly claimed payment of that aggregate sum and it did so when the letter clearly conveyed that the (aggregate) sum demanded was $545,353,18 and that if that sum was not paid, Kennedy was to be treated as having served a single payment claim, as permitted by s 13(6)(a) of the Act.

The labelling point

It is true that paragraph 6 of the letter did not bear the notation referred to in s 13(2)(c). But I accept Kennedy's point, supported by McDougall J's decision in Fernandes Construction, that what counts is whether the documents (and, I would add, where there are multiple documents, treated as a composite whole and read in context including prior dealings), reasonably convey to Total that Kennedy intended to engage the operation of the Act. Paragraph 6 of the letter would, alone, have satisfied this requirement, but I agree that the intention would have reasonably been apparent to Total from the notation which did appear on each of the supporting invoices.
A variation on this argument appears also in Total's misleading or deceptive conduct and abuse of process points later to be considered.

The contractual precondition point and the s 34 point

I do not accept Total's proposition that on the facts of this case the statutory requirements under s 13(2) were affected by requirements for progress claims under cl 12.2 (or, by extension cl 12A) of the subcontract in the sense that if contractual requirements bearing upon how Kennedy was to make the statutory claim or what it was obliged to supply Total under the subcontract when making payment claims was a precondition to the making of a claim for a statutory debt under the Act. For one thing, cl 12.2 (unsurprisingly) did not expressly purport to say that the requirements extended to progress claims made under the Act.
It is not obviously apparent to me that Acting Justice Macready in Beckhaus was intending to lay down the broad propositions that Total contended for (at paragraph 37, above); even if his Honour noted that the Act contemplated a 'dual system' and even if it could be said that the Act represented, on the whole, only a limited alteration of the parties' contractual regime. If his Honour could be regarded as laying down the proposition, I would, with respect, not follow it. The decision was an interlocutory one and, according to what the Court was informed, had not been authoritatively approved in a way that is binding on this Court. Such a proposition strikes me as being antithetical, at least, to the statutory objects in ss 3(2) and (4) of the Act; which clearly positive clear alternatives.
Further, I accept Kennedy's submissions that it is sufficient to claim an entitlement to bring a payment claim under the Act and this has superseded what Acting Justice Macready said in Beckhaus at [61].
It is trite that the law comprehends that Kennedy's rights under s 8 of the Act stand apart from its contractual rights (Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1) and are not calculated by reference to 'contractual mechanisms': John Holland Pty Ltd v RTA (NSW) [2007] NSWCA 19 per Hodgson JA at [38].
In light of that conclusion, in my view, it is unnecessary to consider the s 34 point. If I am wrong in that conclusion, however, I would have found that the superimposition of a contractual requirement to comply with all of the matters in cl 12.2(a)(i)-(xi) (and especially the provision of information in cl 12.2(a)(iv)) or, for that matter, adherence to cl 12A, in order to sustain a payment claim for the purpose of s 13(2) would amount to a (substantial) modification or restriction, and even exclusion, of the effective operation of s 13(2)(a) and possibly also (b).

The misleading conduct point

The applicable principles were conveniently stated by Barrett JA (Bathurst CJ and Beazley JA agreeing) in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [161]: "Conduct is of the prohibited kind if "it has a tendency to lead into error". These are words found in a number of decided cases and recently used by French CJ, Crennan, Bell and Keane JJ in Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640 at [39]. It is the quality of the conduct in terms of capacity or tendency, objectively ascertained, that must be judged, not its actual impact on a particular person. Where, as here (on the appellants' case), the conduct consists of a representation actively made to a particular person in a one-on-one situation, the quality of the conduct is to be ascertained by reference to the context in which the parties are situated, including such matters as their respective states of prior knowledge and understanding. It is within the whole of that context that the court must address the question whether the representation "has a tendency to lead into error" and make an objective assessment of its likely effect on rational decision-making by a person in the position of the representee. The question whether the representee relied or acted upon the representation is irrelevant to that inquiry. Only if monetary relief (or some other order) is sought by a plaintiff who alleges that a particular misrepresentation was made to him or her does that plaintiff need to establish a causal link between the impugned conduct and the loss that is claimed: see Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 at [37]. That need arises from the word "by" in the phrase "by conduct" in s 82 and s 87. Reliance is relevant to the causation question" (emphasis supplied)
To obtain the relief that it seeks under ss 236-237 or 243 of the Australian Consumer Law, Total must establish that it has suffered loss or damage because of a contravention of s 18 (s 236(a)). This imports the same causal connection of which Barrett JA referred to in Traderight.
By its Amended Defence (paragraph 22), Total asserted that the misleading or deceptive conduct arose partly from an omission: the failure to state in an email (enclosing the letter of 25 October and other attachments) that a claim was made for a statutory debt, coupled with an indication on the face of the email that Kennedy was supplying (only) a 'letter of demand'. This amounted to a variation of the labelling point referred to earlier.
This particular of misleading conduct is without merit. First, it erects a false dichotomy between letters of demand and assertions of a statutory claim in the sense of them not having concurrent operation. Secondly, it severs the email from the accompanying documents which expressly referred to the Act. Plainly it would have been easier for all concerned if, in the covering letter of 25 October (and maybe also the email attaching it), Kennedy expressly stated that the email and the letter, supported by the attachments to it, that or those document(s) constituted a payment claim made under the Act. Its omission to do so was not however misleading or deceptive.
The second particular of the pleaded defence was another omission in the covering email: that the claims had previously been made. This is the same or similar to the indebtedness and multiple claims points referred to earlier. The premises are that multiple claims were made on 25 October 2022 and all of them were substantially the same as the claims previously made. I have rejected both premises. A single, composite claim was made on the basis of substantially modified earlier invoices which, in relation to the amounts (respectively) claimed had clearly purported to take into account past payments by Total.
The balance of Total's argument on this point rested on matters which it did not plead but, for reasons previously supplied, can still fairly be addressed and which centred upon representations conveyed in the covering letter of 25 October 2022.
I agree with Total that, when viewing the covering letter of 25 October 2022 in isolation, if Kennedy was intending to convey to Total that a statutory payment claim was being made, then false statements were contained in the letter. The statements were essentially legal conclusions, or at least conclusions that were partly legal. In circumstances where a letter of demand can also constitute a statutory payment claim [15] , there is perhaps an inherent possibility that statements made to support a claim in contract (or debt) may not sustain a statutory debt claim. I accept Total's submission that, for the purpose of asserting a statutory claim under the Act, it was wrong for Kennedy to assert in the letter an existing indebtedness for the sum of $545,353,18. It was also wrong for Kennedy to assert that its statutory claim could be established on the basis of a failure to pay the sum demanded within the period Kennedy demanded in that letter.
But it is not sufficient to establish misleading or deceptive conduct by isolating statements, separably from the context in which they are made. To repeat what I said earlier, the context made it manifestly apparent that Kennedy was foreshadowing the exercise of its rights under the Act. By necessary implication, by paragraph 6 of the letter Kennedy was conveying to Total a representation that the letter of 25 October 2022, and the annexures to it, was to be treated as a payment claim for the purposes of s 13. I disagree with Total's suggestion that to interpret the letter in that way was the reading that only a construction lawyer would give to it. If such implication did not arise from paragraph 6 itself, which in my view it did, then the implication was founded by the combination of paragraph 6 of the letter and the notations on the attached tax invoices each of which bore the notation indicated by s 13(2)(c) of the Act and the contextual circumstances referred to earlier in these reasons, including the parties' mutual use of the PayApps system by which prior payment claims and payment schedules were lodged and processed.
Viewed in context, despite the falsity of statements made in the respects identified, I am not satisfied that the overall effect of the conduct was objectively apt to instil in Total the belief that Kennedy was not bringing a payment claim for the purposes of s 13(2).
I am not persuaded that if there was, contrary to this primary conclusion, any misleading conduct Total suffered any loss or damage or because of the conduct. This is not a case like Marques Group, where on the faith of what was misleadingly represented, a contractor took a course detrimental to itself; in that case, scheduling positive amounts which it would not have done but for the contravention of s 18 of the ACL.
A causal connection could be forged by proof that Total refrained from lodging a payment schedule because it did not (actually) believe that a payment claim to support a statutory debt had been lodged on 25 October 2022. That would have required evidence from Total's decision-makers as to what effect, if any, paragraph 6 of the letter, the clear association between the attached invoices with past invoices entered on the PayApps system and other matters had on their decision-making.
It is not to the point that Mr Francois expected any payment claim under the Act to be lodged by the PayApps system. That was, as previously indicated, a contractual requirement for a progress payment under contract but was not a precondition for the bringing of a statutory claim. Nor did it matter that other notice requirements in the contract were not observed. These beliefs were plainly influenced by a misapprehension of law; the belief or assumption that the requirements for a contractual claim were applicable to a statutory claim brought by Kennedy. That does not establish the causal connection with a contravention of s 18.
Nor was it to the point that Mr Francois had difficulties reconciling the amounts claimed in the invoices attached to the letter with the earlier invoices which had been substantially paid.
I am not persuaded that a connection between any misleading or deceptive conduct and loss or damage was established.
I am fortified in so finding by Total's unexplained failure to call the real decision-maker, probably Ms Nagul, Mr Whitten or Mr Giordando, in Total as to why it did not serve its written response (ultimately dated 31 October 2022) until 9 November 2022 once the time limit for service of a payment schedule had expired when it appeared to be well prepared to provide that schedule not only within the 10 day period prescribed by the statute but even before the date (1 November 2022) demanded in the letter.

The abuse of process point

In circumstances where part of Total's misleading or deceptive conduct defence partly relied upon an alleged omission by Kennedy to state that "the claims had previously been made", in my view Total's complaint (which on one view might be inconsistent with this part of the defence) that the previous claims had in fact been 'rebadged' by Kennedy, but had just not been clearly indicated as such by Kennedy, raises substantially the same point. The common thrust of the complaint was Kennedy's effective concealment of what it was purporting to do when attaching the invoices it did to the covering letter.
I reject that complaint. It does not square with what appears on the face of the invoices attached to the 25 October letter.
If it was the case that new dates were put on each of the invoices attached to the letter, then there might have been substance to the complaint. But that did not occur. The invoices bore the same dates as those which had previously been the subject of payment claims lodged on the PayApps system. On many of those invoices, it was readily apparent that the amounts claimed took into account Total's prior payments. For those invoices, I agree with Kennedy that a fairer inference was that Kennedy was trying to assist Total to understand how the figure for the amount claimed in each individual invoice was derived.
I therefore reject each and all of Total's challenges to Kennedy's assertion that on 25 October 2022 a payment claim was made which satisfied the requirements of s 13 of the Act.
I find that: 1. Kennedy's letter of 25 October 2022 attached tax invoices identifying the relevant construction work, the detailed nature of which had previously been provided to Total in PayApps. The requirement in s 13(2)(a) was satisfied; 2. generally the amounts in the invoices attached to the letter reflected Kennedy's asserted entitlement to claim release of retention amounts (s 13(3)(b)) and which had been the subject of prior claims (s 13(6)(b)) and the covering letter identified the amount ($545,353.18) which Kennedy claimed was due. A qualification was that the sum of approximately $147,000 from one invoice (1 CB 110, 111) was omitted from the amount claimed in the covering letter. That omission (or error) benefitted Total. As to the accuracy of what was claimed, the sum claimed took into account the circumstance that Total had previously paid $106,062.37 and if Total could not reconcile what was claimed against what the work identified, the proper response for it to take was to say as much in a payment schedule and thereby enable an adjudicator to assess the reasonableness of its position. The requirement in s 13(2)(b) was satisfied; 3. the documents emailed by Kennedy to Total on 25 October 2022, as a whole, adequately conveyed to Total that Kennedy intended to engage the operation of the Act so as to satisfy s 13(2)(c).
The payment claim thus satisfied the requirements of s 13(2). I will now go on to consider other points, summarised earlier, which Total raised as bars to judgment in Kennedy's favour.

The failure of proof point

Ordinarily, I would have considered that if Total contended that Kennedy had not proved that Total had not served a payment schedule, and that Total had not paid the amount claimed, these were matters which should have been specifically pleaded: Uniform Civil Procedure Rules 2005 (NSW), r 14.14(2). Be that as it may, Kennedy did not take objection to the point being raised.
Whilst it is true that Kennedy bore the onus of proving (on the probabilities) matters under s 14(4)(b) and s 15(1(b) of the Act, it is also the case that, in both cases, it is proving a negative. In such circumstances the principle of evidence attributable to Apollo Shower Screens [16] applies, so that it would be expected to supply only some evidence. Contrary to Total's submission, this principle (a manifestation of Blatch v Archer) does arise because the system for payment claims and payment schedules was effectively under Total's control by means of the PayApps centralisation of information. This meant that Total had the more ready means to prove that it did serve a payment schedule within the prescribed period and that it could demonstrate that it had paid, wholly or partly, the amount claimed. The circumstance of the recipient of a payment claim having better systems in place in this context is not uncommon [17] .
On the aspect concerning proof that the payment schedule was not served on Kennedy under s 14(4)(b), Kennedy established with reference to Total's internal correspondence that, in its outward manifestation towards Kennedy, Total was inactive in the period from 25 October to 9 November 2022, when it sent its first response to the claim made on 25 October. This exceeded the 10-day period prescribed in the statutory provision. Total did not call or tender evidence to cast doubt on this matter. That was unsurprising when the gist of its defence was that no valid payment claim was served.
On the aspect concerning proof that no payment was made under s 15(1)(b), since a payment schedule was not supplied within the prescribed time limit, by operation of s 14(4), Kennedy established Total's liability to pay the amount claimed on the due date for the progress payment. It was manifestly apparent from Total's letter of 9 November 2022 that Total had no intention of paying the whole or any part of the amount claimed. Indeed on the face of that correspondence (the negative sum) Total manifested its position that Kennedy owed Total money.
I further find that these issues, if they were truly controversial, could have been the subject of evidence from Ms Nagul or Mr Whitten and the absence of explanation by Total for why neither was called not only gives rise to an inference that their evidence on those matters would not have assisted Total, but strengthens the inferences I have drawn. I find that: 1. for the purposes of s 14(4)(b), Total did not provide a payment schedule to Kennedy; and 2. for the purposes of s 15(1)(b) Total failed to pay the whole or part of the amount claimed on or before the due date (22 November 2022).

The payment point

I agree with Counsel for Kennedy that this point should have been pleaded. In this particular instance, Kennedy did take the pleading point which, ordinarily means that Total should not be permitted to run it.
Be that as it may, since I have found that a valid payment claim was made for the purposes of s 13, s 15(4)(b)(i) and/or alternatively s 15(4)(b)(ii) of the Act precludes Total from relying upon what it contends was the full or partial sum of the amount claimed.

Power and principles

In anticipation that judgment might be ordered for Kennedy, Total applied for the Court to exercise its discretion to order a stay under s 67 of the Civil Procedure Act.
Total noted that the existence of a set-off may provide a basis for a stay and in that circumstance, a judgment creditor's insolvency was an important factor [18] . It relied upon observations of Richmond J in Piety (at [49]-[51]), in which his Honour had applied principles set out by Ball J in Hakea Holdings Pty Ltd v Denham Constructions Pty Ltd [2016] NSWSC 1120 at [5]-[6]. Ball J identified the factors underlying the competing policies as: 1. the strength of the applicant's claim; 2. the basis of the applicant's claim (indicated by whether or not the applicant challenges the debt or an adjudicator's determination. The absence of challenge to a debt is a power factor against the grant of a stay); 3. the likelihood of the judgment creditor being unable to repay the amount. If there are strong reasons for belief that the judgment creditor will be unable to repay, this is a factor favouring a stay; 4. the risk that the judgment creditor will become insolvent if the stay is granted.
Richmond J also referred to another decision emphasising a requirement in the applicant for the stay to establish that unless a stay was granted it might suffer irreparable prejudice [19] .

The facts

The following facts were summarised in Total's outline of submissions. They are based substantially upon Mr Francois' evidence. This evidence was admissible at an interlocutory level and was scarcely challenged in the procedural context earlier described; although in fairness, Counsel for Kennedy noted that there was likely to be dispute about them in some respects. What follows are facts which should be viewed as being at least reasonably arguable.
In December 2021, Total entered into a contract with B&J City Kitchen Pty Ltd (BJ) as principal for the construction of a food manufacturing facility in Arndell Park, NSW.
Mr Francois was the sole contract administrator for the Project
The Contract contained the following relevant provisions: 1. Liquidated damages of $7500 per day: cl 9.2(b) and Item 9; 2. The date for practical completion was 19 November 2022 (as adjusted); 3. As at 17 February 2023, completion was scheduled to occur on 29 March 2023, which is a delay of 83 business days; and 4. Assuming an 83-business day delay, liquidated damages will be $622,500.
Total's liability in liquidated damages to BJ is also $7500 per day for the first 30 days and $5000 a day thereafter.
Mr Francois forecast that completion under the head contract with BJ will be achieved on 28 April 2023 and, as such, Total will be liable for $515,000 in liquidated damages.
Clause 12.12 of the sub-contract with Kennedy provides that where Total is entitled to make payment to a secondary sub-contractor, Total may pay directly, and the amount paid will be a debt due from Kennedy to Total.
On 7 June 2022, Mr Francois on behalf of Total and Mr Kennedy on behalf of Kennedy struck an agreement by which Total agreed to make payments directly to Kennedy's sub-contractors and suppliers and, in return, Total was entitled to charge Kennedy (the Direct Payment Agreement).
In accordance with the Direct Payment Agreement, Total made payments totalling $1,823,248.23 inc GST.
On 1 June 2022, Total exercised its step-in rights under the Contract.
On 18 August 2022, Total issued a default notice to Kennedy pursuant to cl 13 of the Contract.
On 26 August 2022, a further default notice was issued.
Total's off-setting claim, including for the purposes of s553C, is summarised at paragraph 123 of Mr Francois' affidavit.
Clause 4 of the DOCA provides:
Under cross-examination, Mr Devine said he could not estimate when a dividend could be issued in relation to any proof of debt lodged with a liquidator of Kennedy.
The deed administrators, by their solicitor, undertook to be personally liable for any adverse costs order in relation to an appeal for an adjudication of a proof of debt and appeals (Exhibit 1 on the stay application) therefrom.

Total's submissions

Counsel for Total (applicant for the stay) submitted that Total had a strong offsetting claim. This was indicated by the circumstance that it was forced to take the works out of Kennedy's control, from which it could naturally be inferred that it had incurred loss and damage in order to complete the works; also its payment of the sum of approximately $699,000 under the agreement; and also Kennedy's acknowledgement that the sum of $106,000 had been paid.
On other discretionary matters, Total argued that Mr Devine's evidence suggested that it was uncertain whether or when any dividend could be obtained pursuant to the process under the DOCA. If any dividend was obtained for Kennedy, it was likely to be slight. The process was likely to be a protracted one. Total would prefer to have the money paid into Court. This had the advantages of quicker recourse than if the monies were held by the liquidators on trust and also facilitated the prospect of the recovery of interest, which if the monies were held in trust, would be dubious.

Kennedy's submissions

To repeat, Kennedy (respondent on the stay application) does not dispute that the facts indicate serious questions to be tried about the existence of a valid claim in Total, whether it caused delay and was liable for liquidated damages and the quantum of such claim. Counsel for Kennedy did indicate that Kennedy disputes the oral agreement and other assertions made by the applicant. Kennedy also pointed out that Mr Francois' estimate of damages in his affidavit was only subjective.
Kennedy argues that no irreparable prejudice would be sustained to the applicant if the stay is not granted. First, cl 4 of the DOCA was consciously modelled on undertakings that had been accepted by White J (as his Honour then was) as warranting a lifting of a stay of execution of a judgment on the debt under the statute [20] . The validity of an identical DOCA was upheld in a decision of Ball J rejecting a challenge [21] . The reasoning of McDougall J in Veolia was subsequently approved in different litigation in the Court of Appeal [22] .
The provision adequately protects Total's interests since monies paid pursuant to the judgment on the statutory debt will be held on trust by the deed administrators and paid out by them after a final determination of Total's claim against Kennedy in accordance with the regime; which would involve a process of the lodgement by Total and determination of a proof of debt in any liquidation of Kennedy, to be followed by appeals. Rights for a determination by the Court are accommodated.
If Total was dissatisfied with the determination of a proof of debt, it would be entitled to appeal the liquidator's decision de novo. Moreover, the liquidator would be a party to such appeal and personally liable for costs if the appeal succeeded.
If, contrary to Kennedy's primary submission, cl 4 was insufficient, Kennedy, through its solicitor, has also supplied a written undertaking, inter partes, to Total (Exhibit 1 on the stay application) to accept a liability as to costs of any successful appeal brought by Total against decision on a proof of debt.
In answer to points raised verbally by Total's Counsel, Kennedy argued:

If there has been delay to date or if there is a concern of future delay, this is a circumstance that was or is within Total's control. In its asserted status as a creditor of Kennedy [23] , Total could have sought and can seek the Court's leave under s 444E(3)(c) of the Corporations Act 2001 (Cth) to commence a claim against Kennedy;
The process of lodging and appealing from an adverse determination of a proof of debt is not the only pathway identified in cl 4 of the DOCA. Total's right to have recourse to a court (any court) for determination of its rights is preserved (cl 4.3(e) of the DOCA);
It should not be inferred that Total would be deprived of the opportunity for claiming interest. If it could not be inferred that the liquidators would invest the monies received unilaterally, Total could request that this be done and the liquidators may face adverse consequences if they do not comply with that obvious course of conduct.
As a discretionary matter, the Court would not grant a stay where, on the one hand, Total asserts that it is a creditor of Kennedy, but on the other has evinced an unwillingness to be bound by the DOCA, like other creditors (s 444D)
It was wrong for Total to say that a term of any stay should feature an adjustment of the amount to be paid, in recognition of $106,000 (approximately) already paid or the discrete portion of $147,000 which Kennedy did not make claim for. As indicated in Counsel for Kennedy's calculations (MFI 4, paragraph 12) the claimed amount ($545,353.18) was calculated on the premise that the sum of $106,062.37 had been deducted and Kennedy was willing to wear the sum of $147,000 that it may have been entitled to, but did not, claim.

Accordingly, there was no material disadvantage to Total if any judgment monies were paid to the deed administrators and held on trust under cl 4. That is the appropriate course.
In reply, Total rhetorically asked why it would seek leave to commence a proceeding when it had very little prospect of obtaining a dividend. Although it did not resist being identified as a 'creditor', Total's Counsel noted that Mr Francois had indicated that no proof of debt had (yet) been lodged.

Consideration

In circumstances where Kennedy concedes that serious issues arise on Total's claim, it is not necessary to go further and be any more categorical as to the strength of Total's claim.
I give substantial weight to the circumstance that if not technically insolvent, there are plainly real difficulties in Kennedy's financial predicament and its prospective viability.
I also give weight to Total's concern about delay in allowing processes under the scheme for lodgement of proof of debts, viz a viz a court proceeding. Although there may be force to Kennedy's argument as to how much of that is something for which Total is itself responsible, it is not necessary to decide the point. More pertinently, the DOCA does not preclude Total's recourse to the court, with leave, if it considers this is appropriate to its commercial interests. There might, in any event, be additional delay in the effective enforcement of any judgment that Total obtains if it obtains leave to commence a proceeding in Court and succeeds in obtaining judgment.
It is not for nothing that cl 4 in the DOCA in this proceeding has been modelled on a precedent undertaking accepted by the Supreme Court [24] . That expedient overcomes the legal concern that the interim judgment herein awarded to Kennedy becomes permanent. Clause 4 has received judicial endorsement of the provision as adequate to balance the interests of the parties.
In my opinion, the circumstance that necessarily, Total must regard itself as a creditor and is or should be taken to be bound by the terms of the Deed of Company Arrangement is a compelling reason against ordering a stay on a basis that Total would pay the judgment sum into Court. It matters not, for this purpose, whether Total has or will lodge a proof of debt. Its muted cross-claim is predicated upon it being a creditor. It should not be put in any different position to other creditors of Kennedy.
I accept Kennedy's submissions regarding the absence of prejudice to Total in the sense of incurring costs of an appeal from any adverse adjudication of its proof of debt.
The other prejudice identified by Total is a suggested inability to recover interest on its own claim. I agree with Kennedy's Counsel however, that if it was not otherwise likely, or even obvious, that the external administrators for Kennedy would not invest the judgment proceeds, than the matter could be drawn to the attention (beyond the reference in this judgment).
In the circumstances, I am not persuaded to exercise the Court's discretion to order a stay on execution of the judgment in Kennedy's favour.

Orders

For the foregoing reasons, the Court orders: 1. Judgment for the plaintiff for the sum of $545,353.18. 2. Judgment for the plaintiff for interest under s 11(2) of the Building and Construction Industry Security of Payment Act 1999 (NSW). 3. The defendant's notice of motion dated 23 February 2023 is dismissed. 4. The defendant is to pay the plaintiff's costs of the proceeding. 5. Any application to vary order 4 should be brought by notice of motion within 14 days.

Endnotes

These are predominantly taken from a voluminous court book (running to 5 volumes) which was Exhibit A in the proceeding. Evidentiary references to the Court Book will use the prefix "CB" with the number before the CB denoting the volume number.
Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd [2023] NSWSC 309 ("Piety") at [43]
Isis Projects Pty Ltd v Clarence Street Pty Ltd [2004] NSWSC 714 at [36]-[37], upheld on appeal (Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391 ("Clarence Street"); and cited approvingly in Nepean Engineering per Hodgson JA (Ipp JA agreeing) at [24]
Style Timber Floor Pty Ltd v Krivosudsky [2019] NSWCA 171 at [44]-[47]
Piety at [42]-[43]
Beckhaus v Brewarrina Council [2002] NSWSC 960 at [60]-[61]
MGW Engineering Pty Ltd t/as Forefront Services v CMOC Mining Pty Ltd [2021] NSWSC 514 at [80].
Pacific General Securities Ltd v Solimon & Sons Pty Ltd [2005] NSWSC 378
A-Civil Aust Pty Ltd v Meso Solutions Pty Ltd [2023] NSWSC 372
Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; Marques Group Pty Ltd v Parkview Constructions Pty Ltd [2023] NSWSC 625 at [11]
John Beevor (Aust) Pty Ltd v Paper Australia Pty Ltd [2019] VSC 126 ("John Beevor")
John Beevor at [83]
Fernandes Constructions v Tahmoor Coal (t/as Centennial Coal) [2007] NSWSC 381 at [38]
Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340 especially at [51]-[54]
Thiess Pty Ltd & Anor v Lane Cove Tunnel Nominee Company Pty Ltd [2009] NSWSC 53 at [38]; A Civil v Meso Solutions Pty Ltd [2023] NSWSC 372 at [78])
Piety at [43]
Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corporation (1985) 1 NSWLR 561
Style Timber at [49]
Grosvenor Constructions (NSW) Pty Ltd (in admin) v Musico [2004] NSWSC 344
Ceerose Pty Ltd v A-Civil (Aust) Pty Ltd [2022] NSWSC 1487 at [34]
Paul Michael Pty Ltd v Urban Traders Pty Ltd [2010] NSWSC 1246 ("Urban Traders") citing Veolia Water Solutions v Kruger Engineering (No.3) [2007] NSWSC 459 ("Veolia") at [75]
Kennedy Civil Contracting Pty Ltd (Administrators appointed) v Richard Crookes Construction Pty Ltd [2023] NSWSC 99 ("Richard Crookes Construction")
Seymour White Constructions Pty Ltd v Ostwald Bros Pty Ltd (2019) 99 NSWLR 317 at [254]
For the purposes of s 444D, it has been held that the concept of 'creditor' is broad enough to include any person who has had dealings with the company and is owed money by the company: ASIC v Lawrenson Light Metal Die Casting Pty Ltd (1999) 158 FLR 307 at [79].

Amendments 04 October 2023 - Par [165] order (2): Amended in accordance with the orders of his Honour Abadee DCJ dated 30 August 2023 from "s 100 of the Civil Procedure Act 2005 (NSW)" to "s 11(2) of the Building and Construction Industry Security of Payment Act 1999 (NSW)". 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 October 2023

Corporations Act 2001(Cth)ss 444D, 444E

At a glance

Court

Decision date

Source

Judgment (27 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (34)

Cited By (3)