Kingston Building (Australia) Pty Ltd v Dial D Pty Ltd as trustee for the Smith Street Unit Trust

Supreme Court of NSW|2013-03-04|Before: Stevenson J

Introduction 1This is a dispute between a builder and a proprietor as to the builder's entitlement to be paid a progress claim. The builder made that progress claim on 21 December 2012.

Background 2On 31 March 2010 the plaintiff, Kingston Building (Australia) Pty Ltd ("the Builder") and the defendant, Dial D Pty Ltd as trustee for the Smith Street Unit Trust ("the Proprietor"), entered an agreement ("the Contract") pursuant to which the Builder agreed to construct for the Proprietor a medical centre in Charlestown. The contract sum was $9,345,189, subject to variations and other adjustments. 3Work achieved practical completion on 5 July 2012. Thereafter, the Builder undertook further variations and remedial works in the period from July to December 2012. 4The Builder has done no work on the site since 21 December 2012. 5On 21 December 2012 the Builder sent the Superintendent under the Contract a Progress Claim of $1,170,695.09 ("the Progress Claim"). 6The matter for consideration is whether, in the events that happened, the Builder is entitled to be paid the amount of that Progress Claim.

Terms of the Contract 8Clauses 37.1 and 37.2 of the Contract are in the following terms (to facilitate reference to sub-clauses within these clauses, I have added sub-clause numbering, thus "[x]"): - "37.1 Progress claims [1] The Contractor shall claim payment progressively in accordance with Item 28. [2] An early progress claim shall be deemed to have been made on the date for making that claim. [3] Each progress claim shall be given in writing to the Superintendent and shall include details of the value of WUC done and may include details of other moneys then due to the Contractor pursuant to provisions of the Contract. 37.2 Certificates [1] The Superintendent shall, within 14 days after receiving such a progress claim, issue to the Principal and the Contractor: a) a progress certificate evidencing the Superintendent's opinion of the moneys due from the Principal to the Contractor pursuant to the progress claim and reasons for any difference ('progress certificate'); and b) a certificate evidencing the Superintendent's assessment of retention moneys and moneys due from the Contractor to the Principal pursuant to the Contract. [2] If the Contractor does not make a progress claim in accordance with Item 28, the Superintendent may issue the progress certificate with details of the calculations and shall issue the certificate in paragraph (b). [3] If the Superintendent does not issue the progress certificate within 14 days of receiving a progress claim in accordance with subclause 37.1, that progress claim shall be deemed to be the relevant progress certificate. [4] The Principal shall within 7 days after receiving both such certificates, or within 21 days after the Superintendent receives the progress claim, pay to the Contractor the balance of the progress certificate after deducting retention moneys and setting off such of the certificate in paragraph (b) as the Principal elects to set off. If that setting off produces a negative balance, the Contractor shall pay that balance to the Principal within 7 days of receiving written notice thereof. [5] Neither a progress certificate nor a payment of moneys shall be evidence that the subject WUC has been carried out satisfactorily. Payment other than final payment shall be payment on account only." 9"Item 28" referred to in clause 37.2 [2] is in the following terms: - "Progress Claims (subclause 37.1) a) Times for progress claims 25th day of each month for WUC done to the 25th day of that month". 10Clause 7 deals with the service of notices and is in the following terms: - "A notice (and other documents) shall be deemed to have been given and received: a) if addressed or delivered to the relevant address in the Contract or last communicated in writing to the person giving the notice; and b) on the earliest date of: i) actual receipt; ii) confirmation of correct transmission of fax; or iii) 3 days after posting." 11Clause 45.2 is in the following terms: - "Failure by the Superintendent to set out in a progress certificate an amount which the Principal is entitled to retain, deduct, withhold or set-off from the amount which would otherwise be payable to the Contractor by the Principal will not prejudice the Superintendent's ability to set out in a subsequent progress certificate an amount which the Principal is entitled to retain, deduct, withhold or set off from the amount which would otherwise be payable to the Contractor by the Principal." (emphasis in original) 12The Contract defines "days" to mean "calendar days". It is also clear that in the Contract "days" includes Saturdays, Sundays and public holidays.

Progress claims under the Contract 13Pursuant to cl 37.1 of the Contract, the Builder was entitled to submit progress claims for payment. The progress claims were to be submitted to the Superintendent and were to include certain details. 14The Builder was required to claim payment progressively on the 25th day of each month for work done under the Contract to the 25th day of that month. 15If, as happened in this case, a progress claim was made "early" (that is, before the 25th day of the month) it was "deemed" by cl 37.1 [2] to "have been made on the date for making that claim"; that is on the 25th day of the month. 16Once a progress claim was made, the Superintendent had 14 calendar days, after receipt of the progress claim, to issue a progress certificate. If the Superintendent did not issue a progress certificate in that time, the progress claim was "deemed to be the relevant progress certificate" (see clause 37.2 [3]). 17In that event, the proprietor was obliged to pay the Builder the amount of the progress claim within 21 days of receipt by the Superintendent of the progress claim. The Progress Claim of 21 December 2012. 18On 21 December 2012, the Builder sent the Progress Claim by post to the post office box of the Superintendent at Adamstown. That post office box was one of the addresses nominated by the Proprietor to the Builder as one to which claims could be directed. 19The Progress Claim was received at that post office box on 24 December 2012. Evidently it was not collected from that box until some time between 9 and 14 January 2013. 20By operation of cl 7 of the Contract, the Progress Claim was deemed to be served on 24 December 2012. That was three days after the Progress Claim was posted. It was also the date of "actual receipt" of the Progress Claim by the Superintendent as it was the date that the Progress Claim arrived in the Superintendent's post office box. In my opinion, on the proper construction of cl 7, a document is "actually received" when it is "delivered to the relevant address" (see clause 7(a)); in this case the Superintendent's post office box. In my opinion, for the purposes of the Contract, "actual receipt" of a document does not depend on the addressee taking physical possession of the document that was delivered to the address or even becoming aware of its delivery. 21As the Progress Claim was made "early", that is, before the 25th of the month, it was by reason of cl 37.1 [2] deemed to have been made on 25 December 2012. 22Curiously, on the combined operation of the deeming provisions in cl 7 and cl 37.1 [2] of the Contract, the Progress Claim was deemed to have been received by the Superintendent on 24 December 2012 but deemed to have been made on 25 December 2012. 23In any event, the Superintendent had 14 days from, at the latest, 25 December 2012, to issue a progress certificate. That is, to 8 or 9 January 2013. 24It did not do so. 25The Superintendent did not purport to issue a progress certificate until 14 January 2013. The progress certificate now relied upon by the proprietor is one issued later, on 31 January 2013. 26The result is, in my opinion, as the Builder submits, that the Plaintiff was obliged to pay the Progress Claim by 11 January 2013; being within 21 days of the Superintendent receiving the Progress Claim. 27Fitzgerald P sitting as a member of the Queensland Court of Appeal in Re Concrete Constructions Group Pty Ltd [1996] QCA 86, speaking of a similar provision, putting the matter pithily: "What is certified is intended to be paid". I agree. 28In my opinion, once the entitlement to payment arose it became something akin to an accrued right in the sense that it was unconditionally acquired; albeit on account of whatever may be determined to be the Builder's final entitlement to payment under the Contract, if and when the dispute resolution provisions of the Contract are enlivened (cf McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-7 per Dixon J and Macquarie International Health Clinic Pty ltd v Sydney South West Area Health Service [2010] NSWCA 268 at [217] per Hodgson JA, Allsop P and Macfarlan JA concurring at [1] and [389] respectively).

The alleged Progress Certificate 29On 31 January 2013, the Superintendent issued a progress certificate ("the Progress Certificate") which, far from requiring the Proprietor to pay the Builder any money (let alone the $1,170,695.09 in the Progress Claim), purportedly required the Builder to pay the Proprietor $1,067,571.53. 30The Progress Certificate dealt with each of the items in the Progress Claim and, in effect, purported to disallow many of them. The Progress Certificate thus, in terms, contradicted the Progress Claim. 31In issuing the Progress Certificate, the Superintendent evidently relied upon the provisions of clause 37.2 [2]; set out above. 32The Builder had not made a progress claim in January. That was because, the evidence revealed, the Builder had done no work under the Contract after service by it of the Progress Claim at the end of December 2012. The Proprietor submitted that as the Builder had not made a progress claim in January, it was open to the Superintendent to issue a progress certificate contradicting the Progress Claim in the manner I have outlined. 33This is notwithstanding the accrual to the Builder, on account of its ultimate entitlement under the Contract, of a right to payment by reason of the Superintendent's failure to respond to the Progress Claim in the time specified in the Contract. 34Mr Kalyk, who appeared for the Proprietor, submitted that the Progress Certificate had "superseded" the Progress Claim. 35That submission, if correct, would have the effect that in any month when the Builder did not make a progress claim (for example, as here, because it had completed the work) it would be open to the Superintendent to issue a progress certificate that deprived the Builder of its entitlements under any earlier unpaid progress claims. 36That would be an extraordinary result. It would repose in the hands of the Superintendent power to deprive the Builder of an accrued right to payment. It would also give the Superintendent what would effectively amount to a "slip rule", whereby the Superintendent would overcome the effect of its failure to respond to a progress claim in the time limits agreed by the parties by the simple expedient of waiting for a month in which the Builder did not make a progress claim and then issue the progress certificate under cl 37.2 [2]. 37In my opinion, looking at the language used by the parties in the Contract, I do not think this is what they intended. 38First, the position of cl 37.2 [2] within the body of cl 37.2 points against the conclusion that this is what the parties intended. 39Clause 37.2 [2] appears before cl 37.2 [3] (which deals with the consequence of the Superintendent not issuing a progress certificate within 14 days of the receipt of a progress claim); before cl 37.2 [4] (which contains the Proprietor's obligation to pay) and before cl 37.2 [5] (which emphasises that a progress claim is "on account" only). 40That suggests to me that the parties did not intend cl 37.2 [2] to give power to the Superintendent to deprive the Builder of accrued rights arising from subsequent subparagraphs of cl 37.2. 41Second, and perhaps more importantly, cl 37.2 [2] must be read together with "Item 28" to which it refers. When those provisions are read together, cl 37.2 [2] reads: "If the Contractor does not make a progress claim [by the 25th day of each month for work under the Contract done to the 25th day of that month], the Superintendent may issue the progress certificate with details of the calculations and shall issue the certificate in paragraph (b)." (emphasis added) 42This makes clear, in my opinion, that the parties intended that cl 37.2 [2] only be enlivened when the Builder did not make a progress claim, by the 25th of the month, for work the Builder had done in that month. In my opinion, the clause is not enlivened where, as here, the Builder made no progress claim during the month because it did no work. 43It follows, in my opinion, that the occasion for the Superintendent to issue a progress certificate under cl 37.2 [2] has not arisen. The purported Progress Certificate of 31 January 2012 is of no effect. 44In those circumstances, I do not consider that cl 46.2 of the Contract has any role to play. That clause is to the effect that a failure by the Superintendent to set out a relevant matter (for example a deduction) in one progress certificate does not affect its entitlement to do so in a later progress certificate. That clause does not, in my opinion, give the Superintendent an entitlement to issue a progress certificate which it does not otherwise have. 45Rolfe J, in Algons Engineering Pty Limited v Abigroup Contractors Pty Limited [1997] NSWSC 478, dealt with a similar provision to cl 37.2[2]. His Honour rejected a submission that the Superintendent was not entitled to issue a progress certificate in circumstances where the Builder had not made a claim for payment. It is not clear from the judgment that the argument before his Honour was developed as it has before me. His Honour dealt with the matter very briefly. 46In those circumstances, I do not see anything in his Honour's decision to deflect me from the conclusion to which I have come. 47I make these declarations and orders: - (1)Declare that the purported progress certificate issued on or about 31 January 2013 was and is void and of no effect under the terms of the Contract made between the parties on 31 March 2010. (2)Enter judgment for the plaintiff against the defendant in the sum of $1,170,695.09. (3)Order that the defendant pay the plaintiff's costs of the proceedings. (4)Order that the judgment in par 2 be stayed until 5pm on 8 March 2013. (5)Order that the injunction granted by the McDougall J in the proceedings be extended until 5pm on 8 March 2013. (6)Grant the parties liberty to apply to me on short notice.

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: 07 March 2013

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