Plaintiff v Defendant [2018] VSC 635 | Case summary

Supreme Court of Victoria|2018-10-26|Before: Digby J

BUILDING - Reference date for payment claim - Whether jurisdictional fact satisfied - Whether inadequate payment claim documentation precludes finding reference date - Building and Construction Industry Security of Payment Act 2002 (Vic), s 16(2)(a)(i).

PRACTICE AND PROCEDURE - Application for summary judgment - Application to strike out pleadings - Whether pleadings disclose cause of action - Whether pleadings address causation - Whether pleadings address loss and damage - Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 23.

PRACTICE AND PROCEDURE - Where proceeding must be commenced by originating motion - Whether judgment is a summary judgment - Applicable approach to and test for judgment - Building and Construction Industry Security of Payment Act 2002 (Vic), s 16(2)(a)(i); Civil Procedure Act 2010 (Vic), s 61; Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 22; Supreme Court (Chapter 1 Summary Judgment Amendment) Rules 2015 (Vic).

1 On 28 January 2016, John Beever (Aust) Pty Ltd (plaintiff) and Roads Corporation (defendant) entered into a construction contract (the construction contract) in respect of strengthening works to the Wallen Road Bridge in Hawthorn, in the State of Victoria.[1]

2 On 11 April 2017, the defendant certified that practical completion of the works was achieved on 22 March 2017.[2] At the earliest, the Defects Liability Period (DLP) under the construction contract expired in March 2018.

3 On or around 28 September 2017, a representative of the plaintiff sent a payment claim (PC 16) under the Building and Construction Industry Security of Payment Act 2002 (SOP Act) to the defendant seeking a progress payment under the contract in the sum of $290,146.61.[3] PC 16 was served within the DLP.

4 The defendant did not serve a payment schedule in response to PC 16.

5 By its Statement of Claim dated 29 March 2018, the plaintiff seeks the sum of $290,148.61 from the defendant as a debt due to the plaintiff, recoverable under s 16(2)(a)(i) of the SOP Act. The plaintiff also claims for damages for breach of the construction contract and a contract payment claim in respect of certain disputed variation work.[4]

6 By Summons dated 16 May 2018, the plaintiff seeks summary judgment in the sum of $290,148.61, pursuant to s 16 of the SOP Act on the basis that the defendant did not serve a payment schedule in response to PC 16 under the SOP Act.

7 By Summons dated 29 May 2018, the defendant applied to strike out certain paragraphs of the plaintiff's Statement of Claim, namely those parts which alleged that:

(a) pursuant to the SOP Act, the plaintiff was entitled to judgment in the sum of $290,148.61 and interest, as a result of the defendant failing to serve a payment schedule in respect of the plaintiff's PC 16 payment claim;[5]

(b) the construction contract contained an implied term that the defendant would procure the Contract Superintendent to act honestly, fairly, justly and impartially;[6]

(c) the defendant had breached the construction contract by failing to procure the Contract Superintendent to act honestly, fairly, justly and impartially with respect to references by the plaintiff to the Contract Superintendent for explanation and direction for a 'Weldability Issue'[7] and allegedly resulting damages; and

(d) the defendant had directly or via its Contract Superintendent ordered variations for which the plaintiff has not been paid and in relation to which the plaintiff has suffered loss and damage.

8 Since filing its Summons, the defendant has clarified that it only maintains its complaint that the plaintiff failed to properly allege the existence of a 'reference date' for its SOP Act related claims at [6] to [12] of the plaintiff's Statement of Claim. The defendant argues this asserted cause of action should be struck out for that reason. The defendant otherwise accepts that the balance of its strike out application has been satisfied with the further and better particulars received from the plaintiff.[8]

9 The present judgment deals with the following applications:

(a) the plaintiff's application for summary judgment on its claims under the SOP Act (the SOP Application) in the sum of $290,148.61, plus interest;[9] and

(b) the defendant's strike out application in relation to the plaintiff's SOP Act claim, referred to at [6] to [12] of its Statement of Claim (the Strike Out Application).[10]

10 It is convenient to dispose of both applications together. For the reasons below, I have decided that the plaintiff's application for summary judgment must fail and the defendant's strike out application should be rejected.

11 The plaintiff is a mechanical engineering company providing construction, maintenance and industrial services to the manufacturing, resources, infrastructure and industrial sectors.[11] The defendant is a statutory corporation trading under the name VicRoads.[12]

12 The Wallen Road Bridge (the Bridge) is an extension of Swan Street linking Richmond with Hawthorn across the Yarra River in Victoria. Originally designed and construed in 1881,[13] it is one of the only remaining examples of nineteenth-century bridges in Australia.[14] In 1916, the Bridge was strengthened and modified to accommodate electric trams.[15] In 1934, the Bridge suffered a partial collapse which required strengthening works.[16] The General Manager of the plaintiff deposes that the Bridge requires 'careful maintenance and work to maintain safe operation to modern standards'.[17]

13 On 22 October 2015, the defendant awarded the plaintiff the subject construction contract. The construction contract required the plaintiff to perform strengthening works and other associated maintenance works to the Bridge (the Works).[18] The construction contract was executed on 28 January 2016,[19] for a contract price in the sum of $2,122,064 plus GST.[20]

14 The construction contract is described as a 'substantial document which required a variety of works and included drawings and specifications prepared by or on behalf of VicRoads'.[21] The drawings, amongst other things, identified the following 'Welding Procedures for Wrought Iron':[22]

(a) Welding procedures shall be carried out and qualified in line with the requirements of AS 1554.1;

(b) Welders and welding supervisors shall be qualified as to AS 1554.1;

(c) Welding contractors shall be experienced and qualified in working with wrought iron; and

(d) All paint shall be removed from surfaces to be welded by grinding.

15 'AS 1554.1' is a reference to an Australian Standard regulating the welding of a wide range of steel structures. It is set by Standards Australia, an independent standards organisation, which the Australian Government recognises through a Memorandum of Understanding. Broadly, AS 1554.1 specifies the types of parent metal and welding consumables to which it apples and also describes permissible levels of imperfections.[23]

16 Between about May and June 2016, the plaintiff raised concerns that the material to be welded as part of the Works would not achieve mechanical properties that were specified under AS 1554.1.[24] This led to an extended email exchange in which the plaintiff repeatedly requested an explanation and directions for how to proceed,[25] and suggested that there be a review of the design to remove the requirement for welding.[26]

17 In response, the defendant undertook to 'review in good faith the design and extent of the welding required'.[27] Ultimately, however, the defendant asserted that the plaintiff was contractually obliged to develop an appropriate welding procedure in accordance with AS 1554.1 and conveyed that the designers had rejected any request for an alteration to what it asserted were the contractual welding requirements.[28]

18 On 5 November 2016, the plaintiff made a variation claim for additional welding work.[29] In substance, the claim asserted an entitlement to costs which it had incurred beyond the scope of the requirements of the construction contract and pursuant to an instruction which had been issued by the defendant.[30] This claim was rejected by the defendant.[31]

19 On 30 November 2016, the plaintiff sent its weld procedure pre-qualification to the defendant.[32] The defendant responded that the procedure was unsatisfactory 'due to the low strength when tested' and sought resubmission of the procedure to conform to the agreed requirements.[33] This was followed by a meeting on 22 December 2016 between representatives of the plaintiff and the defendant to discuss an appropriate welding procedure.[34] The plaintiff's welding work at the bridge concluded on or around 30 January 2017.[35]

20 The evidence on which the parties rely for the welding procedure-related variation claim under the SOP Act is summarised and analysed as necessary below. However, given the welding dispute briefly described above goes to the heart of the broader contractual dispute between the parties, this issue cannot be determined finally on return of the current interlocutory applications.

21 On or around 6 April 2017 the Senior Project Manager at John Beever sent a letter to the defendant requesting a Certificate of Practical Completion for the works.[36] The Certificate of Practical Completion was returned on 11 April 2017. The Certificate of Practical Completion specified 22 March 2017 as the Date for Practical Completion and identified the following defects:[37]

(a) complete test results for painting;

(b) complete test results for concrete repairs; and

(c) As Constructed Drawings.

22 The extent to which the test results and As Constructed Drawings were 'defects' claimable after practical completion is a point of difference between the parties.

23 On 28 September 2017, a representative of the plaintiff sent a letter by express post to the defendant enclosing PC 16.[38] PC 16 claimed $290,148.61 as follows:

AUSTRALIA

PROGRESS PAYMENT CLAIM FORM

Project 20181 - Wallan Road Bridge

John Beever (Aust)

Claim No: 16

Application to VICROADS

Contract VicRoads Wallen Rd Bridge Strengthening

Job No 20181

Date 15-Sep-17

We hereby apply for a Progress Payment of $290,148.61 in accordance with the following:-

Value of contract works (Exc. GST) As per Attached Schedule

Plus Non Agreed Variations for additional works

This is a payment claim under the "Building and Construction Industry Security of Payment Act 2002 (VIC)" .[39]

24 As earlier noted, the defendant did not serve a payment schedule contesting any of the amount claimed.[40] This is despite claims being made for additional work for variations completed in respect of the disputed welding work. Instead, on 3 November 2017, a representative of the defendant made the following observations in relation to PC 16:

It is not clear what JBA says is the relevant reference date, but it seems unlikely that a reference date has arisen since payment claim 15 was paid. If JBA takes a different view, I invite you to explain when the relevant reference date arose.

Payment Claim No 16 is comprised predominately of unapproved variations. These are Excluded Amounts for the purposes of the Security of Payment Act.[41]

25 The plaintiff now seeks judgment under s 16(2)(a)(i) of the SOP Act for the amount claimed in PC 16. The defendant asserts PC 16 is deficient for want of a reference date and that the 'purported payment claim is defective'.[42] The defendant also argues that judgment should not be entered on PC 16 because the plaintiff claims an excluded amount. Finally, the defendant applies to strike out the plaintiff's claim for $290,148.61 plus interest for want of an alleged 'reference date' as required by the SOP Act.

26 One of the objects of the SOP Act is to establish an interim statutory entitlement to 'progress payments' under construction contracts.[43] Proceedings to recover the amount of a progress payment in Court should, if possible, be conducted expeditiously in light of the 'pay now argue later' policy underpinning the SOP Act.[44] To mitigate the otherwise harsh summary consequences of this statutory regime, s 47(3)(b) of the SOP Act allows a court to make orders for allowances and, inter alia, the restitution of amounts awarded under the SOP Act, in future civil proceedings that finally determine the rights of the parties.[45]

Cash flow is the lifeblood of the construction industry. It is critical that industry participants obtain prompt interim payment, pending a final determination of the matters in dispute.[46]

28 The scheme of the Act has justifiably been described as 'pay now, argue later'.[47] In Protectavale Pty Ltd v K2K Pty Ltd (Protectavale),[48] Finkelstein J stated that the SOP regime:

...places the claimant in a privileged position in the sense that he acquires rights that go beyond his contractual rights. The premise that underlies the legislation is that cash flow is the lifeblood of the construction industry and that the principal under a construction contract should pay now and argue later.[49]

Reconciliation of the Civil Procedure Act 2010 (Vic) and the SOP Act

29 The plaintiff has applied for 'judgment' under s 16(2)(a)(i) of the SOP Act.[50] The precise nature of this 'judgment' was not identified in the plaintiff's Summons. Nor does the Summons identify any rule of Court pursuant to which that application is brought. However, in submissions, the parties to this application both identified the nature of the plaintiff's application as being for 'summary judgment'. Indeed, both the plaintiff and the defendant referred to r 22 of the Supreme Court (General Civil Procedure) Rules 2015 (the SC Rules) as relevant to the plaintiff's application in relation to s 16 of the SOP Act, without any suggestion that r 22 was in the circumstances inapplicable or inappropriate.[51]

30 A central point of difference between the parties is the nature of an application for judgment under s 16(2)(a)(i) of the SOP Act as outlined at paragraph [52] below. That question cannot be resolved in the abstract. It is important to consider the procedure by which the present matter was instituted:

(a) On 29 March 2018, the plaintiff filed an Originating Process-RedCrest indorsed with a Statement of Claim. Paragraphs [6] to [12] of the Statement of Claim make a claim under s 16(2)(a)(i) of the SOP Act. Paragraphs [13] to [34] of the Statement of Claim plead a separate claim for contractual damages.

(b) On 16 May 2018, the plaintiff filed and served a Summons seeking 'judgment' against the defendant in relation to the claims made in paragraphs [6] to [12] of the Statement of Claim, namely the SOP Act claims. The nature of this 'judgment' and the basis of the application for judgment were not otherwise expressly identified in the plaintiff's Summons.

31 Rule 4.05 of the SC Rules requires applications under s 16(2)(a)(i) of the SOP Act to be commenced by way of originating motion:

A proceeding shall be commenced by originating motion...

(b) where by or under any Act an application is authorised to be made to the Court...[52]

32 If there are issues beyond the scope of s 16(2)(a)(i), the parties may seek orders that all or part of the claims pleaded in the originating motion be progressed and addressed as if commenced by writ and that any affidavits filed stand as pleadings.[53]

33 If there are issues which are not suitable for an application for judgment under s 16(2)(a)(i) of the SOP Act, a moving party is permitted to bring separate proceedings.

34 As earlier mentioned, the overarching position established by s 47 of the SOP Act is that determinations under the Act for the recovery of progress payments do not affect other proceedings arising under the construction contract. In subsequent proceedings before a court or tribunal (including an arbitral tribunal) under the same construction contract, the SOP Act enables an allowance or restitution to be made for an amount paid under Part 3 of the Act, as the case may require.[54]

35 Formerly, under the SC Rules_,_ summary judgment was not available in proceedings commenced by originating motion.[55] That may have informed the requirement that applications for judgment made under specific statutes with unique procedures be commenced by originating motion. Now, however, that restriction does not apply,[56] and the requirement has less procedural significance.

36 Plaintiffs may commence a proceeding to recover a payment claim under the SOP Act by writ. However, in the usual course, an application for summary determination, such as pursuant to s 16(2)(a)(i) of the SOP Act, would be commenced by originating motion supported by affidavit.[57]

37 Rule 22 of the SC Rules appears to provide for the sole procedural avenue for an application for summary judgment. That Order aligns the test for summary judgment under the SC Rules with and refers to the relevant test under the summary judgment provisions of Part 4.4 of the Civil Procedure Act 2010 (Vic) (the CPA).

38 Part 4.4 of the CPA relevantly provides:

61. Plaintiff may apply for summary judgment in proceeding

A plaintiff in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a defendant's defence or part of that defence has no real prospect of success.

63. Summary judgment if no real prospect of success

(1) Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.

(2) A court may give summary judgment in any civil proceeding under subsection (1) -

(a) on the application of a plaintiff in a civil proceeding;

(b) on the application of a defendant in a civil proceeding;

(c) on the court's own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.

64. Court may allow a matter to proceed to trial

Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because -

(a) it is not in the interests of justice to do so; or

(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.

Summary judgment

Part 1 - General

22.01 Scope of Order

This Order applies to all civil proceedings in the Court to which, in accordance with section 4 of the Civil Procedure Act 2010, that Act applies.

Part 2 - Application by plaintiff for summary judgment

22.03 Application by plaintiff for judgment

An application under section 61 of the Civil Procedure Act 2010 by a plaintiff in a civil proceeding for summary judgment in the proceeding shall be made in accordance with this Part of this Order.

22.04 Summons and affidavit in support

(1) An application shall be made by summons supported by an affidavit -

(a) verifying the facts on which the claim or the part of the claim to which the application relates is based; and

(b) stating that in the belief of the deponent the defence to the claim or the defence to the relevant part of the claim -

(i) has no real prospect of success; or

(ii) has no real prospect of success except as to the amount of the claim or as to the amount of the relevant part of the claim.

40 Where the plaintiff can demonstrate that the defendant's case in defence lacks a real prospect of success, the Court may enter judgment summarily without a full trial.

41 In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd,[58] Warren CJ and Nettle JA made the following observations in relation to the test for summary judgment under the CPA:

Upon the present state of authority:

(a) the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a "real" as opposed to a "fanciful" chance of success;

(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the "hopeless" or "bound to fail test" essayed in General Steel;

(c) it should be understood, however, that the test is to some degree a more liberal test than the "hopeless" or "bound to fail" test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent's case is not hopeless or bound to fail, it does not have a real prospect of success;

(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.[59]

(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.

43 Section 16 of the SOP Act provides in relevant part:

16 Consequences of not paying claimant where no payment schedule

(1) This section applies if the respondent -

(a) becomes liable to pay the claimed amount to the claimant under section 15(4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section; and

(b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.

(2) In those circumstances, the claimant -

(a) may -

(i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction;

...

(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 -

(i) of the existence of the circumstances referred to in subsection (1); and

(ii) that the claimed amount does not include any excluded amount; 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. (Underlining added)

44 Subparagraphs (a) and (b) of s 16(4) set the parameters of the cause of action under s 16(2)(a)(i) and identify requirements for engaging the Court's power to enter judgment for the plaintiff. In particular, s 16(4)(a)(ii) precludes the Court from giving judgment for the claimant in respect of any 'excluded amount' as defined by the SOP Act. Subsection 16(4)(b) also prevents any contractual defence or cross-claim being brought or raised against the applicant's claim for judgment on the debt created by the receipt of a valid payment claim and the failure to the recipient of the payment claim to provide a payment schedule under the SOP Act.

45 Notwithstanding s 16(4)(b), it is open to a respondent to 'deny' the existence of the facts that engage the Court's power to enter judgment.

46 If the plaintiff applies for 'summary judgment' the Court should apply the test prescribed in s 61 of the CPA and follow the procedure in r 22 of the SC Rules, to determine whether the defendant has no real prospect of success in challenging the claimed entitlement to judgment under s 16(2)(a)(i) of the SOP Act.

47 The challenges that could be raised by the defendant include the following that:

(a) there was no 'construction contract' as defined in the SOP Act;[60]

(b) there was no 'reference date' as required under the SOP Act;[61]

(c) the documentation constituting the payment claim does not meet the formal requirements of the SOP Act;[62]

(d) the claimant cannot otherwise satisfy the requirements of s 16(1)(a)[63] and (b) and s 16 (4)(a)(i) of the SOP Act.[64]

Nature of 'Summary' Judgment under the SOP Act

48 The plaintiff's submissions track the statutory requirements to recover a payment claim. In its written submissions responding to the plaintiff's application, the defendant states:

Although the plaintiff's summons dated 16 May 2018 fails to properly identify the grounds of its application, it is obviously an application for summary judgment under rule 22 and s 16(2)(a)(i).[65]

49 The defendant also referred to the following observation of Vickery J in Phoenix International Group Pty Ltd v Resources Combined No 2 Pty Ltd (No 2) (Phoenix International): [66]

In cases where application is made for the entry of judgment pursuant to s 27 of the Old Act, in my view it is appropriate to approach the matter by applying the closely analogous procedure for entry of a summary judgment pursuant to O 22 of the Rules of Court.[67]

50 The procedure under s 16(2)(a)(i) has also been described as 'summary' by the Victorian Court of Appeal in Façade Treatment Engineering Pty Ltd (in liq.) v Brookfield Multiplex Constructions Pty Ltd (Façade).[68]

Insofar as VicRoads' submissions refers to the summary judgment test under s 63 of the Civil Procedure Act 2010, that test is essentially uncontroversial ... So whatever "caution" is to be exercised in making an order for summary judgments in other contexts, an application for summary judgment under s 16 of the Act (which also expressly limits the matters a defendant can raise by defence) is governed by the Purpose and Object of the Act, respectively stated in ss 1 and 3 thereof.[69]

52 The submissions of the parties on this aspect are in essence as follows:

(a) the plaintiff submits that the s 16(2)(a)(i) is a specific regime for summary judgment under the SOP Act, which either partially or wholly displaces the operation of the general regime of the CPA in these circumstances;

(b) the defendant submits that, by reason of the decision of Vickery J in Phoenix International,[70] the general summary judgment test in r 22 of the SC Rules informs the relevant considerations attending the Court's power to enter judgment under s 16(2)(a)(i) of the SOP Act.[71]

53 Accordingly, the two relevant bodies of legislation to be considered are:

(a) the procedure for an application for 'judgment' under s 16(2)(a)(i) of the SOP Act. The SOP Act provides that if certain conditions are satisfied (such as a valid payment claim, the absence of a payment schedule and the absence of an excluded amount), the Court is required to enter judgment for the amount of the payment claim for the plaintiff;

(b) the regime for an application for 'summary judgment' under s 61 of the CPA and r 22 of the SC Rules. Such an application can be made in all proceedings to which the CPA applies.

54 The undifferentiated use of the term 'summary' can be confusing. Ordinarily, 'summary' describes the expeditious disposition of a claim without a full trial. In this respect, given the SOP Act provides an interim mechanism to facilitate the payment of payment claims, the description 'summary' is particularly apt to describe the procedure for entering judgment under s 16(2)(a)(i) of the SOP Act. Such a description accords with the purpose and object of the SOP Act referred to above.[72]

55 However, 'summary' also describes the process of 'summary judgment'; an interlocutory process facilitating the Court's disposal of unmeritorious claims and defences that have 'no real prospect of success'.

56 Notwithstanding that it is intended to be resolved expeditiously, and gives rise to only interim entitlements which are subject to allowance and restitution in future civil proceedings,[73] the claim and procedure for entering judgment under s 16(2)(a)(i) of the SOP Act is treated analogously to any other civil claim to which the CPA applies. That is to say, the plaintiff can apply for 'summary judgment' under s 61 of the CPA on its claim under s 16(2)(a)(i) of the SOP Act, and the plaintiff should succeed on such an application if the defendant's defence to that claim has 'no real prospect of success'.

57 I see no justification for displacing one of the regimes under consideration in favour of the other. The two statutes, namely the SOP Act and the CPA, and the regimes which they establish, although fulfilling different functions, are capable of being construed in a harmonious manner and operating in a complementary way.

58 Section 16(2)(a)(i) of the SOP Act gives rise to a substantive cause of action. Like many other causes of action, statutory or otherwise, s 16(2)(a)(i) sets parameters for what can be argued by the parties in relation to an application for judgment under s 16 of the Act. These parameters are limited by s 16, and in particular s 16(4)(b).

59 Sections 61 and 63 of the CPA, and r 22 of the SC Rules, provide a procedural mechanism and a test to determine whether summary judgment may be entered in respect of a cause of action.

60 In my view, the Court of Appeal's use of the term 'summary' in Façade does not amount to it holding, nor does it necessarily suggest, that an application for judgment under s 16(2)(a)(i) is attended by identical considerations to an application for summary judgment under s 61 of the CPA.

61 If an applicant such as the plaintiff in this proceeding applies for 'summary judgment' under s 16(2)(a)(i) of the SOP Act, the applicant must however demonstrate that the defendant's case in defence to the application has no real prospect of success. That is the summary judgment test established by the provisions of the CPA. The application will be brought via r 22 of the SC Rules. In this setting the onus is on the applicant as the moving party.[74]

62 If the plaintiff's application for summary judgment is unsuccessful, there may as is the case with any other civil claim if the applicant's claim is pursued, be a trial as to whether the requirements of s 16(2)(a)(i) of the SOP Act have been satisfied. If judgment is entered on a successful application under s 16 of the SOP Act the outcome will nevertheless be of an interim nature.

63 Accordingly, if the plaintiff applies for 'summary judgment' under s 16 of the SOP Act, the Court should apply the test referred to in s 61 of the CPA and follow and apply the procedure and approach prescribed in r 22 of the SC Rules in determining whether the requirements of s 16 of the SOP Act have been satisfied and whether a defendant's defence(s), here based on one or more of the limited challenges identified below in relation to s 16 of the SOP Act, have any real prospect of success.[75]

64 In light of the parties' submissions, the following questions in particular, in addition the defendant's pleading related complaints, arise for determination on the plaintiff's application for summary judgment, namely whether the defendant has any real prospect of success in arguing that PC 16:

(a) was not supported by a reference date (the reference date objection);[76]

(b) does not satisfy the formal requirements of the SOP Act (the formal requirements objection); and

(c) includes an amount which is an 'excluded amount' under the SOP Act (the claimable variations objection).

The Plaintiff's Application for Summary Judgment

65 Under s 16 of the SOP Act, I consider that the plaintiff's summary judgment application should be determined on the balance of probabilities on the basis of whether the plaintiff has established that the circumstances referred to s 16(1) of the SOP Act are shown to exist; and on the basis of whether I am satisfied that the plaintiff's claim does not include an excluded amount as defined by s 10B of the SOP Act and that the matters raised against the plaintiff's claim for judgment under s 16 of the SOP Act by the defendant have no real prospect of success.

66 The entitlement to a progress payment under the SOP Act accrues on a 'reference date' under the parties' construction contract, or in certain circumstances by force of the provisions of the SOP Act.[77]

67 It has been suggested that the validity of the payment claim does not require identification of the reference date in the payment claim.[78] However, under the New South Wales equivalent to the Victorian Act, in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd,[79] the High Court of Australia held that the existence of a reference date is a precondition to making a valid payment claim.[80] This interpretation of the Act has been applied to various security of payment regimes across Australia,[81] including Victoria.[82]

68 Here, if there is no applicable 'reference date' under the SOP Act, the payment claim on which the plaintiff seeks judgment under s 16(2)(a)(i) of the SOP Act will be invalid and the plaintiff's application for summary judgment will be unsupported in that critical respect.

69 The Act prescribes different methods for determining a reference date. Essentially, for specific items of work or the provision of specific goods and services under a construction contract, the SOP Act provides that a 'reference date' is to be determined in accordance with the terms of the parties' contract.[83] The means of determining the 'reference date' can be either by reference to the date on which a progress payment claim may be made,[84] or the date by reference to which the amount of a progress payment is to be calculated.[85]

70 Where the subject construction contract makes no provision for a reference date, the SOP Act deems the first reference date to occur twenty business days after the date on which construction work was first carried out, or goods and services were first supplied under the contract, and also deems further reference dates to have occurred every twenty business days thereafter.[86] There are exceptions in the cases of 'single or one-off payments;'[87] and for a 'final payment'.[88]

71 Parties cannot 'contract out' of statutory entitlements to progress payments under the SOP Act_._[89] Any provision in a construction contract that purports to exclude modify or restrict the operation of the SOP Act or which could be 'reasonably construed' as attempting to deter a person from taking action under the SOP Act is void.[90]

72 However, subject to the requirement that the parties' statutory entitlements are preserved, parties are afforded the contractual freedom to adopt 'any particular mechanism for determination of progress payments',[91] because the 'framework of the SOP Act is to create a statutory system alongside a contractual regime'.[92] In this regard it was aptly stated that the statutory progress payment regime should 'underwrite' the parties' contractual entitlements.[93]

73 The construction contract in this instance provides the following in relation to reference dates:

S17.1.1 Payment claims

Unless otherwise provided in the Contract, the Contractor shall submit to the Superintendent a payment claim stating that it is made under the Security of Payment Act, in a form satisfactory to the Superintendent, every month, at a date to be agreed at the first site meeting, (the reference date for the purpose of the Security of Payment Act), showing the contract value of the work carried out in performance of the Contract and incorporated in the Works together with the requisite statutory declarations. If the date for a payment claim falls due on a day which is not a business day, the Contractor shall submit the payment claim on the next business day following that date.[94]

S17.3 Practical Completion Payment Claim and Payment

Within fifty-six (56) days of the issue of the Certificate of Practical Completion, or where there is more than one, the last to be issued, the Contractor shall provide the Superintendent with a Practical Completion Payment Claim and endorse it "Practical Completion Payment Claim".

In addition to claims for payment required to be included in a payment claim under Clause S17.1.1, the Contractor shall include in the Practical Completion Payment Claim all claims for moneys that the Contractor considers to be due from the Corporation arising out of any alleged breach of the Contract. Subject to the following paragraph, all claims which could have been made under Clause S17.1 or this Clause S17.3 or any other clause of the Contract, which have not already been barred, shall be barred after the expiration of the period for lodging a Practical Completion Payment Claim.

During the Defects Liability Period the Contractor may make further claims for payment but (other than the Practical Completion Payment Claim) solely in respect of work required to be performed during the Defects Liability Period.[95]

74 The minutes of the parties' first site meeting on 19 November 2015 evidence their agreement that progress payments would be submitted on the twenty-fifth day of each month.[96] Both parties accepted that this evidence satisfied the requirement for an 'agreement' in cl S17.1.1.[97]

75 On 11 April 2017, the defendant recognised that Practical Completion of the Works was achieved on 22 March 2017.[98] This engaged clause S17.3 of the construction contract.

76 Upon the achievement of the practical completion of the works, the contractually defined DLP under the construction contract ran for twelve months from the date of practical completion, and as earlier noted, at the earliest concluded in March 2018.

77 Thus, between 22 March 2017 and 22 March 2018, in addition to the Practical Completion Payment Claim, the plaintiff was able to make further claims for payment, but this type of claim was restricted to a claim 'solely in respect of work required to be performed' during the DLP.[99]

78 The meaning and application of that italicised phrase above is in issue on this application and requires determination. Because service was effected on 28 September 2017 at the latest,[100] there is no doubt that PC 16 was served during the DLP. Issues however remain, including as to whether during the DLP, and furthermore after the time specified for the payment claim required by cl S17.3 (paragraph one) to be endorsed 'Practical Completion Payment Claim', the Contractor is permitted to make any payment claim other than solely in respect of work required to be performed during the DLP.

79 The plaintiff interprets the construction contract as providing for three schemes in relation to the identification of reference dates, namely:

(a) 'normal' progress payment claim reference dates under clause S17.1.1;[101]

(b) a practical completion reference date under the first and second paragraphs of clause S17.3;[102] and

(c) the further reference date after the commencement of the DLP, in respect of a further entitlement to progress payments during the DLP under the third paragraph of clause S17.3.[103]

80 The plaintiff submits that PC 16 was compliantly served pursuant to the third reference date scheme referred to above.[104] Further, the plaintiff submits that:

(a) a reference date occurred on 25 September 2017.[105] The plaintiff also observed that the third paragraph clause S17.3 does not expressly set a reference date for DLP claims.[106] Even so, the plaintiff contended that, reading the contract 'harmoniously as a whole', the parties' agreed to set the twenty-fifth day of each month as the reference date applicable to payment claims for work performed during the DLP;[107]

(b) the work claimed had been properly identified as 'defects'. The construction contract permitted the defendant to issue a 'Certificate of Practical Completion' requiring the plaintiff to rectify certain omissions and defects within the DLP.[108]

81 The plaintiff submits that the work claimed in PC 16 had been identified in the Certificate of Practical Completion as work to be performed.[109] Accordingly, the plaintiff submits, that work is claimable in accordance with clause S17.3 and relevant provisions of the SOP Act because it is in respect of work required to be performed during the DLP.[110]

82 Specifically, the work identified in the Certificate of Practical Completion as 'defects and omissions' was to 'complete test results for painting', to 'complete test results for concrete repairs' and to provide 'as built drawings'.[111] The plaintiff's General Manager deposes that the plaintiff performed and claimed for these works during the DLP.[112]

83 The plaintiff contends that, even if it were the case that the subject works ought to have been performed prior to practical completion, or that the plaintiff had made claims previously for these works for which it had not been paid, this does not alter the position that a relevant applicable reference date provided for by the third paragraph of clause S17.3 exists in relation to these works.[113]

84 In relation to the three items of work referred to above, Counsel for the plaintiff acknowledged a typographical error in PC 16, which claimed a 'nil' amount for the 'as constructed drawings'.[114] Counsel for the plaintiff also stressed that the amount which should have been claimed in PC 16 in relation to 'as constructed drawings', had not been previously claimed by the plaintiff in earlier progress claims,[115] and further submitted that, in any event, the defendant was in a position to identify the error and to understand the documentation associated with this part of the claim.[116]

85 In substance, on the plaintiff's submissions, the defendant 'must live with the consequences' of electing not to contest the subject payment claim by serving a payment schedule.[117]

86 The plaintiff also argues that once a reference date arises pursuant to the terms of the construction contract, as the plaintiff argues it does here during the DLP, a claimable variation can be included in any payment claim made in relation to that reference date by reason of s 10(2) of the SOP Act.[118]

87 The defendant submits in substance that the contract contemplates two types of payment claim in relation to the DLP, namely:

(a) a payment claim for work up to the date of practical completion; and

(b) a payment claim for work solely required to be performed during the DLP.

(a) the practical completion payment claim 'picks up all work that has been done and was claimable at the date of that claim';

(b) subsequent DLP claims should not be interpreted as having the same function as a Practical Completion payment claim. Instead, DLP claims pick up a limited type of claim which is completely different to a claim which can be made under cl 17.1.1; and

(c) to be claimable under a DLP progress claim, work must be 'solely required' during the DLP, such as a claimable variation, or work prescribed in the contract as performable during the DLP.

89 The defendant rejects the existence of a relevant reference date in relation to PC 16. On the defendant's submission, there are only two schemes in the construction contract for the identification of a reference date following practical completion:

(a) the first is the agreed reference date referred to in clause S17.1.1 of the construction contract at which a payment claim may be made for all work completed prior to the date of practical completion. This claim must be served within either fifty-six days following the practical completion certificate, or three months and fifty-six days following the practical completion certificate (applying s 14(a) of the SOP Act).[119]

The defendant submits that the correct timeframe is a question of construction, however even if the relevant period was three months and fifty-six days, being the more generous timeframe, the plaintiff's right to serve a payment claim under this first scheme lapsed on 6 September 2017.[120]

(b) the second scheme allows a payment claim for work completed during the DLP. The defendant emphasises that the scope of this payment claim is limited by cl S17.3 to a payment claim 'solely in respect of work required to be performed during the Defects Liability Period_'_.[121]

Under the second scheme, the defendant points out that s 9(2) of the SOP Act sets default reference dates in the absence of an express agreement between the parties.[122]

90 The defendant submits that the contractual provision in relation to the submissions of payment claims during the DLP does not extend to 'all work that happens to be done in the 12 months following practical completion'.[123]

91 Instead, the defendant submits that the phrase 'solely in respect of work required to be performed' is directed to work other than what is first required after practical completion.[124] In this way, cl S17.3 of the construction contract contemplates 'specific' items of work that will be performed during the DLP. In a practical sense, the term 'solely' contemplates that something extraneous to the parties' initial agreement, such as a variation, could be required during the DLP and would properly be the subject of a cl S17.3 type payment claim.[125]

92 The defendant also submits that the plaintiff's interpretation of the provision for claims during the DLP does 'the work that the practical completion payment claim is plainly intended to achieve'.[126]

93 The defendant acknowledges that the contract contemplates 'as constructed drawings' would be produced by the plaintiff during the DLP after practical completion.[127] It submits, however, that there was no claim for these works in PC 16,[128] because a 'nil' amount appeared in the ledger appended to the claim.[129]

94 The defendant submits that no claim for this work can be inferred.[130] Even if the claim for 'nil' was a typographical mistake, the effect of a failure to claim 'as constructed drawings' is to deprive PC 16 of a reference date during the DLP.[131] This is considered in more detail under 'Formal Requirements Objection' below.

95 The defendant also points out that annotations in PC 16 suggest most of the other claimed work was completed before practical completion.[132] Therefore, the defendant submits failure to claim the 'as constructed drawings' prevents the plaintiff from 'piggy-backing' on a reference date that might otherwise have been available,[133] and thus precludes finding that the work is claimable under a reference date falling within the DLP.[134]

96 Notably, as pointed out by Counsel for the plaintiff, the defendant did not address the plaintiff's evidence that it completed the 'test results for painting' and 'test results for concrete repairs' elements of incomplete work which were identified in the Certificate of Practical Completion.[135] On the defendant's view of the scheme of the construction contract, it seems those claims could only have been made under a post-practical completion payment claim and are thus barred.[136]

97 In summary, the defendant's submission in relation to the existence of a valid post practical completion 'reference date' is that no valid reference date can be identified in relation to PC 16 because payment claims for post practical completion work are not permitted, save in respect of narrowly defined works 'solely' required during the DLP, that do not extend to what was claimed in PC 16.

98 The defendant also impugns the plaintiff's pleading in relation to a reference date. This is part of the defendant' case addressed below in connection with the defendant's Strike Out Application.

99 Counsel for the plaintiff submitted that items in the payment claim were made in respect of 'defects' claimable during the DLP.[137] The plaintiff rejected the defendant's focus on the 'as constructed drawings' as the only claimable 'defect'.[138] Counsel for the plaintiff observed that the construction contract also required the plaintiff to provide test results, as referred to in the Certificate of Practical Completion, at the request of the Superintendent.[139] The plaintiff also submits that non-fulfilment of this contractual requirement prior to practical completion amounted to a 'defect'.[140]

100 The central questions to be considered in relation to whether the defendant's defensive contentions have a real prospect of success are, in essence, the likely meaning and application of cl S17.3 of the construction contract including the following phrase: 'solely in respect of work required to be performed during the Defects Liability Period' in the third paragraph of that clause.

101 The Certificate of Practical Completion dated 11 April 2017 was relevantly in the following terms:[141]

Vicroads CERTIFICATE OF PRACTICAL COMPLETION

Issued pursuant to Sub-clause S17.2 of the General Conditions of Contract for Road and Bridge Works 1994

499 Ballarat Road

Sunshine VIC 3020

Date: 11/04/17

CONTRACT NO. 9061

CONTRACT DESCRIPTION: Strengthening and other associated maintenance works to Wallan Road Bridge over the Yarra River, Hawthorn

CONTRACTOR'S NAME: John Beever

CONTRACTOR'S ADDRESS: 174 Turner Street,

Port Melbourne, Vic 3207

I hereby certify that the Date of Practical Completion of the Works under the above Contract was 22/03/17 and that the Defects Liability Period referred to in Clause 37 commenced on that date.

The Defects Liability Period is 12 months unless it is extended; the due date for the issue of the Final Certificate is 22/03/18.

During the Defects Liability period the following omissions and defects shall be rectified.

Complete test results for the painting
Complete test results for the concrete repairs
As-Build Drawings

(a) expressly requires certain work to be performed by the plaintiff, namely:

(i) complete test results for the painting

(ii) complete test results for the concrete repairs

(iii) as-build drawings; and

(b) expressly requires that the said work to be performed during the DLP .

103 Accordingly, in my view, the three items of work, namely:

(a) complete test results for the painting;

(b) complete test results for the concrete repairs; and

(c) as-build drawings

referred to in the 'Description' section of the above Certificate of Practical Completion are in the nature of work required to be performed during the DLP.

104 PC 16 dated 15 September 2017 was served on 28 September 2017, well after the fifty-six day timeframe in cl S17.3 of the construction contract which permitted the plaintiff to serve a Practical Completion Payment Claim.

105 Here both parties have treated the present application as one for summary judgment under s 61 of the CPA. Accordingly, it is incumbent on the plaintiff, in addition to its positive proofs under s 16 of the SOP Act referred to above, and any formal requirements of r 22 of the SC Rules, to demonstrate that the defendant's case in defence of the plaintiff's claim for summary judgment has 'no real prospect of success'.

106 In my view, the present case is one in which the defendant has a real prospect of success in defending the plaintiff's claim under s 16(2)(a)(i) and s 16(4)(a) of the SOP Act in relation to the reference date objection, the formal requirements objection and the claimable variations objection in relation to excluded amounts. Thus, the present case is not appropriate for summary judgment.

I have come to this decision, dealing first with the reference date objection, for the following reasons:

(a) The plaintiff submitted that there was an available reference date under cls S17.1.1 and S17.3 of the construction contract which founded PC 16 because John Beever had been required to perform the work, including in relation to As-Constructed Drawings, that was identified in the Certificate of Practical Completion.[142]

(b) The defendant made a number of the cogent and plausible arguments against the plaintiff's submission in this respect. One such argument is that the asserted reference date sought to be relied on in the DLP applied 'solely' to work required to be performed during the DLP, whereas the As-Constructed Drawings were defects within the original scope of work under the contract.[143]

(c) Another cogent and plausible argument mounted by the defendant is that the plaintiff did not make a claim in relation to As-Constructed Drawings in PC16 in any event.[144] The defendant submits that this factual position, which was not seriously contested by the plaintiff, should prevent the plaintiff from being able to rely upon a reference date in the DLP as the basis for claiming either payment in relation to providing As-Constructed Drawings, or any other items of work claimed by PC 16, which included the plaintiff's claim for $211,622.32 for the non-agreed welding procedure related variation works.[145]

(d) In respect of each of the defendant's arguments referred to above, as outlined below I am not satisfied the defendant's case is devoid of any real prospect of success.

(e) Further, the connection between the welding work (comprising $211,000 of the $290,000 claim) and the asserted reference date(s) on which the plaintiff relied is unclear and arguably against the plaintiff's position. The defendant submits that the plaintiff's entitlement to claim these works, pursuant to a reference date, was curtailed during the DLP. In response, the plaintiff only asserts that there were multiple reference dates and at least one ought to be sufficient.

(f) The plaintiff also submits that:

Accordingly, as long as the plaintiff attended to some part of the defects as identified by VicRoads at ex.RJM576 (whatsoever their nature) during the Defects Liability Period prior to 25 September 2017, then under clause S 17.3 that triggered a further reference date under the Contract and thereby also the Act, which in turn invoked the potential right under s.14(9).[146]

However, the question remains: whether Practical Completion, and specifically the provision for a final claim post practical completion, referred to in the first paragraph of cl S17.3, extinguished or altered the right to make regular payment claims. In my view the plaintiff could not demonstrate that the defendant had no real prospect of success on this point.

107 I consider that it is at least strongly arguable that the effect of cl S17.3 is as follows:

(a) following certification of Practical Completion (which occurred by Certificate of Practical Completion issued on 11 April 2017), the Contractor was to provide a specifically entitled 'Practical Completion Payment Claim' within fifty-six days. That claim was permitted to include:

(i) the type of payment claims earlier authorised to be made under S17.1.1 on the twenty-fifth day of each month;

(ii) all claims asserted as due from the defendant arising out of any alleged breach of the contract, subject to claims in relation to work required by the defendant to be performed during the DLP; and

(iii) all claims which could have been made under S17.1 or S17.3, or any other clause of the contract which had not already been barred, noting that cl S17.3 also provides that such claims would be barred after the expiration of the period for lodging a Practical Completion Payment Claim;

(b) during the DLP, the Contractor was entitled to make further claims for payment (other than the above Practical Completion Payment Claim), but solely in respect of work required to be performed during the DLP.

108 The defendant's arguments are cogent, viable and prima facie establishes a real prospect of success in at least the following strongly arguable respects:

(a) After Certification of Practical Completion, cl S17.3 of the construction contract, replaces and renders inoperative the past monthly reference date mechanism in S17.1.1.

(b) Under cl S17.3, the plaintiff was restricted to claiming payment solely in respect of work required to be performed during the DLP, and further the plaintiff is subject to the clear time constraints provided in that clause.

(c) The plaintiff has not made an effective claim for such work, compliantly identified in PC 16, so as to engage the potential reference dates under cl S17.3, in particular because:

(i) even if the provision of As-Constructed Drawings was claimable during the DLP, the plaintiff failed to make an effective claim for this amount in PC 16 for the reasons explained below under 'Formal Requirements Objection'; and

(ii) even if the 'Complete test results for the concrete repairs' and 'Complete test results for the painting' works were claimable during the DLP, it is unclear, on the present state of the evidence, whether and when those items of work were completed by the plaintiff or precisely what value the plaintiff sought to claim for those works.[147]

(d) The plaintiff has not submitted a Practical Completion Payment Claim as required by cl S17.3 within fifty-six days of the issue of the Certificate of Practical Completion. The plaintiff's PC 16 payment claim is not so endorsed and was not provided within the specified time frame.

(e) The plaintiff claimed work in relation to the disputed welding claims was performed well before the DLP, and in December 2016 and January 2017.[148]

(f) Save in respect of the specific type of work solely permitted to be claimed in the DLP, by reason of the third paragraph of S17.3, the plaintiff's claims, including its 'non-agreed variation' claims, are arguably barred by 15 September 2017 under the second paragraph of S17.3.[149]

(g) Further, s 10(2) of the SOP Act addresses the amount which may be claimed in relation to a progress payment entitlement. Section 10(2) of the SOP Act is however not directly material to the stipulations of the Act which establish applicable reference dates. I therefore consider that the plaintiff's contention about its entitlement to include any claimable variation in the DLP progress claim[150] is not to the central point if, in the context of this matter, there is a real prospect of success associated with the defendant's case that the plaintiff is unable to found its PC 16 claim on any available reference date.

109 In short, the defendant has raised and rendered cogent a number of viable arguments for impugning the validity of PC 16 for want of a reference date. I consider that each of these aspects of the defendant's defensive case enjoys a real prospect of success.

110 In addition, there are a number of further considerations militating against giving summary judgment for the plaintiff in this case.

111 One such consideration is that the plaintiff depends, quite emphatically, on certain interpretations of the parties' contract and the SOP Act. That is not to say that the plaintiff may not ultimately be correct. But the crux of an argument based on interpretation is the need to resolve ambiguity. By identifying and seeking to resolve such ambiguities, the plaintiff has shown that a competing interpretation must also have some merit. For this further reason, in the respects referred to above, I am unable to conclude that the defendant's defensive case does not have any real prospect of success.[151]

112 For the above reasons, I consider that the defendant does have a real prospect of success in arguing that PC 16 was not compliant with the reference date regime created under the parties' construction contract and the SOP Act. Accordingly, the test for summary judgement for the plaintiff has not been satisfied.

113 The above conclusion is in addition to my conclusions, explained below, that the defendant also has a real prospect of success in arguing that variations in the sum of $211,622.32 are excluded under s 16(4)(a)(ii) of the SOP Act, and that the provision of As-Constructed Drawings was not in fact claimed in PC 16, and that the amount claimed by the plaintiff in the sum of $52,149.14, as well as the As-Constructed Drawings claim in PC 16, were non-compliant with s 14(2) of the SOP Act.

114 The requirements of an effective payment claim are prescribed in s 14 of the SOP Act_._ Section 14 provides in relevant part:

(1) A person referred to in section 9(1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.

(2) A payment claim -

(a) must be in the relevant prescribed form (if any); and

(b) must contain the prescribed information (if any); and

(c) must identify the construction work or related goods and services to which the progress payment relates; and

(d) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount ); and

(e) must state that it is made under this Act.

(3) The claimed amount -

(a) may include any amount that the respondent is liable to pay the claimant under section 29(4);

(b) must not include any excluded amount.

115 In Protectavale,[152] Finkelstein J made the following observations in relation to s 14 of the SOP Act:

The test is an objective one; that is, it must be clear from the terms of the document that it contains the required information...But the terms must be read in context. Payment claims are usually given and received by parties experienced in the building industry who are familiar with the particular construction contract, the history of the project and any issues which may have arisen between them regarding payment. Those matters are part of the context.

The manner in which compliance with s 14 is tested is not overly demanding...The requirements for a payment claim should not be approached in an unduly technical manner ... As the words are used in relation to events occurring in the construction industry, they should be applied in a common sense practical manner... A payment claim and a payment schedule must be produced quickly; much that is contained therein in an abbreviated form which would be meaningless to the uninformed reader will be understood readily by the parties themselves... The Act emphasises speed and informality. Accordingly one should not approach the question whether a document satisfies the description of a payment schedule (or payment claim for that matter) from an unduly critical viewpoint.

Nonetheless a payment claim must be sufficiently detailed to enable the principal to understand the basis of the claim. If a reasonable principal is unable to ascertain with sufficient certainty the work to which the claim relates, he will not be able to provide a meaningful payment schedule. That is to say, a payment claim must put the principal in a position where he is able to decide whether to accept or reject the claim and, if the principal opts for the latter, to respond appropriately in a payment schedule...That is not an unreasonable price to pay to obtain the benefits of the statute.[153]

116 These observations were approved by Vickery J in Gantley Pty Ltd v Phoenix International Group Pty Ltd (Phoenix).[154] His Honour added the following:

What is necessary is an identification of the work which is sufficient to enable a respondent to understand the basis of the claim and provide a considered response to it. The test of identification is not an overly exacting exercise. It is to be tempered by what is reasonably necessary to be comprehensible to the recipient party when considered objectively, that is from the perspective of a reasonable party who is in the position of then recipient. In evaluating the sufficiency of the identification of the work, it is appropriate to take into account the background knowledge of the parties derived from their past dealings and exchanges of information.[155]

117 The plaintiff submits that the payment claim 'passes muster'[156] because on a 'fair reading' of the payment claim it provides a relevant and adequate break down of non-agreed variations.[157]

118 The plaintiff also submits that the list of second-class variations attached to the payment claim, 'identified the relevant breakdown...in terms of actual hours, sometimes by reference to invoices'.[158]

119 Counsel for the plaintiff submitted that a situation of 'partial invalidity' with respect to the $52,149.14 claim would require nothing more than severance of the affected amount.[159] That would preserve the plaintiff's right to a progress payment on the remaining amount under the payment claim. In so submitting the plaintiff in substance conceded that, insofar as PC 16 made a claim of $52,149.14, the payment claim was deficient in relation to the requirements of s 14(2) of the SOP Act.

120 Counsel for the plaintiff also in substance accepted that the claim '0.00' for item 1.12 ('Provision of As-Constructed Drawings') in PC 16 was an error and that it intended to claim $10,000 for that item.[160] In effect, the plaintiff conceded that the absence of that claim from the plaintiff's schedule of claims at CB709 was fatal to compliance with the SOP Act in respect of that particular component of PC 16. The plaintiff also accepted in substance that the solution available to the Court was to sever that claim.[161]

121 The defendant submits that the plaintiff's payment claim for $263,711.46 fails to satisfy s 14(2), in particular s 14(2)(c) of the SOP Act. Specifically, the defendant submits the payment claim does not 'identify the construction work or related goods and services to which the progress payment relates' in the following respects:[162]

(a) Of the claimed amount, $211,622.32 refers to 'non-agreed variations for additional work' which are amounts excluded under the SOP Act.[163]

(b) The basis for the remaining amount ($52,149.14) has not been identified in the payment claim. In attempting to explain the amount, the defendant has observed that no amount is claimed in respect of the plaintiff's 'original scope of work', which cannot refer to 'agreed variations' because these are listed in a separate attachment to the payment claim.[164] Counsel for the defendant submitted that this amount should be severed because it lacks sufficient detail.[165]

122 The defendant also relied on Multiplex Constructions Pty Ltd v Luikens.[166] In that decision, Palmer J made the following observation:

A payment claim and a payment schedule should not, therefore, be required to be as precise and as particularised as a pleading in the Supreme Court. Nevertheless, precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in the dispute.[167]

123 More generally, the defendant identifies what it submitted was the failure of the subject payment claim to 'identify work which fits within the allowable claim during the defects liability period'.[168] Instead, the defendant submits most of the work referred to in the subject payment claim was 'mostly done before practical completion'.[169]

124 The parties accepted that the test for evaluating whether the payment claim satisfies the requirements of s 14 of the SOP Act is an 'objective' test. In light of the authorities above, the question is whether PC 16 evinces a degree of 'precision and particularity' that is 'reasonably sufficient to appraise the parties of the real issues in the dispute'.

125 There are essentially three components which require attention:

(a) non-agreed variations for additional work, which the defendant asserts is in the nature of an 'excluded amount', and therefore cannot form part of a valid payment claim;

(b) the sum of $52,149.14, which the defendant argues is not identified or explained or cogent on a fair reading of PC 16; and[170]

(c) within the sum of $52,149.14, a sub-component of $10,000 in relation to 'Provision of As-constructed Drawings', of which '0.00' is claimed.[171]

126 The non-agreed variations in subparagraph (a) above are addressed below under 'Claimable Variations Objection'.

127 In relation to (b) and (c) of the above paragraph, I accept the argument that there is no identification of the construction work related goods and services to which the sum of $52,149.14 relates. I also accept that there was, in effect, no claim in PC 16 for the 'Provision of As-Constructed Drawings'. I also again note in respect of both these two elements of PC 16 that the plaintiff in effect accepted the force of the defendant's arguments in the ways I have outlined above.[172]

128 The following components of the plaintiff's PC 16 payment claim are, for the reasons I have outlined above, non-compliant with s 14(2) of the SOP Act:

(a) the amount of $52,149.14;

(b) the item 'Provision of As-Constructed Drawings'.

129 In PC 16, the plaintiff claims non-agreed variations for 'additional works' in respect of, inter alia, 'Additional Man-hours incurred due to Fitment and Welding change' in the sum of $211,622.32.[173] The present application requires determination of whether the relevant work was either requested or directed by the defendant.[174]

Included and Excluded Amounts under the SOP Act

130 The following provisions of the SOP Act are relevant:

(1) This section sets out the classes of variation to a construction contract (the claimable variations) that may be taken into account in calculating the amount of a progress payment to which a person is entitled in respect of that construction contract.

(2) The first class of variation is a variation where the parties to the construction contract agree -

(a) that work has been carried out or goods and services have been supplied; and

(b) as to the scope of the work that has been carried out or the goods and services that have been supplied; and

(c) that the doing of the work or the supply of the goods and services constitutes a variation to the contract; and

(d) that the person who has undertaken to carry out the work or to supply the goods and services under the contract is entitled to a progress payment that includes an amount in respect of the variation; and

(e) as to the value of that amount or the method of valuing that amount; and

(f) as to the time for payment of that amount.

(3) The second class of variation is a variation where -

(a) the work has been carried out or the goods and services have been supplied under the construction contract; and

(b) the person for whom the work has been carried out or the goods and services supplied or a person acting for that person under the construction contract requested or directed the carrying out of the work or the supply of the goods and services; and [underline added]

(c) the parties to the construction contract do not agree as to one or more of the following -

(i) that the doing of the work or the supply of goods and services constitutes a variation to the contract;

(ii) that the person who has undertaken to carry out the work or to supply the goods and services under the construction contract is entitled to a progress payment that includes an amount in respect of the work or the goods and services;

(iii) the value of the amount payable in respect of the work or the goods and services;

(iv) the method of valuing the amount payable in respect of the work or the goods and services;

(v) the time for payment of the amount payable in respect of the work or the goods and services; and

(d) subject to subsection (4), the consideration under the construction contract at the time the contract is entered into -

(i) is $5 000 000 or less; or

(ii) exceeds $5 000 000 but the contract does not provide a method of resolving disputes under the contract (including disputes referred to in paragraph (c)).

10B Excluded amounts

...

(2) The excluded amounts are-

(a) any amount that relates to a variation of the construction contract that is not a claimable variation. (Underlining added)

131 The Court must not enter judgment for the plaintiff unless it is satisfied that the amount claimed does not include any 'excluded amount'.[175] If the relevant work claimed by the plaintiff falls within either the statutory definition of 'first class' of variation (extra work beyond the original contract scope which is fully agreed by the parties) or a 'second class' of variation (having been requested or directed), the amount claimed for the variation may be taken into account in calculating the amount of the progress claim to which the plaintiff is entitled.

132 Ordinarily the above provisions would require the plaintiff to satisfy the Court that its payment claim PC 16 does not include any 'excluded amount'. In this application, the plaintiff will not be granted summary judgment unless it can satisfy the Court that its relevant claim does not include any excluded amount. Concomitantly, given that this application is for summary judgment under s 16 of the SOP Act, the plaintiff must also satisfy me that in relation to the defendant's defensive case, the plaintiff can demonstrate that the defendant's claim that PC 16 includes an excluded amount, has no real prospect of success.

133 PC 16 advances a claim of $211,622.32 in relation to 'non-agreed variations for additional works'.[176]

134 The current question on this aspect of the plaintiff's application includes whether the plaintiff has shown that the defendant has no real prospect of success in arguing that the work performed by the plaintiff to redress the 'Weldability Issue' was not performed according to a 'request or direction' for the purposes of s 10A(3)(b) of the SOP Act.

135 The plaintiff submits that there was a 'clear trail of contemporaneous objective "requests" and "directions" for the purpose of the SOP Act' that 'emanated' from the defendant to the plaintiff.[177] The plaintiff submits that this situation is the 'very type of dispute which the second class of variation permitted under the SOP Act contemplates'.[178]

136 Notwithstanding the many communications and related materials and the considerable detail put forward by the parties as evidence of the welding dispute, at the core of the plaintiff's case, by which it seeks to establish the position outlined in the last preceding paragraph, there are four requests or directions said to give rise to a claimable variation under s 10A(3) of the SOP Act for the 'non-agreed variations for additional works'.

137 The first request or direction was allegedly constituted by letter dated 10 October 2016 from Mr Peter Long (Team Leader Structures, VicRoads) (Long) to Ms Julia McCarthy (Senior Project Manager, John Beever) (McCarthy). The plaintiff referred to the following passages of this letter:

It is recommended to adopt a 5mm partial penetration butt weld in lieu of the specified 6mm full penetration butt weld for the horizontal weld between the 6mm thick plate and the angles (top and bottom) and leaving a 1 mm buffer from the wrought iron (see sketch below). The steel plate should be prepared to have a tight fit with the angles. The purpose is to eliminate the deposit of weld metal directly onto wrought iron web, therefore minimising the potential shrinkage stress (through thickness direction).[179]

It is recommended to bolt the steel plate, using 8.8/TB bolts as specified, to the web of the wrought iron beams prior to welding.[180]

To further reduce the shrinkage stress (laminar tearing and production of inclusions) in the through thickness direction of wrought iron beams, it is suggested to adopt a low current and an appropriate type electrode in the development of the weld procedure.

Whilst I note JBA's request for the designer to review the design with a view of removing the requirement of welding, this has not been accepted by the designer, and welding is required. Therefore JBA is to proceed with the welding and prepare welding procedures accordingly.[181]

VicRoads has been willing to work with JBA on the resolution of this matter, and as demonstrated in the suggestion provided in this letter. Wrought iron has been proven to be a weldable material, and as VicRoads' pre-qualified contractor it is expected that JBA is able to explore alternative options to enable the timely completion of the strengthening works under the Contract.[182] (underlining added)

138 The context for this letter was an ongoing debate between the parties as to how certain welding procedures were to be undertaken and as to the scope of the contracted work.[183]

139 On 29 August 2016, following discussions held at a Project Meeting on 10 August 2016, the defendant wrote to the plaintiff acknowledging that it was in discussions with designers to 'develop a design that removes the requirement for welding'.[184] This was followed by correspondence, first by the defendant on 2 September 2016,[185] and then by the plaintiff on 12 September 2016, [186] disputing whether a non-conformance report should be submitted in accordance with the project Quality Management Plan.

140 In light of this background, Counsel for the plaintiff emphasised the repeated use of the term 'recommended' in the letter dated 10 October 2016.[187] When read in light of the ongoing factual dispute between the parties, Counsel for the plaintiff submitted that this letter was not a 'bare helpful suggestion by VicRoads,' but rather, 'a requirement that VicRoads is mandating on [his client]', and that the imperative mood was patently clear.[188]

141 The plaintiff submits that this letter of 10 October 2016 communicated to the plaintiff the defendant's expectation that the plaintiff would perform certain items of welding related work. To this end, McCarthy deposes that 'John Beever Australia had effectively no choice but to comply because it was not possible to produce a weld procedure which would satisfy the requirements of the Contract'.[189]

Plaintiff v Defendant

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Judgment (375 paragraphs)

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Legislation Cited (6)

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