REFORM PROJECTS PTY LTD v Merman Investments Pty Ltd

Legislation Cited: Building and Construction Industry Security of Payment Act 1999

Cases Cited: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
Pacific Carriers Ltd v BNP Paribas (2004) 208 ALR 213
NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842

Texts Cited: n/a

Category: Principal judgment

Parties: Reform Projects Pty Ltd (Plaintiff)
Merman Investments Pty Ltd (Defendant)

Representation: Counsel:
Mr. D. K. Ratnam (Plaintiff)
Mr. H. Stowe (Defendant)
Solicitors:
HWL Ebsworth (Plaintiff)
Yates Law (Defendant)

File Number(s): 2025/00083867

Publication restriction: n/a

JUDGMENT

1. The Plaintiff proceeds by Statement of Claim for an unpaid portion of an amount owed under a Payment Claim served on the Defendant on 22 November 2024 (“Payment Claim 31”), the unpaid portion being $200,485.12 (inclusive of GST). The Plaintiff makes its claim pursuant to s 15(2)(a)(i) of the Building and Construction Industry Security of Payment Act 1999 (“the Act”). There is no dispute that sum remains unpaid. Without more, the Plaintiff would ordinarily be entitled to sue for the debt in these proceedings pursuant to s 15 of the Act.

2. It is agreed that Payment Claim 31 was a valid Payment Claim in accordance with s 13 of the Act and clause 37.1 of the Contract. It is agreed that the Defendant did not serve a Payment Schedule in response to Payment Claim 31 within 10 days: s 14(4) of the Act.

3. By Amended Defence (leave was granted on the second day of hearing for the Defendant to amend its defence), the Defendant denies that the Plaintiff is entitled to proceed on the basis of Payment Claim 31. The Defendant says that communications by email between the parties over the two days of 12 and 13 December 2024 and, in particular, the Tax Invoices then conveyed, evidenced an implied agreement between the parties that Payment Claim 31 was withdrawn.

4. The Defendant does not positively contend that, and makes no admission as to whether, the Plaintiff's Tax Invoices issued on 12 and 13 December 2024 (or either of them) were valid Payment Claims made under the Act: Exhibit A; further and better particulars of the original Defence; particulars of the Amended Defence.

5. I understand that the parties agree that the issue for determination is whether their dealings on 12 and 13 December 2024 infer that an implied agreement was struck between them that Payment Claim 31 was withdrawn. The Defendant argues that this is the case. Conversely, the Plaintiff argues that the 12 and 13 December 2024 dealings reflect mere commercial accommodations to the Defendant for a small reduction of the amount owed under Payment Claim 31. The Plaintiff argues that the Defendant was required to pay the amount owed under Payment Claim 31 within 15 business days of it being served or it would breach its obligations under the Contract (clause 37.2) and the statutory regime (s 11(1A)(a) of the Act).

6. It is not contested that, but for the Defendant being successful in its argument that the parties agreed over 12 to 13 December 2024 that the Payment Claim served 22 November 2024 was withdrawn, the Defendant became liable to pay the claimed amount to the Plaintiff from 15 business days after the service of Payment Claim 31 on 22 November 2024, that date being 13 December 2024: Contract Item 33; s 14(4) of the Act.

7. In closing submissions, the Defendant clarified that it relied only on principles of contract law and did not advance any defence of estoppel.

8. That payments were made by the Defendant to the Plaintiff after the dispute arose over Payment Claim 31, leaving the balance at $200,485.12, does not assist either argument because performing the payments after the dispute is an action equally consistent with Payment Claim 31 having been withdrawn, as the Defendant submits, as it is with the Tax Invoice being a mere accommodation, as the Plaintiff submits.

FACTS

9. The dispute arises between substantial and sophisticated builders. The parties entered a construction contract on 22 March 2022 (“the Contract”) for the construction of a development at 3 Wiston Gardens, Double Bay, Sydney at a "Target Trade Cost" of $16,102,599 (excluding GST): Contract Item 15. Pursuant to the Contract, the Plaintiff was to carry out design and construction of the development.

10. On 15 August 2024, the parties varied the Contract by Deed (“the Deed”). The parties did not make any submission of fact or law arising out of the terms of the Deed, by which they effectively terminated the Contract and entered into mutual releases from prior accrued liabilities. The subject claim falls within “Excluded Claims” according to the Deed.

11. In relation to Payment Claim 29, issued 30 September 2024, the parties exchanged emails regarding information within the claim prior to the Defendant serving a Payment Schedule on the 10th business day following service. The Defendant’s covering email stated that the only difference between the Payment Claim and the Payment Schedule was the Defendant’s rejection of $17,121 in relation to a Shotcrete item. On 18 October 2024, at the behest of the Defendant, the Plaintiff forwarded a Tax Invoice in the sum of the Payment Schedule, being the sum of Payment Claim 29 less the sum of the disputed shotcrete item.

12. In relation to Payment Claim 30 issued on 31 October 2024, the parties exchanged emails between 13 and 14 November 2024 that commented on inclusions within the Payment Claim and, on the 10th business day following service, the Defendant served its Payment Schedule noting that the only change was a reduction of $58,424 for construction insurance. The next day, being 15 November 2024, the Plaintiff issued its Tax Invoice to the Defendant in the sum of Payment Claim 30 less the sum of the insurance item.

13. In regard to both Payment Claims 29 and 30, the Plaintiff’s Tax Invoices bore the identical statement, “This is a payment claim made under the… Act” which appears at the conclusion of the Plaintiff’s Tax Invoice forwarded to the Defendant on 13 December 2024, which invoice is at the centre of the contest.

14. Payment Claim 31 claimed the sum of $521,207.41 (excluding GST), comprised of the value of works carried out by the Plaintiff in March 2024 in the sum of $339,515.77 (excluding GST) and retention monies due to be released by the Defendant to the Plaintiff, pursuant to clause 4.4 of the Deed, in the sum of $181,691.64 (excluding GST).

15. Unless Payment Claim 31 was withdrawn, the time for the Defendant to issue a Payment Schedule in response to it had lapsed on 6 December 2024: Contract clause 37.2; s 14(4) of the Act. The period for payment by the Defendant to the Plaintiff of Payment Claim 31 expired on 13 December 2024: Contract clause 37.2; s 11(1A)(a) of the Act.

The 12 – 13 December 2024 Conduct

16. On 12 December, the penultimate day for payment of the Payment Claim 31, the Defendant emailed the Plaintiff at 9:45 AM claiming that there were “some small claims” for glazed windows, fly screens, glazed balustrades, render and carpentry which the Defendant “assumed… are errors”: “Contractors Tax Invoice-Can you please kindly remove the above mentioned minor amount and issue the Tax invoice dated 30th November $338,948.21 plus GST”. The email was headed “Subject: Re: Progress Claim 31 – November 2024…” The email referred the Plaintiff to comments of the Defendant’s quantity surveyor. The assertion of “errors” and the email subject recital make connection to Payment Claim 31.

17. In compliance with the Defendant’s request, the Plaintiff issued a Tax Invoice on the same 12 December 2024 at 2:38 PM for an amount only reduced by $567.56 from the value of the work performed, claimed in Payment Claim 31. The email simply stated, “Please find attached invoice as requested”. The Plaintiff dated the invoice 9 December 2024. The “Due Date” was stated as 20 December 2024.

18. On 13 December 2024, at 9:04 AM, the Defendant emailed the Plaintiff making the request: “can you lease (sic) chance (sic) the invoice date to November please” [the parties agree the email should be read: ”can you please change the invoice date to November please”]. Thirteen minutes later, at 9:17 AM, the Plaintiff emailed the Defendant a fresh Tax Invoice in the same adjusted sum and giving the same due date for payment of 20 December 2024, but with the covering email stating: “Invoice date changed to the date we issued the claim”. The attached Tax Invoice was dated 22 November 2024, being the date of Payment Claim 31. The email was headed, “Subject: Re: Progress Claim No. 31 – November 2024…”

19. In my observation, the following facts are significant in the determination of the issues:

20. the Defendant requested a “Contractors Tax Invoice”, not a substitute Payment Claim;

21. in the emails, both parties described Payment Claim 31 as the subject of their communication;

22. neither party referred to withdrawing Payment Claim 31; and

23. there was never a reference to a “revised” Payment Claim 31;

CONSIDERATION

20. The Defendant submits that a contractual agreement to withdraw Payment Claim 31 is to be inferred from the emails on 12 and 13 December 2024.

21. I do not understand it to be disputed that Payment Claims can be withdrawn.

22. The Defendant argues that the contractual agreement arises not from a formal offer and acceptance but, rather, argues that the Court would “infer… [a contractual agreement from] a real intention express[ed] through, or to be found in, a body of conduct, including… communications…”: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [369].

23. I bear in mind that the subjective understanding or intention of the parties as they corresponded over 12-13 December 2024 is not important. The construction of the documents is to be determined by answering the question: what would a reasonable bystander in the position of the parties have understood them to mean. This requires consideration not only of the documents on their face, but also of the surrounding circumstances of which the parties were aware of and the purpose and objective of their commercial engagement: Pacific Carriers Ltd v BNP Paribas (2004) 208 ALR 213.

24. The Defendant sought to highlight one of those surrounding circumstances as the legislative backdrop of s 13(5) of the Act which provides that a complainant may only serve one Payment Claim in any particular month for construction work carried out or undertaken to be carried out in that month.

25. The Defendant does not positively contend that, nor makes any admission as to whether, either of the two Tax Invoices issued over the 12-13 December 2024 correspondence were valid Payment Claims for the purposes of the Act.

26. In my view, s 13(5) no more assists the Defendant than the Plaintiff in determining the central question of whether an agreement to withdraw Payment Claim 31 was reached because of the 12-13 December 2024 correspondence. Neither party submits that the re-issued invoices provided on 12 and 13 December 2024 were actually valid Payment Claims, and I find no good reason to find otherwise; accordingly, there is no necessary withdrawal of the prior Payment Claim due to the operation of s 13(5) of the Act*: NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd* [2013] NSWSC 842 (“NC Refractories v Consultant Bricklaying”) at [4] (per Hammerschlag J).

27. The argument submitted by the Defendant is that the reasonable objective bystander, knowing the legislative backdrop of s 13(5), and that a revised Payment Claim would necessarily withdraw Payment Claim 31, would conclude that the parties evinced an intention to issue a new Payment Claim for the same works and so, even if that attempt were unsuccessful, it must have been their intention to withdraw the 22 November 2024 Payment Claim 31.

28. The question remains whether the parties by their conduct on 12 and 13 December 2024 objectively evinced an intention for the withdrawal of Payment Claim 31.

29. The Defendant submitted that the principles espoused by Hammerschlag J in NC Refractories v Consultant Bricklaying support its argument. The Defendant drew attention to his Honour’s observations at [39] that:

“The Plaintiff’s statement that it would pay a different rate was an offer to the defendant, which it accepted by issue of the second invoice.”

30. The relevant facts in NC Refractories v Consultant Bricklaying were:

31. After receiving the first defendant’s payment claim, the Plaintiff sent the following email:

“Mick

I am very disappointed with the out come (sic) of this project.

…

This as significant monetary burden on us and effect (sic) our reputation as supplier and installer.

Regardless of above, the guys have to paid (sic). I expect you to provide me actual costs incurred by you + 10% (not @$70 per hour).

I do not intend to drag on the issue but you have to be realist (sic) under the situation.

We will pay @$50 for Ord Hour, @$60 for OTI.5 and @70 for OT2.

…

Await your response.”

1. The first defendant responded to the plaintiff the next day with the following email:

“Attached revised invoice reflecting reduction in rates. Would ask that this be settled as a matter of urgency.” (underlining added for emphasis)

31. As those communications show, the plaintiff in that case made plain that it had no intention of paying the Payment Claim enumerated by the first defendant’s invoice. The plaintiff clearly stated that it was not going to pay at the rate of 70$ per hour (for, presumedly, ordinary hours worked). The rejection of the calculation for the invoice was followed by an offer made by the plaintiff, “We will pay @$50 for Ord Hour, @$60 for OTI.5 and @70 for OT2.” In response, the first defendant provided an invoice which was referred to as a “revised” invoice. The word revised strongly inferred that the first defendant had accepted the plaintiff’s offer of an hourly rates basis for calculation of payment due.

32. The facts in the instant case distinguish it from NC Refractories v Consultant Bricklaying. The correspondence in evidence in this case bears the hallmarks of a commercial party engaging in an administrative method of commercial goodwill or compromise in a minor sum to facilitate payment, as the Plaintiff properly submits at [34(l)].

33. In arguing that a shared intention for withdrawal was evinced, the Defendant firstly relied on the email from Ryan Khatri (for the Defendant) on 12 December 2024, at 9:45 AM, asking for the Contractor's Tax Invoice to have minor amounts removed and the Tax Invoice to be issued for $338,948.21 plus GST and dated 30 November 2025. Neither party was able to explain why the request was for the invoice to be dated “30 November 2024” as opposed to 22 November 2024 (the date of issue of Payment Claim 31). Counsel for the Plaintiff rightly pointed out that the Plaintiff never provided an invoice dated 30 November 2024, only an invoice dated 22 November 2024: T 16.38-40. As I already observed, the email referred to Payment Claim 31 in its subject line. I find as a matter of logic and common-sense that the reference to “30 November” in the 12 December 2024 email at 9:45 AM was a typographical error or a lax reference to the “November” Payment Claim, being Payment Claim 31. I note that Payment Claims were issued monthly.

34. In my opinion, the request by the Defendant for the re-issued Tax Invoice to bear the same date as Payment Claim 31 leads to a reasonable assumption that the parties displayed an intention that Payment Claim 31 be still operative and not be withdrawn. This is particularly so since there was no explicit request by the Defendant for Payment Claim 31 to be withdrawn, or to vary the statutory requirement of payment within 15 days: s 11(1A) of the Act. I find these facts compelling. I also think it significant that the amount of the adjustment which the Defendant requested in the invoice, and to which the Plaintiff agreed to, was very minor.

35. The Defendant, unlike how it had previously practised in relation to Payment Claims 29 and 30, did not serve a Payment Schedule. I reject the Defendant’s submission (at [29(d)]) in respect of the Affidavit evidence of Mr Scarf that his observations of the parties’ dealings with Payment Claims 29 and 30 is equally consistent with “the alternative inference that there was a general practice under which the Plaintiff reissued and varied its earlier payment claim following dealings.” The submission does not meet with the facts set out at [11]-[13] above.

36. The Plaintiff submitted, and I agree, that the due date for payment provided by the 13 December 2024 Tax Invoice at 9:17 AM is best characterised as showing an agreed intention held by the parties for there to be a 5-business-day extension from the due date for payment of 13 December 2024, that date being the original due date for payment owed as a result of the service of Payment Claim 31 on 22 November 2024.

37. Referring to standard notations on the Tax Invoices issued on 12 and 13 December 2024, the Defendant put in oral submissions that:

“It can’t be in contest that the basis for the resolution in relation to the proper construction of the parties’ dealings in respect of this issue is the objective theory of contract. What would a reasonable person have inferred, observing this exchange of correspondence between the partes? And, of profound significance to the defendant’s case is that the plaintiff has explicitly, in bold, very prominently, asserted that this constituted a payment claim under the Act.” (T 15.35).

38. While both Tax Invoices bore the bolded notification that the invoice was a “payment claim made under the Building and Construction Industry Security of Payment Act 1999”, I do not think that this would lead an objective bystander to presume that the parties intended for those tax invoices to be new Payment Claims that necessarily withdrew Payment Claim 31. On the whole of the evidence and, most importantly, the face of the Tax Invoices, I think a reasonable bystander, being aware of the prior mode of dealing of the parties as experienced industry participants, would see the familiar statutorily required notifications as no more than confirmation that they are tax invoices related to Payment Claim 31.

39. Ultimately, it is my opinion that the 12-13 December 2024 correspondence is more consistent with the Tax Invoices conveying no more than a commercial compromise for slight adjustment of value and extension of time to pay. That is to say, an agreement was reached that the Plaintiff would not proceed on the basis of its s 15 statutory rights for debt as long as $338,948.21 plus GST was paid by 20 December 2025. I do not find, on the balance of probabilities, that a reasonable person observing the conduct of the parties would infer that there was a bilateral or even unilateral (from the Plaintiff’s behest) intention for the Plaintiff to have disabled (even temporarily) its rights under Payment Claim 31.

40. Having determined the submissions going to there having been an implied contract between the parties I have, in essence, dealt with the Defendant’s submission that the Plaintiff would be inviting an abuse of process by enforcing a statutory debt arising from Payment Claim 31. I reject that submission by the Defendant.

ORDERS

41. Judgment for the Plaintiff in the sum of $200,485.12 (including GST).

42. Defendant to pay Plaintiff’s costs of the proceedings.

**********

Amendments

17 November 2025

Changed progress claim to payment claim in catchwords.