Sand Excavation Pty Ltd v Nahas Constructions Pty Ltd

Supreme Court of NSW|2011-03-21|Before: Macready J

JUDGMENT 1These proceedings are a claim for a debit arising out of a construction contract pursuant to the Building and Construction Industry Security of Payment Act 1999 ("the Act").

Background 2On 11 November 2009 the plaintiff entered into a subcontract with the defendant to carry out shoring, bulk earthworks and excavation works at Spring Street and Oxford Street, Bondi Junction. 3On 30 April 2010 the plaintiff served, by facsimile, a payment claim on the defendant under the Act in the sum of $1,198,789.39. 4The payment claim was served by the plaintiff on 30 April 2010 which meant that the defendant had to serve a payment schedule on the plaintiff within 10 business days from the date the payment claim was served. That is, the payment schedule had to be served by the defendant on the plaintiff on or before Friday 14 May 2010 ("the due date"). 5The plaintiff's witnesses gave evidence that no payment schedule was served on or before 14 May 2010, and that on 20 May 2010 a payment schedule was found partially stuck under the door at the plaintiff's former offices at Double Bay. If served on that day it was outside the timeframe required for the service of a payment schedule under the Act. 6The initial evidence by the defendant's witnesses was that the payment schedule was served by being placed under the door of the plaintiff's former offices at 9.30am on 13 May 2010. This would have been before the due date. 7Apart from the controversial question of when the payment schedule was served the following issues are also raised in the proceedings: (a) Whether, if there was service on 13 May 2010, there had been proper service as the document was not placed wholly within the plaintiff's offices; (b) Whether, if there had been service on 13 May 2010, service was in accordance with s 31 of the Act by lodgement during normal office hours; and (c) Whether, on the proper construction of the contract and the Act, there was an entitlement to relief pursuant to s 15 of the Act which is dependent upon the failure to pay an amount due on or before the due date. The defendant submits that in the circumstances there was no due date for payment and therefore no entitlement for relief.

Service of the payment schedule 8The defendant's evidence initially was that Mr Sarkis Elia and Mr Sarraf, who were both employees of the defendant, drove to the plaintiff's Double Bay office on 13 May 2010 and served the payment schedule by pushing it part way under the door of the premises at 9.30am on that morning. 9On the plaintiff's part, evidence was given by Mr Hiatt that he was engaged in a meeting with Mr Milgrom between 9am and 10am on 13 May 2010. That meeting was said to have taken place on a couch opposite the entrance to the plaintiff's office. Mr Hiatt gave evidence that no service occurred at that time. 10The plaintiff was in the process of moving to new premises in New South Head Road. In effect, the move was completed by Saturday 15 May 2010. Mr Hiatt's personal assistant, Ms Orlievsky, gave evidence that she observed the payment schedule under the door of the old offices on 20 May 2010. 11It can be seen that the factual circumstances put forward by each party involve a direct conflict between the witnesses, which has to be resolved. The conflict of evidence cannot be resolved by one of the witnesses being mistaken. The conflict is between: (a) Mr Elia and Mr Sarraf who claimed that they placed the envelope containing the payment schedule under the door to the plaintiff's office at about 9.30 am on 13 May 2010 after having determined that the door to that suite was locked and (b) Mr Younan who deposed to a conversation he had with Mr Elia, also at 9.30 am on 13 May 2010, when Mr Elia advised that he was at the offices to serve the payment schedule on the plaintiff. and (c) Mr Hiatt and Mr Milgrom who said that they had a meeting immediately outside the door to the plaintiff's office during the period 9 am to 10 am on 13 May 2010, and that nothing was delivered during that period and (d) Ms Orlievsky who confirmed that Mr Hiatt was at that meeting when she arrived at work just prior to 10 am and that no envelope was in the vicinity of the plaintiff's door. 12When evaluating what happened it is also necessary to refer to some matters that occurred on 17 May 2010, the following Monday. On that day, Mr Hiatt asked Ms Orlievsky, his personal assistant, to call the defendant to see whether a payment schedule had been served. He took this step after speaking to his lawyers and receiving advice that he ought to check whether the payment schedule had been served. He also sent an email asking whether the payment schedule had been served, in response to which Mr Elia, the person who was the author of the relevant payment schedule, sent him a copy of an earlier payment schedule from April 2010, but no copy of the payment schedule dated 13 May 2010 was provided. 13The plaintiff suggested that the evidence of Mr Hiatt had been corroborated and supported by documentary evidence: (a) There was the fact that Mr Hiatt asked his solicitors for advice on 17 May 2010 prior to calling the defendant to check whether a payment schedule had been served. The file notes of the Solicitors support this and lead me to accept that the conversation did, in fact, occur. (b) The mobile telephone records of Mr Hiatt and Ms Orlievsky which show their whereabouts on the morning of 13 May 2010. The expert evidence concerning the positioning of telephone reception towers supported this. Such evidence shows that Mr Hiatt could have made the calls from the plaintiff's Double Bay office on the morning of 13 May 2010. (c) The telephone records of Mr Milgrom also show that he could have been in Double Bay on the morning of 13 May 2010, at the relevant times. 14Acceptance of the defendant's evidence would mean, of course, that Mr Hiatt would have removed the payment schedule and embarked on a duplicitous course of conduct. This was put to Mr Hiatt in these terms: "Q. And the reason that you did that Mr Hiatt I want to suggest is because on 13 May having concluded your meeting with Mr Milgrom shortly after 9am you left your office to travel elsewhere, returned before 10am when your assistant arrived, removed the envelope containing the payment schedule from below the door of suite 303 and decided upon a course of action, namely concealing the payment schedule so as to enable you to seek summary judgment? A. That's incorrect, it's ridiculous." 15It was submitted that such a suggestion involved Mr Hiatt taking, at least, the following steps: (a) keeping the payment schedule after 13 May 2010 but removing it from the plaintiff's office [noting that Ms Mergelian and Ms Orlievsky did not see any such document prior to 20 May 2010 so therefore he had to have removed it]; (b) having Ms Orlievsky contact the Defendant by telephone and ask about the missing payment schedule, despite actually having the payment schedule [noting that it was suggested to Ms Orlievsky by an officer of the defendant that there was to be no payment schedule issued]; (c) emailing the defendant on 17 May 2010, asking it to " confirm whether or not Nahas will be issueing [sic] a payment schedule to sand excavation for its claim for Spring Street Bondi Junction works for the month of April 2010 ", despite already having the fortune of the defendant denying the existence of a payment schedule; (d) receiving, even more fortuitously, from Mr Elia of the defendant a payment schedule which was sent on 15 April 2010, not being the payment schedule which he had already taken on 13 May 2010; (e) returning the payment schedule to the plaintiff's office on 20 May 2010 for no apparent reason, despite his previous good fortune in the defendant's consistent failure to produce any evidence of a payment schedule being created, dated, finalised or served on the plaintiff on 13 May 2010 during the correspondence on 17 May 2010; (f) waiting for Mr Younan to discover that there was mail at the door of the plaintiff's office on 20 May 2010 [noting that the plaintiff was no longer using that office space at that time]; and (g) being fortunate that Mr Younan did not simply ignore this mail which was not his and apparently had nothing to do with him, but instead chose to tell Mr Milgrom that he should contact his sister, Ms Orlievsky, because there was some mail at the door of the plaintiff's office which she should collect. 16Quite apart from suggesting the inherent unlikelihood of such a scenario, the plaintiff puts that clearly the defendant did not serve any payment schedule on 13 May 2010 and that in some misconceived attempt to belatedly serve the payment schedule it was placed at the plaintiff's office by some representative or agent of the defendant on 20 May 2010. Ms Orlievsky's reaction upon finding this document in the company of Mr Younan is said to be instructive; according to Mr Younan, who was called by the defendant, she said, " It's too late Peter ." 17It should also be noted that there is additional unchallenged evidence that at other times after the morning of 13 May 2010 there was no delivery to the plaintiff's office. That evidence is as follows: (a) Mr Hiatt's evidence that he attended the plaintiff's office on 14 and 15 May 2010, and that there was no payment schedule at the plaintiff's office on these dates; (b) the evidence of Ms Mergelian, who worked in an office next door to that of the plaintiff, that she did not observe any payment schedule at, or being delivered to, the plaintiff's office on 17 and 18 May 2010, this being after the date on which the plaintiff vacated the office. 18The other matters which the plaintiff suggests support its case are: (a) the building where the plaintiff's office was located was familiar to the defendant, as it had weekly meetings at that building; (b) a meeting was actually held by representatives of the defendant at the building where the plaintiff's office was located on 20 May 2010; (c) the first time that the payment schedule was ever provided to the plaintiff by email was on 20 May 2010 by Mr Elia, despite express requests by Mr Hiatt that the document to be provided on 17 May 2010. The defendant admits that it sent the wrong payment schedule to the plaintiff on 17 May 2010. Both Mr Gary Cory and the General Counsel of the Defendant, Ms Maria Kavaratzis, were copied in on Mr Elia's email of 17 May 2010, whereby the wrong payment schedule was sent. The Defendant has not satisfactorily explained why the alleged correct document was not then sent on 18 or 19 May 2010, despite three of the defendant's employees being party to correspondence sending the wrong payment schedule; and (d) the fact that the defendant could send the payment schedule by email to the Plaintiff on 20 May 2010 but did not send it by email on 13 May 2010 is also not explained. Clearly the document was capable of being sent by email. It was suggested by the plaintiff that the only rational explanation for the failure to email the payment schedule on 13 May 2010, despite emailing it on 20 May 2010, is that the payment schedule had not been completed by 13 May 2010. However, that suggestion ignores the expert evidence that the relevant file was first created on Mr Elia's computer on 12 May 2010. 19The defendant, for its part, suggested that there were a number of reasons, particularly those related to the financial situation of the plaintiff, which support their version of events and the necessary hypothesis that Mr Hiatt hid the document and planned a course of deception, for the purpose of bringing the present proceedings. 20Before turning to consider the credibility of the various witnesses, it is worth noting the objective facts which the defendant puts in support of its version of events. 21Those objective matters were as follows: (a) t hat the plaintiff was in financial difficulties; (b) that the relevant payment claim was clearly an inflated payment claim, which the plaintiff did not want to be subject to scrutiny; and (c) that there was personal motivation involved, resulting from what was said to be the heated predicament between the plaintiff and the defendant. 22Turning firstly to the financial matters, the following is said to be illustrative: "Sand Excavation failed to pay rent for the Cross Street address for March and April 2010 (Hiatt, T182.9-11 and T.183-20-34); and the Time Telecom records (tab 15, exhibit 7) which show: (a) consistent default in the period February to May 2010; (b) Sand Excavation was unable to pay its accounts, initially in the sum of $483.38 (26 February 2010) and subsequently in the sum of $1,135.44 (28 April 2010); (c) weekly enquiries and repeated warnings of the impending disconnection of services; and (d) various promises being made by "Inna" of impending payment of part of the amounts due to maintain services (see comments for 22 April that "they are having trouble getting money through the door..." and for 11 May that "she's waiting for money to come in from some clients")." 23This summary accurately reflects the evidence. That evidence indicates that the plaintiff experienced some difficulty in paying some suppliers. However, without any detailed evidence as to their financial circumstances it is not possible to conclude that the plaintiff was in substantial financial distress. 24In respect of the claim that the payment claim was inflated, the defendant's relevant submissions were as follows: "73. The payment claim the subject of these proceedings was for an amount of $1,198,789.39. This was issued on 30 April 2010 at a time when, two weeks earlier: a. Nahas Construction indicated that "$Nil" was due and payable by its payment schedule dated 15 April 2010 (Elia affidavit 24 August 2010, tab 7 of exhibit SE-1) in reply to Sand Excavation's payment claim (claim 4) dated 30 March 2010 which was in the amount of $704,000; and b. Sand Excavation' s remaining works under the contract were taken out of its hands by Nahas Construction by written notice dated 14 April 2010 (Elia affidavit 24 August, paragraphs 13 and 14, tab 3 of exhibit SE-1). 73. Accordingly, Robert Hiatt was angry at Nahas Construction and he was in financial distress as at 30 April 2010. 74. Sand Excavation did not proceed to adjudication on either the 28 February 2010 payment claim or the 30 March 2010 payment claim after receiving Nahas Construction's payment schedules. The reasonable inference to be drawn in this circumstance is that Sand Excavation did not want any scrutiny of the merits of its claims. 75. It is readily apparent that the 30 April 2010 payment claim is an inflated claim as: a. the Subcontract sum was $800,000 (see clause 3(a) of the contract, Elia affidavit 24 August 2010, tab 1 of exhibit SE-1) whereas the claim is for $1,198,789.39 b. the previous claim dated 30 March 2010 was for $740,000 (Nahas, T57.40-45); c. Sand Excavation was only on site for two weeks after the 30 March payment claim before the works were taken out of its hands on 14 April 2010, and no works were carried out by Sand Excavation after 14 April 2010 (Elia affidavit 24 August 2010, paragraphs 13 and 14; tab 3 of exhibit SE-1); 76. it is inconceivable that Sand Excavation could have performed works to a value of $494,789.39 (being the difference in the amount claimed by the 30 March payment claim and the 30 April payment claim) in two weeks." 25The critical matter is of course what was said in paragraph 76 above, namely, whether there is any possibility that the relevant works could have been performed. It is clearly a very substantial claim but, in the absence of any detailed evidence about the extent of the works, it is difficult to draw a conclusion on that possibility. 26In so far as the personal motivation is concerned, it is abundantly clear that there was deep division between the plaintiff and the defendant, as the plaintiff had been removed from the work and the personal difficulties had reached a stage where Mr Hiatt had to ask Ms Orlievsky, his personal assistant, to ring the defendant, rather than make the call himself. 27I turn to the question of the credit of the various witnesses.

Mr Hiatt 28It was suggested that Mr Hiatt and Ms Orlievsky did not disclose the new business premises of Sand Excavation. It became clear that the plaintiff's right to occupy the premises ceased at the end of April 2010 and they were clearly moving in early May to new premises. 29It is also plain that Mr Hiatt made general claims to have been at the Cross Street, Double Bay address every day from 30 April to 15 May 2010. He also made it plain that he was at the plaintiff's office from 7am on 14 May 2010 and he said he was there all day apart from short breaks, which was the same as he had done the previous day. In cross-examination it became clear that he was not at his office all day as he had to visit the new premises for some two hours to deal with the installation of equipment for the new premises. 30This suggests inaccuracies in his evidence and a desire to assist his case.

Ms Orlievsky 31Ms Orvlievsky was said to be the person who corroborated Mr Hiatt. She also did not disclose the move to the new premises in her affidavits. Surprisingly, when she gave evidence about the meeting on 13 May 2010 that Mr Hiatt had with Mr Milgrom she described him as a client. In fact Mr Milgrom is her brother who occupied an office below the plaintiff where he conducted his own business. Clearly, I think Ms Orlievsky was trying to distance herself from him so that he appeared to be an independent witness. Notwithstanding this, I do not have any reason to doubt her evidence.

Mr Milgrom 32Mr Milgrom gave evidence that the meeting occurred from 9am until 10am, as suggested by Mr Hiatt. He said that from where he sat on the couches outside the plaintiff's office he saw no one go to them. 33Mr Milgrom annexed a diary note of his appointments for the relevant day. It only partially supports the suggestion made that a late change of another meeting made him available to meet Mr Hiatt at the relevant time. His evidence was criticised on two bases. The place where the meeting was held was said to be unusual. His explanation that his office was a shared one was quite appropriate. The other evidence about the length of the meeting had some force. However, it is possible it may have taken as long as he suggested. Ultimately, I would be prepared to accept Mr Milgrom's evidence.

Mr Elia and Mr Sarraf 34It is convenient to deal with these gentlemen together because they accompanied each other on the alleged trip to serve the payment schedule on 13 May 2010. 35In this matter these witnesses had given evidence including, prior to the proceedings in a statutory declaration, which clearly put the time of service of the payment schedule at about 9.30am on 13 May 2010. In due course their telephone records became available, shortly prior to 20 October 2010. Thereafter, both gentlemen sought to change their evidence to suggest that service of the payment schedule occurred at 8.15am, rather than 9.30am. 36The telephone records in question indicated that Mr Elia was at Bondi Junction at 8.14am and that he was at Pymble between 9.18am and 10.09am on 13 May 2010. The telephone records of Mr Sarraf indicated that he was at Colyton (Mt Druitt) for the entire morning of 13 May 2010. 37Mr Sarraf claimed that he left his phone with Mr Nahas so that he could manage a particular project. The plaintiff's submissions as to the change in the evidence of Mr Elia and Mr Sarraf was as follows: "4. The Defendant's scrambling alteration to its evidence that it in fact served the payment schedule at 8.15 am and not 9.30 am and that Sarraf left his phone with someone else should not be accepted for the following reasons: i) The affidavit evidence of each of the Defendants' witnesses was unequivocal and identical. Each of Sarraf and Elia said that they met at the Defendant's North Parramatta office at about 8.am (Sarraf [5] Elia [17]). This is also consistent with Sarraf's earlier evidence that they had agreed to meet at this time (Sarraf [3]). There is simply no possibility that what they had meant was that they had in fact met at 7 am as they now contend; ii) Similarly the evidence of each witness regarding the 9.30 am service was also identical (Sarraf at [6], Elia at [21], [23] and [24], and Younan at [7] and [8]). This was also the evidence that Sarkis Elia had given in a statutory declaration on 4 June 2010 (tab 13 to the Elia affidavit) just over two weeks after the alleged service. None of these witnesses said the time was "early morning" or "about 8 am" or even "about 9 am"; iii) Neither can it be claimed that the Defendant's witnesses had not turned their minds to the importance of this evidence when they swore their respective affidavits. Each of Elia (at [24]) and Sarraf (at [10]) specifically refer to the evidence of Robert Hiatt (that he was outside the Plaintiff's offices between 9.am and 10.am on Friday 13 May 2010) and deny this evidence on the basis that they were present at this time and did not see him. If they really had served this payment schedule at 8.am then they could not have made this denial. It is also worth noting that the statutory declaration produced by Elia was in response to a letter from the Plaintiff's solicitors wherein the Plaintiff asked the Defendant to specifically advise at what time this payment schedule had been served (tab 12 pge 324 Q 13(1) Elia affidavit); iv) It was, until the telephone records were produced on subpoena, always the Defendant's position that the payment schedule was served at about 9.30 am. The Defendant never previously claimed that it could have been served at anything like 8.am. It was never put to any of the Plaintiff's witnesses in cross examination that service could have been as early as 8.am. The Defendant, Sarraf and Elia simply refused to produce the actual telephones of Elia and Sarraf in answer to the Notice to Produce and subpoenas issued by the Plaintiff which wqere returnable on 16 September 2010. At this time the Defendant was maintaining that service of the payment schedule had taken place at 9:30am on 13 May 2010. The reticence of the Defendant to have the telephones of Sarraf and Elia investigated is timely noting that as at 16 September 2010 no telephone records had been produced from the Defendant or under subpoena which disclosed the location of the telephones of Sarraf and Elia when receiving and making calls on 13 May 2010. The Plaintiff only had access to these documents of Vodafone on 19 October 2010 after the Defendant had first access to the documents. Only on the production of these records which disclose that neither of Elia or Sarraf were anywhere near Double Bay at 9:30am on 13 May 2010 did the evidence of the Defendant change. v) In short the Defendant is asking the Court to accept that its three witnesses simultaneously made the identical mistake of confusing "about 8 am" for "about 9.30 am". Further that Elia and Sarraf made the identical mistake of confusing 8.am for 7 am when they left the Defendant's premises on the morning of 13 May; vi) The claim by Sarraf that he left his telephone with Andy Nahas was not corroborated by Andy Nahas. An inference may be drawn that the evidence of this witness would not have assisted Sarraf's claim ( Jones v Dunkel (1959) 101 CLR 298); Sarraf's explanation of why he could not have dealt with telephone calls from suppliers or subcontractors without being at the site (T 148 L45) was unconvincing, as was his explanation for why the site manager could not have dealt with these calls (T 149 L14) or why he could not have diverted his calls to the site manager or Andy Nahas (T 148 L30); The manner in which the Defendant's witnesses dealt with the production into evidence of their telephone records also reflected poorly on their credit. Elia admitted that he had given evidence that he had been at North Parramatta at 8 am on 13 May 2010 (T 105 L24) but denied that this was inconsistent with his telephone records showing that he was at Bondi Junction at 8.14am (T 105 L18); There is also the claim by Elia that Sarraf had told him he would leave his telephone with Andy Nahas (T 107 L35 and T 108 L5I). There was no reason for Sarraf to have provided this information to Elia and it had all the hallmarks of jointly concocted evidence; It was clear that Elia and Sarraf had been briefed on what the telephone records of each of them would reveal before they were cross examined. Sarraf admitted as much (T 147 LT 147 L37) however his denial that he could not remember who it was that supplied the briefing (T 147 L40 and 50) did not ring true; particularly given that the briefing had occurred only the night before he was cross examined. Elia however did not even admit that he had been advised of the contents of Sarraf's records (T 108 L30) which he most clearly had" 38The evidence supports the factual assertions, which are made in these submissions. These matters are, in and of themselves, sufficient to support the conclusion I refer to below. However, the plaintiff suggested that further matters were relevant and reflected poorly on the credit of the individual witnesses. I set these out in turn.

Mr Elia 39In so far as Mr Elia is concerned, the following matters were said to be relevant: "(a) Elia annexing failed email communications to his affidavit when the relevant form of communication was facsimile not email and when he could find no evidence of any failed facsimile transmissions (T 110 L12 and 110 L27); (b) Elia's late introduction of the claim that the payment schedule had been too large to send by facsimile (T 112); (c) Elia's failure to refer in his statutory declaration to Sarraf being with him when he served the payment schedule notwithstanding the fact that he was answering the letter from the Plaintiff's solicitors that had asked who had served the payment schedule (T 120); (d) no mention in either the affidavit of Elia or Sarraf of any difficulty in "placing the affidavit under the door" until after the Plaintiff's photographs were tendered (T 113 L20); (e) no mention in Elia's affidavit about "trying to pull the envelope back" (T113 L18). Further Elia's weak argument that this was because he was worried about someone trying to steal it (T 114 L5); (f) no attempt by Elia to contact Nahas, or the Defendant's corporate house counsel to check whether stuffing the schedule partially under the door was good service(TT 116-117); (g) the telephone records show Elias being at Bondi Junction on 13 May 2010 and not Double Bay at all (T 123 L35); (h) Elia's claim that Younan had seen himself and Sarraf from his desk (T 127 L10) compared to Younan's evidence that he was at the entrance to his office (T 158 L38); (i) Elia firstly admits that when he received the email of 17 May 2010 requesting the April payment schedule he knew that this was referring to the payment schedule he claimed to have served two days earlier (T 130 L35) but when pressed why if the payment schedule in fact existed he had then not sent it to the Plaintiff he changed his evidence to say that he did not understand the email (T 131 L5 and T 133 L45); (j) the identical evidence of Sarraf [9] and Elia [23] that after they delivered the payment schedule they " made [their] way back to Nahas Construction's offices in North Parramatta ". Whereas Elia said, once the telephone records had been disclosed which indicated that he had been to Pymble after being in Bondi Junction on 13 May 2010, that in fact he went to a Nahas site in Pymble (T 121 L20-42) which his affidavit evidence failed to disclose. Sarraf made no mention of any trip to Pymble."

Mr Sarraf 40In so far as Mr Sarraf is concerned, the following matters were said to be relevant: "(a) why Mr Sarraf considered it necessary to explain in detail to Younan that he was serving a payment schedule was not explained (T 126 L35); (b) the evidence (from Daniel Salim) that Sarraf was outside the court listening to the evidence of Elia; (c) Sarraf failing to explain why he swore that the time was "9.30" when he in fact did not know what the time was (T 150 L35); (d) Sarraf's evidence that he may have discussed his evidence with Younan and Elia (T 150 L35-50); (e) Sarraf's evidence that in fact the envelope went all the way under the door (T 152 L5) compared to Elia's evidence that it did not (T T113 L18)"

Mr Younan 41In so far as Mr Younan is concerned, the following matters were said to be relevant: "(a) Younan's evidence that he approached Milgrom about what Milgrom had said in his affidavit because Younan considered Milgrom's evidence could affect "his project" (T 156 L30); (b) Younan seeking to distinguish between asking Milgrom about what was in his affidavit compared to asking him about his evidence (T 156 L43); (c) Younan's attempts to give unresponsive answers helpful to the Defendant (T 156L50-157 L8); (c) Younan's evidence (which did not appear in his affidavit) that he had been checking for blown light globes (T 159 L 20); (e) Younan's obviously rehearsed evidence to try and alter the time of the conversation from 9.30 to 8.15 (T 161 L15). The claim that it was "mid morning" was not only unbelievable it also did not assist the Defendant's new delivery time, a point that Younan eventually had to concede (T 161 L34); (f) Younan's attempt to explain why he went to see Milgrom about Milgrom's evidence (T 162 L15-30)" 42So far as Mr Elia is concerned, the above matters show he gave incomplete evidence, has been caught out and has had to change his evidence. Even without considering the change in the evidence as to the time of service, I would have reservations about his truthfulness. 43Mr Sarraf did not seem convincing to me in his explanation about handing his phone over to someone else on the site. I am uneasy about his evidence. 44Mr Younan's explanation for the change in his evidence was clearly rehearsed, such that I am uneasy about his evidence. 45The defendant's submissions as to what happened in relation to service are highly improbable, and the necessary steps in pursuit of the deception illustrate its improbability. The change in the evidence as to the time of service has all the hallmarks of a previously concocted story being exposed. The defendant's objective matters do little to assist its case. 46I am satisfied that the evidence of Mr Elia and Mr Sarraf has been concocted in conjunction with Mr Younan. Clearly, what happened is that, although Mr Elia may have prepared the payment schedule and discussed it on 12 May 2010, he has, either by oversight or for some other reason, failed to serve it as required by 14 May 2010. 47In these circumstances, the other two points do not arise. However, I will refer to them briefly.

Failure to serve by not placing document wholly within the plaintiff's office 48It seems clear on the evidence that, because of its size, the payment schedule was not able to fit entirely under the door of the plaintiff's office. Ms Orlievsky says that when she collected the package it was stuck under the door and the door had to be opened to force the package out. The defendant's witnesses accepted that the payment schedule could not (and did not) go all the way inside the plaintiff's office. 49The defendant referred to a number of cases, most of which referred to the situation that applies when a document is served at a letterbox. 50In Career Trading Online Pty Ltd v BES Trading Solutions Pty Ltd; Buckland [2010] NSWSC 460, the court had to deal with a statutory demand which had been served by sliding the demand wholly under a glass door of a closed accountancy practice on Christmas Eve. At [27] Barrett J said: "It follows that the action of Ms Buckland is depositing the envelope containing the two statutory demands under the glass doors at the street frontage so as to be wholly within the premises behind those doors constituted "leaving" each such document "at" the registered office of the plaintiff. Each statutory demand was therefore served on the plaintiff on 23 December 2009." 51In the instant case, the demand was not wholly within the office and a passing stranger could have taken it from the outside of the office. Therefore, as it was not within the control and possession of the occupants of the office, I would have thought that it was not left at the registered office.

Service not in accordance with section 31 of the Act 52Section 31 of the Act provides that a notice may be served: (a) by lodging it during normal office hours at the person's ordinary place of business; ... (b) in such other manner as may be provided under the construction contract concerned 53The evidence suggests that Mr Hiatt was at the plaintiff's office from 7am on 13 May 2010 and that Ms Orlievsky usually arrived at about 10am. On the basis that the payment schedule had been served at 8.15am, this would seem to be within normal office hours on 13 May 2010. However, normal office hours is an expression which refers to the general operation of an office. In this case there is not sufficient evidence to determine this point.

The due date for payment argument 54The defendant's argument focuses on the terms of s 11 of the Act which provides: 11 Due date for payment (1) A progress payment under a construction contract becomes due and payable: (a) on the date on which the payment becomes due and payable in accordance with the terms of the contract, or (b) if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made under Part 3 in relation to the payment. (2) Interest is payable on the unpaid amount of a progress payment that has become due and payable at the rate: (a) prescribed under section 101 of the Civil Procedure Act 2005 , or (b) specified under the construction contract, whichever is the greater. (3) If a progress payment becomes due and payable, the claimant is entitled to exercise a lien in respect of the unpaid amount over any unfixed plant or materials supplied by the claimant for use in connection with the carrying out of construction work for the respondent. (4) Any lien or charge over the unfixed plant or materials existing before the date on which the progress payment becomes due and payable takes priority over a lien under subsection (3). (5) Subsection (3) does not confer on the claimant any right against a third party who is the owner of the unfixed plant or materials. 55In this case we are concerned with s 11(1)(a) of the Act, because the contract in question makes provision for a date on which the payment becomes due and payable in cl 13. Sections 14 and 15 of the Act are as follows: 14 Payment schedules (1) A person on whom a payment claim is served (the respondent ) may reply to the claim by providing a payment schedule to the claimant. (2) A payment schedule: (a)must identify the payment claim to which it relates, and (b)must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount ). (3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment. (4) If: (c)a claimant serves a payment claim on a respondent, and (d)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, (iii)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. 15 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 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and (b)fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates. (2)In those circumstances, the claimant: (a)may: (i)recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii)make an adjudication application under section 17(1)(b) in relation to the payment claim, and (b)may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract. (3)A notice referred to in subsection (2) (b) must state that it is made under this Act. (4)If the claimant commences proceedings under subsection (2) (a) (i) to recover the unpaid portion of the claimed amount from the respondent as a debt: (a)judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and (b)the respondent is not, in those proceedings, entitled: (i)to bring any cross-claim against the claimant, or (ii)to raise any defence in relation to matters arising under the construction contract. 56In this case, it is the terms of s 15(1) upon which the plaintiff relies in making its claim. That claim is one brought pursuant to section 15(2)(a)(i). The defendant's argument focuses on the requirement in section 15(1)(b) that there be a failure to pay "the claimed amount on or before the due date of the progress payment to which the payment claim relates". 57The argument is that, under the contract, there is no due date for the progress payment sought to be recovered. 58This contention depends, in part, on the terms of the contract. Clause 13 of the contract provides: "(a) Unless otherwise stated herein Progress Claims shall be paid within 45 days from the end of the month in which a valid and complete Progress Claim is made or within 14 days of certification by the Builder that such amount is payable whichever occurs later. Claims for progress payments shall be calculated in consultation with the Builder having regard to the contract value of work then carried out up until the date for submission of Progress Claims. Variations which have been agreed or determined by the Builder under Clause 12(c) may be included in the Subcontractor's Progress Claim to the extent that they have been completed. (b) To assist the Builder to make claims under the Head Contract, the Subcontractor must deliver to the Builder a monthly progress report on the 23 rd day or when the 23 rd day is not a Business Day immediately prior to the 23 rd day, of the each month in which the Subcontractor is entitled to make a Progress Claim. The progress report must be in the form required by the Builder and must: i. set out all amounts the Subcontractor proposes to include in its next Progress Claim under this Clause 13; and ii. include a breakdown of the amount claimed for each item and the amounts claimed for each variation and must be accompanied by day works sheets (where applicable) signed on behalf of the Builder; and iii. contain such further information as the Builder may require In respect of work not yet performed at the date of the progress report but which is anticipated to be performed by the date of the Progress Claim under this Clause 13, the Subcontractor must include an estimate of the value of the work and must clearly indicate in the progress report that the amount proposed to be claimed for that work is an estimate only. (c) A progress report is not a Progress Claim and the Builder has no obligation to assess or certify a progress report but may discuss its content with the Subcontractor or make enquiries about it. The Subcontractor must promptly respond to all queries raised by the Builder about a progress report. Until the time for delivery of its Progress Claim, the Subcontractor must keep the Builder informed as to whether any estimate included in its progress report will vary when the Progress claim is delivered. (d) Subject to: (i) the provisions of the Subcontract; and (ii) the Subcontractor complying with Clause 13(b); the Subcontractor is entitled to make claims for payment for work completed on site ("Progress Claim"), supported by evidence of the amount due to the Subcontractor as set out in clause 13(b) together with a completed and signed Subcontractor Declaration in the form contained at Annexure C: A. on the day specified in the Schedule or at such other periods as agreed in writing; and B. a claim with in 7 days of the expiry of the Defects Liability Period (the "Final Payment Claim") (e) An early Progress Claim shall be deemed to have been received on the date specified in the Schedule. A late progress Claim will be treated as being submitted on the day specified in the Schedule of the following calendar month. Except in relation to a Final Payment Claim the amount to which the Subcontractor is entitled in respect of a Progress Claim shall not exceed the amount stated by the Subcontractor in the progress report delivered prior to the claim pursuant to Clause 13(b). (f) Within 10 Business Days of receipt of a progress Claim, the Builder shall issue the Subcontractor a payment Schedule stating that amount of the payment which in the opinion of the builder and having regards to Clause 13(i) is to be made by the Builder to the Subcontractor and, subject to clause 27, that shall be the amount payable by the Builder in accordance with clause 13(a). ... (k) Without limiting the Builder's other rights, the Builder shall not be obliged to make a progress payment or the final payment to the Subcontractor if the Subcontractor has failed to: i. submit a priced BCQ if one was required under Clause 2(b); ii. sign and return all copies of the Subcontract; iii. submit proof of all required insurance; iv. submit a Subcontractor Declaration in the form contained at Annexure C; v. if requested, submit as built drawings, manuals and certificates; and vi. (in the case of the final payment only) deliver to the Builder an executed Certificate of Release in the form contained at Annexure D. 59The defendant's submissions suggest that there are three failures to comply with cl 13. They are:

the failure to submit an appropriate subcontractor declaration in accordance with cl 13(k)(iv);
the failure to deliver to the defendant the monthly progress report required by cl 13(b) of the contract; and
the failure to provide certification for the works as required by cl 13(k)(v) of the subcontract. 60Assuming that failures 1 and 3 are established, it is a fairly simple argument by the defendant, as indicated above. In particular the defendant points to s 15(4) of the Act, which clearly indicates that judgment is not to be given by the court unless it is satisfied of the matters referred to in s 15(1). 61The plaintiff's answer to the claim suggests that, on its proper construction, cl 13(k) does not purport to alter the date that a progress claim is payable under cl 13(a) of the contract. The plaintiff expressed its argument in these terms: i) Clause 13(k) does not purport to alter the date that a "Progress Claim" is payable under clause 13(a), it does not even refer to "Progress Claims". This clause states that the builder is not obliged to make a "progress payment". The term "progress payment" is not defined however it is probably a reference to the amount a builder becomes obliged to pay after submitting a payment schedule (clause13(f)) or a term that means any payment that the builder would otherwise have become obliged to make to the subcontractor. On either definition it is drafted as a potential defense that the builder may choose to raise if served with a claim by the subcontractor. The clause is not drafted as an express (or implied) alteration of the due date otherwise imposed by clause 13(a) of the Contract. For the purposes of clause 11(a) of the SoP Act the relevant date is still 45 days from the end of the month in which the valid and complete Progress Claim was served (ie 14 June 2010); ii) An example of a clause that is drafted as an express alteration of the due date otherwise prescribed by clause 13(a) (ie a clause the subject of the words "unless otherwise stated herein") is clause 13(e). That clause provides that an "early Progress Claim" shall be deemed to have been received on the date specified in the Schedule (in this contract the last day of each calendar month). It further provides that a late Progress Claim shall be treated as being submitted on the day specified in the Schedule of the following calendar month. This clause, unlike clause 13(k), does have the effect of altering the "due date" for payment of Progress Claims. All that clause 13(k) does is raise an optional defence for the builder that would have been relevant if it had served a payment schedule but is irrelevant when it did not (see Zebicon Pty Ltd v Remo Constructions Pty Ltd [2008] NSWSC 1408 at [33] and Brookhollow Pty Ltd v R and R Consultants Pty Ltd [2006] NSWSC 1 at [48] and [51]). 62Brookhollow Pty Ltd v R&R Constructions Pty Ltd [2006] NSWSC 1, to which these submissions refer, concerned an allegation that a payment claim was not a valid payment claim. Justice Palmer dealt with the effect of the Act and construed s 13 as a provision giving defences to a builder; see par [44] to par [51], as follows. [44] A payment claim under the Act is, in many respects, like a Statement of Claim in litigation. In pleading a Statement of Claim, the plaintiff sets out only the facts and circumstances required to establish entitlement to the relief sought; the Statement of Claim does not attempt to negative in advance all possible defences to the claim. It is for the defendant to decide which defences to raise; the plaintiff, in a reply, answers only those defences which the defendant has pleaded. [45] In my opinion, a payment claim under the Act works the same way. If it purports reasonably on its face to state what s 13(2)(a) and (b) require it to state, it will have disclosed the critical elements of the claimant's claim. It is then for the respondent either to admit the claim or to decide what defences to raise. [46] An assertion that service of a payment claim is prohibited under s 13(4) or (5) is like a defence in bar. For example, in the case of an action at law or in equity founded upon an oral contract for an interest in land it is open to a defendant to elect whether to raise a defence in bar founded on the Statute of Frauds. Similarly, it would be open to a respondent served with a payment claim under the Act to elect whether to raise a defence in bar that service of the claim is prohibited by s 13(4) or (5). A respondent to a payment claim may have a reason for electing not to raise such a defence: the payment claim may raise for determination an issue which will inevitably have to be determined in subsequent payment claims and the respondent may wish the issue to be resolved sooner rather than later. [47] However, if the respondent does elect to raise a defence in bar founded on s 13(4) or (5), adjudication of that defence will require examination of the relevant terms of the contract, possibly the facts relating to the work performed and the time of performance and possibly also the content of previous payment claims. That examination may well be contentious and may involve issues of fact and law upon which minds may legitimately differ. [48] In my opinion, the scheme of the Act in general and of s 13 and s 14 in particular requires that a defence in bar to a payment claim founded on s 13(4) or (5), like any other defence said to defeat or reduce the claim, must be raised in a timeously served payment schedule. If it is not, then the defence may not be relied upon to set aside or restrain enforcement of the adjudication determination as a nullity, nor may it be relied upon as a defence to entry of judgment under s 15(4) of the Act. [49] In my opinion, these conclusions are consistent with, and are inherent in, the reasoning in Brodyn and they are not contrary to the majority decision in Nepean . They are also in conformity with the general approach to the determination of invalidity of a payment claim under s 13(4) and (5) taken by McDougall J in Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 801 at 25, by Campbell J in Lifestyle Retirement Projects No 2 Pty Ltd v Parisi Homes Pty Ltd [2005] NSWSC 705 at 19, and by Campbell J in Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 1143 at 87-90. Was Claim No 9 a nullity [50] Brookhollow does not contend that Claim No 9 did not purport reasonably on its face to comply with the requirements of s 13(2) of the Act. [51] For the reasons which I have given, I conclude that because Claim No 9 complied with the requirements of s 13(2), it was not a nullity under the Act, ie it was effective to engage the provisions of Pt 3. If Brookhollow wished to assert that the payment claim was barred by reason of the prohibition in s 13(4) or (5), it had to do so in a timeously served payment schedule. Having failed to serve a payment schedule within time, Brookhollow was not entitled to assert nullity of the payment claim in order to resist the entry of judgment under s 15(4). Likewise, it cannot now rely upon the defence in bar to found an injunction restraining enforcement of the adjudication determination or of the judgment resulting from it." 63The principles referred to by his Honour are said to go to the matters sought to be raised in this case as being nothing more than defences that might be raised appropriately in the payment schedule under the Act. In this case they were not raised. 64In Zebicon Pty Ltd v Remo Constructions Pty Ltd [2008] NSWSC 1408 at [33], McDougall J applied his Honour's reasons. 65In approaching the matter it is necessary to focus on the words in s 11(1)(a) which are "The date on which the payment becomes due and payable in accordance with the terms of the contract". Relevantly, the construction contract contains a term that " Progress Claims shall be paid within 45 days from the end of the month in which a valid and complete Progress Claim is made ". Arguably, the use of the words "valid and complete" may mean that an invalid or incomplete progress claim would not be a progress claim. From this it would follow that there would be no due date for payment, because there would be no progress claim. 66When one looks at cl 13(k) it is, as the plaintiff submits, not couched in terms that vary the date when something becomes due. It is more couched in terms of being a basis for refusing to make a progress payment. On its face, it does not touch upon when a progress payment is due for payment. That is a separate temporal matter. 67Although there are tensions within cl 13, if one concentrates on section 11(a) of the Act that fastens upon a temporal matter, namely, the date on which the payment becomes due. In my view the correct construction of the Act is that the matters which are now raised by the defendants are matters of defence which must be raised in a payment schedule served within time and cannot be raised in this hearing under s 15(4) of the Act. 68This means that the matters sought to be raised by the defendant cannot be raised in these proceedings and that the plaintiff is entitled to judgment. 69However, in case the matter goes further I should refer to the terms of the matters which are said to constitute reasons why no amount was due under s 15(1).

The failure to submit an appropriate subcontractor declaration in accordance with cl 13(k)(iv) 70The relevant statutory provisions of the Industrial Relations Act 1996 are as follows: " 127 Liability of principal contractor for remuneration payable to employees of subcontractor (1) Application This section applies where: (a) a person ( the principal contractor ) has entered into a contract for the carrying out of work by another person ( the subcontractor ), and (b) employees of that subcontractor are engaged in carrying out the work ( the relevant employees ), and (c) the work is carried out in connection with a business undertaking of the principal contractor. (2) Liability of principal contractor The principal contractor is liable for the payment of any remuneration of the relevant employees that has not been paid for work done in connection with the contract during any period of the contract unless the principal contractor has a written statement given by the subcontractor under this section for that period of the contract. (3) Content and form of statement The written statement is a statement by the subcontractor that all remuneration payable to relevant employees for work under the contract done during that period has been paid. The regulations may make provision for or with respect to the form of the written statement. (4) Retention of copies of statements The subcontractor must keep a copy of any written statement under this section for at least 6 years after it was given. (5) Payments under contract The principal contractor may withhold any payment due to the subcontractor under the contract until the subcontractor gives a written statement under this section for any period up to the date of the statement. Any penalty for late payment under the contract does not apply to any payment withheld under this subsection. (6) Remuneration For the purposes of this section, remuneration means remuneration or other amounts payable to relevant employees by legislation, or under an industrial instrument, in connection with work done by the employees. (7) False statement not effective The written statement is not effective to relieve the principal contractor of liability under this section if the principal contractor had, when given the statement, reason to believe it was false. ..." 71Pursuant to section 127(3), the Industrial Relations (General) Regulations 2001, regulation 43A provides: "43A Subcontractor's statement about payment of employees (1) Without limiting the form in which a written statement under section 127 (3) of the Act may be made, the written statement may be in a form approved by the Director-General of the Department of Commerce. (2) A written statement under section 127 (3) of the Act may include, or be included in, any statement made by the subcontractor for the purposes of section 31H of the Pay-roll Tax Act 1971 , section 175B of the Workers Compensation Act 1987 or a similar provision under any other Act." 72It is plain that a statement was submitted and it can be found at p 4 and 5 of Tab 2 of Exhibit 1 in these proceedings. The relevant incompleteness of the statement is encapsulated in par 18 of the defendant's submissions in the following terms: The document provided by Sand Excavation did not identify the period to which the written statement related. This is a serious default and renders the document ineffective for its statutory purpose. There is a notation next to the space in the document where the period for the relevant work is to be identified ( "Note 3" ). On the following page (p.5, tab 2 of the exhibit SE1 to the Elia affidavit 24 August 2010), "Note 3" is in the following terms: In order to meet the requirements of s127 [of the] Industrial Relations Act 1996, a statement in relation to remuneration must state the period to which the statement relates. (emphasis added) 73There is no doubt that the requirement to state the period for which the statement relates is important, as can be seen from the terms of s 127 of the Industrial Relations Act 1996. 74It was the plaintiff's submission that in this case there has been compliance with the contract because a declaration has been submitted and, although what has occurred may be a breach of the Act, it is not a breach of the contractual requirement. 75Under cl 13(d)(ii), what is required to be supplied is a " completed and signed Subcontractor Declaration in the form contained at Annexure C ". The reference to Annexure C is probably meant to be a reference to Annexure B. However, the parties seem to have acted on the basis that the form supplied by the plaintiff (which was its form for a Subcontractor's Statement) was the appropriate one. It seems to me, given the terms of the contract, that it needed to be completed. Clearly it has not been and, accordingly, no appropriate declaration has been supplied.

The failure to deliver to the defendant a monthly progress report required by cl 13(b) of the contract 76Given the express requirements in clause 13(d), the right to make a claim for payment for work is subject to the subcontractor complying with clause 13(b). Thus there is no right to make a progress claim in the absence of that compliance. The evidence demonstrates that the required document was not submitted.

The failure to provide certification for the works as required by cl 13(k)(v) of the subcontract 77The only evidence identified as to this failure appears to be some general statements in the Payment Schedule for Progress Claim No 4 that no certification has been provided despite repeated requests. From that evidence, I am not satisfied that there has been a failure to provide certification, as the matter has not been addressed in any of the affidavits. 78As a result of my decision the plaintiff is entitled to judgment. 79Accordingly, I give judgment in favour of the plaintiff against the defendant in the sum of $1,198,789.34. 80I order the defendant to pay the plaintiff's costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 August 2011

Industrial Relations (General) Regulations 2001(NSW)

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