Seabay Properties Pty Ltd v Galvin Construction Pty Ltd & Anor [2011] VSC 183

Seabay Properties Pty Ltd v Galvin Construction Pty Ltd & Anor [2011] VSC 183 - VSC 2011 case summary — Zoe

[7]

42.1 Payment Claims, Certificates, Calculations and Time for Payment

At the times for payment claims or upon completion of the stages of the work under the Contract stated in Annexure Part A and upon the issue of a Certificate of Practical Completion and within the time prescribed by Clause 42.5. the Contractor shall deliver to the Superintendent claims for payment supported by evidence of the amount due to the Contractor and such information as the Superintendent may reasonably require. Claims for payment shall include the value of work carried out by the Contractor in the performance of the Contract to that time together with all amounts then otherwise due to the Contractor arising out of the Contract.

If the time for any payment claim under the preceding paragraph falls due on a day which is Saturday, Sunday, Statutory or Public Holiday the Contractor shall submit the claim either on the day before or next following that date which itself is not a Saturday, Sunday, Statutory or Public Holiday.

If the Contractor submits a payment claim before the time for lodgement of that payment claim, such early lodgement shall not require the Superintendent to issue the payment certificate in respect of that payment claim earlier than would have been the case had the Contractor submitted the payment claim in accordance with the Contract.

Within 14 days of receipt of claim for payment, the Superintendent shall assess the claim and shall issue to the Principal and to the Contractor a payment certificate stating the amount of the payment which, in the Superintendent's opinion, is to be made by the Principal to the Contractor or by the Contractor to the Principal. The Superintendent shall set out in the certificate the calculations employed to arrive at the amount and, if the amount is more or less than that amount claimed by the Contractor, the reasons for the difference. The Superintendent shall also set out, as applicable, in any payment certificate issued pursuant to Clause 42, the allowances made for -

(a) the value of work carried out by the Contractor in the performance of the Contract to the date of the claim;

(b) amounts otherwise due from -

(i) the Principal and the Contractor; and

(ii) the Contractor to the Principal;

(c) amounts assessed under Clause 46.4 and not duly disputed;

(d) amounts paid previously under the Contract;

(e) amounts previously deducted for retention moneys pursuant to Annexure Part A; and

(f) retention moneys to be deducted pursuant to Annexure Part A,

arising out of the Contract resulting in the balance due to the Contractor or the Principal, as the case may be.

If the Contractor fails to make a claim for payment under this Clause 42.1, the Superintendent may nevertheless issue a payment certificate and the Principal or the Contractor, as the case may be, shall pay the amount so certified within 14 days of that Certificate.

Subject to the provision of the Contract, within 28 days of receipt by the Superintendent of a claim for payment or within 14 days of issue by the Superintendent of the Superintendent's payment certificate, whichever is earlier, and within 14 days of the issue of a Final Certificate, the Principal shall pay to the Contractor or the Contractor shall pay to the Principal, as the case may be, an amount not less than the amount shown in such certificate as due to the Contractor or to the Principal, as the case may be, or if not payment certificate has been issued, the Principal shall pay the amount of the Contractor's claim. A payment made pursuant to this Clause 42.1 shall not prejudice the right of either party to dispute under Clause 47 whether the amount so paid is the amount properly due and payable and on determination (whether under Clause 47 or as otherwise agreed) of the amount so properly due and payable, the Principal or the Contractor, as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable.

Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be payment on account only, except as provided under Clause 42.6.

[61]

10A(2) The first class of variation is a variation where the parties to the construction contract agree- [Emphasis added]

(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 service 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.

10A(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

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

(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)). [Emphasis added]

(4) If at any time the total amount of claims under a construction contract for the second class of variations exceeds 10% of the consideration under the construction contract at the time the contract is entered into, subsection (3)(d) applies in relation to that construction contract as if any reference to "$5 000 000" were a reference to "$150 000".

[156]

Section 10 of the Act prescribes the manner of calculation of the amount of the progress payment to which the person [the claimant] is entitled under the Act.
In calculating the amount of the progress payment to which the person [the claimant] is entitled, s.10B(1) precludes [the claimant] from taking into account an excluded amount, which are set out in s.10B(2)(a) to (e).
In accordance with s.14(2)(d) of the Act, a payment claim (served by the claimant) must indicate the amount of the progress payment ("claimed amount"), which is the amount, calculated by the claimant under ss.10, 10A and 10B of the Act.
Thus, it is the claimed amount, which is the sum calculated by the claimant, that is circumscribed by the operation of ss.10, 10A and 10B of the Act. A respondent has no part to play in making a payment claim.
The fact that it is the claimant alone that undertakes this task is reinforced under s.14(3)(b) of the Act, which directs that a claimed amount [in the payment claim] must not include any excluded amount.
Under s.15 of the Act, the respondent may serve a payment schedule, which, pursuant to s.15(2)(b) and (c), must indicate the amount of the payment (if any) that it proposes to make (the scheduled amount) and must identify any amount of the claim that the respondent alleges is an excluded amount.
The only obligation of the respondent under the Act with respect to s.10B of the Act is to identify which part of the claimed amount is an excluded amount.
Where the scheduled amount is less than the claimed amount, pursuant to s.15(3) of the Act, the respondent is to indicate why it is less and give reasons for withholding payment. There is nothing in the Act to limit the right of a respondent to set-of or deduct amounts owing under the contract from the claimed amount which then determines the scheduled amount. The law is clear, so it was put: common law rights must be expressly excluded if that is Parliament's intention. Such rights are not expressly excluded under s.15 or anywhere else in the Act.

[190]

A fundamental feature of the legislation is that, apart from the fact that parties to a construction contract cannot contract out of the rights given by the legislation ... nothing ... affects any of the rights that parties to a construction contract have ... The concern of the Act is with maintaining the cash flow of claimants, by enabling them to recover quickly amounts which the adjudication process says they are entitled to. It is possible for the person who pays the amount of money which an adjudication has found due to seek to reclaim that money, in court proceedings which decide what the ultimate legal rights of the parties are. An evident purpose of the Act is that, if there is to be such litigation, it will start from a position where the claimant has been paid the amount which the adjudication process has decided should be paid. [Specific references to the sections of the NSW Act omitted]

(g) Campbell J also considered the contents of the second reading speech in introducing amendments to the NSW Act, the Building and Construction Industry Security of Payment Amendment Bill 2002 (NSW).[15] Given the provenance of the Victorian Act, these observations of the New South Wales Minister provide useful insights into the operation of the Victorian Act.[16] In his speech the New South Wales Minister said:

The main purpose of the Act is to ensure that any person who carries out construction work, or provides related goods or services, is able to promptly recover progress payments. The Government wanted to stamp out the practice of developers and contractors delaying payment to subcontractors and suppliers by ignoring progress claims, raising spurious reasons for not paying, or simply delaying payment. ...

The Act was designed to ensure prompt payment and, for that purpose, the Act set up a unique form of adjudication of disputes over the amount due for payment. Parliament intended that a progress payment, on account, should be made promptly and that any disputes over the amount finally due should be decided separately. The final determination could be by a court or by an agreed dispute resolution procedure. But meanwhile the claimant's entitlement, if in dispute, would be decided on an interim basis by an adjudicator, and that interim entitlement would be paid ...

Cash flow is the lifeblood of the construction industry. Final determination of disputes is often very time consuming and costly. We are determined that, pending final determination of all disputes, contractors and subcontractors should be able to obtain a prompt interim payment on account, as always intended under the Act ...

... there will be instances when the progress payment determined by the adjudicator will be more or less than the entitlement finally determined to be due under the contract. However, it is better that progress payments be made promptly on an interim basis, assessed by an independent party, rather than they be delayed indefinitely until all issues are finally determined.

Presently, when a respondent fails to pay the claimant by the due date for payment under the contract, the claimant's only recourse to enforce payment is to commence proceedings in a court. The Bill will give the claimant another option. The claimant will be able to opt to have an adjudicator determine the amount of the progress payment that is due. This is an "optional adjudication". The claimant will still be able to proceed to adjudication earlier if the respondent provides a payment schedule and the scheduled amount is less than the amount claimed. The benefit to the claimant of proceeding with an optional adjudication rather than commencing proceedings in a court is that the claimant will then be able to use the adjudication certificate to obtain judgment expeditiously and without a court hearing. The claimant will be able to initiate an optional adjudication when the respondent fails to provide a payment schedule within time and fails to pay the amount claimed, or the respondent provides a payment schedule but fails to pay the whole of the scheduled amount.

At a glance

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Judgment (264 paragraphs)

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Legislation Cited (32)

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