Veer Build Pty Limited v TCA Electrical and Communication Pty Ltd

Summary of salient facts

1. There is no dispute that in August 2014 the plaintiff and the first defendant entered into a construction contract whereby the first defendant agreed to carry out construction work for the plaintiff. The contract was made when the first defendant's quotation in the sum of $171,650 (excluding GST) was accepted by the plaintiff's purchase order No. 1672.
2. The contract made no provision with respect to the dates upon which progress payments may be claimed under the contract. Accordingly, s 8(2)(b) of the Act operated to make the last day of the named month in which construction work was first carried out, and the last day of each subsequent named month, to be reference dates in relation to the contract.
3. By October 2014, a progress claim in the amount of $71,973.16 (excluding GST) had been claimed by the first defendant and paid to it.
4. On 27 October 2014, Mr Southers of the first defendant sent an email to Mr Ugov of the plaintiff. The subject was stated to be "Hoyts Broadway Claim 2 - Veer Group". The email attached a certificate of currency from an insurer, a sub-contractor's statement, a spreadsheet dated 25 October 2014 and headed "Progress Claim" and "Claim No.2", and invoice No. 616 dated 25 October 2014 in the sum of $114,046.84 (plus GST). The invoice included a statement that it was a payment claim made under the Act. The spreadsheet included contract items and variations totalling $114,046.84. The email itself stated: "Al I haven't included the varies pending but here is what we have so far? Regards Dave Southers"
5. On 10 November 2014, Mr Ugov sent an email to Mr Southers in response. The email included the following: "Can you please revise your 27th October 2014 claim Inv 00000616 due to the following: 1. You have claimed 100% complete for items that were not complete at the time of invoice. 2. We need to go through the variations as there has been many changes that need to be address [sic]. 3. We need to look at the cost to replace the damaged sheet of mirror glass that was cracked by your Electrician. 4. We also need to look at costs associated with the fire that your Electrician caused."
6. Mr Southers sent an email in response to Mr Ugov shortly thereafter on 10 November 2014. This email included the following: "Yes we can revise as it was only a forecast to months end and didn't take into account the daily extras asked for onsite from 27th to 31st we had to complete. We probably need to sort points 2 & 3 first and then we can update it with variations not on that claim that got done in that time period instead of contract works (does that work for your claim too)? I have spoken to Phil regarding his list from that last week/weekend and up to now and he will get it to me today. I can email through every vary up to date hopefully this afternoon or first up tomorrow, and see what you have your end? Let me know the cost of the glass and I'll add to the variation list as a credit? (When will this be ready for us to go back and disconnect/reconnect) Can you explain further on costs for fire? […]"
7. On 18 November 2014, Mr Southers sent a further email to Mr Ugov. The subject was stated to be "progress calim [sic] 2 Hoyts October 14 revised". Attached to the email was a revised spreadsheet in relation to Claim No.2 which contained different figures to those contained in the spreadsheet sent on 27 October 2014, but which was otherwise in the same terms. The revised spreadsheet contained contract items and variations totalling $106,786.79. The covering email included the following: "Here is the draft of the revision as requested, I just changed the contract claim percentage to 95% and left varies on this claim the same to make it easier, if ok we will send amended invoice next? (There is $8k less on this claim) I will update the vary list now and send it over for you to review. […]"
8. On 25 November 2014, Mr Ugov sent an email response to Mr Southers in the following terms: "This claim was issued approx. 2 weeks before handover and your men were onsite for at least another week after handover so I cannot justify your claim as 95% complete at 25th Oct 2014 when you had another 3 weeks' worth of work to complete. I would conservatively put it at 70% complete. Could you have a realistic look at this claim and re-issue. As an example, you have claimed 100% complete for the switchboard but labelling and legend isn't done to date. I have a meeting with the Architect on Thursday to go through the variations. We can finalise the variations after this meeting."
9. Mr Southers sent a further email to Mr Ugov on 27 November 2014. The subject was stated to be "Hoyts Oct claim 2 rev 3 and provisional for claim 3". This email attached a further revised spreadsheet in relation to Claim No.2 which included contract items and variations totalling $89,121.29. The email also attached a spreadsheet dated 25 October 2014 and headed "Claim No.3". It contained contract items and variations totalling $32,233.55. The covering email included the following: "I have spoken to Phil as to what was complete by the 31st October (invoice was projected to end of month), and although I don't believe there was 25% of the project left for the last week, I have amended it down to include some variations we had to do in that last week and down to 80% on the install items mentioned, it is now down another $17k, if ok I will get the accounts girl to amend tomorrow. The last claim (which is due today) would look as attached with varies to be finalised and the as builts to you by Tuesday morning. Please advise if ok as claim 2 is due to be paid next week?"
10. A further email was sent by Mr Southers to Mr Ugov on 1 December 2014. The subject was stated to be "Hoyts Broadway Claim 2 - Veer Group". This email attached a certificate of currency from an insurer, and a sub-contractor's statement. It also attached the further revised spreadsheet in relation to Claim No. 2 which included contract items and variations totalling $89,121.29, and a revised version of invoice No. 616 dated 25 October 2014. The invoice was now in the sum of $89,121.29 (excluding GST). The invoice still contained the statement that it was a payment claim made under the Act. The covering email included the following: "Did you check the revised claim 2? Is everything ok mas [sic] this one is due? We are meeting Brenton to finish the couple of items on defect list tomorrow first up."
11. Mr Ugov sent an email in response on 8 December 2014. The subject was stated to be "Hoyts Broadway October 2014 Claim". The email included the following: "As outlined in my email dated 25th November 2014, overall work completed in your October claim was only 70% at best. […] Variations Some variations in your spread sheet are part of your contract and others are doubled up. I'm yet to receive the Architect's assessments of all variations. Upon receipt, I go through all of your variations and advise appropriately."
12. Mr Ugov also referred in his email to various alleged defects, and to costs incurred as a result of a fire which was stated to be the responsibility of the defendant.
13. The payment claim that ultimately became the subject of adjudication was made by the first defendant on 7 January 2015. The total amount claimed was $135,262.43 (including GST). That amount was equal to the total of two invoices that formed part of the payment claim. The first invoice (invoice No. 616 dated 25 October 2014) was in the sum of $89,121.29 (excluding GST). The second invoice (invoice No. 634 dated 25 November 2014) was in the sum of $33,844.55 (excluding GST). Invoice No. 616 was in identical terms to the revised invoice No. 616 that accompanied the email sent by Mr Southers to Mr Ugov on 1 December 2014. There is no evidence that invoice No. 634 had been sent previously to the plaintiff. The amount of the invoice does, however, reflect the "Balance to Claim" amount contained in the spreadsheet that accompanied the email sent by Mr Southers to Mr Ugov on 1 December 2014.
14. The payment claim made on 7 January 2015 was variously described as "Final Payment Claim 4", "Progress Claim No. 4 (final progress claim)", and "Claim No. 4".
15. The plaintiff provided its payment schedule in response to the payment claim on 19 January 2015. In essence, it indicated that for various reasons it proposed to make no payment to the first defendant.
16. On 3 February 2015 the first defendant made an application for adjudication in respect of the payment claim. The adjudication application specified 31 December 2014 as the reference date, or "date to which progress value is calculated". It was further stated that 31 December 2014 was the reference date as it was "the last day of the named month in which works were carried out on site". The adjudication application also contained statements that the "original contract works" (including variation works) had been completed by the first week of November 2014, and that all defects on a defects list given on about 12 November 2014 had been attended to.
17. Following the appointment of the second defendant as the adjudicator, the plaintiff provided its adjudication response on 12 February 2015. The adjudication response stated that the adjudication application was incompetent in circumstances where, inter alia, "the Claimant had made multiple repetitious payment claims for the same reference date" and "the Claimant served the Payment Claim after the cessation of work where there was no reference date". The plaintiff further stated that "the Claimant completed its works that were practically complete on 4 November 2014, which was also the handover date".
18. On 13 February 2015, the adjudicator sought further submissions from the parties in relation to various issues, including: 1. whether the first defendant "has made multiple repetitious payment claims for the same reference date"; and 2. whether the first defendant "served the payment claim after the cessation of work for which there was no reference date".
19. On 16 February 2015 the first defendant, in its response to that request, took issue with the suggestion that no further works were carried out after 4 November 2014. It provided evidence to the effect that, following a written request made by the plaintiff on 4 December 2014, it had returned to the site on 5 December 2014 and carried out additional works.
20. On 17 February 2015 the plaintiff, in its response to the arbitrator's request, advanced reasons in support of its contention that the first defendant was making "multiple repetitious payment claims". It stated that in circumstances where the first defendant completed its work on 4 November 2014, the only available reference date was 30 November 2014, which date was the subject of the claim made on 1 December 2014. The plaintiff further stated that there was no evidence that the payment claim included "different and new work after the reference date of 30 November 2014". The plaintiff, which had received the first defendant's response of 16 February 2015, did not explicitly address the first defendant's submission concerning returning to the site on 5 December 2014 at the request of the plaintiff.
21. The second defendant issued his adjudication determination on 20 February 2015. He determined that the first defendant should be paid an amount of $124,197.53 (including GST). The second defendant's reasons included the following: "The Respondent submitted that the Claimant made multiple repetitious payment claims for the same reference date hence is contrary to the provisions of the Act. This reason was not included in the payment schedule but goes to the validity of the payment claim so is considered. The Claimant advised in a reply to a request for further submissions that it issued progress claim 2 on 27 October 2014 and amended the claim on 27 November 2014 and 1 December 2014. It issued progress claim 3 on 27 November 2014. The current payment claim is progress claim 4. The Claimant is entitled under the Act at section 13(6) to include amounts in the current claim that is the subject of a previous payment claim. I determine that the Claimant is entitled to include the amounts from previous claims in the current payment claim. […] The Respondent submits that the Claimant has made multiple repetitious payment claims for the same reference date and the payment claim was issued after the cessation of work where there was no reference date. The Claimant submits that it last carried out on 5 December 2014. The Respondent submits that the Claimant completed its work on 4 November 2014. This reason was not included in the payment schedule but goes to the validity of the payment claim so is considered. The Claimant advised, in a reply to a request for further submissions, that it was requested to carry out further work on 4 December 2014. The Respondent has not addressed this submission by the Claimant in its response to the Claimant's further submission. The Claimant has provided a copy of the Respondent's email of 4 December 2014 requesting the work be carried out. The Claimant carried out the work on 5 December 2014. I am satisfied the Claimant carried out the construction work on 5 December 2014 and the reference date for that work is 31 December 2014. The Claimant has issued one payment claim in respect of the reference date 31 December 2014 in accordance with the provisions of the Act. […] The Claimant submits that it has carried out and completed the contract works. The contract work was carried out between September 2014 and December 2014. The Respondent does not deny that the work has been completed but has withheld payment as there has been damage caused by fire at the cinema complex which the Respondent submits was caused by the Claimant and the Respondent submits that the Claimant's work is defective. I determine that the contract work has been completed and the Claimant is entitled to payment for that work. […]"

Determination

1. The plaintiff contends that the payment claimed served on 7 January 2015 offends s 13(5) of the Act as a second payment claim served in respect of one or more reference dates (being 31 October 2014 or 30 November 2014). It is said that one or other of those dates was the reference date in relation to payment claims made previously by the first defendant in respect of the work it carried out in October and November 2014. It is then said that the payment claim served on 7 January 2015 was in respect of one or other of those reference dates because no claim was made for work that was not the subject of one or other of the earlier claims.
2. In considering the plaintiff's contention, it is first necessary to determine what, if any, payment claims under the Act were in fact served prior to 7 January 2015.
3. In my view, the first defendant served a payment claim under the Act (Claim No. 2) on 27 October 2014 for the sum of $114,046.84 (plus GST). However, this claim was withdrawn by the first defendant on 10 November 2014 in accordance with a request by the plaintiff to undertake a revision of the claim. In effect, the payment claim was withdrawn by agreement between the parties (see NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842 at [38]-[39]; Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 at [17]).
4. I do not think that a further payment claim was made on 18 November 2014 when Mr Southers sent the email that attached the revised spreadsheet for Claim No. 2. The terms of the email made it clear that the spreadsheet was a draft, and that if it was satisfactory, an amended invoice would be sent. It was also contemplated that the list of variations would be updated.
5. Neither do I think that a further payment claim was made on 27 November 2014 when Mr Southers sent the email that attached the spreadsheets concerning Claim No. 2 and Claim No. 3. As far as Claim No. 2 is concerned, the spreadsheet was evidently the product of a further revision carried out at the plaintiff's request, and Mr Southers was looking to the plaintiff to indicate whether it was "ok". It was not accompanied by an invoice, or any statement that it was a payment claim made under the Act. Whilst it is no longer necessary for a payment claim to contain a statement that it is made under the Act, the absence of such a statement is relevant, particularly as invoices issued by the first defendant contain the statement. As far as Claim No. 3 is concerned, the spreadsheet was said to show how such a claim "would look", and the stated subject of the email indicated that it was provisional only.
6. However, a payment claim under the Act (Claim No. 2) was in my opinion served on 1 December 2014, in the sum of $89,121.29 (plus GST). This payment claim was made when Mr Southers sent the email that attached various documents, including the revised invoice No. 616. The invoice contained a statement that it was a payment claim made under the Act. It appears from the email that the claim was made even though the first defendant was unsure whether the plaintiff had found the revised Claim No. 2 "ok".
7. Claim No. 2 was concerned with work carried out up to 31 October 2014. This is made clear by the terms of the parties' communications about the claim, in particular Mr Southers' email of 27 November 2014. Such a claim could have been served at any time in November 2014. This is because 31 October 2014 was, by the operation of s 8(2)(b) of the Act, a reference date in relation to the contract. Nevertheless, the claim was not served until 1 December 2014. By that time, another reference date in relation to the contract had arisen, namely, 30 November 2014. In my view, in the absence of a clear agreement that 31 October 2014 would be treated as the applicable reference date, Claim No. 2 should be regarded as a payment claim served in respect of the reference date 30 November 2014.
8. It is next necessary to consider whether the payment claim served on 7 January 2015 is itself a payment claim served in respect of the reference date 30 November 2014. If it is, then it was served contrary to the prohibition contained in s 13(5) of the Act, and is invalid (see Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; (2009) 74 NSWLR 190 at [13]-[14]; The Trustees of the Roman Catholic Church for Diocese of Lismore v T F Woollam and Son [2012] NSWSC 1559 at [49]; Kitchen Xchange v Formacon Building Services (supra) at [21]-[22]).
9. However, for the reasons which follow, I do not consider that the payment claim served on 7 January 2015 offended s 13(5) of the Act.
10. It may be accepted that at least insofar as the claim concerns the work the subject of invoice No. 616, it concerned work that was the subject of the payment claim served on 1 December 2014. Insofar as the claim concerns the work that was the subject of invoice No. 634, it appears to concern work carried out in November 2014 that could have been, but was not, the subject of the payment claim served on 1 December 2014 (or any other payment claim served prior to 7 January 2015). I therefore do not accept the plaintiff's submission that the payment claim made on 7 January 2015 only concerned work that was the subject of earlier payment claims.
11. No contravention of s 13(5) of the Act is established by the mere fact that the payment claim made on 7 January 2015 includes a claim for work that was the subject of the payment claim made on 1 December 2015. Section 13(6) of the Act makes it clear that s 13(5) does not prevent a claimant from including in a payment claim an amount that has been the subject of a previous claim. The previous claim was not the subject of any adjudication, so no question of issue estoppel arises (see Dualcorp Pty Ltd v Remo Constructions Pty Ltd (supra) at [60] and [68]).
12. This is not a case like Dualcorp where the claimant, after completing the work and leaving the site, made a claim in respect of the work (and indeed pursued adjudication of the claim) and later repeated the very same claim. Here, the defendant made a claim in respect of work done up to 31 October 2014. After completing some further work and leaving the site, the defendant made a claim for work that included the work done up to 31 October 2104.
13. As mentioned earlier, s 8(2)(b) of the Act operates in this case to make the last day of the named month in which construction work was first carried out, and the last day of each subsequent named month, to be reference dates in relation to the contract. By s 21 of the Interpretation Act 1989 (NSW) "named month" means "January, February, March, April, May, June, July, August, September, October, November or December". Accordingly, if construction work commenced in August 2014, 31 August 2014 would be a reference date in relation to the contract, as would the last day of each subsequent named month. In my opinion, 31 December 2014 thereby became a reference date in relation to the contract.
14. In Brodyn Pty Ltd t/as Time Cost and Quality v Davenport and Another [2004] NSWCA 394; (2004) 61 NSWLR 421 Hodgson JA (with whom Mason P and Giles JA agreed) stated at [63]: "However, s 8(2) of the Act does not provide that reference dates cease on termination of a contract or cessation of work. This may be the case under s 8(2)(a) if the contract so provides but not otherwise; while s 8(2)(b) provides a starting reference date but not a concluding one. In my opinion, the only non-contractual limit to the occurrence of reference dates is that which in effect flows from the limits in s 13(4): reference dates cannot support the serving of any payment claims outside these limits."
15. The subsequent decisions of the Court of Appeal in Dualcorp Pty Limited v Remo Constructions Pty Ltd (supra) and Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 78 NSWLR 393 do not in my opinion require that a judge at first instance not follow this aspect of the decision in Brodyn Pty Limited t/as Time Cost and Quality v Davenport (supra) (see Allpro Building Services Pty Ltd v C&V Engineering Services [2009] NSWSC 1247 at [8] to [10]; see also Patrick Stevedores Operations No. 2 Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2014] NSWSC 1413 at [29]).
16. Nevertheless, it has been held that for reference dates to arise on the last day of a month pursuant to s 8(2)(b) of the Act, it is necessary that some construction work be undertaken in that month (see, for example, Grid Projects NSW Pty Ltd v Proyalbi Organic Set Plaster Pty Ltd [2012] NSWSC 1571 at [23]-[39]). Even on that basis, a reference date arose in this case on 31 December 2014. It is clear that some construction work was carried out by the first defendant in December 2014.
17. Accordingly, on and from 31 December 2014, the first defendant was a person entitled to a progress payment within the meaning of s 8(1) of the Act (see Southern Han Breakfast Point Pty Limited v Lewence Construction Pty Limited [2015] NSWSC 502 at [30]-[40]). 31 December 2014 was a reference date available to the first defendant to support the service of the payment claim it made on 7 January 2015. In my view it was open to the first defendant to make the claim regardless of whether the claim extended to the work done in December 2014. It was entitled to make a claim for the work done in October and November 2014 for which it had not been paid. The plaintiff's primary contention that the payment claim was invalid is not accepted. The statutory mechanism which depends upon the existence of a valid payment claim was properly engaged. The second defendant did not lack jurisdiction to adjudicate the claim.
18. The remaining issue to consider is the plaintiff's complaint that it was denied procedural fairness by the second defendant. The complaint is based upon that part of the adjudication determination in which the second defendant stated that the plaintiff did not address the first defendant's submission that it was requested to carry out further work on 4 December 2014.
19. I do not think there is any substance to this complaint. As noted earlier, the plaintiff did not explicitly address the first defendant's submission concerning returning to the site on 5 December 2014 at the request of the plaintiff. The plaintiff certainly did not contest the fact that it made a request on 4 December 2014 that the first defendant carry out further work. The second defendant's observation to that effect was soundly based. More importantly, there is nothing to suggest that the second defendant failed to consider any submission made by the plaintiff, or otherwise denied procedural fairness to the plaintiff.
20. On the contrary, the evidence discloses that the adjudicator made considerable efforts, including by calling for further submissions from the parties, to understand the issues raised by the plaintiff concerning the validity of the payment claim. Further, it appears from the adjudication determination that the adjudicator read and considered those submissions in the course of reaching his conclusions.
21. The challenges made by the plaintiff to the validity of the payment claim and the process of adjudication have not been made out. No basis has been shown for the adjudication determination to be declared void or ordered to be quashed. The plaintiff's Summons should be dismissed with 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: 02 July 2015