In this case the reference date under the contract was the 28th day of each month, and there was no contractual entitlement to make a progress claim earlier.
28 Secondly, it was submitted that as a precondition to being entitled to serve a payment claim the claimant must be, in the words of s 13(1), "entitled to a progress payment under a construction contract". Reliance was placed upon the process under cl 42.1 of the contract which follows delivery by the Contractor of a claim for payment whereby liability of the principal for payment is established. This process obliges the Superintendent to assess the claim within 14 days and to issue a payment certificate stating the amount of payment to be made. It also provides that within 28 days of receipt of a claim for payment, or within 14 days of issuing a payment certificate, (whichever is the earlier) the principal is obliged to pay an amount not less than that shown on the payment certificate, or if no certificate is issued, the amount of the claim.
29 It was submitted that under the contract no obligation to pay arises until the expiry of the relevant time period. In this case, the time for issuing the payment certificate expired on 3 January 2003 absent which the Plaintiff became entitled to payment upon expiry of the period ending 17 January 2003. Thus it was put that as at 20 December 2002 under the contract the Plaintiff was not entitled to payment of progress payment 20, and the Defendant was not liable to pay it. In other words, until the process by either certification or lapse of time had taken place the amount payable would not be established.
30 This situation attracted consideration of s 9(a) of the Act which provides:
"9 The amount of a progress payment to which a person is entitled in respect of a construction contract is to be:
(a) The amount calculated in accordance with the terms of the contract, or".
31 It was then submitted that, absent proof of entitlement to an amount calculated in accordance with the terms of the contract, the amount of a progress payment to which a person was entitled would not be established within the meaning of s 9(a). It followed that the requirement of s 13(2)(b) would not be met. It was argued that the expression in this sub-para "the amount of the progress payment that the claimant claims to be due for the construction work done" refers to the amount which has actually been determined under the contract to be due and payable to the claimant. In this case, therefore, there having been no determination as at 20 December 2002, of an amount pursuant to cl 42.1 of the contract, no amount could properly be indicated in the payment claim "to be due" and, consequentially, it was not a valid claim within the meaning of s 13(1).
32 Reference was made to Beckhaus v Brewarrina Council (2002) NSWSC 960 in which the court considered a submission to similar effect, namely that unless a progress payment under a contract is due and payable in accordance with the terms of the contract there is no statutory entitlement under the Act, that is to say the words "person who is entitled to a progress payment under a construction contract" in s 13(1) refers to a contractual entitlement. It was submitted that Macready, AJ, erred in rejecting the submission when he held (para 63) that the opening words of s 13(1) must be a reference to the statutory entitlement created in the previous sections and not to the entitlement under the contract.
33 Thirdly it was submitted that the payment claim did not relate to construction work (or related goods and services) within the meaning of s 13(2)(a).
34 The definition of "construction work" is to be found in s 5 of the Act. It provides:
"(1) In this Act, construction work means any of the following work:
(a) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not),
(b) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, power-lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage or coast protection,
(c) the installation in any building or structure of fittings forming, or to form, part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems,
(d) the external or internal cleaning of buildings and structures, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension,
(e) any operation which forms an integral part of, or is preparatory to or is for rendering complete, work of the kind referred to in paragraph (a), (b) or (c), including:
(i) site clearance, earth-moving, excavation, tunnelling and boring, and
(ii) the laying of foundations, and
(iii) the erection, maintenance or dismantling of scaffolding, and
(iv) the prefabrication of components to form part of any building or structure, whether carried out on-site or off-site, and
(v) site restoration, landscaping and the provision of roadways and other access works,
(f) the painting or decorating of the internal or external surfaces of any building or structure,
(g) any other work of a kind prescribed by the regulations for the purposes of this subsection.
(2) Despite subsection (1), construction work does not include any of the following work:
(a) the drilling for, or extraction of, oil or natural gas,
(b) the extraction (whether by underground or surface working) of minerals, including tunnelling or boring, or constructing underground works, for that purpose,
(c) any other work of a kind prescribed by the regulations for the purposes of this subsection."
35 The definition of "related goods and services" is in s 6 which provides:
"(1) In this Act, related goods and services , in relation to construction work, means any of the following goods and services:
(a) goods of the following kind:
(i) materials and components to form part of any building, structure or work arising from construction work,
(ii) plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work,
(b) services of the following kind:
(i) the provision of labour to carry out construction work,
(ii) architectural, design, surveying or quantity surveying services in relation to construction work,
(iii) building, engineering, interior or exterior decoration or landscape advisory services in relation to construction work,
(c) goods and services of a kind prescribed by the regulations for the purposes of this subsection.
(2) Despite subsection (1), related goods and services does not include any goods or services of a kind prescribed by the regulations for the purposes of this subsection".
36 It was submitted that the payment claim includes items which are outside the definitions thereby rendering it invalid as a claim within the statute.
37 These items are part of claimed variations in the total sum of $13,607,059.00 (Exhibit A p 247), details of which are at Exhibit A pp 251-264. The Schedule (p 264) discloses "item LTR00922" described as "EOT Consolidated Claim (EOT, 19A, 25, 26, 26A and 26B only)" for the sum of $3,140,022.00. This is a consolidation of extension of time claims previously made by the Contractor. Also disclosed is item LTR00928 described as "Special measures claim" for the sum of $1,863,799.00. The last item appears as LTR01032 described as "Further Entitlements claim" for the sum of $3,000,000.00. Reference was made to the letter dated 28 November 2002 from the Plaintiff to the Superintendent (Exhibit A p 264A) in which items LTR00922 and LTR00928 were referred to.
38 It was submitted that these claims, on their face, could not be said to relate to "construction work" or to be "related goods and services" as those terms are defined in ss 5 and 6 respectively.
39 In particular it was submitted that a progress payment made in respect of an extension of time claim cannot constitute a payment that relates to construction work as required by s 13(2)(a) of the Act. It was put that the introductory words to s 5 namely "… construction work means any of the following work …" shows that physical work is contemplated as fundamental to an entitlement to a payment claim. Consequential loss occasioned by delay to the progress of the works under the contract is in a substantially different category.
40 As to the items which include delay or disruption costs, reference was made to cl 36 of the contract which provides:
"36 Where the Contractor has been granted an extension of time under Clause 35.5 for any delay or disruption caused by any of the events referred to in Clause 35.5(b)(i), the Principal shall pay to the Contractor such extra costs as are necessarily incurred by the Contractor by reason of the delay.
Where the Contractor has been granted an extension of time under Clause 35.5 for any delay caused by any other event for which payment of extra costs for delay or disruption is provided for in Annexure Part A or elsewhere in the Contract, the Principal shall pay to the Contractor such extra costs as are necessarily incurred by the Contractor by reason of the delay.
Nothing in this Clause 36 shall -
(a) oblige the Principal to pay extra costs for delay or disruption which have already been included in the value of a variation or any other payment under the Contract; or
(b) limit the Principal's liability for damages for breach of contract".
41 It was submitted that the precondition to the valuation of such a claim was the grant of an extension of time under cl 35.5 of the contract which had not been made in respect of the claims to which the items related. It was therefore submitted that to the extent that the payment claim sued upon includes items for delay or disruption costs for which an extension of time has not been granted the Plaintiff had failed to establish its entitlement to a progress payment as required by s 13(1).
42 Fourthly, it was submitted that the contract, being a lump sum contract pursuant to which the Plaintiff agreed to construct the project for the sum of $26,618,856.00 inclusive of GST, was a contract to which the Act does not apply. Reliance was placed upon s 7(2)(c) which provides:
"7(2) This Act does not apply to:
…
(c) a construction contract under which it is agreed that the consideration payable for construction work carried out under the contract, or for related goods and services supplied under the contract, is to be calculated otherwise than by reference to the value of the work carried out or the value of the goods and services supplied".
43 It was put that the consideration payable for the work carried out under the contract in this case was by reason of the covenant in the contract as set out para 10 above. In such circumstances it cannot be said that the consideration payable should be understood to have been calculated by reference to the value of the work carried out or the value of the goods and services supplied.
44 Finally, the Defendant submitted that summary judgment should be refused having regard to the allegations raised in its Cross-Claim that the Plaintiff's conduct in serving the payment claim in the form therein pleaded was misleading and deceptive within the meaning of s 52 of the Trade Practices Act 1974 (Cth) para 45.
45 As I understood the submission, it was that the circumstances of the service of Progress Claim No. 20 (Exhibit A pp 224-245) with service of the payment claim (Exhibit A pp 246-266) when considered with the contents of the covering letters for each claim (Exhibit A p 224 and 246 respectively) and the placement of the statement "This Claim is made under the Building and Construction Industry Security of Payment Act 1999" on the document (Exhibit A p 247) found the inference that the Plaintiff intended to mislead and deceive the Defendant by concealing that the payment claim was made under the statute. It was this conduct of the Plaintiff in deploying both sets of documents at the same time that was said to be misleading and deceptive.
46 There was no evidence before the court apart from the document. It was submitted that this evidence was sufficient to establish circumstances which gave rise to serious triable issues.
The December payment claim
47 There was evidence relevant to the question as to the time for making the payment claim under the contract for the month of December 2002. The Plaintiff submitted that this evidence established that the parties had agreed that the claim for that month should be made on 20 December instead of 28 December 2002 as provided under the contract.
48 The evidence was in the affidavit of Mr Paul William Barber, a director of the Defendant, sworn 28 February 2003. It contained paragraph 21(d) which stated:
"21 Having reviewed the letter dated 20 December 2002, I say that, had I seen the letter and its enclosure at any time prior to 24 January 2003, I would:
(d) remained cognisant of the arrangement for early lodgment of progress claim 20 to which I refer above, and would therefore have regarded the letter dated 20 December 2002 as having been submitted by WCG pursuant to and consistent with that arrangement".
49 There was also the evidence in the affidavit of Jacques Yvan Gnany, a project director employed by the Superintendent, sworn 28 February 2003. In paragraph 12 of his affidavit he deposed to a meeting on 5 December 2002 attended by himself, Mr Barber, Mr David Winney (the commercial manager employed by the Plaintiff) and some others at which the timing of the payment of the November 2002 progress claim and the timing of the submission of the Plaintiff's December 2002 progress claim were discussed. On behalf of the Plaintiff the preference was expressed for payment of the November 2002 progress claim before Christmas although earlier than ordinarily would be the case, to enable the Plaintiff to pay its subcontractor's claims before the Christmas shutdown. Either Mr Barber or Mr Gnany informed the Plaintiff that arrangements would be made by the Defendant to meet the Plaintiff's preference.
50 There was also the evidence in the affidavit of Sean Andrew Fry, a quantity surveyor engaged by the Defendant, sworn 28 February 2003. In paragraph 11 he deposed to having had a telephone conversation with Mr Winney in early December 2002 in which the Plaintiff's December progress claim was discussed. He says that Mr Winney stated that he was trying to work out what precedent was set from the Christmas claim last year in relation to when the Plaintiff actually submitted that claim. He requested a copy of the December 2001 progress claim. Mr Fry, having located it, informed Mr Barber that it was dated 20 December 2001 and thereupon sent the first two pages of the December 2001 claim to Mr Winney.
51 The evidence was, unsurprisingly, not challenged. There was no evidence before the court which suggested that the Defendant did not accept the Plaintiff's entitlement to make the payment claim under the contract on 20 December 2002. It seems clear to me from the whole of the evidence, and I so find, that the parties had agreed that the payment claim under cl 42.1 of the contract should be submitted earlier than 28 December 2002 and that the Defendant accepted Progress Claim No. 20 served on 20 December 2002 as made in accordance with the contract. Using the language of s 8(2)(a)(i) of the Act I find that the parties agreed that the date on which the claim for the December progress payment may be made was 20 December 2002. (That the parties to a contract may do so was recognised in Brewarrina Shire Council v Beckhaus Civic Pty Ltd [2003] NSWCA 4 by Ipp JA where he said at para 53:
"53 As the contract was entered into on 3 October 2001, it seems that the first claim for payment was made prematurely. It may be that the parties, by their conduct, accepted that claims for payment should be made at times different to the times specified in cl 42.1, or that the monthly periods were to be calculated in a way that differed from that required by the contract. But there was no evidence to this effect and this does not appear to have been an issue before Macready AJ".
The issues considered
The claim is premature
52 In Beckhaus v Brewarrina Council , Macready, AJ, considered a submission with reference to s 13(1) of the Act that unless a progress payment under a contract is due and payable in accordance with the terms of the contract there is no statutory entitlement under the Act. After detailing relevant provisions of the Act he expressed his conclusions as follows:
"60 The Act obviously endeavours to cover a multitude of different contractual situations. It gives rights to progress payments when the contract is silent and gives remedies for non-payment. One thing the Act does not do is affect the parties' existing contractual rights. See ss 3( 1), 3(4)(a) and 32. The parties cannot contract out of the Act (see s 34) and thus the Act contemplates a dual system. The framework of the Act is to create a statutory system alongside any contractual regime. It does not purport to create a statutory liability by altering the parties' contractual regime. There is only a limited modification in s 12 of some contractual provisions. Unfortunately, the Act uses language, when creating the statutory liabilities, which comes from the contractual scene. This causes confusion and hence the defendant's submission that the words "person who is entitled to a progress payment under a construction contract" in s 13(1) refers to a contractual entitlement.
61 The trigger that commences the process that leads to the statutory rights in s 15(2) is the service of the claim under s 13. That can only be done by a person who "is entitled to a progress payment under a construction contract". The words "progress payment" are a defined term in the Act. It means a payment to which a person is entitled under s 8. That section fixes the time of the "entitlement" given by the section by reference to the contractual dates for making claims or, if there is no contractual provision, for making claims by reference to a four week period. Section 9 deals with the amount of such a statutory progress payment. Importantly, s 9 uses similar words to s 13 in that it refers to "a progress payment to which a person is entitled in respect of a construction contract" and then directs determination of that amount by reference to both contractual amounts or if no contractual amount on the basis of the value of the work done.
62 Section 11 then deals with the due date for payment in respect of "a progress payment under a construction contract". It does it also by reference to contractual due dates and if no such provision then by reference to a two-week period. One thus has a series of sections which create a statutory right to a progress payment by fixing entitlement, the date for making claims, amount of claims and due date for payment of claims. The statutory right to claim is for both situations, namely, where a contract provides for such claims and where it does not.
63 Thus s 13 merely continues on the statutory procedure and the opening words must be a reference to the statutory entitlement created in the previous sections not the contractual entitlement submitted by the defendant. If the defendant's submission were correct it would mean that in respect of contracts which do not provide for progress payments there is no ability to recover the statutory right to progress claims in Division 3. This consequence makes otiose the earlier provisions of the Act and defeats its express object which is to:-
"ensure that any person who carries out construction work (or who supplies related goods and services) under a construction contract is entitled to receive, and is able to recover, specified progress payments in relation to the carrying out of such work and the supplying of such goods and services."
64 In my view the submissions of the defendant are simply not arguable.
65 As under 42.1 the plaintiff is entitled to progress payments there is no reason why he cannot make the statutory claim at the same time as his contractual claim. The statutory claim must comply with Section 13(2). On its face the document appears to do this and there was no submission to the contrary".