IN THE COUNTY COURT OF VICTORIA Revised

_{Not Restricted}

AT MELBOURNE CIVIL DIVISION COMMERCIAL LIST BUILDING CASES DIVISION

_{Case No. CI-12-00347}

FINELINE BUILDING PROJECTS PTY LTD Plaintiff

(ACN 119 044 594)

_and

LEXICOM CONSTRUCTIONS PTY LTD (ACN 100 030 902)

Defendant

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^{JUDGE :} HIS HONOUR JUDGE GINNANE

^{WHERE HELD :} Melbourne

^{DATE OF HEARING :} 14 March 2012

^{DATE OF JUDGMENT :} 27 March 2012 (revised)

^{CASE MAY BE CITED AS :} Fineline Building Projects Pty Ltd v Lexicom Constructions Pty Ltd

^{MEDIUM NEUTRAL CITATION :} [2012] VCC 308

REASONS FOR JUDGMENT

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Catchwords: Building and Construction Industry - security of payment - summary judgment – payment claim - whether excluded amount - Building and Construction Industry Security of Payment Act 2002 ss 10B,14 and 16

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APPEARANCES: CounselSolicitors

HIS HONOUR:

1 The plaintiff, Fineline Building Projects Pty Ltd (Fineline) seeks summary judgment pursuant to s.16(2) of the Building and Construction Industry Security of Payments Act 2002 (the Act) against Lexicom Constructions Pty Ltd (Lexicom) in the sum of $148,200.00. In order for the plaintiff to obtain summary judgment, it must prove that the defendant’s defence has no real prospects of success – see s.61 and 63 of the Civil Procedure Act 2010.

2 The authorities suggest that in applying the provisions of the Act, the Court should not adopt a technical approach but look at the purpose for which the legislation was enacted.

3 Under s.16(4) of the Act, if the claimant commences proceeding to recover the unpaid portion of the scheduled amount from the respondent as a debt, judgment in favour of the claimant is not to be given unless the Court is satisfied of the existence of matters, one of which is:

“ that the claimed amount does not include any excluded amount.”

4 Fineline’s application is supported by affidavits of Mr M Hanger, its Chief Executive Officer. Fineline’s case is that it was retained by Lexicom to and did carry out building works in connection with a construction project at Melbourne Central in 2011. The client was Westpac. The contract between the parties was formed on 22 March 2010 upon receipt by Fineline of Lexicom’s purchase order, a purchase order provided for work to the value of $294,950.00 plus GST totalling $324,995.00.

5 Fineline alleges that in addition to carrying out the works during the period March 2011 to May 2011, it carried out variations and additional works that did not form part of its initial quotation on the contract. Mr Hanger states that at a meeting of the offices of Lexicom in Sydney on 1 June 2011, it was agreed that Lexicom would pay Fineline the amount of $161,750.00 including GST for the variations and additional works carried out by Fineline. Following that meeting it served a payment claim for that amount by emailing sent to Mr R Ratalino and Mr M Gray of Lexicom.

6 Lexicom has provided no payment schedule but has paid the sum of $11,550.00 and as I understand it, the amount now claimed is $148,200.00.

7 The defendant’s case is that the claims made by the plaintiff were excluded amounts pursuant to s.10A of the Act and therefore the plaintiff had not served a valid payment claim and the defendant was not liable under the Act. The relevant parts of s10B(1) and (2) of the Act state that:

(1) This section sets out the classes of amounts (excluded amounts) that must not be taken into account in calculating the amount of a progress claim to which a person is entitled under a construction contract.

(2) The excluded amounts are -

(a) any amount that relates to a variation of the construction contract that is not a claimable variation.

8 Section 10A sets out the classes of variations to a construction contract that may be taken into account in calculating the amount of a progress payment to which a person is entitled in respect of that construction contract.

9 Section 10A (2) describes the first class of variation where the parties to the construction contract have agreed on six matters and these are set out in paragraphs (a) to (f).

10 Section 10A (3) describes the second class of 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 –

(i) that the doing of the work or the supply of goods and services constitutes a variation of 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.

11 The defendant contended that it was a term of the contract between Fineline and Lexicom, that in order to issue a valid claim for payment pursuant to the contract, that Fineline’s invoice had to be first approved by Westpac’s consultant.

12 The defendant, by an affidavit of Mr M Gray, who is employed as an estimator, and who attended the meeting of 1 June 2011, denied that there was an agreement by which any variations were authorised. Rather, he swears that variations were discussed on the basis that they were all subject to the prior approval of the client. He states that Mr Hanger of the plaintiff, agreed to that. He also states that it was agreed that the plaintiff would accept all variations approved by the client and would not seek any further payment beyond the amount approved by the client.

13 Mr Gray states that the defendant carries on business mainly in New South Wales and was not familiar with the requirements of the Victorian Act. That argument goes very little distance because there is similar legislation in New South Wales.

14 A further affidavit relied on by the defendant was made by Mr Ratalino, a director of Lexicom, in which he states that Fineline was last on site on or about 10 May 2011, and practical completion occurred on 13 May 2011. He states that the project manager for the job acted on behalf of Westpac, to whom all claims had to be submitted for approval before payment was made. Fineline was advised at the outset that payment of any of the invoices was subject to the prior approval of Westpac’s consultants and Westpac required details of the state of the works before authorising the progress payment. Fineline had worked on other Westpac projects and was familiar with its requirements. This was one of the reasons that Fineline was chosen for the works.

15 Mr Ratalino swears that on 13 May 2011, Fineline submitted a summary of the variations for which it was seeking payment. On 20 May 2011, Lexicom submitted by email to Fineline a list of the agreed variations that required more detail before they could be submitted to Westpac for approval.

16 Between 20 May and 2 June 2011, Lexicom and Fineline exchanged emails about the details of the variations. Lexicom was required to carry out rectification because of defects and incomplete work for the sum of $60,924.38 plus GST.

17 Mr Ratalino stated that the persons attending the meeting of 1 June, in addition to him were, Mr S Hawkins, Lexicom’s foreman, Mr Gray and Mr Hanger. Mr Ratalino states that the purpose of the meeting was to discuss the client variations to the original quotations that had been submitted. He states that he informed Mr Hanger that the variations were too high and had not enough detail, and would first need to be authorised by the client. Mr Ratalino denied that any variations were authorised at the meeting, as the approval for such variations had to come from Westpac. Further details of variations were submitted to Westpac. Variations subsequently approved by Westpac have amounted to $50,701.25. Fineline has failed to submit an invoice for that sum.

18 Lexicom proposed to file a counterclaim against Fineline for an amount exceeding $100,000.00.

19 Mr Ratalino raised a number of other matters that could have been included in the payment schedule, including the argument that the total claims ended up exceeding the amount of the original purchase order.

20 The defendant’s arguments therefore put in issue the payment terms and scope of the variations.

21 The affidavits reveal a dispute as to what happened at the 1 June 2011 meeting. There is some support in Mr Ratalino’s description of the events leading up to the 1 June meeting, for Lexicom’s position that no agreement was made regarding variations on that date.

22 The other argument relied on by the defendant was that there was no satisfactory evidence of who authorised, instructed or agreed to the variations and whether the defendant had any knowledge of the variations now claimed by the plaintiff. The defendant also relied on statements said to have been made by Fineline that it would not seek further payment beyond the amount approved by the client. This was argued to be misleading and deceptive conduct¹.

23 It was also submitted that the plaintiff’s claim was not a good faith claim because it had agreed that it would accept all the variations approved by the claim and that it would not seek further payment beyond the amount approved by the client.

24 The defendant also submitted that merely because work was done did not establish that there was a construction contract.

_{25 The defendant primarily submitted that the relevant category of variation was} the second class and therefore the plaintiff needed to establish that the person for whom the work had been carried out had requested or directed it.

26 The plaintiff submitted that the variations were of the first class of variation because they were performed pursuant to an agreement by the parties. There had been no payment schedule provided so the Court should give judgment unless there was material suggesting that there was no agreement. The affidavits relied on by the defendant were insufficient. So far as the misleading or deceptive conduct argument was concerned, the evidence demonstrated that the defendant had not relied on any statement about the need for Westpac to approve variations. Mr Hanger had sent the payment demand three weeks after the alleged representation and the defendant had not responded indicating its reliance on it.

¹ Reliance was placed on s 52 of the Trade Practices Act 1974, but see now s 18 of the Australian

Consumer Law .

27 The plaintiff has to prove that the defendant’s defence has no real prospects of success.

28 The meaning of s.10A was considered by Vickery J in Seabay Properties Pty Ltd v Galvin Construction Pty Ltd². His Honour stated that the relevant agreement between the parties for the purposes of s.10A(2) had to be in place by the time the payment claim was served; ie on 21 June 2011³.

29 Based on the differing accounts of the meeting of 1 June 2011, the plaintiff has not satisfied the Court that the defendant’s defence has no real prospects of success.

30 The plaintiff has also not proved that the defendant’s defence concerning the requirements of the second class of variations argument has no real prospects of success. The evidence does not establish to the requisite degree that 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. It may be thought likely that such evidence will be forthcoming in view of the fact that work has been carried out. However, those are not matters to be determined on a summary judgment application.

² _{[2011] VSC 183}

³ _{Supra at [53]}

31 I mention briefly the other matters relied on by the defendant. My present view is that any set-off claim, or argument that the plaintiff has claimed more than has been agreed could have been included in a payment schedule. The alleged misleading and deceptive conduct case was based on an alleged representation that Fineline would accept all variations approved by the client and would not seek further payment beyond the amount approved by the client, I do not consider that that statement by itself would provide a basis for resisting summary judgment. Even if it could be shown that it was this was a statement as to the future, and the plaintiff had no reasonable basis for the making of it, it has not been shown how the defendant acted in reliance on that statement to suffer loss or damage. The work had already been carried out at the time the statement was made.

32 I express no concluded view on that argument but indicate that in itself, it would not have provided a ground for resisting summary judgment on the material currently before the Court⁴. Of course, at trial the evidence may be different.

33 There is one other point. The plaintiff submitted in the alternative that it should receive judgment for the sum of $50,701.25 that Westpac has apparently approved. There is good sense in the parties reaching agreement about the payment of that sum. However I do not consider on a summary judgment application, that raised the issues about excluded amounts, that the Court should award judgment for that sum. The plaintiff at the standard required for summary judgment has not established that it is entitled to judgment for that sum under the Act.

34 The plaintiff’s summons is dismissed.

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⁴ See Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238 and [2009] NSWCA