IN THE COUNTY COURT OF VICTORIA AT MELBOURNE

CIVIL DIVISION

COMMERCIAL LIST BUILDING CASES DIVISION

Revised

Not Restricted

Case No. CI-12-04369

BLUE CONSTRUCTIONS PTY LTD Plaintiff v

ZX GROUP PTY LTD Defendant

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^{JUDGE :} HIS HONOUR JUDGE GINNANE

^{WHERE HELD :} Melbourne

^{DATE OF HEARING :} 28 November 2012

^{DATE OF JUDGMENT :} 28 November 2012 (revised)

^{CASE MAY BE CITED AS :} Blue Constructions Pty Ltd v ZX Group Pty Ltd

^{MEDIUM NEUTRAL CITATION :} [2012] VCC 1879

REASONS FOR JUDGMENT

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BUILDING CONTRACT – default judgment – failure to file a defence – whether arguable defence – identifying terms of construction contract - judgment set aside - Building and Construction Industry Security of Payment Act 2002; County Court Civil Procedure Rules Rule 21.07

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COUNTY COURT OF VICTORIA

250 William Street, Melbourne

HIS HONOUR:

1 The defendant applies to set aside a default judgment entered by the plaintiff against it on 26 October 2012 and the application is made under Rule 21.07 of the County Court Civil Procedure Rules. That default judgment was for the sum of $308,549.58 plus interest and costs. The proceeding had been issued on or about 10 September 2012 and an appearance entered on 19 September

2012. The judgment was in default of filing a defence.

2 The defendant’s solicitor, Mr Alderuccio, made an affidavit in which he states that, having read the Practice Note in the Building Cases Division of the Commercial List and the standard orders of the List, which include provision of a date for the filing of a defence, he formed the view that the date for filing and service of the defendant’s defence would be set at the mention on 12

November 2012. This was the only reason the defence was not filed in the time required by the Rules.

3 That explanation is not a justification for not filing a defence in time and it was not submitted that it provided a justification. But all that the authorities concerning the exercise of the Court’s discretion suggest is required in order to satisfy this initial criteria of an application to set aside a default judgment, is some explanation for the failure to file a defence.

4 While Mr Alderuccio’s affidavit does not justify the failure to file a defence, it provides an explanation for that omission. The defendant did act reasonably promptly to issue the summons that is returnable today.

5 The question then becomes whether the defendant has established that it has an arguable defence to justify setting aside the default judgment. Involved in that question is whether, in the interests of justice, the default judgment should be set aside. The defendant has the onus of establishing those matters.

6 The defendant contended that there was an arguable defence based on the question of what documents comprised the construction contract pursuant to which the plaintiff purported to issue the payment claim which was the basis of its judgment. Related to this was the issue of whether the payment claim had been served in accordance with the requirements of s14 of the Building and Construction Industry Security of Payment Act 2002 (the Act).

7 It is necessary to refer to the statement of claim to describe the basis on which the claim was brought. The plaintiff pleads that on or about 9

September 2007, the plaintiff and the defendant entered into a contract for the plaintiff to carry out building works at the property at 364−372 Lonsdale Street, Melbourne, being the extension and refurbishment of a six level commercial and residential building, Askew House, for a contract price of $5,600,000 plus GST. The contract is particularised as being in writing and as being in a “Trade Contract Agreement” dated 9 September 2007. It is then pleaded that on or about 5 February 2009, the plaintiff and the defendant amended the contract by increasing the scope of the work and the contract price to

$6,950,000 plus GST. It is pleaded that the contract was a construction contract within the meaning of the Act. It is pleaded that the terms of the contract included that the contract price was payable in progress payments, that the plaintiff could submit a claim for progress payments at 21 day intervals and that the defendant would pay the amount of the progress claim within 7 days of receiving the progress claim from the plaintiff. The plaintiff then pleads that on or about 8 March 2011, the plaintiff submitted a claim to the defendant for a progress payment under the contract for the amount of the default judgment, $308,549.58 inclusive of GST.

8 Section 14 of the Act provides that a person to whom that section applies may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. The term “construction contract” means a contract or other arrangement under which one party

undertakes to carry out construction or to supply related goods and services for another person. It is necessary, as part of a claim under the Act, to show a right to the progress payments and that right is dealt with by s9 of the Act. To determine in accordance with s9 when the right to progress payments exists it is necessary to be able to identify the terms of the contract. To do that requires identification of the documents that constitute the contract.

9 Ms Bing Wu made an affidavit in support of the application to set aside the default judgment. She states that on 9 September 2007, the parties entered into two trade contract agreements. The first agreement provided for contracts respectively of $4,100,000 plus GST, and in the second document,

$1,500,000. On 18 December 2008, the defendant and the plaintiff entered into a variation of the trade contract agreements, increasing the price by

$400,000 plus GST to compensate the plaintiff for additional works that the defendant requested be undertaken by it. On 5 February 2009, the parties entered into a second variation agreement to increase the contract price under the trade contract agreement by $500,000 plus GST for similar reasons.

10 Ms Wu then states that on a date unknown to her, the plaintiff delivered to the defendant a copy of a document headed “Trade Contract Agreement” in respect of the Askew House project which provided for a contract sum of

$6,950,000 plus GST. That document is Exhibit 5 to her affidavit.

11 The defendant then alleged that in or about September 2009, there was a third variation increasing the contract price by $450,000 plus GST, again for additional works. It is then alleged that by facsimile letter dated 19 March

2010, the plaintiff sent a copy of a document headed “Trade Contract Agreement” in respect of the Askew House project, which also provided for a contract sum of $6,950,000 plus GST.

12 Ms Wu then refers to a letter sent to Mr Alderuccio by the plaintiff’s solicitors dated 10 June 2011, which attached what was described as a copy of the

relevant Trade Contract Agreement that shows a contract sum of $6,950,000 plus GST. Ms Wu states that the document is a forgery and that the execution page of the alleged Trade Contract Agreement is in fact the execution page of one of the earlier variation agreements. That execution page has a number of signatures dated 5 February 2009, but the signature of the witness to Mr G Kovatch’s signature on behalf of the plaintiff appears to be dated 8 February 2009. The defendant apparently contends that the Trade Contract Agreement signed on 5 February 2009 was a variation increasing the price by $500,000 plus GST, rather than a document that, as the plaintiff pleads, fixed the price as $6,950,000, plus GST. The plaintiff has been unable to produce the original of the document attached to its solicitor’s letter of 10

June 2011.

13 The relevance of this forgery argument is that, as previously stated, the plaintiff alleges that the on or around 5 February 2009, the plaintiff and the defendant amended the contract by increasing the scope of the work and the contract price to $6,950,000 plus GST. The plaintiff appears to rely on the document sent with the solicitor’s letter of 10 June 2011 as evidence of the agreement reached on 5 February 2009.

14 The plaintiff’s solicitor swore an affidavit disputing that the document was a forgery and stating that the director of his client, Mr Lu, said that in 2009 the defendant agreed to the trade contract agreement, as amended, for the price of $6,950,000 plus GST and this higher figure was confirmed by the defendant’s bank which was financing the project.

15 However there is a question to be answered as to what the terms of the contract were and whether they included the document a copy of which was sent under cover of the letter dated 10 June 2011.

16 The progress claim on which the plaintiff sues is dated 7 March 2011, and addressed by the plaintiff to the defendant for the total sum, including GST of

$308,549.58. It is pleaded to have been served under the contract. It bears an inscription stating: “This invoice Payment Claims to the Building and Construction Industry Security of Payment Act 2002 (“the SOP Act”)”¹. Mr J Cotton, the solicitor for the plaintiff, in his affidavit states that he: “can advise as follows based on my knowledge and instructions received”. He then states that the payment claim was contained in invoice 54, which was sent by the plaintiff’s office by facsimile to a person named Lisa of the defendant’s office on 8 March 2011 at 9.54. A confirmation of transmission sheet marked “OK”

was received by the plaintiff. The defendant did not serve any payment schedule in reply on the plaintiff.

17 Ms Wu states that by email dated 5 July 2011 from John Lu of the plaintiff, the defendant received a copy of the plaintiff’s tax invoice numbered 54 and dated

4 May 2011, claiming a balance due of $308,549.58. She exhibits that document to her affidavit. The defendant points to the fact that invoice 54, sent on 5 July 2011, is for the same amount and, in many respects, in the same terms as that dated 7 March 2011 exhibited to Mr Cotton’s affidavit and on which the plaintiff sues. Ms Wu states:

“ This was the first time of which I am aware that the Defendant had received a copy of the Plaintiff’s tax invoice 00000054 and given that the invoice is dated 4 May 2011 I cannot see how it could be alleged that it was submitted to the Defendant in March 2011.”

18 Mr Cotton states that any facsimile sent by Mr Lu in July 2011 was the provision of another copy of the same document that had been previously sent.

19 The primary question in determining this application is whether it has been shown that, as at 8 March 2011, the plaintiff did, and was entitled to, submit a progress claim under the contract for $308,549.58.

_{20 I have taken into account that the purposes of the Security of Payment}

¹ This was the exact wording of the inscription

legislation includes to avoid technicality and to enable builders to recover money without being impeded by technical arguments of little merit, whilst preserving the rights of owners, developers and other defendants to separately litigate the quality or alleged defects in the work carried out.

21 I should add that there are cross allegations that the plaintiff and defendant have repudiated the contract and the defendant alleges that there were defects in the work that was performed. Those issues are not central to the question to be decided at this point.

22 In issue is the identification of the terms of the contract under which the progress claim was made and the time at which progress claims could be made. Of course in this application, it is for the defendant to prove that it has an arguable defence to justify setting aside the default judgment.

23 In my opinion, the defendant has satisfied that onus. It has established an arguable question as to what the terms of the construction contract were and whether they entitled the plaintiff to serve the progress claim on 8 March

2011. This involves the question of whether the contract was varied on or around 5 February 2009 as the plaintiff alleges. The issues raised by the defendant about the authenticity of the Trade Contract Document sent on 10

June 2011 raise an arguable question of whether the construction contract took the form that the plaintiff alleges. It follows that it is in the interests of justice to set aside the judgment.

24 I make no finding as to whether a progress claim was served on about 8

March 2011. The evidence exhibited to Mr Cotton’s affidavit suggests that it was. When issues of service are in dispute, however, it is generally undesirable for the Court to make findings without the parties being given the opportunity to cross-examine the relevant persons about that service.

25 However, the issue of service is secondary to the primary issue as to what the terms of the contract were, in what documents were they contained and

what they provided in respect of the service of payment claims.

26 For those reasons I order that the default judgment be set aside.