DISTRICT COURT OF QUEENSLAND

CITATION: McCarthy t/a PJ McCarthy Commercial and Residential Builders v The State of Queensland [2013] QDC 79

PARTIES: PATRICK JOHN MCCARTHY trading as P J MCCARTHY COMMERCIAL AND RESIDENTIAL BUILDERS

(Applicant)

v

THE STATE OF QUEENSLAND through the

DIRECTOR GENERAL DEPARTMENT OF HOUSING

AND PUBLIC WORKS

(Respondent)

FILE NO/S: 75/2012

DIVISION: Civil

PROCEEDING: Applications

ORIGINATING

COURT: District Court of Brisbane

DELIVERED ON: 30 April 2013

DELIVERED AT: Brisbane

HEARING DATE: 26 March 2013

JUDGE: Farr SC DCJ

ORDER: The application is dismissed.

CATCHWORDS: APPLICATION – summary judgment – application dismissed - statutory debt - Building and Construction Industry Payments Act 2004 (QLD) – section 19 – Uniform Civil Procedure Rules 1999 (QLD) – rule 292 – whether payment claim valid – progress payments – where no reference date specified under contract – where contract provided time for making payments was ‘monthly’ – where alleged multiple payment claims made in relation to earlier reference dates - whether a real prospect of defending a claim - whether no need for a trial – where plaintiff ought to be put to strict proof of his claim

COUNSEL: P D Hay for the applicant

A W Duffy for the respondent

SOLICITORS: Flehr Law for the applicant

Crown Law for the respondent

[1] The applicant plaintiff seeks judgment for a statutory debt pursuant to s 19 of the Building and Construction Industry Payments Act 2004 (QLD) (the Act) and/or Rule 292 of the Uniform Civil Procedure Rules 1999 (QLD). The claim is for money the amount of which was the subject of a payment claim purportedly made pursuant to the Act and in respect of which no payment schedule was served by the respondent and no payment made.

[2] The claim is in the amount of $272,987.00 plus interest and costs.

Background

[3] The purported payment claim was made under a contract dated 2 March 2011 for the construction of a multi apartment complex at 177 Jellicoe Street, Toowoomba.The contract is comprised of tender documents, special conditions and the AS2124- 1992 General Conditions.

[4] There is some dispute between the parties as to when the contract works were commenced on-site, although there appears to be little doubt that it was during March of 2011.Practical completion was certified as having being reached as at 28 November 2012.

[5] At all relevant times the applicant was a registered builder and carried on the business of commercial and residential builder.

[6] Between May 2011 and July 2012 the applicant made 15 payment claims under the contract and the Act.Payment claim number 16 was served on 29 August 2012. It claimed a sum of $428,832.80 in respect of work, the last of which was completed by 30 June 2012.

[7] Payment claim 17 is the subject of this application. It was served on 19 September 2012 and it originally claimed a sum of $701,819.80 comprising of:

(1) $272,987.00 for payment claim 17; and

(2) $428,832.80 from payment claim 16 which had not at that time been paid.

[8] Claim 16 has subsequently been paid and the dispute now relates only to the sum of $272,987.00 plus interest.

[9] The respondent admits service of the applicants claim number 17, but has provided no payment schedule in response to that claim.

Liability under the Act

[10] Sections 7 and 8 of the Act express its objects and the means of achieving those objects. In respect of those provisions, Fraser JA has observed:

“The object of BCIPA is expressed in section 7. It is to ensure that a person who undertakes to carry out construction work or to supply related goods and services under a construction contract is ‘entitled to receive’ and ‘able to recover’ progress payments. Section 8 provides that the object is to be achieved by granting an entitlement to progress payments, whether or not that is provided in the contract, and by establishing a procedure that involves the making of a payment claim, response by way of a payment schedule, referral of a disputed or unpaid claim to an adjudicator, and payment of the progress payment decided by the adjudicator.”

[11] By s 19 of the Act a claimant is entitled to judgment for a claimed sum if the Court is satisfied that the respondent:

(1) has become liable under s 18 to pay the claimed amount because the respondent has failed to serve a payment schedule within the allowable time; and

(2) has failed to pay the claimed amount on or before the due date.

[12] Liability therefore arises under s 18 after service of a payment claim when a respondent fails to serve a payment schedule within the time allowed and fails to pay the whole or any part of the claimed amount before the due date.

[13] The validity of a payment claim requires compliance with s 17 of the Act. Section 17 states:

Payment Claims

(1) A person mentioned in section 12 who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment (the respondent).

(2) A payment claim—

a) must identify the construction work or related goods and services to which the progress payment relates; and

b) must state the amount of the progress payment that the claimant claims to be payable (the claimed amount); and

c) must state that it is made under this Act.

(3) The claimed amount may include any amount—

a) that the respondent is liable to pay the claimant under section 33(3); or

b) that is held under the construction contract by the respondent and that the claimant claims is due for release.

(4) A payment claim may be served only within the later of—

a) the period worked out under the construction contract; or

b) the period of 12 months after the construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied.

(5) A claimant can not serve more than 1 payment claim in relation to each reference date under the construction contract.

(6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.

[14] Section 12 states:

Rights to progress payments

From each reference date under a construction contract, a person is entitled to a progress payment if the person has undertaken to carry out construction work, or supply related goods and services, under the contract.

[15] ‘Reference date’ is defined in the schedule of the Act as follows:

reference date, under a construction contract, means –

(a) a date stated in, or worked out under, the contract as the date on which a claim for a progress payment may be made for construction work carried out or undertaken to be carried out, or related goods and services supplied or undertaken to be supplied, under the contract; or

(b) if the contract does not provide for the matter –

(i) the last day of the named month in which the construction work was first carried out, or the related goods and services were first supplied, under the contract; and

(ii) the last day of each later named month.

Issues in dispute

[16] The issue here is the validity of the payment claim as all other relevant matters are un-controversial. The question is whether the applicants’ payment claim satisfies the requirements of the Act.

[17] In asserting the invalidity of the payment claim, the respondent makes two essential contentions, namely:

(1) that the payment claim was served prematurely and is, therefore invalid; and/or

(2) that it claimed amounts that had been claimed in relation to previous reference dates and was, therefore, in breach of s 17(5) of the Act.

Reference date

[18] The contract did not specify any particular reference date. It merely provided that the time for making payments claims is “Monthly”.

[19] The applicant argues that it is well established that the reference to “Monthly”, in such a contract refers to the monthly anniversary of the commencement of the work on-site.

[20] The respondent argues that there is no basis under the contract or otherwise for construing that the date that work commenced on-site is relevant to the determination of the reference date. In support of that argument the respondent has referred to the timing of payment claims 1-15 which were all made in relation to periods concluding on the last day of their respective calendar month. It is submitted that all 15 of those claims were purportedly made as “payment claims” pursuant to the Act and that the reference date in respect of each of those claims is, on the face of each of those claims, the last day of the month.

[21] Of course, if the respondent is correct in that submission then this application must necessarily fail as there would not be a valid “payment claim” pursuant to the Act.

[22] The respondent submits that as no date has been specified in the contract as the date on which a claim for a progress payment may be made, and given that the contract provides that claims be made monthly, the contract does not provide a reference date but rather a frequency or interval. It is submitted, that “Monthly” does not connote that claims may be made at any interval chosen by the contractor as long as they are made in different calendar months. I agree with that submission.It is further submitted that as there is no basis under the contract for ‘working out’ a date, there is therefore no contractual warrant for calculating a date from the date work commenced on-site as opposed to calculating it from the date of the contract, or, from the date when any work (whether on-site or not) commenced.

[23] The respondent submits that as the contract does not state a reference date, nor provide any method for such a reference date to be “worked out under it”, the relevant provision is therefore sub-paragraph (b) of the definition of ‘reference date’ in the Act. It is submitted that pursuant to that provision, the reference date for this contract would fall on the last day of the calendar month. The respondent seeks to support that submission from the fact that it appears that the last day of the calendar month was the date adopted by the applicant in this contract for claims 1 to 15. It is submitted therefore that the applicant had no entitlement to make a payment claim before the relevant reference date and the claim was therefore not valid under the Act.

[24] Despite some initial uncertainty, the applicant’s evidence is that work commenced on-site under the contract on 14 March 2011, by way of a site meeting attended by employees of the applicant.There is no dispute that such meeting took place.

[25] The applicant submits that the reference date under the contract is therefore the 14^thday of each calendar month thereafter. If that is correct, payment claim 17 was not served prior to the reference date.

[26] In Brewarrina Shire Council v Beckhaus Civil Pty Ltdthe contract similarly provided that the contractor shall deliver payment claims to the superintendant “at the times…stated in the Annexure”. Those “times” according to the Annexure were “monthly”. Ipp JA said at [50]:

“The contract does not expressly stipulate the day of the month on which the monthly periods are to commence. In my view, the monthly period commenced on the date upon which Beckhaus commenced work on the site and expired at the end of a calendar month, whereupon the next monthly interval commenced, and so on. On this basis, the first payment claim should have been in respect of one calendar months work, as should the claims for each succeeding month. That, it seems to me, was the intent of the contract. Accordingly, the commencement of each monthly period depends upon the date on which Beckhaus commenced work on the site.”

[27] In State of Queensland v T and M Buckley Pty Ltd, Margaret Wilson J said:

“Times for payment claims not having been inserted in the Annexure to the contract, the time for payment is ‘monthly’ – that is, on the monthly anniversary of the commencement of work.”

Her Honour sighted Brewarinna in support of that conclusion. Later at [42] Her Honour said:

“The statutory reference date is the date worked out under the contract on which a claim for a progress payment may be made. That date is the monthly anniversary of the commencement of the work, regardless of whether the sub-contractor has delivered the statutory declaration required by Clause 43.2 of the subcontract….”

[28] The respondent has submitted that the correct interpretation of Ipp JA’s comment in Brewarrina as cited above, is, that His Honour held that to work out the reference date under the contract one needed to look at the date upon which work on-site commenced and then go to the last day of that particular calendar month. It is submitted that His Honour found that the relevant reference date for that period is the last day of that calendar month and thereafter the last day of each succeeding calendar month. Particular reliance is placed upon His Honours terminology of “calendar month” as opposed to “lunar month” when discussing this issue. Clearly Margaret Wilson J did not give Ipp JA’s comments that interpretation. Neither do I. The last sentence in paragraph 50 of Ipp JA’s judgment makes it perfectly clear that each month’s anniversary of the date of commencement of work on-site was the relevant reference date:

“Accordingly, the commencement of each monthly period depends upon the date on which Beckhaus commenced work on the site”

That statement is unambiguously clear as to His Honours meaning. Furthermore, if His Honour’s intention was to conclude that the reference date in such circumstances was the last date of each calendar month, then he did not need to embark upon the calculation process that he undertook. He simply could have relied upon sub-paragraph (b) of the definition of ‘reference date’ in the Act.

[29] Alternatively, the respondent has submitted that the fact that payment claims numbered 1 to 15 were submitted for periods ending at the end of a calendar month provides a true indication of the proper reference date as interpreted by both parties to the contract throughout the duration of the contract agreement. This submission is made notwithstanding that an uncontroversial rule of contract law, is that interpretation of a contract by reference to subsequent conduct is impermissible.It is submitted that despite that rule, it appears that Ipp JA relied upon subsequent conduct in determining the starting date of calculations as being the date that work commenced on-site. It is further submitted that as that ‘subsequent conduct’ was considered regarding this issue in that matter, then so too would it be permissible to have regard to the apparent reference date that the parties appeared to agree upon in claims 1 - 15. Once again I disagree. In Brewarrina, Ipp JA did no more than refer to the first day that work on-site commenced pursuant to the contract. That did not involve any consideration of the subsequent behaviour of either party to the contract. His Honour, simply by reference to the date of commencement of work on-site, was able to “work out under the contract” the appropriate reference date. That is a distinctly different approach to that which is argued on behalf of the respondent here.

[30] The absence of a specific date in the contract does not result in s 19(b) having automatic application. Section 19(a) provides that a contract may state a specific date or it may be worked out under the contract. In my view, that is precisely what Ipp JA and Margaret Wilson J did in their respective matters.

[31] The respondent has also submitted that as payment claim 17 was submitted within a period of less than one month since the submission of payment claim 16, it was, irrespective of whatever the relevant reference date may have been, invalid. Of course if however, the correct reference date is the 14th of each month then there is no merit to that submission. Claim 16 was made in August and claim 17 on a date after 14 September 2012.

Conclusion: Reference date

[32] Adopting the approach of Ipp JA and Wilson J, I have concluded that the reference date in this matter is the 14th of each month commencing on 14 March 2011. Accordingly, payment claim 17 was not served prior to the reference date and only one payment claim referable to that reference date was served.

Alleged multiple payment claims

[33] The respondent otherwise asserts non-compliance with s 17(5), because:

(1) payment claim 17 is for amounts claimed as “under measures” not by way of progress claims for work done under the contract since the last reference date;

(2) payment claim 17 relates to work that had been claimed for on previous reference dates; and

(3) the applicant was not entitled to serve more than one payment claim in relation to each reference date.

[34] In that regard I have been referred to Simcorp Developments and Constructions Pty Ltd v Gold Coast Titans Property Pty Ltd, where Douglas J said:

“[33] It seems clear that the previous claims made by Simcorp, the subject of the proceedings it now wishes to discontinue, related to work done before earlier reference dates which is the same as work described in claim 13 said to relate to 28 February 2010 as a reference date. Titans’ submission is that this is contrary to s 17(5) of the Act prohibiting the service of more than one payment claim in relation to each reference date under the contract.

[34] Section 17(6), which provides that section 17(5) does not prevent the claim from including in a payment claim an amount that has been the subject of a previous claim, has been interpreted in several decisions of this Court. One view is that s 17(6) is ‘meant to permit the inclusion in a subsequent payment claim made in relation to a different reference date of an amount previously claimed but disallowed, perhaps on the basis that the work was not completed. When completed the work may be included in a subsequent claim though it had been asked for earlier.’ It has also been held that it is not necessary that a claim must include all work done up to that date.

[35] Where, as here, claim 13 relates to all the work done in relation to the reference dates of the earlier claims, the conclusion seems inescapable that service of claim 13 is prohibited by s 17(5) unless Titans is correct in its argument that those claims, or some of them had not been served. That is the issue that Simcorp wishes to abandon by discontinuing its previous proceedings. It is Simcorps position, however, that it had served the earlier claims but merely wishes to avoid protracted problems of proof of those facts. In other words it continues to assert that it has served the previous claims as well as claim 13 in circumstances where claim 13 covers the same work referred to in the earlier claims. It did not seek to argue that it had not served the earlier claims or that claim 13 was not caught by the effect of s 17(5) because of lack of such service. In those circumstances, it is my view that Simcorp should now be precluded from relying on claim 13 on this basis, breach of s 17(5), also. Its rights to commence normal civil proceedings under s 100 of the Act remain.”

[35] The respondent submits that in this case the claims made in claim 17 are of the kind referred to by Douglas J as being not permissible. It is submitted that they relate to work previously claimed for and paid and that the applicant is not seeking to merely include unpaid amounts from previous claims, but to, in effect, have those claims re-valued.

[36] The applicant has submitted that whilst it accepts the terms and effects of s 17(5), it is wrong to contend that the applicant has served more than one payment claim in relation to the reference date of 14 September 2012, or any earlier reference date under the contract. The applicant has argued that this contract involved a Bill of Quantities in which a preliminary assessment of the quantities of certain measurable works such as earth works and concreting was recorded. It is further argued that the Bill of Quantities however is merely a best estimate and is subject to later adjustment to the actual work and quantities required to complete the contract works. The mechanism for such an adjustment was provided for by clause 4.4 of the standard conditions.

[37] The applicant submits that:

(1) the sum of $272,897.00 is for necessary adjustments due to deficiencies in the Bill of Quantities;

(2) while the earlier payment claims reflect that 100% of the measureable work was claimed previously, that was only for those quantities as set out in the original Bill of Quantities. None of the extra work beyond the Bill of Quantities has been subject of any previous payment claim;and

(3) payment claim 17 does not relate to works subject of any previous claim.

[38] The applicant distinguishes the facts here from those in Simcorp because in that case, the subsequent claim related to work that had already been claimed in earlier payment claims.It is submitted that the position here is as that contemplated by Fryberg J in Doolan v Rubikcon (QLD) Pty Ltd, where His Honour said:

“That is not to say that the claim must include all work done up to that date. If something is omitted from a claim, notwithstanding that it could have been claimed on a particular reference date, there is no reason why it cannot be claimed on the next reference date. Likewise, anything further which give rise to reclaim after the first of such reference dates, may also be included in the next claim.”

[39] Furthermore, the applicant submits that there is no relationship between a reference date and the time when work under the contract is carried outand therefore it is immaterial whether the work subject of a claim has been done since the last reference date, or much earlier. It follows, so it is submitted, that by complaining that the payment claim relates to work that was not carried out since the last reference date, the respondent seeks to impose a restriction which is neither stated in the Act nor consistent with the objects of the Act.

[40] The evidence of the applicant is therefore that payment claim 17 does not replicate any previous claim that has been made or paid by the respondent.

[41] I note that Clause 4.4 of the Standard Conditions provides a mechanism for the variation in amounts that can be claimed if the Bill of Quantities is in error.It provides that adjustments to correct the error may be determined in the manner provided by Clause 40.5 for the valuation of variations as if the correction were a variation under Clause 40. It further provides that a Bill of Quantities “shall be deemed to be in error as expressed to the extent that the items and quantities included in it differ from those required for the execution of the Works in accordance with the drawings and specifications referred to in the contract, measured in accordance with the method of measurement evidenced by the contract.”

[42] Clause 40.5 of the General Conditions provides the circumstances under which a variation of this type may be allowed.

Conclusion

[43] One must not lose sight of the fact that this is an application for summary judgment pursuant to Rule 292(2) of the UCPR. It states:

(2) “If the Court is satisfied that:

a) the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and

b) there is no need for a trial of the claim or the part of the claim;

(3) the court may give judgment for the plaintiff against the defendants for all or the part of the plaintiffs claim and may make any other order the Court considers appropriate.”

[44] There is no doubt that when deciding whether to allow a plaintiff to obtain summary judgment, the objective of the rules being to “facilitate the just and expeditious resolution” of the matter in dispute provides a relevant context to the consideration of the issues.In circumstances where a defendant has indicated an intention to contest the plaintiffs claim however, it is a power that should be exercised sparinglyand only where it is clear that there is an absence of a cause of action or defence.

[45] It is a matter of discretion as to whether summary judgment should be granted and the party seeking judgment bears the onusof satisfying the Court that there is “no real prospect of defending” a claim and “there is no need for a trial” of the claim.

[46] The words “real prospect of success” were considered by Lord Woolf MR in Swain v Hillmanand described as follows:

“The words ‘no real prospect of succeeding’ do not need amplification, they speak for themselves. The word ‘real’ distinguishes fanciful prospects of success or… they direct the Court to the need to see whether there is a ‘realistic’ as opposed to a ‘fanciful’ prospect of success.”

[47] As noted by White JA in LCR Mining Group Pty Ltd v Ocean Tyres Pty Ltd:

“this Court has endorsed the approach in Swain v Hillman on a number of occasions”.

[48] In National Australia Bank Ltd v Block, McGill SC DCJ considered the application of the requirement that the Court must also be satisfied that “there is no need for a trial of the claim”. His Honour said:

“If the defendant cannot point to a specific issue which ought to be tried but nevertheless satisfies the Court that there are circumstances that ought be investigated, then I think that those concluding words are invoked. There are cases where the plaintiff ought to be put to strict proof of his claim, and exposed to full investigation possible at a trial; and in such cases it would, in my judgment, be wrong to enter summary judgment for the plaintiff.”

[49] The comments of McGill SC DCJ have application here. On the material before me it is my view that this is a matter where the plaintiff ought to be put to strict proof of his claim, and exposed to the full investigation possible at trial. Although the applicants evidence is that payment claim 17 solely related to permissible variation and adjustment from the amounts stated on the Bill of Quantities, that is a matter about which full and detailed evidence both of the work involved and the manner in which the claimed amounts were calculated should be given. Furthermore, the court would require evidence at a trial to assist in reaching the conclusion sought by the applicant that the work the subject of payment claim 17 did not relate to any work previously claimed. It may well be that such matters can be proved easily but there is no denying that, currently, these are matters hotly disputed by the respondent. In addition, I have received no submissions as to whether the amount sought in payment claim 17 was calculated consistently with the requirements of clause 40.5 of the General Conditions. As these are circumstances that ought be investigated this is not a matter where “there is no need for a trial of the claim”. The plaintiff ought to be put to strict proof of his claim.

[50] Furthermore, s 19(4)(b)(ii) of the Act relevantly provides that judgment in favour of a claimant is not to be given by a court in circumstances where the respondent is entitled to raise any defence in relation to matters arising under the contract. For the reasons detailed above, bearing in mind the fact that the applicant carries the onus of proof on this application, I am not satisfied that the respondent is not entitled to raise such a defence.

Orders

[51] The application is dismissed.