SUPREME COURT OF QUEENSLAND

CITATION: McCarthy v State of Queensland [2013] QCA 268

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

(applicant)

THE STATE OF QUEENSLAND through the DIRECTOR GENERAL, DEPARTMENT OF HOUSING AND PUBLIC WORKS

(respondent)

FILE NO/S: Appeal No 4784 of 2013

DC No 75 of 2012

DIVISION: Court of Appeal

PROCEEDING: Application for Leave s 118 DCA (Civil)

ORIGINATING

COURT: District Court at Toowoomba

DELIVERED ON: 20 September 2013

DELIVERED AT: Brisbane

HEARING DATE: 11 September 2013

JUDGES: Muir, Gotterson and Morrison JJA

Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS: 1. Leave to appeal be granted.

2. The appeal be allowed.

3. The orders of the primary judge made on 30 April 2013 and 8 May 2013 dismissing the application and as to costs be set aside.

4. The respondent pay the applicant $272,987 together with interest thereon at the rate of 10 per cent per annum from 19 September 2012.

5. The respondent pay the applicant’s costs of and incidental to the proceedings, including the costs of the appeal on the standard basis.

6. The parties have liberty to file and serve written submissions in relation to the award of interest within five days of today’s date.

CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – PAYMENT CLAIMS – where the applicant and respondent entered into a construction contract – where the applicant made 17 payment claims pursuant to s 17 of the Building and Construction Industry Payments Act 2004 (Qld) (the Act) – where payment claim 17 claimed $272,987 in respect of under-measures on the Bill of Quantities – where the respondent contended that the payment claim contravened s 17(5) of the Act as it was in respect of work previously claimed for and paid in relation to earlier reference dates – where the applicant swore that these matters had not been included in any prior claim – where the respondent failed to serve a payment schedule on the applicant under s 18 of the Act – where s 19 of the Act gave the applicant a prima facie right to judgment for the unpaid amount of its claim if the respondent failed to serve a payment schedule – where the primary judge refused to make a finding as to whether payment claim 17 infringed s 17(5) of the Act and refused the applicant’s application for summary judgment pursuant to r 292 of the Uniform Civil Procedure Rules 1999 (Qld) – whether the payment claim contravened s 17(5) of the Act – whether summary judgment should be granted

Building and Construction Industry Payments Act 2004 (Qld), s 12, s 17, s 18, s 19

District Court of Queensland Act 1967 (Qld), s 118

Uniform Civil Procedure Rules 1999 (Qld), r 292

Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41, cited

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

Miles v Bull [1969] 1 QB 258; [1968] 3 All ER 632, cited

National Australia Bank Ltd v Block [2011] QDC 238, cited

Pickering v McArthur [2005] QCA 294 , cited

Spankie & Ors v James Trowse Constructions Pty Limited [2010] QCA 355 , cited

COUNSEL: C D Coulsen for the applicant

A W Duffy for the respondent

SOLICITORS: Flehr Law for the applicant

Crown Law for the respondent

[1] MUIR JA: Introduction The applicant applies for leave, pursuant to s 118 of the District Court of Queensland Act 1967 (Qld), to appeal against an order of the primary judge dismissing his application for summary judgment under r 292 of the Uniform Civil Procedure Rules 1999 (Qld).

[2] The critical issue in the appeal, should leave be granted, is whether the payment claim purportedly made by the applicant pursuant to s 17 of the Building and Construction Industry Payments Act 2004 (Qld) (the Act), upon which the applicant’s claim in the proceeding was based, contravened the prohibition in s 17(5) of the Act by being a second payment claim in relation to an earlier “reference date”.

[3] The applicant is a commercial and residential builder. He entered into a contract with the respondent for the construction of an apartment complex in Toowoomba.

[4] The applicant made 17 payment claims under the contract and the Act. The first claim that is of particular relevance for present purposes is payment claim 16 which was served on 29 August 2012. It claimed $428,832.80, including GST, in respect of work completed by 30 June 2012. Payment claim 17, the claim upon which the summary judgment application was based, was served on 19 September 2012. It again claimed the $428,832.80 outstanding from payment claim 16 and a further $272,987 made up of:

“Claim for part Bill of Quantities Under Measure as follows and as per attached Details:

Preliminaries 18,361.00 (Based on 7.99%) 18,361.00

Earthworks 142,578.00

Concrete 12,713.00

Formwork 35,538.00

Metalwork (Part Only) 33,468.00

Hard Landscaping (Part Only) 5,512.00

248,170.00

GST 24,817.00

TOTAL CLAIM 17 272,987.00

Account Rendered Claim No.16 428,832.80

TOTAL OUTSTANDING $701,819.80”

[5] The amount claimed in claim 16 was paid prior to the summary judgment and only the sum of $272,987 was in dispute.

[6] Claim 17 was served by the applicant in reliance on s 17(1) of the Act, which provides:

“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 ).”

[7] Under s 18 of the Act, a respondent served with a payment claim may reply to the claim by serving a payment schedule on the claimant containing the prescribed information.

[8] If a payment claim is served by a claimant on a respondent and the respondent does not serve a payment schedule on the claimant within the prescribed time, the respondent “becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates”.

[9] The respondent did not serve a payment schedule on the applicant under s 18 of the Act. That invoked the application of s 19 of the Act under which the claimant “may … recover the unpaid portion of the claimed amount from the respondent, as a debt owing to the claimant, in any court of competent jurisdiction”.

The respondent’s arguments at first instance and the primary judge’s reasons

[10] The respondent contended before the primary judge that the claim was not a valid payment claim under the Act because:

(a) it was not a claim in relation to a reference date under the contract as it was made only three weeks after the making of payment claim 16 and prior to 30 September 2012, which, in accordance with sub-paragraph (b) of the definition of “reference date” in the Act, was the relevant reference date under the contract; and

(b) it contravened s 17(5) of the Act as it was in respect of work previously claimed for and paid in relation to earlier reference dates.

[11] The primary judge found against the respondent on the first of these arguments. There is no challenge to that finding.

[12] The primary judge recorded the applicant’s submissions with respect to the allegation of non-compliance with s 17(5) of the Act as follows:

“[37] The applicant submits that:

(1) the sum of [$272,987.00] 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 [the] subject of any previous payment claim; and

(3) payment claim 17 does not relate to works [the] subject of any previous 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 out and therefore it is immaterial whether the work [the] 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.” (citations omitted)

[13] The primary judge did not resolve the question whether claim 17 infringed s 17(5). In that regard, he observed:

“Although the applicants (sic) 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 … 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.”

[14] His Honour referred to the following observations of Megarry J in Miles v Bull quoted by McGill DCJ in National Australia Bank Ltd v Block :

“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 to be investigated, then I think that those concluding words [‘that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial’] are invoked. There are cases where the plaintiff ought to be put to strict proof of his claim, and exposed to the full investigation possible at a trial; and in such cases it would, in my judgment, be wrong to enter summary judgment for the plaintiff.”

[15] In reliance on the approach identified in the above passage, the primary judge concluded that:

“On the material before me it is my view that this is a matter where the [applicant] ought to be put to strict proof of his claim, and exposed to the full investigation possible at trial … 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.”

Consideration

[16] It is convenient to set out the more relevant provisions of the Act.

“ 12 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.

…

17 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

(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.

…

19 Consequences of not paying claimant if no payment schedule

(1) This section applies if the respondent—

(a) becomes liable to pay the claimed amount to the claimant under section 18 because the respondent failed to serve a payment schedule on the claimant within the time allowed by the section; and

(b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.

(2) The claimant—

(a) may—

(i) recover the unpaid portion of the claimed amount from the respondent, as a debt owing to the claimant, in any court of competent jurisdiction; or

(ii) make an adjudication application under section 21(1)(b) in relation to the payment claim; and

(b) may serve notice on the respondent of the claimant’s intention to suspend, under section 33, carrying out construction work or supplying related goods and services under the construction contract.

(3) A notice under subsection (2)(b) must state that it is made under this Act.

(4) If the claimant starts proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt—

(a) judgement in favour of the claimant is not to be given by a court unless the court is satisfied of the existence of the circumstances referred to in subsection (1); and

(b) the respondent is not, in those proceedings, entitled—

(i) to bring any counterclaim against the claimant; or

(ii) to raise any defence in relation to matters arising under the construction contract.”

[17] Section 17(5) was not infringed. Claim 17 was not served in relation to the reference date of claim 16 or any other preceding claim and the primary judge erred in not making that finding. In so far as claim 17 sought payment of the then unpaid sum claimed in claim 16, it was sanctioned by s 17(6). The balance of claim 17 was for under-measures on the Bill of Quantities “plus an amount for ‘preliminaries’ allowed for in respect of such items”. The appellant swore that these matters had not been included in any prior claim. This evidence was undisputed. The applicant submitted that such a claim is authorised by cls 4.4 and 40.5 of the General Conditions of Contract and the respondent did not assert to the contrary.

[18] The claim in payment claim 17 for the sum of $272,987 is in relation to the reference date of that claim. The fact that the claim, although not previously made, has some relationship to or connection with a previous claim is irrelevant.

[19] The primary judge erred in not resolving this question in the applicant’s favour. The primary judge also erred in failing to have due regard to the scheme of the Act and, in particular, to s 19. Section 19 operates to give a claimant a prima facie right to judgment for the unpaid amount of its claim if the respondent failed to serve a payment schedule on the claimant within the prescribed period and failed to pay the whole or any part of the claimed amount on or before the prescribed date. Significantly, the respondent is unable to rely on any counterclaim or on any “defence in relation to matters arising under the construction contract”.

[20] As the exercise of the primary judge’s discretion miscarried, this Court, being in a position to do so, should itself determine whether summary judgment should be granted. It has not been satisfactorily explained why this Court should not be satisfied that the respondent “has no real prospect of successfully defending all or a part of the [applicant’s] claim” and that “there is no need for a trial”. There is a “high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way”.

[21] The respondent opposed the granting of leave to appeal on grounds that an appeal was not “necessary to correct a substantial injustice to the applicant and there [was no] reasonable argument that there [was] an error to be corrected”. The errors to be corrected are identified above. Plainly, denying the applicant contractor the remedy to which he is prima facie entitled under the Act in respect of a substantial sum of money would constitute a substantial injustice.

Conclusion

[22] For the above reasons, I would order that:

1. Leave to appeal be granted.

2. The appeal be allowed.

3. The orders of the primary judge made on 30 April 2013 and 8 May 2013 dismissing the application and as to costs be set aside.

4. The respondent pay the applicant $272,987 together with interest thereon at the rate of 10 per cent per annum from 19 September 2012.

5. The respondent pay the applicant’s costs of and incidental to the proceedings, including the costs of the appeal on the standard basis.

6. The parties have liberty to file and serve written submissions in relation to the award of interest within five days of today’s date.

[23] GOTTERSON JA: I agree with the orders proposed by Muir JA and with the reasons given by his Honour. I agree also with the comments of Morrison JA.

[24] MORRISON JA: I have had the benefit of reading the reasons of Muir JA. I agree with his Honour’s reasons and would add only the following comments.

[25] Before the primary judge, and again in this Court, the respondent advanced an argument that the items in claim 17 were “for work done and claimed for in relation to earlier reference dates”. The only document referred to was the schedule to claim 16, which set out that the relevant works the subject of that claim were said to have been 100 per cent complete.

[26] However, that submission fails because claim 17 is in respect of under-measures on the basis that the Bill of Quantities did not accurately reflect the true quantities required for the work. Thus when claim 16 referred to areas of work being 100 per cent complete, that was based on the existing Bill of Quantities. By definition under-measures were not in such a claim.

[27] I agree with the orders proposed by Muir JA.