MYKRA PTY LTD v ALL STATE MAINTENANCE PTY LTD
[2014] SADC 149
Decision of His Honour Judge Stretton
27 August 2014
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - PAYMENT CLAIMS
The plaintiff served a ‘payment claim’ on the defendant pursuant to the Building and Construction Industry Security of Payment Act 2009 (SA). Unless the recipient responds with a ‘payment schedule’ setting out what it does and does not dispute, and why, a plaintiff is entitled to summary judgement for the amount of its payment claim. In this way the Act provides a quick and summary process to enable contractors to secure progress payments under building and construction contracts. The defendant responded to the plaintiff’s payment claim by email referring to an earlier schedule it had sent denying aspects of the payment claim and agreeing to make some payment. The issue was whether this response amounted to a valid responding payment schedule.
Held:
1. So long as the defendant’s response sets out what is in dispute, why it is in dispute and how much if any the responder will pay, such that the claimant understands what it would have to dispute in any subsequent determination, it will amount to a valid responding payment schedule.
2. The defendant’s response was brief, abbreviated, and incorporated a previous communication by reference, but it did sufficiently communicate what was in dispute and why, and what the defendant would pay, sufficient to amount in law to a payment schedule.
3. The plaintiff is accordingly not entitled to summary judgement on its payment claim.
Building and Construction Industry Security of Payment Act 2009 s3, referred to.
Consolidated Constructions Pty Ltd v Ettamogah Pub [2004] NSWSC 110; Built Environs Pty Ltd v Tali Engineering Pty Ltd & ORS [2013] SASC 84; Isis Projects v Clarence Street [2004]
NSWSC 714; Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248; Lahey Constructions Pty Ltd v Trident Civil Contracting Pty Ltd [2013] NSWSC 176; Multiplex Constructions Pty Ltd v
Luikens [2003] NSWSC 1140; Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA
391; Nepean Engineering Pty Ltd v Total Process Services Pty Ltd [2005] NSWCA 409; (2005)
64 NSWLR 462; Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd [2009] NSWCA 157, considered.
MYKRA PTY LTD v ALL STATE MAINTENANCE PTY LTD
[2014] SADC 149
The action
1 This is an application for summary judgement by the plaintiff Mykra Pty Ltd pursuant to the Building and Construction Industry Security of Payment Act 2009 (“the Act”).
2 The plaintiff claims that in late 2013 it subcontracted with the defendant All State Maintenance Pty Ltd to carry out construction works at Adelaide Airport. The plaintiff says it undertook that work between September 2013 and January 2014. The plaintiff says that on 31 January 2014 it served a claim for payment under the Act (“the Payment Claim”) on the defendant.
3 The plaintiff claims that as the defendant did not dispute the Payment Claim as required by the Act, the defendant is liable to pay the Payment Claim, and the plaintiff is entitled pursuant to the Act to summary judgement for the amount claimed.
The issue
4 The defendant agrees that the plaintiff issued it with a Payment Claim, but argues that it legitimately disputed the claim pursuant to the Act by serving a “Payment Schedule”, and accordingly the plaintiff is not entitled to summary judgement.
5 The plaintiff agrees it got a response from the defendant but says the response was not a Payment Schedule, and that it therefore remains entitled to summary judgement.
The scheme pursuant to the Building and Construction Industry Security of Payment Act 2009
6 The Act primarily sets up a process for claiming progress payments for building and construction work.
7 The aim of the legislation is to ensure that a person who undertakes to carry out construction work under a construction contract is entitled to receive, and is able to recover, progress payments in relation to their work, and may do so regardless of whether the contract makes provision for progress payments.
8 The Act does this by providing that a person can make a progress claim whether or not their contract allows it, requires that the claim be paid to the extent it is not disputed, and provides for a speedy method of administrative adjudication of any disputed amount.
The statutory criteria
9 There are statutory criteria for both the making of a Payment Claim and responding with a Payment Schedule.
10 Section 13 provides that a person who claims to be entitled to a progress payment may serve a Payment Claim on the person who, under the contract concerned, is or may be liable to make the payment. A payment claim must identify the construction work to which the progress payment relates, must indicate the amount of the progress payment that the claimant claims to be due, and must state that it is made under the Act.
11 Section 14 provides that the person on whom a Payment Claim is served may reply to the claim by providing a “Payment Schedule” to the claimant. A Payment Schedule must identify the Payment Claim to which it relates and must indicate the amount of the payment if any that the respondent proposes to make. If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and if it is less because the respondent is withholding payment for any reason the schedule must articulate the respondent's reasons for withholding payment.
12 There is a bite to this, in that if the respondent does not respond within 15 business days with a Payment Schedule disputing the claim, then the respondent becomes liable for the sum claimed as a judgement debt registrable in any court of competent jurisdiction.
13 In such case, the judgement sum cannot be disputed, whether or not the work has even been done. The defendant can still litigate over the matter, but must do so in separate proceedings, and in the meantime must pay the progress claim.
The relationship between a “Payment Claim” and a “Payment Schedule”
14 As mentioned, the Act provides that a Payment Schedule must identify the claim to which it relates, indicate what the respondent proposes to actually pay, say why that amount is less, and specify the reasons for what is being withheld.
15 There is mirror legislation in other states and consequently there is considerable authority on what a Payment Claim and a responding Payment Schedule must contain.
16 While the defendant criticised the brief and very general nature of the Payment Claim in this matter, it conceded the plaintiff had served a Payment Claim. As the issue is whether the defendant’s response amounted to a Payment Schedule, I will primarily examine what principles relevant to that issue may be distilled from the legislation.
17 Whether documents amount to a Payment Claim or a Payment Schedule is an objective test. It does not depend on what the parties may have thought at the time.
18 The content and the particularity of the Payment Claim has some relevance to the required contents of a responding Payment Schedule, as the Payment Claim sets the parameters of what is being claimed, and it is the document the content of which must be meaningfully responded to.
The contents of a “Payment Claim”
19 It is clear that a Payment Claim must be clear enough to enable the recipient to ascertain with sufficient certainty the basis of the claim so as to be able to provide a meaningful Payment Schedule in response.
20 The test is an objective one; it must be clear from the terms of the Payment Claim, albeit read in the relevant building industry context, that it contains the required statutory information.
21 It must identify with sufficient certainty the work to which the claim relates, so that the recipient will be able to properly reply. It should put the recipient in a position where he is able to decide whether to accept or reject the claim and if he rejects the claimed amount he is meaningfully able to respond appropriately in a Payment Schedule.
22 In Isis Projects v Clarence Street , McDougall J considered the required particularity of a Payment Claim, and said:
In principle, I think, the requirement … that a payment claim must identify the construction work to which the progress payment relates is capable of being satisfied where:
(1) The payment claim gives an item reference which, in the absence of evidence to the contrary, is to be taken as referring to the contractual or other identification of the work;
(2) That reference is supplemented by a single line item description of the work;
(3) Particulars are given of the amount previously completed and claimed and the amount now said to be complete;
(4) There is a summary that pulls all the details together and states the amount claimed.
The contents of a “Payment Schedule”
23 A Payment Schedule needs to respond to the Payment Claim, setting out what is in dispute and why, and how much if any the responder will pay.
24 I extract the following principles from the authorities.
• A Payment Schedule should enable the claimant to understand what it will have to contest in any adjudication and hence enable the claimant to make a meaningful decision whether or not to pursue a claim for the disputed amount.
• A Payment Schedule will need to have sufficient particularity to apprise the parties of the real areas in dispute.
• A Payment Schedule does not need to be as detailed as pleadings
• A Payment Schedule can be in an abbreviated form, so long as that is sufficient to identify the areas of dispute.
• A Payment Schedule can refer to and adopt previous communications, and incorporate material by reference, if that is sufficient to sufficiently identify the areas of dispute.
• Cryptic or vague responses may however not be sufficient to identify the real areas of dispute.
25 It is clear therefore that a Payment Schedule will be adequate if, in whatever form it takes, whether it be brief or abbreviated, including by reference to other materials or communications, on an objective analysis it identifies the areas of dispute sufficient for the recipient to make a meaningful decision whether to contest the disputed amount.
The evidence
26 Rules of Court provide that matters such as these may proceed on affidavit. That has occurred on this occasion with the consent of both parties. I have had regard to, without repeating here, all the affidavits read in the matter.
27 No oral evidence was called and no application was made to cross examine any deponent as to their affidavit.
28 The document alleged by the defendant to comprise its Payment Schedule was tendered separately.
The contract
29 The contract between the parties was effected by correspondence. It comprised a detailed quote by the plaintiff dated 16 September 2013 and emailed to the defendant on that day which set out an itemised scope of work over a number of locations in the defendant’s premises. It related to the installation and removal of electrical equipment, fittings and wiring.
30 After further email negotiations that day, the detailed quote was accepted with a revised price of $98,000. In response, the defendant raised a purchase order to the plaintiff, incorporating on its face a range of other documents not before me, including for example “drawings”, which I assume are electrical plans. That purchase order is dated 27 September 2013 and is for $98,000 plus GST.
31 There is another purchase order dated 4 October 2013 for what appear to be supplementary works to the electrical installation work, involving demolition, removal, disposal and replacement of walls, bulkheads and joinery. That purchase order is for $47,500 plus GST.
The Payment Claim
32 On 30 January 2014 the plaintiff served three invoices on the defendant totalling $38,093, $55,944.86 and $39,133, plus GST. Each set out in very brief terms what it was for, being “Arrivals works as quoted”, “Electrical works as quoted”, and “Departures works as quoted”. There were additions for variations, and credit given for specified incomplete works. The documents said to support the variations were included.
The claimed “Payment Schedule”
33 From 28 January 2014 email correspondence passed between the parties concerning outstanding monies, with the plaintiff seeking payment of accounts presumably earlier served, and the defendant raising issues with the quality and adequacy of the work performed.
34 At 12.02pm on 31 January 2014 the defendant sent a schedule with a covering email to the plaintiff, indicating;
“James, Geraldine
Attached is the adjusted contract rate based on works completed, I have applied generous rates to works completed. Please review and reissue invoices. I will find out our payment amount from client this afternoon and advise payments.
Regards
Glenn Ryeland
Senior Project Manager
All State”
35 The attached spreadsheet sets out details of the identified quoted items to the value of $91,500, and then appears to set out in brief form a list of items described as “Revised Contract Figures” under which is set out, in relation to itemised contract items, the response of the defendant and why it is proposing, by way of a proposed revised contract, to pay significantly less. Some items assert that what was done was worth less than contracted for by citing a proposed hourly rate resulting in a lower figure, some items relate to ‘waste’. Some items just indicate the defendant is not paying anything. Other items specify that the contracted works were not carried out.
36 It is a somewhat cryptic document, expressed in a rudimentary, shorthand manner. It is badly drawn, and there are few identifiably complete sentences in it. Also, rather than saying that reduced payment is proposed for poor value, or inadequate or non-performed work, it somewhat strangely proposes a new contract figure.
37 It is nonetheless a document identifying in a crude way the work within the Payment Claims to which it relates, and purporting to set out exactly what it proposes to pay in relation to that part of the plaintiff’s work. The reasons given are sparse and illiterately expressed, however they are supplemented to some degree by the email correspondence that passed between the parties.
38 Some of the items are unsatisfactory, in that in relation to some items the schedule does not set out why it proposes not to pay, however it identifies those items, and overall it gives a basic idea of why it is not going to pay the majority of items.
39 Of quoted items totalling $91,500, primarily to do with hoarding, demolition, new walls and bulkheads and ceiling works, it proposes payment of a revised sum of $40,676.
40 In response to the emails and the schedule, the plaintiffs revised their existing accounts and at 12.10 on 31 January 2014 issued the formal Payment Claims now before the Court. From the respective parties’ copies of this email, it was sent at 12.10 Adelaide time, which is 12.40pm NSW time. All State emails were sent from Emu Plains NSW. It is agreed this amounts to a Payment Claim.
41 At 1.27pm (NSW time) the defendant responded, and given the significance of the response to the central issue of whether the defendant responded to the Payment Claim with a Payment Schedule, I set out that document in full:
Subject : MY 14.30 AA Duty Free I OUTSTANDING FUNDS I
Will
Thanks for the response,
The schedule I sent was fair rates for works completed, not rectifications, these were set by myself in the first place as I was unable to eve (sic) get a quote from Mykra despite many requests.
As far as the plasterers are concerned I was personally there on site on at least 3 nights where they did not show or send (sic) 2 guys instead of promised, this was discussed regularly with James, I would like to reiterate that there (sic) performance was appalling.
If there was any racist remarks or issues this would be very concerning to us at Allstates (sic) and would be more than happy too (sic) pursue these issues as it is unacceptable.
With the hoardings and demolition this was also an issue with labour as constantly asked for 4 persons and it was usually only Pat and a labourer, your records clearly show this, we pulled out the hoardings at the end of each job as well,
The painter was also unreliable and his work was of poor quality, he did however complete some works in Departures which is reflected in the schedule,
In regards to supervision it was the main reason we engaged Mykra to carry out the building works as you sold yourselves as the contractor that carries out most of the work in Adelaide Airport, supervision of trades was always on the table and in fact one of your selling points, please show me otherwise
The latest claim is rejected, please adjust to the schedule issued today.
Regards
Glenn Ryland
42 Several things may be observed about this document. It acknowledges and identifies the claim, ie the ‘response’ which put the plaintiff’s position and attached the Payment Claims. It discusses several issues in detail, rejects the ‘latest claim’ and conveys that the defendant stands by ‘the schedule issued today’, earlier discussed.
43 In the final analysis, the scheme of the Act and the effect of the authorities is that the response must effectively dispute any Payment Claim and indicate why and by how much, so that the claimant may assess whether it joins issue or not. It is legitimate for a Payment Schedule to do so by reference to other materials, and indeed I see no difference in principle why the response cannot identify a schedule sent earlier in the day as part or all of a Payment Schedule response.
44 Whilst it is far from a perfectly drafted response, and is relatively brief, abbreviated and in short form, in my view it does sufficiently articulate the areas of disputed payment, and why, so as to amount to a Payment Schedule pursuant to the Act.
Conclusion
45 For the reasons above, I conclude that while the plaintiff did serve a valid Payment Claim on the defendant pursuant to the Act, the defendant’s reply whilst far from perfect, was sufficient to amount to a Payment Schedule, such that the plaintiff is not entitled to summary judgement on the basis that the defendant did not dispute the payment as required by the Act.
46 The application for summary judgement is dismissed.