ACP Properties (Townsville) Pty Ltd v Rodrigues Construction Group Pty Ltd & Anor [2021] QSC 45 [2021] 11 QLR

SUPREME COURT OF QUEENSLAND CITATION: ACP Properties (Townsville) Pty Ltd v Rodrigues Construction Group Pty Ltd & Anor [2021] QSC 45 PARTIES: ACP PROPERTIES (TOWNSVILLE) PTY LTD ACN 631 282 203 (applicant) v RODRIGUES CONSTRUCTION GROUP PTY LTD ACN 164 580 401 (first respondent) AND WARREN DAVID FISCHER (second respondent) FILE NO/S: 12791 of 2020 DIVISION: Trial PROCEEDING: Hearing ORIGINATING COURT: Supreme Court of Queensland at Brisbane DELIVERED ON: 26 February 2021 (ex tempore) DELIVERED AT: Brisbane HEARING DATE: 26 February 2021 JUDGE: Bradley J ORDERS: THE ORDER OF THE COURT IS THAT: 1. It is declared that the decision of the Second Respondent dated 6 November 2020 and numbered 935267 is void for want of jurisdiction and of no effect. 2. The amount paid into Court by the Applicant pursuant to paragraph 1 of the order of 3 December 2020 (December Order), together with any accretions thereto, be paid out to the Applicant forthwith. 3. The First Respondent pay the Applicant’s costs of the issue reserved in the December Order for separate determination (referred to as the Adjudication Validity Issue) on the standard basis. 4. The December Order is amended to reflect that the order was made by Ryan J and not Crow J. -- 1 of 11 -- 2 CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – PAYMENT CLAIMS – PAYMENT SCHEDULES – where the applicant engaged the first respondent to undertake refurbishment work of a commercial building – where the applicant challenges the validity of an adjudication decision made by the second respondent adjudicator under the Building Industry Fairness (Security of Payment) Act 2017 – whether an invoice issued by the first respondent contained sufficient detail to make it a payment claim within the meaning of the Act – whether two emails from the applicant to the first respondent constituted payment schedules within the meaning of the Act – whether the adjudicator’s failure to recognise either email as a payment schedule is a jurisdictional error that invalidates the adjudication decision, or, whether the error was within jurisdiction and does not invalidate the adjudication decision Building Industry Fairness (Security of Payment) Act 2017, s 68, s 69, s 82, s 88 Heavy Plant Leasing Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2013] QCA 386 KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd & Ors [2019] QSC 178 Melaleuca View Pty Ltd v Sutton Constructions Pty Ltd [2019] QSC 226 Neumann Contractors Pty Ltd v Peet Beachton Syndicate Ltd [2009] QSC 376; [2011] 1 Qd R 17 T & M Buckley Pty Ltd v 57 Moss Rd Pty Ltd [2010] QCA 381; (2011) 27 BCL 280 COUNSEL: N H Ferrett QC and J P Hastie for the applicant B E Codd for the first respondent SOLICITORS: Archibald & Brown for the applicant Rostron Carlyle Rojas Lawyers for the first respondent [1] In this case, the applicant (ACP) challenges the validity of an adjudication decision made by the second respondent (the adjudicator) under the Building Industry Fairness (Security of Payment) Act 2017 (the Act). There are two grounds. [2] Firstly, ACP contends that an invoice and its attached documents issued by the first respondent (RDG) on 4 September 2020 (the RDG Invoice), lacked sufficient detail to make it a payment claim within the meaning of the Act. If the RDG Invoice is not a payment claim, then ACP and RDG are agreed that the adjudicator had no jurisdiction to make the adjudication decision under the Act. -- 2 of 11 -- 3 [3] Secondly, ACP contends the adjudicator failed to recognise two emails from ACP to RDG (the ACP emails) as payment schedules within the meaning of the Act. The emails were sent on 4 and 7 September 2020 respectively. There are competing positions between ACP and RDG about the consequences if one (or both) of the ACP emails was a payment schedule. ACP contends the adjudicator’s failure to recognise either as a payment schedule is a jurisdictional error that invalidates the adjudication decision. RDG contends that, if such an error occurred, it was within jurisdiction and does not invalidate the decision. [4] Appropriately, the adjudicator made no submissions, called no evidence and abides the decision of the court. [5] By an order of 3 December 2020, Ryan J directed that this issue of the validity of the adjudication decision be reserved for separate determination. Background [6] ACP is the owner of the Townsville Transit Centre, a commercial building. It engaged RDG to undertake construction work in the form of refurbishing the building. For the purposes of this application, ACP and RDG are content for the court to assume that this construction work was undertaken pursuant to a building contract. ACP has identified a report from a quantity surveyor dated 13 September 2019 that included a detailed cost estimate and a detailed scope of works for what were then proposed works. RDG invoice [7] On 4 September 2020, RDG sent ACP the link to the RDG Invoice it contends is a payment claim. By the invoice, RDG claimed a total of $237,574.62. Of this amount, $39,150.80 was for items RDG had not previously invoiced to ACP. The balance of $198,423.82 was for items that had been the subject of previous invoices delivered by RDG to ACP. [8] The newly invoiced items were described in this way: Description Quantity Unit Price GST Amount AUD Timesheets/labour on- charged referred to attached spreadsheet – no margin charged 1 $3,805.13 10% $3,805.13 Supplier invoices on-charged 1 $10,871.17 10% $31,786.51 Subtotal $35,591.64 Total GST 10% $3,559.16 Subtotal including GST $39,150.80 [9] The RDG Invoice was accompanied by a series of annexures. These included timesheets for a number of employees, which stated the times the employees had worked. They did not identify the nature or type of work undertaken by the employees during those times. -- 3 of 11 -- 4 [10] RDG also attached a document entitled, “Billable expenses – outstanding”. It listed a number of subcontractors with an amount for each. The list totalled $31,784.51, which was the supplier invoices on-charged included in the invoice. RDG attached supplier invoices from those suppliers included in the list. As might be expected, each of these invoices identified the supplier and the amount of the invoice. Some did not identify the work or materials supplied or when this had occurred or where in the building the construction work was done. [11] The second part of the RDG Invoice sets out the dates, invoice numbers and amounts of invoices RDG had issued to ACP between 1 June and 17 August 2020. As noted, these previously issued invoices total $198,423.82. The RDG Invoice was sent via email link at 5.03 pm on 4 September 2020. The ACP emails [12] At 5.14 pm that same day, Mr Campbell of ACP responded with the first of the relevant emails, which ACP contends was a payment schedule. He wrote: “Hi Natalie I have just had a look at this and appear [sic] there is a gap in understanding. I acknowledge RDG has continued to invoice on a cost plus basis but this was capped at $2.7m +. The additional charges are clearly overruns from your side for which I am not responsible for as the project is now 9 months over. The contract was for $2.7m + GST. The variation is SPNQ in the main which the QS will review but early discussions with the QS is this will be less than $100k as there are pluses and minuses (i.e. windows put in place of doors so the windows get added and the doors get minused). I have paid nearly $2.8m + GST. So broadly speaking I believe I have paid in full there may be amounts go either way but these will be small. Once the SPNQ variations are assessed is the only other charge that needs pulled out is the cost of airfares and hotel as these are separate to contract. Regards, Stephen Campbell / Managing Director” [13] The reference to “SPNQ” might be better understood in light of the covering email which Natalie of RDG forwarded with the link to the RDG Invoice. It read: “Stephen. Please see link below with new invoice. I have included all invoices that have not been reviewed by yourself as Mark mentioned you are getting a quantity surveyor to review. My apologies for not having the SPNQ information as asked by yourself and Mark, as I have had two sick children at home for the last -- 4 of 11 -- 5 two weeks, and I am still awaiting information from Damien Chapman to complete, I hope to have this next week. Again, my apologies, Natalie. [14] After Natalie received Mr Campbell’s 4 September email she responded: “Stephen I completely understand what you are saying however Mark instructed me to send through for your QS. As previously stated I will send through costings for SPNQ this week. Natalie” [15] The second email, which ACP also contends is a payment schedule, was sent at 11.47 pm on 7 September 2020. It was a direct response to the Natalie email set out immediately above. In it, Mr Campbell wrote: “Hi Natalie. Noted. Not sure how relevant for the QS but I will pass as appropriate. However, do note that my review showed these invoices appeared to be for works within scope hence part of the $2.7m+ already paid IN FULL. Whilst I note there were errors made on invoices these are irrelevant given I have paid the cost of contract already. Invoice errors do not push up the cost of the contract as you would appreciate. RDG continued to issue invoices based on Cost plus but having missed the $2.7m + capped price via your internal systems and as a result I am clearly well ahead. You should probably be returning the money paid in advance of works. Hence as previously advised these overruns are at RDG risk which was also confirmed by the QS. I have seen the SPNQ list sent through by Mark earlier today. I have raised that their approvals were to be in writing so I will go digging for approvals as a number of things on the list are not their works but works already covered under the contract to which I have advised Mark. However I will check what I have on record now I have a view of what he considers included. To prevent any argument the QS will be provided the list Mark has sent through and make a determination on each item separately as to whether these were part of the scope or otherwise and if otherwise he will provide a costing based upon the additional works less allowed works, that is the plus and minus. I personally do not see the logic in your trying to apply a costing as Mark and I had agreed (I thought) that the QS would issue the report and costings which I was happy to abide by. Nonetheless I appreciate you have to do as instructed. But I am highlighting that I will not be acting upon anything sent to me until the QS has finalised the report which will also include gap to scope or works left to complete and an early stage defects report. I would also like to state for the record the delays as to instructing the QS have been the result of RDG not issuing they’re considered view until today (I have been requesting since June) and not on my end. Furthermore give my conversation with the -- 5 of 11 -- 6 QS included all of the list of the SPNQ works sent through today I am more than comfortable with my stated position based upon the QS advice that these variations will be sub $100k. Which also happens to be the figure provided to me by Mark at the time, which was the basis of the loan amount for the project $2.7m build + 100k variations = $2.8m financed amount. I would appreciate you splitting out the flights and Marks accommodation for me as there will be extra here I think but small yet as mentioned I am actually well ahead at this point but these will be valid.” [16] ACP did not pay any amount to RDG in respect of the RDG Invoice. [17] On 15 October 2020, RDG applied for an adjudication under the Act. On 29 October 2020 ACP gave RDC and the adjudicator a document described as an adjudication response. [18] On 6 November 2020, the adjudicator delivered the decision. In it, the adjudicator concluded that the RDG Invoice was a valid payment claim for the purposes of the Act and that neither of the ACP emails was a payment schedule for the purposes of the Act. Was there a valid payment claim? [19] The first issue is whether the RDG Invoice was a payment claim. ACP contends that the invoice was not a payment claim because it did not meet the requirement in section 68(1)(a) of the Act that it be a document that “identifies the construction work or related goods and services to which the progress payment relates”.1 [20] In written and oral submissions, counsel for ACP have identified a number of bases upon which they contend that the RDG Invoice contained insufficient detail. I have been taken to many of the attachments to the invoice. The submissions may be considered in this way: (a) First, that the RDG Invoice failed to identify the specific nature or type of work undertaken by the employees, for whom timesheets were attached and an amount was claimed. (b) Secondly, that some of the supplier invoices attached to the RDG Invoice lacked detail as to the work done or the materials supplied. (c) Thirdly, the RDG Invoice and its attachments had insufficient detail as to where within the building, and when in time, the work was undertaken. (d) Fourthly, there was no explanation as to how the work claimed in the RDG Invoice related to the QS report obtained before parties entered into the contract. 1 Section 68(1)(a) provides that a payment claim for a progress payment, is a written document that identifies the construction work or related goods and services to which the progress payment relates. -- 6 of 11 -- 7 (e) Finally, the inclusion of all the previous invoices in this new invoice gave rise to an oppressiveness, as a large amount of material had to be processed in a small amount of time, which ought not to be tolerated by the court. [21] As to the first submission, the inclusion of the timesheets and their relevant amounts in the RDG Invoice was plainly an assertion that the work done by those of its employees at those times, on those days, for those hours, was work on the project. I understand the complaint to be about the extent that the information did not allow ACP to know, with precision, which parts of the project the employees were working on, on each of those days, or during each of those hours. [22] The total sum involved ($3,805.13) is relatively modest in the scale of the project. At this distance, providing the days worked, the employees working and their hours each day, in respect of such a modest amount seems sufficient detail to reasonably identify the basis of the claim and allow ACP to reasonably comprehend and form a judgment as to whether that amount claimed should be paid or should be rejected, in whole or in part, perhaps on the basis that it might be, to some extent, work outside the scope of the contract.2 [23] The second complaint concerns the supplier invoices. In most of the supplier invoices to which I was taken, the supplier identifies the type of work in which they were engaged, and identifies the work, material or services they were supplying and the amount for each of those. It is true that a few supplier invoices are quite scant as to detail. If any is so lacking in detail as to make it insufficient, then the RDG submission, about whether a payment claim is void as a whole when some of the work, goods or services for which payment is claimed is sufficiently identified and some is not and whether that might be dealt with by way of severance, would be of relevance. Because of the view I have formed about other matters in the case, it is unnecessary to go to the level of examining further each of the supplier invoices attached to other invoices attached to the RDG Invoice for the sufficiency of detail it contains. [24] As to the third and fourth grounds of criticism of the RDG Invoice, these proceed on an assumption that, in order to provide sufficient detail to amount to a payment claim, it was necessary for RDG to correlate the work in each supplier invoice, subcontractor’s invoice, and timesheet to an item in the QS report. ACP submitted this was necessary to allow the claim to be reconciled to a specific contractual obligation. I reject that submission. A payment claim must provide sufficient identification of the work for which payment is claimed. The requirements for a payment claim under the Act do not pick up contractual requirements entered into between parties. They do not require a claimant to go to the level of detail which ACP here appears to demand. [25] Finally, the inclusion in the RDG Invoice of all previous invoices, which had been issued but had not been the subject of any earlier payment claim, was not, in my view, oppressive. The work involved in considering and responding to a payment claim is undoubtedly considerable in many cases. For contracts for building work of the order of $2.7 million, like this one, a principal party should ordinarily expect to have to exert itself to monitor, review and consider payment claims against the contract and 2 See: T & M Buckley Pty Ltd v 57 Moss Rd Pty Ltd (2001) 27 BCL 280; [2010] QCA 381 at [31]-[41]. -- 7 of 11 -- 8 against other information it has relevant to the progress, sufficiency, completeness and quality of the work. [26] The short timeframes imposed by the Act call for resources to be available to address these matters when payment claims are made. The fact that ACP had all of these previous invoices over periods preceding the issue of the RDG invoice – some for up to three months - is an additional factor that leads me to conclude that the inclusion of the previous invoices in the RDG Invoice was not oppressive in the sense identified by White J in Neumann Contractors3 and by Brown J in KDV Sport.4 [27] For all of these reasons, I am not persuaded that the invoice issued by RDG was insufficiently detailed to be a payment claim within the meaning of the Act. Were there valid payment schedules? [28] The second question is whether either or both of the emails of 4 and 7 September 2020 was a payment schedule for the purposes of the Act.5 [29] The complaint RDG agitated here today, having been raised before the adjudicator, is that the emails failed to state the amount of the payment, if any, that ACP proposed to make.6 And, if ACP proposed to make a payment of less than the amount claimed in the RDG Invoice, then ACP failed to state why the amount proposed to be paid was less.7 [30] RDG’s submissions on this question proceed on a reading of the emails which I do not consider to be reasonably open. In my view, in each of the emails Mr Campbell made very clear that he considered no amount was payable under the contract in respect of the RDG invoice and that ACP proposed to pay no amount. He explained his reasons for this position in simple terms. He asserted that the contractual arrangement was capped at a specific amount and that ACP had already paid RDG an amount in excess of that cap. [31] The interpretation of the emails is complicated by the references throughout them to two other matters: one is “the SPNQ information” and the other is flights and accommodation. [32] As to the first, RDG urges that the court should interpret the emails on an assumption that the RDG Invoice included claims for a variation to the contract for the “SPNQ”. If that assumption were to be made, then RDG seeks to persuade the court to read the 4 September 2020 email as if it left open the prospect that ACP would pay a further amount to RDG for the SPNQ work. In my view, the assumption is not sufficiently established by the email trail for the court to act upon it. The emails from Natalie tend to show that the SPNQ information was still being assembled at the time the RDG Invoice was sent and that, even after the invoice was sent, it was still being put together. 3 Neumann Contractors Pty Ltd v Peet Beachton Syndicate Ltd [2011] 1 Qd R 17 at [29]. 4 KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd & Ors [2019] QSC 178 at [49]. 5 s 69 6 s 69(b). 7 s 69(c). -- 8 of 11 -- 9 [33] Even if the assumption RDG proposes could be made, the email of 4 September could not be clearer. In it, Mr Campbell says that he has already paid about $100,000 more than the capped price that he asserts applies under the contract for the work. And he observes that his discussions with the quantity surveyor are to the effect that the amount of the SPNQ variation, when it is finally assessed, will be less than $100,000 so that no further amount will be payable from ACP to RDG. [34] As to the cost of airfares and accommodation, in the 4 September email, Mr Campbell asserts that these are “separate to contract”. And, in the 7 September email, he refers to them as “extra”. For RDG, it is asserted that these costs are amounts payable under the contract. I note that the adjudicator appears to have formed the same conclusion. It may well be correct. But the proposals from Mr Campbell to pay these amounts when they are separated out or, to use his words, pulled out, is expressly on the basis that they are not amounts due under the contract but are “separate to contract”. His proposal or offer to pay any amount that might be established for such flight and accommodation costs could not reasonably be read as an assertion that he would pay them under the contract pursuant to the RDG Invoice in a way that conceded them for the purposes of the processes under the Act. [35] In all the circumstances, each of the ACP emails was a payment schedule. The adjudicator’s conclusion to the contrary was in error. Consequences for the adjudicator’s error [36] The adjudicator accepted RDG’s submissions that both emails from Mr Campbell were not payment schedules. As a consequence the adjudicator considered he was obliged not to consider them and not to consider any adjudication response provided by ACP in deciding the adjudication application. In both these respects the adjudicator was in error. Section 88(2)(d) of the Act required the adjudicator in deciding the adjudication application to consider the payment schedules, and the adjudicator also wrongly excluded the adjudication response because of the first erroneous decision. [37] For RDG it was contended that the court could regard these as being errors within the adjudicator’s jurisdiction. As I understood this submission, it was made on the basis that the adjudicator had, in fact, considered the emails for the purpose of deciding whether either was a payment schedule and that his consideration of the emails for that purpose meant that there was compliance with section 88(2)(d): “In deciding an adjudication application, the adjudicator is to consider the following matters only - … (d) the payment schedule, if any, to which the application relates, together with all submissions, including relevant documents, that have been properly made by the respondent in support of the schedule”. [38] It is plain from the adjudicator’s decision that he considered the emails only for the purpose of deciding whether either or both was a payment schedule. Having decided they were not, the adjudicator determined the adjudication application without consideration of the payment schedule documents and, of course, without consideration of an adjudication response. -- 9 of 11 -- 10 [39] The error was one which affected the exercise by the adjudicator of his jurisdiction to determine the adjudication application. I do not accept the submission that the error was one within jurisdiction. It was an error that led the adjudicator to act contrary to the obligations set out in subsection 88(2). The failure to consider the payment schedules in deciding the adjudication application was a jurisdictional error because: “The adjudicator lacked authority to decide an adjudication application, where a payment schedule existed and was relied on by the respondent to the application, other than by reference to that payment schedule.”8 [40] As Brown J explained more recently in Melaleuca View: “Section 88(2) of the Act provides that the adjudicator is to consider, amongst other things, the payment schedule and an adjudication response, unless it is prohibited from being taken into account by the operation of s 82. The determination of whether or not there is a payment schedule as provided for under the Act determines the scope of the adjudicator’s jurisdiction, since its existence or absence determines what the adjudicator may have regard to when making a determination. The language of s 88, which prescribes the “only” matters the adjudicator is to consider in making a decision and excludes consideration of an adjudication response in the absence of a payment schedule having been given in accordance with s 76, supports the contention that the determination of whether or not a document constitutes a “payment schedule” is a jurisdictional fact. That fact is one that must be determined prior to considering the matters provided under s 88(2) of the Act and the making of any decision. While an adjudication can still proceed in the absence of a payment schedule, the scope of the decision-making process that is undertaken by the adjudicator is determined by the presence or absence of a payment schedule. The effect of a finding that no payment schedule has been provided is that the respondent is precluded from making any response in opposition to the claimant before an adjudication is made. Unlike the 2004 Act, there is not a further opportunity to provide a payment schedule after notice has been given of the claimant’s intention to apply for adjudication of the payment claim. The language of s 88 and the legislative scheme whereby a party is precluded from having its adjudication response considered as part of the adjudication support the conclusion that the existence of a payment schedule is a jurisdictional fact. I find that the determination of whether the 19 February email constitutes a payment schedule is a jurisdictional fact.”9 [41] The adjudicator’s failure to consider the payment schedules in deciding the adjudication application, and the adjudicator’s consequential refusal to consider an 8 Heavy Plant Leasing Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2013] QCA 386 at [59] (Muir JA). 9 Melaleuca View Pty Ltd v Sutton Constructions Pty Ltd [2019] 226 at [43]-[44] (footnotes omitted). -- 10 of 11 -- 11 adjudication response, have the consequence that the adjudicator’s decision is void for want of jurisdiction and so is of no effect. -- 11 of 11 --