Camporeale Holdings Pty Ltd v Mortimer Construction Pty Ltd & Anor [2015] QSC 211

SUPREME COURT OF QUEENSLAND CITATION: Camporeale Holdings Pty Ltd v Mortimer Construction Pty Ltd & Anor [2015] QSC 211 PARTIES: CAMPOREALE HOLDINGS PTY LTD (ACN 129 353 537) (Applicant) v MORTIMER CONSTRUCTIONS PTY LTD (ACN 123 976 312) (First Respondent) and DEBRA WARDLE (Second Respondent) FILE NO/S: SC 110 of 2015 DIVISION: Trial PROCEEDING: Application ORIGINATING COURT: Supreme Court at Cairns DELIVERED ON: 27 July 2015 DELIVERED AT: Cairns HEARING DATE: 23 April 2015 JUDGE: Henry J ORDERS: 1. The statutory demand is varied by substituting the amount $90,311.58, where it appears, with the amount $46,101.58. 2. The statutory demand is declared to have had effect, as so varied, as from 27 February 2015. 3. The application is otherwise dismissed. 4. I will hear the parties as to costs at 10am on Friday, 7 August 2015. CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where the applicant seeks to set aside a statutory demand for payment of a claim adjudicated under the Building and Construction Industry Payments Act 2004 (Qld) – whether the payment claim was valid – whether the adjudicator had jurisdiction CORPORATIONS – GENERALLY – CORPORATIONS LEGISLATION – where the applicant seeks to set aside a -- 1 of 11 -- 2 statutory demand for payment pursuant to s 459H of the Corporations Act 2001 (Cth) – where the applicant claims there is a genuine dispute and that it has an offsetting claim against the first respondent - whether there is adequate evidence of the offsetting claim Acts Interpretation Act 1954 (Qld) s 32C Building and Construction Industry Payments Act 2004 (Qld) s 17, s 21, s 30, s 31 Corporations Act 2001 (Cth) s 459G, s 459H Alan Conolly & Co v Commercial Indemnity [2005] NSWSC 339, distinguished Ardnas (No 1) Pty Ltd v J Group (Aust) Pty Ltd [2012] NSWSC 805, distinguished Brodyn Pty Ltd v Davenport (2004) NSWCA 394, applied Financial Solutions Australasia Pty Ltd v Predella Pty Ltd (2002) 26 WAR 306, cited Tailored Projects Pty Ltd v Jedfire Pty Ltd (2009) 2 Qd R 171, applied COUNSEL: CJ Ryall for the Applicant Dr MA Jonsson for the First Respondent No appearance for the Second Respondent SOLICITORS: Preston Law for the Applicant B Gillan for the First Respondent No appearance for the Second Respondent Introduction [2] The first respondent performed construction work as a subcontractor for the applicant in a building project at Proserpine State High School. [3] It is common ground the contract for the performance of that work attracted the operation of the Building and Construction Industry Payments Act 2004 (Qld) (“BCIPA”). That Act stipulates a system under which construction contract progress payment claims are to be made and paid. Its practical effect is to mandate the making of progress payments in response to payment claims if the requirements of BCIPA are met. [4] This application relates to such a payment claim, issued to the applicant by the first respondent on 25 September 2014. The claim was not paid. The applicant asserts the claim did not comply with the requirements of BCIPA. [5] The first respondent applied for an adjudication pursuant to s 21 of BCIPA. The adjudicator decided in the first respondent’s favour, concluding the claim for payment was outstanding, along with interest from 31 October 2014. [6] The claim remained unpaid. The first respondent instructed that steps be taken to enforce the adjudication application. This can be done, under ss 30 and 31 of BCIPA, -- 2 of 11 -- 3 by obtaining and serving an adjudication certificate and filing it as a judgment for a debt enforceable in a court of competent jurisdiction. [7] An adjudication certificate was obtained but apparently not served and filed as a judgment. Instead the first respondent issued a creditor’s statutory demand on 27 February 2015 for payment of the debt of $90,311.58 detailed in the adjudication certificate which was relied on by the statutory demand. The demand was not met. [8] By this application the applicant seeks: (1) to set aside the statutory demand; (2) a declaration that the adjudicator’s decision is void or voidable on the basis of a want of jurisdiction;1 (3) to set aside the adjudicator’s decision; (4) to restrain the first respondent from enforcing the decision or alternatively to recover any money paid pursuant to the decision.2 [9] The adjudicator is the second respondent. She has taken no active part in the proceeding and has indicated she will abide the order of the court. The issues [10] The applicant’s first argument is the payment claim was not a valid payment claim within the meaning of BCIPA, meaning the adjudicator had no jurisdiction and her decision is therefore void or at least voidable pursuant to the court’s order.3 [11] If that first argument is correct, the applicant submits the statutory demand ought be set aside pursuant to s 459H Corporations Act 2001 (Cth). That is because the debt the subject of the demand arises from the adjudicator’s decision and were the applicant’s main argument successful there would therefore exist a genuine dispute within the meaning of s 459H. [12] If the applicant’s first argument fails it relies on a second argument, namely that the applicant has an offsetting claim. If correct that would be another basis for the setting aside of the statutory demand pursuant to s 459H. Requirements for a valid payment claim under BCIPA [13] Section 17 of BCIPA relevantly provides: “17 Payment claims … (2) A payment claim – … (b) must state the amount of the progress payment that the claimant claims to be payable (the claimed amount); and 1 The application also sought such a declaration on the basis of a denial of natural justice but the applicant’s counsel did not pursue that basis because the merit of the want of jurisdiction argument was said to be determinative - T1-8 L36. 2 The filed application also sought interim orders but that became academic when it was decided to hear the matter on its merits at the outset. 3 T1-4 LL28-34. -- 3 of 11 -- 4 (c) must state that it is made under this Act. ... (4) A claimant can not serve more than 1 payment claim for each reference date under the construction contract, but may include in any payment claim an amount that has been the subject of a previous payment claim.” [14] The applicant emphasises s 17’s requirements that: (1) the payment claim must state the amount of the progress payment claimed; (2) the payment claim must state that it is made under the Act; (3) a claimant cannot serve more than one payment claim for each reference date under the contract. [15] The reference date4 pursuant to the present contract fell once per month.5 The payment claim [16] The payment claim the subject of this dispute was served by and in the form of an email consisting of a covering email and attachments in portable document format (“pdf”). [17] The single page covering email, excluding the email addresses and graphics, contained the following: “Claim #8 Proserpine High School Thu, Sep 25, 2014 at 4:41 PM Hi Sandra, Attached is Claim #8 for Proserpine High School along with Variations 1-3. Please advise if you require any further documentation 5 attachments annexure E complete.pdf 480K Inv00001419-V1 Pumphouse Ventilation.pdf 34K Inv00001420-V2 Western Walkway.pdf 34K Inv00001421-V3 Handrails.pdf 34K Inv00001422-Claim 8.pdf 34K” [18] One of the five attachments, namely the pdf document described in the covering email as “annexure E complete.pdf 480K”, is not included in evidence before me. Neither party submitted that annexure was relevant or that its absence was of significance. I proceed on that basis. [19] The other four attachments consist of four separate tax invoices from the first respondent to the applicant. Three of them were for variations, namely: 4 A term defined in BCIPA’s Sch 2 dictionary. 5 Affidavit of Mark Luciano Valente Ex P 13. -- 4 of 11 -- 5 (1) “Variation #1 – Pumphouse Ventilation” for a total amount of $4,325.20; (2) “Variation #2 – Western Walkway” for a total amount of $6,316.20; and (3) “Variation #3 – Additional Handrails” for a total amount of $10,024.96. Each variation was described in some greater detail. [20] The fourth invoice for a total amount of $62,722 was for: “Progress claim #8 Handrails complete to 100%” [21] The description of work in each invoice identified it as relating to “The Project at Proserpine State High School”. Each invoice was dated 25 September 2014, as was the covering email. Each of the four invoices was endorsed: “This invoice is issued under the Building and Construction Industry Payment Act 2004” The applicant’s first argument [22] The applicant submits that what was served on 25 September 2014 were four separate payment claims, each of which stated they were made under the Act and each of which stated an amount payable. It submits that is contrary to the requirement a claimant not serve more than one payment claim. [23] The applicant contends the arrival together of invoices under a covering email does not assist the first respondent’s position because the covering email did not identify itself or the whole content of the email as one payment claim, did not state the amount of the progress payment claimed and did not state that it was made under the Act. Discussion [24] It is well settled that because of the mandatory consequences of the BCIPA regime the content of a progress payment claim must strictly comply with the requirements of that statutory regime.6 However, whether a purported claim does satisfy the description of a payment claim is not to be approached from an unduly critical viewpoint and the only concern is whether the content of the purported claim satisfies the statutory description.7 [25] The real issue here is whether compliance ought be assessed in a purely literal sense without regard to the combined effect of multiple documents served together. [26] The importance of considering the totality of the documents served in purported compliance with s 17 was illustrated in Tailored Projects Pty Ltd v Jedfire Pty Ltd.8 There 18 separate invoices, each described as a claim made under the Act, were served attached to a covering document, described as a payment claim under the Act, which 6 See for example FK Gardner & Son Pty Ltd v Dimin Pty Ltd (2007) 1 Qd R 10, 15. 7 Per Chesterman J in Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd & Ors [2007] QSC 333, [20]; cited with approval in Neumann Contractors Pty Ltd v Traspunt No. 5 Pty Ltd [2011] 2 Qd R 114, 122. 8 (2009) 2 Qd R 171. -- 5 of 11 -- 6 made out monetary claims by reference to the attached invoices. Douglas J rejected an argument that this involved the service of more than one payment claim, observing: “That each invoice also bore the words describing it as a claim made under the Act should not lead to the conclusion that the delivery of these documents at the one time amounted to the service of more than one payment claim. To conclude otherwise would require the triumph of form over substance, even in an area where adherence to form and strict compliance with the Act is important. That approach is also consistent with the decision in Alan Conolly & Co v Commercial Indemnity. To use the language of that decision, “the person receiving the payment claim would be immediately aware, on receipt of all documents, that the contractor was claiming the total of the amounts shown in the documents”. That was doubly clear here because of the form of the first document described as a claim under the Act; it was itself a summary of the following documents.”9 [27] The applicant seeks to distinguish that case from the present on the basis that unlike the covering document in Tailored Projects, the covering email here did not state it was a payment claim made under the Act. The applicant argues that the presence of such a statement on each of the invoices does not assist the first respondent’s position and, to the contrary, supports the argument that more than one payment claim has been served, contrary to s 17(4). [28] It will be recalled however that s 17’s prohibition is on the service of more than one payment claim “for each reference date”. The reference date here was monthly. The only evidence of any service of payment claims for the month in question was the act of service of 25 September 2014.10 If that service is properly construed as service of one payment claim there could only have been one service claim for the relevant reference date. [29] The four invoices here were received as one set of documents in the one act of service as attachments to a single covering email. To interpret s 17 as requiring that the covering email here had to explicitly state the attachments formed part of one payment claim would be to ignore the collective state in which they were received and referenced by the covering email. Similarly, to interpret s 17 as requiring the covering email to state that it was made under the Act would be to ignore that each of the invoices stated they were made under the Act. Considered collectively, those invoices and the covering email constituted one payment claim which was stated to be made under the Act. [30] That conclusion is consistent with New South Wales authority. In Alan Conolly & Co v Commercial Indemnity,11 referred to in the above quoted passage of Douglas J, Master Macready concluded three invoices forwarded as part of a single facsimile transmission without any covering letter constituted one payment claim because of the contemporaneous service of the documents. A similar conclusion was reached by 9 Ibid 176 (footnotes omitted). 10 Cf Peter Boyd Enterprises Pty Ltd v QR Concrete Pty Ltd [2012] QDC 324 where the invoices attached had a range of dates and a wide range of invoice numbers, suggesting they were not all issued for the first time as part of the purported progress claim being considered. 11 [2005] NSWSC 339. -- 6 of 11 -- 7 Hammerschlag J in Ardnas (No 1) Pty Ltd v J Group (Aust) Pty Ltd12 where two invoices each stated to have been made under the relevant act were sent under cover of one facsimile. His Honour there concluded: “Viewing the matter as a matter of substance rather than form, only one payment claim was made comprising two amounts each reflected in an invoice of the same date.”13 [31] The applicant sought to distinguish this line of New South Wales authority on the basis that the parallel New South Wales provision, s 13(2) of the Building and Construction Industry Security of Payment Act 1999 (NSW), requires the payment claim “indicate” the amount of the progress payment as distinct from the Queensland provision which requires the payment claim “state” the amount of the progress payment. In the present context there is no material difference between the meaning of “indicate” and “state”. The obvious meaning of both the New South Wales and Queensland provisions is the amount of the progress payment must appear and be identifiable as such within the documents served. [32] The applicant submitted the covering email here should have cited a single total amount claimed. However, it is obvious when the documents are considered together that the amount claimed was the total of the four amounts stated in the invoices. The absence of a statement of the mathematical total of those amounts does not make the statements of the four amounts considered in combination any less a statement of the amount of the progress payment claimed. I am fortified in reaching that conclusion by s 32C of the Acts Interpretation Act 1954 (Qld) which provides that in an act words in the singular include the plural and vice versa. Thus a payment claim which states the amounts of the progress payment claimed to be payable will comply with s 17(2)(b), as long as those amounts are stated as part of one payment claim. [33] When collective consideration is given to the content of all of the documents served it is readily discernible that the combined total of the invoices served was the amount of the progress payment claimed, that what had been served was one payment claim and that it was said to be made under the Act. The documents were served together and it would have been obvious to their recipient that they fell for consideration collectively. When they are considered collectively it can be seen that what was served was one payment claim and that it met the requirements of s 17. [34] The payment claim was a valid payment claim within the meaning of BCIPA. That conclusion is fatal to the applicant’s first argument as to a lack of jurisdiction on the part of the adjudicator. [35] A premise of the applicant’s first argument was that if I concluded the payment claim did not comply with BCIPA, it would automatically follow the adjudicator did not have jurisdiction. There is good reason to doubt the validity of that premise. [36] The adjudicator was obliged by s 25(3)(a) to decide whether she had jurisdiction and she reached reasoned conclusions about the validity of the payment claim grounding that jurisdiction. Given the legislature’s intent that she perform that task, an error she 12 [2012] NSWSC 805. 13 Ibid [11]. -- 7 of 11 -- 8 made in performing it would likely have been “an error within jurisdiction rather than an error going to jurisdiction”.14 [37] The doubtful validity of the applicant’s premise was discussed by Hodgson JA in Brodyn Pty Ltd v Davenport:15 “There is also a question whether this point could in any event lead to a conclusion that the determination was void. If there is a document served by a claimant on a respondent that purports to be a payment claim under the Act, questions as to whether the document complies in all respects with the requirements of the Act are generally, in my opinion, for the adjudicator to decide. Many of these questions can involve doubtful questions of fact and law; and as I have indicated earlier, in my opinion the Legislature has manifested an intention that the existence of a determination should not turn on answers to questions of this kind. However, I do not need to express a final view on this.” As in Brodyn it is likewise unnecessary here to express a final view on the point because my conclusion that the payment claim was a valid payment claim within the meaning of BCIPA dispenses with the first argument. An offsetting claim? [38] The applicant’s second argument is that it has an offsetting claim, which is another basis under s 459H of the Corporations Act to set aside a statutory demand. [39] In summary the applicant asserts an offsetting claim with two components. The first is for the cost of rectification of the respondent’s works. The second component is the amount of liquidated damages the applicant will allegedly be liable to pay the project’s principal because the delay allegedly occasioned by the rectification resulted in the project not being completed on time. [40] It is not disputed an offsetting claim can exist notwithstanding the debt here asserted arises from the adjudication certificate rather than from the contractual dealings grounding the offsetting claim.16 The issue in dispute here is whether there is sufficient evidence before the court to satisfy it that the applicant has an offsetting claim. Evidence of the offsetting claim [41] The totality of the potentially relevant evidence appears in the affidavit of the applicant’s solicitor, Mark Valente. Mr Valente deposes: “ In addition to matters going to the validity of the Decision, I am instructed by Michael Camporeale, director of the Applicant, and I believe it to be true, that the Applicant has a number of claims against the Respondent as set out in the Applicant’s adjudication response (refer Exhibit MLV-02 to this Affidavit).” 14 A distinction discussed by Spigelman CJ in Woolworths Ltd v Pallas Newco Pty Ltd (2004) 61 NSWLR 707, 719-720. 15 (2004) NSWCA 394, [66]. 16 All Type Developments Pty Ltd v Hickey [2010] 2 Qd R 199; also see In the matter of Douglas Aerospace Pty Ltd [2015] NSWSC 167. -- 8 of 11 -- 9 [42] The adjudication response exhibited to Mr Valente’s affidavit is titled “Respondent’s Submissions”. In part 2.4 thereof, headed “Set Off For Defective Works”, the applicant repeated and relied upon paragraphs 5.1 to 5.6 inclusive of the payment schedule which is also exhibited to Mr Valente’s affidavit as an annexure to the adjudication application. [43] Paragraph 5.1 of the payment schedule cited the special condition in the contract between the parties entitling the applicant to set off any claim for defective work against monies payable and purportedly disentitling the first respondent to enforce any award under BCIPA until the claim for defective work has been rectified or, if disputed, resolved. The ensuing paragraphs stated: “5.2 The Claimant carried out parts of the Subcontract Works in an unworkmanlike manner and are defective. 5.3 Details of the defective works have previously been provided by the Respondent to the Claimant. 5.4 The Claimant has failed to rectify the defective work. 5.5 The Respondent estimates that the cost to rectify the defective work will be $100,000.00 which the Respondent sets off against the Claim pursuant to Special Condition 16(b). 5.6 The defective works and delays in the Claimant completing the Subcontract Works caused the Respondent to be approximately 60 days late in completion and handover of the Project. The Respondent is or may be liable for liquidated damages at $850.00 per day pursuant to its Head Contract which the Respondent sets off against the Claim pursuant to Special Condition 16(b).” [44] The above information was enlarged upon in part 2.4 of the adjudication response. This included reference to:  an explanation that the first respondent had insisted on using a cheap rectification method which did not meet the specifications in the contract;  an estimate the rectification would cost $44,210.00 per the annexed statement of Michael Camporeale; and  an assertion the defects and delays had caused a 58 day delay in handover to the principal contractor giving rise to a liability of $49,300 in liquidated damages. [45] The signed though not sworn statement of Michael Camporeale of 15 January 2015 was within the exhibited material. It provided more detailed information about the need for and costs of rectification. Of the exposure to liability for liquidated damages it said: “9. In addition the defective work and the cost to repair the defective work, the Respondent remains potentially liable to the principle contractor for liquidated damages for the delays in hand over of the job due to the delays in rectifying the defective work. The Respondent is liable for liquidated damages at $850.00 per day under the head contract from 10 September 2014. The supervisor informed me recently that the Principal is currently calculating the claim for liquidated damages.” Adequacy of the affidavit in support -- 9 of 11 -- 10 [46] The first respondent submits17 an affidavit supporting an application to set aside a statutory demand must be made by a deponent with direct knowledge of the matters deposed to. However, the approach of the courts18 has not been to so confine the meaning in s 459G of “an affidavit supporting the application”. As was observed by Parker J, with whom Anderson and Scott JJ agreed, in Financial Solutions Australasia Pty Ltd v Predella Pty Ltd,19 there is no settled and universal principle to be satisfied, save for the statutory yardstick that the affidavit support the application, and the precise nature of the application may well influence what this requires. [47] In the present matter the affidavit of Mr Valente exhibited materials showing the existence, nature and substance of the two components of the purported offsetting claim, all of which the applicant would already have been aware of from the adjudication process. The affidavit was not objected to on the basis that its authorship by Mr Valente would unfairly deprive the first respondent of an opportunity to test the real source of its information, Mr Camporeale, in cross-examination. That is unsurprising given the first respondent’s past knowledge of the information the applicant was relying on and that s 459H is concerned with the existence rather than determination of an offsetting claim. Given the nature and extent of the materials exhibited to Mr Valente’s affidavit the fact those materials were not exhibited to an affidavit by their predominant source, Mr Camporeale, did not per se render the affidavit incapable of supporting the application. Adequacy of the evidence [48] The first respondent also submits the evidence was deficient in that it did not go beyond mere assertion and did not show some substantive basis for the offsetting claim. The adjudicator’s reasons show she regarded the materials as deficient in that regard. However, the present exercise is not an adjudication. It is concerned with whether an offsetting claim exists, not a determination of the claim’s merits. As the above review of the exhibited materials demonstrates, the applicant provided some detailed information about the offsetting claim. [49] The exhibited material included information which was sufficiently detailed to identify the existence and basis of an offsetting claim relating to rectification work in the amount of $44,210. That is to say nothing of the merits of that claim but it satisfies me the applicant does have an offsetting claim to that extent. [50] More problematic is the state of the material as to the existence of an offsetting claim in respect of liquidated damages arising from the delay in handover because of the delays in rectifying the defective work. That component of the purported offsetting claim is important. Without it the applicant would not have a large enough offsetting total to justify setting aside the statutory demand. [51] The evidence is silent as to whether the rectification work was the sole cause of delay in completion and thus silent as to whether the quantum of any offsetting claim would necessarily include the entirety of any liquidated damages claimed by the principal. That is not the only problem. The evidence shows in light of the supervisor’s comments earlier this year that the applicant then had good reason to anticipate the 17 Citing Faji (Australia Constructions) Pty Limited v AC Professional Accounting [2009] NSWSC 180. 18 Reviewed for example in Infratel Networks Pty Ltd v Gundry’s Telco & Rigging Pty Ltd [2012] NSWCA 365. 19 (2002) 26 WAR 306 [34]. -- 10 of 11 -- 11 making of such a claim by the principal in the future. Unfortunately there was no more contemporary or certain evidence on this topic by the time of the application. At best it appears from the above circumstances that the principal may claim liquidated damages against the applicant in the future. Until that point is reached can it be said that the applicant has an offsetting claim within the meaning of s 459H? [52] Section 459H defines an offsetting claim as meaning “a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand” (emphasis added). Those words do not specifically require that such a claim has been made, for instance by the filing of a claim by the company or the making of a demand for payment by the company. However, the temporal requirement of the definition is plain. It can hardly be said a company “has” a claim if the factual circumstances grounding the entitlement to make the claim do not yet exist. There is no evidence the principal has even requested the applicant to pay liquidated damages. Nor is there sufficient evidence about the totality of the applicant’s financial relationship with the principal to infer that a claim by the principal for liquidated damages is so inevitable that it ought be regarded as now existing let alone existing in the approximate amount referred to by Mr Camporeale. Therefore I am not satisfied the applicant “has” an offsetting claim against the first respondent in connection with the principal’s entitlement to liquidated damages. [53] It follows I am satisfied the applicant only has an offsetting total within the meaning of s 459H of $44,210.00. That is $46,101.58 short of the $90,311.58 the subject of the first respondent’s statutory demand and thus the application to set aside the statutory demand must fail. However, it so substantially exceeds the statutory minimum as to make this a proper case to exercise the discretion pursuant to s 459H(4) to vary the demand by reducing it to $46,101.58 and declaring it to have had effect as so varied from when it was served, namely from 27 February 2015. Orders [54] My orders will be: 1. The statutory demand is varied by substituting the amount $90,311.58, where it appears, with the amount $46,101.58. 2. The statutory demand is declared to have had effect, as so varied, as from 27 February 2015. 3. The application is otherwise dismissed. 4. I will hear the parties as to costs at 10am on Friday, 7 August 2015. -- 11 of 11 --