Brimar Electrical Services Pty Ltd v Zi-Argus Australia Pty Ltd [2014] QDC 78

DISTRICT COURT OF QUEENSLAND CITATION: Brimar Electrical Services Pty Ltd v Zi-Argus Australia Pty Ltd [2014] QDC 78 PARTIES: BRIMAR ELECTRICAL SERVICES PTY LTD (ACN 104 143 875) (applicant) v ZI-ARGUS AUSTRALIA PTY LTD (ACN 140 767 335) (respondent) FILE NO/S: 739/2014 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: District Court of Queensland DELIVERED ON: 11 April 2014 DELIVERED AT: Brisbane HEARING DATE: 3 April 2014 JUDGE: R S Jones DCJ ORDER: 1. The application is dismissed; 2. Subject to order 3 the applicant is to pay the respondent’s costs of the application; 3. The applicant has liberty to apply in respect to the question of costs only. CATCHWORDS: Judgment pursuant to s 19 of the Building Construction and Industry Payments Act 2004 – where the applicant claimed to be entitled to a progress payment for work done – where the respondent contends it is not liable for the amount claimed – where the respondent asserts that it served a payment schedule on the applicant which was in accordance with s 18(2) of the Act – where the applicant asserts that it was not and was thereby entitled to the full amount claimed. Building Construction and Industry Payments Act 2004 (Qld) Minimax Fire Fighting Systems Pty Ltd v Bremore -- 1 of 10 -- 2 Engineering (WA) Pty Ltd [2007] QSC 333 Gisley Investments v Williams (2010) QSC 178 COUNSEL: Ms S McNeil for the applicant Mr G Beacham for the respondent SOLICITORS: MacKay’s Solicitors for the applicant Thomson Geer Lawyers for the respondent [1] This proceeding is concerned with an originating application seeking judgment against the respondent for the sum of $258,096.51 pursuant to s 19 of the Building and Construction Industry Payments Act 2004 (the Act) together with interest and costs. For the reasons set out below the orders of the court are: 1. The application is dismissed; 2. Subject to order 3 the applicant is to pay the respondent’s cost of the application; 3. The applicant has liberty to apply in respect to the question of costs only. Background [2] The applicant is a licensed electrical contractor who, on or about 29 June 2012 entered into a contract with the respondent for the supply and installation of electrical services on a project known as the Bio Pharmaceuticals’ Australia project within the precincts of the Princess Alexandra Hospital at Brisbane. Between June 2012 and April 2013 the applicant carried out certain works associated with the project and on 1 July 2013 served on the respondent a payment claim (the Claim). It was not in contest that the claim satisfied the requirements of s 17 of the Act. By way of emails dated 4 July 2013 the respondent contended that it served on the applicant a valid payment schedule (the Schedule) which accorded with the statutory requirements of s 18 of the Act. The applicant contended that the Schedule did not satisfy the requirements of s 18 of the Act and, accordingly, pursuant to s 19 was entitled to payment. [3] Sections 18 and 19 of the Act relevantly provide: “18. Payment Schedules 1. A respondent served with a payment claim may reply to the claim by serving a payment schedule on the claimant. 2. A payment schedule – (a) must identify the payment claim to which it relates; and (b) must state the amount of the payment if any that the respondent proposes to make (the scheduled amount) 3. If the scheduled amount is less than the claimed amount, the schedule must state why the scheduled amount is less and, if it is less because the -- 2 of 10 -- 3 respondent is withholding payment for any reason, the respondent’s reasons for withholding payment …” “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…” [4] Section 19 thereafter provides that, in certain circumstances, a contractor may recover the amount claimed as a debt. Subsection 4 of s 19 provides: “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) judgment in favor 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.” [5] It was uncontroversial that the schedule was within the time prescribed by the Act and that it identified the relevant payment claim. Accordingly the dispute between the parties was limited to whether the schedule stated the amount of the payment which the respondent proposed to make to the applicant in response to its claim (s 18(2)(b)) and, whether in circumstances where the amount proposed to be paid was less than the full amount claimed, the schedule provided sufficient reasons as to why the respondent intended to withhold payment. (Section 18(3)). [6] The legislative intent behind the Act and the approach the courts should take to it was, with respect, concisely summarized by Chesterman J (as he then was) in Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd & Ors1: “[17] Before considering the first question, I think it necessary to remember the purpose of the Act because that purpose will influence the approach one takes to the construction of the 14 December email. As Hodgson JA said in Brodyn Pty Ltd T/as Time Cost and Quality v Davenport (2004) 61 NSW LR 421 at 440-1:” ‘the Act discloses a legislative intention to give an entitlement to progress payments, and to provide a mechanism to ensure that disputes 1 [2007] QSC 333. See also Gisley Investments P/L v Williams & Anor (2010) QSC 178 -- 3 of 10 -- 4 concerning the amount of such payments are resolved with the minimum of delay. The payments themselves are only payments on account of a liability that will be finally determined otherwise… the procedure contemplates a minimum of opportunity for court involvement…’ … [19] In Brodyn Pty Ltd T/as Time Cost and Quality (ACN 001 998 830) v Phillip Davenport & Ors [2003] NSWSC 1019 Einstein J referred to the legislation as: ‘a fast track interim progress payment adjudication vehicle.’ [20] The Act emphasises speed and informality. Accordingly one should not approach the question whether a document satisfies the description of a payment schedule (or payment claim for that matter) from an unduly critical viewpoint. No particular form is required. One is concerned only with whether the content of the document in question satisfies the statutory description. To constitute a payment schedule the applicant’s email of 14 December had to: (i) identify the payment claim to which it related; and (ii) state any amount which the recipient of the payment claim proposed to make in response to it; (iii) importantly, if that amount is less than the amount claimed the payment schedule it must state why it is less. [21] If these three criteria are satisfied the document will be a payment schedule. How they are expressed, with what formality or lack of it, and with what felicity or awkwardness, will not matter. … [27] If the applicant had no objection to paying those amounts the Act required to say so in its payment schedule. The whole purpose of such a document is to identify what amounts are in dispute and why. The delivery of a payment claim and a payment schedule is meant to identify, at an early stage, the parameters of a dispute about payment for the quick and informal adjudication process for which the Act provides. If a builder wishes to take advantage of the Act to dispute the claim it must comply with the provisions and must, relevantly, take the trouble to respond to a payment claim in the manner required by the Act. The process is not difficult. The applicant was required to identify those parts of the claim which it objected to paying and say what the grounds of its objection were.” -- 4 of 10 -- 5 Discussion [7] The amount claimed in the sum of $258,096.49 was made up of a number of invoices:2 Invoice 4130229 - $25,880.26 (Progress Claim 8) Invoice 4130378 - $9,263.26 (Progress Claim 9) Invoice 4130594 - $192,263.48 (Final Claim No1) Invoice 4130112 - $22,102.08 (Progress Claim No1) Invoice 4130377 - $8,587.41 (Final Claim) [8] The email response to the claim comprised of a short narrative together with a number of documents including tax invoices and schedules.3 It relevantly stated: “Dear Mr McGrath We acknowledge receipt of the letter from your solicitor dated 5th June 2013 and your fax dated 30 June 2013. I have discussed this ongoing matter with my managing director Alan Reece who has engaged our solicitors and hence he is copied on this email and will be on all future correspondences [sic]. I may highlight some important series of events here. 1. Project work was done on fixed price and in no correspondences [sic] did we state that this is a do and charge work as you seem to imply. We have not interfered with how you handled your labour force on this job either in the number of electrician [sic] or the hours worked. Hence, we consider your submission of the timesheet to be irrelevant and as such will not be reviewed. (original emphasis) 2. I have attached a spreadsheet with our current position which was in reply to Kane’s email to me on 18th June. As you can see, my reply was sent to Kane on the 27th June after further investigation with our people and consultation with my customer A E Smith. 3. I have also attached a spreadsheet highlighting your invoices and how they correspond to the various claims. Those items highlighted in red are not legitimate claims. The following comments pertain to some of your larger claims. (emphasis added) 4. Invoice 4130594 –‘Overtime Worked Difference – Automation’. This claim is not legitimate as we did not instruct any overtime to be done. Furthermore, as all phases of this project was [sic] done on a fixed price, we had no control over your personnel to execute the project. This claim is not approved. (emphasis added) 2 Affidavit of Mr McGrath at p 102. (See also at pp 138-151) 3 Refer to exhibit AEE-1 of the affidavit of Alana Elliot. -- 5 of 10 -- 6 5. Invoice 4130594 – ‘Supervision Extra Work – Automation’. This claim is not legitimate as all supervision was part of the fixed price. All additional work have [sic] been quoted and where we acknowledge a variation work, we have handled each in isolation and complete in it’s claim. (emphasis added) 6. Invoices 4130112 and 4130377 – Commissioning support. On advise [sic] from Danial Smith (see attached email) we sent our electrician to site for commissioning support. We do however recognise that we utilised some of Brimar’s personnel and the extent of this usage was communicated to you via an email from Romani (see attached). We are approving $10,053.00 of your variation claim and consider this to be generous. 7. From our list of variation claims which have been highlighted in red, these are not legitimate claims as there [sic] were either not done, not caused by Zi-Argus or could have been avoided by better site co-ordination. The site co-ordination was sadly lacking as confirmed by you dismissing …. We do not feel that our interests were handled adequately which Zi-Argus paid for ($28,160.00+GST). (emphasis added) 8. We have also included our counter claims for work not done by Brimar. We did not get a single test document from Brimar or even a statement of readiness. … I urge you to go through our list of approved variations and agree as getting solicitors will serve no one but one that we will undertake in order to protect our rights.” [9] The submission made on behalf of the applicant that the schedule did not satisfy s 18(2)(b) of the Act were set out in Ms McNeil’s, (counsel for the applicant,) written submissions: “29. The payment claim includes a table which contains a number of invoices. Of those invoices referred to, there are 5 invoices which are stated to be unpaid and therefore form the basis of the payment claim. 30. In the email of 4 July the respondent chose to address each invoice separately. … 31. Nowhere in the email does the respondent acknowledge the total amount of the payment claim and by reference to that amount state the total amount that it intends to pay by way of comparison with the $258,096.49. -- 6 of 10 -- 7 32. In paragraphs 4 and 5 there is reference to 1 of the 5 invoices (being #4130594 being for $192,263.48). The respondent states that the claim for ‘overtime worked difference – automation’ is not a legitimate claim. The respondent fails to state what amount, if any, of that invoice it proposes to pay. 33. In paragraph 6 of the email reference is made to 2 of the 5 invoices (being 4130112 and 4130377) and subsequent to the reference to those two paragraphs is the statement that the respondent is ‘approving’ $10,053.00 of the variation claim. It does not state that the respondent is proposing to pay that amount but only approves that amount. (original emphasis) 34. This paragraph cannot be interpreted as a statement that of the total payment claim amount of $258,096.49 that the respondent proposes to pay his $10,053.00. 35. The email does not address at all the remaining 2 invoices, being invoice numbers #4130229 (being for $25,880.26) and #4130378 (being for $9,263.26). …” [10] In support of the argument that s 18(3) of the Act was not satisfied it was submitted: “37. Where is the respondent’s ground of the objection to paying those two invoices for this work undertaken? 38. The table relied on by the respondents sets out the total amount of each invoice. In respect of the two invoices #4130229 and #4130378 the table says nothing in respect of why the total amount in those invoices is not payable. In accordance with Minimax the respondent had to: ‘identify those parts of the claim which it objected to paying and say what the grounds of its objection were.’ It has not done so. (original emphasis) 39. If the respondent seeks to argue that by the words ‘not approved’, it stated what its grounds or objection were, the applicant says this argument is untenable. It cannot be stating the grounds of an objection to simply state ‘not approved’. There must be articulated grounds for the refusal to pay an amount. 40. The threshold for satisfying the requirements for a payment schedule cannot be held to be so low as to allow ‘not approved’ as satisfying the s 19(3) [sic] requirement to state the reasons for withholding payment … .” [11] Paragraph one of the e-mail emphasised that as far as the respondent was concerned the contract was for a fixed price. And also while paragraph three identified that -- 7 of 10 -- 8 only some of the larger claims were going to be specifically dealt with it is clear from the balance of that paragraph that the attached spreadsheets addressed all of the claims and identified those considered to be “not legitimate claims”. The reason for them not being legitimate was because, as stated, as far as the respondent was concerned it was a fixed price contract and accordingly, none of the claims concerning overtime and supervision etc were going to be paid. [12] In my opinion neither of the complaints made against the respondent are valid. Paragraph three of the email clearly drew the applicant’s attention to the spreadsheet and to the fact that those items highlighted in red were not considered to be legitimate claims. The only inference that can be drawn from that assertion is that they were claims that the respondent had no intention of paying. The spreadsheet under the heading “outstanding payable” has a table identifying, among other things, the description of works, the amount claimed for those works, whether the claim was approved and whether, if approved, the works had been paid for or were yet to be paid for. At the conclusion of that table there is reference to what is described as “summary claim from Brimar” and the total amount identified by the respondent as a consequence of the calculations contained within the table the amount of was $49,496.00, being the total of the claims approved for payment. On the following page of the schedule is another table headed “Outstanding Receivable”, this table identified what the respondent considered the applicant owed to it. Thereafter, there is what is described as a summary claim from the respondent in the amount of $24,440 [13] As Chesterman J identified in Minimax, in determining whether or not it satisfies the requirements of a payment schedule for the purposes of the Act, the document should not be analysed in an unduly critical way and no particular form is required. Further, provided the relevant criteria established by s 18 of the Act are satisfied, the document will be a payment schedule for the purposes of the Act regardless of how they are expressed, with what formality or lack thereof and with what felicity or awkwardness. In this case, no doubt it might have been clearer if within the narrative of the email it was clearly stated that the respondent only intended to pay the applicant $25,056. However, in circumstances where the email clearly directs the applicant’s attention to the spreadsheet it is inconceivable that after reading the words “money owed to Brimar” it did not know that that was the total amount the respondent proposed to pay in response to the claim and how that amount was arrived at. [14] Turning then to the applicant’s argument concerning s 18(3) of the Act, it could not be sensibly disputed, in my respectful opinion, that the respondent made clear its reasons for not paying or only paying in part for the works claimed under invoices 4130594 – “overtime worked difference – automation”, 4130594 – “supervision extra work – automation” ($192,263.48), and invoices 4130112 ($22,102.08) and 4130377 ($8,587.41). Those reasons were identified by reference to paragraphs 1, 4, 5, 6 and 7 of the e-mail. [15] According to Ms McNeil, the omission on the part of the respondent to specifically address the remaining two invoices 4130229 ($25,880.26) and 4130378 ($9,263.26) also failed to satisfy the requirements of s 18(3) of the Act and, accordingly the -- 8 of 10 -- 9 schedule was in effect a nullity. In this regard I agree with Mr Beacham’s submission to the effect that the applicant’s position fails to give sufficient regard to the interaction between the email and the attached spreadsheets. [16] With regard to the so-called unaddressed invoices, 4130229 is concerned with progress claim 8 and 4130378 with progress claim 9. By reference to the relevant invoices attached to Mr McGrath’s affidavit, the works claimed are identified by reference to a description, for way of an example; “variation #20 – level 5 HCV 4.02.1 Cable Relocation Automation”.4 The way the spreadsheet to the email sent by the respondent operates is to then essentially identify the claim number, give a brief description of the works and the amount claimed for those works. It then goes on to identify if payment is (or has been) approved and whether the claim will (or has been) paid. The first item marked in red in the schedule is described as “level 6 Duct 3HT Installation” for $1,530.00. That figure has been rounded up from the figure of $1,529.70 being the amount claimed for those works in progress claim 8.5 That process then follows through to the last entry in the schedule marked in red being “Supervision Extra Work” ($76,797.00). That can be cross-referenced to progress claim 9 “Supervising Extra Work – Automation” claimed in the amount of $76,796.75.6 As far as I am able to ascertain, this process applies to all of the claims made in all of the subject invoices. [17] Bearing in mind that the applicant would be expected to be fully aware of the contents of and descriptions used in its claims, there is little room for doubt that when the applicant read the email and the reference to those claims identified in red in the spreadsheet it would have known that it was not going to be paid for those works, and the reasons why it was not going to be paid for those works. If paragraphs 1 to 6 of the email did not make it sufficiently clear, paragraph 7 must have. It said in part “from our list of variation claims which have been highlighted in red, these are not legitimate claims as they were either not done, not caused by Zi Argus or could have been avoided by better site co-ordination.” Ms McNeil’s focus on the words “not approved” fails to recognise that those words were never meant to express the grounds for rejecting particular claims but merely expressed the consequence of the respondent’s decision about the legitimacy of those claims. [18] Notwithstanding a degree of complexity associated with the documents I am satisfied that it is a valid payment schedule for the purposes of s 18 of the Act. The respondent’s payment schedule adequately identified the amount it intended to make in respect of the subject claims and the reasons why it was less than the amount claimed. Accordingly the application must be dismissed. In this context it also to be borne in mind, that by reference to the documents placed before me, the works involved were relatively extensive and complex in nature. 4 Mr McGrath’s affidavit at p140 5 See at p 139 6 See at p 145 -- 9 of 10 -- 10 Costs [19] Costs were not addressed during submissions. However, in circumstances where the respondent was wholly successful in defending the claim against it, it is difficult to see why the usual rule that costs follow the event ought not to apply. Accordingly I propose to make such orders. However, in circumstances where the applicant has not been given the opportunity to be heard, I will allow it to be heard (if necessary) as to the question of costs by the giving of notice to the respondent of its intention and after having secured a hearing date from my associate. Orders 1. The appeal is dismissed. 2. Subject to order 3 the applicant is to pay the respondent’s costs of the application. 3. The applicant has liberty to apply in respect to the question of costs only. -- 10 of 10 --