Supreme Court New South Wales Medium Neutral Citation: Lamio Masonry Services Pty Ltd v TP Projects Pty Ltd [2015] NSWSC 127 Hearing dates: 25 February 2015 Decision date: 27 February 2015 Jurisdiction: Equity Division - Technology and Construction List Before: Ball J Decision: Summons dismissed with costs. Catchwords: Building and Construction – Validity of payment claims under Building and Construction Industry Security of Payment Act 1999 (NSW) – Whether payment claims were valid payment claims for the purposes of s 13(2) of the Act Building and Construction – Natural justice – Whether payment claims contained sufficient information so as not to deny natural justice Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Cases Cited: Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 78 NSWLR 393 Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391; (2005) 64 NSWLR 448 Clyde Bergemann v Varley Power [2011] NSWSC 1039 Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (In Liq) [2005] NSWCA 409 Northbuild Constructions P/L v Central Interior Linings P/L [2011] QCA 22; [2012] 1 Qd R 525 Category: Principal judgment Parties: Lamio Masonry Services Pty Ltd (Plaintiff) TP Projects Pty Ltd (First Defendant) Max Tonkin (Second Defendant) Representation: Counsel: F Corsaro SC (Plaintiff) RC Gration (First Defendant) Solicitors: Doyles Construction Lawyers (Plaintiff) Warren McKeon Dickson (First Defendant) File Number(s): 2014/358955 Publication restriction: None Judgment Introduction 1. In these proceedings, the plaintiff, Lamio Masonry Services Pty Ltd (Lamio), seeks to set aside two adjudication determinations purportedly made by the second defendant (the Adjudicator) in favour of the first defendant, TP Projects Pty Ltd, under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Security of Payment Act). 2. Even if the determinations are not set aside, Lamio also seeks an injunction restraining TP Projects from taking steps to enforce judgments obtained in the Local Court based on the determinations on the ground that there are currently proceedings in the District Court concerning the merits of TP Projects' claims and if Lamio succeeds in those proceedings, and the money the subject of the determinations has been paid, Lamio will not be able to recover the amount of the payments because of TP Projects' financial position. 3. Mr Corsaro SC, who appeared for Lamio, submitted that such an injunction may be justified on the basis that the proceedings to enforce the judgment amounted to an abuse of process. During the course of the hearing, I indicated that I thought that such an application had no reasonable prospects of success, that the appropriate procedure for Lamio to adopt was to seek a stay from the court in which judgment had been obtained and that, in those circumstances, evidence going to TP Projects' financial position should be rejected. Having regard to the conclusions that I reached, it is not necessary to say anything more about that relief. Factual background 1. The determinations which Lamio seeks to set aside are both dated 8 October 2014. One relates to a payment claim served on Lamio by TP Projects on 22 August 2014 in relation to services provided by TP Projects to Lamio in connection with the construction of a Woolworths supermarket in Katoomba. The other relates to a payment claim served on Lamio by TP Projects on 4 September 2014 in relation to services provided by TP Projects to Lamio in connection with upgrade works to the Great Western Highway at Hazelbrook. In each case, the payment claim related to contracts by which TP Projects agreed to provide Lamio with the services of labourers and bricklayers. 2. In the case of the Katoomba project, the terms on which the services were provided are evidenced by a quotation dated 13 May 2013. The quotation relevantly provided: This quotation is based on the following and labour only. 1. Labour only to lay 190 and 140 hollow blocks at the rate of $4.50 plus GST. 2. Block cutting horizontal, vertical and rake at rate of $30.00/meter plus GST. 3. Lamio to Supply sand, cement, ties, flashing, and vertical DPC and expansion joints Lintels, Door frames and brick elevator. 4. Concrete block filling and placing vertical reinforcement will an extra an on hourly rate as required. 5. Bricklayer to supply one lift of scaffolding only. 6. Builder/Lamio to supply survey grids and mark up all floors and footing and permitter internal scaffolding to stairs and any wall exceed 3.m in height. 7. All rubbish to remain onsite or placed in the bin provide by builder or area. 8. Cutting to new opening, rebuilding walls, and toothing to existing works to be charged as hourly rate bricklayers $55.00/hr plus GST and labours $45.00/hr. 9. Note any delay for work not ready will be charged out as lost time on an hourly rate. 10. Accommodation and meal for works to be under taken as per discussion $10,000. 11. All Safe Work Method Statement to be provided by Lamio. 1. In the case of the services that were provided in connection with the Hazelbrook contract, the services were provided pursuant to an oral contract. Under that contract TP Projects agreed to provide labour to undertake block work at the rates agreed in respect of the Katoomba job – that is, at the rate of $55.00 per hour for bricklayers and $45.00 per hour for labourers. 2. The payment claim in respect of the Katoomba project claimed a total amount of $177,220.00 including GST. It included a schedule setting out the date of the work, the total number of men involved in performing the work, the total hours worked by each man, the total hours, where relevant, the length of blocks cut, a brief description of the work done, the rate claimed and the total claimed in respect of that work. It is noteworthy that virtually all work was claimed at the rate of $55.00 per hour. Also attached to the payment claim was the original invoice dated 12 December 2013 in respect of the work and copies of various pages of the site instructions day book which gave some additional information in relation to the work done. None of the information included and supplied with the payment claim identified who did the work or whether the person was a labourer or bricklayer. 3. Lamio served a payment schedule in response to the payment claim on 4 September 2014. The payment schedule raised a number of issues in relation to the payment claim. Relevantly, under the heading "Day labour", the payment claim stated: Please note there although a spreadsheet of hours claimed has been provided there is no supporting documentation to substantiate the claims. There is [sic] no day records signed by either the builder or Lamio Masonry Services Pty Ltd Authorised person (standard industry practice for any day labour claims) There are no photos of the works being completed (standard industry practice. There are [sic] no sign in register sheets for proof of men on site for hours being claimed (usually can be obtained from the builder, and is industry practice) The payment schedule did not raise an issue concerning the rates that had been charged for the work that had been claimed. 1. TP Projects lodged an adjudication application with Adjudicate Today on 18 September 2014. Attached to the adjudication application were a number of documents including site diaries covering the period 20 May 2013 to 2 October 2013 and receipts. 2. It was evident from the site diaries who had done the relevant work. On that basis, Lamio sought to raise in its adjudication response an issue concerning the rate at which some of the work had been charged. 3. The Adjudicator made his determination on 8 October 2014. He concluded that TP Projects was entitled to the sum of $77,138.33 including GST. In reaching that conclusion, the Adjudicator rejected a number of submissions that the payment claim claimed work at the wrong rates on the basis that that ground had not been raised in the payment schedule and consequently could not be raised in the adjudication response. In adopting that approach, the Adjudicator relied on s 20(2B) of the Security of Payment Act which provides: The respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant. 1. The Adjudicator also refused to consider a number of other submissions made in the adjudication response on the ground that the reasons relied on had not been included in the payment schedule. In particular, one submission made by Lamio in its adjudication response was that TP Projects was not entitled to claim block cutting, installation of wall stiffeners and handling materials as part of the day labour claim, on the basis that that was governed by cl 2 of the quotation. That submission was rejected on the basis that it had not been raised in the payment schedule. Other submissions made by Lamio that were rejected on the same basis were that TP Projects' claim in respect of the length of blocks cut was greater than the actual length cut, that others had cut some of the blocks, that bond beams formed part of block laying and could not be claimed separately, that moving rubbish was part of TP Projects' contractual works and that work performed on particular days constituted duplicate claims. 2. The payment claim in respect of the Hazelbrook contract was for an amount of $45,507.00 inclusive of GST. It was supported by a spreadsheet setting out similar information to the spreadsheet supporting the payment claim in respect of the Katoomba site. Again, all labour was claimed at the rate of $55.00 per hour. Also supporting the payment claim was a schedule setting out the total value of work to 30 July 2014 and deducting the payments received to arrive at the amount claimed. 3. Lamio served a payment schedule in response to the Hazelbrook payment claim on 4 September 2014. The payment schedule took issue with the claim on various bases. One was the following: Please note TP Projects Pty has claimed a flat rate of $55/hr per man (for both bricklayers and Labourers) for this project which is contray [sic] to the verbal agreement based on the quote dated 13.5.13 whereby bricklayers would be charged at $55/hr & labourers at $45/hr. 1. TP Projects lodged an adjudication application with Adjudicate Today on 18 September 2014 in respect of the Hazelbrook payment claim. Attached to the adjudication application were a number of documents including site diaries covering the period 31 July 2013 to 27 September 2013, ANZ Bank statements, Induction cards and receipts. 2. The Adjudicator made his determination on 8 October 2014 and concluded that an amount of $33,982.00 inclusive of GST was payable. 3. In making his determination, the Adjudicator refused to consider a submission that the hours claimed by TP Projects were incorrect on the ground that that issue had not been raised in the payment schedule. The Issues 1. Lamio seeks to challenge the Adjudicator's determinations on two bases. First, it submits that in neither case was there a payment claim complying with the requirements of s 13(2) of the Security of Payment Act. Second, it submits that in both cases the Adjudicator denied Lamio natural justice. 2. It is not disputed that the determinations were void if there was no valid payment claim. Nor is it disputed that the Adjudicator was obliged to comply with the rules of natural justice, although the content of those rules must be understood in the context in which the adjudication process is to take place and, in particular, the restrictions contained in the Security of Payment Act on the material that the Adjudicator can consider, the tight timetable imposed by the Act on the parties and the Adjudicator and the general purpose of the Act to provide what has been described as a "rough and ready" means of ensuring that contractors who do building work are paid promptly for the work that they do: see Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 78 NSWLR 393 at [207] - [209]; Clyde Bergemann v Varley Power [2011] NSWSC 1039 at [83] – [84] per McDougall J; Northbuild Constructions P/L v Central Interior Linings P/L [2011] QCA 22; [2012] 1 Qd R 525 at [107] per White JA. Was there a payment claim? 1. Section 13(2) of the Security of Payment Act provides: A payment claim: (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the "claimed amount"), and (c) if the construction contract is connected with an exempt residential construction contract, must state that it is made under this Act. 1. In Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [76], Palmer J said: A payment claim and a payment schedule are, in many cases, given and received by parties who are experienced in the building industry and are familiar with the particular building contract, the history of construction of the project and the broad issues which have produced the dispute as to the claimant's payment claim. a payment claim and a payment schedule must be produced quickly; much that is contained therein in an abbreviated form which would be meaningless to the uninformed reader will be understood readily by the parties themselves. A payment claim and a payment schedule should not, therefore, be required to be as precise and as particularised as a pleading in the Supreme Court. Nevertheless, precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in the dispute. That statement was adopted in Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391; (2005) 64 NSWLR 448 by Mason P with whom Giles and Santow JJA agreed. 1. In the present case, Mr Corsaro submitted that a payment claim must contain sufficient information so that a reasonable person who considered the payment claim in the context of the contract and in light of the surrounding circumstances would be left in no doubt as to what the claim was for and would be able to make a proper assessment of it. He pointed out that, unless the respondent to a payment claim understood the claim, the respondent would not be able to prepare a proper payment schedule. That would be unfair to the respondent who is bound by the reasons advanced in the payment schedule in any subsequent adjudication. It would also be inconsistent with the purpose behind the Security of Payment Act, which is to provide a streamlined system for the making of and the assessment of progress claims. That system depends on properly articulated claims. 2. Mr Corsaro submitted that, in the present case, both claims were inadequate. In making that submission, he relied on an affidavit of Mr Anthony Barbalace, the Managing Director of Lamio, who said that he was not able to assess either claim. In order to do so, Mr Barbalace said that he needed to know where the work took place, the extent of the work and the names of the persons who did the work. 3. Mr Corsaro also sought to attach significance to the fact that each of the claims in this case was a claim for services related to construction work, and submitted that s 13(2) was not to be read as requiring the payment claim to identify the related services to which the progress payment relates, but rather was to be read as requiring the identification of the services related to construction work to which the progress payment relates. Although I found the submission difficult to follow, the suggestion appears to be that s 13(2) requires identification of both the construction work and the way the services related to that work. 4. The starting point in relation to the question whether there were valid payment claims is the words of the section. In the case of related services, in my opinion, those words require no more than the identification of the services to which the payment claim relates. Contrary to what I understand to be Mr Corsaro's submission, they do not require identification of the construction work to which the services relate, although the identification of that work may be necessary at least in part to identify the services. Of course, the payment claim must also indicate the amount of the progress payment that the claimant claims to be due. I accept that it is implicit in s 13(2) that the services must be sufficiently identified so that the respondent can properly consider and respond to the claim. However, just what that involves will depend very much on the circumstances of the case, and may depend on what the terms of the contract between the parties require. The services do not have to be identified completely or accurately. Rather, they must be identified sufficiently so that the respondent is able to respond to the claim: see Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (In Liq) [2005] NSWCA 409 at [34]ff per Hodgson JA. 5. In the present case, the contracts were informal. They gave no indication of how progress claims were to be made. The only question is whether the payment claims contained sufficient information so that Lamio was able to respond sensibly to them, and, in particular, was in a position to identify the grounds on which it should object to the claim if that is what it thought it should do. No doubt a well presented payment claim would expedite the adjudication process. But one that is not well presented or documented or particularised does not cease by virtue of those facts alone to be a payment claim. 6. In my opinion, the claims in this case met the requirements of a payment claim. They identified the job. They gave a brief description of the work done, how many men did the work, how long it took to do the work and the amount charged. I cannot see why that was not sufficient to enable Lamio to respond to the claims and for the Adjudicator to make a sensible determination in relation to the disputes. It is noteworthy that in the case of both disputes, the Adjudicator appears to have had no difficulty in setting out a clear statement of the issues between the parties and dealing with those issues. 7. Mr Corsaro in his submissions focussed on the Katoomba determination and, in particular, the fact that the payment claim did not identify who had done the work, with the result that Lamio did not raise the question whether the right rates had been claimed until its adjudication response. However, it was clear from the payment claim that all work had been claimed at the same rate; and if there was an issue about that, it is not clear why it could not have been raised in the payment schedule. Lamio had no difficulty in raising that issue in the payment schedule in response to the Hazelwood payment claim, although the payment claim in that case contained no additional information. It appears that the issue was not raised in response to the Katoomba payment claim due to an oversight. 8. Mr Barbalace gave evidence of the additional information he thought should be included. However, he did not explain how the absence of that information prevented him from serving a payment schedule that raised all the issues that he wanted to raise. For example, one issue that Lamio sought to raise for the first time in the adjudication response was the length of blocks actually cut. However, the length claimed was set out in the payment claim and it is difficult to see why Lamio could not have taken issue with the lengths claimed in the payment schedule. I have already mentioned another example, concerning the rates charged for labour. 9. In my opinion, both payment claims were valid payment claims under s 13(2) of the Security of Payment Act. Natural justice 1. It is not easy to understand Lamio's claim based on natural justice. Mr Corsaro sought to tie the question of natural justice to the question of what was required by a payment claim: the payment claim had to provide sufficient information so that the respondent was not denied natural justice. At a general level, I accept that proposition. However, for the reasons I have given, the payment claims contained sufficient information to achieve that purpose. Mr Corsaro did not advance any independent argument that there had been a denial of natural justice, although he said he had no instructions to abandon such a claim that appears to be raised by Lamio's Technology and Construction List Response. 2. In the Technology and Commercial List Response, Lamio says that the adjudication application in respect of both the Katoomba and Hazelbrook payment claims contained information that was not included in the payment claim and that in considering that additional information the Adjudicator acted outside s 22 of the Security of Payment Act. In the case of the Katoomba adjudication application, the additional information was site diaries covering the period 20 May 2013 to 2 October 2013 and receipts. In the case of the Hazelbrook adjudication application the additional information was site diaries covering the period 31 July 2013 to 27 September 2013, ANZ Bank statements, Induction cards and receipts. In written submissions, Lamio submitted that by not including the information in the payment claim, TP Projects denied it a fair opportunity to respond to the information. 3. In my opinion, there is no merit in these contentions. Section 22(2)(c) of the Security of Payment Act specifically states that in determining an adjudication application, the adjudicator is to consider: The payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim. 1. The additional documents about which Lamio complains unquestionably fall within the description of "relevant documentation". It is difficult to see how the documents in question raised new claims that Lamio did not have an adequate time to consider. They simply contained information supporting the contentions made in the payment claim. Lamio was able to make submissions on those documents and, in some cases, the Adjudicator accepted those submissions. To the extent that it is said that the site diaries raised an issue concerning the rates that were charged for the men who did that work, I have already dealt with that issue. Orders 1. The summons should be dismissed with costs. *********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 March 2015