31/07/14 – Spartan Hall Construction Services Pty Ltd v Central & Southern Queensland Training Consortium Ltd t/a General Practice Training Queensland
Spartan Hall Construction Services Pty Ltd v Central & Southern Queensland Training Consortium Ltd t/a General Practice Training Queensland
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Authorised Nominating Authority
Due Date for Payment
Rate of Interest
Apportionment of Adjudication Fees
Institute of Arbitrators and Mediators
Spartan Hall Construction Services P/L
Central & Southern Queensland Training
Consortium Ltd t/a General Practice
Training Room and Mezzanine, Unit 1, 32
Billabong St STAFFORD QLD 4053
Served 10 June 2014 for $104,371.06
Served 16 June 2014 for $NIL
30 June 2014
4 July 2014 (email & letter)
8 July 2014
31 July 2014 (revised recalculated amt)
17 June 2014
Table of Contents
II. Application to an ANA and appointment of Adjudicator
III. Material provided in the adjudication
a. Claimant’s Material
b. Respondent’s Material
IV. Is it a Construction Contract within BCIPA?
V. Payment Claim
VI. Payment Schedule
VII. Jurisdictional issues
c. Invalid Payment claim
d. Payment claim insufficiently particularised
VIII. Merits of the claim
e. The terms of the contract
f. Residual adjudication application submissions
g. Residual adjudication response submissions
IX. The amount of the progress payment
X. Defects list
XI. Due date for payment
XII. Rate of interest
XIII. Authorised Nominating Authority and Adjudicator’s fees
Attachment: CGL 1 – Defective & incomplete works register
I have made a decision under the Building and Construction Industry Payments Act 2004 (“BCIPA”), and in respect of the claimant’s payment claim, that:
- the amount of a progress payment be made by the respondent to the claimant is the adjudicated amount,
- the date upon which the payment claim is due,
- the rate of interest at the rate of interest, and
- the parties are liable to pay the adjudication fees (being the fees of the adjudicator and the authorised nominating authority) in the proportions,
as shown on the first page of this decision.
- Spartan Hall Construction Services Pty Ltd (referred to in this adjudication as the “claimant”) was engaged by Central & Southern Queensland Training Consortium Ltd trading as General Practice Training Queensland (referred to in this adjudication as the “respondent”), to construct a training room and mezzanine at Stafford (the “work”).
- The claimant and respondent entered into a Queensland Master Builders Commercial Building Contract for the works for the sum of $252,362.00 including GST in early January 2014 and work commenced in late January 2014.
- The claimant claimed that the works were practically complete on 28 April 2014, but that is in dispute.
- The respondent contended that its earlier payment schedule dated 2 May 2014 was deemed a notice of dispute under the contract and a series of experts’ reports were commissioned to investigate the alleged defective and incomplete work.
- On 10 June 2014 the claimant served the payment claim for $104,371.06 and on 16 June 2014 the respondent served a payment schedule identifying that $NIL was payable and reasons were provided, including 2 important jurisdictional issues.
- These jurisdictional issues related to:
Invalid payment claim
(i) the payment claim had not been submitted on the last day of the month as required by the contract;
(ii) it claimed for work performed after 31 May 2014 which meant it was premature and therefore invalid;
Amounts claimed not properly particularised
(iii) the payment claim failed to properly particularise the amounts claimed in the payment claimBuilding and Construction Industry Payments Act 2004 (“BCIPA”)
- The claimant disputed the payment schedule in its adjudication application dated 30 June 2014, and the respondent provided its adjudication response on 8 July 2014, in which it reiterated its jurisdictional objections, and provided further details of its reasons for non-payment.
II. Application to an ANA and appointment of Adjudicator
- The claimant applied to the Institute of Arbitrators and Mediators Australia (“IAMA”) on 30 June 2014 for adjudication. By letter dated 1, July 2014, IAMA referred the adjudication application no. 30374 for me to determine.
- IAMA is an Authorised Nominating Authority under BCIPA and I am a registered adjudicator under BCIPA with registration number J622914.
- By letter dated 4 July 2014 sent by email and facsimile to the claimant and to the respondent, I accepted the Adjudication Application and thereby became the appointed Adjudicator.
- On 8 July 2014 the respondent delivered 2 folders of its adjudication response.
- I find therefore that an adjudication application was made to an authorised nominating authority on 30 June 2014, and that there was a reference to an appropriately registered adjudicator, and that the respondent provided its adjudication response all within the time limits prescribed under BCIPA.
III. Material provided in the adjudication
- I received both an adjudication application and an adjudication response as follows:
a. Claimant’s Material
- Adjudication Application served on 30 June 2014 for $104,371.06 including GST with the claimant’s submissions (the “application”) comprising 100 paragraphs of submissions as well as 13 attachments.
- The attachments consisted of the following:
(i) Tab 2 (contract and/or evidence of contract);
(ii) Tab 3 (payment claim);
(iii) Tab 4 (payment schedule);
(iv) Tab 5 (suitability of drawings);
(v) Tabs 6 (response to list of defective and incomplete works);
(vi) Tab 7 (statutory declaration of Russell Hall);
(vii) Tab 8 (statutory declaration of Kim Axton);
(viii) Tab 9 (statutory declaration of Brett Theideke);
(ix) Tab 10 (statutory declaration of Chris Gleeson);
(x) Tab 11 (statutory declaration of Taylor Pearson);
(xi) Tab 12 (expert opinions);
(xii) Tab 13 (photographs of completed project);
(xiii) Tab 14 (Case note of Eriksson v Whalley) the.
b. Respondent’s Material
- Volume 1 – comprising:
(i) 34 adjudication response submissions in 36 pages;
(ii) statutory declarations of:
- Peter Harrison
- Stephen Milton;
- Darren Jeffs;
- Flavio Costanzo;
(iii) Tab 1 through to 20 comprising various documents that had been indexed in part E (pages 34 to 36 of the response submissions;
- Volume 2 comprising Tabs 21 to 54, which had been indexed in part E identified above.
IV. Is it a Construction Contract within BCIPA?
- In paragraph 24 of the application the claimant states that there is no dispute between the parties that the contract is a construction contract under BCIPA.
- I agree that nowhere in the payment schedule, nor in the adjudication submissions, had the respondent raised that the contract was not a construction contract under BCIPA.
- However, I need to be satisfied as to the existence of a construction contract under BCIPA so that I have jurisdiction.
- In paragraph 23 of the application, the claimant stated that the contract was a Master Builders Association Commercial Building Contract – eDocs (“eDocs”), and attached the contract at Tab 2 which comprised 13 pages.
- In paragraph 3.2 of the adjudication response the respondent said that in early January 2014, the parties entered into a Master Builders Commercial Building Contract and it attached the contract in Tab 4 of the response. The attached contract also comprised the 13 pages eDocs provided by the claimant. However, it also attached the preliminary drawing numbered A01.01 through to A01.03, A03.01, A05.01 and A09.01, together with Tekton Consulting Addenda comprising 7 Pages, as well as a further 16 pages of drawings, photographs and specifications.
- At this stage, I am not deciding the contents of the contract because I am aware that there is a significant dispute about its terms, and I still have to consider some jurisdictional objections from the respondent. Suffice is to say for present purposes I find that the contract at least contained the 13 page eDocs as both parties proffered this document in their submissions.
- Schedule 2 of BCIPA states that a construction contract means a “contract, agreement or other arrangement under which one party undertakes to carry outconstruction work for, or to supply related goods and servicesto, another party.”
- I have found that there is a contract within the Schedule 2 definition.
- Looking at whether the claimant carried out construction work or supplied related goods and services in relation to construction work, I find that the claimant carried out construction work in accordance with the eDocs relating to the Training rooms and mezzanine floor and associated work as described in Annexure A’s Scope of Work, because its payment claim identified this work.
- I must now be satisfied that this was construction work as defined by BCIPA.
- Construction work is defined in section 10of BCIPA and I am satisfied that the construction of the training room and mezzanine floor and associated works which involved alterations and additions falls within the meaning of section 10(1)(a) of BCIPA which provides:
“the construction, alteration, repair…of buildings or structures…;”
- I am therefore satisfied that the Schedule 2 definition of construction contract has been satisfied because I have found a contract for construction work within BCIPA to which the payment claim related.
- The respondent has not pointed to, nor have I found, that any of the exceptions under section 3 of BCIPA apply. Accordingly, I am satisfied that the matter can be adjudicated.
- I will now sufficiently consider the payment claim and payment schedules and the respective submissions on jurisdiction, in order to consider the 2 important jurisdictional issues that have been raised by the respondent in the payment schedule and the adjudication response.
- Thereafter, if I have jurisdiction, I will then consider the merits of the claim.
V. Payment Claim
- On 10 June 2014, the claimant served a payment claim relating to the work that it carried out, and I find this document in Tab 3 of the claimant’s application.
- It consisted of a tax invoice no 10250 referring to Contract works with an attached schedule, together with details of 3 variations and some additional adjustments and agreed adjustments specified in an attached schedule.
- There were 14 agreed adjustments alleged, which were identified in some detail, and the claimant advised that these works were part of an arrangement between the parties that there be no formal variations to the contract, because the value added almost equalled the value subtracted. The addition amount of $23,555.00 nearly equalled the credit amount of $23,137.00, and the claimant made no claim for these items
- There is a contest about whether the payment claim was sufficiently particularised. as is required by section 17(2)(a) of BCIPA that will be dealt with under the jurisdiction heading below.
- It stated that it was a payment claim made under the Building and Construction Industry Payments Act 2004 QLD, so I am satisfied that the payment claim was endorsed as is required by section 17(2)(c) of BCIPA.
- Essentially the payment claim was divided into the following categories:
(i) Contract works $229,420.00
(ii) Variations $25,039.16
(iii) Additional adjustments $14,245.60
Revised contract sum $268,704.76
Less previously paid $173,821.98
TOTAL DUE $104,371.06
- There was an amount of $104,371.06 including GST specified in the payment claim, so I’m satisfied that the payment claim has identified an amount as required by section 17(2)(b) of BCIPA.
VI. Payment Schedule
- On 16 June 2014 the respondent provided the claimant with a payment schedule comprising 39 submissions in 6 pages, together with 4 attachments.
- It referred to the payment claim by invoice number and specified the schedule amount of $NIL and I find that it was made within 10 business days of receipt of the payment claim.
- The payment schedule identified two jurisdictional reasons to reject the payment claim, viz:
(i) It was invalid;
(ii) The amounts in the claim were not properly particularised.
- The reasons for non-payment were then specified as follows:
(i) Practical completion had not been achieved;
(ii) Liquidated damages of $20,000
(iii) Contract variations and PC sums adjustments in which it specifically denied the additional adjustment claims of $14,245.60 on the basis that no written notice had been issued by the claimant and no agreement for these variations had been reached.
- The respondent added some attachments to its payment schedule including:
(i) Its breach notice dated 21 May 2014 with an attached list of defective and incomplete work;
(ii) The architect’s revised list of defective and incomplete works schedule dated 16 June 2014;
(iii) Flavio Costanazo’s QS rectification cost report;
(iv) Some security tag and visitor sign in sheets.
- I was unable to find anything in the payment schedule challenging the agreed adjustments on page 4 of the payment claim. In particular, there was no argument that these needed to follow clause 17 of the contract, as had been argued in relation to the additional adjustment claims.
- I’m satisfied, however, that the payment schedule complies with section 18(2) of BCIPA which can be adjudicated.
- I now turn to the jurisdictional issues raised in the payment schedule and the adjudication response.
VII. Jurisdictional issues
- The respondent takes issue with the payment claim in Part A, paragraphs 5 through to 22 of the payment schedule in relation to 2 jurisdictional issues. In particular in paragraph 5 of the payment schedule, the respondent identified as follows:
(i) Invalidity of the payment claim insofar as it:
- was not submitted on the last day of the month;
- claimed for work performed after 31 May 2014;
(ii) Payment claim insufficiently particularised.
- I will examine the payment claim and payment schedule in further detail to deal with those jurisdictional objections, and will also have regard to the adjudication application and adjudication response on these issues.
c. Invalid Payment claim
- The two objections are dealt with under separate headings.
Not submitted on the last day of the month
- The respondent argued, in paragraph 7 and 8 of the payment schedule, that the payment claim was required to be submitted on the last day of the month in accordance with clause 14(a) of the contract, because the schedule to the contract did not stipulate a particular business day, which meant that the default provision of the last business day applied.
- Under a heading “Reference Date” on page 6 of the adjudication application submissions, at paragraph 18, the claimant identified that there were monthly reference dates on the last day of each month, which accorded with the submissions of the respondent.
- In paragraph 19 of the adjudication submissions, the claimant submitted that the reference arose on 31 May 2014, and at paragraph 22 it submitted that the reference date for this payment claim was 31 May 2014, and that no other payment claim had been issued since 31 May 2014.
- In paragraph 22.9 of the adjudication response, the respondent agreed with that assertion, but submitted that that was not the matter at issue, and then went on to deal with the second objection about the claim for work after 31 May 2014.
- Dealing with the respondent’s objection under this heading of it not being submitted on the last day of the month, which was what it argued in paragraph 5(a) of the payment schedule, I find that the payment claim was made on 10 June 2014 which is after the reference date of 31 May 2014, which I find is the reference date.
- The respondent does not further engage in the adjudication response on the proposition that the claim must be made on the last day of the month, and I am satisfied based on the authority of Tenix Alliance P/L v Magaldi Power P/L  QSC 7 referred to by the claimant in paragraph 20 of its submissions that the payment claims can be made from the reference date, as provided in s12 of BCIPA.
- Accordingly, I accept the claimant’s submission in the application at paragraph 49 and reject the respondent’s payment schedule submissions on this point, which did not appear to be pressed in the adjudication response.
- The respondent’s objections under the next heading, however, have been widely canvassed in the payment schedule and the adjudication response, with some supporting statutory declaration material to which I now turn.
Claimed for work performed after 31 May 2014
- The respondent argued in paragraph 9 of the payment schedule that the payment claim made a claim for work performed in June 2014, such that the proper reference date for the payment claim was 30 June 2014. The consequence, it argued, was that the payment claim had been issued prematurely on 10 June 2014 and was invalid.
- In particular, at paragraph 13 of the payment schedule, the respondent referred to the claim for painting claiming it was 100% complete, when in fact it said that the painting work was being carried out in early June 2014, as it identified in attachment 4 to its payment schedule.
- Attachment 4 of its payment schedule referred to “GPTQ Security Tag Sign In Sheet and GPTQ Visitor Sign In Sheet for early June 2014 (the “respondent’s painting evidence”).
- The consequence, it argued in paragraph 14 of the payment schedule, was that the claimant had no entitlement under section 12 of BCIPA to claim for work performed in June 2014, in this payment claim.
- At paragraph 15 of the payment schedule, the respondent argued that the claimant did not fall within section 17 of BCIPA, such that that the entire claim should be thrown out. It provided 3 case authorities of Walter Construction Group v CPL (Surry Hills) Pty Ltd  NSWSC 266 (‘Walter”), Beckhaus v Brewarinna Council  NSWSC 960 (“Beckhaus”) and FK Gardner & Sons Pty Ltd v Dimin Pty Ltd  QSC 243 (“FK Gardner”) in support of that proposition. Each of these cases dealt with a claim for summary judgment, where no adjudication was involved.
- In my view, the respondent’s submissions are dependent on a finding that the painting work carried out in June 2014 was work for which a payment claim could be made in June 2014 for the reference date at the end of June 2014.
- The claimant dealt with the payment schedule objections in paragraphs 47 to 57 of the application submissions.
- At paragraph 51 of the application, the claimant agreed that work involving the painting of a garage and the installation of door seals and a small handrail was done after 31 May 2014.
- However, it submitted at paragraph 52 that this work was the rectification of minor defects or correction of minor omissions (the “minor defects work”), neither of which it claimed for payment in the adjudication application.
- It is important for the claimant to appreciate that it is not the claim in the adjudication application that is in issue here, but the claim in the payment claim that needs to be evaluated.
- To my mind it is important to decide whether:
(i) the painting work and installation of door seals and a small handrail was work to correct minor defects and omissions, for which there was no entitlement to claim under the contract (as the claimant essentially submits), or
(ii) whether it was work in the contract scope for which there was an entitlement to claim, such that if that work spilled over into a fresh reference date and the work had already been claimed in an earlier reference date, thereby demonstrating that the payment claim was premature (as the respondent essentially submits).
- This is an important jurisdictional question, and I will firstly turn to the law identified by the respondent in its objections in order to provide the appropriate framework, before making a finding of fact in the contest between the parties’ respective statutory declarations. Thereafter, I will apply the facts to the law.
The law identified by the respondent
- There are essentially three legal propositions and one factual proposition in the respondent’s submissions in paragraph 21.2 of the response as follows:
(i) A claimant may only claim for work performed up to and including a reference date [paragraph 21.2(a)] – a legal issue;
(ii) The payment claim in this adjudication claims for work after 31 May 2014 [paragraph 21.2(b)] – a factual issue;
(iii) The work performed in June 2014 only had a 30 June reference date [paragraph 21.2(c)] – legal issue;
(iv) A premature payment claim means the claimant was not a person to whom s12 of BCIPA applied [paragraph 21.2(d)] – a legal issue.
- In relation to paragraphs 21.2(a) and (c), the respondent referred to FK Gardner at , Walter at , Doolan v Rubikon (Qld) Pty Ltd  2 Qd R 117 at 121 (“Rubikon”), and Development Dynamics (Queensland) Pty Ltd v Davies Project Pty Ltd  QDC 145 at 146 (“Davies”).
- The respondent relied upon these same cases (and the paragraph references of each case) in paragraph 22.10 of the response submissions that a claimant may only claim from a reference date for work performed under the contract up to and including that reference date.
- I will refer to each case to decide precisely the authority that each supports.
- FK Gardner was a case involving summary judgment under s19(2)of BCIPA, in circumstances where the claimant submitted a payment claim on or about 20 June 2006 for work done in May and June 2006. The contract required payment claims be made on the 28 day of a month for WUC to the 28th day of the month.
- The applicant had accepted that its claim was contractually due on the 28th of the month, but that it had a right to make a payment claim under the statute outside its contractual right.
- Paragraph  of FK Gardner merely states that the claim in that case was not made pursuant to the contract but was reliant on the NSW equivalent of the BCIPA, so I do not accept that it supports the respondent’s position.
- However, the Court held at  that one needed to have a contractual entitlement to a progress payment claimed in order to fall with s12 of BCIPA, and therefore have a right to claim under s17 of BCIPA.
- It appears in FK Gardner that there was no contest that the claimant was claiming for work before being entitled to contractually claim for it; as on the 20 June 2006 any work after that date until 28 June 2006, for which it was claiming payment, would not have been done.
- I accept that FK Gardner prevents a claim for payment for work done after a reference date, but I do not find that it prevents a clamant for carrying out work after a reference date, for which it is not claiming payment.
- I appreciate that this may appear to be a fine distinction, but it is an important one in this adjudication and adjudication generally.
- Claims for practical completion are made in most construction contracts, and yet work is done by claimants after practical completion during a defects liability period. This work to rectify defects and omissions is generally a requirement under the contract for which claimants are generally not entitled to payment, because this work forms part of the scope of work which the claimant is obliged to complete (the “minor defects work”). This is the case in this contract, when one has regard to the definition of Works in clause 31 which includes the rectification of defective works.
- I do not find that FK Gardner supports the proposition that minor defects work after a reference date renders that previous payment claim invalid.
- In this adjudication, the respondent argues that work was done in June 2014 for which the claimant had claimed in the 31 May 2014 payment claim, which therefore infected the payment claim with invalidity. However, the key ingredient appears to be whether the work done in June was work for which the claimant claimed payment in the 31 May 2014 payment claim.
- I will discuss the factual contest in more detail later, but from paragraph 50 through to 57 of the application, the claimant argued that as a matter of fact, the work that it had done in June with not work for which it makes a claim for payment to which I will refer in more detail later.
- In Davies, which was another summary judgment application, the Court was not satisfied that the claimant was entitled to make a payment claim at the relevant time, because the claimant could not demonstrate agreement about a reference date. This meant the Court was not satisfied that there was a valid payment claim from a reference date. I do not find that it is authority for the response submissions 21.2(a) or (c).
- In Walter, which was also a summary judgement case, the respondent’s reference to paragraph [52} in Walter which itself makes reference to an extract in the case of Beckhaus paragraphs 60 through to 65. This extract from Beckhaus merely canvassed the duality of a contractual regime and a statutory regime. Nicholas J in Beckhaus at paragraph  held that the entitlement to make a payment claim under the NSW equivalent of s17 of BCIPA, must be a reference to a statutory entitlement.
- In Beckhaus, (which was also summary judgement case) His Honour held at paragraph  that the defendant’s assertions that s17’s entitlement was a contractual entitlement was not arguable.
- In Walter at the end of paragraph , after having made reference to the extracts in Beckhaus, there was a note that there was no challenge to the finding in the appeal from His Honour’s order for summary judgement in the New South Wales Court of Appeal.
- At paragraph  of Walter, His Honour held that it was unsound for a defendant to argue that a claimant’s entitlement to the amount claimed must be established under the contract before a person is entitled to the payment claim.
- Accordingly, it is my view that Beckhaus and Walter stand for the proposition that a statutory entitlement to make a payment claim does not require a contractual entitlement to do so.
- However, they are being proffered by the respondent as authority that a claimant may only claim for work performed up to and including a reference date, which to my mind is dealing with a contractual entitlement. I do not agree that they support that proposition.
- Both those cases appear at odds with the Queensland case of FK Gardner, where at paragraph  the Court held, “Under the contract no claim could have been made for this work until 28 June 2006…”
- At paragraph  of FK Gardner, Lyons J said that the applicant agreed that the progress claim number 16 was contractually due on 28 of June, but asserted that it had a statutory right to make a payment claim outside its contractual right.
- At paragraph  Lyons J held that, “On 20 June 2006 the applicant was not entitled to the progress payment claimed..”
- The only basis, in my view, for Her Honour coming to that conclusion is that she must have rejected the assertion that a statutory entitlement to make a progress claim outside the contractual right to do, because she had already identified that under the contract, no claim could be made until 28 June 2006.
- Accordingly, I find both these NSW cases are inconsistent with FK Gardner, which the respondent has relied upon, and I find that I am obliged to follow the Queensland Supreme Court in preference to those of New South Wales in circumstances where there is inconsistency.
- I’m satisfied that FK Gardner is authority that there needs to be a contractual entitlement before one can invoke BCIPA.
- This leaves me to consider the case of Rubicon, which of all cases referred to by the respondent in this context, is the only one dealing with adjudication.
- Fryberg J was dealing with a case where the claimant had first made a payment claim on 15 November 2006 which it attempted to have adjudicated. This adjudication failed and was treated as a nullity by the adjudicator and he did not make a decision.
- The claimant then submitted an identical payment claim, which it re-issued on 16 February 2006 which was the subject of adjudication. The ratio of His Honour’s decision, at line 37 on page 121, was that an identical payment claim was not permitted by section 17(6) of BCIPA.
- In obiter, Fryberg J certainly stated from line 29 onwards that (on page 121 to which the respondent refers as authority), “If something is omitted from a claim, notwithstanding that it could have been claimed on a particular reference date, there is no reason why it cannot be claimed on the next reference date. Likewise anything further which gives rise to a claim after the first such reference date, may also be included in the next claim.”
- By inference, I find that Rubicon is authority (albeit obiter), but not a very compelling one, that a claimant may only claim for work performed up to and including a reference date.
- In summary therefore, I find that neither FK Gardner nor Rubikon are authority that minor defects work cannot be done after a reference date. I am not saying that the respondent has gone as far as saying that these cases support this proposition, but if I had found that they were authority for this proposition, it would have been necessary for me to ask for submissions from the parties on this point.
- Therefore, in relation to jurisdiction, it is necessary to deal with the factual contest as to whether the minor defect works entitled the claimant to payment, and whether it did make a claim for such payment.
- The respondent’s paragraph 21.2(d) legal proposition that a premature payment claim meant that a person was not entitled to make a claim under section 12, was not directly contradicted by the applicant in the adjudication, as the applicant was arguing that the work was minor defects work for which it had not made a claim for payment.
- Accordingly, given that the claimant has not controverted this proposition, I accept that if it is a premature payment claim, then the claimant is not entitled to make the claim under section 12 of BCIPA.
- As I mentioned earlier, to my mind this jurisdictional point hinges upon the characterisation of the work which was done in June, which is identified in paragraph 21.2(b) of the response submissions.
The facts surrounding the work carried out in June 2014
- The respondent submits in the payment claim that there were claims for work performed in June 2014. In the payment schedule, paragraph 13, it only referred to painting work.
- However, at paragraph 51 of the application, the claimant referred to painting by Taylor Pearson, as well as installation of door seals to one door and a handrail to a small segment of stairwell, which opened up the issue a little wider, and allowed the respondent to provide submissions on this point from paragraph 23.11 through to 23.18 of the response.
- I refer to each item of work separately.
- Turning to the respondent’s painting evidence provided in attachment 4, it is not clear to me that the sign in sheets demonstrate evidence that the claimant was carrying out painting in June 2014 for which it was still entitled to make a payment claim. It merely provides evidence that some of the claimant’s personnel were on site in June 2014.
- However, at paragraph 23.9 of the response, the respondent demonstrated that on 2 June 2014 and 6 June 2014 there were attendances to perform painting works. It attached sign in sheets at tab 29 to support this proposition. I’m therefore satisfied that painting work was done on those two dates.
- In the application the claimant argued, particularly at paragraph 54, that the painting of the garage was a minor defect or correction of a minor omission. It explained that the painting the garage was just under 6% of the total painting cost for the contract, which did not prevent the work from being practically complete, nor prevented the claimant from being entitled to make a claim for 100% of the painting on the project.
- The claimant provided statutory declarations of Messrs Hall, Axton and Pearson in support of the proposition of a late requirement by the respondent that the garage be painted. To my mind that does not deal with whether that work is a minor defect or omission for which it is not entitled to make a claim for payment.
- Mr Milton in his statutory declaration in support of the respondent, at paragraph 49 took issue with paragraph 47 of Mr Axton’s statutory declaration, and said that painting work was not completed pursuant to the contract, the garage had not been painted, the breakout area had not been painted and that in fact over 50% of the painting work that comprised the scope of work under the contract had not been completed.
- At paragraph 50. Mr Milton then made reference to the defects list 1 that had been provided with the breach notice demonstrating that this was incomplete work. I have reviewed tab 16, which provided the breach notice and the defects list (dated 21 May 2014), and paragraph 2.0 of the defects list in particular, which related to the garage and noted that only 1 of 4 walls had been painted. However, I was not assisted by the extent of the alleged incompletion. I do find, however, as at 21 May 2014 the northern wall of the garage had been painted.
- Mr Milton’s earlier assertion in paragraph 49 of his statutory declaration that over 50% of the painting work had not been completed has to be considered in context, because it is in relation to paragraph 47 of Mr Axton’s statutory declaration, which made reference to the date of 14 April 2014. The painting may well have been less than 50% complete at that time; however that is some 6 weeks before the reference date for this payment claim.
- In Mr Costanzo’s statutory declaration, he attaches a later defects list dated 16 June 2014 (attachment “FC, 3”) in which the list noted that the painting work was 90% complete in relation to the garage. I appreciate that some painting work was carried out in June 2014, but Mr Costanzo, in his report dated 16 in June 2014 (attachment “FC 2”) regarding the garage item 4.1, stated, “The work has been confirmed as now completed and therefore no additional rectification is required.”
- I therefore find as at 16 June 2014, the painting in the garage had been complete, and there is no evidence that any further painting work had taken place after 6 June 2014, so I’m satisfied that that date the garage painting was complete.
- I accept the submission from the claimant that the garage painting was only 6% of the painting component of the contract, because I have looked at:
(i) the photographs provided by Mr Costanzo in his statutory declaration, which were dated 7 of May 2014 (attachment “FC 4”) which shows the large and high training room with walls and ceilings having been painted;
(ii) his photographs also include 3 photographs of the unpainted garage walls, but the photographs also show large windows and a roller doors which were not to be painted, because I find from the notation reference that the respondent refers to is “Apply new paint finish to all plasterboard walls and existing painted walls in the training room, breakout space and garage [Drawing CD/A02.03 revision D];
(iii) the final revised drawings in the contract, where I find that the garage, particularly with a new mezzanine floor over half the garage, did not constitute a large component of the painting work.
- Dealing with the evidence provided to me, together with the drawings and applying commonsense, I have already found as at 21 May 2014 the garage wall on the northern side had been completed. In my view, this wall constituted more than 25% of the painting in the garage, because from the plan CD/A02.03 revision D, it can be seen that both the western and southern walls contained at least one large window and a roller door each, and on the eastern wall there is shown an existing double door as well, as a single door.
- I have not been provided with measurements to assist me, however, even if the northern wall was only 25% of the painting in the garage, this means at most that only 4.5% of all the painting (75% of 6% of painting) was left to be done as at 21 May 2014.
- Accordingly, even if no painting work was done between 21 May 2014 and 31 May 2014, about which there is no evidence, I am satisfied that less than 5% of the painting work may have been done in June 2014, which in the circumstances of the changing requirements of the respondent, to which I will refer later, I am satisfied is a minor omission that did not prevent the claim for 100% being made as at 31 May 2014. The painting related to the garage which was already in use which I find from the photographs of Mr Costanzo as one can see a car in thee photographs.
- Furthermore, at paragraph 58 of Mr Axton’s statutory declaration, which was not controverted by any of the respondent’s witnesses, he swore that the painting work was a minor omission by the claimant, and it was not work for which the claimant had claimed payment in the payment claim issued on 10 June 2014.
- Accordingly, I’m satisfied that this work was not work for which a claim for payment could have been made, or indeed was made.
- In paragraphs 23.11 through to 23.18 of the response, the respondent refers to the certifier’s direction, dated 15 April 2014 (at tab 30) to demonstrate that work done to the stairs was required for the mezzanine to be BCA compliant. I do not see that this is an issue in this dispute, because the claimant states that all it did was provide a handrail to a small segment of the stairs.
- Item 3 in this direction, says, “The handrail need not continue between flights at the mid-landing”, and this is the only reference to the handrail that I can see.
- In paragraph 43 to 46 of the statutory declaration of Mr Milton, he makes reference to the handrail but there is no evidence that any work to the stairs was being done in June 2016.
- Mr Milton does not state that this handrail was a significant omission, whereas Mr Hall at paragraph 80 of his statutory declaration infers that it was a defect.
- At paragraph 23.16 of the response, the respondent suggested that the work to install the handrail was necessary for the mezzanine to be BCA compliant and allow the certifier to issue a certificate of classification.
- However, at paragraph 63 of Russell Hall statutory declaration he makes reference to and provides a copy of the certificate of classification dated 16 May 2014 (attachment “RH 32”) in which he says the certificate was conditional upon the installation of the handrail to the existing mezzanine stairs, which had not been finalised because Mr Milton, the architect needed to provide new design for the stairs.
- The certificate states at point 3, “This certificate excludes to rear mezzanine as access stairs are subject to redesign by the owner.”
- Mr Milton, although he denies that he said that he would provide a redesign to the stairs for the mezzanine in paragraph 46 of the statutory declaration, stated that “Clear directions had been given by the certifier, as detailed in the certifier’s direction (to which he must have been referring to the direction dated 15 April 2014).
- I prefer the evidence of Mr Axton, at paragraph 52 of his statutory declaration where he said that Mr Milton had agreed to provide a redesign and an updated plan in a meeting dated 5 May 2014. Mr Harrison in his statutory declaration, between paragraphs 54 and 58 did not controvert Mr Axton’s paragraph 52 statutory declaration, whereas elsewhere he took issue with what Mr Axton had said. What he did say about the handrail at paragraph 56 was that Mr Axton should take the matter up with Mr Milton.
- In the application, at Tab 6 the, claimant provided a document marked D1.12 which related to the handrail, and in it the certifier advised that it was Mr Axton who had told him the handrail was incomplete because it was under design review. The respondent could have controverted this material in the response, and has not done so.
- It then comes to a contest between 2 witnesses in their respective statutory declarations, and I find that the certificate of classification with reference to the owner being required to provide a new design for the stairs, tips the balance in favour of what Mr Axton had said.
- Accordingly, I’m satisfied that the handrail was at worst from the claimant’s point of view a minor “omission”.
- At paragraph 23.17 of the response, the respondent stated that the claimant’s claim for metalwork in the sum of $1200, it understood was the claim for the installation of the handrail. It provides no evidence that this was the case, and it may that the more appropriate item for such work is that called “Structural steel for mezz including stairs”, about which the respondent makes no submission.
- Mr Hall, at paragraph 80 and 81 of his statutory declaration, stated that the claimant was not seeking to recover payment for the defects and the painting in the adjudication application. Whilst I have already said that the key issue is whether the work was claimable in the payment claim, rather than in the adjudication application, I find no evidence that a claim for the handrail had been made in the payment claim. Accordingly, I’m satisfied that Mr Hall’s statement that it was not claiming in the adjudication application, by inference applies to the payment claim.
- Accordingly, I’m not satisfied that the payment claim contains a claim for this small handrail, which was completed in early June 2014.
Minor defect works
- The respondent takes issue with the claimant regarding minor defects and omissions, and argues in this adjudication that neither the painting nor the handrail, were minor defects or omissions.
- I have found that in the circumstances, that they are minor defects or omissions, such that neither activity constituted work for which a claim for payment was made.
- Furthermore, at paragraph 56 of the claimant’s application submissions it raises the issue that the rectification of minor defects and omissions was not work for which the claimant is entitled to make a claim under the contract.
- The respondent did not directly engage with the claimant on this point, and I have found as a matter of fact that the claimant has not made claims for the minor defects works.
- I could therefore accept the claimant’s submissions without further analysis, because the respondent has not controverted this submission, However, I feel that it is important to close off on this point because it is an important jurisdictional issue.
- In my view, the respondent has raised the issue of the scope of work, and suffice is it from me to say that I cannot accept that the rectification of minor defects and omissions prevents a claim for 100% of work from being made.
- The claimant in paragraph 54 of the application asserted that it was entitled to claim 100% for the painting which did not prevent that portion of the work from being practically complete within the meaning of the term of the contract.
- Practical completion is defined to mean, “..the completion of the works, except for minor defects or omissions which do not prevent the works from being reasonably capable of being used for their intended purpose.”
- I appreciate that this refers to completion of the entire works, however, in my view the analogy regarding minor defects can equally apply to part of the works.
- Accordingly, the fact that the claimant has claimed 100% for the painting, does not mean that any painting work carried out after that time automatically infects a previous payment claim for painting with invalidity.
- If this was the case, any respondent could always raise the subsequent carrying out of work to rectify minor defects and omissions as grounds for a jurisdictional challenge to the validity of a payment claim on the basis that it had been made prematurely.
- In my view, as has already been identified in FK Gardner, contractual entitlement is the foundation of a claimant statutory entitlement to make a claim, and nowhere have I seen that in the contract an entitlement for a claimant to make a claim for the rectification of minor defects and omissions. The mere fact that the concept of practical completion recognises minor defects and omissions to my mind demonstrates the practical operation of a construction contract, wherein the existence and rectification of minor defects and omissions is part and parcel of the construction process.
- Therefore, I find that the rectification of the minor defects and omissions, which I have found, is not work for which the claimant would have been entitled to make a claim for payment in any event.
- I therefore find that the respondent’s submissions on this aspect of jurisdiction must fail, and note that a considerable amount of time has been spent on dealing with this issue by reference to all the material in the adjudication.
d. Payment claim insufficiently particularised
- The complaint in the payment schedule (from paragraphs 16 through to 22) argues that the claimant has failed to properly particularise the amounts claimed in the payment claim, particularly at paragraph 18 of the payment schedule.
- Surprisingly, in the adjudication response in relation to jurisdictional issues on this payment schedule point, nowhere does the respondent advance this submission further. However, it does not say that it has abandoned this submission, so this issue needs to be canvassed because it remains live in the payment schedule.
- In paragraph 58 through to 61 of the application, the claimant repeats its earlier submissions in paragraphs 4 through to 10 of the application, and in particular, at paragraph 7, that the payment claim sufficiently identified the construction work to which the claim relates.
- The claimant referred to the decision of T&M Buckley Pty Ltd v 57 Moss Road Pty Ltd  QCA381 (“Buckley”), in which the Court of Appeal stated by reference to the New South Wales case of Clarence Street Pty Ltd  NSWCA 391, that a payment claim was no more than a claim, and that it was not its function to identify the scope of a dispute.
- At paragraph  of Buckley, the Court held, “The issue for determination was not whether the payment claim explained in every respect the means by which a particular claim item had been calculated, but whether the relevant construction work or related goods and services was sufficiently identified as explained above. That is, whether the payment claim reasonably identified the construction work to which it related, such that the basis of the claim was reasonably comprehensible to the applicant.”
- At paragraph 59 of the application, the claimant stated that the payment claim needed to merely describe the claimant’s claim with sufficient particularity to allow the respondent to respond to it, and that the respondent had done so with little trouble.
- I refer to the documents at tab 6 and 7 of the response submissions, which related to the claimant’s earlier payment claim dated 28 April 2014 and the respondent’s payment schedule dated 2 May 2014. That payment claim was very similar to the payment claim in this adjudication, and the payment schedule of 2 May 2014 took no issue with the argument about insufficient particularity.
- In the circumstances, and having regard to the comprehensive response provided by the respondent in this adjudication, together with the fact that it had not earlier taken this issue in the previous payment schedule, which is attached to its adjudication response, as well is the fact that it did not press this lack of particularity in the adjudication response, I am satisfied that the payment claim is sufficiently particularised.
- In the case of Protectavale Pty Ltd v K2K Pty Limited  FCA 1248, which the respondent relied upon as authority for its jurisdictional argument in paragraph 17 of its payment schedule, it is useful to note that Finkelstein J said:
“ It is necessary to decide whether the invoice meets the requirements of s14. The test is an objective 1; that is, it must be clear from the terms of the document that it contains the required information: Walter Construction Group Ltd v CPL (Surry Hills) Pty Ltd  NSWSC 266 at . But the terms must be read in context. Payment claims are usually given and received by parties experienced in the building industry who are familiar with the particular construction contract, the history of the project and any issues which may have arisen between them regarding payment. Those matters are part of the context: Multiplex Constructions  NSWSC 1140 at …” [My underlining]
- Applying the underlined statement of the law to this case, I find that the respondent’s earlier response to a previous payment claim, together with its response in this instance, demonstrated that it was familiar with the construction contract, and the issues that it had with the claimant’s payment claim.
- I am therefore satisfied that section 17(2)(a) of BCIPA has been complied because the payment claim sufficiently identified the construction work or related goods and services to which the progress claim relates.
- I find therefore that I have jurisdiction to adjudicate the matter.
VIII. Merits of the claim
- Now that I have found jurisdiction, the approach that I intend to take is to determine:
(i) whether the claimant has made out its claim (bearing in mind that the claimant bears the onus of proof) after taking account all the objections raised in the payment schedule and adjudication response (but only insofar as they support a reason in the payment schedule) about the claim; and then
(ii) the respondent’s residual entitlement to reduce the claim under the contract, over and above all those already identified in (i) above; and then.
(iii) whether there is any residual valuation that I am obliged to make under section 13 or 14 of BCIPA in order to determine the adjudicated amount, as submitted by the respondent in paragraph 11, 14 and 15 of the adjudication response.
- The appropriate point of departure is to determine as much as necessary, the precise terms of the contract between the parties because the respondent has argued:
(i) practical completion had not been achieved [paragraphs 23 through to 31 of the payment schedule];
(ii) it was entitled to liquidated damages [paragraphs 32 through to 35 of the payment schedule];
(iii) it rejected Variation claims and PC adjustments sums. [paragraphs 36 through to 39 of the payment schedule];
(iv) the rectification costs and incomplete and defective work, exceeded the amount in the payment claim [paragraph 2.3 of the response];
(v) the respondent was entitled to set-off for this defective and incomplete work. [Paragraph 2.6 of the response];
(vi) even if there was no contractual right to set-off, I was obliged to have regard to rectification costs in valuing the claim [paragraph 2.8 and 2.9 of the response];
(vii) on 16 June 2014, the respondent terminated the contract due to substantial breaches of the claimant in respect of defective and incomplete work. [Paragraph 2.11 of the response];
(viii) the precedence of documents clause 5(d) applied to prioritise the respondent drawings over the claimant’s tender resulting in extensive amount of defective and incomplete work that required rectification [paragraphs 5 and of the adjudication response].
- There are some other issues that will need to be covered during this analysis, but they will be dealt with progressively, and the important starting point is determining what the parties have agreed, including having to their post contractual conduct, to see if the contract was varied.
e. The terms of the contract
- In determining whether there was a construction contract under BCIPA, I have already found that pages 1 to 13 of eDocs formed part of the contract between the parties.
- In annexure A to the eDocs, is the reference to “Contract Documents” which identified as follows:
(i) Specification N/A;
(ii) Drawings Tekton A01.01(E), A01.02(C), A02.03(D), A03.01(E), A05.01(E), A09.01 (D) (the “drawings”);
(iii) Bill of Quantities N/A;
(iv) Other documents Spartan Hall Construction Services P/L Tender letter dated 27/11/13 that nominated the inclusions, exclusions and PCs Sums (the “tender”).
- There were no special conditions in the contract in Annexure B.
- Neither party provided me a copy of the signed agreement, but both parties agree that the contract commenced in late January 2014.
- I am satisfied by reference to this document, together with the extensive reference by both parties to the drawings, and the tender, that they formed part of the contract.
- In addition, the respondent in its response at paragraph 3.2 stated that the tender included the architect’s Addenda’s 1A, 1B, 2, the drawings, together with the engineer’s drawings S01, S02, S03 and S04.
- In this paragraph the respondent said that it had included a copy of the complete contract at Tab 4. However, I find that it did not contain the tender.
- Nevertheless, I have been satisfied that the tender formed part of the contract, and the respondent provided it at tab 4 of the response, and this document is identical to that provided as attachment RH17 of Russel Hall’s statutory declaration.
- I note that the contract does not state that it constituted the entire agreement between the parties, so I am able to consider the precontract communications between the parties, which are important.
- In constructing the contract, I will start with the precedence of documents submissions of the respondent, because this issue assists in providing a framework as to the scope of work agreed between the parties.
Precedence of documents
- In the payment schedule the respondent did not mention the precedence of documents clause, and yet in paragraph 5 of the response in particular, the respondent refers to the precedence of contract documents clause 5(c) of the contract. It argued at paragraph 5.3, that the drawings took precedence over the claimant’s tender on the basis that the tender was described as other documents in annexure A of the contract, which was lower in the order of precedence in the drawings.
- Although this appeared on its face to be a new reason for non-payment, which is prohibited by section 24(4) of BCIPA, I find that in paragraph 28 of the payment schedule, it referred to an attached list of defects where there was clear reference in item 2 entitled contract variations/PC sum adjustments , to a failure by the claimant to include adjustments for PC items.
- For example, item 2.2 in the list of incomplete works identified a PC item for 124 “Camatic Quantum 850 upholstered seat with the 2 tablet with phenolic laminate” at $378 per seat excluding GST total price $46,945.16 excluding GST. In the payment schedule the respondent also attached the report of Mr Flavio Costanzo who costed some of these items as PC adjustments.
- In paragraph 6 of the response, the respondent then expanded upon the reason why this issue was so important, and that essentially related to the fact that on the drawings were notations, and these notations provided support for the respondent’s argument that there was a need for PC adjustments by the claimant, which it had failed to take into account in its payment claim.
- In the application paragraphs 35 through to 42, the claimant advised that there was no need to refer to the order of precedence of documents, because the documents in the contract were each capable of clear interpretation and expression.
- Accordingly, I’m satisfied that the claimant was aware of the respondent’s reliance upon precedence of documents in asserting adjustments to PC sums, such that it engaged with the respondent on this issue.
- It is appropriate for me to firstly consider the claimant’s submissions in this regard, because it is only if there is some ambiguity, inconsistency or error between the documents that there is then a need to have regard to the precedence of documents clause.
- At paragraph 39 of the application, the claimant says that the tender letter nominates the inclusions, exclusions and PCs sums. I find that there had been 3 tenders for the project over a period exceeding a year [Tab 6 in the application – documents dated 26 October 2012, 6 August 2013 and 27 November 2013], and as I have found below, there was a budgetary constraint that drove this process.
- The tender letter makes reference to “Inclusions”, “Exclusions” and Drawings” and I am satisfied that this it identified these amount, if they were applicable. Accordingly, if a PC sum was not included in the tender letter then it did not form part of the contract.
- The respondent provided me with no authority as to how one is to apply the precedence of documents clause to contracts, and the only authority that has been provided to me (and that was by the claimant) was Abigroup Contractors P/L v Multiplex Constructions P/L & Ors  QCA 501 where McPherson JA held:
“….Such provisions are, if possible, to be interpreted so as to render them harmonious with each other: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109-110 (Gibbs J). There are several instances here in which the Standard Conditions have been altered in the Special Conditions by the deletion or substitution of other specific provisions which are listed in the Subcontract. Subject to those instances, it is only where there is, within the meaning of clause 3, a conflict or inconsistency between the terms and provisions of the various Subcontract documents that the order of precedence laid down in clause 3 of the Formal Instrument will prevail.”
- In applying this principle, I am satisfied that there is a need to consider the documents harmoniously with one another, and in this context given the evidence of how the tenders were developed in the no inconsistency
- I appreciate the respondent’s submission that it is necessary to read the contract as a whole as identified in paragraph 6 of the submissions, particularly in paragraph 6.3 of the response.
- Clause 16 of the contract deals with provisional sums and prime cost items, and I find the latter relates to “PC sums” that the respondent refers to. Clause 16 provides:
“(a) Where a Provisional Sum or Prime Cost Item is included in the Contract, the Owner shall give the Contractor all necessary Directions regarding the selection and supply of materials, goods or work comprising the Provisional Sum or Prime Cost Item in sufficient time to ensure the progress of the works is not delayed..
- The governing words to the clause, relating to PC items is, where they are included in the contract. The claimant asserts that the tender identified the PCs sums that had been included, and if they were not identified, then they had not been included.
- In paragraph 40 of the application the claimant says that the drawings were updated between the series of tenders submitted by the claimant, and the tiered seating had been completely removed from the drawings, but that the notation regarding tiered seating had not been.
- Surprisingly, the respondent did not engage with the claimant on this point in its response. It rather challenged the claimant’s proposition that the tender exclusively nominated the inclusions and exclusions in respect of the works, by arguing that one needed to read the contract documents and the contract as a whole and the order of precedence of documents provided by clause 5(c) of the contract needed to be correctly applied to the contract documents.
- Clause 5(c) of the contract provides as follows:
“Subject to clause 5 (D), any ambiguity, inconsistency or error in or between the contract documents shall be resolved by applying the following order of precedence:
(i) special condition;
(ii) the general conditions of contract;
(iv) drawings; and
(v) other Contract Documents,
provided that figures shall always prevail over scaled dimensions in the event of any ambiguity or inconsistency between them.”
- I agree with the claimant that the precedence of documents clause is only activated in the event of an ambiguity, inconsistency or error, because the opening words of clause identify that is the reason for having regard to this clause.
- I am satisfied that the tender specifically identified the inclusion of PC items, because it makes reference to them, and the drawings had a number of errors.
- The drawings internal errors in notations, were in relation to the seating, but also regarding:
(i) The Conditions of Contract being ABIC SW-1 2002 Simple Works Contract, when the eDocs were the contract which Mr Milton explained in his declaration;
(ii) Warranties to be provided by Lessor, when there was no Lessor;
(iii) No ceiling finishes in the breakout area, when the notation still required ceilings.
- In my view, the parties could not have considered that the drawings would take precedence over a tender that was taking into account all the changes that were taking place over a year. I am satisfied that the tender provided for inclusions and exclusions, such that I can consider the documents operating harmoniously on that basis.
- For example, in relation to the tiered seating referred to by the claimant, drawing number CD/A01.01E in the amendments box involving issue D dated 17 May 2013, under the subject was the note, “Tiered seating deleted, mezzanine floor added, extent of work scope amended.” Nevertheless, as the claimant says, the schedule of prime cost items had not been removed from the drawing.
- What is important is whether tiered seating formed part of the contract, and nowhere does the respondent engage with the claimant on this point.
- At paragraph 16 of Mr Hall’s statutory declaration, he refers to a meeting with Mr Harrison and Mr Milton, where cost savings to the project were discussed. At this meeting he received a drawing (attachment “RH 12”) showing that the tiered seating had been removed, and neither Mr Milton, nor Mr Harrison, both of whom conceded that the meeting took place in their statutory declarations denied the removal of the tiered seating.
- In fact, Mr Harrison at paragraph 17 of his statutory declaration conceded that there was a budget for the project of approximately $250,000, and that design of the works needed to be reduced to fit within this budget. I find therefore that there were budget constraints that influenced the negotiations prior to contract and as will be seen later, governed the parties’ conduct throughout the contract.
- I therefore find that negotiations between the parties, which had commenced from 5 October 2012 [paragraph 5 of Mr Hall’s statutory declaration, and paragraph 7 of Mr Milton’s statutory declaration] culminating in the tender of 27 November 2013 were continually focused on finding cost savings (the “budget constraints”). Mr Harrison in his statutory declaration paragraph 14 confirms a series of negotiations to make the design more cost efficient and reduce the scope to make the work more affordable.
- I find that tiered seating had been removed from the contract, as was evidenced by attachment “RH 12” and from the issue D amendment referred to above. In the circumstances of budget constraints, it is inconceivable that a PC item would be required for work that had been removed from the contract.
- This means that tiered seating could not have been a PC item, because the PC item clause 16 of the contract referred to earlier, refers to items that are within the contract, and then provides a mechanism as to how to deal with the costs associated with this PC item prime cost, by deducting this amount from the contract sum and adding the actual cost associated with the provision of the PC item.
- I cannot accept that a PC sum for tiered seating, which had specifically been removed from the contract could be reasonably construed as still being required to be provided as a PC sum. I accept paragraph 40 of the claimant’s submissions in this regard
- I will make further reference to the issue in relation to specific items below; suffice is it to say that there is no need to have regard to the precedence of documents clause unless there is ambiguity, and so far I have not yet found such ambiguity, but the respondent has relied upon this interpretation, so it is appropriate to consider the other PC items as an issue, which I do below.
“Tit for tat” arrangement giving rise to changes to the works
- I have already found that the project was driven by budget constraints.
- In Mr Harrison’s statutory declaration at paragraph 44, he denies the “tit for tat” arrangement that was asserted in paragraph 39 through to 42 of Mr Hall’s statutory declaration.
- At paragraph 39 of Mr Hall’s declaration he says that Mr Harrison had described the amendments on the go to counterbalance any increases to the works with those subtracted from it as the “tit for tat” arrangement.
- At paragraph 10 of Mr Axton’s statutory declaration he also make reference to the “tit for tat” approach which required the claimant balancing any extra cost for improvements with the cost of removal of items. Mr Axton said this was described by Mr Harrison as the “tit for tat” approach.
- I prefer the evidence of Messrs Hall and Axton to Mr Harrison, as both witnesses attest to the same conversation having taken place with Mr Harrison being the person describing the “tit for tat” approach (the “balancing arrangement”). 1 person’s denial of the balancing arrangement in the face of two people who swear that this was the arrangement, is unlikely to be persuasive, particularly when the parties’ conduct and correspondence supports evidence of the balancing arrangement.
- Furthermore, Mr Thiedeke, at paragraph 20 of his declaration referred to almost weekly site meetings which he would attend with Mr Harrison and Mr Axton, together with Chris Gleeson and himself, and he attested to Mr Harrison, providing instructions to the claimant on how he wished to alter the project from the architectural drawings. This is additional support of the evidence of the balancing arrangement.
- There are also a number of independent reasons for making this finding.
- There are two letters dealing with the balancing arrangement:
(i) Mr Hall’s letter to Mr Harrison dated 12 May 2014 (tab 11 in the adjudication response) in which Mr Hall refers to a list of alleged changes that Mr Harrison had agreed with Mr Axton;
(ii) Mr Harrison’s letter in reply (attachment “RH21” in Mr Hall’s declaration) concedes that these items had been discussed with Mr Axton, but that no agreement was reached, no specific details were discussed, and the changes were not documented because they had not been agreed.
- One issue that detracts from the respondent’s denials of the balancing arrangement is its failure to challenge the list of agreed adjustments on page 4 of the payment claim. This list contained assertions of requests by the owner, or agreements with the owner to add, alter or delete items, and they went unanswered in the payment schedule.
- The defects list that was attached to the payment schedule (and Mr Costanzo’s quantification of the cost to rectify those defects) was a list created by the architect from a series of inspections he said that he had made on the site. His defects list compared work done on site to the architect’s drawings, which to my mind took no account of the balancing arrangement that the parties had been following.
- In his declaration at paragraph 34, Mr Milton makes reference to the precedence of documents clause, such that the drawings make reference to inclusions and PC sums that stand in priority to the tender.
- He then adds in paragraph 35, that Mr Hall’s reference to the contract at Tab 2 of the adjudication application, with only the general conditions of contract being attached, is a failure by Mr Hall, as at least support that Mr Hall had misconstrued the effect of his own contract.
- Mr Milton’s evidence as an architect does not automatically qualify him as having expertise in the construction of contracts, which is a legal issue about which I must decide and I am unable to accept these paragraphs of his statement.
- He goes further in paragraph 36 to attest to Mr Harrison having no involvement in the construction industry, and that Mr Harrison had not managed the project on behalf of the respondent. Such assertions are hearsay and I am not prepared to accept them from Mr Milton.
- The architect did not supervise the project, as Mr Hall says in paragraph 26 of his declaration, and Mr Milton confirms this in paragraph 4 of his declaration. At paragraph 5 of his declaration, Mr Milton says he only inspected the works when requested by the respondent from time to time.
- I therefore find that the architect was not on the project on a regular basis such that he would not have been aware of the balancing arrangement that the claimant alleged existed.
- In my view, given the budget constraints, and the lack of day to day involvement by the architect, and the failure by the respondent to respond to the agreed adjustments, together with two witnesses attesting to the balancing arrangement, I am prepared to find that the balancing arrangement existed.
- I appreciate the existence of the denial by Mr Harrison of the balancing arrangement, but in his 14 May 2014 letter, he conceded discussing these issues with Mr Axton, and then his principal argument that permeated through his denials was that no formal variation was agreed in relation to 8 out of the 12 items listed. In my view this requirement of formality strictly in accordance with the contract was inconsistent with the balancing arrangement which I have found existed between the parties.
- I have not found that the balancing arrangement was a basis of entitlement for the claimant for payment, but that it reflected the agreement as to particular items, about which the respondent now wishes to make a claim for defects.
- Furthermore, the respondent had only challenged the lack of formality of not following clause 17 of the contract in the claimant’s payment claim regarding the additional adjustments as a reason for non payment. I am not prepared to allow it to creep in as a reason for non payment of the 14 items identified in the agreed adjustments.
- In my view this would be contrary to s24(4) of BCIPA, and it would also be a breach of natural justice to the claimant, because it has not been given the opportunity to counter such submissions.
- To my mind, it was incumbent on the respondent to challenge the agreed adjustments in the payment schedule, if it had reasons for doing so, because the agreed adjustments varied the works from those identified in the drawings.
- The architect’s defects list was generated by Mr. Milton, and based on a legalistic interpretation of precedence of documents governing the scope of work, which failed to take into account the balancing arrangement, and it needs careful evaluation.
- Mr Milton and the respondent have failed to explain how it can possibly be the case that tiered seating that Mr Milton had specifically removed from the drawings as early as 8 May 2013, was suddenly still a PC item.
- This is particularly strange when Mr Milton’s, in his architect’s advice to the owner, assessment of contract price dated 2 May 2014 (attachment D2.22) in tab 6 of the application, said “Undisputed amount – Owner to supply furniture.” Mr Hall, in paragraph 59 of his declaration makes reference to this document, and said, “It was clear to me that GPTQ were now attempting to construe the contract documents to deliberately deprive SHCS of payment in circumstances where they will well aware that payment was owing.”
- Mr Harrison, at paragraph 62 of his declaration, controverted that paragraph 59 of Mr Hall when he said, “However, the suggestion that the tiered seating was in dispute is misleading, as the tiered seating was no longer a contract requirement. What was a contract requirement was for SHCS to provide the seating nominated as Camatic seating to a PC sum.”
- To my mind this does not answer the threshold question of why a PC item needed to be identified for work that was no longer part of the contract, and for which it was specifically not included in the tender. As I’ve already found, the PC sums are only identified in the contract for items that form part of the contract.
- Furthermore, it does not explain why the respondent had done an about-face in relation to the specific item between 2 May 2014 and 14 May 2014, at which time it then became evident that the parties were in dispute over a whole host of issues.
- I reiterate that I have found the balancing arrangement had been made by Mr Harrison quite sensibly, in circumstances of budget constraints, and that it was evident that progressive changes to the contract requirements took place during the construction. Accordingly, I reject paragraph 27.1 of the response that the works were not varied.
- The contract does not contain an entire agreement clause, and it is quite open for the parties to have entered into the balancing arrangement for their mutual convenience, as part of their mutual contractual obligations.
- Accordingly, I find that the balancing arrangement formed part of the contract between the parties by virtue of their mutual agreement do so.
- I am not prepared to consider any arguments about the need for formally following the contract variation requirements for any items apart from the 2 additional adjustments items for the C bus lighting and the incorrectly specified lights, because that would be contrary to section 24(4) of BCIPA and in breach of natural justice to the claimant.
- This means that paragraph 28.2 through to 28.4 of the response, and the references to paragraph 56 and 57 of the Harrison declaration, and paragraph 81 to 82 of the Milton declaration have not been considered by me.
- In relation to other the PC items about which there is a dispute, I have considered the respondent’s argument which it acknowledged was entirely based on an analysis of the written contract, including the drawings and the precedence of documents clause. It fails to take into account the balancing arrangement. In the context of PC items, I have already analysed that an item is only included as a PC item, if it is required to be used in the work, and the tender identifies what items are included for PC items. I consider the following:
(i) Item 2.1 – No Dynalights
- I accept the claimant’s submissions, having regard to the third tender that dynalights were not part of the tender, and had been deleted in order to come in under the respondent’s budgetary constraints, whereas they had been in the previous 2 tenders [attachments D2.11 in Tab 6].
- Accordingly, they could not have been needed as a PC sum, which only applies if an item is part of the contract. Therefore, there is no need to consider the precedence of documents clause, because there is no ambiguity.
(ii) Item 2.3 – Ceiling mounted data projectors
- I accept the assertion in tab 6 that projectors were part of the Audio Visual PC sum as attested to by Mr Hall in paragraph 25(c) of his declaration that they were not in the tender, where he expressed concern to Mr Milton about it as an issue, and requested the drawings be amended. There is no controverting evidence for another witness about this point, and the respondent’s submissions rely solely on the precedence of documents argument, which only applies if there is ambiguity and I find none.
- I accept this evidence in the context of the budgetary constraints I have found that pervaded the dealings between the parties throughout the negotiations and in fact during the contract
- I am satisfied from the letter in tab 12 of the application that a QS, Mr Gray of GRC, has verified that there was no separate allowance in the tender for projectors.
- Accordingly, there is no need to have recourse to the precedence of documents clause.
(iii) Item 2.4 – Carpet coverings
- I accept the assertion in tab 6 that the carpet was not in the tender as attested to by Mr Hall in paragraph 25(d) of his declaration where he expressed concern to Mr Milton about it as an issue, and the need for the drawings to be amended. There is no controverting evidence for another witness about this point, and the respondent’s submissions rely solely on the precedence of documents argument, which only applies if there is ambiguity and I find none
- Again, I accept this evidence in the context of the budgetary constraints I have found that pervaded the dealings between the parties throughout the negotiations and in fact during the contract
- Accordingly, there is no need to have recourse to the precedence of documents clause.
(iv) Item 2.5 – Mechanical ventilation
- I am unable to find a requirement for a PC sum for the mechanical ventilation in the contract as asserted by the respondent in Tab 32 which are the answers to the claimant’s response to the defects list, and although the tender makes reference to a PC sum, none is identified in the tender.
- I cannot find the reference to mechanical work contract allowance of $45,000 on the drawing CD/A09.01, so I am unable to accept that the respondent has discharged its onus.
- The respondent appears to have focussed on a progress claim by the claimant for this amount, but this does not demonstrate that this needed to be a PC item in the contract.
- I also accept that the mechanical system is adequate for the respondent’s needs based on attachment D2.56, an email from Design Air, such that it is not defective, as the claimant was responsible for providing adequate ventilation, and there is no evidence from the respondent that it is defective.
- In addition, the claimant has provided a letter from Bayside Air Conditioning dated 28 June 2014 confirming these units were probably better than what was proposed.
(v) Item 2.6 – Dishwasher and sink PC sum
- I accept the respondent’s submissions that this was not installed as the claimant has not controverted this assertion in any of the statutory declarations.
- In paragraph 66 of the application the claimant argued that the respondent needed to have a contractual right to set-off, and said that the contract expressly provided no right to set-off against the payment claim [clause 14(g) of the contract], such that I must disregard any offsetting claims.
- In paragraph 13 of the response, the respondent essentially argues that the contractual right of set off is preserved for those items that are in dispute, because clause 14(c)(ii) provides a mechanism for the respondent to identify amounts in dispute and details of the dispute.
- In support of this proposition, at paragraph 13.5 it said that otherwise the dispute mechanism outlined in clause 14(b) & clause 14(c) as regards any deduction under the contract, would be meaningless and of no effect.
- I agree with the respondent that the contract be given its natural and ordinary meaning (paragraph 13.7 of the response), and that words should not be inserted into the contract with the intention of them having no effect (paragraph 13.6 of the response).
- Earlier in paragraph 6 of the response, the respondent stated that one needed to read the contract as a whole, and this is the correct statement of law. For example, Cheshire and Fifoot’s: Law of Contract, 9th edition (2008), at paragraph 10.32 dealt with the need for a contract to be considered in context, and as a whole.
- I agree with the respondent that the interpretation put forward by the claimant regarding the set-off clause, that the respondent’s rights to dispute payment for matters about which it had identified defects and amounts in dispute, would be rendered of no effect.
- Accordingly, I reject the claimant’s submissions at paragraph 66 through to 69 of the application, and am satisfied that the respondent is entitled to set off amounts against the payment claim.
f. Residual adjudication application submissions
- I will deal with any other submissions under separate headings that have not already been considered in relation to jurisdiction and the terms of the contract above.
Termination of the contract
- In paragraph 25 of the application, the claimant said that the termination of the contract was immaterial to the payment claim reference date of 31 May 2014, but that in any event it was invalid
- From paragraphs 26 onwards, the claimant argues that the notice to remedy breach was invalid in itself and the ensuing notice of termination had not allowed 21 days following the receipt of the notice to remedy breach for the claimant to remedy the breach.
- Importantly, at paragraph 34 of the submissions, it said that the purported termination of the contract was immaterial to the adjudication application and I agree.
- An adjudicator is not an arbitrator, and has a very narrow duty to value a payment claim under a construction contract (the “valuation process”) as prescribed by section 26 of BCIPA. Unless termination of contract influences that valuation process, I am of the view that it and any submissions in relation to it are irrelevant.
- Furthermore, at paragraph 20.2 of the response the respondent concedes that, nothing turns on whether the contract was validly terminated or not.
- Accordingly, I have made no findings about whether the notice to remedy breach was valid, nor that the contract termination was valid as I’m not required to do so.
- However, some of the reasons identified in the breach notice dated 21 May 2014 (tab 16 in the response submissions), may require some scrutiny, because this notice was attached to the payment schedule.
- This requires me to consider paragraph 18, 19 and 20 of the response because they deal with the breach notice, a without prejudice conference and termination of the contract, respectively.
- Turning to paragraph 18 because this deals with the notice to remedy breach. At paragraph 18.2 of the response the respondent stated that the scale of defective and incomplete works that it had identified, and in the face of the claimant’s practical completion claim, meant that it had no alternative than to issue a breach notice.
- The breach notice attached the defects list 1 and the Savery report which dealt with acoustic defects and I am satisfied that this was brought to the attention of the claimant because at paragraph 27 of the application the claimant acknowledged that it obtained the notice to remedy breach by hand on 27th of May 2014.
- At paragraph 71 of Mr Hall’s statutory declaration he attests to this fact and attached the breach notice as attachment RH39.
- The respondent’s response submissions 18.10 through to 18.12 referred to the claimant’s response to the breach notice dated 21 May 2014, which it attached at tab 20. I will need to consider the breach notice and this response because it provides facts in relation to the status of the works and the conduct of the parties.
- 5 However, the alleged deficiency of the breach notice and the ensuing contract termination is not relevant, and I do not consider it further.
- As to paragraph 19 of the response submissions, which makes reference to a without prejudice conference, I see no relevance as to any of the issues associated with this conference. I am not prepared to consider the without prejudice communications because they are privileged.
- It is well known that the reason for such a privilege attaching to such communications is that parties make concessions in such communications against their respective interests in order to make concessions with the other party with the objective of reaching an acceptable compromise.
- Accordingly, I have had no regard to the statutory declaration of Mr Darren Jeffs because his entire evidence relates to the without prejudice conference and the minutes that he took in that conference.
- I therefore ignore the paragraph 19 of the response submissions, and any other references within the response to without prejudice communications. I also ignore the paragraph 20 response submissions, because the validity of termination of contract has no bearing on the valuation process.
Practical completion has not been achieved
- At paragraph 63 of the application, the claimant said that this was immaterial to the valuation of its payment claim, particularly given that the contract does not require practical completion to be achieved and certified in order for the claimant to be entitled to claim 100% of the contract sum.
- In paragraphs 7.8 through to 7.13 of the response, the respondent disputes that practical completion was achieved, and submits that the nature and extent of defective and incomplete work is a major issue, such that it is evident that practical completion has not been achieved.
- I do not need to decide whether or not practical completion has been achieved. In paragraph 7.17 of the response, the respondent identified a list of 4 categories that were defective or incomplete, such that practical completion could not have been achieved. Apart from the acoustic insulation defect, the other items on the list regarding the certificates of classification have now been provided (attachment RH 32), and a certificate of classification dated 13 June 2014 (attachment D1 .15 in tab 6 of the application), together with a certificate from a registered professional engineer dated 10 April 2014 (attachment D4 .21 in tab 6 of the submissions), which are dealt with the mezzanine floor footings have also been provided. The painting work in the garage is also acknowledged by both parties as now complete, so on balance, it appears as if the respondent is likely to be using the training room.
- The contract is now terminated so that the issue of practical completion in this adjudication in circumstances where the respondent has abandoned its claim for liquidated damages is really irrelevant.
- The key issue is whether the works as far as the claimant’s contractual position is concerned were complete for payment purposes, and I’m satisfied from paragraph 50 of Mr Hall’s statutory declaration that as at 30 June 2014, the works were complete for payment purposes.
- I therefore find that the claimant is entitled to have made its claims for the balance of the contract sum, together with the 3 agreed variations, the additional adjustments claimed and the agreed adjustments (for which no amount was claimed) by virtue of clause 14(b) of the contract, and as submitted by the claimant in paragraph 69 of the application.
- This is not to say that there is not a dispute about the items being claimed about which I need to still have regard, however, I’m satisfied that the claimant was entitled to issue the payment claim for the claimed amount.
- At paragraph 32 of the response, and at paragraph 32.5 in particular, the respondent concedes that, pursuant to the contract it is not yet in a position to levy liquidated damages, and it no longer presses that claim.
- Accordingly, I no longer to have regard to paragraph 79 through to 90 of the application and of the submissions in paragraph 32 of the response.
- I appreciate that the issue of the prevention of principle has been raised by the claimant has an alternative argument to the inapplicability of liquidated damages, but given that liquidated damages are not being pressed, there is no need to consider those submissions on either side.
Ambiguity in contract documents giving rise to an indemnity
- At paragraph 73 of the application, the claimant says that if I find that there is an amount owing to the respondent in respect of defective work, then that amount would be a cost to the claimant arising out of a discrepancy, ambiguity or unsuitability of the contract documents.
- In paragraph 29 of the response, the respondent stated that it was in fact relying upon the accuracy and suitability of the drawings, such that the rectification costs related to non-conformance in relation to those drawings, such that the indemnity had no application.
- As I’ve mentioned under the heading below, the respondent, is obliged to discharge its onus in relation to the cost of defects, and if I am satisfied that it is done so, the evidentiary onus then shifts to the claimant.
- In this particular case, a general submission about an indemnity arising out of the unsuitability of the contract documents creates some difficulty without a more detailed submission about the operation of clause 5(d) the contract. I appreciate that the claimant has provided its response in relation to the alleged defects in tab 6 of the application, and that these are quite detailed.
- However, the difficulty I have is that clause 5(d) of the contract requires the claimant to:
“…take any steps necessary to resolve any ambiguity, inconsistency or error in or between the Contract Documents and, where a relevant Contract Document was given by the Owner, the cost to the Contractor, in taking any such steps, together with the Contractor’s Margin on that cost, shall be added to the Contract Sum.”
- The claimant has not demonstrated the cost to it in relation to the steps to resolve the ambiguity, and it is not the cost to the claimant that is in issue here, but rather the potential cost to the defendant in rectifying the defect.
- Furthermore, I understand the claimant’s position is that it has carried out the works in accordance with the balancing arrangement rather than on the basis of the resolution of ambiguity between contract documents.
- Accordingly, I reject the claimant’s submissions in relation to this issue.
Better outcome and unreasonable to recover rectification of alleged defects
- In paragraphs 74 through to 77 of the application, the claimant submits that the result it achieved for the respondent was a better outcome and more in line with the respondent’s intentions for the final outcome of the project than the original scope of works.
- It then adds that for the respondent to seek payment for rectification of the particular defect or incomplete items of work, it must be reasonable and necessary to do so, and it referred to the case of Bellgrove v Eldridge  HCA 36 as authority for this proposition, such that, “economic waste” is prevented.
- At paragraph 76, it argued that it constructed the works in accordance with the respondent’s preferences and that the respondent is not entitled to recover any sum in respect of the rectification of the alleged defects where it is not reasonable, nor necessary, to rectify the alleged defect.
- This argument has merit in the event that I find that the balancing arrangement did not cover a particular item that is in the defects list, and I need to explore this issue in a bit of detail.
- Essentially the respondent has relied upon a strict interpretation of the original drawings to demonstrate that work is defective or incomplete, because I have found that the defects list was provided by Mr Milton, who was not involved in the day-to-day running of the project.
- At paragraph 28.5 of the response, the respondent quite properly identified that:
“….the defect items listed in Defects List 2 are either incomplete or defective work by reference to the contract documents, in particular, the Drawings at Annexure A to the Contract.”
- I am therefore satisfied that the basis upon which the defective or incomplete work is characterised relates entirely to the contract documents.
- At paragraph 77, of the application, the claimant emphasised that none of the alleged defects were reasonable and necessary, and the respondent should not be entitled to a set-off.
- In paragraph 31 of the response, the respondent took issue with the remedial work is not being reasonable or necessary and suggested that the claimant had not previously raised this issue, nor provided any alternative remedial action.
- The respondent identified that in the absence of no genuine and reasonable alternative remedial actions identified by the claimant, that I should accept the remedial actions proposed in the defect list 2.
- It is incumbent upon me to value the construction work, and this includes the estimated cost of rectifying any defective work, as required by section 14(1)(iv) of BCIPA.
- BCIPA does not state that the cost needs to be reasonable.
- In my view, whilst the respondent bears the onus in relation to the amount it claims were defective work, once it discharges that onus, the evidentiary onus shifts to the claimant to demonstrate, in this context, that the work was not reasonable or necessary.
- The claimant has provided me with no evidence upon which I can make an alternative valuation for rectifying defective work, so that if I find the work is defective, to the extent that I can rely upon Mr Costanzo’s report, I’m obliged to do so.
- It would be a breach of natural justice if I took upon myself to make an evaluation of whether the cost provided of a particular defect item was unnecessary or unreasonable without asking the parties for submissions.
- This is not to say that I have already found that the respondent has made out that there is defective work, but I will not be taking reasonable or necessary issues into account in the event that I find that some work is defective.
Contract variations and PC Sums adjustments
- At paragraphs 91 through to 97, the claimant engaged with the respondent about its complaint about the CBUS lighting system and the claims for costs of incorrectly supplied lights.
- At paragraph 33 of the response, the respondent stated that the claimant had installed these lights in complete disregard of the contract, and denied that it had ever requested such a system.
- At paragraph 34 it re-iterated that the drawings made no reference to a CBUS lighting system.
- I will considered these objections when I discuss the entitlement to the additional adjustments under “Payment claim- additional adjustments claimed” heading below.
g. Residual adjudication response submissions
- There are a number of submissions that have already been dealt with in the various headings above, as well as consideration of the amount of the payment claim below. I now deal with those submissions that have not yet been considered under those various headings as follows.
- At paragraph 4 of the response the respondent stated that the scope and extent of works had to be determined before any assessment of the extent of works and the amount due could be determined.
- It referred to the scope and extent of work in Annexure A, and then referred to clause 31 for the definition of “Works” which it extracted as follows:
“means the whole of the work that the Contractor is required under the Contract to carry out in accordance with Clause 1(a), a brief description of which is set out in the Schedule, and includes Variations and the rectification of any part of the Works that is defective”
- It referred to the definition of Contract and the need for the claimant to carry out the work in accordance with the Contract Documents and it also referred to the definition of Contract Documents, and I agree with the definitions.
- I have already found that the balancing arrangement also formed part of the contract, based on the extensive submissions and documents provided by the claimant, and these will also be used in considering the scope and extent of the work.
Acoustic insulation defect
- This is referred to in submissions 7.14 through to 7.17 and was an item that arose early in the dispute between the parties, and the respondent chose to engage an acoustic expert to determine the extent of the defects insofar as acoustic insulation was concerned. It appeared to be the trigger for further investigation by the respondent, because the expert had identified defects, and at paragraph 7.16 through to 7.21, the respondent dealt with an increasing number of defects, and then referred to other parts of the submissions for further details.
- I appreciate that the architect identified that there was an acoustic defect, based on Savery & Associates Pty Ltd report dated 9 May 2014. However, the respondent has not demonstrated to me that the insulation was an acoustic requirement, such that there was a contractual obligation for the claimant to adhere to acoustic requirements.
- It may well be that the acoustic characteristics of the work that has been carried out by the claimant is not as acoustically efficient as it might be, but if the parties have deviated from the drawings by agreement, then the reduction on optimal acoustic efficiency is not something that I could find is a defect.
- In any event, the only reference to sound as regards walls and ceilings I have found, is the note about insulation for both internal and external walls and the reference to “BRADFORD SOUNDSCREEN 75mm thick R2.0” and Bradford New Generation Soundscreen Insulation On Furring Channels on the architect’s drawings. I have been unable to find any reference in the Addenda to sound insulation, and the respondent has not pointed to any additional contractual requirement about this issue.
- In the claimant’s response to the defects in tab 6 of the application, it advised that the reference to the BRADFORD SOUNDSCREEN R2.0 was a thermal requirement, not an acoustic one.
- In tab 32 of the response, in a table created by the respondent to deal with each individual defect item, it listed the claimant’s response, and then adjacent to this response, the respondent provided its response.
- Insofar as Defect Section 5 relating to the Rectification Works to the New Training Room, the respondent did not point to any other contractual requirement, and did not engage with the claimant on the R rating of the soundscreen being a thermal rating and not an acoustic one.
- The respondent referred to without prejudice communications about alleged admissions by the claimant, in relation to which I have earlier said are not admissible in this adjudication.
- I note that Mr Milton, at paragraph 74 of his declaration demonstrated that Mr Hall demonstrated ignorance of the acoustic design requirements, and at paragraph 75 of his declaration, he said that Mr Hall had agreed that the claimant would undertake any necessary remedial works to correct the defective works.
- This statement was not supported by Mr Harrison in the paragraph 50 through to through to 58 of his declaration.
- Mr Hall makes no reference in paragraph 55 to any agreement to rectify acoustic insulation, and neither does Mr Axton, at paragraph 52 of his declaration. I appreciate that the respondent has the last “shot” in adjudication, such that Mr Hall and Mr Axton have not had the opportunity to controvert this assertion by Mr Milton.
- I note Mr Milton makes no reference to the handshake agreement with Mr Harrison, which I note Mr Harrison found offensive at paragraph 58 of his declaration.
- However, both Mr Hall and Mr Axton referred to this arrangement, and I am concerned about paragraph 55 (g) of Mr Hall’s declaration, where he refers to accepting a deal on purely a commercial basis connotes some sort of bargaining that may have taken place at this meeting in an attempt to reach a compromise.
- I’m not going so far as to make a finding that this meeting was, “without prejudice” because neither party has made such a submission. However, I am entitled to accord weight to any particular person’s evidence in the context of the facts.
- I therefore consider it unsafe, based purely on the evidence of Mr Milton that Mr Hall did make an admission that he would rectify any acoustic defects, particularly when the balancing arrangement covered a lot of these acoustic issues in the agreed adjustments, which the respondent had not controverted.
- Mr Milton was not privy to the balancing arrangement as he was not involved on the day to day basis, whereas Mr Harrison was, and Mr Harrison made no comment about Mr Hall’s alleged acceptance of the defective work.
- Accordingly, insofar as any defect items associated with acoustic insulation are concerned, which appear to be items 5.1 through to item 5.4 inclusive, I accept that these were items which mainly fell within the balancing arrangement, as identified by the claimant in tab 6 response to defects, which comprehensively dealt with them, with substantiating documentation as follows:
|Defect number||Agreed adjustment (“AA”) # in payment claim or other reason|
|5.1||AA 5 to 8, and thermal batts in south wall, which had an R3.0|
|5.2||Owner’s request and option B on 14 April architect’s instruction – ceiling to be black and paragraph 40 of Mr Axton’s declaration|
|5.4||Claimant acknowledged defect|
The Respondent’s notice of dispute
- At paragraph 8 of the response, the respondent deals with its notice of dispute which then promptly to engage a series of experts, including an acoustic report who identified defective work.
- It made reference to a without prejudice meeting under clause 27(d) of the contract to deal with the issues that have been raised in the April 2014 schedule.
- I have not made a finding about the notice of dispute, because I do not see that it has a bearing on the valuation in this adjudication.
- At paragraph 16 of the response, the respondent took issue with the variations.
- At paragraph 16.5 of the response stated in relation to variation number 1 that the claimant had failed to install the acoustic installation as required by the contract in the walls and ceilings. Nothing in variation number 1, which I accept had been agreed by the parties deals with acoustic insulation, and I find that it deals with additional audiovisual requirements. Accordingly, the reference to paragraphs 67 to 69 and 73 to 75 of the Milton declaration to my mind, do not deal with an objection to variation number 1.
- In relation to variation number 3, I accept Mr Harrison’s comments at paragraph 23 of his declaration that the claimant has failed to install a dishwasher and this is not controverted by any of the claimant’s witnesses.
- Accordingly, apart from the need to delete an amount for the dishwasher, I do not agree that the two variation claims are unsustainable.
IX. The amount of the progress payment
- Adjudication requires valuation of the payment claim for work done under a construction contract and I will need to further consider the claim to determine the validity of the amounts in the payment claim.
- I have already found that the claimant is entitled to make the payment claim for the balance of the contract sum.
- Furthermore, I am satisfied that the 3 variations, it has claimed are justified, apart from the fact that the dishwasher amount must be deducted.
- In considering the payment claim in more detail, I have considered the payment schedule and adjudication responses, where applicable, if I’ve not already taken the submissions into account earlier.
- At paragraph 11 of the response, the respondent identified that I needed to consider the provisions of BCIPA as well as the provisions of the construction contract from which the application arose, and referred to the case of O’Brien (provided in tab 13 of the response), as support for the need for me to consider a genuine contractual entitlement to set-off. I agree that this is appropriate.
- At paragraph 12 of the response, the respondent referred to clause 14 of the contract as entitling it to a set-off if there was a genuine dispute about an amount. I have already found that the set-off clause for disputed amounts is valid, and will value the payment claim accordingly.
- At paragraph 14 of the response the respondent refers to its submissions in relation to “Works” which it says are defined in clause 31 of the contract to include any rectification of any parts of the works that is defective. I agree that this is allowable to decide the value of any claim under the contract.
- At paragraph 14.6 of the response it says that in any event, I am obliged to assess the value of the claim in accordance the terms of contract and make appropriate adjustment for rectification costs in accordance of section 14(a) of BCIPA. I agree with this proposition
- Furthermore, in accordance with paragraph 15 of the response, the respondent refers to section 14(b)(iv) of BCIPA which essentially requires me to consider the estimated cost of rectifying any defects. I agree with this, but will only do so, if the contractual mechanism does not provide such accounting.
Payment claim – additional adjustments claimed
- There are two items in dispute relating to CBUS lighting and incorrectly specified lights, and the respondent’s paragraphs 33.2 and 33.3 contains the denial that the respondent had requested CBUS lighting, and earlier in the payment schedule paragraphs 37 to 39 the respondent stated there was no record that it had received a written notice from the claimant about the lights and that agreement had been reached about this item.
- At paragraph 92 of the application, the claimant relied on the statutory declarations of Mr Hall and Mr. Axton in relation to the exclusion of CBUS lighting from the scope of works, and I am satisfied that this is the case because it was specifically excluded in the tender.
- However, at paragraph 92 of the application, the claimant says that Mr Hall and Mr Axton confirmed that the respondent requested the claimant supply and installed a CBUS lighting system.
- I have been unable to find any such direction in either of these declarations.
- I note, however, that Mr Thiedeke, at paragraph 10 said that Mr Harrison had wanted CBUS lighting, and at paragraph 14 he referred to Mr Harrison and Mr Milton wanting the lighting.
- At paragraph 63 of his declaration Mr Milton, referred to paragraph 16 of Mr Thiedeke’s declaration, which dealt with the incorrectly specified light fittings, but he did not controvert Mr Thiedeke about the CBUS lighting direction.
- Mr Milton did, however, at paragraph 29, in commenting on what Mr Hall had said in paragraph 27 of his declaration, denied that a CBUS system was ever requested by the respondent. The contest between the 2 declarations is equivocal, so I am prepared to accept that Mr Milton did not give such a direction.
- However, given that Mr Milton was not on the site on a day-to-day basis, I’m not satisfied that he can give evidence that no direction was given on behalf of the respondent, because Mr Thiedeke said that Mr Harrison had given that direction.
- Furthermore, Mr Harrison makes no comment, denying this lighting direction in his declaration.
- Accordingly, based on Mr Thiedeke’s evidence, I’m satisfied that this request was made by Mr Harrison.
- The respondent denies that any variation was agreed in terms of the contract, and I find that there is no evidence of a written variation. Nevertheless, the respondent has failed to engage with the claimant in relation to its mechanism to recover its costs based on clauses 5(a) through to (d) of the contract.
- In this instance, the claimant is the person making a claim pursuant to the indemnity for its costs under clause 5, and given that this has not been controverted by the respondent in circumstances where it has engaged the claimant on virtually every other point, I’m satisfied that the costs in implementing the CBUS system and the incorrect light fitting could be added to the contract sum under clause 5(d) of the contract.
- Accordingly, I’m satisfied that these 2 items are claimable by the claimant.
- I have already been satisfied about the balancing arrangement in which the list of 14 items provided by the claimant had been agreed by the respondent under the “tit-for-tat”process put forward by Mr Harrison.
- Accordingly, I’m satisfied about the claimant’s entitlement to make the payment claim, in the amount of $104,371.06, subject to the off-setting amount for the dishwasher that had not been installed.
- However, I must now have regard to the defects asserted by the respondent in the defects list in order to value the claimant’s entitlement under the contract based on my findings that the respondent has a set-off. This approach deals with the valuation under section 14(1)(a) of BCIPA.
- The alternate basis for dealing with the defects is under section 14(1)(b)(iv) of BCIPA, which I will use, if the contractual mechanism does not deal with these costs.
X. Defects list
- The respondent’s defects and incomplete works list was costed by Flavio Costanzo (“FC”) and I have valued each of these items (where Mr. Costanzo had quantified an item).
- The respondent bears the onus in relation to its assertions about defective and incomplete work, so if there was no quantum against an item, I have decided against the respondent because it did not discharge that onus in relation to quantum.
- For example, in relation to section 5, New Training room building rectification which I deal with in more detail under a particular heading below, Mr Costanzo has identified a series of preliminaries costs to be incurred by a rectifying builder, and I accept that this is a legitimate.
- I have already not found in favour of the respondent in relation to the first three of these items 5.1 through to 5.3. In relation to the fourth item (item 5.4), I found in favour of the respondent.
- However, the amount for the provision of the ceiling frame system was not entirely clear from Mr Costanzo’s calculations because he had combined items 5.2 through 5.4, together, and I took item E only of his description as most closely reflecting the cost of the new suspended ceiling system.
- I need also therefore to adjust the preliminaries to reflect a reduced preliminaries amount. The basis of the preliminaries valuation adopted by me was to calculate the revised preliminaries on the basis of the percentage of my valuation compared to Mr Costanzo’s valuation of Section 5.0, multiplied by the preliminaries figure calculated by Mr Costanzo. In my view this was the most logical basis of determining the preliminary, because no other approach was proffered by either side on this point.
- The respondent asserted that I need to decide on the scope and extent of the work so that it is clear the amount to which the claimant is entitled, and I will apply this to the issue of defective work.
- This analysis is somewhat awkward, because my focus is on the items that the respondent says are defective or incomplete, and which I will decide, having regard to all the material whether an item is within scope, and therefore defective or incomplete.
- I have used Mr Costanzo’s list for this purpose, because it relied on the Defects List 2 for its input, and if Mr Costanzo had not valued the item (e.g. Item 3.1 – non provision of hearing loop), there was no need to further decide whether it was within scope or not, because there was no value against it for a reduction.
- In paragraph 9.5, the respondent stated that the claimant had already been paid well in excess of its entitlement, and that the application was an opportunistic attempt to obtain further payment for defective and incomplete works.
- That is the task to which I must now turn, and in so doing I will have regard to the written contract and the balancing arrangement, which I have found formed part of the contract.
FC’s list – converted to a spreadsheet in Attachment CGL 1
Section 2.00 Contract Variations and PC Sum adjustments.
- I have already considered the response to the defects in tab 6 of the application for the PC items under the “tit for tat” heading above and evaluated those reasons in light of the balancing arrangement. These reasons have then been captured in the spreadsheet.
Section 3.00 Building Services rectification works
- Items 3.1 and 3.2 have not been costed, so I do not accept any amount as a deduction.
- Item 3.3 regarding absence of LED light panels, I have had regard to the Tab 6 reasons of the claimant. Mr Thiedeke provided a declaration in support of some electrical issues. However, I do not see this issue being covered by him.
- In tab 6, the claimant stated that the lights installed were confirmed by the owner, and that it have an 8 to 10 week delay lead time. The claimant says that it would replace the lights if a variation, as agreed to cover the extra cost to do so.
- I do not understand the basis upon which the claimant is entitled to claim a variation, and it appears to me that it merely the lead time that is of concern, so I’m not satisfied that the item is not a defect.
- Accordingly, the respondent has demonstrated the defect.
- Item 3.4 regarding the Pier light DOT LED downlights. Mr Thiedeke provided a declaration in support of this item, and explained that the particular light fitting had been discontinued time the project commenced [paragraph 16 of the declaration].
- At paragraph 18, he says that substitute replacement fittings were supplied on an urgent basis, and incurred significant additional costs due to airfreight were incurred because of the architect’s failure to specify an obtainable light fitting.
- At paragraph 19 he then says that it was discovered that the replacement lights were not dimmable and needed to be replaced and that Pierlite was not prepared to accept the return of the replacement lights, and all these costs were as a result of the incorrect specification of the original light fitting.
- The claimant advised that if it was paid for the non-dimmable lights claimed in the payment claim it would return and supply the new lights at no cost.
- I have already found that the claimant was entitled to the additional adjustment of $4743.60 for the incorrectly specified lights, and in light of the claimant acceptance to replace these lights, I find that they are a defect.
Section 4.00 Building works rectification garage
- Items 4.1 and 4.2 have not been costed, so I do not accept any amount as a deduction.
- Item 4.3 – I accept this is part of the balancing adjustment as the claimant asserts, and is identified in adjustment 1 of the agreed adjustments in the payment claim, which was not controverted by the respondent in the payment schedule. It is also supported by paragraph 14 of Mr Axton’s declaration.
- I note that Mr Harrison, at paragraphs 27 and 28 of his declaration says that Mr Axton’s statement is false, but then he goes on to say, “I would not make a decision regarding design without consulting Steve Milton. I would refer any such enquiry to Steve Milton, and typically respond, with words to the effect…”
- To my mind, this answer is too general and refers to an alleged pattern of behaviour by Mr Harrison that everything would be referred to Mr Milton, when other witnesses (e.g. Mr Thiedeke) have said that Mr Harrison gave directions, and in the circumstances I am prepared to accept that he gave a direction in this case.
- item 4.4. I accept that this is part of the balancing adjustment as the claimant asserts, and is identified in item 13 of the agreed adjustments in the payment claim, which was not controverted by the respondent in the payment schedule.
Section 5.00 Building Works Rectification – New Training Room
- I have already dealt with items 5.1 through to 5.4 above.
- Having regard in particular to tab 6 in the application and tab 32 in the response with the respective submissions contained therein.
- item 5.5. – I am satisfied that this requirement was varied under the balancing arrangement as the claimant asserts, and is identified in adjustments 7 of the agreed adjustments in the payment claim, which was not controverted by the respondent in the payment schedule.
- item 5.6 – I am satisfied that this requirement was varied under the balancing arrangement as the claimant asserts, and is identified in adjustment 3 of the agreed adjustments in the payment claim, which was not controverted by the respondent in the payment schedule.
- item 5.7 – I am satisfied that this requirement was varied under the balancing arrangement as the claimant asserts, and is identified in adjustment 11 of the agreed adjustments in the payment claim, which was not controverted by the respondent in the payment schedule.
- item 5.8 – I am satisfied that this requirement was varied under the balancing arrangement as the claimant asserts, and is identified in adjustment 2 of the agreed adjustments in the payment claim, which was not controverted by the respondent in the payment schedule.
- item 5.9 – I am satisfied that this requirement was varied under the balancing arrangement as the claimant asserts, and is identified in adjustment 2 of the agreed adjustments in the payment claim, which was not controverted by the respondent in the payment schedule.
- item 5.10 – I accept that this item has been rectified, and is no longer a defect
- item 5.11 – I am satisfied that this requirement was varied under the balancing arrangement as the claimant asserts, and is identified in adjustment 2 of the agreed adjustments in the payment claim, which was not controverted by the respondent in the payment schedule.
- Item 5.12 was not quantified by Mr Costanzo, and therefore I do not accept any amount for deduction.
- item 5.13 – I am not satisfied that just because the defect was identified on 16 June 2014, that somehow the claimant is not responsible for the defect. Accordingly, I find that it is a defect.
- item 5.14 – I am not satisfied that just because the defect was identified on 16 June 2014, that somehow the claimant is not responsible for the defect. Accordingly, I find that it is a defect.
Section 6.00 Building Works Rectifications Mezzanine Floor
- item 6.1 – the claimant referred back to items 5.3, which related to discussions between Mr Axton and the owner. Mr Axton’s statutory declaration from paragraphs 6 through to 13 dealt with the agreed mezzanine and wall changes, and Mr Harrison’s agreement, and this was not controverted by Mr Milton, nor by Mr Harrison. Accordingly, I accept that this is part of the balancing arrangement, and item 5.3 refers to agreed adjustment number 14.
- item 6.2 – the claimant referred back to items 5.3, which related to discussions between Mr Axton and the owner, and Mr Axton’s statutory declaration from paragraphs 6 through to 13 dealt with the agreed mezzanine and wall changes, and Mr Harrison’s agreement, and this was not controverted by Mr Milton, nor by Mr Harrison. Accordingly, I accept that this is part of the balancing arrangement, and item 5.3 refers to agreed adjustment number 14.
Section 7.00 building works rectifications breakout space
- item 7.1 – the claimant advised that the breakout space was not in the tender, and I accept paragraph 25(a) of Mr Hall’s about lodging his price and concerns expressed to Mr Milton, that the drawings needed to delete the breakout space (ceilings and carpets). I accept Mr Hall’s paragraph 17 where he said that Mr Harrison had advised him that the ceiling and lighting to the breakout space had been deleted from the scope of works, and this was not controverted by Mr.Harrison in his declaration
- item 7.2 – the claimant stated that it was not aware of any existing exposed flouro light fittings, and that it had only been advised of the item on 16 June 2014.
- I do not consider that the claimant has discharged its onus in relation to this, issue, the such that I find that it is a defect.
- item 7.3. – the claimant advised that the breakout space was not in the tender, and I accept paragraph 25(a) of Mr Hall’s about lodging his price and concerns expressed to Mr Milton, that the drawings needed to delete the breakout space (ceilings and carpets). I accept Mr Hall’s paragraph 17 where he said that Mr Harrison had advised him that the ceiling and lighting to the breakout space had been deleted from the scope of works, and this was not controverted by Mr. Harrison in his declaration stop.
- Furthermore, the claimant said that between the drawings, A 03 – 01 A and the contract drawing A 03 – 01 E, the ceiling to the breakout space had been deleted on the drawings, and I accept therefore that it was not part of the contract.
Attachment CGL 1
- In my attached spreadsheet (attachment CGL), in the reasons column, the parties’ can quickly see my short reasons relating to each item and its value, if any.
- Those reasons are already contained in the decision, and in relation to the agreed adjustments, which I have found as part of the balancing arrangement, the agreed adjustment item number has been transferred to the spreadsheet. In some cases I have referred to a paragraph in a declaration to amplify a particular component of the balancing arrangement that I have found took place.
- I refer to the parties to the spreadsheet for the listed defects and the calculation from that spreadsheet I have carried over the amount of $74,364.11
- Accordingly, I find is the adjudicated amount is $74,364.11.
XI. Due date for payment
- s15 of BCIPA deals with the due date for payment, and the contract date is used unless it is void under one of the exceptions identified therein [s15(1)(a) of BCIPA].
- The claimant asserts in paragraphs 43 and 44 of its application that the contract clause 14(c) provides a due date the payment of 5 business days from the submission of the payment claim.
- At paragraph 45 of the application, it said that the payment claim was issued on 10 June 2014 which meant that the due date the payment was 17 June 2014, and at paragraph 34.5 of the response, the respondent makes no submissions as to the due date the payment.
- I am satisfied that the 17 June 2014 is due date for payment as it is 5 business days from the date of the invoice.
- Accordingly, the due date for payment is 17 June 2014.
XII. Rate of interest
- I’m obliged to find that the interest rate and I find that the contract provided an interest rate of 10% for late payments.
- S15(3) 0f BCIPA provides that:
“(3) For a construction contract to which the Queensland Building And Construction Commission Act 1991, section 67P applies because it is a building contract, interest is payable at the penalty rate under that section.”
- I note that the Claimant, at paragraph 99 of the application, claims the penalty rate of interest under section 67 of the QBCC Act (the “QBCCA”). In paragraphs 34.3 and 34.4 of the response, the respondent merely denies that any interest is required to pay, but make no admissions as to whether a penalty interest is applicable.
- The QBCCA requires one to consider if the contract is a building contract to which s67P of the QBCCA. This provision is in Part 4A of the QBCCA which deals with building contracts other than domestic building contracts. A domestic building contract is defined in Schedule 2 of the QBCCA as having the meaning in the Domestic Building Contracts Act 2000.
- s7(1)(a) of the Domestic Building Contracts Act 2000 (“DBCA”) provides that a domestic building contract is a contract to carry out domestic building work. Domestic building work is defined in s8 of the DBCAas the erection or construction of a detached dwelling.
- A detached dwelling is defined in Schedule 2 of the DBCA a single detached dwelling or a duplex, and I find that the training room and new mezzanine works are neither. This means that the contract is not a domestic building contract and s67P of the QBCCA applies.
- s67P of the QBCCA provides for interest of late progress payments in relation to a building contract. Building contract is defined in s67A of the QBCCA as a contract or other arrangement, other than a domestic building contract, for carrying out building work in Queensland. Building work is defined in Schedule 2 of the QBCC the A as the erection or construction of a building, and I find that the construction of the training room and mezzanine floor is within a building, and I have already found that the contract is other than a domestic building contract.
- The s67P(2) provides that interest at a penalty rate is payable for unpaid progress payments, and the penalty rate is defined in s67P(3) as 10% per year plus the annual rate of 90 day bank bills published by the Reserve Bank of Australia. I referred to the Reserve Bank online at http://www.rba.gov.au/statistics/tables/index.html and the link to Interest Rates and Yields – Money Market Daily – F1, which provided 2.64% on 25 July 2014 as the last entry for 90 day bank bills.
- The contract provides an interest rate of 10%, which is lower than the penalty rate, such that the penalty rate must therefore apply.
- I therefore find interest at the penalty rate of 12.64% on the unpaid payment claim.
XIII. Authorised Nominating Authority and Adjudicator’s fees
- The default provision contained in s34(3)(b) of BCIPA makes the parties liable for the ANA’s fees and the adjudicator’s fees in s35(3) of BCIPA in equal proportions, unless I decide otherwise.
- The claimant has succeeded in its payment claim, but its application contained some submissions regarding indemnity, betterment, set-off that I found were without merit.
- As is often the case, a significant amount of time was spent in dealing with the jurisdictional issues which were important to allow the adjudication to proceed.
- I had to evaluate the contending arguments from both sides about the quantum which required about an equal amount of time for each.
- Unfortunately, it was one of those adjudications where the parties did not engage directly with one another on a number of points which meant that the decision required a careful sifting through to ensure that every aspect was covered.
- Accordingly, I am satisfied that I should disturb the default provision, because I had to spend more time dealing with unsuccessful jurisdictional arguments of the respondent, and the claimant has been successful for most of its claim.
- Accordingly, the claimant and respondent are liable to pay the ANA’s fees under s34(3)(b) and my fees under 35(3) of the Act in the following proportions:
(i) claimant 25%
(ii) respondent 75%.
31 July 2014
Revised recalculated amount
Attachment: CGL 1 – Defective & incomplete works register