Chief Judge Muecke of the South Australian District Court has recently retired, but before doing so he heard the case of Fabtech v Exact. He handed down judgment last week as [2017] SADC 44.

In a sense, the case is routine under the Building and Construction Industry Security of Payment Act 2009 (SA): a subcontractor – Fabtech – served a payment claim on the head contractor – Exact – but Exact failed to provide a payment schedule. And so the court gave summary judgment for the amount claimed. I was counsel for the successful subcontractor.

The interest in the case is in the side issues.

Intention

Exact’s initial position was to deny that the payment claim was a payment claim within the ambit of the Act. That position was abandoned before the court, but the denial had an effect: the court had in mind what Exact’s intentions were at the relevant time:

68           I consider that Exact’s email of 5 August 2016 to Fabtech was not intended by Exact to be a “payment schedule” in reply to a “payment claim” to it from Fabtech. I consider that, in the circumstances of the meeting held between the parties on 5 August 2016 between Fabtech “Progress Claim” and Exact’s email, that to be an understandable position for Exact to take. It is consistent with Exact’s position not much later when it maintained “strenuously” that Exact had not made a “payment claim” on it pursuant to the Act. All this leads me to conclude that Exact did not intend to respond by providing a payment schedule to Fabtech, as it did not consider Fabtech’s claim to be a payment claim.

Thus, while the court applied an objective test as to whether the email amounted to a payment schedule[1], it was “hardly surprising” that the email failed that test[2].

A Recommendation for Payment

Exact claimed that the email it sent through, setting out its position of various aspects of the claim, was sufficient. In respect of part that email said it would recommend to its own client that that the costs be accepted as a variation.  The email did not contain a dollar amount of the proposed payment, although some amounts in respect of parts not disputed were in fact paid. As such, the email did not meet the statutory requirement for a payment schedule:

62           What is said by Exact to be a payment schedule (Annexure B email dated 5 August 2016) does not purport, on its face, to operate as a payment schedule. It does not say it is and it does not identify any amount or amounts Exact proposes to pay or withhold.

63           This is hardly surprising as it purports to confirm Exact’s position following a meeting it had with Fabtech in which discussions were held regarding “Fabtech’s claims for variations at Hill Dam”. Exact sets out its understandings as to “actions required by Fabtech in relation to” five dot-pointed claims by Fabtech. The last two dot-pointed claims did not require any “action” by Fabtech, but rather by Exact. In one Exact indicated that it would recommend that certain costs be accepted by its client as a variation. In the other Exact indicated that it would recommend “costs of sacrificial liner and water ballast tubes” to its client as a variation and Exact would advise Fabtech following approval of those costs.

64           In respect of these last two dot-pointed claims, Exact could be understood to be saying that it may or may not pay all or any of these two items depending upon its own client’s acceptance and approval of some or all of them.

Estoppel

Exact then argued that Fabtech was estopped from enforcing its rights under the Act because the evidence was that the parties were negotiating at the time of the claim. It relied on the case of Barclay Mowlem Construction v Tesrol Walsh Bay [2004] NSWSC 716, per McDougall J at [20], [26].  Issues arose as to whether the defence of estoppel was precluded by s 15(4)(b)(ii) and s 33 of the Act, and whether the evidence of negotiations was to be excluded by s 67C of the Evidence Act 1929 (SA). But the court found it was not necessary to express any concluded view about those issues, because it was satisfied that there was no factual basis for the estoppel asserted:

78           In the case of Barclay McDougall J withheld summary judgment and indicated (in para [21]) that the proper application of a provision similar to s 33 of the Act was a matter for a final hearing rather than on a hearing of an application for summary judgment. In that case, his Honour set out (in para [16]) that it was said in that case that it had been “agreed that the parties would take no further step in response to the claim that otherwise might have been necessary until the [meeting] had taken place and the parties had failed to resolve the dispute”. It was also said that the respondent in that case relied on those matters and acted to its detriment by taking no further steps under the Act in respect of the payment claim.

79           In my view, there is nothing of that type in the case before me.  In this case, Exact was not acting to its detriment in reliance upon any representation, let alone on any contract agreed upon by the parties for “a course of action going forward” whereby Fabtech agreed not to pursue any rights it may have under the Act on the basis of its payment claim.

Severance

Exact also argued that the defective parts of the email could be disregarded pursuant to the doctrine of severance. But that was of no help either:

84           I do not consider that the principle of severance arises in this case. What the Act required Exact to do is to respond to Fabtech’s Payment Claim. The Act required it to do so in particular ways. I have found that it did not do so and, for the purposes of the so-called severance argument, Exact’s email of 5 August 2016 said nothing about whether Exact would pay Item No. VO-05 of the Payment Claim in the sum of $4,116.00 or Item No. VO-07 of the Payment Claim in the sum of $4,622.40. Those are the two items referred to in written submissions of the parties.

Finally, a point about GST. As so often, the parties expressed themselves in terms of the GST-exclusive amounts, and the payment claim did not expressly seek the GST element. When the court raised this point in argument, Fabtech conceded that it could not press a claim under the Act for the GST. GST is not something to be “automatically” added under the Act.

 

 

 

[1] 71         I do not consider that I should decide the matter before me in a way other than on an objective reading of Exact’s email of 5 August 2016, albeit in a commonsense, practical manner. I must give due regard to the clear requirements in s 14 of the Act.

[2] 72                         In this case, as I do not consider that Exact considered that it was responding to a payment claim under the Act, it is hardly surprising that what it now says to be a payment schedule did not, in my judgement, identify either the payment claim to which it related, it did not in any way at all identify the amount of the payment (if any) that it proposed to make to Fabtech, and it did not identify why it proposed to withhold payment or payments to Fabtech.

73           I so find.