BCIP Act – Payment Schedules and Without Prejudice offers

National Vegetation Management Solutions P/L v Shekar Plant Hire P/L [2010] QSC 3

I refer to my earlier entries as to how the Building and Construction Industry Payments Act 1994 (Qld) operates.

The issue in dispute was whether correspondence by the respondent’s solicitor was a “payment schedule” within section 18 of the Act and if it was privileged. The letter in contention was as follows:

“Without Prejudice”

“I am Solicitor for Shekar Constructions. My instructions are from Karl and Shelley Sheedy.

I have been handed your Tax Invoice No. 1257 issued on 31st August, 2009, seeking payment of the sum of $511,324.44.

My clients instruct it was never agreed that National Vegetation Management would be entitled to be paid for stand time, safety observer, cleaning of heavy equipment, cleaning of support of vehicles, demobilisation and loss occasioned by wrongful determination of contract. These are spurious claims and are rejected.

My clients instruct there was no specific remuneration per hectare agreed to. However, they acknowledge National Vegetation Management did perform work on behalf of Shekar Constructions for which National Vegetation Management is entitled to be remunerated.

Firstly, the area of hectares cleared the subject of Invoice No. NVM1219 was 21.94611 hectares not 41.8 hectares.

Secondly, I am instructed it was agreed between the parties that any payment due to National Vegetation Management would be reduced by the cost of its fuel paid for by my clients, the accommodation for three (3) persons employed by it and paid for by my clients and the cost to my clients of mobilisation of the equipment.

Particulars of the fuel paid by Shekar Constructions are as follows:

May-June 2009 6,741 Litres

July 2009 4,480 Litres

August 2009 716 Litres

Total 11,917 Litres

Cost of fuel to my clients was $1.39 per litre for a total of $16,564.63. I enclose copies of my client’s fuel records for your information.

Accommodation costs totalled $6,300.00, calculated as follows:

$35.00 per night x 3 persons x 60 days

= $6,300.00

Mobilisation costs are calculated as follows:

3,215 km @ $5.00 per km

= $16,075.00

The total of these expenses: $42,834.00 ($38,939.50 plus $3,894.00 GST).

My clients have already paid National Vegetation Management $100,000.00 as part payment for the work performed. My clients offer to pay a further sum of $153,575.72 inclusive of GST in full satisfaction of the National Vegetation Management claim. The GST included in this payment is $23,052.34 ($230,523.38 plus $23,053.34 less $100,000.00).

The payment of the sum of $253,573.72 inclusive of GST plus the expenses incurred by my clients of $42,834.00 equates to $2,674.00 per hectare.

Acceptance of this offer must be by letter to be received at this office within seven (7) days of today’s date. Upon receipt of the letter of acceptance I will prepare a Release of Discharge to be executed by National Vegetation Management in exchange for payment of $153,575.72.”

Without prejudice

Her Honour Margaret Wilson in the absence of full argument declined to conclude a view about privilege and admissibility, but did comment as to the general rules:

[16] The privilege attaching to “without prejudice” communications is, in part at least, “founded on the public policy of encouraging litigants to settle their differences rather than litigate them to a finish”.[9] A letter expressed to be “without prejudice” initiating negotiations may attract the privilege.[10]

[17] The privilege is a joint one, and can be waived only with the consent of both parties.[11]

[18] The privilege is directed against the admission in evidence of express or implied admissions.[12] In Unilever plc v The Proctor & Gamble Co Robert Walker LJ stressed that it is subject to numerous exceptions, and listed eight of the most common instances where evidence of what one or both parties said or wrote in the course of “without prejudice” negotiations is admissible.[13] Relevantly for present purposes, it does not preclude the proof of communications or statements relied on, not as an express or implied admission, but as an objective fact having legal consequences.[14]


Payment Schedule

Her Honour concluded:

[19] A “without prejudice” communication might conceivably be admissible as a payment schedule under the Building and Construction Industry Payments Act 1994 if it satisfied the three criteria identified by Chesterman J in Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd.[15] In the absence of full argument, I decline to express a concluded opinion on the point. But, assuming it could, the letter of 7 October 2009 failed to satisfy the second of those criteria, as I shall explain.

Her Honour reviewed  Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd[5] and recited Chesterman J’s views:

“[17] Before considering the first question, I think, it necessary to remember the purpose of the Act because that purpose will influence the approach one takes to the construction of the 14 December email. As Hodgson JA said in Brodyn Pty Ltd T/as Time Cost and Quality v Davenport:[6]

‘The Act discloses a legislative intention to give an entitlement to progress payments, and to provide a mechanism to ensure that disputes concerning the amount of such payments are resolved with the minimum of delay. The payments themselves are only payments on account of a liability that will be finally determined otherwise…The procedure contemplates a minimum of opportunity for court involvement…’

[18] Mackenzie J noted in Roadtek, Department of Main Roads v Davenport & Ors:[7]

‘… the Act prescribes tight time limits for the process of adjudication. It is essentially a summary process based on written information…Unless the parties extend time, the decision must be given within 10 days of receipt of the respondent’s response or from the time one could have been received. Further, written submissions may be asked for by the adjudicator…The adjudicator may call a conference of the parties…and make an inspection…Any conference called must be held informally. Legal representation is excluded…The process is not conducive to resolving questions of fact that cannot be resolved on written submissions or in a conference or by inspection.’

[19] In Brodyn Pty Ltd t/as Time Cost and Quality (ACN 001 998 830) v Philip Davenport & Ors[8] Einstein J referred to the legislation as:

‘…a fast track interim progress payment adjudication vehicle.’

[20] The Act emphasises speed and informality. Accordingly one should not approach the question whether a document satisfies the description of a payment schedule (or payment claim for that matter) from an unduly critical viewpoint. No particular form is required. One is concerned only with whether the content of the document in question satisfies the statutory description. To constitute a payment schedule the applicant’s email of 14 December had to:

(i) identify the payment claim to which it related, and

(ii) state any amount which the recipient of the payment claim proposed to make in response to it.

(iii) Importantly, if that amount is less than the amount claimed the payment schedule it must state why it is less.

[21] If these three criteria are satisfied the document will be a payment schedule. How they are expressed, with what formality or lack of it, and with what felicity or awkwardness, will not matter.”

Her Honour applied the test and determined it failed the second limb and entered judgment for $511,324.44 against the respondent:

[20] By s 18(2)(b) a payment schedule must state the “scheduled amount” – that is, the amount of the payment, if any, that the respondent proposes to make. Under s 20, if a respondent does not pay the scheduled amount, the applicant may recover it as a debt, which the respondent may ultimately be able to claw back in civil proceedings.[16]

[21] While I respectfully agree with Chesterman J that what matters is the content rather than the form of the response to a payment claim, there is a fundamental difference between a proposal to make a payment within the meaning of s 18 (that is, a payment on an interim basis) and an offer, open for acceptance within 7 days, to make a payment in full satisfaction of the applicant’s claim. In the latter case, the liability to pay the amount offered depends on the applicant’s acceptance of the offer, and there is no scope for the respondent’s later clawing it back.

[22] In my view, then, the letter of 7 October 2009 was not a payment schedule.

Brisbane Barrister – David Cormack

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