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Fitzroy Shopfitting and Building Pty Ltd v. Solene Investments Pty Ltd [2016] VCC 1352 (21 September 2016)
Last Updated: 21 September 2016
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IN THE COUNTY COURT OF VICTORIA
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Revised
(Not) Restricted
Suitable for
Publication
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AT MELBOURNE
COMMERCIAL DIVISON
GENERAL
LIST
Case No. CI-16-03184
FITZROY SHOPFITTING AND BUILDING PTY LTD
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Plaintiff
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v.
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SOLENE INVESTMENTS PTY LTD
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Defendant
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JUDGE:
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His Honour Judge Anderson
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WHERE HELD:
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Melbourne
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DATE OF HEARING:
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9 September 2016
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DATE OF JUDGMENT:
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21 September 2016
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CASE MAY BE CITED AS:
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Fitzroy Shopfitting and Building Pty Ltd v. Solene Investments Pty
Ltd
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MEDIUM NEUTRAL CITATION:
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REASONS FOR JUDGMENT
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Catchwords: Building contract – Adjudication completed under
Building and Construction Industry Security of Payment Act 2002 (Vic)
– Cheque for much lesser amount sent by defendant to plaintiff –
Accompanied by letter stating that presentation
of cheque will be deemed
acceptance in full and final payment – Whether accord and satisfaction
– Whether purported settlement
agreement breached section 48 by having
“the effect of excluding, modifying or restricting the
operation” of the Act.
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APPEARANCES:
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Counsel
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Solicitors
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For the Plaintiff
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Mr A. Beck-Godoy of Counsel
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KO Construction Law
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For the Defendant
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Mr M. Dean of Counsel
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Rennick & Gaynor Lawyers
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HIS HONOUR:
- On
28 July 2016, I ordered that “judgment be entered in favour of the
plaintiff against the defendant in the sum of $48,204.63” together
with costs fixed at $1,500. The judgment was entered upon the ex parte
application of the plaintiff pursuant to section 28R of the Building and
Construction Industry Security of Payment Act 2002 (Victoria) (“the
Act”). The judgment was based upon an Adjudication Certificate dated
16 September 2015 for $109,884.73.
- By
Summons filed 15 August 2016, the defendant seeks to set aside the judgment. The
defendant relies upon the defence of accord and
satisfaction constituted by an
offer made by the defendant on 7 September 2015 sending a cheque for $61,680.10
to the plaintiff with
a letter explaining the basis upon which the cheque was
offered and the acceptance of the offer by the plaintiff presenting the cheque
for payment.
- The
letter dated 7 September 2015 read as follows:
“Please find
attached a cheque in the amount of $61,680.10 being for full and final payment
of works contracted at Solene Paris Knox.
We advise the tiles that still have not been supplied and fixed at the
Salon together with the Air freight paid by Solene that you
refused to pay have
been deducted from the Invoice as well as the items that were part of the
original quote pursuant to the plans.
We advise that presentation (depositing) of the attached cheque will deem
considered acceptance of full and final payment in this
matter.
After the experience we have had as a result of non-completion of
contracted works including not supplying or fixing tiles aforesaid
and the
overcharging of items that were contained in the plans signed off by Westfield
and quote of the original contract by Fitzroy
Shop-fitting and Building Pty Ltd
we again wish to convey our deep dis-satisfaction”.
- By
email dated 15 September 2015, the defendant’s accountant responded,
“Just letting you know we received your cheque in the mail”.
The plaintiff banked the cheque and did not make its application for judgment
for the balance until it filed the ex parte
application on 21 July 2016.
- In
support of the ex parte application, a director of the plaintiff, Terry Marsh,
swore an affidavit which included the following
statement, “Subsequent
to the 16th September 2015, the Respondent paid to the Plaintiff, in
reduction of the Adjudicated amount, the sum of $61,680.10”.
- In
a recent affidavit in response to the defendant’s application to set aside
judgment, Mr Marsh stated in relation to the defendant’s
cheque sent with
the letter dated 7 September 2015 that, “whilst the letter said the
cheque attached was for full and final payment of the contracted works I did not
accept that as I did not
believe that the Defendant could unilaterally determine
what was full settlement. The plaintiff therefore took the payment to be
part
payment on account of the amounts due rather than satisfaction of all claims and
the adjudication determination. I say that
under no circumstances did the
Plaintiff advise the Defendant nor did it intend, by banking the cheque, to
forgo its rights to the
adjudicated amount of $104,721.10 (inc GST) plus
interest and costs. The defendant’s cheque in the amount of $61,680.10 was
banked by the Plaintiff on account of it being part payment of the monies owing
and in order to reduce the Plaintiff’s financial
duress”.
- In
my view, the statements by Mr Marsh as to the plaintiff’s intention by
accepting the payment cannot affect my determination
as to whether the defendant
has established an accord and satisfaction, being the acceptance of the payment
on the terms contained
in the letter dated 7 September 2015.
- The
issue of whether there had been an accord and satisfaction was the issue upon
which the parties came before the Court to argue
on 9 September 2016. At that
hearing, I raised with counsel the question of whether the “accord and
satisfaction”, if established by the defendant, was a
“contract” covered by section 48 of the Act which had the
“effect of excluding, modifying or restricting the operation of this
Act”, and was therefore void.
- This
was an issue that had been raised before me in the matter of Simtec Group Pty
Ltd v Ascot Building Pty Ltd [2016] VCC 1127. The parties requested the
opportunity to file written submissions, including in relation to section 48 of
the Act. Although it will be necessary to return to this issue, it is
appropriate to first determine whether there has been an
accord and
satisfaction.
Accord and satisfaction
- Mr
Dean, the defendant’s counsel relied on a number of English authorities
including Bell v Galynski [1974] 2 Lloyd’s Rep 13 in which
the English Court of Appeal found that the acceptance of a letter with an
enclosed cheque had compromised a dispute. Lord
Justice Megaw said that the
crucial issue was to objectively assess what the written words would be
understood to mean and how they
would “be treated by a reasonable,
sensible, unbiased, unprejudiced person with knowledge of the relevant
facts”;
- In
the present case “the relevant facts” include the following
matters:
- at
the time the defendant sent the letter and accompanying cheque, an adjudication
had been made on 31 August 2015 pursuant to Division
2 of Part 3 of the Act,
that as from 18 August 2015, the defendant was liable to pay the plaintiff the
sum of $104,721.10;
- the
plaintiff was entitled, pursuant to Section 28R of the Act to apply ex parte to
have judgment entered for the unpaid balance of the adjudicated sum, including
interest and costs;
- $104,721.10
was claimed by the plaintiff as a payment claim under the Act being the total of
three invoices, numbers 5034 ($79,784.10),
5035 ($3,234) and 5037
($21,703);
- the
defendant had submitted a payment schedule by email on 12 August 2015 admitting
that the total sum of $81,185.10 was owing. The
filing of the payment schedule
meant that the plaintiff could seek an adjudication under the Act;
- the
explanation given by the defendant for only paying $61,680.10 on 7 September
2015 was set out in an attachment to the letter headed,
“Fitzroy
Shopfitting Final Payment”;
- the
defendant’s attachment used the sum of $81,559.10, the “balance
owing under the agreement”, as the starting point in the calculation
of the cheque for $61,680.10. The table of calculations included two additions
and
four specific deductions and noted that a number of other stated variations
were “in quote”, that is, included in the contract
sum:
- additions:
$3,234 as the “balance due on invoice 5035” and $400 for
“cut/weld paint entry frame (as agreed with supplier)”;
- deductions:
$1,815 for “installation of mosaic tiles”, $15,740 as the
“cost of Baro 001 Tessuti tiles”, $3,608 “credit of
feature wall” and $2,350 as the defendant’s “cost of
freight for incorrect tiles”;
- deductions
were apparently made in the calculation for a number of stated items which were
noted as being “in quote”;
- the
adjudicator’s “determination” (reasons for decision)
were provided to the Court on the present application. The document indicates
the scope of the defendant’s
payment schedule under the Act, the issues
raised for determination by the adjudicator and his consideration of these
matters;
- the
attachment to the defendant’s letter dated 7 September 2015 sets out
matters raised before the adjudicator and also, it
seems, further disputes;
- the
defendant’s affidavit in the present application provides further
explanations seeking to justify the quantum of the cheque
profferred on 7
September 2015.
- In
F. T. Jeffrey Pty Ltd v Evington Holdings Pty Ltd [1997] VicSC 616
(“Jeffrey”), a decision of the Full Court, Young CJ stated at
pages 12 and 13, “When a cheque sent in full settlement of existing
liabilities is retained, the mere retention is not conclusive that there is an
accord
between the parties: it is a question of fact to be determined by the
tribunal of fact what are the terms upon which the cheque is
retained. Put in
another way, it is a question whether the recipient of the cheque agreed to take
it in satisfaction of his claim”.
- In
Wiseman v MQH Developments [1977] VicSC 190, Chernov J at page 7
referred to what Lush J had said in Jeffrey, namely that “it is
not just a matter of analysing the question by analogy with offer and acceptance
principles. Consensus or concurrence of minds
has to exist (determinant on an
objective basis) before it can be said that an accord has arisen”.
- In
Ebbage v McMahon’s Transport Pty Ltd (1999) 1 QdR 185, Pincus JA
delivering the judgment of the Court of Appeal, stated at pages
194-5:
“The cases on conditional tender of payment,
although numerous, give no clear guidance. I, like the primary judge, prefer to
follow
those in which the court has rejected the offeror’s assertion that
there has been an accord; I do so on the basis that the
question is whether
there is a contract and that the answer to that question is that there is none,
because in general the law does
not allow the imposition of an obligation in
contract to be achieved by a stipulation that it shall be deemed to be imposed
if the
prospective obligor performs a stipulated act...or does
nothing”.
- In
SNL Group Pty Ltd v CMA Corporation Ltd [2011] NSWSC 464, Sackar J at
paragraphs 43 to 55, dealt with a line of authorities commencing with Penny v
Cole (“Pinnel’s Case”) (1602) 5 Co. Rep.
117a and Foakes v Beer [1884] 2 AC 605.
- At
paragraph 53, Sackar J noted the distinction “between the ineffective
agreement to reduce or extinguish a debt owing and an alternatively binding
agreement that purports to extinguish
or reduce an existing debt whilst also
providing fresh consideration”.
- In
El-Mir v Risk [2005] NSWCA 215, McColl JA (with whom Handley and
Ipp JJA agreed) stated at [54] that, “The question of whether
there has been an accord and satisfaction is one of fact. It turns upon
determining the parties’ intentions,
which may be discerned from the terms
of the document said to constitute all or part of the agreement or from the
surrounding circumstances”.
- In
the present case, the letter dated 7 September 2015 offered no more than payment
of a lesser sum to extinguish an existing debt.
There was no “fresh
consideration” provided. Further, I consider that no
“accord” was reached, having regard to the circumstances of
the case.
- The
parties were following the processes set out in the Act: 4 August 2015 –
payment claim, 12 August 2015 – payment schedule,
13 August 2015 –
adjudication application, 25 August 2015 – defendant’s adjudication
response, 31 August 2015 –
adjudication.
- In
these circumstances, the letter by the plaintiff to the defendant simply
acknowledging, “we received your cheque in the mail” together
with the banking of the cheque, was plainly insufficient to indicate that an
agreement had been reached or that there
had been a “concurrence of
minds” that the payment of $61,680.10 was to extinguish the
adjudicated debt of $104,721.10 plus interest and costs.
Whether
purported agreement contrary to section 48 of the Act
- Section
48 of the Act provides as follows:
“No contracting
out
(1) The provisions of this Act have effect despite any provision to the
contrary in any contract.
(2) A provision of any agreement, whether in writing or
not-
- (a) under
which the operation of this Act is, or is purported to be, excluded, modified or
restricted, or that has the effect of excluding,
modifying or restricting the
operation of this Act; or
- (b) that may
reasonably be construed as an attempt to deter a person from taking action under
this Act-
is void.”
- In
Simtec Group Pty Ltd v Ascot Building Pty Ltd [2016] VCC 1127, I
considered the question of whether section 48 of the Act applied to an alleged
settlement agreement which had “the effect of excluding, modifying or
restricting the operation of” the Act.
- In
that case, I stated as follows:
“15. The terms of the
section appear clear and unambiguous. They are consistent with the intended
purpose of the Act which has been
expressed to be as follows:
‘The Building and Construction Industry Security of Payment Act 2002
was introduced in Victoria to allow for the rapid determination of progress
claims under construction contracts or sub-contracts,
and contracts for the
supply of goods or services in the building industry. The process was designed
to ensure cash flow to businesses
in the building industry, without parties
getting tied up in lengthy and expensive litigation or arbitration. It was
intended to
establish a process for the fast recovery of progress payments
payable under a construction contract. This was to be achieved by
a novel
procedure which provided for the rapid adjudication of payment disputes at a low
cost to the parties’ (Grocon Constructors
v Planit Cocciardi Joint Venture
(No. 2) [2009] VSC 426, per Vickery J at para. 33).
- If
a broad interpretation of the Act were to be applied, it may have the effect of
preventing parties from compromising a proceeding
brought under the Act. Such a
result would appear to be inconsistent with the provisions of the Civil
Procedure Act 2010 which encourages parties to resolve their disputes at the
earliest possible stage.
- It
is useful to consider the likely consequences if the facts of the present case
had been slightly different. There may have been
no dispute or ambiguity in the
terms as to payment in the agreement, and Ascot might have actually performed
its obligations under
the agreement, for example by making the first payment of
$35,000 it says was required of it. In those circumstances, it would be
surprising, if a court were not to uphold the agreement and prevent the action
proceeding. In such circumstances, that result might
be achieved by a party
making an application for the proceeding to be dismissed as an abuse of
process”.
- After
examining the circumstances of that case, I concluded that “it would be
surprising ... if Simtec’s rights under the Act were to be
curtailed”. Accordingly, it was not necessary for me to finally
determine whether section 48 had application.
- Since
delivering that judgment, my attention has been drawn to a line of authority in
the Supreme Court relating to whether a settlement
of a dispute as to the
quantum of a costs order is itself a “costs agreement” which,
if it involved a breach of section 3.4.31 of the Legal Profession Act 2004
(Vic) (“the LPA”) by purporting to exclude the statutory
right to a “costs review” under the LPA, was therefore void
(see Gardens Lawyers v. Beba Enterprises Pty Ltd [2012] VSC 519 per
Emerton J, on appeal as Beba Enterprises Pty Ltd [2013] VSCA 136
(“Beba”) and GLS v. Goodman Group Pty Ltd [2015] VSC
627 per Macaulay J).
- In
Beba, the Court of Appeal affirmed the correctness of Emerton J’s
conclusion that “Beba, as a non-associated third party payer, was not
precluded from entering into an agreement with the client by which it waived
its
rights to have the client’s legal costs reviewed”.
- Section
3.4.48A gave “an associated third party” the right to
“contract out of this Division”. The Court of Appeal
considered that Parliament could not have intended the section to prevent
non-associated third parties
desiring to bring “an end to a legal
dispute, including its costs ramifications” from reaching
“agreements settling costs issues (whether solely relating to costs, or
part of a wider resolution) [which otherwise might] be at risk of being
partly set aside at the instance of the payer [79]” per Ashley JA
(with whom Redlich and Priest JJA agreed).
- In
my view, the policy considerations raised by the Court of Appeal are relevant in
the present case. Notwithstanding the special
nature of the Building and
Construction Industry Security of Payment Act 2002 (Vic), and the clear and
direct wording of section 48, if the parties by their words and conduct have
shown that their agreement was not directed to the exclusion, modification or
restriction
of the operation of the Act but rather the genuine resolution of a
dispute, the parties should be bound by their agreement and section 48 would
have no application.
- In
this case, I have concluded that the parties did not enter into a
“settlement” agreement. The adjudication process
had recently
concluded. The defendant had very limited rights (under section 28B) to review
the adjudication. The plaintiff could make an ex parte application for the entry
of judgment under section 28R. The plaintiff’s rights to pursue recovery
for the adjudicated amount by payment or judgment (under Division 2B of Part 3)
were not affected.
- In
these circumstances, it is necessary to decide whether such an agreement would
be contrary to section 48. In my view, if the reasoning of the Court of Appeal
in Beba were applied, section 48 would not apply if there had been accord
and satisfaction.
Orders
- In
the circumstances, I propose to order that:
- The
order of His Honour Judge Anderson upon the ex parte application of the
plaintiff is affirmed.
- The
defendant’s summons dated 15 August 2016 is dismissed.
- The
defendant must pay the plaintiff’s costs of the summons, including the
hearing on 9 September 2016 and the further submissions
filed pursuant to the
order make 9 September 2016, to be assessed by the Costs Court on a standard
basis in default of agreement.
- The
parties will be notified by my intention to hand down my reasons for decision in
open court. If they wish, the parties need not
attend as the reasons will
immediately be emailed to them.
- If
a party wishes to be heard on the form of the orders proposed, it must file
further written submissions with my associate by 12
noon on 23 September 2016.
Otherwise, I will make orders in the terms proposed.
- - -
Certificate
I certify that these 8 pages are a true
copy of the reasons for decision of His Honour Judge Anderson delivered on 21
September 2016.
Dated: 21 September 2016
Carla Cianfaglione
Associate to His Honour Judge Anderson
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