Adjudication Decision: 13979

Adjudication Decision: 13979 Building and Construction Industry Payments Act 2004 QLD (“the Act”)

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Adjudicator : Aleisha Jane MacKenzie (J1145742)

Application Details

Claimant

Name : Q Line Industries Pty Ltd

ACN/ABN : 12 099 947 458

Address : HQ Robina Suite 14, Level 1, 58 Riverwalk Avenue, Robina QLD 4226

Respondent

Name : SJ Higgins Constructions Pty Ltd

ACN/ABN : 69 006 869 307

Address : PO Box 481, Morningside QLD 4170

Project

Type : Commercial

Location : Kimberley College, 41 Kruger Road, Carbrook QLD

Payment Claim

Date : 25 February 2016

Amount : $152,881.08 (including GST)

Nature of claim : Standard

S18 Payment Schedule :

Date : 29 February 2016

Amount : -$96,045.45

Application Details

Application Date : 11 March 2016

Acceptance Date : 17 March 2016

Response Date : 30 March 2016

Adjudicator’s Decision Jurisdiction : Yes

Adjudicated Amount : $22,502.35

Due Date for Payment : 10 March 2016

Rate of Interest : 10% per year plus the rate comprising the annual rate, as published from time to time by the Reserve Bank of Australia, for 90 day bills

Decision Date : 18 April 2016

Claimant Fee Proportion : 50%

Respondent Fee Proportion : 50%

Claimant: Q Line Industries Pty Ltd

Respondent: SJ Higgins Construction Pty Ltd

Adjudication Application no. 13979 2 | P a g e Adjudicator: Aleisha Jane MacKenzie

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Table of Contents

Contents

INTRODUCTION .................................................................................................................................................... 3

PAYMENT CLAIM .................................................................................................................................................. 3

PAYMENT SCHEDULE ............................................................................................................................................ 3

ADJUDICATION APPLICATION ............................................................................................................................... 3

ADJUDICATOR’S NOTICE OF ACCEPTANCE ............................................................................................................ 4

ADJUDICATION RESPONSE .................................................................................................................................... 4

JURISDICTIONAL ISSUES ........................................................................................................................................ 4

REQUEST FOR FURTHER SUBMISSIONS AND EXTENSION OF TIME TO PROVIDE DECISION .................................... 4

REQUEST FOR EXTENSION OF TIME TO PROVIDE DECISION .................................................................................. 5

RESPONSE TO RFFS ............................................................................................................................................... 5

SUBCONTRACT ...................................................................................................................................................... 5

REFERENCE DATE .................................................................................................................................................. 9

SUBSTANTIAL COMPLETION ............................................................................................................................................. 9 TERMINATION ............................................................................................................................................................ 11

CLAIMANT AMOUNT AND SCHEDULE AMOUNT ..................................................................................................20

REASONS FOR NON-PAYMENT IN PAYMENT SCHEDULE ......................................................................................20

EXPOSED GRID CEILINGS ............................................................................................................................................... 21 AUTEX ACOUSTIC PANELS ............................................................................................................................................. 21 SOFFITS ..................................................................................................................................................................... 21 CHILL SPOT ................................................................................................................................................................ 21 SUNDRY HARDWARE .................................................................................................................................................... 22 DOORS AND DOOR HARDWARE ...................................................................................................................................... 22 VARIATION 5 – VAR-KCC-005-AB-ACCESS PANELS ......................................................................................................... 22 VARIATION 6 – VAR-KCC-006-AB-DELAY COSTS ............................................................................................................ 23 DEDUCTIONS – TAKING WORKS OUT OF HANDS ................................................................................................................. 24

Soffits ................................................................................................................................................................. 26 Chill Spot ............................................................................................................................................................ 26 Exposed Grid Ceilings / Internal Grid Ceilings .................................................................................................... 27 Internal setting to walls and ceilings ................................................................................................................. 28

LIQUIDATED DAMAGES ................................................................................................................................................. 28

ADJUDICATED AMOUNT ......................................................................................................................................30

DUE DATE ............................................................................................................................................................31

RATE OF INTEREST ...............................................................................................................................................31

PAYMENT OF ADJUDICATOR’S FEES AND EXPENSES ............................................................................................32

DECISION .............................................................................................................................................................33




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Introduction

1. This is an adjudication decision made pursuant to section 26 of the Building and Construction Industry Payments Act 2004 (Qld) (Act).

2. An adjudication application has been made under the Act by Q Line Industries Pty Ltd (Claimant) against SJ Higgins Construction Pty Ltd (Respondent) for ceilings, linings, partitions and carpentry work carried out by the Claimant as a subcontractor for the Respondent at Kimberley College, 41 Kruger Road, Carbrook in the State of Queensland (Site).

Payment Claim

3. On 25 February 2016, the Claimant served a payment claim on the Respondent (Payment Claim) under the Act. The amount claimed in the Payment Claim was $152,881.08 (including GST) (Claimed Amount).

4. The Respondent contends that the Payment Claim was invalid because it had not been made in relation to an available reference date under the Act. For the reasons set out below, I am satisfied the Payment Claim complied with the requirements of section 17 of the Act.

Payment Schedule

5. On 29 February 2016, the Respondent served a payment schedule on the Claimant (Payment Schedule) via email for a scheduled amount of -$96,045.45 (including GST). The Claimant did not take issue with the validity of the Payment Schedule. I am satisfied that the Payment Schedule complied with the requirements under section 18 of the Act.

Adjudication Application

6. On 11 March 2016, the Claimant submitted an adjudication application to the Queensland Building and Construction Commission (QBCC) pursuant to section 21 of the Act (Application).

7. The Application was made within the time frames required under section 21(3) the Act, namely by 14 March 2016. The Application consisted of the following material:

(a) A letter from Q Line Industries to the QBCC dated 11 March 2016 (8 pages) (Claimant’s Submissions);

(b) Payment Claim;

(c) Payment Schedule;

(d) Qline FWA Agreement 2011-2015;

(e) Qline FWA Agreement 2015; and

(f) 515 pages of project correspondence (Correspondence)1;

8. As noted by the Respondent, the Claimant did not provide a statutory declaration with the Application and the documents included were in no apparent order and did not include any explanation, tabs or numbering system to enable them to be easily identified or referred to.

9. The Claimant provided correspondence dated 18 March 2016 confirming that the Respondent was served with the Application on 11 March 2016. I am satisfied that the Application was served on the Respondent as required under the Act on 11 March 2016.

1 I did not count the number of pages included in the Application, however the Claimant contends that that there are 515 pages




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Adjudicator’s Notice of Acceptance

10. On 17 March 2016, my agent served notice of my acceptance as adjudicator via email on the parties pursuant to section 23 of the Act.

Adjudication Response

11. On 30 March 2016, I received an adjudication response from the Respondent pursuant to section 24 of the Act (Response). The Response was given within the time period required under section 24A of the Act.

12. The Response consisted of the following material:

(a) Tab A – Adjudication Response Submissions (Respondent’s Submissions);

(b) Tab B – the Payment Claim;

(c) Tab C – the Payment Schedule;

(d) Tab D – statutory declaration of Alexander Campbell Johnson together with exhibits AJ-1-AJ-30 (statutory declaration of Johnson); and

(e) Tab E – copies of cases.

Jurisdictional issues

13. Pursuant to section 25(3)(a) of the Act, I am required to decide whether I have jurisdiction to determine the Application.

14. The Respondent contends in the Payment Schedule and Response that I do not have jurisdiction to decide this matter and the Payment Claim is invalid on the basis that:

(a) the subcontract was terminated on 24 February 2016;

(b) prior to termination, reference dates arose on the 25th day of each month (clause 8.3 of the subcontract);

(c) the subcontract was terminated prior to the reference date arising on 25 February 2016 and therefore the Payment Claim was not made in respect of an available reference date.

15. For the reasons set out below:

(a) I am not satisfied that the Respondent validly terminated the subcontract on 24 February 2016; and

(b) I am satisfied that the Claimant has established a right to a progress payment under section 12 of the Act and that I have jurisdiction to decide this matter.

Request for further submissions and extension of time to provide decision

16. At 12.24pm on 5 April 2016, I caused to be sent a request for further submissions to the parties pursuant to section 25(3) of the Act (RFFS). A copy of the RFFS is attached at Annexure A to this decision.

17. In summary, the RFFS requested submissions from the parties to enable me to determine the following issues:

(a) what is the reference date (if any) for the Payment Claim; and

(b) was the subcontract terminated on 24 February 2016.




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Request for extension of time to provide decision

18. In the RFFS I also requested, pursuant to section 25A(2) of the Act, to have further time to decide the Application.

19. I received an email from the Claimant’s representative and the Respondent’s solicitor confirming consent to my request for an extension of time until 18 April 2016 to decide the Application. Accordingly, the due date for my decision was extended until 18 April 2016.

Response to RFFS

20. At 3.32pm on 7 April 2016, I received submissions from the Claimant via email in response to my RFFS (Claimant’s Response to the RFFS) which consisted of:

(a) statutory declaration of Paul Rahurahu (statutory declaration of Rahurahu);

(b) annexure A – Time Sheets;

(c) annexure B – Invoices;

(d) annexure C – Variation No. 5;

(e) annexure D – Programs; and

(f) a voice recording of Daniel Harris (SJ Higgins Site Manager), Marc Frame (Qline Supervisor) and Paul Rahurahu (Qline Manager) (Voice recording).

21. Between 3.46pm and 3.53pm on 7 April 2016, I received submissions from the Respondent via email in response to my RFFS (Respondent’s Response to the RFFS) which consisted of the following:

(a) Tab F – further submissions (Respondent’s Further Submissions);

(b) Tab G – supplementary declaration of Alexander Campbell Johnson (including AJ-1 – AJ-7) (supplementary declaration of Johnson);

(c) Tab H – copies of the cases referred to in the further submissions.

22. I also received a hand delivered USB containing the Respondent’s Response to the RFFS at approximately 3.55pm on 7 April 2016.

23. At 2.16pm on 8 April 2016, I received further submissions from the Claimant in reply to the Respondent’s Response to the RFFS (Claimant’s Reply Submissions) together with a statutory declaration of Marc Andrew Frame (statutory declaration of Frame) dated 8 April 2016.

24. Between 6.34pm to 6.37pm on 8 April 2016, I received further submissions from the Respondent in reply to the Claimant’s Response to the RFFS (Respondent’s Reply Submissions) together with:

(a) Attachment A (specification);

(b) Attachment B; and

(c) Cases.

25. I have considered these addition submissions in response to the RFFS in deciding this Application.

Subcontract

26. In order to determine whether I have jurisdiction to decide this matter, I am required to consider the provisions of the subcontract between the parties.




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27. Although there is no dispute between the parties that they have entered into a “construction contract” for “construction work” as those terms are defined in the Act, there is dispute regarding the terms of that subcontract and particularly what documents comprise the subcontract documents.

28. The Claimant contends in the Claimant’s Submissions that the subcontract documents consisted only of the Claimant’s Quote and the Vetting Notes. This contention was based on the following:

(a) on 7 July 2015, the Respondent emailed the Claimant the Revision 2a Construction Program (Revision 2a Program);

(b) on 5 August 2015, the Claimant emailed a quote to the Respondent for the amount of $646,900 plus GST (Claimant’s Quote);

(c) after phone and text negotiations regarding price, on 24 September 2015 the Respondent phoned the Claimant and confirmed the contract price of $622,000 plus GST;

(d) on 24 September 2015, the Respondent emailed the Claimant the vetting notes requesting that they be completed and signed;

(e) on 28 September 2015, the Claimant amended the vetting notes to align with the Claimant’s Quote and emailed them to the Respondent (Vetting Notes);

(f) on 30 September 2015, the Claimant received an Intention to Enter Contract letter from the Respondent (Intention to Enter Contract) which referred to the Vetting Notes and Tender minutes but attached no documents;

(g) works commenced on site on 12 October 2015;

(h) on 22 October 2015 the “Major Works Subcontract, Version 04.09.2015” was emailed to the Claimant by the Respondent and on 27 October 2015, the Claimant received the written contract in the post (subcontract);

(i) on 29 October 2015 the Claimant sent the subcontract back to the Respondent which contained its handwritten amendments (Claimant’s Amended Subcontract);

(j) the Claimant never received a signed copy of the Claimant’s Amended Subcontract back from the Respondent in the post;

(k) at some stage between 2 November 2015 and 26 February 2016, the Claimant’s Amended Subcontract has been amended by the Respondent in 7 locations on pages 11, 12, 21, 26, 35 and 37 and theses amendments have not been countersigned by the Claimant;

(l) on 26 February 2016 (after numerous requests) the Claimant received a scanned copy of the subcontract from the Respondent with handwritten amendments made by the Respondent (2 days after the subcontract was allegedly terminated) (Respondent’s Amended Subcontract).

29. The Claimant contends that the Respondent’s Amended Subcontract is not the contract binding on the parties for the following reasons:

(a) at the time of commencement of the work the Respondent had not issued any written contract;

(b) the Claimant was instructed to proceed with the works based solely on the Claimant’s Quote and the Vetting Notes;

(c) it is clear from the Intention to Enter Contract that the formal contract was something to be dealt with by the parties at some time subsequent to the commencement of the works;




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(d) the formal contract when provided was not consistent with the Claimant’s Quote and Vetting Notes;

(e) when an unsigned proposed contract was received by the Claimant four weeks after the Intention to Enter Contract (and over 2 weeks after the Claimant commenced work on Site), it was immediately amended in hand, signed by the Claimant and forwarded to the Respondent by registered mail on 29 October 2015 (a copy of the Claimant’s Amended Subcontract was provided at AJ-4 of the statutory declaration of Johnson);

(f) whilst the Australia Post records show that the subcontract was collected by the Respondent on 2 November 2015, the Respondent at no time informed the Claimant that any of the amendments to the form of contract were not acceptable nor did the Respondent countersign and return the contract;

(g) it was not until 26 February 2016 (after the subcontract was terminated) that the Respondent returned the subcontract with “unauthorized” amendments made to it, significantly deleting hand written amendments which had been made by the Claimant;

(h) the Claimant contends that the amendments were made in hindsight and with the intention of alleging breaches of the subcontract by the Claimant;

(i) the amendments [of the Respondent] are of no effect as the Claimant has never accepted them;

(j) any offer made by the tendering of the written form subcontract by the Claimant to the Respondent was rejected by the alteration of the contract by the Respondent;

(k) as a result the written form subcontract is to be ignored with only evidence of the agreement between the parties as to performance of the work being the Claimant’s Quote and Vetting Notes.

30. The Respondent’s primary contention is that the subcontract documents which form that basis of the agreement between the parties are the following documents as amended by the Respondent (a copy of which is located at AJ-6, now referred to as Respondent’s Amended Subcontract):

(a) Formal Instrument of Agreement for Subcontract;

(b) General Conditions of Subcontract;

(c) Schedule 1 – Subcontract Particulars;

(d) Schedule 2 – Vetting Notes;

(e) Schedule 3 – Drawings.

31. At paragraph 33 of statutory declaration of Johnson, he contends that in or around November 2015, the Respondent signed and posted to the Claimant the Respondent’s Amended Subcontract (being the version of the subcontract that was later emailed to the Claimant on 26 February 2016).

32. There is no evidence provided by the Respondent to support the contention that the Respondent’s Amended Subcontract was sent to the Claimant in November 2015 (or at any time prior to 26 February 2016). As stated above, the Claimant contends that it did not receive the Respondent’s Amended Subcontract until after the alleged termination of the subcontract.

33. I am of the view that the documents which formed the basis of the agreement between the parties compromised of the following documents as amended by the Claimant on 29 October 2015 and posted to the Respondent that day (AJ-4 to statutory declaration of Johnson):




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(a) Formal Instrument of Agreement for Subcontract;

(b) General Conditions of Subcontract (General Conditions);

(c) Schedule 1 – Subcontract Particulars (Schedule 1);

(d) Schedule 2 – vetting notes (Vetting Notes);

(e) Schedule 3 – Drawings.

(In the balance of my decision I refer to these documents as the Subcontract)

34. I have made this decision based on the following:

(a) the Subcontract (as amended by the Claimant on 29 October 2015) was received by the Respondent on 2 November 2015 but was never countersigned and returned to the Claimant prior to the alleged termination date;

(b) I accept the Respondent’s contention (at paragraphs 36 to 42 of the Respondent’s submissions) that the parties conducted themselves as if they were bound by the Subcontract, and more particularly that:

a. the Claimant signed and returned the Subcontract, including the General Conditions and therefore acknowledge that it was bound by the General Conditions;

b. during the Project the parties conducted themselves as if they were bound by the terms of the Subcontract as demonstrated in paragraph 41 of the Respondent’s Submissions;

c. on the authority in the decision in Barron Properties Pty Ltd (in Receiverships) & Order v Borhani-Shidani [2010] QDC 253, although the parties did not agree on the discreet amendments to the General Conditions, the parties did agree that the General Conditions were binding on them.

(c) I do not accept the Respondent’s contention that the clauses that the Claimant alleges were amended by the Respondent are of no consequence to the present dispute. My reasons for this are apparent in my decision below. In any event, given that I have decided that the documents that comprised the subcontract are those as amended by the Claimant on 29 October 2015, this has no bearing on my decision.

(d) I also note the Respondent’s contention that it is content to proceed on the basis that the Subcontract as signed by the Claimant, including the Claimant’s hand amendments on 29 October 2015, constitutes the terms that governed the relationship between the parties (albeit on its understanding that the amended clauses bear no relevance to this claim).2

(e) I accept the Respondent’s contention that the fact that there are differing hand amendments to a limited number of terms in the General Conditions does not justify a wholesale abandonment of the General Conditions.3 More particularly I accept the Respondent’s contention that:

A) the essential terms of the Subcontract were clear and complete; and

B) there is no basis to suggest that there is any uncertainty regarding the written terms that were not the subject of hand amendment by either party.

2 Paragraph 46(a) of the Respondent’s Submissions 3 Paragraph 47 of the Respondent’s Submissions




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35. I do not accept the Respondent’s contention that, to the extent that there is uncertainty regarding the hand amended terms only, those terms are non-essential and can be severed or ignored.4 I do not consider that there is any uncertainty regarding the handwritten amendments.

36. I have considered the contentions of the Respondent at paragraphs 47 to 58 of the Respondent’s Submissions, but they do not alter my finding.

Reference date

37. Section 12 of the Act provides that “from each reference date under a construction contract, a person is entitled to a progress payment if the person has undertaken to carry out construction work, or supply related goods and services, under the contract.”

38. ‘Reference Date’ is defined in Schedule 2 of the Act and means (in this case) a date stated in, or worked out under, the contract as the date on which a claim for a progress payment may be made for construction work carried out or undertaken to be carried out under the contract.

39. The Subcontract provides the following in relation to reference dates:

(a) pursuant to clause 8.3, the Claimant may submit one claim for a progress payment on the 25th day of each month, unless different arrangements are made in writing between the Claimant and the Respondent; and

(b) pursuant to clause 8.9, within 28 days of Substantial Completion being reached by the subcontractor or at least Practical Completion being reached under the Head Contract, the subcontractor shall provide the contractor with a final payment claim and endorse it ‘Final Payment Claim’.

40. There is no dispute that the Payment Claim was issued on 25 February 2016, however the Respondent contends that the Subcontract was terminated on 24 February 2016 and therefore the reference date did not arise. I accept that the correct legal principle is that in the event that termination was effective on 24 February 2016 then the reference date of 25 February 2016 does not arise as the reference date does not accrue after termination and they do not survive termination under the Subcontract.

41. However, given the Claimant had contended that it had completed all work under the Subcontract as at 24 February 2016 (and prior to termination), in order to determine whether there was a reference date I must also determine whether substantial completion under the Subcontract had been achieved by the Claimant and whether a reference date under clause 8.9 applies to the Payment Claim. It was on this basis that I requested submissions from the parties.

Substantial completion

42. Clause 37.1 of the General Conditions provides that ‘Substantial Completion’ is that stage in the execution of the Subcontract Works when:

(a) the Subcontract Works are complete except for minor omissions and minor defects;

(b) those tests which are required by this Subcontract to be carried out and passed before the Subcontract Works reach Substantial Completion, have been carried out and passed;

(c) the Subcontractor has delivered to the Contractor the following:-

A) all original warranties;

4 Paragraph 49 of the Respondent’s Submissions




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B) all notices, permits, approvals and certificates required to be obtained from relevant authorities;

C) an executed Deed of Release;

D) documents and other information required under this Subcontract which, in the opinion of the Contractor, are essential for the use, operation and maintenance of the Subcontract Works; and

(d) …

(e) ….”

43. Clause 37.2 of the General Conditions provides that “when the Subcontractor is of the opinion that the Subcontract Works have reached the stage of Substantial Completion, the Subcontractor must notify the Contractor, specifying the date on which, in the Subcontractor’s opinion the Works reached Substantial Completion.”

44. The Claimant contended in the statutory declaration of Rahurahu at paragraph 4.1.1 that as at 3.30pm on 24 February 2016 the Claimant had reached Substantial Completion under clause 37.1 of the Subcontract in that it had complied with clause in so far as it was required, and in relation to other aspects, such as tests, warranties, notices, documents, none were required to be provided.

45. The Respondent provided detailed submissions at paragraphs 17 to 27 of the Respondent’s Reply Submissions as to the requirements specified in the Subcontract to provide various documents including warranties and certificates. I accept those submissions.

46. After considering all of the submission made by the parties, I am not satisfied that Substantial Completion was reached on 24 February 2016 on the basis that:

(a) as contended by the Respondent, the Claimant was required to provide various documents pursuant to clause 37.1(c) of the Subcontract and those documents were not provided until after 24 February 2016. This is evidenced by the Respondent’s contention that on 2 March 2016 the Claimant provided electronic copies of:

A) original warranties (as required by clause 37.1(c)(i);

B) Notices, permits, approvals and certificates required to be obtained from relevant authorities are required by clause 37(c)(ii)

C) Documents essential for the use, operation and maintenance of the Subcontracts works as required by clause 36.1(c)(iv).5

(b) clause 37 must be read as a whole and that the Claimant was required to give notice to the Respondent under clause 37.2 that substantial completion had been reached, which it did not do;

(c) by issuing a further payment claim endorsed under the Act on 24 March 2016 for return of retention monies, the Claimant has shown an intention that the Payment Claim was not a claim that was made under clause 8.9 of the Subcontract.

47. I do not accept the Claimant’s contention, at paragraph 4.3.1 of the statutory declaration of Rahurahu that “insofar as 37.1 of the contract requires the production of documents and information which may be held or requested by third parties, those requirements are void as they would affect what would otherwise be a right to make a payment claim under the Act”. The

5 A copy of those documents were contained at Attachment B to the Respondent’s Submissions in Reply




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Claimant has not been clear on which section of the clause it is referring to, but it appears (as identified by the Respondent) this is a reference to the obligations under clause 37.1(c). I accept the Respondent’s contention that such obligations (or preconditions to a final payment claim) fall outside the ambit of section 99 of the Act.

48. It is not necessary for me to consider whether the works were complete subject to minor defects or omissions (under clause 37(1)(a) of the Subcontract), because I have determined that Substantial Completion was not met by reason of non-compliance with clause 37.1(c) as at 24 February 2015.

49. Further, I do not consider it necessary for me to decide on my ability to consider the Claimant’s voice recording on 25 February 2016 provided by the Claimant regarding a discussion on site which the Claimant alleges supports its contention that the works were complete subject to minor defects and omission. The Respondent has provided detailed submissions in the Respondent’s Reply Submissions (at paragraphs 28 to 40) as to why I should not consider that recording. I did not listen to the recording. For the reasons set out below the recording has no bearing on my decision.

Termination

50. Having decided that substantial completion was not reached by 24 February 2016, the only reference date that may have been available to the Claimant for the Payment Claim was the reference date of 25 February 2016 pursuant to clause 8.3 of the Subcontract.

51. I accept the Respondent’s submissions that the reference date of 25 February 2016 was not available to the Claimant if the Subcontract was terminated on 24 February 2016. This conclusion is on the basis that reference dates do survive after termination pursuant to clause 30 of the Subcontract (unless it is a final claim).

52. In order to determine whether the termination is valid I need to consider whether there were any grounds giving the Respondent a right to terminate under the Subcontract.

53. Pursuant to clause 30 of the Subcontract, the Respondent may terminate the Subcontract by notice to the Claimant if the Claimant:

(a) fails to proceed with the Subcontract works “regularly and diligently” or in a “competent manner”;

(b) neglects or persistently neglects to comply with the direction from the Contractor which is given in accordance with the terms of this Subcontract; or

(c) is in otherwise substantial breach of its obligations under the Subcontract.

54. There is no definition of “substantial breach” in the Subcontract.

55. On 24 February 2016, the Respondent sent an email to the Claimant notifying it that it terminated the Subcontract (Termination Notice) as the Claimant was in substantial breach of the Subcontract for failing in their obligation to:

(a) proceed regularly and diligently with the Subcontract Works as per clause 2.1(c) (Ground 1);

(b) bring the Subcontract Works to the state of Substantial Completion by the Date for Substantial Completion as identified in Schedule 1 as per clause 2.1(d) (Ground 2);

(c) not interfere with, delay or damage the work of the subcontractor, the principal, other contractors or subcontractors as per clause 2.1(h) (Ground 3);

(d) do all things necessary to ensure that the Head Contract Obligations are met to the satisfaction of the contractor and the superintendent as per clause 2.1(f) (Ground 4);




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(e) comply with directions given by the contractor pursuant to the subcontract as per clause 2.1)(i) and clause 28 (Ground 5);

(f) provide a Statutory Declaration and evidence of payments to workers, secondary subcontractors, and supplies of goods and services has been provided when requested by the Contractor, as per Clause 8.1(d) (Ground 6).

56. The Claimant contends that the termination was defective because:

(a) it was based upon breaches of a particular written contract which the Claimant disputes formed the basis of the contract between the parties (as noted above I do not accept the Claimant’s submission regarding the contract documents);

(b) the Respondent cannot rely upon its own breach to give rise to a termination;

(c) the works were practically complete and were “finalised” on the day of termination;

(d) the Respondent appreciated that the works were complete, that there was a reference date the following day and “jumped in” with its purported termination as to attempt to hold the Claimant out of payment and in particular hold the Claimant out of relief by adjudication.

57. The Claimant also contends in the Claimant’s Submissions that:

(a) a party purporting to terminate a contract without cause does not effect a termination at all;

(b) that the attempted termination amounts to a repudiation of the Subcontract but that the Subcontract remains on foot;

(c) the Respondent has repudiated the Subcontract but the Claimant did not accept that repudiation and has in fact affirmed the Subcontract and has remained ready willing and able to perform the Subcontract (as set out in the Claimant’s lawyers letter dated 1 March 2016).

58. For the reasons set out below I have decided the Respondent did not have grounds to terminate the Subcontract on 24 February 2016.

59. Given I have made this determination, it is not necessary for me to consider in relation to the issue of termination, whether the Respondent was itself in breach of the Subcontract or whether the Respondent had breached an implied term in the Subcontract to act in good faith when exercising any right of termination.

Ground 1 - Failure to proceed regularly and diligently with the Subcontract works

60. Pursuant to clause 30.1 of the Subcontract, if the Claimant fails to “proceed regularly and diligently with the Subcontract works” then the Respondent may terminate the Subcontract.

61. The Respondent contends in the Respondent’s Submissions and the statutory declaration of Johnson that the Claimant has failed to comply with this requirement on the basis that:

(a) the Claimant was required to comply with Revision 2a of the construction program which provides that the Date for Substantial Completion is 5 December 2015. The Claimant did not reach substantial completion by 5 December 2015;

(b) the Respondent issued “works to go” programs to the Claimant which reflected the status of the relevant items. The “works to go “programs demonstrated that the Claimant had 55 days’ worth of work remaining as at 7 December 2015 and 27 days’ worth of work remaining as at 6 January 2016;




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(c) the Claimant was entirely responsible for its failure to progress the Subcontract works in accordance with the Revision 2a Program;

(d) the Claimant never requested an extension of time under clause 32.2 of the Subcontract;

(e) the closest the Claimant came to notifying the Respondent of a delay was on 25 January 2016 when it wrote “We….hereby give notice of our intention to recover costs for delays past the completion date of 5/12/2016”. This sentence is not enough to comply with clause 32.2 of the Subcontract;

(f) if this was adequate notice, which is denied by the Respondent, then it was not caused by the Respondent or its agents or a direction to vary the work but rather the Claimant failing to adequately resource and a failure to diligently carry out the Subcontract works;

(g) the Respondent regularly raised issue with the Claimant’s delayed progression and inadequate resourcing for example in an email on 15 January 2016;

(h) on 15 January 2016, representatives of the parties had a meeting on Site where it was proposed by Johnson that part of the Subcontract works be carried out by other contractors at the Claimant’s expense and that the Claimant agreed to other contractors carrying out this part of the Subcontract works;

(i) on 21 January 2016 the Respondent sent a letter advising of the Claimant’s failure to progress the works in accordance the program;

(j) on 25 January 2016 the Claimant denied the it had failed to meet its obligations under the Subcontract and asserted, that it had supplied sufficient labour at all times;

(k) on 2 February 2016, the Respondent advised the Claimant that it was engaging others to complete outstanding parts of the Claimant’s works.

62. The Respondent also contends in the statutory declaration of Johnson that the Claimant failed to proceed regularly and diligently because:

(a) over the 2015-2016 Christmas period, the Site was shut down from 24 December 2015 to 3 January 2016, the Claimant was required to recommence on Site on 4 January 2016 but they commenced one week later, on 11 January 2016 with only three-person crew;

(b) pursuant to clause 16.0 of the Subcontract, the working hours and working days for work on the site shall be 6.00am to 6.00pm, Monday to Saturday;

(c) item 17 of the Vetting Notes states that the tenderer has allowed “to work site personnel six (6) days per week (Monday to Saturday, between 6.00am to 6.00pm) or as necessary to maintain the construction program”;

(d) on 15 December 2015, in response to an email from the Respondent regarding limited works hours, Frame from the Claimant advised that the hours for the Claimant are 5.45am to 2.45pm Monday to Thursday, 5.45am to 1.45 Friday and 6am to 11am on Saturday and that the Claimant is normally the only one who is on site on Saturdays;

(e) the Guymer Bailey Architecture report (attached at AJ-15) provides evidence that the Claimant failed to complete the Subcontract works diligently because of the defects in the Claimant’s work.

63. Rahurahu contends at paragraph 5.1 of his statutory declaration that the number of employees on site was optimum for the working conditions having regard to the tasks to be done at the time. He contends that:




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(a) the number of the Claimant’s employees on site from, day to day varied from a maximum of 7 reducing to 2 at the end of the month as the need reduced;

(b) during that month [February] the Claimant was unable to complete certain works until the Respondent had finalised various matters including the supply of door hardware, doors, curtain tracks, sundry hardware and the installation of the plinth to the chill out spot and those things were provided at various time during February allowing the Claimant to finalise the works.

64. The Claimant also contends (at paragraph 5.2 of the statutory declaration of Rahurahu) it was unable to complete the works in accordance with the program and that there is no dispute that the roof to the library had not been finalised by the Respondent before 5 December 2015 which made compliance with the program impossible for the Claimant.

65. On review of the material, I am not satisfied that the Respondent had the right to terminate the Subcontract on 25 February 2016 for a breach of Ground 1 for the following reasons:

(a) There is no evidence that the Claimant’s failure to reach Substantial Completion by the Date for Substantial Completion was as a result of conduct of the Claimant that would amount to a failure to proceed regularly or diligently.

(b) The Claimant contends that as at 5 December 2015 the works were delayed due to the work of other subcontractors being incomplete and this is evidenced by the revised program dated 7 December 2015 indicating that the roof to the library building had not been finalised at this stage. I accept the Claimant’s contention that the roof was required to be on before it could proceed with substantial aspects of the Subcontract Works.

(c) The Claimant also contends, which I accept, that the program completion date was a relevant factor in the Claimant entering into the Subcontract. More particularly, by inserting the notation at the beginning of clause 27 in relation to the issuing of programs that “both parties agreeing to the construction program the milestones and overall duration being accepted by Qline”, any program (other than the one that formed part of the Subcontract) was required to be agreed upon by the Claimant if it was to be contractually bound by it.

(d) There was never any requirement for the Claimant to follow the “works to go” program given the amendments to clause 27 of the Subcontract. The “works to go” program were not contractually binding on the Claimant by reason of the clause 27 amendments and the fact that the Claimant never agreed to them.

(e) There is no evidence to suggest that as at 24 February 2016, the Claimant was in breach of its obligation to proceed regularly and diligently and in fact the evidence suggests that the works were complete as at that date (although the Claimant had not complied with the formal requirements for reaching Substantial Completion as determined above).

(f) Even if the Claimant was in breach of this obligation as at the Date for Substantial Completion being 5 December 2015 or even as at 4 January 2016 when they were allegedly required to be back on site, by continuing to issue “works to go” programs and not exercising the right to terminate when the right arose, the Respondent has waived earlier breaches.

(g) There is no evidence in the site diaries to suggest that there were major issues on Site or that the Claimant failed to progress the works apart for one date (on 3 February 2016) where the Claimant appears to have failed to have enough men on site but the Respondent perfected this by arranging another contractor on Site.




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(h) Whilst the Subcontract stated the working hours and working days on site at clause 16, I do not regard the requirements of the clause to be mandatory and requiring the Subcontractor to be on Site every day between those hours. The clause deals with the time within which work on Site can be performed and clause 16.3 says that the Claimant cannot work outside those hours. The clause is not the sole indicator of whether the Claimant was proceeding “regularly and diligently”. For example, it could not be assumed that 6 men were required to be on site 6 days a week for 12 hours a day if that level of man power was not required to complete the work. I accept the Claimant’s position that they resourced the project depending on the level of work that was required to be performed.

66. It is clear that the Respondent was of the view in its 2 February 2016 letter that it had the right to terminate the Subcontract (based on amongst other things the Claimant was not proceeding regularly and diligently with the works) but elected not to. The Respondent persisted with the Claimant and waived the breaches and after 2 February 2016, based on the site diaries, there is nothing to suggest that the Claimant was not proceeding regularly and diligently.

67. I am simply not satisfied that there is enough evidence to suggest that as at 24 February 2016 the Claimant had failed to proceed regularly and diligently with the works.

68. The Respondent contends that the breaches were “continuing and ongoing”. I can see no direct evidence of this. The project as a whole was behind Revision 2a Program. But there is no evidence to suggest that the Claimant was solely responsible for delays to the project prior to 5 December 2015. Further, there is no evidence to suggest that the Claimant was not proceeding with its work regularly and diligently prior to 5 December 2015.

69. A failure to reach Substantial Completion by the date for Substantial Completion and a failure of the Claimant to request an extension of time does not justify a conclusion that the Claimant did not proceed regularly and diligently with the works.

70. The Claimant was on site and was performing works (as evidenced by the Claimant’s site diaries and invoices attached to the statutory declaration of Rahurahu). Whilst I note that the record of hours on site by the Claimant differs between the Claimant and Respondent, I am minded to give preference to that of the Claimant’s as it is a record of its own time on site. Further, it appears that the Claimant’s records are up to date and accurate, whereas the Respondent’s are blank on some days.

71. I do not accept that the Claimant had breached this ground or that the Respondent was entitled to terminate the Subcontract as a result of such a breach.

Ground 2 – failure bring the subcontract works to the stage of Substantial Completion by the Date for Substantial Completion

72. The Respondent contends that:

(a) the Claimant failed to “bring the Subcontract Works to the stage of Substantial Completion by the Date for Substantial Completion as identified in Schedule 1” as required by clause 2.1(d) of the Subcontract; and

(b) this failure alone, or considered with one or a combination of substantial breaches 1 and 3 to 6, amounts to a substantial breach of the Subcontract, which entitled the Respondent to terminate the Subcontract on 24 February 2016.6

73. Schedule 1 of the Subcontract states that the Date for Substantial Completion is “as per the current Construction Program.” There is no dispute that the Date for Substantial Completion was

6 Paragraph 78-81 of the statutory declaration of Johnson




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5 December 2015 based on the Revision 2a Program and that the Claimant did not bring the Subcontract works to Substantial Completion by the Date for Substantial Completion.

74. However, I do not accept that the Respondent had a contractual right to terminate the Subcontract on the basis that the Claimant failed to bring the works to Substantial Completion by the Date for Substantial Completion.

75. The remedy for failing to bring the works to Substantial Completion under the Subcontract is set out in clause 33.1 of the Subcontract, namely damages calculated in accordance with that clause. In the event that the parties intended a breach of clause 2.1(d) to permit an immediate right of termination on the part of the contractor then it would have been specified in clause 30.1 of the Subcontract.

76. I do not accept the Respondent’s contention in the Respondent Further Submissions at paragraph 88, that the Claimant’s promise to bring the works to substantial completion by 5 December 2015 was a continuing breach and a “fresh right to terminate the Subcontract based on Ground 2 accrued, day to day from 5 December 2015 to 24 February 2016”. The Respondent’s actions after 45 December 2015 do not reflect that position.

77. In any event, even if I am incorrect and a failure to comply with clause 2.1(d) of the Subcontract was a substantial breach which gave rise to a right to terminate under clause 30.1 of the Subcontract, that right no longer existed as at 24 February 2016 on the basis that: 2 months had passed since the right arose; the Respondent had elected to proceed with the Claimant continuing to carry out work under the Subcontract; the Respondent had issued new “works to go” programs; and the Respondent had requested and approved variations to the scope of work.

Ground 3 - not interfere with, delay or damage the work of the Contractor, the Principal Other Contractors or Subcontractors


(a) pursuant to clause 2.1(h) of the Subcontract, the Claimant must “not interfere with, delay or damage the work of the Contractor, the Principal Other Contractors or Subcontractors”;

(b) that the Claimant’s breach of clauses 2.1(c) and 2.1(d) of the Subcontract caused the Claimant to breach clause 2.1(h) of the Subcontract; and

(c) the Claimant’s interference with and delay of works being carried out by others amounts to a substantial breach of the Subcontract which considered alone (or with one or a combination of substantial breaches 1, 2 and 4 to 6, entitled the Claimant to terminate the Subcontract on 24 February 2016.7

79. More specifically the Respondent contends that8:

(a) on 8 February 2016 the plasterer engaged by the Respondent sent an email to the Respondent in relation to delays it was experiencing “due to the poor plastering in the library area” and other matters;

(b) as a consequence of the delays that the Claimant was causing the plasterer, the painter engaged by the Respondent was also experiencing delays, which the Respondent contends is evidenced in an email from the painter also on 8 February 2016; and

(c) the mechanical, electrical and hydraulic contractors engaged by the Respondent were also delayed by the delays in plastering that had, in turn, been caused by the Claimant.

7 At paragraph 85 of the statutory declaration of Johnson 8 At paragraph 84 of the statutory declaration of Johnson




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80. I do not accept the Respondent’s contention that the Claimant has breached this clause. There is insufficient evidence to suggest that the Claimant was in breach of clause 2.1(h) on the basis that:

(a) the only evidence of any issue with the plaster impacting other trades was the email dated 8 February 2016. There could be any number of reasons why the plasterer was being held up from completing their works. There was no issue noted in the site diary on this day and the only notation is simply “Qline are still setting in the Library and building the Chillout spot”;

(b) there is no evidence of any allegation that the Claimant had delayed other contractors (such as mechanical, electrical and hydraulic). Even if there was evidence that these trades were delayed, there is no evidence to suggest how that was attributable to conduct of the Claimant; and

(c) the Claimant contended that they were other factors affecting their performance, such as that they were being held up by other trades (as set out in detail in Ground 1);

(d) there is only one entry in the Respondent’s site diaries that would suggest any such inference which was on 3 February 2016 which states “there is only three qline workers on site today. I tried to call Paul this morning but only got to leave a message. I did however bring in a plasterer from Narambar to help out with the plastering so as to keep up with the painting.”. However, I also note on the previous day that the Respondent has 6 men on site but the site lost power from 11.30am until 3am. This entry alone does not indicate a breach of this ground sufficient to terminate.

(e) as at 24 February 2016, the works were largely, if not entirely complete and therefore it could not be said as at 24 February 2016 that such breach remained an ongoing issue.

81. In the event that the Claimant was in breach of this obligation and it amounted to a substantial breach, then the right terminate would have arisen on either 3 February 2016 or 8 February 2016. The Respondent did not elect to terminate the Subcontract at that point, but rather continued to provide the Claimant with instructions under the Subcontract, including taking part of the works out of the Claimant’s hands. These actions are not consistent with the Respondent’s contention that the breaches would be relied upon as a ground for termination.

Ground 4 – failure to do all things necessary to ensure that the Head Contract Obligations are met to the satisfaction of the Contractor and the Superintendent


(a) the Claimant has failed “do all things necessary to ensure that the Head Contract Obligations are met to the satisfaction of the Contractor and the Superintendent” as required by clause 2.1(f) of the Subcontract; and

(b) such a breach is a substantial breach of the Subcontract which, considered alone, or with one or a combination of substantial breaches 1 to 3 and 5 to 6 entitled the Respondent to terminate the Subcontract on 24 February 2016.9

83. The Respondent contends that the Claimant’s:

(a) failure to progress the Subcontract works in accordance with the construction program; and

(b) failure to achieve Substantial Completion by the Date for Substantial Completion,

9 Paragraph 90 of the statutory declaration of Johnson




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prevented the Respondent from meeting its obligations under the Head Contract, and this is a clear breach of the Respondent’s obligation to do all things necessary to facilitate the achievement of the Respondent’s obligations under the Head Contract.10

84. No evidence has been provided by the Respondent that the Respondent has not met its obligations under the Head Contract. For example, the Respondent has not provided any notices issued from the Superintendent or the Principal which suggests that the Respondent is in breach of the Head Contract and the reasons for such breach.

85. I am not satisfied that the Claimant has breached the obligation in clause 2.1(f) of the Subcontract.

Ground 5 – failure comply with directions given by the contractor pursuant to the subcontract


(a) the Claimant has failed to “comply with directions given by the contractor pursuant to the subcontract” as required by clause 2.1(i) and clause 28; and

(b) clause 30.1(e) of the Subcontract expressly provides that the Respondent may terminate the Subcontract if the Claimant “neglects or persistently neglects to comply with the direction from the Contractor which is given in accordance with the terms of this Subcontract; and

(c) such a breach is a substantial breach of the Subcontract which, considered alone, or with one or a combination of substantial breaches 1 to 4 and 6 entitled the Respondent to terminate the Subcontract on 24 February 2016.11

87. The Respondent has referred to clause 27.1 of the Subcontract which provides that the “Contractor may from time to time, issue to the Subcontractor a Construction Program. The Subcontractor must comply with any Construction Programme issued by the Contractor. The Issue of a Construction Programme constitutes a direction by the Contractor under this Subcontract.”

88. As noted by the Respondent, this clause has been amended by the Claimant by inserting the following handwritten words before the clause “With both parties agreeing to the Construction Program, the milestones and overall duration being acceptable to Qline”.

89. The Respondent contends that the following amounted to a substantial breach of this clause by the Claimant:

(a) the Revision 2a Program was agreed to by both the Respondent and the Claimant and therefore constituted a direction by the Respondent;

(b) the Claimant failed to comply with the Revision 2a Program, including the failure to achieve Substantial Completion by the Date for Substantial Completion;

(c) the Respondent issued “works to go” programs throughout the project, including on 7 December 2015 and 6 January 2016;

(d) the Claimant failed to comply with the “works to go” programs.

90. The Respondent further contended that as the Revision 2a Program specified a start and finish date for each activity which comprised the Subcontract Works, and the Revision 2A Program

10 Paragraph 89 of the statutory declaration of Johnson 11 Paragraph 90 of the statutory declaration of Johnson




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constituted a direction to comply with those start and finish dates, every time the Claimant was late in starting or finishing an activity the Claimant breached the Subcontract. 12

91. I do not accept the Respondent’s contention that Revision 2a Program was a direction by the Respondent. It was a document in existence at the time that the parties entered into the Subcontract and therefore not a program issued during the Project. Further, as previously stated, given the amended wording in clause 27.1, I do not accept that the issue of “works to go” programs which were not agreed to by the Claimant constituted a direction that the Claimant was required to comply with.

92. There is no evidence of a direction from the Respondent to the Claimant that the Claimant failed to respond to. As submitted by the Respondent, they issued “works to go” programs, however as previously determined, the issuing of these programs and whether they constituted a “direction” must be considered with the amendments made to clause 27 of the Subcontract. The “works to go” program never became a direction as they were not agreed to by the Claimant.

93. No other “directions” are relied on by the Respondent in support of this ground.

94. I am not satisfied that the Claimant has failed to comply with this obligation and therefore find that the Respondent has not established that they had a right to terminate on this ground.

Ground 6 - Failure to provide a Statutory Declaration and evidence of payments to workers, secondary subcontractors, and supplies of goods and services has been provided when requested by the Contractor

95. The Respondent contends that the Claimant has:

(a) failed to provided a “Statutory Declaration and evidence of payments to workers, secondary subcontractors, and supplies of goods and services when requested by the Contractor”;

(b) the Claimant submitted progress claims on 25 October 2015, 25 November 2015, 25 January 2015 and 25 February 2015 and none of these progress claims included a statutory declaration as required by clause 8.1(d) of the Subcontract;

(c) this amounts to a substantial breach of the Subcontract which, considered along or with one or a combination of substantial breaches 1 to 5, entitled to terminate the Subcontract on 24 February 2016.13

96. The Claimant disputes that the Respondent ever requested the statutory declarations. The Respondent did not provide evidence that the Respondent requested the statutory declarations.

97. In any event I do not accept that this would be a substantial breach of the Subcontract or a ground that would enable the Contractor to terminate the Subcontract. The remedy for failing to provide statutory declaration under clause 8.1(d) of the Subcontract is that the Claimant shall not be entitled to any sum due.

Summary

98. The Respondent contends at paragraphs 110 to 116 of the Respondent’s Further Submissions that the multiple breaches the subject of grounds 1 to 5 went to the root of the contract and therefore collectively entitled the Respondent to terminate the Subcontract. As set out above, I am not satisfied that the Respondent has proven any of the alleged breaches.

99. As at 24 February 2016, I am not satisfied that the Respondent had a right to terminate the Subcontract and issue the Termination Notice.

12 in the Respondent’s Further Submissions at paragraph 86(f) 13 Paragraphs 98 to 101 of the statutory declaration of Johnson




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100. Accordingly, I am satisfied that the Claimant had a reference date which accrued on 25 February 2016 and that the Payment Claim was given with respect to that reference date and is otherwise valid.

Claimant Amount and Schedule Amount

101. The Claimant has claimed the amount of $152,881.08 (including GST) in the Payment Claim. The Respondent contends in the Payment Schedule that the amount owing is -$96,045.05 (excluding GST).

102. Below is a reconciliation of the amounts in dispute between the parties:

Contract Works Claimed amount Scheduled Amount

Exposed Grid ceilings $1,356.60 $0.00

Autex Acoustic Panels $2,700.00 $0.00

Soffits $16,494.66 $0.00

Chill spot $6,750.00 $0.00

Previous Chill Spot deduction $2,040.00 $0.00

Sundry Hardware $644.00 $0.00

Doors and Door hardware $370.30 $0.00

SUBTOTAL (excluding GST) $30,355.56 $0.00

Variations

Variation 5 – access panels $3,427.62 $0.00

Variation 6 – Delay costs $105,199.62 $0.00

SUBTOTAL (excluding GST) $108,627.24 $0.00

TOTAL (excluding GST) $138,982.80 $0.00

Plus GST $13,898.28 $0.00

TOTAL (including GST) $152,881.08 $0.00

LESS Deductions

Soffits $0.00 -$42,133.85

Chill spot $0.00 -$5,220.60

Internal setting to walls and ceilings

$0.00 -$5,984.00

Internal Grid Ceilings $0.00 -$2,206.60

Liquidated damages $0.00 -$40,500.00

SUBTOTAL deductions (excl GST) $0.00 -$96,045.05

Plus GST on deductions $0.00 $9,604.51

TOTAL $152,881.08 $105,649.56

Reasons for non-payment in Payment Schedule

103. In relation to the Contract Works component of the claim (being the amount of $30,355.36), the Respondent disputes that the Claimant is entitled to the entire claimed amount. Below I address each claim separately and the reasons for non-payment.




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Exposed Grid Ceilings

104. The Claimant has claimed that the “Exposed Grid Ceilings” work are 100% complete in the Payment Claim and that it is entitled to payment for this work.

105. The Respondent contends that the amount in dispute is $1,356.00 (being the amount not previously claimed and certified in earlier claims) and that the amount owing is $Nil.

106. In the Payment Schedule, the Respondent provides the reasons for non-payment as “no reference Date has arisen under the Subcontract”. The Respondent further states that it is entitled to setoff for works completed by it under clause 27.2 of the Subcontract. This setoff is address below under the heading “deductions”.

107. Despite contending that it is entitled to setoff for the amount of work completed by another contractor, the Respondent does not dispute that the works are 100% complete.

108. I am satisfied the work is complete and the Claimant is entitled to payment for this work in the amount of $1,356.00.

Autex Acoustic Panels

109. The Claimant has claimed that the “Autex Acoustic Panels” work are 100% complete in the Payment Claim. The Respondent contends that the amount in dispute is $2,700, (being the amount not previously claimed and certified in earlier claims) and that the amount owing is $Nil.

110. In the Payment Schedule the Respondent provides the reasons for non-payment as “no reference Date has arisen under the Subcontract”. The Respondent provides no additional reasons as to why this item is not due for payment.

111. The Claimant contends that the works are 100% complete. The Respondent does not dispute this contention. I am satisfied the work is complete and the Claimant is entitled to payment for this work in the amount of $2,700.

Soffits

112. The Claimant has claimed that the “Soffit” is 100% complete in the Payment Claim. The Respondent contends that the amount in dispute is $16,494.66 (being the amount not previously claimed and certified in earlier claims) and that the amount owing is $Nil.

113. In the Payment Schedule the Respondent provides the reasons for non-payment as “no reference Date has arisen under the Subcontract”. The Respondent provides additional reasons as to why this item is not due for payment, being that it is entitled to a setoff for work completed by it under clause 27.2 of the Subcontract. This setoff is addressed further below under the heading “deductions”.

114. The Claimant contends that the works are 100% complete. The Respondent does not dispute that the works are complete.

115. I am satisfied that the works are complete and that the Claimant is entitled to payment for this work in the amount of $16,494.66.

Chill Spot

116. The Claimant has claimed that the “Chill Spot” is 100% complete in the Payment Claim. The Respondent contends that the amount in dispute is $6,750.00, (being the amount not previously claimed and certified in earlier claims) and that the amount owing is $Nil. The Claimant is also claiming a further $2,040 which appears to have deducted against this item in a previous payment schedule.




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117. In the Payment Schedule the Respondent provides the reasons for non-payment as “no reference Date has arisen under the Subcontract”. The Respondent provides additional reasons as to why this item is not due for payment, being that it is entitled to a setoff for work completed by it under clause 27.2 of the Subcontract. This setoff is addressed further below under the heading “deductions”.

118. The Claimant contends that the works are 100% complete. The Respondent does not dispute that the works are complete.

119. I am satisfied that the works are complete and that the Claimant is entitled to payment for this work in the amounts of $6,750.00 and $2,040.00

Sundry Hardware

120. The Claimant has claimed that the “Sundry Hardware” works are 100% complete in the Payment Claim. The Respondent contends that the amount in dispute is the full amount of $644.00, (being the amount not previously claimed and certified in earlier claims) and that the amount owing is $Nil.

121. In the Payment Schedule the Respondent provides the reasons for non-payment as “no reference Date has arisen under the Subcontract”. The Respondent provides no additional reasons as to why this item is not due for payment.

122. The Claimant contends that the works are 100% complete. The Respondent does not dispute this contention.

123. I am satisfied the work is complete and the Claimant is entitled to payment for this work in the amount of $644.00.

Doors and Door hardware

124. The Claimant has claimed that the “Doors and Door Hardware” works are 100% complete in the Payment Claim. The Respondent contends that the amount in dispute is the full amount of $370.30, (being the amount not previously claimed and certified in earlier claims) and that the amount owing is $Nil.

125. In the Payment Schedule the Respondent provides the reasons for non-payment as “No Reference Date has arisen under the Subcontract”. The Respondent provides no additional reasons as to why this item is not due for payment.

126. The Claimant contends that the works are 100% complete. The Respondent does not dispute this contention.

127. I am satisfied the work is complete and the Claimant is entitled to payment for this work in the amount of $370.30.

Variation 5 – VAR-KCC-005-AB-Access Panels

128. The Claimant has claimed the amount of $3,427.62 for “VAR-KCC-005 – AB – Access Panels” in the Payment Claim.

129. In the Payment Schedule, next to the item in the “Subcontract Payment Schedule Details” it states “refer to memo 7”. Memo 7 is the facsimile enclosing the Payment Schedule which does not appear to contain any reason for not paying this item.

130. The Respondent seeks to provide further reasons for non-payment at paragraphs 154 to 156 of the Respondent’s Submissions. The item is not addressed at all in the statutory declaration of Johnson.




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131. I note from the documents which were included in the Adjudication Application that:

(a) at 11.13am on 9 February 2016 Rahurahu email Johnson attaching Variation No. 5 as per site instructions 4704 and 4705 which totaled $3,900.00;

(b) at 11.19am on 9 February 2016 Rahurahu then emailed Johnson again stating “Can you please approve ASAP the attached 3 site instructions 4704, 4705 & 4707 to proceed as variations”;

(c) at 7.10am on 10 February 2016, Johnson replied to Rahurahu stating “the access panels are approved, can you please build the cost of the curtain track into that”;

(d) at 10.58am on 10 February 2016, Rahurahu sent an email again to Johnson attaching Variation No. 5. The variation had been amended and included an extension of time claim and was for a total amount of $4,670.00;

(e) at 11.11am on 10 February 2016, Johnson sent an email to Rahurahu stating “thanks for sending over, but I note there is a 3 days extension in each, so an additional 6 says to install 10 access panels?”;

(f) at 11.57am on 10 February 2016, Rahurahu responded stating “it is because of timing and the labour I had on site at the time. This is the problem with not being proactive during the job and leaving everything to the end. The story of this project”;

(g) It then appears that on 24 February 2016 (the date before the Payment Claim), Rahurahu sent a further amended Variation 5 to Johnson for the amount of $3,427.62 (being the amount claimed).

132. It appears clear to me that a site instruction (direction) was given by the Respondent on 29 January 2016 (Site instruction 4704) and on 1 February 2016 (Site Instruction 4705) for the supply and installation of access panels and that the variation issued matches those site instructions. I am satisfied that the Respondent approved the variation on 10 February 2016.

133. I am satisfied that the value claimed is reasonable and in fact is less than the amount of the variation when it was approved by the Respondent on 10 February 2016. I allow the amount of $3,427.62 for this Variation 5.

Variation 6 – VAR-KCC-006-AB-Delay costs

134. The Claimant has claimed the amount of $105,199.62 for VAR-KCC-006-AB being for Delay Costs. This claim represents a substantial component of the total claimed amount in the Payment Claim.

135. The Respondent contends in the Payment Schedule that:

(a) the Claimant is not entitled to any claim for extension of time and the Respondent has not received notice from the Claimant in relation to clause 11.2(e) of the Subcontract notifying the Respondent of any delay caused by other trades on site;

(b) the Respondent has not received a notice under clause 32 of the Subcontract and the Respondent is unable to approve any delay cost unless there is strict adherence to clause 32 of the Subcontract (as noted in clause 32.10); and

(c) notwithstanding the above, the Claimant has also claimed in its variation overhead costs, offsite overheads and time related costs, which are not claimable in a variation in accordance with clause 36.1 of the Subcontract.

136. The Claimant contends in the Application that:




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(a) the Claimant gave notice in accordance with the Subcontract on 25 January 2016 in response to the Respondent’s Memo No 002 dated 21 January 2016;

(b) at this stage (ie. 25 January 2016), the Claimant became aware of the additional costs in relation to the project delays and gave notice of their intention to recover costs; and

(c) on Wednesday, 24 February 2016 at 3.10pm, the Claimant issued Variation 6 for associated costs and for 81 day prolongation. The Claimant then proceeded to provide details of the items in the claimed variation at page 4-5 of the Claimant’s Submissions. I note that Variation 6 does not specifically claim an extension of time under clause 32 of the Subcontract.

137. The Respondent provides detailed submissions at paragraphs 148-200 of the Respondent’s Submissions as to why the Claimant is not entitled to this variation.

138. I have reviewed the Subcontract and I cannot find any entitlement under the Subcontract for the Claimant to claim the costs associated with this variation. I accept the Respondent’s submissions that:

(a) there is no basis upon which the Claimant can claim delays costs as a variation pursuant to clause 35 of the Subcontract;

(b) clause 36 of the Subcontract which governs the valuation of variations, provides that in determining a fair and reasonable value for a variation item, no account shall be taken of the overhead costs; administration costs incurred by the Subcontractor and time related costs of any nature whatsoever;

(c) under clause 32.7 of the Subcontract, an extension of time is the sole remedy in respect of delay, and the Claimant is not entitled to payment in respect of an extension of time.

139. The Claimant has not pointed me to any provision in the Subcontract that would entitle it to claim the costs claimed in this variation. These costs are not costs recoverable under the variation clause (being clause 35 and 36) and are specifically excluded. Nor is there a right under the Subcontract to claim costs as a result of delay under clause 32.

140. I also note, and accept the Respondent’s contentions that I can only make a decision in relation to delay costs where there is a contractual mechanism to do so. The Respondent has relied on the decision in Consolidated Construction Co Pty Limited v JM Hargreaves (NSW) Pty Limited [2005] NSWCA 228 and the application of that decision in ACN 060 559 971 Pty Ltd (formerly Abel Point Marina (Whitsundays) Pty Ltd) v O’Brien & Anor [2007] QSC 91 to support the reasoning that in determining whether I have power to award delay damages pursuant to the Act I must consider whether there is a contractual mechanism pursuant to which an amount may become due and payable and be included in a progress payment as part of the total price of construction work.

141. As set out above, there is no such contractual mechanism in the Subcontract and the absence of which means that any claim for delays costs (or prolongation costs), at best, is a damages claim which I do not have jurisdiction to consider.

142. The Claimant has not been able to establish a contractual entitlement to these costs. I value this variation as $Nil.

Deductions – taking works out of hands

143. Pursuant to clause 27.2 of the Subcontract:

“if in the opinion of the Contractor, the Subcontractor is failing to proceed with due expedition and without delay or is not performing in accordance with the Contractor’s




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construction program (as updated from time to time), the Contractor may by notice to the Subcontractor take over the whole or any part of the Subcontractor’s work and complete that work at the Subcontractors cost and expense. The Contractor will determine the cost and expense incurred and any other loss or damage sustained by the Contractor as a consequence and the same will constitute a debt owing buy the Subcontractor to the Contractor…” [emphasis added]

144. The effect of clause 27.2 of the Subcontract is to allow the Respondent to take work out of the Claimant’s hands without prior warning if in the “opinion” of the Respondent the Claimant is failing to proceed with due expedition and without delay or is not performing in accordance with the Contractor’s construction program.

145. In order for the Respondent to take over the works or any part of the works pursuant to clause 27.2 of the Subcontract, notice is required to be given. Clause 41.7 of the Subcontract states that a party giving a notice under the Subcontract must do so in writing.

146. The result being that if work is taken over by the Respondent prior to giving such written notice, then the contractual entitlement to take over the work does not arise and the Respondent is not entitled to recover its costs pursuant to clause 27.2.

147. I note from the material before me that:

(a) on 21 January 2016 the Respondent sent a letter to the Claimant advising (First Take over Notice) that;

A) the Claimant had failed to complete the works in accordance with the updated project program and failed to meet its obligations under clauses 2.1(c), (d) and (f), 27.1 and 27.2;

B) it has no choice but to engage additional labor to help complete the Head Contract works within the project program;

C) provides a list of work yet to be completed;

D) advises that as of that day, they have engaged another contractor to reestablish the program which involves the “employment of a second ceilings & Lining crew to help Q Line Industries Pty Ltd complete suspended grid ceilings, plasterboard ceilings and setting”.

(b) on 25 January 2016 the Claimant responded to the First Take Over Notice rejecting the allegation that they were in breach of the Subcontract and stating, amongst other things that:

A) it had supplied sufficient labour at all time;

B) it has complied with its agreed Construction Program other than delays that were outside their control; and

C) rejecting the Respondent’s claim for costs and giving notice of their intention to recover costs for delays past the completion date of 5 December 2016; and

(c) on 2 February 2016, the Respondent sent further a letter to the Claimant (Second Take over Notice) advising amongst other things that:

“we have had to engage other to complete elements of scope that have been removed from Qline (merely exercising our right under the Subcontract, refer to clause 27.2). This included the external soffit sheeting and supplying internal sheeters, setters and carpenters to push the project over the last two weeks.”




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148. The Respondent relies on the First Take over Notice and the Second Take over Notice as its notification (refer to paragraph 128(c) of the statutory declaration of Johnson) under clause 27.2 of the Subcontract. I accept that the First and Second Take over Notices comply with the requirements of clause 27.2.

Soffits

149. The Respondent contends in the Payment Schedule that it was required to engage another company to complete work that the Claimant was unable to complete due to “insufficient resourcing and an over lack of progress on site. The total cost of this borne by SJ Higgins is $38,303.50 plus administration fees (in accordance with clause 8.1) of 10% totaling $42,133.85, and is a debt due to SJ Higgins in accordance with clause 27.2 of the Subcontract Agreement. This debt owed is shown as a variation in the claim summary.”

150. The Respondent contends that it was entitled to take the work out of the Claimant’s hands, that it has complied with clause 27.2 and that it can recover those costs.

151. The Respondent has provided the following quotations and invoices from Narambel Pty Ltd in the total amount of $38,303.50 in support of its setoff claim:

(a) quotation in the amount of $23,000 for “Soffit Lining” attached at AJ-20 (Narambel Quotation);

(b) invoice (Ref: Var01) in the amount of $12,378.50 for “additional Soffit works” as per AJ-21 and the extracts from the ‘Dayworks book’ attached at AJ-22; and

(c) invoice (ref: VAR02) in the amount of $2,925.00 for further “additional Soffit works” as per AJ-23 and the extracts from the ‘Dayworks Book’ attached at AJ-24.

152. As set out above, in order for entitlement to arise under clause 27.2 of the Subcontract, notice must be given to the Claimant by the Respondent. I note that the works referred to in the relevant invoices above all relate to work which would fall under the Second Take over Notice and do not relate to the works referred to in the First Take over Notice. Further, I note that all of the works were carried out prior to the issue of the Second Take Over Notice as detailed below:

(a) the works the subject of Var01 in the amount of $12,378.50 were carried out between 21 December 2015 and 18 January 2016; and

(b) the works the subject of Var02 were carried out on 19 January 2016, 20 January 2016 and 22 January 2016.

153. In relation to the Narambel Quotation, there is no evidence of when the works were carried out, however presumably they were performed at the same time or before the works the subject of Var01. Further the tax invoice 390/1 from Narambel states that the works the subject of the Narambel Quotation were 95% complete as at 22 January 2016.

154. Based on my reasoning above and review of the supporting invoices, the Respondent has not established its entitlement under the Subcontract to these costs as the works were performed prior to the Second Take over Notice. Accordingly, I allow $Nil a deduction for this claim.

Chill Spot

155. The Respondent also contends in the Payment Schedule that:

“SJ Higgins was required to engage another company to complete work that Q Line were unable to complete due to insufficient resourcing and an overall lack of progress on site. The total cost of this borne by SJ Higgins is $6,786.00, less the amount deducted in the previous claim (-$2,040.00, revised total of $4,746.00) plus administration fees (in




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accordance with Clause 8.10) of 10% totaling $5,220.60 and is a debt due to SJ Higgins in accordance with Clause 27.2 of the Subcontract Agreement.”

156. The Claimant concedes at paragraph 3 of the statutory declaration of Frame that:

(a) the Respondent engaged a carpenter (Jordon) to work with the Claimant’s carpenters to construct the Chill Spot;

(b) Jordon also constructed the Reading Terrace and the base frame of the Auditorium seating located within the Library;

(c) the Respondent also engaged a setter to work in the Library area.

157. Further, the Claimant contends in the Claimant’s Submissions in Reply that “much of these works” (when referring to the carpentry work for the reading terrace and chill spot) were carried out by the Respondent or agents.

158. The Respondent contends in the Payment Schedule that:

(a) the Claimant failed to note in the Payment Claim the credit for works that the Respondent undertook on its behalf regarding the Chill Spot carpentry works as the Claimant was unable to provide sufficient resources to complete the works and overall lack of progress on site; and

(b) the Claimant had accepted this back charge in the previous Payment Schedule.

159. The Respondent is purporting to set off the amount of $5,220.60 in the Payment Schedule for costs it incurred under clause 27.2 of the Subcontract. The Respondent contends that the costs incurred by it is demonstrated in the following invoices:

(a) JRS Carpentry Pty Ltd - Tax invoice 11 dated 28 January for $2,117.00 (excl GST);

(b) JRS Carpentry Pty Ltd – Tax invoice 13 dated 20 February 2016 for $4,669.00 (excl GST) for “Kimberly College (10/02/16-17/02/16 Chill Out area) 18/02/16 Aluminum thresholds”.

160. The Respondent did not give notice pursuant to clause 27.2 in relation to carpentry work until the Second Take over Notice. The work the subject of Tax Invoice 13 clearly relates to work carried out after the date of the Second Take over Notice. I do not allow this aspect of the setoff. I accept that the works in relation to Tax Invoice 11 were performed after the Second Take over Notice. Accordingly, the Respondent has established an entitlement under the Subcontract to set off this the amount of $4,669.00 plus 10% administration fee. The total approved amount for this setoff is $5,135.90.

Exposed Grid Ceilings / Internal Grid Ceilings

161. Under the heading “Internal Grid Ceilings” in the Payment Schedule, the Respondent states:

“SJ Higgins was required to engage another company to complete work that Q Line were unable to complete due to insufficient resourcing and an overall lack of progress on site. The total cost of this borne by SJ Higgins is $2,006.00 plus administration fees (in accordance with Clause 8.10) of 10% totaling $2,206.60 and is a debt due to SJ Higgins in accordance with Clause 27.2 of the Subcontract Agreement.”

162. I note in the Respondent’s Submissions that setoff for “Internal Grid Ceilings” stated above is dealt with under the heading “Exposed Grid Ceilings”. I accept that this reasoning in the Payment Schedule relates to the Exposed Grid Ceilings component of the Payment Claim.

163. The Respondent contends in the Respondent’s Submissions that they were required to take work out the Claimant’s hands that included “labour to install the ceiling tiles and other works




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associated with the Exposed Grid Ceilings”. The Respondent has referred to the First Take over Letter and the Second Take over Letter in support of the deduction. The Respondent contends that it is entitled to a deduction of $2,206.60 for the portion of the exposed grid ceilings in the art classroom and library that was completed by Narambel Pty Ltd.

164. I note from the invoice from Narambel attached at AJ-19, that the works claimed for in that invoice were carried out on 28 January 2016 and 30 January 2016. I am satisfied that the Respondent gave notice in the First Take over Notice that it intended to take these works out of the Claimant’s hands and that the works relate to those works referred to in the First Take over Notice. The Claimant has not provided any submission that the value claimed in this setoff is unreasonable or that it doesn’t relate to works required to be completed by the Claimant under the Subcontract.

165. I allow the deduction in the amount of $2,206.60 for this setoff.

Internal setting to walls and ceilings

166. The Respondent contends in the Respondent’s Submissions that it is entitled to setoff the amount of $5,984.00 as a debt due and payable to the Respondent pursuant to clause 27.2 of the Subcontract.

167. The Payment Schedule states:

“SJ Higgins was required to engage another company to complete work that QLine were unable to complete due to insufficient resourcing and an overall lack of progress on site. The total cost of this borne by SJ Higgins is $5,440.00 plus administration fees (in accordance with Clause 8.10 of 10% totalling $5,984.00, and is a debt due to SJ Higgins in accordance with Clause 27.2 of the Subcontract Agreement.

168. The Respondent contends that it was required to engage additional labour to carry out those works and that this is confirmed in an email exchange between the Respondent and Narambel Pty Ltd dated 21 January 2016 (attached at AJ-27) and that the costs incurred are demonstrated in the invoice of Narambel dated 25 February 2016 being VAR 03 (attached at AJ-28). I note from that invoice that the works were carried out between 25 January 2016 and 4 February 2016, being after the First Take over Notice.

169. The Claimant has not provided any submission that the value claimed for this setoff is unreasonable or that it doesn’t relate to works required to be completed by the Claimant under the Subcontract.

170. I therefore allow a setoff for these works in the amount of $5,984.00.

Liquidated damages

171. The Respondent contends in the Payment Schedule that it is entitled to Liquidated Damages in the amount of $40,500 on the basis that:

(a) the Date for Practical Completion of the works was 5 December 2015;

(b) the actual date of Practical Completion was 24 February 2016 (this position is difficult to reconcile with the Respondent’s submission that Substantial Completion has not been reached);

(c) this equates to being 81 days late;

(d) they have not received a Notification of Delay or Extension of Time request under clause 32 of the Subcontract or in any qualifying form from the Claimant as to why the Date for Practical Completion has been achieved 81 days late.




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172. The Claimant contends in the Application Submissions that the Respondent is not entitled to Liquidated Damages for the following reasons:

(a) the contract as exists between the parties (ie the Quote and the Vetting Notes) do not provide for any formula for liquidated damages, although there is a reference in the Vetting Notes at item 21 to liquidated damages. That reference, however, without a clause giving rise to the liability is meaningless as the clause giving rise to liability could say any number of things. In those circumstances there cannot be any agreement as to liquidated damages and accordingly the Respondent has not entitlement to claim liquidated damages (reason 1);

(b) the Respondent cannot claim liquidated damages for delays which itself caused. The Claimant’s material shows that it had performed its obligations promptly and as quickly as possible having regarding to the state of the works as provided by the Respondent. The Respondent cannot seek damages against the Claimant for losses which it has brought about by its own failures (reason 2);

(c) the Respondent has already wrongly taken the security in the form of bank guarantees by the Claimant in the amount of $31,100 purporting to do so as an entitlement to damages including liquidated damages. By attempting to set those sums off the Respondent attempts to claim the same amount twice (reason 3);

(d) the Claimant rejects the claim based on the lack of notices, breaches, program delays or any correspondence issued in writing by the Respondent (reason 4).

173. The Respondent contends in the Respondent’s Submissions that it has a contractual entitlement to liquidated damages pursuant to clause 33 of the Subcontract which has been varied by providing for a fixed sum per calendar day for liquidated damages pursuant to item 21 of the Vetting Notes. I do not accept this contention for the reasons set out below.

174. Clause 33 of the Subcontract provides:

“If the Subcontractor failed to reach Substantial Completion by the Date for Substantial Completion the Subcontractor shall pay or allow the Contractor the costs, losses, expenses and the damages suffered by the Contractor as a result thereof by way of general damages for breach of contract provided that if the Subcontractor’s delay is not the sole cause….”

175. There is no reference to liquidated damages or a fixed rate of damages in clause 33 of the Subcontract. The clause relates to unliquidated sums.

176. The Vetting Notes which were attached at Schedule 2 of the Subcontract state at item 21:

“The TENDERER acknowledges Liquidated Damages & Prolongation Costs apply under the terms and conditions specified in the main body of this Sub-contract Agreement. The Liquidated Damages Rate is $500 per calendar day”.

177. The Respondent also contends that the amendment of the Subcontract to include a valuation of $500 per calendar day for liquidated damages is “plainly in favour of the Claimant, because the “costs, losses, expenses and damages” caused by the Claimant’s significant late completion would likely be much greater than $500 per Calendar Day”. Whether or not the amendments is for the benefit of the Claimant is irrelevant.

178. The Respondent contends that “Clause 33 is supplanted by item 21 of the Vetting Notices, such that the Respondent’s entitlement to liquidated damages is valued at $500 per calendar day after the date for Substantial Completion”.




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179. I find that there is no contractual entitlement to liquidated damages as there was no clause in the Subcontract which provided a mechanism for the Respondent to claim liquidated damages. I do not accept that item 21 of the Vetting Notes varied clause 33 of the Subcontract.

180. The Vetting Notes simply indicate what items have been included in the contract price, and although a rate for liquidated damages of $500 per calendar day is ticked at item 21, it specifically states that liquidated damages are to apply “under the terms and conditions specified in the main body of this Subcontract agreement”. In this case there are no terms and conditions in the Subcontract that give effect to any liquidated damages entitlement. I do not accept that clause 33 is such a clause, nor is there any other clause in the “main body” of the Subcontract that provides the contractual mechanism for the deduction of liquidated damages.

181. The Respondent has contended an alternative argument that the Vetting Notes provide an entitlement to liquidated damages independent of the General Conditions on the following basis that Item 20 and Item 21 of the Vetting Notes are sufficient to entitle the Respondent to deduct liquidated damages in respect of the Claimant’s failure to reach Substantial completion by 5 December 2015. I do not accept the Respondent’s contentions at paragraphs 214 to 218 of the Respondent’s submissions. The Vetting Notes simply make reference to what has been allowed in the Contract Sum. The Vetting Notes do not contain substantive contractual entitlements.

182. Given that I have determined that there is no contractual entitlement to liquidated damages, it is not necessary for me to consider reasons 2 to 4 of the Claimant’s contentions.

183. I do not allow a deduction of liquidated damages.

Adjudicated Amount

184. Based on the reasoning above, I decide pursuant to section 26(1)(a) of the Act that the adjudicated amount is $22,502.35 (including GST) (Adjudicated Amount), calculated as follows:

Contract Works Claimed amount

Scheduled Amount Adjudicated Amount

Exposed Grid ceilings $1,356.60 $0.00 $1,356.00

Autex Acoustic Panels $2,700.00 $0.00 $2,700.00

Soffits $16,494.66 $0.00 $16,494.66

Chill spot $6,750.00 $0.00 $6,750.00

Previous Chill Spot deduction $2,040.00 $0.00 $2,040.00

Sundry Hardware $644.00 $0.00 $644.00

Doors and Door hardware $370.30 $0.00 $370.30

Subtotal Contract Works $30,355.56 $0.00 $30,355.56

Variations

Variation 5 – access panels $3,427.62 $0.00 $3,427.62

Variation 6 – Delay costs $105,199.62 $0.00 $0.00

Subtotal Variations $108,627.24 $0.00 $3,427.62

SUBTOTAL (variations and Contract Works) (excl GST)

$138,982.80 $0.00 $33,783.18

Plus GST $13,898.28 $0.00 $3,378.32

SUBTOTAL (variations and Contract $152,881.08 $0.00 $37,161.50




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Works) (including GST)

LESS Deductions

Soffits $0.00 -$42,133.85 -$0.00

Chill spot $0.00 -$5,220.60 -$5,135.90

Internal setting to walls and ceilings $0.00 -$5,984.00 -$5,984.00

Internal Grid Ceilings $0.00 -$2,206.60 -$2,206.60

Liquidated damages $0.00 -$40,500.00 $0.00

SUBTOTAL deductions (excluding GST)

$0.00 -$96,045.05 -$13,326.50

Plus GST $0.00 -$9,604.51 -$1,332.65

SUBTOTAL deductions (including GST)

$0.00 -$105,649.56 -$14,659.15

ADJUDICATED AMOUNT $22,502.35

Due Date

185. Pursuant to section 26(1)(b) of the Act, I must decide the date on which the Adjudicated Amount becomes or became payable by the Respondent.

186. Pursuant to section 15 of the Act, a progress payment under a construction contract becomes payable:

(a) if the contract contains a provision about the matter that is not void under section 16 of the Act or under the QBCC Act, section 67U or 67W - on the day on which the payment becomes payable under the provision; or

(b) if the contract does not contain a provision about the matter or contains a provision that is void under section 16 or QBCC Act, section 67U or 67W - 10 business days after a payment claim for a progress payment is made under part 3.

187. The Claimant contends on the Adjudication Application form that the due date for payment is 31 March 2016. It is unclear how that date was calculated.

188. The Respondent contends at paragraph 232 of the Respondent Submissions that clause 8.5 of the Subcontract, which provides the mechanism for calculating the due date for payment, is void pursuant to section 67W of the QBCC Act. I accept that contention.

189. Accordingly, the due date for payment pursuant to clause 15(1)(b) of the Act is 10 business days after the payment claim has been made. The Payment Claim was made on 25 February 2016 and therefore the due date for payment was 10 March 2016 as contended by the Respondent.

Rate of interest

190. Section 26(1)(c) of the Act provides that I must also decide the rate of interest payable on any adjudicated amount.

191. When determining the rate of interest payable on the unpaid amount of a progress payment that has become payable, reference must be had to section 15(2) and where applicable section 15(3) of the Act, which provide:




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“(2) Subject to subsection (3), interest for a construction contract is payable on the unpaid amount of a progress payment that has become payable at the greater of the following rates—

(a) the rate prescribed under the Civil Proceedings Act 2011, section 59(3) for a money order debt;

(b) the rate specified under the contract.

(3) For a construction contract to which 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.”

192. The Claimant does not provide submission in relation to the applicable interest rate. The Subcontract does not appear to specify an interest rate.

193. I note that the Respondent states in its submissions that it accepts the Claimant’s submission at paragraph [91] of the Application submissions that the appropriate rate of interest is the rate under 67P of the QBCC Act. I am not sure what paragraph the Respondent is referring to in the Claimant’s Submissions as the Claimant’s Submissions do not have numbered paragraphs.

194. In any event, I am satisfied that this is a construction contract to which section 67P of the QBCC Act applies and therefore I determine that the applicable interest rate is the penalty interest rate under that section. Section 67P(3)of the QBCC Act provides that the penalty rate for that section means – the rate made up of the sum of the following—

(i) 10% a year;

(ii) the rate comprising the annual rate, as published from time to time by the Reserve Bank of Australia, for 90 day bills; or

(a) if the building contract provides for a higher rate of interest than the rate worked out under paragraph (a)—the higher rate.

195. Accordingly, interest is payable on the Adjudicated Amount at the rate of 10% per year plus the rate comprising the annual rate, as published from time to time by the Reserve Bank of Australia, for 90 day bills.

Payment of adjudicator’s fees and expenses

196. Pursuant to subsection 35(2) of the Act, the Claimant and Respondent are jointly and severally liable to pay the adjudicator’s fees and expenses.

197. Pursuant to subsection 35(3) of the Act, the Claimant and Respondent are each liable to contribute to the payment of the adjudicator’s fees and expenses in equal proportions or in the proportions that the adjudicator decides.

198. In deciding how to proportion the fees, the Act provides guidance at section 35A(2) on the matters that I may consider.

199. In the circumstances, I believe this is not an appropriate matter for me to depart from the position that the parties should be liable to contribute to the payment of my fees in equal proportions. In deciding how to apportion fees, the matters that I have considered to be relevant include:

(a) the relative success of the Claimant;

(b) the reasons given by the Respondent for non-payment including jurisdiction reasons; and




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(c) the amount of time taken to consider discrete aspects.

200. I decide that the Claimant is liable for 50% of my fees and expenses and the Respondent is liable for 50% of my fees and expenses.

Decision

201. Based on my reasons stated above, I decide that:

(a) The Claimant is entitled to a progress payment in the sum of $22,502.35 (including GST) (Adjudicated Amount).

(b) The date on which the Adjudicated Amount became payable was 10 March 2016 (due date).

(c) Interest is payable on the Adjudicated Amount at the rate of 10% per year plus the rate comprising the annual rate, as published from time to time by the Reserve Bank of Australia, for 90 day bills;

(d) The Claimant is liable for 50% of my fees and expenses and the Respondent is liable for 50% of my fees and expenses pursuant to section 35 of the Act.

Ms Aleisha MacKenzie, Adjudicator

Date: 18 April 2016




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ANNEXURE A




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Adjudication Decision: 13979

Documents

Transcript of Adjudication Decision: 13979