Fyntray Constructions Pty Ltd v Macind Drainage & Hydraulic Services Pty Ltd [2002] NSWCA 238

What the court decided

Fyntray Constructions Pty Ltd, the main contractor for works at Mount Annan Leisure Centre, engaged Macind Drainage & Hydraulic Services Pty Ltd in July 2000 to carry out the plumbing, drainage and hydraulic works [3]. Under clause 42.1 of the subcontract and its Annexure, Macind was to claim payment on the 25th of each month, and Fyntray was to pay by the end of the following month [6], [70]. Heydon JA recorded that Fyntray had not paid, or given the written particulars the subcontract required, on the February, March and April 2001 tax invoices, and had offered no explanation for those breaches [7].

On 2 May 2001 Macind served a document stating that it was a payment claim under the Act, for $74,423.58 for February, March and April 2001 [4], [5]. Its schedule comprised four tax invoices, progress claims 9 to 12, the first three of which had already been sent to Fyntray [5]. It was common ground that Fyntray did not provide a payment schedule within ten business days [15]. Gibson DCJ, in the District Court, gave judgment for Macind for $77,376.05 with costs, and Fyntray's application for leave to appeal was heard concurrently with the appeal [1]. In the Court of Appeal, Macind conceded that the $231.93 claimed for work in the 2 May 2001 tax invoice was not validly claimed, and relied on the claim as to the balance of $74,191.65 [11]. Fyntray did not argue that this flaw invalidated the whole claim [21].

Fyntray argued that the 2 May claim was invalid because it bundled three contractual progress claims into one, and because it was served too late [36]. On its case, section 14(4) implied that a payment claim could not be served later than ten business days before the contractual date for payment, a reading it supported by the tense of "becomes" in that provision [36]. It also relied on the speed of adjudication and the risk that defective work would be covered up before it could be inspected [36]. Heydon JA accepted that the construction points had not been decided before and were important, given how widely the Act and the AS 2545-1987 subcontract were used [2].

Heydon JA held that Fyntray's construction was unsound [47]. He saw no strain in reading "becomes" as "became, becomes or will become", so that a respondent could become liable at a date already passed [48]. No express language supported the time limit, and clear language would be needed before concluding that the rights the Act conferred could be lost by a short delay [49]. Such language would be expected in section 13, which stated the formal requirements for payment claims, and it was not there [49]. Nothing in section 13 suggested that a payment claim could not include entitlements to more than one progress payment [50]. The definition of reference date in section 8(2)(a) extended to a contractual date used to calculate the amount of a progress payment, and under clause 42.2 the amount due was the value of the work done to that time, so the entitlement could include sums owing from earlier months [43], [51].

He added that the inspection argument was much weakened by Fyntray's rights under clauses 31.1 and 31.2 of the subcontract to direct testing and to stop work being covered up [45], [52]. He concluded that, on the Act's true construction, a payment claim could be served even though it related to work done in periods before the month of service, so that the claim was not invalid [53].

Heydon JA also relied on discretionary considerations [65]. So far as the evidence went, Fyntray had never questioned Macind's entitlement under progress claims 7 to 9, and it had paid claims 7 and 8, although late [61]. He described its points as "highly technical points" and said that any cross-claim should be pursued in the District Court [64]. The orders did not finally prejudice Fyntray, since it could still bring its cross-claim [64]. Leave was refused partly because the construction arguments lacked validity and partly because of strong discretionary factors against a grant [65].

On Fyntray's complaint that the trial judge gave insufficient reasons, Heydon JA found it unnecessary to decide whether there was error, because any error raised no point of general interest and the sum in dispute was relatively low [66]. The complaint about the refusal of a stay was presumed abandoned, as nothing had been said about it in submissions [67]. The summons was dismissed with costs against Fyntray [68], and Ipp AJA agreed with Heydon JA [78].

Hodgson JA agreed with the orders and substantially with Heydon JA's reasons [69]. He noted that clause 42.2 permitted Macind to accumulate unpaid balances in later progress claims, although it had not in fact done so [71]. Rejecting Macind's submission to the contrary, he was of the opinion that section 11(a) referred to the terms of the contract, so that a progress payment was payable at the end of the following month [74]. In his view, from 25 April 2001 Macind was entitled to make a payment claim for the amount calculated under the subcontract, an amount that contemplated the accumulation of earlier monthly entitlements [75]. The 2 May claim, which enclosed progress claims 9 to 11, sufficiently particularised under section 13(2) a claim for $74,191.65 [75]. Fyntray therefore had to pay that amount on 31 May 2001 unless it provided a payment schedule in time [76]. On that analysis he found it unnecessary to decide whether one payment claim could include amounts due under several earlier contractual progress claims, or whether there was any time limit for serving a payment claim [77]. His tentative view was that Heydon JA's opinion that there was no such time limit was preferable [77]. He added that, if the contract allowed a progress claim to include earlier unpaid amounts, a single payment claim under the Act could be for the accumulated amount [77].

Why it matters

Under the Act as it then stood, Heydon JA, with whom Ipp AJA agreed, held that a payment claim could relate to work done before the month in which it was served, and rejected a time limit for service said to be implied by section 14(4). Hodgson JA decided the case on the narrower basis that, from 25 April 2001, Macind could claim the amount calculated under the subcontract, which contemplated accumulated entitlements, and expressed only a tentative view on the time limit. In Heydon JA's reasons, the construction point was one of two grounds for refusing leave; the other was discretionary.

Readers should check the current Act and later authority before relying on the decision.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.