IN THE COUNTY COURT OF VICTORIA
AT Melbourne
COMMERCIAL DIVISION	Revised
Not Restricted
Suitable for Publication	
  Building Cases List
Case No. CI-21-04921

CNC Kitchens Melbourne Pty Ltd (ACN 626 775 193)	Plaintiff	
		
V		
		
Markscon Pty Ltd (ACN 164 315 173) 	Defendant	

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JUDGE:	Her Honour Judge Burchell	
WHERE HELD:	Melbourne	
DATE OF HEARING:	On the papers	
DATE OF JUDGMENT:	16 December 2021	
CASE MAY BE CITED AS:	CNC Kitchens Melbourne Pty Ltd v Markscon Pty Ltd	
MEDIUM NEUTRAL CITATION:	[2021] VCC 2072 		

REASONS FOR JUDGMENT
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Subject:		CONTRACTS – PRACTICE AND PROCEDURE – EVIDENCE 

Catchwords: 	Building contract – payment claim – where defendant failed to issue payment schedule in response to payment claims – whether correspondence without privilege – whether defendant has paid amounts owing – amendment of summons on originating motion 

Legislation Cited:	Building and Construction Industry Security of Payment Act 2002 (Vic) ss4, 9, 10A, 10B, 12, 14(2), 15, 16(2) and 48; Civil Procedure Act 2010 (Vic) ss61 and 63; Evidence Act 2008 (Vic) s131; Domestic Building Contracts Act 1995 (Vic)

Cases Cited:	Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; Vanguard Developments v Promax [2018] VSC 386; Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112; Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd [2011] VSCA 99; Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385; 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674; SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; John Beever v Roads Corporation [2018] VSC 635; Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053; Hera Resources Pty Ltd v Gekko Systems Pty Ltd [2019] NSWSC 37; Batrouney v Forster [2015] VSC 230; Devaynes v Noble (1816) 35 ER 781; Yarra Capital Group Pty Ltd & Anor v Sklash Pty Ltd [2006] VSCA 109; All Seasons Air Pty Ltd v Regal Consulting Services Pty Ltd [2017] NSWCA 289; MKA Bowen Pty Ltd v Carelli Constructions Pty Ltd [2019] VSC 436; John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106; Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391; Yuanda Vic Pty Ltd v Façade Designs International Pty Ltd [2021] VSCA 44; Traffic Technique Pty Ltd v Burgmann [2020] VSCA 319; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146

APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	Mr A C Blair	Warlows Legal	
			
For the Defendant	Mr A Marcou	PCL Lawyers	

HER HONOUR:
1	In this proceeding, the plaintiff (“CNC”) applies for judgment against the defendant (“Markscon”) pursuant to s16(2) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (“SOP Act”). CNC makes the application by summons on originating motion dated 17 November 2021. The application arises out of kitchen cabinet and joinery works that CNC performed at 62 Black Street, Brighton, in the state of Victoria (“the site”).
2	CNC submits that it is entitled to judgment because Markscon failed to issue a payment schedule in response to its payment claims.
3	Markscon opposes the application on the basis that it has paid all amounts owing, together with any interest.  
4	By correspondence dated 2 December 2021, CNC sought leave to file and serve an amended originating motion and summons. Markscon opposes the grant of leave.
5	In my view, invoices 1131, 1152, 1158, and 1168 are valid payment claims. However, invoice 1166 is invalid because it was issued before its reference date. Invoice 1178 is invalid because it fails to adequately identify the construction work to which it relates.
6	The evidence otherwise establishes that no amount is owing for invoices 1131, 1152, and 1158. However, the entire amount of $8,080.58 is outstanding on invoice 1168; and $1,891.11 is owing on invoice 1178. 
7	As noted above, invoice 1178 is invalid. Therefore, the only amount outstanding is that of invoice 1168: $8,080.58. 
8	Finally, in my view, CNC should have leave to file and serve an amended summons and originating motion in the form attached to the email from Warlows Legal to the Court on 2 December 2021. 
9	Accordingly, I order that there be judgment for CNC in the sum of $8,080.58 plus interest pursuant to s12(2) of the SOP Act, interest on invoice 1131 in the sum of $9,000.00 until 25 November 2021 and interest on invoice 1158 in the sum of $2,759.23 from 27 May 2021 to 25 November 2021. I order that Markscon pay CNC’s costs of and incidental to the proceeding on the standard basis, in default of agreement (unless either party has a basis for a different costs order). I invite the parties to prepare draft orders to give effect to these reasons. I will determine any issue concerning costs on the papers.
The facts
10	CNC relies upon three affidavits of Adi Bzezinski, its director, affirmed 16 November 2021, 2 December 2021, and 10 December 2021. In response, Markscon relies upon two affidavits of Stephen Hearld, its Commercial Manager, affirmed 7 December 2021 and 13 December 2021.
11	Unless otherwise stated, the facts of the proceeding are not materially in dispute. 
12	By a written contract dated 10 July 2020, Markscon engaged CNC to supply and install kitchen cabinetry and joinery at the site.
13	Pursuant to clause 19.1 of the contract, payment claims were to be submitted:
(a)	“monthly in accordance with item 20 of Appendix 1 [“on the 25th day of each month forecasting the remainder of the month”] up until Practical Completion”; 
(b)	once upon practical completion; and
(c)	in accordance with clause 19.4 (concerning the final payment claim and final certificate).
14	Pursuant to clause 19.2, Markscon was to issue payment schedules within 10 days after receiving a payment claim.
15	In or about mid July 2020, CNC commenced the works.
16	On 25 October 2020, CNC issued invoice 1131 in the sum of $116,070.59 (GST inclusive). A covering email from Haim Bzezinski to Michael Ryan and Christian Curtis attached the invoice. A progress report with a highly detailed breakdown of (amongst other things) line items, prices, and percentages complete, was also attached. 
17	Mr Hearld claims that the copy of invoice 1131 (as exhibited to the affidavit of Adi Bzezinski) is not a true copy as Markscon never received a copy of it, it shows monies paid against it, and shows an updated “balance due” of $9,000.00.
18	On 30 November 2020, Markscon paid the sum of $107,070.59 against the payment claim, leaving a balance of $9,000.00.
19	On 25 February 2021, CNC issued invoice 1152 to Markscon in the sum of $27,767.88. 
20	On 29 March 2021, Markscon paid $25,250.05 in respect of invoice 1152.
21	On 25 March 2021, CNC issued invoice 1158 in the sum of $74,168.67 (GST inclusive). A covering email from Haim Bzezinski to Cooper Dames, Markscon Accounts, Sam Leslie, and Michael Ryan, attached the invoice. A progress report in a similar form to that of invoice 1131 was also attached.
22	Markscon failed to serve a payment schedule in response to the payment claim. 
23	Adi Bzezinski deposes that on 7 May 2021, Markscon paid the sum of $35,794.72 against the payment claim, leaving a then balance of $38,373.95. He says that on 27 May 2021, Markscon paid the sum of $35,794.72 against the payment claim, leaving a balance of $2,579.23. 
24	On 19 April 2021, CNC issued invoice 1166 in the sum of $17,028.00 (indicating a payment of $7,028.00 and balance due of $10,000.00).
25	Mr Hearld says the exhibited version of invoice 1166 is not a true copy of the original as Markscon denies ever receiving the version of it as exhibited, it shows monies paid against it, and it shows an updated “balance due” of $10,000.00, which Mr Hearld says is incorrect as that amount was paid on 25 June 2021.
26	Invoice 1166 included variations for the replacement of the front door main entry, extra work on the lobby, first floor, and basement, and a veneer and 2 pac. The variations were the subject of ongoing correspondence between 15 December 2020 and 13 April 2021.
27	On 15 December 2020, Mr Dames sent Haim Bzezinski an email indicating that variation works had been discussed on site but not sent through, requesting that he price the works, detailing the works requested, and requesting he separate out each line item. The works he outlined were:
(a)	“Supply and install cupboards [sic] doors to the FIP location on ground and NBN cupboard in basement”;
(b)	“All other works are to procure sheets of veneer from George Fethers and face/wrap existing doors or jambs”; and
(c)	“The service cupboards will already have veneer we just need to wrap the jambs to match so the whole wall matches”.
28	On 28 January 2021, Mr Dames sent Haim Bzezinski a further email with further details of the requested works as follows:
(a)	“Veneer is George Fethers Metal Gum”;
(b)	“The basement is to be veneer not 2 pac as discussed on site”; and
(c)	“4 doors have to have veneer applied. - We will remove doors and hardware”.
29	On 1 February 2021, Mr Dames sent Haim Bzezinski a further email clarifying that: “Lease exclude wrapping 4 fire doors. That are on site architect has said paint is okay” and that “However, need your price tonight!”
30	Later on 1 February 2021, Haim Bzezinski emailed Mr Dames a quote (not including the four entrance doors).
31	That evening, Mr Dames sent Sam Leslie of Nash Management and “Michael MDA” of Melbourne DA saying: “This [the quote] just came through I haven't vetted it but shit , I don't think any of use were expecting that?” [sic] 
32	On 2 February 2021, Michael MDA sent Cooper Dames and Sam Leslie an email stating that he had spoken to Haim and that: “He is coming up with a more cost effective solution. We should knock off a fair chunk of the 21K quote”.
33	Later on 2 February 2021, Sam Leslie emailed Michael MDA and Cooper Dames asking: “is the scope clear here with Markscon/Haim?” and “When we spoke on site on Friday these doors listed below didn't require veneer as they come pre finished? But looks like he is quoting to veneer them?”
34	On 3 February 2021, Michael MDA emailed Sam Leslie and Cooper Dames (copied to Tom Zallmann of Markscon) stating: “Hi Sam, Pleas [sic] call me on this - would like to know its sorted”.
35	Later on 3 February 2021, Cooper Dames emailed Michael Ryan and Sam Leslie (copied to Tom Zallmann) stating that:
(a)	“there was an overallowance to clad the elec/gass doors [sic]. These are supplied prefinished by Markscon”;
(b)	“Cost of $900 a door to do this so removing it would reduce quote $5,400 to $16,180”; and
(c)	“Obviously 2pac to any of the doors (NBN?) pulls price down from there”.
36	Sam Leslie then responded stating: “Something still not sitting right...the sqm is tiny..,will [sic] speak directly with Haim”.
37	On 10 February 2021, Cooper Dames responded stating: “Sam any update on this one?”
38	On 25 February 2021, Cooper Dames emailed Sam Leslie, Michael MDA, and Haim Bzezinski (copied to Tom Zallmann):
(a)	requesting that in addition to the BBQ drawings, Haim Bzezinski finalise the price on the extra cupboards and veneer works to the lobbies;
(b)	noting that the pricing and works discussed were in the below email chain;
(c)	noting that: “We just need a final price for approval to get going!”;
(d)	noting that: “If you can provide an option between white 2pac and white vinyl we'll make a decision straight away;” and
(e)	requesting a response by COB that day.
39	On 3 March 2021, Haim Bzezinski responded that: “According to the list below it will be an extra deduction of 1600+ GST on the basement doors to be in white 2 pac. The same thing apply to the ground floor cabinet if you decide to go with white instead of the Veneer. Please confirm”.
40	Later that day, Cooper Dames responded and:
(a)	asked: “Is there a faster option than 2 Pac? They've already had their issues with turnaround time on this”.
(b)	noted: “To confirm, pricing will be as below depending on what is selected”;
(c)	asked: “is either of those a strike price?”;
(d)	noted that: “we stuffed a door as below, can you sand and re-veneer this door please in a LIGHT colour veneer to match 1.02. Not interested in wait times and cost for George Fethers can you use the look alike that we have use [sic] elsewhere”; and
(e)	requested Haim Bzezinski to: “Just confirm please and we'll get it to your factory ASAP”.
41	On 10 March 2021, Cooper Dames emailed Haim Bzezinski and Michael MDA stating: “We have discussed this on site with Michael and we are proceeding with service cupboards in veneer. FIP in veneer and basement in 2Pac white for $14,580 + GST” and “Haim please measure and proceed”.
42	On 11 April 2021, Haim Bzezinski emailed Cooper Dames requesting he: “Please confirm as discussed fixing the internal door for 102 will be $900 plus GST”.
43	On 13 April 2021, Cooper Dames responded confirming that: “As discussed, variation amount $900 to veneer one side approved”.
44	Markscon failed to serve a payment schedule in response to the payment claim. 
45	However, Mr Hearld claims that on 25 June 2021, Markscon paid $10,000.00 for this payment claim. CNC admits that on 30 July 2021, Markscon paid the sum of $7,028.00 against the payment claim.
46	On 25 April 2021, CNC issued invoice 1168 in the sum of $8,080.58 (GST inclusive). A covering email from Haim Bzezinski to Markscon Accounts, Cooper Dames, Sam Leslie, and Michael Ryan, attached the invoice. A progress report in a similar form to invoice 1131, was also attached.
47	Markscon has not issued a payment schedule in response to the payment claim.
48	CNC claims that Markscon has not made any payment. Mr Hearld responds that on 25 November 2021, Markscon made full payment.
49	On 24 May 2021, CNC completed the works save for minor defect rectifications. The progress report for payment claim 4 indicated that 100% of the works were complete. However, Adi Bzezinski explains that due to confusions caused by COVID-19 restrictions, CNC had accidentally overlooked some incomplete works. The works comprised joinery supplied to the site but stored out of site and so not installed.
50	On 25 May 2021, CNC issued invoice 1178 in the sum of $1,891.11 (GST inclusive). The invoice was described: “Services 62 Black Street, Brighton Total $475,000+ gst May Claim”. No covering email or trade breakdown appeared on the evidence before the Court.	
51	Markscon has not issued a payment schedule in response to the payment claim. 
52	CNC claims Markscon has not made any payment. 
53	On 25 November 2021, Markscon made a further payment of $12,550.92 to CNC. Markscon did not nominate or direct that the payment be made against a particular invoice.
54	CNC purported to apply the $12,550.92 figure against amounts said to be owing on invoices 1131 and 1158. It applied $9,000.00 against the alleged balance of invoice 1131 such that nothing is said to be owing (and CNC no longer presses it save for interest and costs), and $3,550.92 against the alleged balance of invoice 1158, being $12,222.06, such that $8,671.14 is said to be owing.
55	On 13 December 2021, Markscon made payment to CNC comprising $2,517.83 for invoice 1152 and interest on the amounts claimed in the summons dated 16 November 2021 in the sum of $888.59.
56	CNC now claims the sum of $28,642.83 (including GST) under s16(2) of the SOP Act.
The legal context
57	The SOP Act seeks to ensure that people who undertake to carry out construction work can recover progress payments for the performance of that work. 
58	Section 4 of the SOP Act defines “construction contract” as a “contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services for another party”. The SOP Act applies to any construction contract whether written or oral, or partly written and partly oral. “Construction work” is defined in s5. 
59	Section 16(2)(a) of the SOP Act provides that a claimant may recover from a respondent any unpaid portion of an amount claimed in a payment claim where the respondent fails to submit a payment schedule within time (or at all) in response to the payment claim. 
60	Section 14 of the SOP Act concerns the form and content of payment claims. Sections 14(2) and (3) provide that a payment claim:
(a)	must be in the prescribed form (if any) and contain the prescribed information (if any) — neither is prescribed;
(b)	must identify the construction work or related goods and services to which it relates;
(c)	must indicate the amount of progress payment that the claimant claims to be due;
(d)	must state that it is made under the SOP Act; and
(e)	must not include any “excluded amounts”.
61	Section 14(4) of the SOP Act addresses when a payment claim can be served, where it is not a payment claim in respect of a final, single or one-off progress payment. It provides that such a payment claim may only be served within: 
(a)	the period determined in accordance with the construction contract “in respect of the carrying out of the item of construction work or the supply of the item of related goods and services to which the claim relates”; or
(b)	the period of three months after the “reference date referred to in s9(2) that relates to the progress payment”.
62	Sections 14(5), (6) and (7) of the SOP Act concern payment claims claimed in respect of a final, single or one-off progress payment and are not relevant for present purposes. Section 14(8) provides that a claimant “cannot serve more than one payment claim in respect of each reference date under the construction contract”. Section 14(9) provides that this limitation does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous payment claim if the amount has not yet been paid. 
63	Another important provision informing the formal requirements for payment claims is s9 of the SOP Act. Section 9(1) provides that “on and from each reference date under a construction contract” a claimant is “entitled to a progress payment under this Act calculated by reference to that date”.
64	Section 9(2)(a) of the SOP Act provides that a reference date is a date determined by or in accordance with the construction contract as:
(a)	a date on which a claim for a progress payment may be made; or
(b)	a date by reference to which the amount of a progress payment is to be calculated,
in relation to a specific item of construction work “carried out or to be carried out” or a specific item of related goods and services “supplied or to be supplied” under the contract. The rest of s9 concerns situations where the contract makes no express provision for reference dates.
65	It is now well established in Victoria that unless a payment claim answering the description in s14(1) of the SOP Act is served, there can be no application to a court under s16(2)(a)(i). Although dealing with the alternative option of an adjudication application referred to in the New South Wales equivalent of s16(2)(a)(ii), this follows inexorably from the decision of the High Court in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (“Southern Han”). On the other hand, the available defences to a payment claim are very limited.
66	Generally speaking, the available defences concern either the nature of the underlying contract or the form and service of the purported payment claim, and thus whether the payment claim is effective to trigger the procedures established by Part 3 of the SOP Act. More particularly, the defences to a payment claim enlivened by the formal requirements of the SOP Act are, in substance, that the payment claim:
(a)	does not relate to a “construction contract” (including because it does not involve carrying out “construction work”), or it relates to a construction contract excluded from the operation of the SOP Act under s7 (for example, a construction contract that forms part of a loan agreement, or one that is a domestic building contract under the Domestic Building Contracts Act 1995 (Vic));
(b)	fails to satisfy the formal requirements of s14(2) (for example, by failing to identify the construction work or failing to state that it is made under the SOP Act);
(c)	was made when no valid reference date existed, including where it is served before an applicable reference date or relies on a reference date that has already been used up by an earlier payment claim;
(d)	includes variations that are “excluded amounts” under s10B; and
(e)	was not validly served on the respondent under either the terms of the contract or under s50.
67	Under s47, nothing in Part 3 of the SOP Act precludes bringing or continuing proceedings under the construction contract, including where those proceedings deal with the same issues in dispute in the proceeding relying on Part 3. Thus, a judgment under ss16 and 17 is a provisional judgment in what it grants and what it refuses. The statutory context both contemplates and permits inconsistent judgments. This section is, in effect, the statutory manifestation of the “pay now, argue later” description often given to the policy behind the SOP Act and its counterparts in other states. 
68	Further, in considering any purported defences to a payment claim, it is important to be mindful of s48 of the SOP Act. This section provides that the provisions of the SOP Act have effect despite any contractual provision to the contrary. It further provides that any provision in any contract purporting to exclude, restrict or modify the operation of the SOP Act or that may reasonably be construed as an attempt to deter a person from taking action under the SOP Act, is void. 
69	This Court has endorsed the hearing of applications under the SOP Act on a summary basis by summons on originating motion with affidavit evidence. Such claims are properly assessed on the balance of probabilities, with the quality of the evidence weighed having regard to the fact that the legislation seeks to facilitate a swift but temporary remedy. Occasionally, a plaintiff nevertheless applies for relief under s16 by bringing a proceeding commenced by writ and statement of claim, then issuing a summons seeking summary judgment pursuant to s61 of the Civil Procedure Act 2010 (Vic) (“CPA”). This can add an additional layer of complexity in determining the test to be applied to any defences raised. However, the present proceeding was commenced by summons on originating motion, so questions of the application of the test under CPA ss61 and 63 do not arise.
Preliminary issue — without prejudice privilege
70	An initial issue which arises is that CNC objects to paragraphs 32 and 33 of the Hearld affidavit dated 7 December 2021 and paragraphs 98–100 of exhibit “SH-1” on the basis of without prejudice privilege. The excerpts reveal communications in respect of amounts said to be owing and attempts by Markscon to make payment.
71	CNC says those excerpts are communications between the parties in connection with an attempt to negotiate settlement (Evidence Act 2008 (Vic) s131). 
72	Markscon responds that Markscon sent the letter on an open basis, and the letter was not stated be confidential, without prejudice or privileged. 
73	I accept that the letters between the solicitors were communications between the parties in dispute in connection with an attempt to negotiate settlement. Paragraph 14 of the Open Letter makes that clear: “Our client remains ready, willing and able to effect payment of the balance”.
74	There is no requirement that the letter contain the words “without prejudice”. That is a matter of form. In substance, the letters are directed to the settlement of the proceeding. 
75	Accordingly, paragraphs 32 and 33 of the affidavit of Stephen Hearld dated 7 December 2021, and pages 98–100 of exhibit “SH-1”, are inadmissible.
Threshold issue — have all outstanding amounts been paid?
76	To assess this issue, it is necessary to consider the evidence before the Court in respect of each invoice.
Initial payments
77	Invoice 1131 was in the sum of $116,070.59 (GST inclusive). On 30 November 2020, Markscon paid the sum of $107,070.59 against the payment claim, leaving a balance of $9,000.00. This is consistent with the invoice itself, which noted a payment of $107,070.59 and balance due of $9,000.00. Accordingly, I accept that as at 30 November 2020, the balance owing on invoice 1131 was $9,000.00.
78	Invoice 1152 was in the sum of $27,767.88. The parties agree that on 29 March 2021, Markscon paid $25,250.05 in respect of invoice 1152. Accordingly, I accept that as at 29 March 2021, the balance owing on invoice 1152 was $2,517.83.
79	Invoice 1158 was in the sum of $74,168.67 (GST inclusive). The parties agree that on 7 May 2021, Markscon paid the sum of $35,794.72 against the payment claim, leaving a then balance of $38,373.95. On 27 May 2021, Markscon paid the sum of $35,794.72 against the payment claim, leaving a balance of $2,579.23. Accordingly, I accept that as at 27 May 2021, the balance owing on invoice 1158 was $2,579.23.
80	Invoice 1166 was in the sum of $17,028.00 (GST inclusive). The parties agree that on 25 June 2021, Markscon paid $10,000.00 for this payment claim. On 30 July 2021, Markscon also paid the sum of $7,028.00 against the payment claim. This is partially consistent with the invoice itself, which indicated a payment of $7,028.00 and balance due of $10,000.00. Accordingly, I accept that as at 30 July 2021, the balance owing on invoice 1166 was nil. 
81	Invoice 1168 was in the sum of $8,080.58 (GST inclusive). CNC claims that Markscon has not made any payment. Mr Hearld responds that on 25 November 2021, Markscon made full payment (see below).
82	Invoice 1178 was in the sum of $1,891.11 (GST inclusive). CNC claims Markscon has not made any payment. Mr Hearld responds that on 25 November 2021, Markscon made full payment (see below).
The 25 November 2021 Payment
83	On 25 November 2021, Markscon made a further payment of $12,550.92 to CNC. Markscon did not direct that the payment be made against a particular invoice.
84	At paragraph 10 of the second Bzezinski affidavit dated 2 December 2021, CNC purported to apply the $12,550.92 figure against invoices 1131 and 1158, as follows:
(a)	$9,000.00 against invoice 1131 such that no amount is said to be owing (and CNC no longer presses invoice 1131 save for interest and costs); and
(b)	$3,550.92 against invoice 1158, such that $8,671.14 is said to be owing.
85	The issue is how the 25 November 2021 payment is properly to be applied.
86	CNC notes that if a debtor owes more than one debt to a creditor, the debtor may direct the debt to which a payment is to be applied. However, if the debtor fails to so direct, the creditor may apply the payment to whichever debt the creditor chooses.
87	Accordingly, CNC says it was not open to Markscon to nominate the debts which were reduced by the 25 November 2021 payment. Rather, CNC could do so, and did so, in paragraph 10 of the second Bzezinski affidavit.
88	CNC presses that allocation of the 25 November 2021 payments.
89	Markscon responds that the payment was for the entire balance owing. It refers in particular to the conclusion of the “Open Letter”:
“14. By virtue of the Payments, the Remittance and the Original 1131 Invoice, the balance of $12,550.92 (Balance) remains due and payable to your client. Our client remains ready willing and able to effect payment of the Balance.”

90	According to a table in the Open Letter, that balance is said to comprise a balance of $0.00 on invoice 1131; $2,579.23 on invoice 1158; $0.00 on invoice 1166; $8,080.58 on invoice 1168; and $1,891.11 on invoice 1178.
91	Markscon contends that CNC has conveniently applied money to the invoice stated to be invalid in the Open Letter, and has substituted what it says is the partially paid invoice 1158 for invoice 1152.
92	Markscon further says it is unclear whether CNC is relying on, for example, the “first in first out” presumption for repaying debts (Clayton’s Case). Given that invoice 1152 predates invoice 1158, it is not doing so consistently. Further, the presumption does not operate where there are separate and distinct debts, and here the presumption is displaced by the fact of the express intention in the Open Letter.
93	I accept the submissions of CNC. The binding authority of Batrouney v Forster provides that, where a debtor fails to indicate the debt to which a payment applies, the creditor is at liberty to apply the funds as they so choose.
94	As Robson J held (at [140]):
 “If a debtor owes several debts to a creditor, the debtor may inform the creditor to which debt a payment by the debtor should be applied. If a debtor fails to inform the creditor of an allocation, the creditor may make the allocation. If the allocation is made by the creditor in his or her books of account, the creditor may alter the allocation at any stage before the debtor is informed of an allocation”.
95	Applying that principle, CNC was at liberty to apply $9,000.00 to invoice 1131, and $3,550.92 against invoice 1158.
96	Accordingly, as at 25 November 2021, I accept that:
(a)	no amount was owing on invoice 1131;
(b)	$2,517.83 was owing on invoice 1152;
(c)	no amount was owing on invoice 1158, contrary to what CNC says (the evidence above shows that as at 27 May 2021, the balance owing on invoice 1158 was $2,579.23);
(d)	$8,080.58 was owing on invoice 1168.
(e)	$1,891.11 was owing on invoice 1178.
The 13 December 2021 Payment
97	On 13 December 2021, Markscon made payment to CNC comprising $2,517.83, directed to “INV-1152”. The direct entry payment report indicates as “payment details”: “MARKSCON INV 1152. It also paid interest on the amounts claimed in the summons dated 16 November 2021 in the sum of $888.59. The direct entry payment report indicates as “payment details”: “MKS INTEREST SUMMO”.
98	Therefore, as at 13 December 2021, the only amounts outstanding were $8,080.58 on invoice 1168; and $1,891.11 on invoice 1178 (which is invalid – see below). 
Are the requirements of the SOP Act satisfied?
99	At the outset, it is not possible to determine whether invoice 1152 satisfies the requirements of the SOP Act, as it is not exhibited. However, invoice 1152 has been paid. Accordingly, I will examine the remaining invoices only.
Construction contract
100	The contract in issue is a construction contract because it is a contract under which CNC undertook to carry out construction work for Markscon, namely the supply and installation of kitchen cabinet and joinery items (ss4 and 5 of the SOP Act).
Reference dates
101	The next requirement is that the payment claims have a reference date. In effect, the payment claims must only be submitted “on and from” a reference date (s9(1) of the SOP Act).
102	In this proceeding, the contract provides for reference dates. Pursuant to clause 19.1, CNC was only to submit payment claims “monthly in accordance with item 20 of Appendix 1 [“on the 25th day of each month forecasting the remainder of the month”] up until Practical Completion”. Therefore, the reference date for each payment claim was the 25th day of each month.
103	CNC issued the payment claims at issue on the following dates:
(a)	invoice 1131 – 25 October 2020;
(b)	invoice 1158 – 25 March 2021;
(c)	invoice 1166 – 19 April 2021;
(d)	invoice 1168 – 25 April 2021;
(e)	invoice 1178 – 25 May 2021.
104	Accordingly, invoices 1131, 1158, 1168, and 1178 have reference dates. However, invoice 1166 was issued prematurely, and is invalid.
Identification of construction work
105	The next question is whether the payment claims adequately identify the construction work.
106	Whether a payment claim adequately identifies the construction work is an objective test. The question is whether a reasonable person in the position of the respondent would understand the basis of the claim. The test is not overly strict; the Court must not adopt an unduly technical approach. 
107	The context of the payment claim is relevant, including industry conventions and earlier contractual dealings. The background knowledge of the parties from their past dealings and prior exchanges of information (including correspondence) are also relevant. Thus, the Court may look beyond the face of the payment claim.
108	In my view, invoices 1131, 1158, and 1166 satisfy this requirement. Payment claims 1131, 1158 and 1166 are accompanied by a highly detailed breakdown of line items. The correspondence in the lead up to invoice 1166 provides significant detail in relation to the variation the subject of invoice 1166. Accordingly, a reasonable person in the position of Markscon would readily comprehend the works to which those invoices relate.
109	However, the same cannot be said for invoice 1178. As indicated above, the relevant invoice was vaguely described: “Services 62 Black Street, Brighton Total $475,000+ gst May Claim”. Unlike the other payment claims, the “services” were not particularised or broken down. No covering email or trade breakdown appeared on the evidence before the Court. A reasonable person in the position of Markscon is left guessing as to the works to which this payment claim relates.
110	Accordingly, invoice 1178 is invalid.
Excluded amounts
111	The next issue is whether CNC has satisfied me that the payment claims do not contain excluded amounts (ss10A and 10B of the SOP Act).
112	The only payment claim which may contain an excluded amount is invoice 1166. Invoice 1166 contains variations for: the replacement of the front door main entry, extra work on the lobby, first floor, and basement, and a veneer and 2 pac.
113	The issue is whether the variations are claimable variations. However, the correspondence in the lead up to invoice 1166 (as outlined above) reinforces that the parties agreed to the requisite elements of a first-class variation (s10A(2) of the SOP Act). Indeed, the correspondence covers each of the variation items and the sum of the payment claim ($17,028.00):
(a)	On 10 March 2021, Cooper Dames emailed Haim Bzezinski and Michael MDA stating: “We have discussed this on site with Michael and we are proceeding with service cupboards in veneer. FIP in veneer and basement in 2Pac white for $14,580 + GST” and “Haim please measure and proceed” (emphasis added).
(b)	On 11 April 2021, Haim Bzezinski emailed Cooper Dames requesting he: “Please confirm as discussed fixing the internal door for 102 will be $900 plus GST”.
(c)	On 13 April 2021, Cooper Dames responded confirming that: “As discussed, variation amount $900 to veneer one side approved” (emphasis added).
114	Of course, the Court may only assess “the face of the payment claim”. However, this includes the supporting documents, such as correspondence in the lead up to the payment claim. Accordingly, CNC has satisfied me that the payment claims do not contain excluded amounts.
Other formal requirements
115	Each payment claim indicates the amount of the progress payment which CNC claims is due (s14(2)(d) of the SOP Act).  
116	Each claim indicates that it is a claim made under the SOP Act in terms: “This is a payment claim made under the Building and Construction Industry Security of Payment Act 2002 (VIC)” (s14(2)(e) of the SOP Act). The copy of invoice 1131 did not state that it was made under the SOP Act. CNC claims that the original did. However, since CNC does not press invoice 1131, it is unnecessary to address this issue. It suffices to say that given the requirements of the SOP Act are not to be applied in an unduly technical manner, the fact that the original invoice states it was made under the SOP Act suffices.
117	Each payment claim was validly served by email to Markscon.
Failure to issue payment schedule
118	Adi Bzezinski confirms that Markscon failed to serve a payment schedule in response to the payment claims. Accordingly, CNC may recover the unpaid portion of the amount claimed as a debt due (s16(2)(a) of the SOP Act) together with interest pursuant to s12(2)(a) of the SOP Act.
Leave to amend
119	As indicated above, by correspondence dated 2 December 2021, CNC sought leave to file and serve an amended originating motion and summons. Markscon opposes the grant of leave.
120	Under cover of the proposed amendments, CNC:
(a)	no longer presses order two (the sum of $9,000.00 under s16(2)(a)(i) of the SOP Act;
(b)	now claims interest on the sum of $9,000.00 to 25 November 2021 (proposed order 3);
(c)	now claims the sum of $8,671.14 under s16(2)(a)(i) of the SOP Act (proposed order 4);
(d)	now claims interest on the sum of $12,222.06 to 25 November 2021, and thereafter interest be payable on the sum of $8,671.14.
121	In Traffic Technique Pty Ltd v Burgmann, the Court of Appeal recently outlined the principles applicable to amendments. In summary:
(a)	The judge balances the merits of the proposed amendment against case management considerations (such as the interests of other parties, and the need to facilitate public confidence in the justice system). This reflects the approach in Aon Risk Services Australia Ltd v Australian National University (“Aon”).
(b)	The merits of the proposed amendment are no longer the dominant criterion (cf Queensland v JL Holdings Pty Ltd).
(c)	There is no single, universal approach to amendments.
(d)	There is no universal proposition that applications for an amendment, even at a late stage, must fail.
(e)	The essential question is: “what do the interests of justice dictate?”
122	In Aon, French CJ made similar observations as follows:
 “In the proper exercise of the primary judge’s discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system.”
123	In my view, the interests of justice dictate that CNC has leave to file and serve an amended summons and originating motion. 
124	There is no prejudice occasioned by the grant of leave. Rather, Markscon is at an advantage, since the quantum sought has been reduced. Further, there were affidavits and submissions after the proposed amendment, which properly canvassed and grappled with the new way in which the case was put (i.e. the abandonment of invoice 1131).
125	Moreover, the grant of leave is consistent with the case management considerations in Aon. Indeed, the narrowing of the quantum in dispute is compliant with the overarching obligations under the Civil Procedure Act 2010 (Vic), particularly the duty to narrow the issues (s23).
126	Finally, there is no foreseeable delay arising from the amendment, or any impact upon court lists or other court users generally. 
127	Accordingly, CNC has leave to amend its summons and originating motion.
Conclusion
128	For the foregoing reasons, there is judgment for CNC in the sum of $8,080.58 together with interest, plus interest on invoice 1131 in the sum of $9,000.00 until 25 November 2021 and interest on invoice 1158 in the sum of $2,759.23 from 27 May 2021 to 25 November 2021. I order that Markscon pay CNC’s costs of and incidental to the proceeding on the standard basis in default of agreement.
Case management observations
129	The Court observes that the conduct of the parties in the proceeding has been inconsistent with the overarching purpose and obligations under the Civil Procedure Act 2010 (Vic), and the purpose of the SOP Act — to facilitate the timely resolution of payment disputes.
130	In particular, the Court notes that:
(a)	the filing of a 435-page court book;
(b)	the opposition to an amended summons and originating motion (such opposition being bound to fail);
(c)	the filing of three affidavits by the plaintiff, and two by the defendant; and
(d)	the fact that the proceeding was adjourned twice,
is disproportionate to a claim of initially $41,193.75, adjusted to $28,642.83 (of which only $8,080.58 was awarded at judgment).
131	The Court further notes that the summons, originating motion, and affidavits, were at times internally inconsistent and included errors. The Court observes that in future, parties should ensure that amounts said to be owed are stated as a lump sum in the summons on originating motion for ease of reference and clarity.
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Certificate
I certify that these 22 pages are a true copy of the judgment of Her Honour Judge Burchell delivered on 16 December 2021.
Dated: 16 December 2021

Andrea Ko
Associate to Her Honour Judge Burchell