Collins and Turner Pty Ltd v Landini & Landini [2018] NSWLC 22 | Case summary

Local Court of NSW|2018-11-29|Before: Mr J

Solicitors: Mr M Bryan (applicant/plaintiff) Mr M Irwin (respondents/defendants) File Number(s): 2018/00197277

Background

Collins and Turner Pty Ltd, the plaintiff, is a firm which provides architectural services. Mark and Rikki Landini, defendants, are the owners of a home in Mosman. Pursuant to a contract, services were provided by the plaintiff to the defendants, in respect of works to be carried out at the Mosman property. The contract was entered into on or about 2 March 2016, and amended/revised on or about April 2016 (the contract).

Issue for determination

The primary issue for determination is whether the Notice of Motion to strike out the Defence should be granted. As detailed further below, a number of issues arise which are relevant to the primary determination; those issues include whether the Building and Construction Industry Security of Payment Act 1999 (the Security of Payments Act) applies in relation to the plaintiff's Statement of Claim. The defendant submits it does not apply, and further submits that given the number of matters of fact and law to be determined in the proceedings, then the Notice of Motion should not be granted. There is authority for the proposition that on a summary dismissal application it may be appropriate for the court to determine short points of law. However, where evidence is required on triable issues raised, summary dismissal based upon determination of a short point of law may not be appropriate.
The issues which arise include: 1. Was the contract between the parties a construction contract to which the Building and Construction Industry Security of Payment Act 1999 applies? 2. Was the contract for residential building work to which the Home Building Act 1989 applies? 3. If the work was not residential building work, was the contract a construction contract connected with an exempt residential construction contract? 4. Depending on the nature of the contract, and the legal provisions which apply, was the invoice subject of the Statement of Claim a "Payment Claim" to which the "pay now litigate later" provisions apply, so that the defence should be struck out? 5. Is this a matter where it is appropriate that the Defence be struck out, or is this a matter where the issues agitated in the Motion should be determined at trial?
In order to understand the Notice of Motion the parties' pleadings require consideration.

The parties' pleadings

The plaintiff, in a Statement of Claim, states that the services to be carried out pursuant to the contract were "related goods and services" within s 6 of the Building and Construction Industry Security of Payment Act 1999 ("the Security of Payment Act"). The plaintiff states that the contract between the parties was a "construction contract" to which the Security of Payment Act applied. In the Statement of Claim the plaintiff states that work was performed under the contract and an invoice was served on the defendants on about 3 November 2017. The plaintiff maintains that the invoice was a payment claim within the meaning of s 13 of the Security of Payment Act, and by operation of s 14 of that Act, the defendants were entitled to provide a Payment Schedule, failed to do so, and by operation of the Act the defendants became liable to pay the sum of $50,713.91 to the plaintiff. The plaintiff states that it was a term of the contract that payment of invoices, issued under the contract, would be made by the defendants within seven days of the invoice being issued. The plaintiff maintains that under the Security of Payment Act the plaintiff is entitled to judgement in that sum. The Statement of Claim further specifies that, by operation of s 15(4)(b) of the Security of Payment Act, the defendants are not entitled to bring any cross claim against the plaintiff, or raise any defence in relation to matters arising under the contract in these proceedings.
In a Defence filed, the defendants deny that the Security of Payment Act applies because the work undertaken by the plaintiff was "residential building work" under the Home Building Act 1989 (NSW) ("HB Act"). The Defence sets out that that the work undertaken by the plaintiff was on property in which the defendants currently reside and/or propose to reside. The Defence admits that the plaintiff undertook work and that on or about 3 November 2017 the plaintiff issued to the defendant a tax invoice dated 31 October 2017 in the amount of $50,713.91, but denies that the invoice was a Payment Claim under the Security of Payment Act.
The Defence also pleads, in the alternative to the argument based on the HB Act, and without prejudice to that argument, that the purported Payment Claim was not made in respect of a reference date provided under the Contract in accordance with s 8 of the Security of Payment Act and provides particulars for that argument. It is further pleaded that the plaintiff failed to sufficiently describe the construction work or "related goods and services" to which the purported Payment Claim relates in accordance with the requirements of s 13(2) of the Security of Payment Act. The defence pleads that given the termination of the Contract on 1 November 2017, no further payment claims can be made under the Contract and the Security of Payment Act. For those reasons the defendants state that they were not required to serve a payment schedule in response to the purported Payment Claim.

The evidence on the Notice of Motion

The affidavit of the applicant/plaintiff by the solicitor, Mr Bryan, of 1 November 2018 states as follows. The plaintiff carries on an architecture business specialising in the design of commercial, residential and public projects. The plaintiff is not a builder and does not purport to be. The principals of the plaintiff are Penelope Collins and Huw Turner. Mr Bryan's affidavit states that in or about February 2016, the defendants contacted Penny Collins, of the plaintiff, to discuss the possibility of the plaintiff providing them with architectural services in connection with works to be carried out at a home owned by them in Mosman ("the Property"). The services included the review of an existing design proposal which had been the subject of Development Approval; the potential preparation of an Application for the purposes of Section 96 of the Environmental Planning and Assessment Act; the preparation of construction documentation; and, if required, services relating to the obtaining of a construction certificate, the tender process, and during the construction stage of the project. It is stated that Penny Collins is a person registered as an architect. On or about 2 March 2017 the plaintiff and the defendant entered into a contract in relation to the works. The contract was subsequently revised by agreement on or about 11 April 2016. Annexed to Mr Bryan's affidavit is a covering letter of 11 April 2016, and a copy of the revised contract dated 12 April 2016.
Mr Bryan states that the contract provided for a mobilisation fee and monthly payments plus expenses at each work stage, payments to be received within seven days of the date of the invoice, plus interest under the contract.
Mr Bryan states at [14], "the Works were architectural and design services in relation to construction work for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW)."
Mr Bryan also states that the plaintiff did not carry out, nor get involved in, and did not coordinate, any residential building work as that term is defined by the Home Building Act 1989. [It is noted that this is a conclusion of fact and law which is in issue in the proceedings].
Mr Bryan states that the services provided by the plaintiff were at an anterior stage to any construction works and comprised of reviewing an existing design proposal which had already been the subject of Development Approval; preparing an application for the purposes of s 96; preparation of construction plan; and work relating to preparation of plans and specifications and the like to allow an application for a construction certificate to be made to Council. No services were provided by the plaintiff during the construction phase of the project, and nor could they be, because no construction work was carried out at all during the time the plaintiff was involved in the project; "Even as at the date of this affidavit, it appears as though no application for a construction certificate has been made and that, even if it has, construction work cannot lawfully commence because the Council has not yet approved it". A search of Mosman Council records is attached to the affidavit, indicating that no application, including for a construction certificate, has been made or approved since about 9 February 2017.
Mr Bryan's affidavit continues that after performing the work under the contract, the plaintiff issued payment claims with respect to the Works. An invoice was served dated 31 October 2017, a copy of the invoice is attached to the affidavit, it was said to be emailed to the defendants on 3 November 2017 "and viewed by them on that date". Mr Bryan states the invoice was a payment claim within the meaning of s 13 of the Security of Payment Act [it is noted that this is conclusion of fact and law in issue in these proceedings]. Mr Bryan also states that no payment schedule was provided by the defendants and the invoice remains unpaid. Mr Bryan expresses his opinion that the defendant has no defence to the claim, and the Defence filed discloses no reasonable cause of action or defence, or other case appropriate to the nature of the pleading, and has a tendency to cause prejudice, embarrassment or delay in the proceedings, and/or is otherwise an abuse of the process of the court.
Annexure A to Mr Bryan's affidavit is letter of 11 April 2016 which states "Huw and I are pleased to provide this Revision 2 fee proposal for architectural services for the works at [the property in] Mosman…. Our understanding of the project requirements can be summarised as follows…". It is noted that the proposal is based on approximate areas including the main house (upper floor, ground floor, and garage/lift area) decks and pool. A breakdown of fees is provided in the cover letter, providing for a fixed fee for a design review; hourly rates for refinement of preferred design and works up to sign off, a fixed fee for the s 96 application; a fixed fee for construction documentation; a fixed fee for the tender; a fixed fee for the construction certificate; and for construction stage services. Option B sets out a reduced scope of service. At clause I of the contract the terms of payment are set out to include the mobilisation fee required before commencement of services equal to 50% of the stage 1 fee; and monthly payments plus expenses to be calculated as the portion of the fee for each work stage, divided by the number of programme months for said stage. Payments are to be received within seven days of the date of invoice. Interest on late payments will be charged at 15%.
Also annexed to Mr Bryan's affidavit are Council search records indicating modification of development consents comprising of changes to layout, changes to Southern deck, changes to openings, extension of pool and changes to pool decking, addition of solar panels, changes to roof form, increase in first floor level, changes to materials and finishes submitted 26 on July 2016, and approved/delegated on 9 February 2017. The initial development application was approved on 23 February 2016. The invoice of 31 October 2017 is annexed to the affidavit. That invoice is addressed to Rikki and Mark Landini, dated 31 October 2017, "architectural services" "for summary in the attached schedule" "due date: 7 November 2017, payment details [bank account is specified]". The schedule is stated to be "Payment Claim Summary" and sets out an itemised list, including laundry revision, plant room access, new mirror/cellar stair, Sydney Water and arborist fees. Nowhere on the invoice does it state that the invoice is provided under the Security of Payments Act. Mr Bryan also provided a second affidavit in response to that provided by the defendants, the second affidavit will be detailed below.
The evidence of the defendants is the affidavit of Rikki Landini of 6 November 2018. Ms Landini states that she is one of the registered proprietors of the property; her husband, the first defendant, is the other registered proprietor. Since April 1997 Mark Landini and Rikki Landini have held the property as joint tenants. A historical title search of the property is attached to the affidavit. "At all material times Mark and I have resided in the Property and have intended to continue to reside there for the foreseeable future". Also attached to the affidavit are copies of past drivers licences bearing the address of the Property, and utility bills in relation to the Property. Correspondence between the plaintiff and the defendants which refer to the Property as the "Landini residence" are also attached. Ms Landini confirms that she is currently residing in the property with no intention of moving.
Ms Landini refers to entering into the contract with the plaintiff for provision of services by the plaintiff in respect of works at the property. A letter dated 2 March 2016 and a copy of a contract dated 2 March 2016 are attached. On or about 11 April 2016 the contract was varied and a copy of a cover letter and revised contract is attached.
Ms Landini indicates that in the cover letter of 11 April 2016, the plaintiff presented two fixed fee options, and that the difference between both options was that option A was for the full scope of the plaintiff's services under each stage for the sum of $246,100, and option B was for a reduced scope under each stage for the sum of $194,300. The affidavit states that on 16 December 2016 Mark Landini wrote to the plaintiff and elected to proceed with option B. The option B scope of services is set out under pages 2 to 5, and pages 10 to 12, of the Contract.
Ms Landini states that on or about 28 September 2016, the plaintiff provided several project cost estimates for the entire project. The estimate is attached to the affidavit. The document refers to a number of consultants who were to be involved in the project.
I note that the document "Project Cost Estimates" includes in the cost estimate for house and garage, pool, hard landscaping, design and documentation stage, fees including structural engineers, private certifying authority, architectural, landscape consultant hydraulic consultant, hydraulic services, arborist, Geotech reports, Geo tech landslide risk management assessments, and DA fees. There is then set out the construction stage fees and charges including for the architect, the structural engineer and various other consultants. The project cost estimate states "exclusions: legal fees, soft furnishings, blinds, furniture, Council bonds, construction finance, future cost increases". I note the specific matters excluded, and the inclusions in the project cost estimate, do appear to indicate project management. However, I do note that that is for "Fee Option A" and that option B is also set out in the contract. The payment claim summary of 6 July 2016 (Tax Invoice No 268-2), annexed to the affidavit, states "payment Claim Summary" and provides for design reviews, refinement and s 96 application in the amount of $4,686. The bank account details are provided. There is no statement that the payment claim is made under the Security of Payments Act. Attached is a tax invoice of 12 July 2016 for engineering consulting services. The invoice states "summary of professional engineering services completed between 27 May 2016 and 12 July 2016: Stage I - General advice '100% completion of stage I - Gen advice. The total amount claimed is $1,100. The tax invoice is issued by Cantilever Consulting Engineers and is addressed to "Landini associates C/- Collins and Turner" and states at the bottom of the invoice "payment terms. Please refer to our terms and conditions. This payment claim is made under the Building and Construction Industry Security of Payment Act". The invoice requests direct payment be made to Cantilever Consulting Engineers.
A further invoice annexed to the affidavit is from BDA Consultants Pty Ltd, Quantity Surveyors and Building Economists. The invoice is addressed to "Rikki and Mark Landini C/- Collins and Turner Architects" and the work is stated as "Preparation of preliminary budget estimate for proposed development, or as your instructions and our report dated 6/6/2016" and the total fee is $1,650. It requests payment to BDA Consultants; no reference is made to the Security of Payments Act in the invoice. Similarly the correspondence from the Private Certifier of 8/8/2016 is addressed to Rikki and Mark Landini C/- Collins and Turner, and sets out the schedule of proposed fees.
The fee proposal is submitted dated 24 August 2016 from J and M Group, Hydraulic and Fire Services Consultants, to "Mark and Rikki Landini C/O Collins and Turner Architects Pty Ltd", and is care of the plaintiff's address in Surrey Hills. The Proposal states "Re: Proposed Residential Development".
An email is annexed from Mark Landini to Huw Turner of 24 August 2016, which appears to be in response to an email from Mr Turner of 23 August 2016 whereby Mr Turner makes recommendations to Mark Landini in relation to a consultant.
An email of 19 April 2017 from the plaintiff, to the defendants and others, states: … we received updated structural drawings from SDA for the Sydney Water approval submission last week and have done a draft of our suggested solution. We are proposing a change in flooring at the entry. Final choice of finishes can be determined later, but the principle is that an additional finish is overlaid over the precast planks proposed by SDA. We know these planks will look agricultural best, and be impossible to waterproof at the glazing threshold, if detailed as the floor finish. Installation is an issue also. We believe this is all resolvable with the attached sketch. Let us know if you are happy to move forward with this as a submission to Sydney Water. On a side note, at this stage SDA have only updated the sewer access drawings, the other changes we agreed will be done when Andrew returns from leave
Attached is an invoice from SDA Structures Pty Ltd, Consulting Engineers, of 17 October 2016 for professional services rendered for design sketches for external works, house and completion of site visit and preliminary advice. The invoice is addressed to Mark and Rikki Landini, C/- Collins and Turner, at the plaintiff's address, and states under Payment terms: "this is a payment claim made under the Building and Construction Industry Security of Payment Act 1999, NSW. Due and payable within 30 days of the Invoice Date."
A copy of correspondence, addressed to the plaintiff, at the plaintiff's address, from VOS Group Consultant Engineers, of 3 March 2017, states: Dear Penny, Re-: 1 Sirius Cove Road, Mosman. Thank you for your invitation to submit a services consulting proposal for the above residential project…. The project consists of the new residential dwelling at 1 Sirius Cove Road Mosman as indicated on your architectural drawings attached to your email dated 7 February 2017.
The scope of the service set out by VOS Group is detailed in the correspondence to the plaintiff and included such matters as hydraulic services for cold water service, hot water service, sanitary plumbing and drainage, roof and balcony drainage and gas services, if required, and "provision of advice to architect". The fees to be charged under the proposal are set out in the correspondence.
Ms Landini states that the contract contains the "breakdown of the fees for the project (milestone dates)" as set out at paragraph 25 of the affidavit. Ms Landini states that the last milestone date was achieved by the claimant in the purported Payment Claim dated 6 July 2016. She further states that on or about 6 July 2016 the plaintiff issued PC2 (progress claim 2) and attaches a copy.
A construction certificate annexed to Ms Landini's affidavit sets out "scope of building works covered by this notice: significant alterations and additions to a dwelling house comprising a two story addition, double garage, tunnel and lift shaft, swimming pool, landscaping works and solar panels at the premises". The certificate refers to a requirement for an architectural construction certificate, and structural engineering plans and geotechnical endorsement including a landslide risk management assessment. There is also a requirement for a landscape architect to produce or sign the plans for landscaping
Ms Landini states that over the course of the project, the plaintiff sourced a number of consultants. "Mark and I did not have substantial dealings with these consultants. Rather, they dealt directly with the plaintiff."
Ms Landini continues that "Mark and I engaged the following consultants" - and she names 9 consultants at [30] of the affidavit. She sets out in the following paragraphs [31] - [59] the work undertaken by those consultants.
Ms Landini states that on or about 1 November 2017, "Mark and I terminated the Contract under which the plaintiff was engaged" and she annexed a copy of the notice of termination. In or about November 2017, they engaged another architecture firm "to complete and rectify the plaintiff's incomplete and defective works and services".
The second affidavit of Matthew Bryan, solicitor, of 23 November 2018, is in response to the affidavit of Ms Landini and provided on instructions. The affidavit states that the plaintiff initially commenced work under its contract with the defendants in accordance with Option A Scope of Services. Interior drawings, (including joinery and wet area drawings for kitchen, bathrooms, bedrooms, laundry and library) which formed part of the Option A Scope of Services, were issued by the plaintiff on or about 18 November 2016 and 17 December 2016. A copy of the drawings is attached. Mr Bryan states that it was not until 16 December 2016 that the defendants decided to reduce the Scope of Services to Option B. The invoices issued by the plaintiff in connection with the contract (including the Payment Claim relied upon by the plaintiff in these proceedings) subsequently reflected the change from Option A to Option B (after that date the cost of preparation of Construction Documentation was reduced from $127,000-$92,700). No payment schedule raising any issues was ever served by the defendant in response to the payment claim relied upon by the plaintiff in the current proceedings. The plaintiff denies that the issuing of progress claims was related to completion of milestones as alleged by the defendant.
Mr Bryan refers to the plaintiff's reliance on section I of the contract of 12 April 2016, and maintains that reference dates for the making of a payment claim arose on a monthly basis. All of the monthly progress claims were issued prior to the claim relied upon by the plaintiff in these proceedings and were all paid by the defendants. In relation to paragraphs 29 to 59 of the defendant's affidavit, none of the consultants referred to were engaged by the plaintiff and the plaintiff was not involved in coordinating, the work of those consultants. None of those consultants are builders and the services provided by them were at an anterior stage to any construction work. The plaintiff was not involved in, or involved in coordinating, the activities of any builders, and no construction work was carried out at all during the time the plaintiff was involved in the project. Further section K of the contract deals with "termination or suspension", and the plaintiff denies that the so-called "notice of termination" had the effect of terminating the contract as at 1 November 2017 (or at all).
An important observation is that while the defendants have provided evidence in the form of an affidavit by one of the defendants, who was a party to the contractual agreement and related matters, the plaintiff's evidence consists of the solicitor's affidavits. Those affidavits are stated to be based on instructions and also a review of documents. Relevant documents are annexed to the affidavits and are the basis for statements and conclusions set out in the affidavits. Parts of the affidavits attract lesser weight for the reason of the hearsay and interpretative nature of the statements in the affidavits, also conclusions and opinions are expressed. The solicitor does not have direct experience or personal knowledge of a number of the matters which are set out in the affidavits. The solicitor's affidavits are not evidence from a witness involved in the agreement/contract between the parties nor a witness to the work agreed and/or undertaken.

Discussion of legal principles - application to strike out pleadings

The Notice of Motion is made pursuant to the Rules. The parties had no dispute about the legal principles which apply. Those principles are usefully summarised by Justice Ward in the case McDonald v Grech; Bank of Western Australia Ltd v McDonald [2012] NSWSC 717, a summary with which I respectfully agree and adopt. Her Honour stated: It is accepted that there is power under Rules 13.4 and 14.28 of the Uniform Civil Procedure Rules 2005 (NSW) for the Court summarily to dismiss proceedings or to strike out proceedings where no reasonable cause of action is disclosed on the pleading. Those rules provide as follows: 13.4 Frivolous and vexatious proceedings (1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings: (a) the proceedings are frivolous or vexatious, or (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the court, the court may order that the proceedings be dismissed generally or in relation to that claim. (2) The court may receive evidence on the hearing of an application for an order under subrule (1). 14.28 Circumstances in which court may strike out pleadings (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1). 27 The test generally applied on such applications is that set out in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 128-9. There, Barwick CJ said: [T]he plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense". 28 Mr Gyles notes that the General Steel test was recently endorsed and applied by the Court of Appeal in Shaw v State of New South Wales [2012] NSWCA 102 at [32], where Barrett JA (with whom Beazley, McColl, Macfarlan JJA and McClellan CJ at CL agreed) stated: The question is...whether the claims in question are so obviously untenable or groundless that there is "a high degree of certainty" that they will fail if allowed to go to trial; and whether this is one of the "clearest of cases" in which the court may accordingly intervene to prevent the claims being litigated. 29 It has on numerous occasions been said that the power summarily to dismiss a claim should be exercised with the utmost caution and only in very clear cases (General Steel; see also Webster v Lampard (1993) 170 CLR 598 at 602-3 and Brimson v Rocla Concrete Pipes Limited [1982] 2 NSWLR 937 at 942). In Dey v Victorian Railways Commissioner (1949) 78 CLR 62 at 91 it was said that it must be clear that there is no real question to be tried. 30 In Skalkos v Smiles [2006] NSWSC 192, Johnson J summarised the principles and authorities in this regard, noting that the power to make an order for summary dismissal should be sparingly employed (the fundamental principle being that prima facie a plaintiff is entitled to have his or her case come to trial) and that a high degree of certainty is required about the ultimate outcome of the proceeding for a summary dismissal application to succeed. His Honour said (at [62]): The mere fact (if it be the case) that a plaintiff's prospects of success must be characterised as slim would not be enough to strike out a pleading: Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1995-1997) 188 CLR 241 at 271; Preston v Star City Pty Limited [1999] NSWSC 127 at para 31. The question for determination is whether a reasonable cause of action is disclosed, that is a cause of action which has some chance of success, or which could conceivably give the plaintiff a right to relief or which, although weak, is properly debateable, and has some apparent legitimate basis, if the facts upon which it is alleged to be based are made good: Preston v Star City Pty Limited at para 37. 31 Similarly, the fact that there may be legitimate complaints in relation to the form in which the claim is pleaded is not sufficient. Johnson J noted that: So far as any deficiency might arise in relation to the particularisation of the matters alleged, that is a matter appropriately left for subsequent amendment rather than a strike out of the pleading, so long as what is alleged sufficiently identifies a reasonable cause of action: Jingellic Minerals NL v Abigroup Limited (1992) 7 WAR 566; Co-Ownership Land Development Pty Limited v Queensland Estates Pty Limited [1973] 47 ALJR 519 at 521; Preston v Star City Pty Limited at para 41. 32 More recently, Hammerschlag J, in Paul Ernest Simmons v Protective Commissioner of NSW also known as NSW Trustee and Guardian [2012] NSWSC 455, has noted the difference in formulation between the two parts of Rule 13 and, in obiter, expressed the view that a reasonable cause of action was one giving rise to real issues requiring resolution by the Court (such that proceedings need not be hopeless or bound to fail in order to be struck out as disclosing no reasonable cause of action, adopting the approach in Spencer v Commonwealth of Australia (2010) 241 CLR 118). 33 The approach advocated by Hammerschlag J in Simmons is that the judicial mandate pursuant to s 56 of the Civil Procedure Act 2005 (NSW) to give effect to the overriding purpose of the just, quick and cheap resolution of the real issues in dispute expands the 'spectrum of circumstances' in which the Court might on discretionary grounds grant relief by way of dismissal under r 13.4 Uniform Civil Procedure Rules 2005 (NSW). His Honour's reasoning adopts the approach of the High Court in Spencer, where, in interpreting s 31A of the Federal Court of Australia Act 1976 (Cth), Hayne, Crennan, Kiefel and Bell JJ took into account the legislative purpose of the text and in particular, the requirement that there be no "reasonable prospect" of success. Hammerschlag J notes (at [62]) that although: UCPR Pt 13 r 13.4 does not expressly provide (as does s 31A of the Federal Court of Australia Act 1976 (Cth)) that a proceeding need not be hopeless or bound to fail to have no reasonable prospects of success, the combination of the inclusion of the word reasonable and the operation of s 56(2) sufficiently clearly indicates, in my view, that the approach to exercising the power to dismiss under the rule is the same as that elucidated by the High Court in relation to the federal enactment. 34 Mr Gyles notes that although, in Simmons, his Honour expressed the view that in order summarily to dismiss a case the Court must not necessarily be satisfied that the proceedings are bound to fail (it arguably being sufficient that the proceedings do not have a reasonable prospect of success fundamentally), it remains a difficult test for an application to meet on any view.
I have applied these considerations, to the facts of the current case, in deciding the Notice of Motion. I note that while the authorities indicate that evidence can be placed before the court on an application for summary dismissal, and legal issues can be determined, it does not constitute a trial of the issues. The situation in the current matter is that substantial submissions of law, as to the application of legislation to the facts of the current matter, are made. Evidence has been submitted indicating factual determinations are required in order to determine the legal issues. These are matters which tend to suggest there are arguable issues indicating that the Notice of Motion should not be granted. I further note that while the defendant relies upon direct evidence from one of the parties to the contract, and one with personal knowledge of the dealings between the parties, the plaintiff relies on a solicitors' affidavit which attests to various matters beyond the solicitor's personal knowledge, although some of the conclusions in the affidavit are drawn from documents which are attached.
There is an issue in dispute as to the legislation which applies to the contract in question. The Statement of Claim relies upon the right to payment under the Security of Payments Act, and the Notice of Motion also relies on this. In determining the Notice of Motion it is important to acknowledge that if the debt in the present matter, as claimed by the plaintiff, arises under the Security of Payment Act, then there is some merit, given the legislative provisions involved, to the application for the defence to be struck out. However, for reasons which follow, the applicability of that Act in the current matter is not clear.

Consideration of relevant legislation

The defendant states that the work involved residential building work and that the Security of Payments Act does not apply to the contract. Residential Building work is defined in the HB Act: 2 Definition of "residential building work" (1) In this Act, "residential building work" means any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling, or (b) the making of alterations or additions to a dwelling, or (c) the repairing, renovation, decoration or protective treatment of a dwelling. (2) Each of the following is included in the definition of "residential building work": (a) roof plumbing work done in connection with a dwelling, (b) specialist work done in connection with a dwelling, (c) work concerned in installing in a dwelling any fixture or fixed apparatus that is designed for the heating or cooling of water, food or the atmosphere or for air ventilation or the filtration of water in a swimming pool or spa (or in adding to, altering or repairing any such installation). (3) Each of the following is excluded from the definition of "residential building work": (a) any work (other than specialist work) the reasonable market cost of the labour and materials involved in which does not exceed the amount prescribed by the regulations, (b) any work (other than specialist work) involved in the manufacturing of a moveable dwelling, within the meaning of the Local Government Act 1993 (other than a moveable dwelling that is a manufactured home within the meaning of that Act), (c) any work involved in the manufacture, assembly or erection of a moveable dwelling that is a manufactured home within the meaning of the Local Government Act 1993, other than: (i) specialist work, or (ii) work involving the connecting together on the site on which the manufactured home is installed of its major sections and any associated structures forming part of the manufactured home and attaching them to footings, (d) any work (other than specialist work) involved in the site preparation for, or the assembling or erection on site of, a moveable dwelling excluded by paragraph (b), unless the work requires development consent, (e) any work referred to in paragraph (d) done in relation to land on which a council has authorised a moveable dwelling to be placed by issuing an approval under the Local Government Act 1993, whether or not a development consent is also required, (f) any work that would otherwise be residential building work but that by or under another Act a person is prohibited from doing unless the person is the holder of a contractor licence or another authority under that other Act, but subject to subclause (4), (g) internal painting work, but subject to subclause (5), (h) any work (other than specialist work) done in relation to the removal and transport of a dwelling, but subject to subclause (6), (i) the supervision only of residential building work: (i) by a person registered as an architect under the Architects Act 2003, or (ii)by a person supervising owner-builder work for no reward or other consideration, or (iii) by any other person, if all the residential building work is being done or supervised by the holder of a contractor licence authorising its holder to contract to do that work, (j) demolition work, (k) any work involved in the installation of any material that forms an upper layer or wearing surface of a floor (even if installed as a fixture) and that does not involve any structural changes to the floor, but not including work involved in the installation of floor tiles unless the regulations otherwise provide, (l) any work that involves the installation or maintenance of any fixed apparatus such as a lift, an escalator, an inclinator or a garage door by means of which persons or things are raised or lowered or moved in some direction that is restricted by fixed guides. (4) Work referred to in subclause (3) (f) is not excluded from the definition of "residential building work" if it is part only of the work to be done under a contract to do residential building work. (5) Internal painting work is not excluded from the definition of "residential building work" (under subclause (3) (g)) if it is part only of the work to be done under a contract to do residential building work. (6) Work referred to in subclause (3) (h) is not excluded from the definition of "residential building work" if it is part only of the work to be done under a contract to do residential building work at the new site of the dwelling (whether or not that work is done under the same contract as the contract to remove and transport the dwelling). (7) The regulations may: (a) declare any work to be included in the definition of "residential building work", or (b) declare any work to be excluded from the definition of "residential building work".
It can be seen that supervision only of residential building work, by an architect, is excluded from the definition: s 2(3)(i). The plaintiff is an architectural firm, and the work which the plaintiff undertook for the defendant may have been limited to supervision, however, on the limited evidence presented this is not clear. The plaintiff argues that no "building work" was undertaken, it was all anterior to work commencing, however the defendant presents evidence to suggest otherwise.
I have been referred to the decision of Supreme Court (Stevenson J), The Owners - Strata Plan 81837 v Multiplex Hurstville Pty Ltd [2018] NSWSC 1488 (Multiplex). In that decision the court focused on a number of issues, including the particular terms of the Development Management Agreement which was the contract under consideration. There were various clauses of the contract which referred to the HB Act (refer [42]-[44] and [279] of Multiplex); other issues were whether Multiplex was an "owner" for the purposes of the HB Act, and recent amendments of the HB Act applying to developers were considered. The decision sets out complex contractual relations and terms. However, relevant to the present matter is the court's consideration of the whether the Development Management Agreement (DMA) was a contract to do residential building work. Whilst the court's conclusions were in large part based on the specific contractual terms, the court also made findings as to the nature of the work carried out under the contract. The court found that the DMA authorised Multiplex to select a builder to construct the project and the court found that the building work was actually carried out by the builder (at [267]). The question which the court went on to consider was whether the DMA should also be seen as a contract to carry out residential building work. The court observed: Was the DMA a contract to do residential building work? 265. "Residential building work" is defined in Sch 1, cl 2 of the HBA to mean, relevantly: "…any work involved in, or involved in co-ordinating or supervising any work involved in: (a) the construction of a dwelling…". 266. However the definition expressly excludes: "the supervision only of residential building work: … (iii) by any other person, if all the residential building work is being done or supervised by the holder of a contractor licence authorising its holder to contract to do that work". 267. The work actually carried out by Baseline under the D&C Contract was "residential building work" for the purposes of the HBA. The D&C Contract was a contract to perform residential building work and thus a contract into which the statutory warranties referred to in s 18B of the HBA were implied. 268. The question is whether the DMA should also be seen as a contract whereby Multiplex itself agreed to carry out building work. 269. Multiplex did not hold a licence under the HBA to carry out residential building work, and would have committed an offence had it done so: s 4(1)(a) of the HBA. 270. The effect of the "supervision only" exception to the general definition of residential building work is that, where a party's involvement is limited to supervising the construction work (rather than actually carrying out or coordinating it), that party's work will not constitute "residential building work". As Dr Bell and Mr Hutton submitted, this leaves it open for a party to procure or make arrangements with a licenced contractor to do residential building work. 271. By reference to the definition of residential building work, the question thus is whether the DMA was a contract by which Multiplex agreed to be: 1. "involved in" the construction (that is the "building process itself") of the Vantage building; or 2. "involved in" "coordinating" the construction work; or 3. involved in supervising construction work, other than merely supervising Baseline; Baseline being the holder of a contractor licence and itself a party which, by virtue of the D&C Contract, was doing and supervising the actual building process. 272. The question must be considered as at the date of the DMA (Owners Corporation Strata Plan 72535 v Brookfield [2012] NSWSC 712 at [105] (McDougall J)) and by reference to usual principles governing the construction of commercial contracts and the objective ascertainment of the intention of the parties. ….. 274. Before me, debate focused primarily on the text of the DMA. 275. The overarching provision in the DMA is cl 1.1 pursuant to which SLH appointed Multiplex as its development manager and conferred upon it the power to do or procure to do a number of matters including, critically, "to procure the construction of improvements as contemplated by the Project". 276. The Statutory Warranties are implied in every contract "to do" residential building work. 277. But Multiplex was not engaged "to do" this work. It was engaged to procure that the work be done by an appropriately licensed builder (cl 3.2). 278. SLH and Multiplex agreed that Multiplex was not engaged "to do" the building work. 279. Thus cl 17.4 (to which I have referred at [44] above) provided: 49 "Without affecting the warranties contained in cl 17.3 ('Home Building Act Warranties'), SLH and the Trusts acknowledge to Multiplex that this document complies with, and Multiplex has not contracted to do work in contravention of, Division 1 of Part 2 of the Home Building Act". (Emphasis added.) 280. This provision cannot be conclusive on the question; as the parties evidently acknowledged by the indemnity in cl 17.4(b) (see [45] above). 281. However, faced with this statement of the parties' actual intention it would require clear words in the DMA to compel the conclusion that their intention had been thwarted.
The court went on to consider the terms of the DMA and noted some ambiguity arose (at [287]). The court concluded that the intention of the parties was that Multiplex agreed to undertake the project by procuring it to be carried out, and that the court was "not persuaded the DMA is a contract to do residential building work" (at [307]).
I note that in Multiplex the Supreme Court, in reaching its conclusion, conducted a detailed consideration of the terms of the contract, the evidence as to the work engaged in, and the parties' intentions were considered in construing the contractual terms. I do not, in the current interlocutory proceedings, have the benefit of detailed evidence on those matters, and I do not have any direct evidence from one of the parties, the plaintiff. The written contract refers to "Construction stage services". The plaintiff's case is that the work never reached that stage. The affidavit of Ms Landini states that over the course of the project the plaintiff sourced a number of consultants with whom the plaintiff dealt with directly. In response, the plaintiff's solicitor's affidavit states that none of the consultants were builders, and all work was work anterior to the construction phase. The invoices annexed to that affidavit refer to the plaintiff charging the defendants for "construction documentation", but not for "Construction Stage Services".
Support for the plaintiff's contention that work anterior to building work is not residential building work is suggested by the words "after work is commenced under a contract to do residential building work" in the definition of "progress payment" in Schedule 1 of the HB Act: "progress payment" for residential building work means any payment on account after work is commenced under a contract to do residential building work.
This term also suggests that a contract to do residential building work is such a contract, regardless of whether the work has commenced. However, there is still a need to decide what "work" is covered by the contract between the parties, and whether it comes within work covered by the HB Act, given the definition of "residential building work" as "any work involved in, or involved in co-ordinating or supervising any work involved in, (a) the construction of a dwelling, or (b) the making of alterations or additions to a dwelling…".
This is a matter where evidence as to what work was included in the contract, and the actual work undertaken under the contract between the parties, may be required.
Other issues raised by the defendants include that even if it is not residential building work and the contract is found to be a construction contract to which the Security of Payments Act applies, the terms of the contract between the parties, the lack of a reference date, and the timing of the sending of the invoice, and the notification requirements which may apply to the invoice are all matters which may lead to a conclusion that the invoice relied upon in the Statement of Claim does not trigger the payment provisions of the Act. These contentions require some examination of the legislation.
A useful summary of the provisions of the legislation is provided in the decision of the High Court of Australia in Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence [2016] HCA 52 (footnotes omitted): 1. KIEFEL, BELL, GAGELER, KEANE AND GORDON JJ. This appeal raises an important question as to whether the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"). 2. Contrary to the conclusion of the Court of Appeal of the Supreme Court of New South Wales, and consistently with the conclusion of the primary judge, the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim and no such reference date existed in the present case. The Act 3. Enacted by the Parliament of New South Wales "to reform payment behaviour in the construction industry", the Act mandated that it be subjected to review after the first three years of its operation. As a consequence of the review then conducted, the Act was extensively amended by the Building and Construction Industry Security of Payment Amendment Act 2002 (NSW) ("the Amendment Act"). 4. The Minister responsible for introducing the Bill for the original Act, for conducting the review and for introducing the Bill for the Amendment Act was the Hon Morris Iemma MLA. In the course of introducing the Bill for the Amendment Act, Mr Iemma explained that when introducing the Bill for the original Act the Government of New South Wales had wanted to "stamp out the practice of developers and contractors delaying payment to subcontractors and suppliers". He went on to explain the original design of the Act which the Amendment Act was intended to enhance. He said: "The Act was designed to ensure prompt payment and, for that purpose, the Act set up a unique form of adjudication of disputes over the amount due for payment. Parliament intended that a progress payment, on account, should be made promptly and that any disputes over the amount finally due should be decided separately. The final determination could be by a court or by an agreed alternative dispute resolution procedure. But meanwhile the claimant's entitlement, if in dispute, would be decided on an interim basis by an adjudicator, and that interim entitlement would be paid." Mr Iemma continued by emphasising that "[c]ash flow is the lifeblood of the construction industry" and that the Government was "determined that, pending final determination of all disputes, contractors and subcontractors should be able to obtain a prompt interim payment on account, as always intended under the Act". 5. The Act in the form relevant to the circumstances giving rise to this appeal is as subsequently amended to 20 April 2014. There have been further amendments since then, but they are not material and it is convenient to refer to the Act in that relevant form in the present tense. 6. Section 3 of the Act gives statutory expression to the object of the Act, summarises the means by which the Act pursues that object, and emphasises that the Act is not intended to affect other entitlements and remedies. It states: "(1) The object of this Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services. (2) The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments. (3) The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves: (a) the making of a payment claim by the person claiming payment, and (b) the provision of a payment schedule by the person by whom the payment is payable, and (c) the referral of any disputed claim to an adjudicator for determination, and (d) the payment of the progress payment so determined. (4) It is intended that this Act does not limit: (a) any other entitlement that a claimant may have under a construction contract, or (b) any other remedy that a claimant may have for recovering any such other entitlement." 7. The Act contains expansive definitions of "construction work" and of "related goods and services", and defines "construction contract" broadly to encompass any "contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party". 8. The Act also contains a definition of "progress payment". That definition is as follows: 35 "progress payment means a payment to which a person is entitled under section 8, and includes (without affecting any such entitlement): (a) the final payment for construction work carried out (or for related goods and services supplied) under a construction contract, or (b) a single or one-off payment for carrying out construction work (or for supplying related goods and services) under a construction contract, or (c) a payment that is based on an event or date (known in the building and construction industry as a 'milestone payment')." 9. Part 2 of the Act is headed "Rights to progress payments". The central provisions of Pt 2 are ss 8 and 9. 10. Section 8 provides: "(1) On and from each reference date under a construction contract, a person: (a) who has undertaken to carry out construction work under the contract, or (b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment. (2) In this section, reference date, in relation to a construction contract, means: (a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or (b) if the contract makes no express provision with respect to the matter - the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month." The reference in s 8(2)(b) to a "named month" is to a calendar month, according to the Gregorian calendar. 11. Section 9 provides: "The amount of a progress payment to which a person is entitled in respect of a construction contract is to be: (a) the amount calculated in accordance with the terms of the contract, or (b) if the contract makes no express provision with respect to the matter, the amount calculated on the basis of the value of construction work carried out or undertaken to be carried out by the person (or of related goods and services supplied or undertaken to be supplied by the person) under the contract." 12. Part 3 of the Act is headed "Procedure for recovering progress payments". Part 3 begins with s 13, which relevantly provides: "(1) A person referred to in section 8(1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (2) A payment claim: (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and (c) must state that it is made under this Act. ... (5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. (6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim." 13. Within the meaning of the Act: a claim referred to in s 13 is a "payment claim"; the person by whom a payment claim is served is the "claimant"; the amount of the progress payment claimed to be due for construction work carried out, or for related goods and services supplied, is the "claimed amount"; and the person on whom the payment claim is served is the "respondent". 14. Service by a claimant on a respondent of a payment claim for a claimed amount is the trigger for the procedure set out in Pt 3. That procedure is essentially in two stages. The timing of the steps to be taken at each stage is closely circumscribed. 15. First, the respondent has an opportunity to reply to the payment claim by providing to the claimant a "payment schedule". The payment schedule is to indicate the "scheduled amount", being the amount of the payment (if any) that the respondent proposes to make. The payment schedule is also to indicate the reasons for withholding payment if the scheduled amount is less than the claimed amount. If the respondent does not provide a payment schedule within time, the respondent becomes liable to pay the claimed amount to the claimant. If the respondent does not pay the whole or any part of the claimed amount (in circumstances where the respondent has not provided a payment schedule) or the whole or any part of the scheduled amount (in circumstances where the respondent has provided a payment schedule), the claimant can recover the unpaid portion from the respondent as a debt in a court of competent jurisdiction. In recovery proceedings for that unpaid portion, the respondent is not entitled to cross-claim against the claimant or to raise any defence in relation to matters arising under the construction contract. 16. Next, if the scheduled amount is less than the claimed amount, or as an alternative to commencing recovery proceedings for an unpaid portion in a court of competent jurisdiction, the claimant can make an application for adjudication of the payment claim. That "adjudication application" is made to an authorised nominating authority, which must refer the application to a person eligible to be an adjudicator. The adjudication application can contain such relevant submissions as the claimant chooses to include. An adjudicator accepts the adjudication application by causing notice of the acceptance to be served on the claimant and respondent. Once that occurs, the respondent has an opportunity to lodge with the adjudicator an "adjudication response" containing such relevant submissions as the respondent chooses to include, following which the adjudicator is obliged to determine the adjudication application as expeditiously as possible. 17. The jurisdiction of an adjudicator is set out in s 22…. … 61. The construction of s 13(1) consonant with the structure of the Act is accordingly that advanced by Southern Han. The description in s 13(1) of a person referred to in s 8(1) is of a person whom s 8(1) makes entitled to a progress payment. Section 8(1) makes a person who has undertaken to carry out construction work or supply related goods and services under a construction contract entitled to a progress payment only on and from each reference date under the construction contract. In that way, the existence of a reference date under a construction contract within the meaning of s 8(1) is a precondition to the making of a valid payment claim under s 13(1). 62. That construction of s 13(1) affords to s 13(1) an operation that is harmonious with s 13(5). Section 13(1)operates to require that each payment claim be supported by a reference date and s 13(5) operates to require that each reference date support no more than one payment claim. Section 13(5) has been held to produce the result that "a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment claim under the [Act]". Section 13(1) correspondingly produces the result that a document purporting to be a payment claim that is not in respect of a reference date is not a payment claim under the Act. The document is ineffective in either case to trigger the procedure established by Pt 3. The determination of a reference date 63. Having concluded that the existence of a reference date under a construction contract within the meaning of s 8(1) is a precondition to the making of a valid payment claim under s 13(1), the issue is then as to how any such reference date is to be determined. 64. That issue needs to be addressed in light of the definition of "progress payment", which applies to the construction of the Act "except in so far as the context or subject-matter otherwise indicates or requires". The definition picks up the statutory entitlement created by s 8(1) by providing that a progress payment means a payment to which a person is entitled under s 8. That was all that the definition did when it was originally enacted. The definition was amended by the Amendment Act, however, in order "to make it clear that the Act creates an entitlement not only to payments that are in the nature of instalments, but also to final payments and to single or one-off payments". The amendment of the definition was responsive to an earlier judicial interpretation which had limited references to progress payments in s 8 and elsewhere in the Act to payments designated by construction contracts to be progress payments. 65. Through its adoption of the drafting device "means ... and includes ...", the amended definition serves to indicate that the categories of payment to which s 8(1) is capable of applying extend to include a payment meeting any of the descriptions in the three paragraphs of the definition. That is to say, s 8(1) is to be read in light of the definition as capable of creating a statutory entitlement not only to a payment in the nature of an instalment but also to a final payment under a construction contract, to a single or one-off payment under a construction contract and to a payment of a type known in the construction industry as a milestone payment. This makes clear that the Act is not concerned only with providing a statutory mechanism for securing payments that are to occur during the currency of an existing construction contract. The statutory contemplation is that a claim for a progress payment might be made after the contract has expired. 66. The repeated references in s 8, and in the extended definition of progress payment, to payment "for" work carried out or to be carried out (or goods and services supplied or to be supplied) "under" a construction contract nevertheless point to an important limitation that is implicit in the overall design of the Act, and that has been so from the time of its original enactment. That limitation is that the Act is concerned to provide a statutory mechanism for securing payment of an amount claimed to be payable in partial or total discharge of an obligation to pay for work (or for goods and services supplied) imposed by the contractual force of a construction contract. The Act is not concerned to provide security for payment of an amount claimed by way of damages for breach of a construction contract. Nor is the Act concerned to provide security for payment of an amount which, according to prevailing authority, might be claimed as an alternative to damages by way of restitution for work carried out (or goods and services supplied) in the event of the construction contract terminating on acceptance of repudiation.
The decision set out above is of guidance in relation to the parties' contentions, in relation to the validity of the payment claim, and whether there is a reference date in the contract or pursuant to the Act.
The authorities on the Security of Payments Act also set out the importance of compliance with s 13 of that Act if a payment claim is to be enforced under the provisions of the Act. It is noted that the authorities to which I refer, were decided before amendments made by the Building and Construction Industry Security of Payment Amendment Act 2013. Section 13(2)(c) now provides: 13 Payment claims (1) A person referred to in section 8 (1) who is or who claims to be entitled to a progress payment (the "claimant") may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (2) A payment claim: (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the "claimed amount"), and (c) if the construction contract is connected with an exempt residential construction contract, must state that it is made under this Act.
The previous s 13(2)(c) provided that the payment claim must state it is made under the Act for all construction contracts. However the authorities, indicating the need for the payment claim to state that it is made under the Act, are still applicable to the class of contracts specified by the amended 13(2)(c). It is noted that it is the defendants' alternative contention, that even if the contract is a construction contract (rather than a contract for residential building work) it is one connected with an exempt residential construction contract. The authorities examining s 13 requirements remain relevant to this class of construction contract.
The case of Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69 examined a situation where, after judgement had been entered (on the basis of an adjudicator's certificate), the same payment claims were reissued and relied upon to make another claim under the Act. Consideration was given the provisions of ss 13 and 15. The Court of Appeal stated: 28 The Act provides a mechanism by which a person who undertakes construction work is able to obtain progress payments, even if the construction contract does not provide for them to be made. The procedure for obtaining a progress payment involves the making of a payment claim, the provision of a Payment Schedule by the person on whom the claim is made, the referral of any disputed claim to an adjudicator for determination and the payment of the progress payment determined to be payable. 29 The procedure is plainly one designed to facilitate the speedy making and payment of progress claims and, where necessary, the speedy resolution of any disputes.
Much of the decision in Dualcorp focused on the finality of the adjudication process under the Act, on the facts of that case, however the Court of Appeal made useful observations: 38 The Act provides two avenues for a claimant to obtain a judgment in its favour. 39 The first is to be found in s 15 which applies where, as here, the recipient of a claim has not served a Payment Schedule. The section provides that in those circumstances the claimant may sue for the unpaid portion of the claimed amount as a debt in any court of competent jurisdiction. Subsection (4) provides that judgment is not to be given in favour of the claimant unless the court is satisfied that a Payment Schedule has not been served by the recipient of the claim and that the claimed amount is still outstanding. It also disentitles the respondent to the claim from bringing any cross claim and, as mentioned earlier, from raising any defence "in relation to matters arising under the construction contract". 40 The provision as to cross-claims and defences is mirrored in s 25 which provides the other avenue for the obtaining of judgment. This section applies where there has been an adjudication. In that circumstance, the claimant may file an adjudication certificate "as a judgment for a debt in any court of competent jurisdiction" and enforce it accordingly. 41 The restrictions in these sections as to the defences that may be raised do not in my view prevent the raising of one based upon or, to use the primary judge's expression, "akin to" res judicata, or indeed issue estoppel if that defence is otherwise available. Such a defence could not in my view be described as a matter "arising under the construction contract". Rather, it is a matter arising out of the proper construction of the Act in conjunction with relevant common law principles. The defence may thus be raised, as may one that service of a payment claim was not effective because it involved misleading or deceptive conduct (Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9 especially at [96] per Basten JA).
If reliance is to be had on the Security of Payment Act for recovery of a sum due under a payment claim, the courts have indicated the importance of conformity with s 13(2) of the Act. In Leighton Contractors Pty Limited v Campbelltown Catholic Club Limited, Campbelltown Catholic Club Limited v Leighton Contractors Pty Limited [2003] NSWSC 1103 Justice Einstein stated: 57 I have given close consideration to the particular submission appearing in paragraphs 3.9 - 3.12 of the above submissions on the special facts presently before the Court. In Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSWSC 903 the Court had occasion in another context to consider the necessity for strict compliance to the letter with the codified procedures provided for in the Act. That judgment made the point that the whole of the rationale underpinning the procedures laid down by the Act is directed at providing a quick and efficient set of procedures permitting recovery of progress payments and the quick resolution of disputes in that regard; hence time limits under the Act being strict, and the consequence of failure to comply with the stipulated time limits being significant (cf Emag at [35] [38] [41]-[43]). 58 The same approach requires to be taken to the very special significance of the wording to be found in a payment claim made under the Act. That this is apparent is to be seen from the draughtsman having included the express requirement in section 13(2)(c) that a payment claim must state that it is made under the Act. There is no room for ambiguity of any type and it is critical that the recipient of a payment claim be made aware by the terms of that claim that the provisions of the Act have been engaged. The appropriate test is that identified in Parist by Nicholas J at paragraph 28: "The principles relevant to the question of compliance with s13(2) were discussed in Hawkins Construction (Aust) Pty Ltd v Mac's Industrial Pipework Pty Ltd [2002] NSWCA 136 par 20; Beckhaus v Brewarrina Council [2002] NSWSC 960 para 73-76; Walter Construction Group Ltd v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266 paras 63-65; 81-85. It must be clear on the face of the document(s) which constitute the statutory payment claim that the information conveyed meets the requirements of s13(2). 'The test is an objective one. In deciding the meaning conveyed by a notice a court will ask whether a reasonable person who had considered the notice as a whole and given fair and proper consideration would be left in any doubt as to its meaning" [Walter Construction Group Pty Ltd para 82] 59 The question is a close one in terms of the document here claimed to have constituted the relevant payment claim. The so-called progress claim is in fact enclosed as an attachment to the covering letter. The covering letter which uses the words "This is a payment claim made under the [Act] ". The attached document does not use those words. Whilst in other fields of discourse this may be regarded as a matter of no moment, it must be appreciated that one could have a circumstance where a covering letter may enclose a number of documents, yet still itself purporting to be the vehicle conveying the section 13(2)(c) endorsement. It would not be appropriate to hold that the endorsement provision had been complied with if, for example, only some of those enclosed documents were claimed to be the relevant payment claim. This is not an area in which the recipient of the payment claim should be in any doubt from its terms as to what it is and as to the fact that it is made under the Act.
Whilst the decision predates the 2013 amendments, the decision makes clear that what must be determined, where s 13(2)(c) applies, is whether, in the particular case, it would be clear to a person who receives a document, that the document activates the statutory mechanism for imposing a debt, which may otherwise not be payable at all. A reasonable person, considering the material, would need to be clear that it was a claim made under the Security of Payments Act. Such an approach is consistent also with other authorities such as the decision of the Federal Court, Protectavale Pty Ltd and v K2K Pty Ltd [2008] FCA 1248 where Finkelstein J observed at [7]: … the Payment Act places the claimant in a privileged position in the sense that he acquires rights that go beyond his contractual rights… The premise that underlies the legislation is that cash flow is the lifeblood of the construction industry…. And the principal under a construction contract should pay now and argue later (Multiplex Constructions [2003] NSWSC 1140 at [96]).
The decision Protectavale also observes that recourse may be had to the construction contract for the purpose of determining what is meant by the expression "progress payments" and whether the principal is liable to make them (at [19]); and the requirement that the invoice meet the requirements of s 14, a test which is an objective one; that is, it must be clear from the terms of the document that it contains the required information. But the terms must be read in context, as given and received by parties experienced in the building industry who are familiar with the particular construction contract, the history of the project and any issues which may have arisen between them regarding payment. Those matters are part of the context (at [10]). Nevertheless a payment claim must be sufficiently detailed to enable the principal to understand the basis of the claim. A payment claim must put the principal in a position where he is able to decide whether to accept or reject the claim and if the principal opts for the latter, to respond appropriately in a payment schedule; "That is not an unreasonable price to pay to obtain the benefits of the statute".
The consideration by Justice Finkelstein in Protectavale as set out above is relevant to the submissions made by the defendant that the Security of Payments Act is intended to apply between those engaged in the construction industry, who have some familiarity with that industry, and is not intended to apply between a residential homeowner and a provider of residential building services. It is submitted that for this reason residential building contracts are excluded from the Act.

Discussion of evidence, parties' submissions and conclusions

Detailed submissions as to the effect of the legislation and the intersection between the HB Act and the Security of Payments Act were made by both parties in this matter. I will not engage with all of those submissions in determination of the Notice of Motion but will briefly identify the main points. The plaintiff submits the contracted works do not fall within the definition of "residential building work" and therefore the HB Act does not apply. The basis of that submission is essentially that the work undertaken was anterior to residential building work, and does not relate to construction stages but only relates to preliminary stages. It is submitted that the HB Act definition of "residential building work" requires there to be the making of actual "alterations or additions to a dwelling" in order for the definition to capture the "work" undertaken by the plaintiff in the present case. It is submitted that the work, the subject of the Payment Claim, was at a stage anterior to the making of alterations or additions to a dwelling. It is therefore submitted that the defence filed, that is the grounds of defence relating to the HB Act, cannot succeed.
In relation to the grounds of the Defence based upon the absence of the reference date, the plaintiff submits that the contract contemplated that monthly progress claims would be made, and this was the reference date, and there were no requirements for particular milestones as a precondition to the making of a progress claim. In the alternative the plaintiff submits that, if the court found that clause I did not support such a contention, then s 8(2)(b) of the Security of Payments Act would apply, such that the reference date accrues on the last day of each month from the month in which the work was carried out. It is submitted that either way, the reference date defence cannot proceed.
It is stated in conclusion that the defendant should not be permitted to circumvent the fundamental "pay now, litigate later" basis on which the Security of Payments Act is premised.
The defendants' submissions include that the contract was for work involved in alterations or additions to a dwelling. It is submitted that the contract is for the carrying out of residential building work and provides for the carrying out of such work. On this basis it is submitted that the Security of Payments Act does not apply (see s 7(2)(b)). The evidence as to this issue is summarised above. I further note that the contract at clause A5 provides for "Contract administration/Construction Period/Pre-Construction" and at A6, under "Construction Period", provides for instructing "the building contractor… regarding materials selection and performance…"
The defendants submit that the Defence pleaded is arguable on the facts of the case, noting that the principals to the contract are homeowners, and the property the subject of the work is a residential dwelling. The defendants also submit that the plaintiff's role as provided for in the contract included a co-ordinating role which went beyond supervision, and thus was not supervision only - to which clause 2(3)(i) of Schedule 1 of the HB Act would apply (the clause is set out above; it exempts an architect who is supervising). The defendants submit that whether the plaintiff was acting in the supervision only role of architect, is a factual dispute to be determined at trial. I note the evidence of Ms Landini and various annexures to her affidavit, summarised above, suggest that the plaintiff may have been acting as a project co-ordinator for a residential building project, and that the contract between the parties provided for such work. While the plaintiff's solicitor states the plaintiff engaged no contractors who were conducting building work, this is not clear as the defendants' affidavit suggests that various consultants were recommended and/or engaged by the plaintiff, and the invoices annexed to the affidavit from various consultants were addressed to the plaintiff, and evidence various consultancies, as detailed above. A number of the invoices refer to the project being a residential building project. It is not clear that the role of the plaintiff was restricted to that of architect, or that of supervision, nor is it clear that the work undertaken by the plaintiff, and the work subject of the contract, was not residential building work.
The defendants further submit that the Security of Payments Act does not apply to a contract connected with an "exempt residential construction contract" which includes a construction contract for the carrying out of residential building work within the meaning of the HB Act. It is submitted that the plaintiff's obligations under the contract which included preparing tender documents, negotiating, and various other functions, and contemplated the carrying out of residential building work that would come into existence and was therefore work that was connected with an exempt residential construction contract.
It is worth noting that the Security of Payments Act (s 4(2)) defines an exempt residential construction contract as: (2) A reference in this Act to a contract that is connected with an exempt residential construction contract is a reference to a construction contract to carry out construction work or supply related goods and services as part of or incidental to the work or goods and services carried out or supplied under the exempt residential construction contract.
I note that there appears to be no evidence before the court of a connected residential construction contract, although the defendants submit that some of the contracts with the subcontractors, as evidenced by Ms Landini's affidavit, were such contracts. It is by no means clear on current evidence that this is the nature of those contracts; further detail is required.
The defendants also oppose the Notice of Motion on further grounds - that the payment claim does not comply with s 13(2) of the Security of Payments Act. It is submitted that the payment claim does not detail the work the subject of the claim. It is further submitted that there is no reference date. It is submitted the relevant dates were the time of completion of various work stages referred to on the second page of the contract. It is submitted that in the industry, these kinds of reference dates are called "milestone" reference dates. They are specifically provided in the definition of "progress payment" in the Act which provides "progress payment" means a payment which a person is entitled under s 8, and includes (without affecting any such entitlement) "(c) a payment that is based on an event or dates (known in the building construction industry as a "milestone payment"). It is the defendants' case that the last milestone which was reached by the plaintiff, was the completion of Stage 2, and the reference date which arose upon completion of stage 2 was subject to a prior invoice issued by the plaintiff as attached to the affidavit of Ms Landini. It is submitted that the invoice subject of the Statement of Claim, supplied on 31 October 2017, was invalid by reason of s 13(5) and also because it did not have a reference date to support it. The plaintiff rejects those contentions, and relies on Clause I of the contract setting out monthly payments. I note however, that the method of calculating the monthly payments, set out in the clause, refers to 'calculation of the portion of the fee for each work phase'.
Overall the defendants submit that there are a number of contentions of law, and issues of fact, which are in dispute, which are reasonably arguable matters which should go to trial, and the Notice of Motion should not therefore be granted.
Submissions in reply were provided by the plaintiff referring to the defendant's argument in relation to s 13(2)(c) of the Security of Payments Act. Reference was made to amendments made in 2013. The plaintiff details that the amendments by the Building and Construction Industry Security of Payment Amendment Act 2013 removed the requirement that a payment claim state that it is a claim under the Act. However the 2013 amending Act preserved the requirement to explicitly state that a claim is made under the Security of Payments Act in certain situations. Reference is made to the Second Reading Speech as to those requirements: … that while the Act had always excluded construction contracts for residential building work, as defined in the Home Building Act 1989, where the principal - in this case, a consumer - resides or proposes to reside in the premises where the work is undertaken… contracts between the head contractor and subcontractors working on those premises have always been covered by the Act. The exemption under the Act that currently applies to a residential contract between a head contractor and consumer is extended for the purposes of the new section 11 of the Bill. This means that the amendments will not apply to a residential contract that is connected to the contract between the consumer and head contractor - referred to in the bill as the "main contract". This limited exemption does not apply to other work that may be described as residential such as high-rise apartments and commercial developments in the sector.…
The plaintiff argues that the "exempt residential construction contract" is the contract between the head contractor and the person who resides or intends to reside in the residential premises. It is said that the "construction contract" which is "connected with an exempt residential construction contract" is the construction contract between the head contractor and the subcontractor. The defendants disputed this construction of the legislation in oral submissions. The plaintiff submits that the plaintiff is not a head contractor, and there is no relevant "exempt residential construction contract". Rather the plaintiff's claim is based on a contract which is not an exempt residential construction contract.
The plaintiff submits that the contract, is a contract between the architect and the homeowners for "related services" namely "architectural, design, surveying or quantity surveying services" in relation to construction work, and is not a contract for the carrying out of residential building work.
It is worth noting that where distinct legal issues arise in an application for summary dismissal, which bear on the likelihood of success of the litigation, it is not inappropriate for a court to determine the legal principle as part of determination of the summary dismissal application; this was illustrated in the case of Protectavale referred to above. At [30] of that decision it is stated: It will by now be obvious that I have resolved finally the arguments about whether the May invoice is a valid payment claim under the Payment Act such as to entitle Lorne Bay to summary judgement on its cross claim. It is not. Although this is a summary judgement application, in my view a court should wherever possible deal finally with short points of law of all construction. The benefit of that approach is so obvious it requires no further explanation. Here there is no real dispute as to any of the relevant material facts; the only question is their legal effect under the contract and Payment Act properly construed. For the reasons stated, I have reached the conclusion that, as a matter of law, the May invoice is neither a valid progress payment claim nor a valid final payment claim for the purposes of the Payment Act.
In the present case there are several legal arguments presented by both parties in their submissions, and it is not a case where there is a short point of law; nor is it a case where the factual dispute is limited to whether one invoice is a valid progress payment claim or a valid final payment claim for the purposes of the Security of Payments Act. Other issues involved are whether this is a contract for residential building work which is excluded from the provisions of the Security of Payments Act. This is a matter which requires further evidence. The evidence submitted by the defendants indicates that the contract and work done included work in relation to planning, landscaping, Sydney Water approvals for construction work on a residential dwelling, and the contract was between the plaintiff and home owners who are the defendants. The evidence submitted on this Notice of Motion included evidence from a party to the contract which suggests that the contract may have encompassed residential building work. The evidence at this preliminary stage of the proceedings does not allow me to finally determine this issue, however it appears, on the evidence presented, that the defendants' position may be reasonably arguable.
It also appears on the evidence submitted that it is reasonably arguable that there may have been a requirement under the legislation for the plaintiff, when issuing invoices to the defendants, if indeed the Security of Payments Act did apply, to make clear that the invoices were issued under that Act with all the consequences which flow. It is a case-by-case determination of whether the notice that is given in a particular case is in a clear form, and it is relevant that the person to whom the notice was given in the present case were homeowners and not members of the building construction industry. This argument is based on the contract being connected to an exempt residential building contract, and there is evidence suggesting that this may be arguable. There may also be an arguable point as to the reference date requirements as set out above.
I note the principles to be applied when determining an application to strike out pleadings, as detailed above, include consideration of whether the case pleaded is "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them [the pleadings] to stand would involve useless expense". I must also consider whether the pleadings set out a reasonable cause of action, that is, one that gives rise to real issues requiring resolution by the court. I note the authorities indicate that although s 56 of the Civil Procedure Act 2005 may widen the discretion to strike out pleadings in appropriate cases, I need to carefully consider whether the claims in question are so obviously untenable or groundless that there is "a high degree of certainty" that they will fail if allowed to go to trial; and whether this is one of the "clearest of cases" in which the court may accordingly intervene to prevent the claims being litigated. For the reasons detailed above I find that there are factual issues which require determination by evidence, including determinations to be made, on evidence, as to the terms of the contract and the work undertaken or contracted to be undertaken.
I also find that there are a number of legal issues to be determined, as previously detailed. I am not satisfied that there are no triable issues raised in the defendants' pleadings, nor am I satisfied that the Defence discloses grounds which have a high degree of certainty that they will fail if they are allowed to go to trial. I am not satisfied the pleadings are so groundless that the court should intervene to prevent the pleadings/defence being litigated.
I have also considered whether the pleadings should be struck out as abuse of process, noting the plaintiff's contention that the defence seeks to subvert the "pay now litigate later" provisions of the Security of Payments Act. For reasons detailed above it is not clear that this is the basis of the defence, rather it appears that there are issues of law and fact to be determined, on the Defence as pleaded, and I am not satisfied that it constitutes an abuse of process. Nor am I satisfied that the Defence has a tendency to cause prejudice, embarrassment or delay in the proceedings, given my finding that the Defence discloses a reasonable case of factual and legal issues to be determined, then there is no basis to so conclude.
Given the need for evidence to determine the work undertaken pursuant to the contract, and given the defendants' evidence filed in response to the Notice of Motion, which appears to indicate there is an arguable case that the work included residential building work within the terms of the HB Act, then for the reasons previously detailed, this is not an appropriate matter in which to order that the Defence be struck out, so that the issues raised do not proceed to trial. For all of the reasons detailed, the Notice of Motion to strike out the Defence is not granted and I dismiss the application.
I will now hear any submissions in relation to costs. Magistrate C Huntsman Downing Centre Local Court 12 December 2018

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 September 2019

Building and Construction Industry Security of Payment Amendment Act 2002(NSW)

Collins and Turner Pty Ltd v Landini & Landini

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (10 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (22)