Duynstee v Dickens & Dickens

Shorten v David Hurst Constructions Pty Ltd [2008] NSWCA 134 B & L Linings Pty Limited & Anor v Chief Commissioner of State Revenue [2008] NSWCA 187 Nichols v Lee [2008] NSWSC 1243 CASES CITED : US Manufacturing Co Pty Limited v ABB Service Pty Limited [2008] NSWSC 705 David Hurst Constructions Pty Ltd v Shorten [2008] NSWSC 164 Walter Construction Group v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266 Kuru v State of New South Wales [2008] HCA 26 State of New South Wales v Kuru [2007] NSWCA 141

TEXTS CITED : Ritchie, Uniform Civil Procedure NSW, LexisNexis Butterworths, 2006

PARTIES : Antonius Duynstee (Plaintiff) Neil Dickens & Roma Dickens trading as NRJ Irrigation Systems (Defendants)

COUNSEL : Mr S Brennan for the Plaintiff Mr L Gor for the Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROGRESSIVE LIST

1 HIS HONOUR: This is an appeal in respect of a judgment given in the Local Court concerned with questions relating to the Building and Construction Industry Security of Payments Act 1999 (BCISP Act) and the Home Building Act 1989 (HB Act).

2 Before engaging in the detail of the matter it is useful to say something about the BCISP Act. Bell JA provided the following in Shorten v David Hurst Constructions Pty Ltd [2008] NSWCA 134: 36 The objects of the Security of Payments Act are set out in s 3: "(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,

(c) the referral of any disputed claim to an adjudicator for determination and

(d) the payment of the progress payment so determined. …" 37 The procedure for recovering progress payments is contained in Division 1 of Part 3. A person who claims to be entitled to a progress payment may serve a payment claim on the person who is liable to make the payment under the construction contract (s 13). A person on whom a payment claim is served may reply to the claim by providing a payment schedule to the claimant (s 14). If the respondent to a payment claim does not provide a payment schedule to the claimant within 10 business days after the payment claim is served he or she becomes liable to pay the claimed amount on the due date for the progress payment (s 14(4)). 38 Section 7(2)(b) provides: "(2) This Act does not apply to: … (b) a construction contract for the carrying out of residential building work (within the meaning of the Home Building Act 1989) on such part of any premises as the party for whom the work is carried out resides in or proposes to reside in, or .."

3 To that should be added that s 15 provides for the consequences of not paying a claim and not providing a payment schedule. It includes that the claimant may then recover the unpaid amount as a debt due in any court of competent jurisdiction. If such proceedings are commenced, the consequences include that the respondent in those proceedings is not entitled to bring any cross-claim against the claimant or raise any defence in relation to matters arising under the construction contract. The claimant becomes entitled to judgment upon proof, in essence, of compliance with the requirements of the BCISP Act.

5 The plaintiff engaged the defendants to carry out work on a property he owned at Oakdale. A dispute arose between them as to the quality and scope of the work that was performed. The plaintiff complied with a number of requests for part payment but refused to make a final payment of $10,477.25. The defendants instituted proceedings in the General Division of the Local Court. The plaintiff sought to pursue a defence and cross claim that were, in essence, concerned with his dissatisfaction with the work and the costs he incurred in rectification. A preliminary issue was raised as to whether the plaintiff could pursue such defence and cross claim. If the work was done pursuant to a construction contract under the BCISP Act, once it was establish that the defendants had complied with its various provisions and that the plaintiff had failed to pay the amount in question, the defendants would become entitled to judgment and the plaintiff would be prevented from raising any defence or bringing any cross claim: s 15(4) BCISP Act. The plaintiff, however, contended that the HB Act applied and so the operation of the BCISP Act was excluded. This preliminary issue was the subject of evidence and submissions before the learned magistrate, his Honour Magistrate Andrews. On 14 July 2008 he gave judgment for the defendants.

6 The plaintiff now appeals against that judgment under s 73 Local Courts Act 1982. Such an appeal is only available in relation to a contention that the judgment is erroneous in point of law. I say that because the submissions that have been made, both in writing in advance of the hearing, and orally at the hearing, have raised quite a number of questions of fact. In determining this appeal on a question of law I have no authority to engage in fact finding on the merits of the case: B & L Linings Pty Limited & Anor v Chief Commissioner of State Revenue[2008] NSWCA 187; Nichols v Lee [2008] NSWSC 1243.

7 Another matter to observe is that the summons should set out the grounds on which it is contended that there is an error of law in the court below: r 50.4(2) Uniform Civil Procedure Rules (UCPR); Nichols v Lee, supra, at [30]. There are five grounds asserted in the summons in this case, each of which contains a contention that the "Court Below erred" in making a decision. Much of the written submissions were then devoted to argument as to why some of the findings of the magistrate are wrong on the facts.

8 There has been much judicial writing on the distinction between questions of law and questions of fact, a distinction that is sometimes difficult to identify in a given case. I am grateful for the summary of principles provided by Hall J in his judgment in US Manufacturing Co Pty Limited v ABB Service Pty Limited [2008] NSWSC 705 at [45] - [55].

Grounds 1 and 3 - Failure to have regard to relevant legislation

9 At the hearing of the appeal the plaintiff's case, at least in relation to grounds 1 and 3, was crystallised into a contention that the magistrate erred in failing to have regard to a relevant provision of the legislation. Such a contention clearly raises a question of law. This error is alleged to have occurred in the course of the magistrate finding that the BCISP Act applied because the exclusion in s 7(2)(b) of that Act did not apply.

10 I have earlier referred to the significance to the outcome of the proceedings of a finding that the BCISP Act applied. If that Act did not apply, the plaintiff would then be free to raise his defence and make his cross claim.

11 There was no issue that the contract in question in this case was a "construction contract" and so the BCISP Act applied unless excluded by the operation of s 7(2)(b). The plaintiff bore the onus of establishing the exception: see David Hurst Constructions Pty Ltd v Shorten [2008] NSWSC 164 at [13]; Walter Construction Group v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266 at [76]. There are two matters that the plaintiff needed to establish. The first was that the contract was one for the carrying out of "residential building work" within the meaning of the HB Act. The second was that the work was "on such part of (the) premises as (the plaintiff) resides in or proposes to reside in".

12 It is necessary to set out some of the provisions of the HB Act in order to understand the plaintiff's argument as to the first of those matters that what was involved was residential building work within the meaning of that Act.

13 Section 3 of the HB Act provides a number of definitions including the following: " 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. It includes work declared by the regulations to be roof plumbing work or specialist work done in connection with a dwelling and work concerned in installing a prescribed fixture or apparatus in a dwelling (or in adding to, altering or repairing any such installation). It does not include work that is declared by the regulations to be excluded from this definition." " Dwelling means a building or portion of a building that is designed, constructed or adapted for use as a dwelling (such as a detached or semi-detached house, transportable house, terrace or town house, duplex, villa-home, strata or company title home unit or residential flat). It includes any swimming pool or spa constructed for use in conjunction with a dwelling and such additional structures and improvements as are declared by the regulations to form part of a dwelling. It does not include buildings or portions of buildings declared by the regulations to be excluded from this definition."

14 It is then necessary to go to the Home Building Regulation 2004 (HB Regulation) to discern what is included and what is excluded from the definition of dwelling.

15 Clause 5 provides for the inclusion of certain structures and improvements: For the purposes of the definition of dwelling in section 3 (1) of the Act, the following structures and improvements are declared to form part of a dwelling when constructed for use in conjunction with a dwelling: (a) parts of a building containing more than one dwelling (whether or not the building is also used for non-residential purposes), being stairways, passageways, rooms, and the like, that are used in common by the occupants of those dwellings, together with any pipes, wires, cables or ducts that are not for the exclusive enjoyment of any one dwelling, (b) parts of a building containing one dwelling only (where the building is also used for non-residential purposes), being stairways, passageways and the like which provide access to that dwelling, (c) if non-residential parts of a building containing one or more dwellings give support or access to the residential part - the structural elements of the non-residential parts giving such support or access, (d) cupboards, vanity units and the like fixed to a dwelling, (e) detached garages and carports, (f) detached decks, porches, verandahs, pergolas and the like, (g) cabanas and non-habitable shelters, (h) detached workshops, sheds and other outbuildings (but not jetties, slipways, pontoons or boat ramps and any structures ancillary to these exceptions), (i) concrete tennis courts and the like, (j) driveways, paths and other paving, (k) retaining walls, (l) agricultural drainage designed or constructed to divert water away from the footings of a dwelling or a retaining wall, (m) fences and gates, (n) ornamental ponds and water features, and other structural ornamentation, the construction or installation of which requires development consent.

16 Clause 6 provides for certain residential buildings and other structures to be excluded. It lists a variety of buildings such as boarding houses, hotels, educational institutions and the like. None are presently relevant.

17 The work involved in the present case emanated from a quotation made by the defendants and accepted by the plaintiff to "Supply and Install Fire Protection to Boundary fence as per our site discussion". The Oakdale property comprising some 37 acres upon which there was a house, a shed, a dam and a boundary fence. It adjoined some bushland. The plaintiff described himself and his wife as "animal lovers". He said that they had on the property "approximately 50 cats, 5 cows and 16 geese". They were concerned about the risk of bushfire burning through the property and injuring or killing the animals. For this reason they decided to install a fire protection system. The system that the defendant agreed to install comprised a pump at the dam connected to a sprinkler system. After the work had commenced it was, by agreement, extended so as to include the installation of sprinklers to protect the shed in which there was a generator so as to ensure there was no loss of power supply to the pump if fire encroached upon that shed.

18 The plaintiff contended before the magistrate that the work carried out by the defendants was "residential building work" within the meaning of the HB Act because it amounted to "agricultural drainage designed or constructed to divert water away from the footings of a dwelling or a retaining wall". This is included in the definition of "dwelling" in s 3 of the HB Act by virtue of cl 5(l) of the HB Regulation. The plaintiff did not rely upon the inclusion in that definition of "detached workshops, sheds and other outbuildings" (cl 5(h)) or "fences and gates" (cl5(m)).

19 In my view it is beyond question that the work carried out by the defendants could in no way be described as "agricultural drainage designed or constructed to divert water away from the footings of a dwelling or a retaining wall". The work had nothing to do with drainage of anything, let alone anything to do with the diversion of water away from anything.

20 The learned magistrate recited the nature of the proceedings and the preliminary issue raised for determination and then turned to a summary of the evidence as to the carrying out of the work and the progress payments made by the plaintiff. He then referred, albeit briefly, to the nature of the argument as to whether the HB Act applied. There is then reference to evidence relevant to the issue of whether, if the BCISP Act applied, its provisions had been complied with by the defendants. His Honour then set about recording his findings. They included: "The HB Act does not apply. The (plaintiff) bears the onus of establishing that s 7(2)(b) of the Act operates to exclude the contract between the parties from the operation of the Act. I am not persuaded that the work done by the (defendants) was residential building work within the HB Act. There is nothing in Regulation 6 of 2004 (sic) to indicate that the contract here in issue would be applied in a similar manner. The exclusions in Regulation 6 all relate to accommodation and residential type building which can be contrasted with the situation here. I accept the (defendants) submission that section 3 of the HB Act makes it clear that it only applies to structures used or to be used as dwellings and the evidence establishes that the work performed by the (defendants) was not for the construction, alteration, addition, repair, renovation, decoration or protective treatment of a dwelling. The works undertaken by the (defendants) amount to 'construction work' as defined in s 5 of the (BCISP) Act. I find that the (BCISP) Act applies."

21 The plaintiff's submissions had raised for the consideration of the magistrate the question of whether a specific matter in cl 5 of the HB Regulation applied (agricultural drainage). The magistrate did not deal with that question in explicit terms. It was contended before me on behalf of the defendants that it could be inferred that the magistrate did consider and dispose of that point. It was said that the inference arises from his reference earlier in the judgment to the plaintiff relying upon cl 5 and his later statement in the passage quoted above that "The HB Act does not apply". Although in that part of the judgment there is no reference to cl 5, I was invited to infer that the first reference to "Regulation 6" was a typographical error and was intended to be a reference to cl 5.

22 I must confess that I have had difficulty understanding precisely what the magistrate was intending to convey in the passage I have quoted. His statement that "the HB Act does not apply" is clear enough but the reasoning for this conclusion that follows is not entirely clear. Nevertheless, I am prepared to accept the submission of the defendants that the first reference to "Regulation 6" was intended to be a reference to cl 5. In the sentence that follows the description of the content of "Regulation 6" is different from what the magistrate must have had in mind in the sentence that precedes it. He had earlier expressed his understanding that there were two, and only two, clauses in the HB Regulation that required consideration (cl 5 and cl 6). In my view the reasons of the magistrate should be interpreted as meaning that he did not regard the HB Act as having application because cl 5 was inapplicable. The only reason that had been put to him for the application of cl 5 was item (l) (agricultural drainage). It is little wonder that he did not think that applied.

23 On the hearing of the appeal the plaintiff sought to rely upon different items in cl 5. The plaintiff now contends that cl 5 applies because it includes sheds (item (h)) and fences (item (m)). It is contended that the magistrate erred in law in misdirecting himself by failing to advert to those provisions of the HB Regulation. The defendants responded by arguing that the plaintiff should not be permitted on appeal to bring a different case than that put to the magistrate and that there was no error of law in the magistrate not considering something he was never asked to consider. Reference was made to Kuru, without specification of whether this was a reference to Kuru v State of New South Wales [2008] HCA 26, or State of New South Wales v Kuru [2007] NSWCA 141. I do not find either decision is helpful in supporting the defendants' contention. Authorities that do support the contention, however, are to be found collected in the annotations in Ritchie's Uniform Civil Procedure NSW LexisNexis Butterworths 2006 at [51.53.105] relating to the general restriction against raising on appeal points not taken at trial. I do not need to concern myself with that issue, however, as I am of the view that in referring to cl 5 (mistakenly as "Regulation 6") the magistrate was referring to the entirety of the clause and not just the one item that had been advanced by the plaintiff as being relevant.

25 Ground 2 contends that the magistrate erred in finding that the (defendants) complied with the provisions of the BCISP Act.

26 The issues raised by the plaintiff in relation to this ground are: (a) whether the work carried out by the defendants pursuant to the contract was completed by 6 December 2006, and (b) whether an invoice sent on 6 December 2006 did not comply with the BCISP Act because the work had not been completed by that date and so under the contract no payment was then due.

27 These issues are solely concerned with questions of fact not law. I reject ground 2.

Ground 4 - Failure of defendants to comply with BCISP Act

28 Ground 4 contends that the magistrate erred in failing to find that the defendants had waived their right to make a progress payment claim under the BCISP Act. It is contended that an invoice sent by the defendants dated 20 December 2006 was not a valid claim for payment under s 13 of the BCISP Act because there had been an earlier payment claim on 6 December 2006. Reference is made to s 13(5) which provides that a "claimant cannot serve more than one payment claim in respect of each reference date under the construction contract". It was submitted, "By issuing a fax on 6 December that did not comply with the Act, the claimants lost the opportunity to then issue a claim which on its face complied with the legislation. That fax operated as a waiver of their rights in respect of their claim. It was an error of law for the learned magistrate to treat the document dated 20 December 2006 as a valid progress claim".

29 It is somewhat difficult to understand this submission in light of what is said in the written submissions a few lines earlier - "It is clear from the wording of section 13 that a claim does not have to fully comply with the provisions of section 13(2) to be called a payment claim for the purposes of the Act, and if there was any payment claim made in December then it was the fax dated 6 December". That is clearly incorrect. Section 13(2) provides that a payment claim must identify the construction work to which the progress payment relates, must indicate the amount of the payment claimed to be due, and mustindicate that the claim is made under the Act. The fax of 6 December 2006 failed to satisfy the last of those mandatory requirements. It was not a valid payment claim under the Act. The invoice of 20 December 2006 did comply with the requirements of s 13(2). The magistrate held that it was a progress payment claim under the Act.

30 The error of law for which the plaintiff contended is that magistrate erred in making this finding because there had been the earlier invalid progress payment claim (notwithstanding the curious contention mentioned at the beginning of the previous paragraph). I reject this contention. Section 13(5) cannot be construed as preventing the service of a valid payment claim after an earlier invalid one. "Payment claim" is defined in s 3 of the BCISP Act as meaning "a claim referred to in s 13". Section 13(2) sets out what must be included for a document to amount to a "payment claim". The document that was the fax of 6 December 2006 was not a payment claim because it did not meet all the requirements of s 13(2). The plaintiff did not serve "more than one payment claim" and so there was no breach of s 13(5), or, as the plaintiff put it in submissions, a waiving of a right to make a payment claim.

32 Ground 5 contends that "the court below erred in finding that the effect of the judgment in this matter is to preclude the (plaintiff) from bringing any defence or cross claim".

At the end of his judgment the magistrate said: "As agreed between the parties, the effect of a finding in favour of the (defendants) on the preliminary issue is that the (plaintiff) is precluded from bringing any defence or cross claim".

This was a reference to the provision in s 15(4): (4) If the claimant commences proceedings under subsection (2) (a) (i) to recover the unpaid portion of the claimed amount from the respondent as a debt: (a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and (b) the respondent is not, in those proceedings, entitled: (i) to bring any cross-claim against the claimant, or (ii) to raise any defence in relation to matters arising under the construction contract.

33 The plaintiff was concerned that this statement by the magistrate might prevent him taking any other action against the defendants aside from the raising of a defence or the bringing of a cross claim in the proceedings themselves. It was submitted, "If the judgment of the court below survives this appeal, there is a prohibition on the respondent starting proceedings for damages for breach of contract or other loss according to this paragraph (of the judgment)".

34 What the magistrate said was clearly directed to the terms of s 15(4) and was not intended to provide some bar to the plaintiff instituting some other proceedings. Counsel for the defendants indicated at the hearing of the appeal that the defendants accepted that this was so.

37 The plaintiff is to pay the defendants' costs of the appeal as agreed or as assessed. **********

27/04/2009 - The word 'BCISP' has been inserted before the word Act. - Paragraph(s) 3

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