National Plant and Equipment Pty Ltd v Subzero Services Pty Ltd

Judgment 1.These proceedings were brought by statement of claim filed on 23 September 2014. Thereby the plaintiff seeks to recover some $598,797.10 from the defendant under s 15(2) of the Building and Construction Industry Security of Payment Act 1999 (NSW). The claim relates to the provision of certain plant and equipment to the defendant under a rental agreement which the parties entered in April 2014. 2.This judgment deals with a motion filed on 23 September, by which the plaintiff seeks an attachment order under s 14 of the Contractors Debts Act 1997 (NSW) against Tarrawonga Coal Pty Ltd, in relation to moneys which the plaintiff claims that company owes to the defendant. 3.The motion was supported by an affidavit of Mr Ackroyd, the plaintiff's managing director. The hearing proceeded ex parte, as contemplated by s 14(2)(b) of the Contractors Debts Act. 4.Mr Ackroyd attested that in April 2014 the plaintiff entered into a rental agreement with the defendant for the provision of certain plant and equipment to the defendant, to enable it to carry out its contractual obligations to Tarrawonga Coal at its Tarrawonga site. The equipment supplied included excavators, dump trucks and a grader. 5.The plaintiff sought payment from the defendant for the plant and equipment provided under the rental agreement in July, by an invoice served by email on 5 August. By its express terms the invoice was a payment claim made under s 13(2) of the Building and Construction Industry Security of Payment Act. On 4 September a further invoice was served for payments due under the rental agreement in August. Those invoices were not paid. 6.Section 14 of Building and Construction Industry Security of Payment Act provides that a person on whom such a payment claim is served, may reply by serving a payment schedule on the claimant. 7.While the defendant did not dispute that the invoice was a payment claim under s 13(2) of the Building and Construction Industry Security of Payment Act, it served no such schedule. Instead, it served a notice under clause 26 of the rental agreement, notifying the existence of a dispute with the defendant as to identified matters claimed to involve breaches of the rental agreement which had damaged the defendant's relationship with Whitehaven Coal (Tarrawonga Coal's Holding Company) and caused its damage which was quantified. 8.The defendant later invoked the dispute resolution procedures provided under the agreement. The defendant alleged, amongst other things, delays in the plaintiff's provision of certain equipment and various breakdowns which had affected the defendant's relationship with Whitehaven Coal, matters which had been discussed at site meetings 9.The plaintiff's case was that in the result, despite service of the contractual notice, s 14(4) of the Building and Construction Industry Security of Payment Act took effect. It provides: (4) If: (a) a claimant serves a payment claim on a respondent, and (b) the respondent does not provide a payment schedule to the claimant: (i) within the time required by the relevant construction contract, or (ii) within 10 business days after the payment claim is served, whichever time expires earlier, the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates. 10.The plaintiff claims that in the circumstances it is entitled to the payment sought by its statement of claim under s 15 of the Building and Construction Industry Security of Payment Act. It provides: 15 Consequences of not paying claimant where no payment schedule (1) This section applies if the respondent: (a) becomes liable to pay the claimed amount to the claimant under section 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and (b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates. (2) In those circumstances, the claimant: (a) may: (i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii) make an adjudication application under section 17 (1) (b) in relation to the payment claim, and (b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract. (3) A notice referred to in subsection (2) (b) must state that it is made under this Act. (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. 11.On 2 September the plaintiff wrote to Tarrawonga Coal Pty Ltd, advising it of the claim for payment which it had made upon the defendant and advising that it understood that the defendant had used the plant and equipment "in undertaking contract works under a contract with Tarrawonga Coal Pty Ltd (the head contract)". It also had advised: "We understand that payments may shortly be due and payable by Tarrawonga Coal Pty Ltd to Subzero Services Pty Ltd pursuant to the head contract. If it is a condition of the head contract that Subzero Services Pty Ltd provide evidence to Tarrawonga Coal Pty Ltd that all sub-contractors have been paid in full as a pre-requisite to the entitlement to payment of a progress payment under the head contract, we write to put you on notice of the amounts outstanding to NPE. We would appreciate your co-operation in ensuring sub-contractors are paid the amounts due and payable to them. Please advise whether there are any further amounts payable to Subzero Services Pty Ltd pursuant to the head contract." 12.A reply to this letter was received on 3 September from Whitehaven Coal, advising that Tarrawonga Coal had been in contact with the defendant to discuss the issues raised. 13.Later that day the defendant advised the plaintiff of the existence of a serious dispute in relation to the invoices, which had been the subject of discussions on 5 August. Notice of dispute was served under clause 26 of the rental agreement on 4 September. Various costs and expenses claimed to have been incurred and not recovered were itemised and explained. The itemised claim amounted to some $342,135. The events described were said to have occurred in May, June and August 2014. They do not appear to relate to July, the period to which the payment claim on which the plaintiff's case rests relates.. 14.It was the plaintiff's case that in all of those circumstances it was not only entitled to the relief sought in the statement of claim, but also to the attachment order which it sought against Tarrawonga Coal under s 14 of the Contractors Debts Act. That section provides: 14 Attachment order (1) If proceedings are commenced by an unpaid person against a person (the defendant) for the recovery of money owed to the unpaid person by the defendant for work carried out or materials supplied by the person, the court may, on the application of the unpaid person, make an order under this section (an attachment order) against any other person from whom the unpaid person may be able to recover the debt under this Act. (2) An application for an attachment order: (a) may be made on the commencement of the proceedings or at any time before judgment is given in the proceedings, and (b) may be heard in the absence of other parties, and (c) is to be verified by oath or affirmation. (3) The court may make an attachment order only if it is satisfied, on the basis of the application, that: (a) the defendant owes the unpaid person money for work carried out or materials supplied by the unpaid person, and (b) the work or materials are, or are part of or incidental to, work or materials for which the defendant is to be paid under a contract with the person against whom the order is sought. (4) On service of a copy of the attachment order on the person against whom the order is made, any money that is payable or becomes payable to the defendant under the contract concerned, not exceeding the amount specified in the order, is attached for the purposes of the proceedings and is to remain in the hands of the person against whom the order is made until judgment is given in the proceedings or until the court otherwise orders. (5) An attachment order: (a) is to be in an approved form, and (b) is to specify the amount that is attached for the purposes of the proceedings (being the amount sued for by the unpaid person or such other amount as the court considers appropriate). (6) An attachment order may be varied or set aside on the application of any person. 15.The operation of s 14(3) was considered in De Martin & Gasparini v Energy Australia & Anor [2002] NSWCA 330; 55 NSWLR 577. 16.As Santow J, (with whom Pearlman AJA agreed), there discussed, there are essentially two stages in the court making an attachment order (see at [43]). The first, satisfaction "at a mandatory threshold, that solely on the basis of the application and the evidence adduced in its support, the claim is not hopeless on its face; that, at the least, the claim is not bound to fail but has some real prospect of success, but based solely on the application and its supporting evidence". 17.His Honour described the second, discretionary considerations as to the making of the order sought as involving: 45 That second stage may see the Court conclude that there is such doubt surrounding the claimed indebtedness, that no order should be made at all, or else a lesser order in terms of amount than that sought. But merely to conclude that a genuine dispute exists, does not of itself foreclose the possibility of an order. The Court must look at the circumstances, but, importantly, without ultimately determining the dispute, to decide if such a freeze order is justified. This must be a genuine exercise of the discretion reposed on the Court, based necessarily on a picture ordinarily incomplete at that interlocutory stage. 18.Hodgson JA considered the test to be somewhat more onerous. Observing: 6 In my opinion, what is required is that the court should have regard to the evidence led on the application, considered in the way appropriate to evidence led on an application for an order to regulate matters pending a final determination of rights, that is, on a prima facie basis. What is then required is that the court be satisfied, on this prima facie basis, that some money is owed by the defendant to the applicant for work or materials and that the work or materials are, or are part of or incidental to, work or materials for which the defendant is to be paid. This statement perhaps makes the mandatory threshold a little more difficult to cross than would Santow JA's formulation, to the effect that the claim must have some real prospect of success: in my opinion, the court is required to be satisfied at least that the evidence on the application gives reasonable grounds for the findings required by s.14(3), and justifies those findings on a prima facie basis. 19.In this case, I am satisfied that on either approach, the plaintiff's submission that the attachment order should be made, notwithstanding the contractual dispute, must be accepted. 20.There is no question that the plaintiff has satisfied the requirements of s 14(1) of the Contractors Debts Act. These proceedings concern a claim for recovery of money owed under the rental agreement made under the Building and Construction Industry Security of Payment Act. That is a claim for the recovery of money owed by the defendant for material, namely the plant and equipment which the plaintiff supplied to the defendant under their agreement. 21.It is important to bear in mind the purpose of the Building and Construction Industry Security of Payment Act. The objects of the Act appear in s 3, which provides: 3 Object of Act (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. 22. "Construction work' is widely defined in s 5, which provides: 5 Definition of "construction work" (1) In this Act, construction work means any of the following work: (a) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not), (b) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, power-lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage or coast protection, (c) the installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems, (d) the external or internal cleaning of buildings, structures and works, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension, (e) any operation which forms an integral part of, or is preparatory to or is for rendering complete, work of the kind referred to in paragraph (a), (b) or (c), including: (i) site clearance, earth-moving, excavation, tunnelling and boring, and (ii) the laying of foundations, and (iii) the erection, maintenance or dismantling of scaffolding, and (iv) the prefabrication of components to form part of any building, structure or works, whether carried out on-site or off-site, and (v) site restoration, landscaping and the provision of roadways and other access works, (f) the painting or decorating of the internal or external surfaces of any building, structure or works, (g) any other work of a kind prescribed by the regulations for the purposes of this subsection. (2) Despite subsection (1), construction work does not include any of the following work: (a) the drilling for, or extraction of, oil or natural gas, (b) the extraction (whether by underground or surface working) of minerals, including tunnelling or boring, or constructing underground works, for that purpose, (c) any other work of a kind prescribed by the regulations for the purposes of this subsection. 23.This definition appears to encompass the contract works which the defendant is undertaking for Tarrawonga Coal. There is no suggestion that those works involve work which would fall within the exceptions provided in s 5(2). 24.The requirements of s 14(2) of the Contractors Debts Act are satisfied by Mr Ackroyd's affidavit. As to the requirements of s 14(3)(a), the evidence led by the plaintiff establishes that its claim under the Building and Construction Industry Security of Payment Act is certainly not hopeless. To the contrary, it appears to have a real prospect of success, notwithstanding the contractual dispute, given the effect of the provisions of s 14(4) of that Act. The defendant not having served a payment schedule on the plaintiff, it has become liable to pay the sum claimed in the July invoice and as the result of the provisions made in s 15(4), in these proceedings the defendant is neither entitled to bring a cross claim against the plaintiff, nor to raise any defence under the rental agreement. 25. In the result, on the evidence currently before the Court, it is difficult to see how the plaintiff's claim might be defended. 26.As to the requirements of s 14(3)(b), the evidence establishes to the necessary standard, that what is claimed under the Building and Construction Industry Security of Payment Act is part of or incidental to work and materials for which the defendant is to be paid under its contract with Tarrawonga Coal. 27.I am satisfied that in all of those circumstances justice requires the exercise of the Court's discretion to make the orders sought in the motion.