The plaintiff, Reward Interiors Pty Ltd, is a building contractor. The defendant, Master Fabrication (NSW AU) Pty Ltd is a subcontractor.
Reward sues Master for damages arising out of work done by Master, as subcontractor, in relation to the construction of a primary school in Schofields.
By its cross claim [1] Master claims $64,504 being the amount allegedly due by reason of service by Master on Reward of a payment claim under s 13 of the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act").
Now, by notice of motion filed on 30 July 2020, and despite the exhortation in the Practice Note against the making of such applications, [2] Master seeks summary judgment for that amount and to strike out the relevant paragraphs of Reward's cross claim defence. [3]
On 29 February 2020 Master served on Reward a payment claim for $566,285.61.
Reward did not serve a payment schedule under s 14 of the Act in response to that payment claim.
However, on 31 March 2020, Mr Mayank Patel from Master sent an email to Mr David Ashcroft from Reward stating that "the total payable amount for the February 2020 progress claim is $202,066.81".
Later on 31 March 2020, Master served a further payment claim on Reward, for $266,570.81, which included the unpaid amount of $202,066.81 from the 29 February 2020 payment claim.
Reward did not serve a payment schedule in response to this payment claim.
A meeting took place between the parties on 21 April 2020.
Reward claims that an agreement was reached at this meeting. In its Defence to Cross Claim [4] Reward alleges:
"(a) … that on or about 21 April 2020 [Master] and [Reward] agreed (the April Agreement) that the amount then payable to the [Master] under the Contract was no more than $202,066.81, comprising:
1. Value of works claimed including variations to 29 February 2020; $1,093,484.70
2. Less amounts paid by the Defendant: $833,692.89
3. Less retention amounts under the Contract: $57,725.01
1. says that on or about 22 April 2020 [Reward] paid [Master] the sum of $202,066.81 in accordance with the April Agreement;
2. says that in so far as the claim forwarded to the plaintiff on 31 March 2020 was a payment claim, it was a claim for no more than $9,779 being the amount of $1,103,263.70 less the amount referred to in paragraph 2(a)(i);
3. otherwise admits the document forwarded to [Reward] on 31 March 2020 was a payment claim".
In effect, Reward's case is that by the "April Agreement" Master agreed to accept $202,066.81 in full satisfaction of its claim under the 31 March 2020 payment claim.
The next day, 22 April 2020, Mr Patel sent Mr Lee, at Reward, an email purporting to be the "Minutes" of the 21 April 2020 meeting, in which he stated, amongst other things:
"[Mr Patel] asked that the February 2020 progress claim for the work completed in the amount of $202,066.81 including GST must be settled immediately as per [Mr Patel] email date of 31/3/2020."
The following day, 22 April 2020, Reward paid Master Fabrication $202,066.81.
Master seeks summary judgment on the basis that any agreement to the effect of the April Agreement is void by reason of s 34 of the Act which provides:
34 No contracting out
(1) The provisions of this Act have effect despite any provision to the contrary in any contract.
(2) A provision of any agreement (whether in writing or not) --
(a) under which the operation of this Act is, or is purported to be, excluded, modified or restricted (or that has the effect of excluding, modifying or restricting the operation of this Act), or
(b) that may reasonably be construed as an attempt to deter a person from taking action under this Act,
is void.
Section 34 is expressed very widely. It renders void any agreement, whether or not in writing and whether or not in the building contract itself that:
1. purports to, or has the effect of excluding, modifying or restricting the operation of the Act; or
2. might reasonably be construed as an attempt to deter a person from taking action under the Act.
The question of the operation of s 34 of the Act is dependent on a case by case analysis. [5]
For the purpose of this application for summary judgment, I must assume the parties did enter an agreement to the effect of the alleged April Agreement. That is, I must assume that, in fact, Master agreed to accept the $202,066.81 in full satisfaction of its claims under the building contract in general and its 31 March 2020 payment claim in particular; and that, but for s 34, that agreement would be binding on Master.
My attention has not been drawn to any authority to the effect that s 34 renders void agreements entered into between parties to a building contract, following service of a payment claim, to compromise a dispute concerning the amount due under that payment claim or the building contract in general. My own research has not found any such authority.
Accepting that the object of the Act is to establish a fast-track "pay now-argue later" scheme [6] to ensure timely payments to parties that carry out construction work, it is hard to see why it should be a part of that scheme to prevent parties reaching binding settlements compromising their rights under the building contract and under the Act.
Here, but for the purported April Agreement, and because Reward did not serve a payment schedule in response to Master's 31 March 2020 payment claim, Master could have moved for judgment for the amount in the payment claim, $266,570.81, under s 15(2) of the Act.
The purported effect of the April Agreement was that, upon receipt of the $202,066.81, Master could not do so; that is, Master could not exercise what would otherwise be its right under the Act.
But that is because, on the assumption I must make for the purpose of this application, Master agreed not to.
It is hard to see how such an agreement could be characterised as one purporting to exclude, modify or restrict the operation of the Act for the purposes of s 34(2)(a). Such an agreement in effect acknowledges the operation of the Act but records the parties' agreement that, in the particular circumstances, their rights will instead be governed by their agreement.
There is no question here of an "attempt to deter a person from taking action under" the Act for the purpose of s 34(2)(b). Master did take action under the Act by serving payment claims. And an agreement entered into by Master itself could hardly be reasonably construed to be such an attempt.
For these reasons, it is at least arguable that the April Agreement, assuming it was made, was not rendered void by s 34.
This not a matter apt to be resolved on a final basis on a summary judgment application.
I do not propose to accede to Master's application.
I order that Master's notice of motion of 30 July 2020 be dismissed with costs.
The matter will be listed for directions on 18 September 2020.
[3]
Endnotes
Originally a claim made in the Local Court but transferred to this Court by orders made on 6 July 2020.
Practice Note SC Eq 3 at [62].
Originally its defence in the local Court proceedings.
Originally its defence in the Local Court proceedings.
McDougall J, writing extra curially "Prohibition on Contracting Out of the Building and Construction Industry Security of Payment Act (NSW)" (2006) 22 BCL 246.
Eg Multiplex Constructions Pty Ltd v Luikens and Anor [2003] NSWSC 1140 (Palmer J) at [96].
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Decision last updated: 14 September 2020