Key points
- A misleading and deceptive conduct defence can be successful in defeating an application for summary judgment under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) and potentially other analogous security of payment legislation enacted in other states and territories in Australia.
- This marks a step away from the legislative intent behind the security of payment schemes, which is fundamentally intended to be a ‘pay now, argue later’ regime.
- The implication is that a summary judgment under section 16(2)(a)(i) of the Act (also available under equivalent security for payment legislation in other States and Territories)1 may become less available in respect of recovering payment. This could make an adjudication application under section 16(2)(a)(ii)2 a more appealing option to enforce payment rights in certain circumstances.
- The decision also acts as another reminder that a claimant’s statutory declaration regarding the status of payments must be true and accurate, and completed with due consideration.
The decision
The Supreme Court of New South Wales decision on 13 June 2023 in Marques Group Pty Ltd v Parkview Constructions Pty Ltd 3 marks the potential for a backward step to the legislative intent behind the security of payment scheme, including newly enacted legislation in some states and territories, such as WA4 and QLD.5
The significance of the case is whether a claimant, seeking to ensure cash flow under the security of payment regime, can have its claim for summary judgment based on an unpaid sum certified in a payment schedule defeated if a respondent raises a misleading or deceptive conduct defence in respect of the payment claim.
Ultimately, Rees J, whilst acknowledging how ‘inherently unattractive’ the defence was to the heart of the security of payment scheme, held that the defence was not so clearly untenable that it could not possibly succeed. Thereby dismissing Marques’ application for summary judgment.
What happened?
Parkview Constructions Pty Ltd (Parkview), a contractor, had engaged Marques Group Pty Ltd (Marques), a subcontractor, to provide formwork on projects in Woolooware and Parramatta for $22.7 million and $14.665 million respectively.
A dispute arose out of two payment claims issued by Marques on 26 October 2022, being:
- a payment claim for the Woolooware project in the amount of $1,610,212.26; and
- a payment claim for the Paramatta project in the amount of $647,048.42.
These were accompanied by two statutory declarations completed by a director of Marques.6
On 3 and 9 November 2022, Parkview issued payment schedules certifying payment of $1,264,804.63 and $520,668.21 respectively, totalling $1,785,492.84.
On 22 December 2022, Marques commenced proceedings seeking summary judgment under section 16(2)(a)(i) of the Act in the amount of $1,785,492.84 on the basis that Parkview had failed to pay the full amount scheduled in its 3 November and 9 November payment schedule. Importantly Marques went into such proceedings with a payment schedule from the counterparty certifying that it was owed the amount in question. Section 16(2)(a)(i) of the Act permits a claimant to recover the unpaid portion of the scheduled amount from the respondent in any court of competent jurisdiction (and under section 16(2)(a)(ii) a claimant can alternatively make an adjudication application in relation to the payment claim).
Parkview contended that Marques, in the statutory declarations accompanying the payment claims, had engaged in misleading and deceptive conduct by representing that:
- all employees and subcontractors had been paid for work done in the period covered by the payment claim; and
- Marques was paying its debts as and when they fell due.
Based on these representations, Parkview argued that they would not have scheduled such substantial amounts and would have instead scheduled either $0 or, at least, a lesser amount.
In response, Marques submitted that Parkview’s defence was so clearly untenable that it could not succeed on several bases, including because that permitting recipients of payment claims to raise non-payment of subcontractors as a basis not to make payment would have a ‘chilling effect’ and would undermine the purpose of the Act.
Although Rees J agreed with Marques that Parkview’s defence appeared to ‘run contrary to the SOPA scheme’, her Honour7 rejected Marques’ application for summary judgement on the basis that she could not conclusively say that the defence was so clearly untenable that it could not possibly succeed.
What are the key takeaways?
The decision marks a potential shift on the horizon as to defences available to respondent parties to applications for default judgement made under the SOPA regimes.
A similar type of defence could potentially be raised in other circumstances. For example, where a principal fails to certify a payment claim at all and the claimed amount is deemed to be due and payable under the relevant SOPA regime, for example, under section 14(4) of the Act.
Careful consideration needs to be given to the alternatives available to enforce payment rights where a payment claim is certified in favour of a claimant (but not paid) or not certified at all – that is, whether to seek to enforce the debt in Court or use the statutory adjudication procedure.
It also stands as a reminder as to the importance of the contents of a claimant’s statutory declaration being true and accurate, and not be completed without due consideration.
This article was written by Kate Morrow, Partner, Michael Harris, Senior Associate and Benjamin Moran, Law Graduate.
1See equivalent sections in other jurisdictions – Building and Construction Industry Security of Payment Act 2002 (VIC) s17(a)(i); Building and Construction Industry Security of Payment Act 2009 (SA) s16(a)(i); Building and Construction Industry (Security of Payment Act) 2009 (ACT) s18(2)(a)(i); Building and Construction Industry Security of Payment Act 2009 (TAS) s20(2)(a)(i); Building Industry Fairness (Security of Payment) Act 2017 (QLD) s78(2)(a); Building and Construction Industry (Security of Payment) Act 2021 (WA) s27(2)(a).
2Equivalently, Building and Construction Industry Security of Payment Act 2002 (VIC) s17(a)(ii); Building and Construction Industry Security of Payment Act 2009 (SA) s16(a)(ii); Building and Construction Industry (Security of Payment Act) 2009 (ACT) s18(2)(a)(ii); Building and Construction Industry Security of Payment Act 2009 (TAS) s20(2)(a)(ii); Building Industry Fairness (Security of Payment) Act 2017 (QLD) s78(2)(b); Building and Construction Industry (Security of Payment) Act 2021 (WA) s27(2)(b).
3[2023] NSWSC 625
4Which only came into effect last year, under the Building and Construction Industry (Security of Payment) Act 2021 (WA).
5Which also relatively recently came into effect under the Building Industry Fairness (Security of Payment) Act 2017 (Qld).
6The subcontract required Marques to provide a Statutory Declaration. Further section 13 of the Act requires a Supporting Statement (being a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned) to be provided by a head contractor to a principal. The security of payment regime in some other States and Territories (such as WA) do not include a legislative requirement for statutory declarations to accompany a payment claim, however it is common practice for this to be included in construction contracts.
7Following a line of authority first established in Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9 and followed in Winslow Constructors Pty Ltd v John Holland Rail Pty Ltd [2008] VCC 1491.
