EXECUTIVE SUMMARY
Under the Building and Construction Industry (Security of Payment) Act 2021 (WA) (Act), if a claimant makes a payment claim and the respondent does not pay by the due date for payment:
- the claimed amount (where no payment schedule is given); or
- the scheduled amount set out in the payment schedule,
the claimant may, as an alternative to an adjudication, recover the unpaid amount owed as a debt due and payable to the claimant in court proceedings.1
On its face, this is a very powerful right available to unpaid contractors, particularly as it is not subject to the same:
- strict time requirements that apply to an application for adjudication; and
- second opportunity to provide a payment schedule (which is a precondition to making an adjudication application where no payment schedule is provided under s 28(2) of the Act).
However, in recent cases, contractors seeking to rely on the deemed liability regime (as it is known) have been unsuccessful in recovering payment.
Recent cases
In 2024,2 related contractors LHRE3 and OSB4 each commenced proceedings against a construction company, Complete,5 seeking summary judgment under this regime.
In both applications the contractor was unsuccessful in receiving summary judgment for the amount claimed.
In LHRE v Complete, Principal Registrar McGivern found that there was room for argument as to the identity of the contracting parties,6 such that a construction contract may not exist, sufficient to dispose of the application. Further, even if the construction contract was found to exist, there was a serious question to be tried as to whether LHRE was able to pursue the debt where it has apparently assigned its entitlement to payment to another entity.7
In OSB v Complete, Musikanth J found that, because summary judgment may preclude Complete from a remedy to which it may be entitled under the Australian Consumer Law (ACL)8 (by reason of an alleged misleading or deceptive representation made by OSB), alleged to have induced entry into the construction contract, about the resources required to perform and complete certain construction work within the time required by Complete,9 the application was refused. There was a serious question to be tried as to whether precluding a respondent in recovery proceeding brought under the Act from pursuing its rights under the ACL in the face of misleading and deceptive conduct gave rise to a constitutional inconsistency.
Discussion
In both cases, it was held that the ‘general principles’ for summary judgment should be applied on an application under the Act.10 The key principle being that summary judgment should only be given where it is clear that there is no real question to be tried.11 That is, where the facts are not in dispute,12 and there is a high degree of certainty about the outcome if the proceedings were allowed to go trial.
Therefore, a judge need only be satisfied that there is an arguable case regarding jurisdiction (or lack thereof) or that an ACL claim exists, to dispose of an application for summary judgment under the Act.
There is good reason for a high bar to summary judgment and where there is some disputation regarding such matters, adjudication under s 27(2)(b) may in fact be the proper route to avoid undesirable outcomes through abuse of court process.
In NSW, similar decisions have been handed down to that in OSB v Complete, including:
- where an ACL claim may arise by reason of a representation that the payment claim was sent to the architect (where it had not) leading to a payment schedule not being issued (Bitannia,13followed in OSB v Complete); and
- where statutory declarations accompanying the payment claims were alleged to be misleading resulting in the respondent scheduling a substantial amount greater than it said it otherwise would have (Marques,14 previously discussed in our article here).
The experience in NSW has resulted in a general preference to pursue the adjudication route to seeking summary judgment (even where no payment schedule is issued within the mandatory timeframe in the Act). It seems this may be the approach now followed in WA following these recent decisions. In any event, as appealing an option as summary judgment may seem the face of s 27 of the Act, careful consideration should be given before pursing this route.
To learn more about the Act, read our article here On a Proper Construction Issue 17: The New Security of Payment Act – HWL Ebsworth Lawyers
This article was written by Kate Morrow, Partner, and Michael Harris, Special Counsel.
[1] On a Proper Construction Issue 9: The New WA Security of Payment Bill – HWL Ebsworth Lawyers
2 LHRE Group Pty Ltd v Complete Hire & Sales Pty Ltd [2024] WADC 61 (LHRE v Complete); OSB Group Pty Ltd v Complete Hire & Sales Pty Ltd [2024] WASC 310 (OSB v Complete).
3 LHRE Group Pty Ltd, being a labour hire company.
4 OSB Group Pty Ltd, being a company that performs contracts works on projects.
5 Complete Hire & Sales Pty Ltd, being a building company.
6 LHRE v Complete, [4], [50].
7 LHRE v Complete, [56].
8 Australian Consumer Law 2010 (Cth).
9 OSB v Complete, [39(1)]
10 RSC O 14 r 1.
11 OSB v Complete, [24]; LHRE v Complete, [8].
12 OSB v Complete, [26].
13 Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9.
14 Marques Group Pty Ltd v Parkview Constructions Pty Ltd [2023] NSWSC 625.
