Promax Building Developments Pty Ltd v PCarol & Co Pty Ltd [2017] VCC 495

Significance

Anderson J's decision provides guidance on the application of Vickery J's decision in in Director of Housing of State of Victoria v Structx Pty Ltd (t/as Bizibuilders) & Anor [2011] VSC 410 that a building owner is 'in the business of building residences' for the purposes of section 7(2)(b) of the Building and Construction Industry Security of Payment Act 2002 (Vic) when it constructs residences 'for the purpose of profit on a continuous and repetitive basis'.

Key provisions

The decision considers section 7(2)(b) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (Act), which provides:

'(2) This Act does not apply to ...

(b) a construction contract which is a domestic building contract within the meaning of the Domestic Building Contracts Act 1995 between a builder and a building owner (within the meaning of that Act), for the carrying out of domestic building work (within the meaning of that Act), other than a contract where the building owner is in the business of building residences and the contract is entered into in the course of, or in connection with, that business'

[emphasis added]

Facts

PCarol & Co Pty Ltd (respondent) was the trustee of the PCarol & Co Trust (trust). Between 2009 and 2011 the respondent undertook building work for three units at Reservoir, which units were sold between 2011 and 2012 for a total of $1,146,000. The respondent purchased property in Bellfield (site) in 2013, which it rented out between 2013 and 2015.

In January 2016 the respondent and Promax Building Developments Pty Ltd (claimant) entered into a domestic building contract for the construction of 12 apartments at the site for the contract sum of $3,010,260 (contract). The contract was subject to the respondent obtaining financier's approval.

On 20 March 2017 the claimant terminated the contract because financier's approval had not been obtained. On 31 March 2017 the claimant issued a payment claim for $115,875.42 under the Act to the respondent (payment claim). The respondent did not serve a payment schedule in reply.

The claimant commenced proceedings under the Act to seek judgment for the payment claim.

Decision

The court held that the respondent was, for the purpose of section 7(2)(b) of the Act, in the business of building residences.

Anderson J found that whether a 'building owner is in the business of building residences' did not depend on the scale of the business, the success of the business, the number of projects undertaken either in the past or at any one time, or as contemplated for the future. Instead his Honour focused on the purpose of the trust and its activities. Accordingly, because his Honour identified that the purpose of the trust was to make investments in the property market and its sole activity had been the purchase and development of two properties, the respondent was held to be 'in the business of building residences'.

The respondent had also raised defences under section 14 of the Act, that the payment claim did not adequately identify the construction work to which it related, and section 10A of the Act, that the amounts claimed included excluded amounts. Anderson J dismissed these contentions.