The recent decision of Stevenson J in State Asphalt Services Pty Ltd v Leighton Contractors Pty Limited [2013] NSWSC 528 serves a timely reminder to respondents to payment claims made under the Building and Construction Industry Security of Payment Act 1999 (Act) that it is extremely difficult to shake the liability for the full amount of the claim that results if they fail to respond with a timely payment schedule.

Respondents faced with summary judgment proceedings under section 15(2)(a)(i) of the Act have the following options:

  1. to pay the full amount of the claim and rely upon its right to recover that part of the money paid that it disputes by commencing separate proceedings;
  2. to seek to defend the claim on grounds that are not prevented under section 15(4) or grounds permitted under overriding Federal legislation, eg section 18(1) of the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act (Cth) 2010) (ACL)); or
  3. to agree to the entry of judgment on the claim but then seek a stay on that judgment.

The Court’s decision in this case has set a precedent in respect of the grounds of defence available to a respondent who decides to contest summary judgment proceedings.  The Court found that the liability for the full claimed amount of an unanswered payment claim under s 14(4) of the Act will survive the claimant giving the respondent another opportunity to respond to the same claimed amount by repeating the claimed amounts in a subsequent payment claim.  As it stands, a claimant can give a respondent an opportunity under the Act to respond to an identical repeat payment claim but then seek summary judgment on an earlier unanswered payment claim.  Such summary judgment proceedings are not prevented under the Act, do not constitute an abuse of the Act or an abuse of process and do not appear susceptible to any restraining application based on arguments the making of repeat claim payment claim was an implicit withdrawal of the earlier claim.  The Court did however consider that the circumstances may be relevant to the question whether a stay on the judgment should be obtained.

Facts

SAS’s claim in the proceedings was made under section 15(2)(a)(i) of the Act for the unpaid portion of the claimed amount of an unanswered payment claim under the Act it had made against Leighton in June 2012 (First Payment Claim).  In this case Leighton followed option 2, relying upon two key factual matters.  The first was that in October 2012 SAS had issued a further payment claim under the Act in identical terms to the First Payment Claim (Second Payment Claim), which Leighton had answered with a payment schedule under the Act (Payment Schedule).  The Payment Schedule scheduled a $Nil amount based on a number of Leighton’s cross-claims against SAS including in respect of defects and loss and damage arising from an incident on-site involving a runaway shuttle buggy.  The second matter, which Stevenson J ultimately found against, was an alleged verbal agreement between the parties in late March 2012 whereby any payment of SAS’s variation claims would await a reconciliation at the end of the project of those claims against Leighton’s cross-claims.

In considering the short point in relation to the repetition of the claimed amount Stevenson J commented that it seemed a strange result that a claimant in SAS’s position could ‘eschew’ from pursuing the Second Payment Claim by adjudication and to seek to enforce its accrued rights in respect of the First Payment Claim, but nevertheless went on to find that this was a course open to a SAS in this case.

The path through Leighton’s defences based on the repetition of the claimed amount was, in summary:

1. Statutory construction

Stevenson J found that there was nothing in the language of the Act to suggest that repetition of a claimed amount (as permitted by section 13(6)) caused any pre-existing section 14(4) liability for the claimed amount to expire because it would render the opportunity afforded by section 14(1) to reply to the subsequent payment claim with a payment schedule superfluous.  Comments of McDougall J in Urban Traders Pty Ltd v Paul Michael Pty Ltd [2009] NSWSC 1072 at [94] to the effect that the right under section 14(1) permitted a respondent to answer both fresh and repeated claims put in a payment claim were not considered as supporting the proposition, Stevenson J finding that the ‘opportunity’ to answer a payment claim afforded by section 14(1) is separate and distinct from the opportunity it afforded in respect of any earlier payment claim, regardless of the repetition of claimed amounts.

2. Misleading and deceptive conductLeighton sought an injunction against SAS under section 232 of the Australian Consumer Law to restrain SAS’s claim in these proceedings on the basis that:

  1. by making of the Second Payment Claim SAS implicitly represented that the First Payment Claim was withdrawn (Implied Representation);
  2. that it relied upon this representation by responding to the Second Payment Claim with a payment schedule and thereafter not responding to the First Payment Claim;
  3. that the Implied Representation was misleading and deceptive conduct within the meaning of s 18(1) of the Australian Consumer Law and that it would suffer loss and damage if SAS were permitted to recover the amount of the First Payment Claim through these proceedings

Stevenson J accepted the fact of the Implied Representation, but was unable to find that the First Payment Claim played any role in Leighton’s decision to respond to the Second Payment Claim or that the Implied Representation resulted in any damage to Leighton.  In relation to reliance, Stevenson J found that it was much more likely that Leighton’s decision to serve the Payment Schedule was motivated by the unfavourable statutory consequences of doing so.

3. Abuse of the Act and abuse of processLeighton contended that the commencement of the proceedings in circumstances where SAS, having received the payment schedule was on notice of the grounds upon which Leighton defended the claim was an abuse of Act and an abuse of process.  Stevenson J found there was no abuse of the Act, as this defence on the basis that it relied upon the correctness of the statutory construction defence which had been determined in SAS’s favour. 

In relation to abuse of process, the fact that prior to commencing the proceedings SAS knew (having received the Payment Schedule) that Leighton disputed the merits of its claim based on its cross-claims and that Leighton would be prohibited under section 15(4) of the Act from bringing any cross-claims was not considered sufficient to constitute an abuse of process.  Stevenson J did however regard that the commencement of these proceedings as analogous to conduct found by the Court of Appeal in Bitannia Pty Ltd v Parkline Constructions Pty Ltd to be ‘improper purpose’ (although to a lower degree) and commented that this may be grounds for a stay of a judgment.

A strange result?

The finding that a section 14(4) liability for a claimed amount survives the repetition of that claimed amount in a subsequent payment claim, as Stevenson J acknowledges in his judgment, appears to produce some strange results.  If a payment claim is regarded as separate and distinct from any earlier payment claim, regardless of the amount claimed being identical, there is the possibility for a claimant to be separately liable multiple times for the same amount.  Further, it would appear to permit a claimant in the position of SAS to proceed to adjudication on the second payment claim and pursue summary judgment on the first payment claim, with the attendant possibility of inconsistent results.

Putting such questions aside however, the decision is important for the industry as a clear statement from the Supreme Court of the perilous position that a respondent is in if it fails to respond to a payment claim.  That liability appears to be final, the law as its stands providing that the repetition of that same claim in subsequent payment claims does not afford a respondent another opportunity to answer the claim and so prevent a claimant enforcing its right under section 15(2)(a)(i) to recover the amount claimed as a debt in a court of competent jurisdiction.