New South Wales District Court CITATION: Kingston Building Pty Limited v Mckay & Ors [2009] NSWDC 204 HEARING DATE(S): 05/06/2009 EX TEMPORE JUDGMENT DATE : 12 June 2009 JURISDICTION: District Court - Civil JUDGMENT OF: Sidis DCJ (1) Judgment for the plaintiff under rule 13(1) of the Uniform Civil Procedure Rules 2005 in the sum of $147,873.53 comprising the amount of the claim of $144,663.20 and interest of $3,210.33. Judgment is entered pursuant to s (15)(2)(a)(i) of the Building and Construction Industry Security of Payment Act 1999. DECISION: (2) The defendants are to pay the plaintiff's costs on an ordinary basis up to and including 27 April, 2009 and on an indemnity basis thereafter. (3) The affidavit evidence will be retained for 28 days. CATCHWORDS: Payment Claims - Whether strict compliance with service provisions of contract required - Whether conduct in not drawing the defendants' attention to their statutory obligations amounted to misleading and deceptive conduct Building & Construction Industry Security of Payment Act 1999 LEGISLATION CITED: Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 CASES CITED: Falgat Constructions Pty Limited v Equity Australia Corporation Pty Limited, CA 40804, 19 September 2006 Bittania Pty Limited v Parkline Constructions Pty Limited CA 40113 2006, 28 August 2006 Kingston Building Pty Limited (ACN 086 479 807) (Plaintiff) PARTIES: Darren Headley McKay (First Defendannt) Malcolm Ross Colling (Second Defendant) Malcolm Colling as Trustee for the Martin View Unit Trust (ABN 41 012 492 482) (Third Defendant) FILE NUMBER(S): 142/09 COUNSEL: Mr F Hicks (Plaintiff) Mr R Cheney (1st, 2nd and 3rd Defendants) SOLICITORS: Moray & Agnew (Plaintiff) Gillis Delaney Lawyers (1st, 2nd and 3rd Defendants) JUDGMENT 1 The matters of Kingston Building Pty Limited and Warners Bay Developments Pty Limited and Kingston Building and Darren Headley McKay and others involved claims by Kingston Building for payment for building work undertaken for the defendants. The claim against Warners Bay Developments Pty Limited involved construction of a residential development at 37 Martin Street, Warners Bay. The claim against Darren Headley McKay and Others involved construction of a residential development at 53 Martin Street, Warners Bay. 2 Mr Darren McKay was a director of Warners Bay Developments as was his wife Jenny McKay. Another director was Malcolm Colling. Darren McKay and Malcolm Colling were defendants in proceedings 142/09. Mr Colling was also joined as the trustee of the Martinview Trust. Jenny McKay and Colin McKay are beneficiaries of the Martinview Trust. All of those individuals were involved in the work of the developments. 3 In each case the plaintiff claimed that it served payment claims on the defendants in accordance with s 13 of the Building and Construction Industry Security of Payment Act 1999. No payment schedules were issued by the defendants as required by s 14 of the Act. On this basis the plaintiff claimed that it was entitled to judgment in each case provided it could establish that: 1 the payment claim was served as required by the Act; 2 that no payment schedule was received as required by the Act; and 3 that the claims have not been paid. There has, in fact, been partial payment of both of the claims. 4 The defendants resisted the application for the entry of judgment on two grounds. Firstly, they claimed that the payment schedules were not served as required by the Act and secondly, they claimed that they were not prevented by the provisions of the Act from pursuing a defence of misleading and deceptive conduct as provided in s 52 of the Trade Practices Act 1974. Service 5 Samantha Cooper, an employee of the plaintiff, stated that she placed an Express Post envelope addressed to 20 Brighton Avenue, Toronto, in an Express Post box at the post office at 1 Market Street, Newcastle, on 27 February 2009. She retained the barcode with the relevant number and handed it to Mark Robards. She was not challenged on this evidence. 6 Mr Mark Robards, the financial controller of the plaintiff, stated that he placed the payment claims relating to both sites in the Express Post envelope that he handed to Ms Cooper who duly posted it. He affixed the barcode to the copy of the letter that he retained. 7 On 1 May 2009 Mr Robards telephoned Australia Post and was informed that the barcode on the envelope was scanned at the Australia Post Edgeworth delivery centre on 2 March 2009. 8 On 27 February 2009, Mr Mark Robards emailed a copy of the letter and the claims to Mr Darren McKay. On 6 March 2009 Mr Mark Robards received an email from Darren McKay indicating that he had received the email sent on 22 February 2009. 9 The letter enclosing the claims was addressed to Darren McKay and Malcolm Colling as trustee of the Martinview Unit Trust care of 20 Brighton Avenue, Toronto. 10 The progress claim concerning 37 Martin Street was addressed to Warners Bay Developments Pty Limited and endorsed at the foot: This is a payment claim under the Building and Construction Industry Security of Payment Act 1999. The progress claim in respect to 53 Martin Street was addressed to Darren McKay and Malcolm Colling, and Malcolm Colling as the trustee of the Martinview Unit Trust, 20 Brighton Avenue, Toronto. It was endorsed: This is a payment claim under the Building and Construction Industry Security of Payment Act 1999. 11 The defendants' response was to provide separate affidavits of Darren McKay, Jenny McKay, Colin McKay and Malcolm Colling. Each deponent denied having received or seen the Express Post envelope in which the payment claims were posted. It was not suggested that the claims were sent to the wrong address or that they were directed at the wrong parties. It was merely stated that they were never received. 12 Darren McKay, as noted, acknowledged on 6 March 2009 that he received the payment schedules by email. He stated in his affidavit of 25 May 2009 that the payment schedules were received by him by email. The email concerned indicated also that it was emailed to Mr Colin McKay. 13 The question therefore was whether the defendants were adequately served. In my view the payment claims were properly served for the following reasons. 14 The building contract was in the form of AS4904-2002. Clause 4 of the document provided: A notice and other documents shall be deemed to have been given and received, (a) if addressed or delivered to the relevant address in the contract or last communicated in writing to the person giving the notice; and (b) on the earliest date of (i) actual receipt; (ii) confirmation of correct transmission of fax; or (iii) three days after posting. 15 On the basis of this provision, the payment claim was deemed given and received on 2 March 2009, coincidentally the date at which it was scanned at the Australia Post delivery centre. 16 The defendants claimed that the contract was varied by an undated deed which was said to have been signed in December 2007. A copy of the deed was attached to the affidavit of Mr Mark Robards. I was not convinced when I read this document that the deed did, in fact, vary the building contract. 17 In my view, it made provision to facilitate the use by the defendant of sub-contractors and product suppliers who were members, as were the defendants, of the BBX Barter System. It set out a mechanism by which progress payments made under the contract were to be dealt with to achieve this purpose. Clause 6 of the deed provided for the giving of notices as follows: 6.1. A notice or other communication required or permitted to be given by one party to another must be in writing, and (a) delivered personally; (b) sent by pre-paid mail to the address of the addressee specified in this deed, or (c) sent by facsimile transmission to the facsimile number of the addressee with acknowledgement of receipt from the facsimile machine of the addressee. 6.3. A notice or other communication is taken to have been given unless otherwise proved, (a) if mailed on the second business day after posting or (b) if sent by facsimile before 4pm on a business day at the place of receipt on the day it is sent and otherwise on the next business day at the place of receipt. 18 Clause 7 of the deed provided that waiver or variation of a right or power provided for in the deed was permitted only if it was in writing and signed by the parties. 19 The defendants argued that their unchallenged evidence that the payment claims were not received represented proof that the documents were not delivered by mail. Assuming that the deed did, in fact, govern the service of notices under the contract, in my view it does not assist the defendants. 20 In Falgat Constructions Pty Limited v Equity Australia Corporation Pty Limited, CA 40804, 19 September 2006, Hodgson J at [58] stated: In my opinion it is clear that if a document has actually been received and come to the attention of a person to be served or provided with a document or of a person to deal with such document on behalf of a person or corporation to be served or provided with a document it does not matter whether or not any facultative regime has been complied with. (see Howship Holdings Pty Limited v Leslie (1996) 41 NSWLR 542; Mohamed v Farah (2004) NSWSC 482 at 42 to 44) In such a case there has been service provision and receipt. 21 It was argued that this paragraph of his Honour's judgment was obiter and therefore not binding upon this court. However, it was common sense and it was illogical to argue that the defendants should be excused from a statutory obligation that arises from the content of a notice which was known to them because it was received irregularly. In this case it was acknowledged by Darren McKay that the payment claims in question were received by him on 27 February 2009 by email. I will deal at a later stage in these reasons with evidence that the document was also drawn to the attention of other defendants on 18 March 2009. In my view, this puts the matter beyond argument and I find that the payment claims were duly served. Defence under the Trade Practices Act 22 The defendants relied upon the decision of the Court of Appeal in Bittania Pty Limited v Parkline Constructions Pty Limited CA 40113 2006, 28 August 2006. This decision established the principle that, where through misleading and deceptive conduct a claimant was in a position to apply for judgment, the entry of judgment in such circumstances would result in the very damage that s 52 of the Trade Practices Act was designed to prevent. Basten J, in his reasons, concluded that a defence relying on s 52 of the Trade Practices Act was not a defence arising under the contract or in relation to a matter arising under the contract and was therefore not a defence precluded by s 15(4)(b)(ii) of the Act. Further, he said, that s 15(4)(b)(ii), to the extent that it prevented the bringing of a cross-claim pleading misleading and deceptive conduct in breach of s 52 of the Trade Practices Act, was invalid. 23 The issue then was whether the defendants persuaded the Court that there was an arguable defence to the effect that they were misled or deceived by the plaintiff. The defendants contended that they received several different versions of the claim. It was said in a number of affidavits that five different versions were received. Scrutiny of the affidavit evidence provided by the defendants demonstrated that this was not so. 24 Mr Darren McKay said that when he received the payment claims by email on 27 February 2009 he believed them to be the same as those delivered to the superintendent on 20 February 2009 and he did not circulate them to his colleagues. Perusal of the claims indicated that they were, in fact, identical to those dated 10 February 2009, as attached as exhibits JM- 1 to the affidavit of Jenny McKay of 25 May 2009. The only difference was that the claims attached to the email bore the endorsement, already referred to, indicating that they were a payment claim under the Act. The endorsement appeared at the front page of the claim and on the second page which set out a break-down of the progress claim. A rudimentary examination of the documents would have drawn attention to these endorsements. 25 There was no evidence from Mr Colin McKay as to his reaction to the email although the email noted that it was copied to him. 26 The defendants then progressed to state that at a meeting on 6 March 2009 the claims, said to be version 1, were discussed. 27 Nothing was raised with Jenny McKay by the plaintiff's representatives, Mark Robards or Colin Robards, to indicate that time was running against the defendants under s 14(4)(b)(ii) of the Act. Each of Mark Robards and Colin Robards stated that they understood the purpose of that meeting was to discuss the process of dealing with claims in accordance with the provisions of the deed relating to the BBX Barter System. Mr Mark Robards stated that prior to the meeting he had received the email from Darren McKay indicating that he received the claims emailed on 27 February 2009. 28 At this meeting Jenny McKay requested that a formal invoice be submitted to the quantity surveyor who acted for the lender, Suncorp Metway, since certification by the quantity surveyor was necessary to the release of funds for the payment of the claims. This resulted in the production of claims dated 9 March 2009 described as version 3. Those documents were slightly amended versions of the progress claims. They did not bear the endorsement under the Act. According to Darren McKay, the changes reflected adjustments made after the discussions that took place on 6 March 2009 dealing with the processing of claims under the BBX Barter System. 29 I did not regard it to be significant that the claims sent to the quantity surveyor were not endorsed as payment claims under the Act since the quantity surveyor was appointed by a third party who had no connection with the contract and no obligations under the Act. 30 To this point I was not satisfied that the plaintiff or its representatives engaged in any conduct that was misleading or deceptive. So far as the plaintiff was aware, the defendants had received the payment claims by post and email and were entering into discussions on 6 March 2009 that would lead to payment. I did not consider the failure of the plaintiff's representatives on that date to make specific reference in the letter enclosing the payment claims or at the meeting of 6 March 2009 to the fact that the progress claim was presented as a payment claim for the purposes of the Act amounted to misleading and deceptive conduct. This is because a cursory examination of the documents concerned would have revealed that fact. 31 There were a number of further reasons why I did not accept that the proposed defence under the Trades Practices Act was of sufficient merit to refuse the relief sought by the plaintiffs. 32 1. There were not five different versions of the progress claims. Only four were referred to in evidence. Three were identical as to the amounts and the break-down of the claim. Version four attached to the affidavit of Jenny McKay was identical to version two. Version four and version two differed only from version one in that they were endorsed as payment claims under the Act. Version three was not a payment claim but it was a document delivered to a quantity surveyor at the request of the defendants to permit funding to be released. 33 2. Jenny McKay stated that the payment claims she described as version four were handed to Malcolm Colling and Darren McKay by the superintendent on 18 March 2009. Those claims were attached as JM-3 to her affidavit. Annexures JM-3 comprised the letter of 27 February 2009 and the enclosed claims bearing endorsement under the Act. This is the letter that the defendants claimed that they did not receive. No explanation was provided of how or when it came to be in the hands of the superintendent. In addition, it was not a different claim, but it was identical to versions one and two. 34 3. Jenny McKay stated that she served a payment schedule on 24 March 2009 with a cheque for the amount due as provided in that schedule. The document alleged to be a payment schedule was not entitled as such. It was titled, "Reconciliation of Settlement". It did not comply with the requirements of s 14 of the Act because it did not identify the payment claim to which it related. There was no mention in the document of payment claim 9. It was apparent from the documents attached to Ms McKay's affidavit that it dealt with claims 1 to 8 in respect of both developments. 35 4. However, this part of the evidence did suggest that by at least 18 March 2009 the defendants were aware of the payment claim for the purposes of the Act and that a response was required. By that stage it could certainly not be said that they were misled or that no payment schedule complying with the requirements of the Act had been served. 36 5. As pointed out by counsel for the plaintiffs, the defendants were contractually bound to pay the amounts claimed in any event. This obligation arose under clause 23(2) of the contract that provided that, in the absence of a progress certificate issued by a superintendent in respect of a progress claim, the defendants were liable to pay the amount of the progress claim within 21 days of its receipt by the superintendent. 37 6. I accepted the submission of the plaintiff's counsel that aside from imposing a separate obligation to pay the amounts of the progress claim, the defendants, since they were contractually bound to pay those amounts, would have difficulty establishing the element of damage that is essential to a claim based on s 52 of the Trade Practices Act. 38 The result was that I was not satisfied that the circumstances existed to deny the relief sought by the plaintiffs. Costs 39 The defendants argued against an order for costs in the proceedings. The plaintiff sought an order for indemnity costs. Their application was based upon letters in respect of both actions, dated 20 and 27 April 2009 respectively, in which they informed the defendants of their intention to seek orders for indemnity costs. These letters were in the nature of Calderbank offers. The question was whether it was reasonable of the defendants to continue to oppose the application to enter judgement and to ignore the matters raised in those letters that put them at risk as to indemnity costs. 40 It is always easy after the event to suggest that parties are not acting reasonably. However, in this case it seemed to me that the defendants did not make out the substantial part of their claim, namely that a number of differing progress claims were issued by the plaintiff that confused and misled them. Close examination of the documents attached to the affidavits would have made it very apparent that the arguments could not be sustained. In those circumstances, in my view, this was a case where indemnity costs were warranted. 41 The orders that I make are as follows: 42 In proceedings 141 of 2009 43 (1) Judgment for the plaintiff under rule 13(1) of the Uniform Civil Procedure Rules 2005 in the sum of $133,083.03 comprising the amount of the claim of $130,193.80 and interest of $2,889.23. Judgment is entered pursuant to s (15)(2)(a)(i) of the Building and Construction Industry Security of Payment Act 1999. 44 (2) The defendant is to pay the plaintiff's costs on an ordinary basis up to and including 27 April 2009 and on an indemnity basis thereafter. 45 (3) The affidavit evidence will be retained for 28 days. 46 In proceedings of 142 of 2009: 47 (1) Judgment for the plaintiff under rule 13(1) of the Uniform Civil Procedure Rules 2005 in the sum of $147,873.53 comprising the amount of the claim of $144,663.20 and interest of $3,210.33. Judgment is entered pursuant to s (15)(2)(a)(i) of the Building and Construction Industry Security of Payment Act 1999. 48 (2) The defendants are to pay the plaintiff's costs on an ordinary basis up to and including 27 April, 2009 and on an indemnity basis thereafter. 49 (3) The affidavit evidence will be retained for 28 days. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.