Isis v Clarence [2004] NSWSC 73

New South Wales Supreme Court

CITATION : Isis v Clarence [2004] NSWSC 73 HEARING DATE(S) : 03/11/2003 JUDGMENT DATE : 23 February 2004

JURISDICTION: Equity Division Technology and Construction List JUDGMENT OF : Master Macready at 1 DECISION : Motion of the plaintiff filed 26 September 2003 be dismissed with costs.

CATCHWORDS : Practice & Procedure - Summary judgment application pursuant to Pt 15 r 2 of Supreme Court Rules - motion dismissed. - Contract Law - Construction contract - progress claims issued pursuant to Building & Construction Industry Security of Payments Act. Whether payment claims could be made between practical completion and the expiration of the defects liability period. Held no triable issue. Whether progress claims were supported by the evidence and information required by the contract and the Act. Held to be a triable issue - whether progress claims made in conravention of s13(5) of the Act. Held no triable issue. CASES CITED : Brewarrina Shire Council v Beckhaus Civil Pty Ltd (2003) 56 NSWLR 576 Fyntray Constructions Pty Ltd v Macind Drainage & Hydraulic Services Pty Ltd [2002] NSWCA 238 PARTIES : Isis Projects Pty Ltd v Clarence Street Pty Ltd FILE NUMBER(S) : SC 55032/2003 COUNSEL : Mr RJ Powell SC for plaintiff Mr RJH Darke SC and Mr M Southwick for defendant SOLICITORS : Turtons Lawyers for plaintiff Watson Mangioni for defendant

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST

Master Macready

Monday 23 February 2004

55032/2003 Isis Projects Pty Ltd v Clarence Street Pty Ltd JUDGMENT 1 Master: This is the hearing of the plaintiff's notice of motion filed 26 September 2003 in which the plaintiff seeks summary judgment pursuant to Part 15 rule 2 of the Supreme Court Rules. Judgment is sought in the sum of $770,347.11 plus interest. Background 2 On 17 May 2002 plaintiff entered into a construction contract with the defendant for the refurbishment and fit out of an office building at 50 Clarence Street Sydney. The contract includes the general conditions of contract (AS 2124 -- 1992). 3 The plaintiff's claims in the summons are for statutory progress claims under the Building and Construction Industry Security of Payments Act 1999 (NSW)(the Act) which was recently amended on 3 March 2003. The relevant progress claims were issued after the commencement of the amendments. The claims in the summons are not made pursuant to the plaintiff's contractual entitlement. 4 Practical completion in respect of the contract was achieved on 4 April 2003 at the request of the plaintiff company and the certificate was issued on 14 April 2003. 5 On 15 May 2003 the plaintiff served a progress claim number 12 on the defendant claiming the sum off $1,702,579.34. Under the terms of the contract this progress claim would be due on 28 June 2003. Between 26 June 2003 and 4 July 2003 various payments were made in relation to this progress claim amounting to $984,225.85 leaving outstanding the sum of $718,353.45. No payment schedule under the Act was supplied by the defendant. 6 On 15 July 2003 the plaintiff served a further progress claim number 13 on the defendant claiming $749,091.72. This included the $718,353.45 outstanding under progress claim number 12 and new work valued at $30,738.23. Under the contract this would become due for payment on 28 August 2003. 7 There is correspondence in response to this progress claim on 17 and 25 July 2003. Although the defence raised a defence that this was a payment schedule it was conceded for the purposes of this application that the correspondence did not amount to a payment schedule. Therefore in respect of this claim there was no payment schedule supplied under the Act. 8 Proceedings were commenced by way of a summons on 29 August 2003. The defendant's contentions as to triable issues 9 The defendant contended that its defence raises triable issues including the following: (a) Whether Claims 12 and 13 were payment claims made under s 13 of the Act in relation to a progress payment. (b) Whether Progress Claims 12 and 13 were supported by the evidence and information required by the contract and the Act. (c) Whether Progress Claims 12 and 13 involve a contravention of s 13(5) of the Act. 10 There were two defences in the defence which the defendant did not raise on this application. One I have mentioned above and the other was that the work was in some way in breach of the Home Building Act 1989 (NSW). Given the concessions made it is not necessary for me to address those defences. Whether Claims 12 and 13 were payment claims made under s 13 of the Act in relation to a progress payment 11 This question involves the construction of clause 42.1 of the contract and arises because of the way the Act fixes liability for payment by reference to the contractual entitlement. In this case there was no service of a payment schedule in response to the claims and accordingly s 14(4) of the Act applies. It is in these terms: (4) If: (a) a claimant serves a payment claim on a respondent, and (b) the respondent does not provide a payment schedule to the claimant: (i) within the time required by the relevant construction contract, or (ii) within 10 business days after the payment claim is served, whichever time expires earlier, the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates. 12 Section 15 of the Act then sets out what it describes as the consequences of not paying the claimant where there is no payment schedule. The section is in the following terms: 15. Consequences of not paying claimant where no payment schedule (1) This section applies if the respondent: (a) becomes liable to pay the claimed amount to the claimant under section 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and (b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates. (2) In those circumstances, the claimant: (a) may: (i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii) make an adjudication application under section 17 (1) in relation to the payment claim, and (b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract. (3) A notice referred to in subsection (2) (b) must state that it is made under this Act. (4) If the claimant commences proceedings under subsection (2) (a) (i) to recover the unpaid portion of the claimed amount from the respondent as a debt: (a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and (b) the respondent is not, in those proceedings, entitled: (i) to bring any cross-claim against the claimant, or (ii) to raise any defence in relation to matters arising under the construction contract. 13 It is apparent that both ss 14(4) and 15(1)(b) presuppose the existence of a due date for the progress payment to which the payment claim relates. Accordingly, for the Court to be satisfied as to the existence of the circumstances referred to in s 15(1) it must be demonstrated that there exists a progress payment to which the payment claim relates, and a due date for that progress payment.