Defence based on misleading or deceptive conduct foils application for summary judgment based on NSW security of payment legislation

Marques Group Pty Ltd v Parkview Constructions Pty Ltd [2023] NSWSC 625, Rees J

The plaintiff contractor issued two payment claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act).  The defendant provided payment schedules in response, with a scheduled amount payable of circa $1.8M.  However, the defendant did not pay the $1.8M as required and the plaintiff sought summary judgment for the debt in the Supreme Court of New South Wales as permitted under the SOP Act.

At the hearing, the defendant alleged that it had a defence to the summary judgment application on the footing that the plaintiff had engaged in misleading or deceptive conduct contrary to the Australian Consumer Law (ACL) when it made its payment claims, as explained below. 

The contract required the plaintiff to provide the usual statutory declaration in support of payment claims including to the effect that all subcontractors had been paid and that the plaintiff was not insolvent or unable to pay its debts when due.  Such a statutory declaration was provided.

However, the defendant alleged that the statutory declaration was incorrect in that all subcontractors had not been paid, and this showed that the plaintiff was not paying all its debts when due. 

The defendant maintained that had it known of these matters it would have scheduled an amount payable of zero or an amount less than scheduled.  On this basis, the defendant said it had an arguable defence.

The defendant relied on the NSW Court of Appeal decision in Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9 (Bitannia) in resisting summary judgment for the unpaid debt.   Bitannia is authority for the proposition that breaches of the ACL can be pleaded by way of defence to a claim for summary judgment under s 15 of the SOP Act (equivalent to s 16 under the Victorian cognate), where summary judgment is sought when a respondent to a payment claim fails to provide a payment schedule.  In other words, while the SOP Act allows for summary judgment on a failure to provide, or non-payment of, a payment schedule for work carried out under a construction contract, a defendant is permitted to raise an ACL defence in response; and if such a defence is raised (provided the defence is non-colourable), then summary judgment for non-payment will not be ordered (because the defendant should have the opportunity to ventilate the ACL defence). 

Bitannia was followed in Victoria by Judge Shelton in Winslow Constructors Pty Ltd v John Holland Rail Pty Ltd [2008] VCC 1491 (Winslow).   In Marques Group,  Rees J said that Winslow was “indistinguishable to the case at hand”.

In following both Bitannia and Winslow, Rees J in the instant case refused the SOP Act summary judgment application.  Her Honour noted that the defendant’s defence “based on alleged misleading and deceptive conduct in respect of the subcontractor’s solvency appears to run contrary to the SOPA scheme.”.  Nevertheless, her Honour held that the ACL defence was not “so clearly untenable that it cannot possibly succeed” and so summary judgment was denied.

Comment: The availability of an ACL defence on a summary judgment application under the SOP Act for: (i) failure to provide a payment schedule; or (ii) non-payment of a scheduled amount, may be an important weapon in a principal’s/head contractor’s armoury in seeking to resist a statutory debt arising under the SOP Act. 

Summary judgment is only to be ordered where the defence “has no real prospect of success”: Civil Procedure Act 2010 (Vic) (CPA), s 61.  There must, of course, be a proper basis for such a defence: CPA, s 42. 

An ACL defence is not available where the alleged contravening conduct arose “under the construction contract”: SOP Act, s 15(4)(b)(ii).      

Practitioners should be alive to this potential avenue of defence to an SOP Act summary judgment application, especially given that the ACL defence need only be not so clearly untenable that it cannot possibly succeed.  Provided that this bar can be overcome, it should be sufficient to avoid summary judgment being granted. 

Conversely, contractors seeking to rely on the SOP Act for cashflow will need to be mindful that their conduct may well be in the spotlight, and that principals/head contractors may be looking to fasten upon any (arguably) misleading conduct in order to attempt to defeat contractors’ SOP Act summary judgment claims.

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