Duffy Kennedy Pty Ltd v Galileo Miranda Nominee Pty Ltd

Duffy Kennedy Pty Ltd (the contractor) and Galileo Miranda Nominee Pty Ltd (the principal) were parties to a construction contract. The contractor sought to recover unpaid amounts under the Building and Construction Industry Security of Payment Act 1999 (NSW), including interest on late payments. The principal had issued a "show cause notice" and subsequently a "take out notice" to the contractor, alleging breaches of contract. The contractor contended that the principal's actions were invalid and that it had validly suspended work. The proceedings concerned appeals from decisions of the primary judge.

The court was required to determine several key legal issues. Firstly, it had to consider whether unpaid interest on the late payment of a "scheduled amount" formed part of that scheduled amount for the purposes of the Security of Payment Act. Secondly, the court had to assess the validity of the "show cause notice" given the principal's involvement in the decision-making process of its representative. Thirdly, the court needed to determine the validity of the "take out notice," which was contingent on the principal's representative being satisfied that the contractor had not remedied the alleged default. Finally, the court considered the scope of "without prejudice" privilege in relation to information disclosed during settlement negotiations.

On the issue of the scheduled amount, the court held that the definition of "scheduled amount" under the Act did not include interest payable under section 11 unless that interest was itself included in a scheduled amount. Regarding the "show cause notice," the court found it was validly issued because the principal's representative gave adequate and proper consideration to its issuance, and it would be inconsistent with the principal's right to ensure its representative acted properly if it could not be involved in such a decision. The "take out notice" was also deemed valid, as there was no evidence that the principal's representative failed to give adequate and proper consideration to the relevant issues or lacked the necessary satisfaction for its issuance. The court clarified that "without prejudice" privilege does not prevent the use of information disclosed in settlement negotiations for purposes other than settlement if the negotiations do not result in an agreement.

The appeals were dismissed with costs.