Kennedy Civil Contracting Pty Ltd (subject to deed of company arrangement) v Linx Constructions Pty Ltd

Kennedy Civil Contracting Pty Ltd (subject to a deed of company arrangement) appealed to the Court of Appeal of New South Wales against a decision of the primary judge. The dispute concerned a payment claim made by Kennedy Civil Contracting for construction works performed. Linx Constructions sought to reduce the amount claimed by asserting a right to set off payments made to a third-party supplier.

The central legal issue before the Court of Appeal was whether Linx Constructions’ attempt to reduce the payment claim by asserting a set-off for payments made to a third-party supplier constituted bringing a "cross-claim" in contravention of section 15(4)(b)(i) of the *Building and Construction Industry Security of Payment Act 1999* (NSW). This provision restricts the grounds upon which a respondent can dispute a payment claim.

The Court of Appeal, comprising Bell CJ, Basten AJA, and Griffiths AJA, considered the nature of a cross-claim in the context of the Act. It reasoned that a set-off, particularly one involving a payment to a third party that was not directly related to the contractual obligations between the parties to the payment claim, could indeed amount to a cross-claim. The Court concluded that Linx Constructions’ defence, as presented, sought to raise issues beyond a simple denial of the work done or the value thereof, thereby falling foul of the statutory prohibition.

Consequently, the Court of Appeal dismissed the summons seeking leave to appeal, ordering that Kennedy Civil Contracting pay the costs of the application.