MN Builders Pty Ltd v MMM Cement Rendering Pty Ltd

[2019] NSWDC 734

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:	MN Builders Pty Ltd v MMM Cement Rendering Pty Ltd [2019] NSWDC 734
Hearing dates:	3, 4 December 2019
Date of orders:	04 December 2019
Decision date:	04 December 2019
Jurisdiction:	Civil
Before:	Abadee DCJ
Decision:	See paragraph 52.
Catchwords:	BUILDING AND CONSTRUCTION – application for summary judgment – claim by subcontractor against builder for unpaid tax invoice – whether valid construction contract was entered into – whether payment claim was served – whether claimant’s pleading precludes submission that payment claim was served.
Legislation Cited:	Civil Procedure Act Construction Industry (Security of Payment) Act 1999 (NSW) Interpretation Act 1987 (NSW)
Cases Cited:	Bastistatos v RTA (2006) 266 CLR 256 Brinson v Rocla Concrete Pipes Limited (1982) 2 NSWLR 937 Civil Procedure Act 2005 (NSW) Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Emag Constructions Pty Ltd v Highrise Concrete Contractors (Aust) Pty Ltd [2003] NSWSC 903 Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 General Steel Industries v Commissioner for Railways (NSW) (1964) 112 CLR 125 Grave v Blazevic Holdings Pty Ltd t/as Kross Building Services (2010) 79 NSWLR 132 Hill ATF Ashmore Superannuation Benefit Fund v Halo Architectural Design Services [2013] NSWSC 865 Isis Projects Pty Ltd v Clarence Street Pty Ltd [2004] NSWSC 714 Kingston Building v McKay [2009] NSWDC 204 Owners SP56587 v Consolidated Quality Projects [2009] NSWSC 1476 Spencer v Commonwealth [2010] HCA 28 The Owners Strata Plan 56587 v Consolidated Quality Projects [2009] NSWSC 1476
Texts Cited:	Ritchie’s Uniform Civil Procedure (NSW)
Category:	Principal judgment
Parties:	MN Builders Pty Ltd (Plaintiff/ cross-defendant) MMM Cement Rendering Pty Ltd (Defendant/ cross-claimant) Salem Sabbough (Second defendant)
Representation:	Counsel: Mr S Ipp (Plaintiff) Mr T Jones (Defendant)   Solicitors: Bradbury Legal Paramonte Legal
File Number(s):	2019/218860

Judgment

INTRODUCTION

1. Before the Court is a notice of motion filed on 22 August 2019, brought by the defendants who are also cross-claimants, seeking summary judgment on a cross-claim. [1]

   1. A cross-claimant is a “plaintiff”, for the purposes of s 3 of the Civil Procedure Act 2005 (NSW) and is thereby entitled to seek summary judgment on its claim.

2. This proceeding involves a dispute between the plaintiff (a builder) and the first defendant (a subcontractor) in relation to payment for the supply by the subcontractor of rendering services in connection with building works at Liverpool in Sydney. Those services were supplied pursuant to a contract entered into on 7 June 2018. The rendering works were performed from the middle of 2018 through to late January 2019.

3. The subcontractor issued 7 tax invoices. All but one of them – the 7th tax invoice – were paid by the Builder.

The builder’s claim

4. The builder contends that, in the circumstances, it overpaid the subcontractor by the sum of approximately $280,000. The builder’s claim is founded upon the existence of a contract entered into on or about 7 June 2018. This contention is premised upon the builder’s view of the basis for charging the price under the contract. The builder says that the price was calculated per square metre in accordance with a quote from the subcontractor on the day the contract, being 7 June 2018. It contends that on that basis, the value of the work performed by the subcontractor was in the sum of $326,635.62 (incl GST).

5. By its defence, the Subcontractor says that since most of the surfaces rendered were less than 1 m², that it charged on a ‘lineal’ basis, not a ‘square metre’ basis, and that the builder verbally agreed with this.

The sub-contractor’s cross-claim

6. This claim is founded upon the subcontractor’s alleged verbal agreement.

7. By this claim, the subcontractor says that it issued a seventh tax invoice on 25 January 2019 but that invoice had not been paid.

8. The subcontractor says that the invoice constitutes a ‘Payment claim’ within the meaning of section 13 of the Construction Industry (Security of Payment) Act 1999 (NSW) (the ‘Act’). No ‘Payment Schedule’ had been served within 10 business days. That being so, and by reason of section 15 of the Act, the builder was liable for the sum of $129,827.50 plus interest.

9. In defence to the subcontractor’s cross-claim the builder denies the existence of the verbal agreement, and/or Mr Dupre’s authority to enter such agreement on the builder’s behalf.

10. Moreover, in response to the claim under the Act, the builder disputes that a valid construction contract was entered into for the purposes of that legislation. It also contends that no valid ‘Payment claim’ was ever served and therefore there was no requirement to serve a payment schedule in response.

11. For the purposes of this application, the subcontractor relied upon two affidavits of Mr Salem Sabbouh, its director. The builder relied upon two affidavits of its foreman, Mr Dupre.

12. It was common ground before the Court that the 7th tax invoice was, in fact, received by the accounts section of the builder on 25 January 2019. That was the result of Mr Dupre forwarding the document that he had received electronically from Mr Sabbouh.

Principles of summary dismissal applications

13. There is no dispute about the principles underpinning applications.

14. The test to be applied on an application for summary judgment has been variously described as whether the proposed defence “is so obviously untenable that it cannot possibly succeed”, is “manifestly groundless” or “so manifestly faulty that it does not admit of argument”: Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J; General Steel Industries v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-130; Spencer v Commonwealth [2010] HCA 28 at [53]-[55]; Bastistatos v RTA (2006) 266 CLR 256 at [46].

15. It is not sufficient that a case defence be weak, as prima facie a party is entitled to a trial. A party is to be deprived of that entitlement only in the clearest of cases where for example it is transparently clear that there is no reasonable cause of action (or defence): Brinson v Rocla Concrete Pipes Limited (1982) 2 NSWLR 937 at 946 F to G.

16. As with all its other powers under the Rules, the question of whether the Court should order summary judgment falls to be assessed with regard to the overriding purpose of case management: Civil Procedure Act 2005 (NSW) s 56(2).

Respondent’s submissions

17. The builder, the respondent to the application, submits that the application must fail since there are triable issues in at least the following senses.

18. First, there is a triable issue as to what is “the construction contract” for the purposes of ss 8 and 13 of the Act. The proper identification and existence of the construction certificate is, it is said, a statutory precondition to the making of a payment claim.

19. The builder submits that the construction certificate upon which the applicant relies can only be a verbal agreement. By the terms of the verbal agreement, it is said, the builder agreed that the charging would occur on a lineal basis; not the square metre basis. However, the existence of such verbal agreement is denied. It being denied, so it is said, it cannot clearly be stated that the respondent is party to any construction contract for the purposes of the Act.

20. Secondly, there is a triable issue as to whether and how the payment claim was served. There are several aspects to this. The first is a pleading point. The respondent notes that the cross-claim only alleges that the service of the payment claim arose by hand (see par 15 of the Cross-Claim). But that being so, the respondent says that the parties are plainly at issue as to whether Mr Sabbour did, in fact, hand deliver the 7th tax invoice to Mr Dupre. That being so, with the issue being joined, it is plainly triable as a matter of fact.

21. The second aspect to this point is that there is genuine dispute whether the contract provided for delivery of payment claims by hand. The respondent says the contract stipulated that payment claims all be served by email to the respondent’s accounts section. There was certain background to this which the Court was taken to. The respondent relied upon the authority of Stevenson J (Hill ATF Ashmore Superannuation Benefit Fund v Halo Architectural Design Services [2] ) and also observations by McDougall J when sitting in the Court of Appeal (Owners SP56587 v Consolidated Quality Projects [3] ) to posit that notwithstanding the width of s 31, where the contract stipulated the means of service of payment claims, that stipulation needed to be adhered to. This being so, there was at least a triable issue of law.

    2. [2013] NSWSC 865 at [52].

    3. [2009] NSWSC 1476 at [20], [34]

22. The third aspect concerns whether s 31 was in fact complied with. The provision stipulates that the payment claim needs to be provided to “the person” or the person who has authority to receive it. The respondent contends that the person here was the builder and that Mr Dupre was not authorised to be provided with the claim.

The applicant’s submissions

23. On the issue concerning the construction contract, the applicant says that had the respondent acted appropriately, it would have raised the issue as to whether there was a construction contract and, if so, its terms in the payment schedule. It says that by s 15(4)(b)(ii) of the Act, read with s 15(1) and 15(2)(a)(ii), the respondent is now precluded from raising any defence in relation to matters arising under the construction contract. It cites Isis Projects Pty Ltd v Clarence Street Pty Ltd [4] as authority for the proposition that the Act does not countenance the situation where a respondent may refrain, on a contractual basis, from providing a payment schedule whilst retaining the right in subsequent judicial proceedings to rely upon the contractual matter. It also says that s 22B of the Act effectively prohibits a respondent from raising a matter in an adjudication response that is not raised in the payment schedule.

    4. [2004] NSWSC 714 at [65]

24. On the service point, the applicant says that it would be productive of absurdity if a builder in the respondent’s position, who has acknowledged actual receipt of a payment claim, can invoke a facultative provision such as s 31 of the Act, to proclaim that it was not served with it. The applicant submitted, without contradiction, that the authorities to which the respondent’s Counsel relied, discussing the significance of the mode of service for valid payment claims, were not cases concerned with the situation where the builder had admitted receipt of the payment claim and accordingly, the cases were distinguishable, if not inapplicable.

25. The applicant submits that the short answer to the respondent’s service point was, as Hodgson J (as his Honour then was) said in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [5] , that the document had actually been received and come to the attention to the person to be served or provided with the document. This was the respondent, through its accounts section. That being so, it did not matter whether or not the facultative regime provided in s 31 of the Act had been complied with.

    5. [2006] NSWCA 259 at [58]

26. Counsel for the applicant also referred me to the decision of this Court in Kingston Building v McKay [6] , where Sidis DCJ rejected an argument, premised upon the view that the relevant contract provided for service of notices in certain ways, that the failure to adhere to one of those modes of service meant that service for the purposes of the statutory claim was not achieved. Her Honour said that it was “common sense and illogical to argue that a builder in the respondent’s position should be excused from a statutory obligation from the content of a notice known to them because it was received irregularly.” The fact that it was received meant that the payment claim was served.

DETERMINATION

6. [2009] NSWDC 204 at [4], [20]-[21]

The construction contract issue

27. As to the point of whether there is a triable issue whether there was a construction contract, in my view, the decision in Grave v Blazevic Holdings Pty Ltd t/as Kross Building Services (2010) 79 NSWLR 132 relied upon by the respondent is distinguishable. In that case, as the leading judgment of MacDougall J makes plain (at [3]), it was sufficiently plain that there was no contract entered into. The Court of Appeal went on to hold that where there was a dispute as to whether there was a construction contract being entered into, a builder was at liberty to maintain a defence in a summary judgment application that it was not a party to such contract.

28. The position here is different. It is that there was a construction contract, to which the respondent was a party. All that is necessary, for this purpose, is that there be a contract under which a party undertakes to carry out construction work for another party. The issue between the parties here is what was the proper basis for the applicant charging: was it based upon a quote (decreeing that it be by square metre), or was there verbal agreement that it be by lineal metre? As Macfarlan JA said in his concurring judgment at [42], once it is accepted that a relevant contract exists, it is sufficient that the person on whom the claim is made ‘may be liable’, that is ‘arguably’ liable, to make the payment. Or, to put the matter another way and to adopt what Allsop P said in his separate concurring judgment, this is not a case of making strangers to a construction contract liable for progress payments.

29. The respondent’s argument here, is that the Court has to concern itself with the content of the construction contract before the applicant’s rights to bring payment claims under ss 8 and 13, such as they are, are enlivened. I do not consider that Grave mandates this course.

30. In my view, also, questions as to the terms of a construction contract are quintessentially within the purview of an adjudicator’s determination under that particular route envisaged by the legislation.

31. I also accept the applicant’s submission as to the operation of s 15(4)(b)(ii) of the Act in the present circumstances where the respondent had not provided a payment schedule within the stipulated period.

32. There is, in my view, no triable issue as to whether there was a construction contract.

The service issue

33. The first question concerns the respondent’s pleading point.

The pleading point

34. It is not mandatory for an applicant to actually file a pleading in order to seek summary judgment, so long as the facts for a claim in an originating process are sufficiently clear, and the absence of any arguable defence, is also clear. Applications of this kind are sometimes brought before any defence is filed or prior to the expiry of the time for filing defences (Ritchie’s Uniform Civil Procedure (NSW) [13.1.75].

35. Rule 13.3 makes it plainly apparent that such applications are determined in accordance with the evidence of the facts upon which the claim is based. Naturally, such applications also must be determined in accordance with the well-established cautionary principles to which I earlier alluded to.

36. It is true, in this case, that the applicant, as cross-claimant specifically pleaded that service of the payment claim was effected by hand delivery. The respondent traversed this pleaded allegation by denying it. But well after the present motion was filed, in his most recent affidavit on 29 November 2019, Mr Dupre admitted that on 25 January 2019 he forwarded a photograph of Tax Invoice 7 to the Accounts Department email address of the respondent.

37. The same accounts department responded with its own email to the applicant on 15 February 2019, in which it was tolerably clear that the respondent had taken the time to consider and respond to the 7th tax invoice. For what it is worth, no point was taken in the email that date that indicated that there was any unusual delay experienced by the respondent that would hinder its ability to meaningfully consider the content of the 7th tax invoice.

38. Counsel for the applicant accepted the discrepancy between the way in which the statutory claim is pleaded, insofar as the service issue is dealt with, and the way that it now (ie since last Friday) understands its payment claim came to the attention of the respondent. Ordinarily, absent any compelling argument as to prejudice, the applicant would be granted leave to amend its pleading, nunc pro tunc.

39. Counsel for the respondent says that such leave would not be granted since the amendment would occasion material prejudice. Whilst I accept that the respondent’s position would not be enhanced by allowing the amendment, I do not see the “prejudice” in the requisite sense where the occasion for the amendment was to rectify the pleading to accord with evidence which the applicant could not actually or reasonably have known but which arose purely from the circumstances of the respondent, or one of its employees, making an admission.

40. I return to my initial point that on a summary judgment application, the emphasis is upon the state of the evidence and whether it is at a level of maturity that would enable the Court to exercise its summary powers, themselves to be exercised cautiously. In the absence of specific prejudice, which I do not find here, in my view there is no procedural impediment to the Court proceeding on the basis of the evidence as it is, whether or not the pleadings are perfectly aligned to it.

The merits of the respondent’s argument on service

41. Though there was little argument directed to it, in my view, the respondent’s argument on service need to be assessed having regard to the statutory context. That is relevantly set out in the objects of the Act in s 3. The foremost object is in s 3(1), which says that the Act is “to ensure that any person who undertakes to carry out construction work … under a construction contract is entitled to receive, and is able to recover progress payments in relation to the carrying out of that work ….”

42. I am mindful that ordinary precepts of statutory construction favour my adoption of a construction that facilitates the objects of the legislation: section 33 of the Interpretation Act 1987 (NSW).

43. In my view, the respondent’s construction of the service requirement is not consistent with the statutory purposes. Indeed, in my view, if the respondent’s argument be accepted, it would be antithetical to the statutory objects.

44. The respondent referred me to the decisions of Einstein J in Emag Constructions Pty Ltd v Highrise Concrete Contractors (Aust) Pty Ltd [7] , which were approved by McDougall J in The Owners Strata Plan 56587 v Consolidated Quality Projects [8] , emphasising the need for strict compliance with the requirements for service. Those observations, with respect, need to be viewed in their proper context. The issue addressed by Einstein J was whether a solicitor’s authority (actual or ostensible) to receive copies of documents on behalf of a client gave way to the statutory requirements. His Honour held that it did. McDougall J also addressed in the decision before him whether circumstances of agency met the requirements.

    7. [2003] NSWSC 903 at [59]

    8. [2009] NSWSC 1476 at [22]

45. Neither decision, it seems to me, addresses the situation here, where the person to whom the payment claim is delivered accepts that it received it. Neither decision takes issue with the correctness of the observations of Hodgson J in Falgat, which I referred to earlier in these reasons.

46. There was no issue that the accounts section of the respondent should not be taken to be the “person” to whom payment claims are to be served or provided with under s 31 of the Act.

47. I agree with the applicant’s submission that once it is accepted that the respondent received the payment claim, questions about compliance with the facultative regime in s 31 become redundant.

41. That being so, in my view, it is unnecessary to address, or perhaps seek to reconcile, whether the respondent’s assertion as to the contractual means for service of payment claims accords with any of the methods set out in s 31 of the Act. In other words, there is no triable issue in that particular regard.

42. There is no triable issue as to whether the respondent had been served with the payment claim, for the purposes of s 31 of the Act.

43. Lest I am wrong, I wish to note that had I found that there was a triable issue whether service needed to have been affected by hand delivery, I would have gone on to find that it was plainly a triable factual issue whether the 7th tax invoice had been delivered by hand. It would have been inappropriate to form views as to contested factual matters based upon preliminary observation of the credibility of the evidence of Mr Dupre in that regard.

44. The applicant has made out its case for summary judgment.

45. After having heard from the parties, I make the following orders:

1. Summary judgment for the Cross-claimant against the cross-defendant in the sum of $129,827.50 pursuant to section 15(2) of the Building and Construction Industry Security Payment Act 1999.

2. Interest on the above sum in the amount of $7,437.52.

3. The cross-defendant pay the cross-claimant’s costs on the ordinary basis.

4. Pending further order, orders 1 – 3 are stayed to 31 January 2020 subject to the conditions that:

1. the cross-defendant pay into Court the sum of $25,000 by 9 January 2020.

2. The judgment debtor pay post judgement interest.

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Endnotes

Amendments

06 December 2019 - Amendment to catchwords.

Decision last updated: 06 December 2019