District Court New South Wales

Case Title: TQM Design & Construct Pty Ltd & Anor v Romeo & Anor

Medium Neutral Citation: [2011] NSWDC 143

Hearing Date(s): 27 & 28 September 2011

Decision Date: 28 September 2011

Jurisdiction: Civil

Before: Levy SC DCJ

Decision:

1. The defence filed by the defendants on 27 June 2011 is struck out;

2. Summary judgment is entered in favour of the first and second plaintiffs against the first and second defendants in the sum of $137,500 in accordance with Uniform Civil Procedure Rules Pt 13 r 13.1 and s 14(4) and s 15 of the BCISP Act ;

3. In accordance with s 100 and s 101 of the Civil Procedure Act 2005, pre-judgment interest o n the amount of $137,500 between 1 March 2010 and 27 September 2011 is assessed in the sum of $21,676.88 ;

4. The total judgment in favour of the plaintiffs against each defendant, including pre-judgment interest, is in the sum of $159,176.88 ;

5. The first and second defendants are to pay the costs of the plaintiffs in respect of the motion filed on 3 August 2011, and of the proceedings, on the ordinary basis unless otherwise entitled;

6. Liberty to apply on 7 days notice if further orders are required .

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords: Building Contracts - whether plaintiffs have established entitlement to summary judgment pursuant to the provisions of the Building and Construction Industry Security of Payments Act 1999

Legislation Cited: Building and Construction Industry Security of Payments Act 1999, s 5, s 7, s 11, s 13, s 14, s 15, s 16, s 31

Civil Procedure Act 2005, s 100, s 101

Evidence Act 1995, s 160

Home Building Act 1989

Uniform Civil Procedure Rules 2005, r 14.28

Cases Cited: Bittania Pty Ltd v Parkline Constructions Pty Ltd [2006]

NSWCA 238; (2006) 67 NSWLR 9

Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Randhawa v Serrato [2009] NSWSC 170

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165

Tsoukatos v Mustafa [2007] NSWSC 614

Texts Cited: Hansard, NSW Legislative Assembly, 29 June 1999, Second Reading Speech

Category: Principal judgment

Parties: TQM Design & Construct Pty Ltd (First plaintiff/Applicant)

Maroun Taouk (Second plaintiff)

Anna Maria Romeo (First defendant/ Respondent)

Giuseppe Romeo (Second defendant/ Respondent)

Representation

- Counsel: Ms D Dinnen (Plaintiffs/Applicants)

Mr D Allen (Defendants/Respondents)

- Solicitors: Magna Carta Lawyers (Plaintiffs/Applicants)

Proctor Phair Lawyers (Defendants/ Respondents)

File number(s): 2010/341969

Publication Restriction:

Judgment

Notice of motion

1 This is a notice of motion filed by the plaintiffs on 3 August 2011 seeking interlocutory orders that the defence and any cross claim by the defendants against the plaintiffs be struck out pursuant to Uniform Civil Procedure Rules 2005 Pt 14 Div 5 r 14.28 and s 15(4)(b) of the Building and Construction Industry Security of Payments Act 1999 ("the BCISP Act "].

Factual background

2 The dispute underlying these proceedings involves two stages of building work in relation to premises situated at 18 - 20 Park Street, Mona Vale, NSW. The works involved the erection of a building containing 18 residential apartments, 6 retail units and a 46 vehicle basement car park.

3 The first component of such works comprised the principal works which were the subject of a contract to which the Home Building Act 1989 applied. Those works gave rise to a second category of works comprising some agreed rectification of the principal works. There was a question as to whether those rectification works were the subject of an agreement to which the BCISP Act applies.

4 On 12 May 2005, the plaintiffs and defendants entered into a construction contract. Subsequently, on 23 November 2007, the plaintiffs and defendants entered into an agreement in relation to various disputes that had arisen under that contract. The agreement included terms that the defendants were to pay the plaintiffs an amount of $137,500 upon execution of the deed to the agreement. The agreement also required the provision of some identified documents as well as requiring the commencement of rectification work to the front facade of an awning on the premises. There was provision for the payment of a further sum of $137,500 within 7 days of the plaintiffs notifying the defendants of completion of the rectification works.

5 On 1 March 2010, the plaintiffs wrote to the defendants and notified them of the completion of the rectification works in accordance with clause 2.1(b) of the agreement for rectification works. At that time a payment claim was issued by the plaintiffs purporting to be in accordance with s 13 of the BCISP Act . At no stage did the defendants raise a relevant dispute by means of serving a payments schedule on the plaintiffs, as contemplated by s 14 of the BCISP Act .

6 It was common ground that in the course of the principal works, the plaintiffs had issued a number of payment notices and had served those notices on the defendants in accordance with the BCISP Act . However, prior to the issue of the payment claim, the subject of these proceedings, the plaintiffs had not issued any previous payment claims relating to the rectification works.

7 In this application there was a dispute as to the entitlement of the plaintiffs to issue the payment claim in question, and there were disputes over the validity of service of the payment notice. For the purposes of determining this interlocutory application it is not necessary to consider the detail of the works.

8 The plaintiffs filed their amended statement of claim on 13 May 2011. The plaintiffs have sued on the agreement to perform rectification works claiming those works were " construction works " within the meaning of s 5 of the BCISP Act . On 27 June 2011 the defendants filed a defence to theamended statement of claim. That defence sought to raise matters arising out of the construction contract.

Issues

9 The issues that call for determination on the motion are as follows:

Issue 1 : Whether the BCISP Act applies to the contract between the parties concerning the rectification works;

Issue 2 : Whether the plaintiffs were entitled to issue the payment claim which is the subject of these proceedings, or whether they were precluded from so doing because, pursuant to s 13(4) of the BCISP Act , the subject works had been completed prior to 12 months before the issue of the claim for payment;

Issue 3 : Whether the payment notice in question had been validly served in accordance with s 31 of the BCISP Act .

10 The context of these issues is that if triable issues are shown to exist between the parties, the claimed remedy of summary judgment would necessarily be unavailable: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125.

Evidence on the motion

11 The plaintiffs relied upon the following evidence:

(a) The affidavit of the second plaintiff, Mr Maroun Taouk, sworn on 2 August 2011, together with an annexed 163 pages of exhibited material;

(b) The affidavit of the second plaintiff, Mr Maroun Taouk, sworn on 23 September 2011, together with an annexed 32 pages of exhibited material;

12 The defendants relied upon the following evidence:

(d) The affidavit of the first defendant, Mrs Anna Maria Romeo, sworn on 30 August 2011. The 162 pages of material exhibited to that affidavit was tendered as evidence on the motion;

(e) The affidavit of Mr Peter Sukkar, sworn on 23 September 2011 . That affidavit was prepared by the plaintiffs in reply to the defendants' affidavits. At the hearing of the motion, that affidavit was called for and tendered by the defendants.

13 In reply, for completeness, the plaintiffs relied upon a further or supplementary affidavit of Mr Peter Sukkar, which had also been sworn on 23 September 2011, in which Mr Sukkar corrected some factual errors in his 23 September 2011 affidavit.

14 Significantly, none of the deponents to these affidavits were required for cross-examination on their affidavits.

Consideration of Issue 1 - Whether the BCISP Act applies to the contract

15 The defendants argued that the BCISP Act did not apply to the rectification works in question, including, because the amended statement of claim only referred to the rectification works, and did not refer to the original contract, thus taking the works outside the terms of the BCISP Act. In contrast, the plaintiff s argued that the BCISP Act applied to the rectification works, thus entitling the plaintiff s to the relief sought.

16 In my view, this issue should be resolved in favour of the plaintiffs in this application for the following reasons.

17 First, the contract under which the principal works were carried out was subject to the BCISP Act and the agreement concerning the rectification works must be viewed objectively as part of that transaction. Furthermore, the agreement must be interpreted in a common sense manner that gives the agreement business efficacy: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; 219 CLR 165, at p 179, [40] . This means that the agreement for rectification works should not be viewed in a vacuum, but should instead be seen in its relevant context as an integral part of the overall contractual transaction for the works.

18 Secondly, since the rectification work was aimed at fulfilling the contract as it originally stood, it was therefore necessarily within the purview of the BCISP Act because it concerned the works that had been the subject of the original contract. This means that the rectification agreement must be seen as an extension of the earlier contract that had been subsumed by the later agreement.

19 Thirdly, the defendants argued, incorrectly in my view, that the BCISP Act did not apply to the contract. That argument was based on the proposition that the contact for rectification works was within the exception provided by s 7(2)(c) of the BCISP Act because the contract for rectification was a contract the consideration for which was " to be calculated otherwise than by reference to the value of the work carried out or the value of the goods and services supplied ".

20 The incorrectness of that argument is readily apparent from the fact that a total sum of $275,000 was to be paid for the rectification works.

21 The defendants argued that the provision of staged payments for the rectification works indicates an agreement for retention monies to secure the performance of the works. In my view those staged or deferred payments simply embody the agreement of the parties for staged payments on completion of the works. The staged payments simply reflect a calculation representing the value of the work agreed to by the parties.

22 Although the staging of the payments may also be seen as representing some form of security for the performance of the work, the total amounts, and therefore the amount of $137,500 that is still outstanding, nevertheless reflects an agreement as to the value of the construction work to be carried out under the contract.

23 For the foregoing reasons I find that the contract for rectification works was within the ambit of s 7(2)(c) of the BCISP Act . I therefore find that the payment scheme under that Act applied to the agreement of the parties for the performance of the rectification works as claimed by the plaintiffs.

Consideration of Issue 2 - Plaintiffs' entitlement to issue the payment claim

24 The plaintiffs claimed they were entitled to issue a notice making a claim for payment when the works had been completed. Such an entitlement has specific consequences in that once such a notice of that kind had been issued by the plaintiffs, unless the defendants then issued a payments schedule within the prescribed time as provided by s 14(4) of the BCISP Act , namely within 10 business days after service of the payment claim, the scheme of the legislation provides that the plaintiff s became entitled to payment of the amount notified in the payment claim.

25 It is common ground that the defendants did not issue any such payments schedule pursuant to s 14(4).

26 The defendants relied upon s 13(4) of the BCISP Act , which in the context of this application, is to the effect that a payment claim may only be served within the period of 12 months after the construction work to which the claim relates was last carried out: s 13(4)(b).

27 The defendants argued that the state of the evidence was ambiguous, and therefore raised a triable issue as to whether or not the plaintiffs' notice of claim for payment was issued within the prescribed time so as to enable the plaintiffs to obtain the benefit of the scheme for payment under the BCISP Act.

28 This submission by the defendants was based upon the evidence of Mr Sukkar, who in his first affidavit, deposed that the works in question had been completed in May 2008, whereas in his supplementary affidavit, he had deposed that the works had been completed in May 2009.

29 The significance of this point was that if the works had been completed in May 2008, then because the plaintiffs had only 12 months in which to issue the notice of claim for payment, and since the notice in question was dated 1 March 2010, this would mean that the plaintiffs were not entitled to the benefit of the statutory scheme of the BCISP Act in respect of the rectification works.

30 The defendants' submission was to that effect based on the proposition that since Mr Sukkar had changed his evidence, this must mean that a triable issue had been raised as to the date of completion of the works, thus contraindicating the justification for granting the relief sought by the plaintiffs.

31 In my view that submission by the defendants has no substance because Mr Sukkar had provided a supplementary affidavit on the same date that his first affidavit had been sworn, and in that supplementary affidavit, he corrected what he had described as an inaccuracy as to the completion date for the rectification works.

32 The defendants did not challenge Mr Sukkar's supplementary evidence that corrected the identified inaccuracy, and instead the defendants sought to rely upon an asserted conflict within the evidence of Mr Sukkar.

33 I consider that Mr Sukkar's evidence must be read as a whole, and not read selectively, as was in effect submitted by the defendants as revealing a triable issue. When read in that way there is no relevant conflict within the evidence as to the date of completion of the works as was asserted by the defendants. Accordingly, I consider that the evidence does not reveal a triable issue.

34 I therefore find that that on the evidence adduced by the plaintiffs, the notice of claim for payment for the rectification works had been validly issued pursuant to the plaintiffs' statutory entitlement to do so.

35 I also find that the defendants did not serve a payments schedule disputing the works as required by s 16 of the BCISP Act .

36 The consequence of a failure on the part of the defendants to serve a payment schedule is that the payment claimed becomes due and payable as the defendants are not entitled, in these proceedings, to bring a cross claim or to raise a defence to matters arising under the construction contract: s 11(4) of the BCISP Act .

37 That position is subject to a consideration of the validity of the service of the payment claim dated 1 March 2010.

Consideration of Issue 3 - Validity of service of the payment claim

38 Service of notices under the BCISP Act may be effected in a variety of ways: s 31. Relevant to this case, sending a notice by post or facsimile to the ordinary place of business of the defendants constitutes valid service: s 31(1)(c) .

39 The plaintiffs initially relied on service of the payment claim on the defendants by means of post, facsimile and email. The plaintiffs no longer rely on the argument that service had been effected by email.

40 The question of service by facsimile was the subject of challenge. Whereas the plaintiffs claimed that the payment claim was served by facsimile to a number provided by the defendants, the defendants asserted the nominated number was not their facsimile number. This was so notwithstanding the appearance of the now disputed facsimile number in the 22 August 2007 report of the Adjudicator: page 2 of the material exhibited to the 23 September 2011 affidavit of Mr Taouk.

41 Accordingly, on that question, I find that a triable issue has been identified by the defendants, and therefore, the plaintiffs cannot obtain summary judgment based on claimed service by facsimile where such service is disputed.

42 The remaining issue of service by post requires examination.

43 The evidence tendered by the plaintiffs is to the effect that the payment claim was sent by pre-paid post to the address of the defendants and the correspondence was not returned with a failed delivery notice.

44 The plaintiffs rely upon s 160 of the Evidence Act 1995 for presumed proof of service. That section relevantly provides that postal articles sent by prepaid post are presumed to have been received at the specified address on the fourth working day after postage. That presumption may be rebutted if evidence sufficient to raise doubt about the presumption is adduced.

45 In this case, the evidence of the plaintiffs as to postage of the payment claim to the defendants was not challenged by cross-examination. Instead, the defendants simply denied having received the payment claim by post and the defendants relied upon that denial to submit that they had identified a triable issue that contraindicate d the making of an order for summary judgment in favour of the plaintiffs .

46 In my view, that argument raised by the defendants should not prevail because without challenge to the evidence of the plaintiffs through crossexamination, there is insufficient evidence to raise doubt about the presumption of receipt.

47 No evidence was called by the defendants as to the existence of a system for handling or dealing with postage, and in that context, a blanket denial of receipt is insufficient to displace the presumption enabled by s 160 of the Evidence Act 1995. An onus lies on the defendants to call cogent evidence on such matters rather than simply contending that the document was not received: Tsoukatos v Mustafa [2007] NSWSC 614 at [40] per Hall J. Unexplained evidence of non-receipt does not in this case constitute necessary or sufficient doubt to displace the statutory presumption of delivery to the designated address : Randhawa v Serrato [2009] NSWSC 170 at [19] per Hammerschlag J.

48 The defendants also argued that the requirement for service at the ordinary place of business of the defendants raised a triable issue as to whether or not there had been effective service of the notice of the payment claim. In my view, that submission should be rejected as there is no requirement that the notion of " ordinary place of business " be confined to the place of business with the closest connection to the works: Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78 per Giles JA at [30] .

Conclusions

49 The plaintiffs have succeeded on all of the issues that have called for determination on the motion, and accordingly, they are entitled to the relief they have claimed, namely summary judgment and pre-judgment interest. As such they are also entitled to an order that their costs of the motion, and therefore, their costs of the proceedings, should be paid by the defendants on the ordinary basis, unless an entitlement to some other order is established.

50 The defendants are therefore liable to pay the claimed amount of $137,500 plus pre-judgment interest because they failed to serve a payment claim: s 15(1) of the BCISP Act . The matters sought to be raised by the defendants in their defence to the plaintiffs' amended statement of claim are concerned with matters arising under the construction contract and under the scheme of that Act, there is no scope in these proceedings for a defence of that kind, or for a cross claim concerning such matters, as the policy that has become known as " pay now argue later " behind the legislation is emphatically clear: Hansard , Legislative Assembly , 29 June 1999, Second Reading Speech, p 2. If such entitlements are available to the defendants, they must proceed to raise those in other proceedings:

Bittania Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9 per Basten JA at [60].

51 The amount of pre-judgment interest was identified in submissions as being $21,676.88.

Orders

52 I make the following orders:

(a) The defence filed by the defendants on 27 June 2011 is struck out;

(b) Summary judgment is entered in favour of the first and second plaintiffs against the first and second defendants in the sum of $137,500 in accordance with Uniform Civil Procedure Rules Pt 13 r 13.1 and s14(4) and s 15 of the BCIS Act ;

(c) In accordance with s 100 and s 101 of the Civil Procedure Act 2005, pre-judgment interest o n the amount of $137,500 between 1 March 2010 and 27 September 2011 is assessed in the sum of $21,676.88;

(d) The total judgment in favour of the plaintiffs against each defendant, including pre-judgment interest, is in the sum of $159,176.88;

(e) The first and second defendants are to pay the costs) of the plaintiffs in respect of the motion filed on 3 August 2011, and of the proceedings, on the ordinary basis unless otherwise entitled;

(f) Liberty to apply on 7 days notice if further orders are required.

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