Supreme Court

New South Wales

Case Title: Johnston v Lianda Constructions Pty Ltd

Medium Neutral Citation: [2014] NSWSC 1178

Hearing Date(s): 20/08/ 2014

Decision Date: 27 August 2014

Jurisdiction: Common Law

Before: Harrison AsJ

Decision:

The Court orders that:

In relation to the plaintiff's appeal

(1) The extension of time to file the summons is granted.

(2) Leave to appeal is granted.

(3) The amended summons filed 31 March 2014 is dismissed.

In relation to the cross appeal

(4) The extension of time to file the cross appeal is granted.

(5) Leave to appeal is refused.

(6) The cross summons is dismissed.

In relation to both the appeal and cross appeal

(7) The decision of his Honour Magistrate Hodgson dated 18 December 2013 is affirmed.

(8) Costs of the appeal and the cross appeal are reserved.

Catchwords: APPEAL FROM LOCAL COURT - whether the Magistrate properly applied the test for summary judgment - whether there was a triable issue

APPEAL FROM LOCAL COURT - application for leave to appeal from a costs order in the Local Court

Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW), ss 3, 4, 8, 13, 14, 15, 32

Civil Procedure Act 2005 (NSW), s 98

Federal Court Act 1976 (Cth), s 31A

Local Court Act 2007 (NSW), ss 39, 40, 41

Uniform Civil Procedure Rules 2005 (NSW), rr 13.4, 42.1, 42.2

Cases Cited: Ampcontrol SWG Pty Ltd v Gujarat NRE Wonga Pty Ltd [2013] NSWSC 707

Be Financial Pty Ltd v Das [2012] NSWCA 164

General Steel Industries Inc v Commissioner for Railways of NSW (1964) 112 CLR 125

Grave v Blazevic Holdings Pty Ltd [2010] NSWCA 324; (2010) 79 NSWLR 132

House v The King (1936) 55 CLR 499

Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) [2005] NSWCA 409

O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71

Parkview Qld Pty Ltd v Fortia Funds Management Ltd [2009] NSWSC 1065

Sayed v Deng [2012] NSWSC 851

Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118

Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517

Sydney City Council v Geftlick [2006] NSWCA 280

Category: Principal judgment

Parties: Peter Martin John (Plaintiff/Cross Defendant)

Lianda Constructions Pty Ltd AFT The Alljaz Trust (Defendant/Cross Claimant)

Representation

- Counsel: Counsel:

- Solicitors: Solicitors:

File Number(s): 2014/70957

Decision Under Appeal

- Before: Hodgson LCM

- Date of Decision: 18 December 2013

- Court File Number(s): 2013/216485

Publication Restriction: Nil

JUDGMENT

1 HER HONOUR: These proceedings concern a payment claim issued pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"). There is an appeal and a cross appeal from the decision of His Honour Magistrate Hodgson dated 18 December 2013. The cross appeal by the defendant is in relation to costs. I shall deal with them in turn.

2 The plaintiff in these proceedings is Peter Martin Johnston, who was the defendant in the Local Court proceedings. The defendant in these proceedings is Lianda Constructions Pty Ltd ATF the Alljaz Trust, who was the plaintiff in the Local Court proceedings. For convenience, I shall refer to the parties by name.

3 By amended summons filed 31 March 2014, Mr Johnston seeks first, leave to appeal from the whole of the decision of Hodgson LCM; secondly, leave to commence the appeal out of time; thirdly, that the appeal be allowed; fourthly, the judgment and orders of the Local Court be set aside; and fifthly, in lieu of the Local Court orders, the notice of motion filed by Lianda Constructions be dismissed and Lianda Constructions pay Mr Johnston's costs of the notice of motion.

4 On 22 October 2013, in the Local Court, Lianda Constructions filed a notice of motion seeking summary judgment.

5 On 18 December 2013, the Magistrate entered summary judgment for Lianda Constructions in the amount of $84,264.74, together with court costs of $444 and professional costs of $1,505, assessed on a default judgment basis plus interest.

Appeals generally

6 Section 39 of the Local Court Act 2007 (NSW) provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law.

7 Section 40(1) of the Local Court Act provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court on a ground that involves a question of mixed law and fact, but only by leave of the Supreme Court.

8 Section 40(2) provides that a party who is dissatisfied with an order as to costs or an interlocutory judgment of the Local Court may appeal to the Supreme Court, but only by leave of the Supreme Court.

9 Section 41(1) of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal.

10 In Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517, Gleeson CJ at [2] reiterated that in the common law system of civil justice, the trial process determines the issues between the parties. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.

11 This appeal was lodged out of time. Mr Johnston has sought an extension of time in which to file the summons. Lianda Constructions opposes this application on the basis that it has delayed the payment of the judgment sum and delay is contrary to the objects of the Act. The explanation for the delay is that Mr Johnson had to obtain the transcript of the judgment. The summons was filed a week after the transcript of the Local Court judgment was obtained. In my view, in these circumstances, an extension of time to lodge the summons should be granted.

Whether leave to appeal is required

12 Leave to appeal is required pursuant to s 40(2) if the Magistrate's decision is considered an interlocutory one. Mr Johnston submitted that the Magistrate's decision is a final one. Lianda Constructions argues that it is an interlocutory decision for which leave is required and it opposes such leave being granted.

13 I will adopt the approach of Hodgson JA in Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) [2005] NSWCA 409. In that case, Nepean Engineering applied for leave to appeal the decision of the primary judge in relation to a decision made pursuant to the Building and Construction Industry Security of Payment Act . The application for leave was argued on the basis that if leave was granted, the appeal would be disposed of without further argument. It is the same situation here. In Nepean Engineering , Hodgson JA commented at [4] to [7]:

"[4] ... leave was argued on the basis that, if leave was granted, the appeal would be disposed of without further argument.

[5] I would comment however that the effect of the order of the primary judge is that a final judgment be entered .... ; so although the order arose out of the Notice of Motion, it would appear to finally dispose of rights of the parties and thus not be interlocutory.

[6] An order that summary judgment be entered is in my opinion different from an order that merely grants leave to enter judgment, as considered in Cox Brothers (Australia) Ltd v Cox (1934) 50 CLR 314 and Prelea v Westpac Banking Corporation , NSWCA, 3/7/92.

[7] In any event, having regard to the effect of the order, the amount involved and the issues, it is appropriate to proceed immediately to consideration of the merits of an appeal."

14 I grant leave to appeal on the same basis as Hodgson JA did in Nepean Engineering so that the appeal can be disposed of without the need for further argument.

Mr Johnston's grounds of appeal

15 Mr Johnston appeals the whole of the decision of the Magistrate on the grounds that first, the Magistrate erred in failing to properly apply the test for summary judgment; secondly, in failing to find that there was a triable issue as to the terms of the construction contract; thirdly, in failing to find that the triable issue as to the terms of the construction contract affected the determination of whether Lianda Constructions had a statutory entitlement to make a payment claim under s 13(1) of the Act; fourthly, in failing to find there was a triable issue as to whether Mr Johnston had paid in part the amount sought by Lianda Constructions in its payment claim; and fifthly, in failing to find that whether Mr Johnston had paid in part the amount sought by the plaintiff in its payment claim was a matter that affected the question of whether Lianda Constructions was entitled to make the payment claim under s 13(1) of the Act . Mr Johnston subsequently abandoned ground 6.

16 The key ground of appeal, from which the other grounds stem, is whether or not there was a triable issue, namely whether Mr Johnston failed to identify the construction contract. In oral argument, counsel for Mr Johnson conceded that grounds two to five are particulars of ground one (T10.14).

The Local Court proceedings

17 The starting point in this appeal is the pleading framework in the Local Court.

18 By statement of claim filed 16 July 2013, Lianda Constructions relevantly pleaded at [3] and [4]:

"3 On or about 2 November 2012 the Defendant engaged the plaintiff to provide building and construction services in relation to the construction of 4 units at ..., Port Macquarie ("the Contract").

Particulars

The Contract was express and contained the following documents.

(a) Master Builders Association Head Contract Residential Building (BC4).

4 The plaintiff carried out work pursuant to the Contract and issued the payment claim dated 29 April 2013 to the Defendant for the sum of $84,264.74 inclusive of GST in accordance with the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act") and the Contract."

19 By amended defence, Mr Johnston relevantly pleaded at [3]:

"3. In answer to paragraph 3 of the statement of claim, the defendant:

(a) admits he engaged the plaintiff to provide building and construction services in relation to the construction of 4 units at ..., Port Macquarie ...

(b) admits that the plaintiff's and defendant's obligations in respect of the plaintiff's promise to provide building and construction services in relation to ... was recorded in a document titled the Master Builders Contract Residential Building (BC4) (the pleaded contract);

(d) otherwise does not admit the facts alleged in paragraph 3."

20 As the construction contract is admitted, it is easy to envisage what the facts that are not admitted could be.

21 On the appeal in this Court, counsel for Mr Johnston referred to paragraph 3(3) of the defence and submitted that in reliance of that paragraph the contract was not properly identified. Counsel submitted that the defence was seeking to put in issue the identification of a contract that was recorded entirely as a written contract being the Master Builders Association Head Contract Residential Building BC4 (T9.29-30).

22 Counsel for Mr Johnson further submitted that evidence would have been called that there were oral variations to the construction contract and that a party seeking to bring a cause of action under the Act had to properly plead and identify exactly the part of the construction contract, whether that be an oral or written part, that they were seeking to plead (T9.35-41).

23 On 22 October 2013, Lianda Constructions filed a notice of motion seeking summary judgment and an order that judgment be entered against Mr Johnston under rule 13 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") in the amount of $86,469.18 pursuant to s 15(2)(a)(1) of the Act.

Legislative provisions

24 It is necessary for me to briefly set out the relevant provisions of the Act.

25 Sections 3, 4, 8, 13, 14 and 15 relevantly read:

" 3 Object of Act

(1) The object of this Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.

(2) The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.

(3) The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves:

(a) the making of a payment claim by the person claiming payment, and

(b) the provision of a payment schedule by the person by whom the payment is payable, and

(d) the payment of the progress payment so determined.

(4) It is intended that this Act does not limit:

(a) any other entitlement that a claimant may have under a construction contract, or

(b) any other remedy that a claimant may have for recovering any such other entitlement

4 Definitions

(1) In this Act:

construction contract means a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party.

...

8 Rights to progress payments

(1) On and from each reference date under a construction contract, a person:

(a) who has undertaken to carry out construction work under the contract, or

(b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment.

(2) In this section, reference date , in relation to a construction contract, means:

(a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or

(b) if the contract makes no express provision with respect to the matter-the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month.

...

13 Payment claims

(1) A person referred to in section 8(1) who is or who claims to be entitled to a progress payment (the claimant ) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.

...

14 Payment schedules

(1) A person on whom a payment claim is served (the respondent ) may reply to the claim by providing a payment schedule to the claimant.

(2) A payment schedule:

(a) must identify the payment claim to which it relates, and

(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount ).

(3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment.

(4) If:

(a) a claimant serves a payment claim on a respondent, and

(b) the respondent does not provide a payment schedule to the claimant:

(i) within the time required by the relevant construction contract, or

(ii) within 10 business days after the payment claim is served, whichever time expires earlier, the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.

15 Consequences of not paying claimant where no payment schedule

(1) This section applies if the respondent:

(a) becomes liable to pay the claimed amount to the claimant under section 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and

(b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.

(2) In those circumstances, the claimant:

(a) may:

(i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or

(ii) make an adjudication application under section 17(1)(b) in relation to the payment claim, and

(b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.

(3) A notice referred to in subsection (2)(b) must state that it is made under this Act.

(4) If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt:

(a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and

(b) the respondent is not, in those proceedings, entitled:

(i) to bring any cross-claim against the claimant, or

(ii) to raise any defence in relation to matters arising under the construction contract."

26 While reference to s 32 is not strictly necessary, I have included it in order to explain that there is a remedy available to Mr Johnson should he be dissatisfied with the work performed under the contract. It reads:

" 32 Effect of Part on civil proceedings

(1) Subject to section 34, nothing in this Part affects any right that a party to a construction contract:

(a) may have under the contract, or

(b) may have under Part 2 in respect of the contract, or

(2) Nothing done under or for the purposes of this Part affects any civil proceedings arising under a construction contract, whether under this Part or otherwise, except as provided by subsection (3).

(3) In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal:

(a) must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order or award it makes in those proceedings, and

(b) may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings."

Summary judgment

27 UCPR 13.4(1) provides that the Court may dismiss proceedings generally, or in relation to any claim for relief, in three circumstances. These are, if the proceedings are frivolous or vexatious, or if no reasonable cause of action is disclosed, or if the proceedings are an abuse of the process of the Court.

28 In O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 the Court of Appeal applied the High Court decision of Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118. In Spencer the High Court was concerned with s 31A(2) of the Federal Court Act 1976 (Cth) but the following principles are of general application:

(a) On a summary judgment application, the real issue is whether there is an underlying cause of action or defence, not simply whether one is pleaded (at [23]).

(b) The critical question can be expressed as whether there is more than a "fanciful" prospect of success (at [25]) per French CJ and Gummow J) or whether the outcome is so certain that it would be an abuse of the process of the court to allow the action to go forward (at [54]). Demonstration of the outcome of the litigation is required, not an assessment of the prospect of its success.

29 Powers to summarily terminate proceedings must be exercised with exceptional caution (at [55]; see also French CJ and Gummow J at [24]).

The hearing before the Magistrate

30 The hearing took place in the Local Court at Port Macquarie on 28 November 2013.

31 Lianda Constructions relied upon the affidavit of Linda Knox, company director of Lianda Constructions. Her evidence is that on about 2 November 2012, Lianda Constructions and Mr Johnston entered into a written contract to undertake the construction of renovation building works at Port Macquarie. A copy of the Master Builders Association Head Contract Residential Building (BC4) was initialled by the parties and was attached to her affidavit at Annexure A. In November 2012, she says that Lianda Constructions commenced the works (Aff, 18/10/2013 [3] and [4]).

32 Mr Johnson relied upon affidavits of his solicitor Georgia Jelina Flynn. In her affidavits sworn 27 November 2013, at [6] she deposed:

"In support of its Defence the Defendant intends, to put on evidence, deposing to matters put in issue by his Defence, including:

(a) Conversations between the Defendant and Ezra Atkins, Supervisor/Builder, Robert Newman, Supervisor/Builder and Andrew Knox, Supervisor Builder of the Plaintiff company in respect of a number of oral conversations between the Plaintiff and the Defendant between 11 December 2011 when the Plaintiff commenced providing building and constructions services in relation to the construction of 4 units at ... Port Macquarie ... and the pleaded payment claim dated 29 April 2013 (the Plaintiff's payment claim) in respect of variations to the written building contract which were not agreed to by the Defendant.

Annexed hereto and marked with the letter 'A' is a copy of the Plaintiff's payment claim. Oral variations that the Defendant will depose he did not agree to include:

i. In respect of invoice number ... 828:

1. Fencing;

2. Sewer and riser;

3. Structural Steel;

4. Timber floor..."

33 It was and remains common ground that first, on 23 April 2013 Lianda served Mr Johnston with a payment claim under the Act for the sum of $84,264.74, inclusive of GST; and secondly, that Mr Johnston did not issue a payment schedule under the Act nor did he pay the amount of the payment claim.

34 Both parties relied upon their written submissions. Mr Johnston submitted that in [3] and [4] of his defence, that he did not admit the allegations made and he intended to call evidence at the hearing which he says would affect Lianda Constructions' entitlement to make a payment claim under s 13(1) of the Act.

35 Lianda Constructions submitted that this evidence at its highest does not give rise to a triable issue affecting its entitlement to make a payment claim under s 13(1) of the Act. It was also pointed out that in Mr Johnston's version of events he made variations to the four items and that defence cannot be raised under s 15(4)(b)(ii) of the Act.

The Magistrate's reasons

36 In his reasons dated 18 December 2013, the Magistrate referred to the well known test for summary judgment as set out in General Steel Industries Inc v Commissioner for Railways of NSW (1964) 112 CLR 125 at 129. At page 5 (CB 157) of his reasons his Honour relevantly stated:

"The legislature has enacted legislation for the just and speedy resolution of disputes such as this and the consequences of summary judgment where a defendant fails to comply with the Act. The defendant disputes the contract, disputes the work carried out pursuant to the contract and admits liability for the sum of $7,537.50.

Having regard to the magnitude of the written agreement and the invoices issued for the work performed and material provided, there is no dispute the work was performed. I consider it is a paltry concession by the defence. ...

The plaintiff's version of the oral variations to the contract are set out in the invoices annexed to their affidavit. The defence version of those oral agreements are not particularised. The defence submit that they are issues of credit that should be determined by the Court. I do not accept this submission. The Act provides for resolution of such disputes by the filing of a payment schedule which the defence have failed to do.

I consider the payment claim to be valid pursuant to the Act. I consider that this was an appropriate matter for the defendant to file a payment schedule to resolve the matters in dispute. And this in my opinion was a proper course for the defendant to take, and the defendant has failed to do so.

I take into account coming to that opinion, the intention of Parliament, the reasoning of the Court of Appeal in the case of Nepean and I accept the plaintiff's submissions in that regard.

I accept I have a discretion in this matter however I prefer the plaintiff's submissions to that of the defendant's. I find the plaintiff's claim to be valid. This was an appropriate matter in my opinion for a payment schedule and I find the defendant failed to provide one."

37 Mr Johnston submitted that the Magistrate made five errors of law in his application of the test for summary judgment. They are first, that the Magistrate failed to properly determine whether there was a real question of fact or law upon which the rights of the parties depend under General Steel , Dixon J (at 91), by taking into account the size of the written contract, and the appearance of invoices issued by Lianda Constructions that on their face they appear to be an "appropriate claim" under s 13 of the Act; secondly, that the Magistrate did not deal with his defence that raised the issue of whether the oral variations to the written contract meant that s 15(2)(a)(i) was not applicable; thirdly, that the Magistrate erred in not recognising that there was a serious conflict of fact in finding that Lianda Constructions was entitled to sue under the Act; fourthly, that there had been a part payment so s 15(2)(a)(i) was not applicable; and finally, that the Magistrate erred in elevating the legislative intention of the Act to provide for a just and speedy resolution.

38 Lianda Constructions contended that it was entitled to summary judgment and that the oral variations to the contract do not go to the entitlement to issue a progress payment or payment claim, but only go to whether there was an agreement to perform certain works.

39 The parties referred to Grave v Blazevic Holdings Pty Ltd [2010] NSWCA 324; (2010) 79 NSWLR 132 and Parkview Qld Pty Ltd v Fortia Funds Management Ltd [2009] NSWSC 1065, which are cases concerning ss 13 and 15 of the Act or a similar statutory provision where summary judgment was not granted. In Parkview , the dispute was whether there was "an arrangement" between the parties. Parkview's position was that it was engaged in about April or May 2007, once the developer had got into a financial position that meant it was unable to continue with the development. Parkview says, it entered into an "agreement or arrangement" with Fortia whereby Fortia effectively took over the project from the developer, and Parkview carried out construction work, or supplied related goods and services, for the benefit of Fortia.

40 Grave involved an appeal, for which leave was required, from a decision of a District Court judge refusing to set aside a default judgment on the basis that any proposed defence to the proceedings was foreclosed by the operation of the Act. The primary judge found that the applicant was a person who fell within s 13(1) of the Act because, in his Honour's view, the applicant was a person who is or might be liable to pay the amount claimed. McDougall JA (with whom Allsop and Macfarlan agreed) found this to be wrong, because it did not pay attention to the words "under the construction contract concerned". His Honour referred to the object of the Act as set out in s 3 and stated that it was no part of that object to give a party to a construction contract a right to receive progress payments from someone who is not a party to the construction contract.

41 The factual situations in Parkview and Grave are different. This current appeal involves a construction contract between the parties. Neither one is the situation here. There was a construction contract between the parties.

42 So far as this pleading point in the defence is concerned, Lianda Constructions in [3] and [4] of its statement of claim pleaded the Master Builders Association Head Contract Residential Building (BC4) thereafter described as the "contract" and that work was carried out pursuant to the "contract". Mr Johnston admitted his "obligations recorded in the contract".

That being so, the "contract" falls within the definition of "construction contract" under s 4(1) that enlivens the provisions of the Act.

43 From this point, I need go no further than referring to the decision of Hammerschlag J in Ampcontrol SWG Pty Ltd v Gujarat NRE Wonga Pty Ltd [2013] NSWSC 707, where his Honour explained the interplay of ss 13 and 15 of the Act at [19], [22]-[25]. They read:

"[19] Section 13 applies when a person who claims to be entitled to a progress payment serves a payment claim. Correspondingly he may serve on the person who is or may be liable to make the payment.

The express words of the section make it clear that the assertion of entitlement is sufficient to enliven the operation of the Act.

...

[22] One of the principal underlying philosophies of the statutory scheme is to provide a swift remedy to a claimant who invokes it.

[23] The defendant had the option of serving a payment schedule, and if ultimately appropriate, an adjudication response raising the contractual issue which it now seeks to raise. But it did not do so.

[24] Section 15(4)(b)(ii) now precludes it from doing so. The statutory scheme does not permit the respondent to refrain, upon some contractual basis, from providing a payment schedule, but to retain the right in subsequent proceedings to rely upon whatever the contractual issue was: see Isis Projects v Clarence Street [2004] NSWSC 714 at [65].

[25] It would be inimical to this philosophy and out of step with the express wording of s 13 for the Court to be required at this stage to become enmeshed in a determination of the contractual efficacy of the plaintiff's claim (or the defendant's response to it): see Consolidated Constructions v Ettamogah Pub [2004] NSWSC 110 at [58] and following."

44 Lianda Constructions served a payment claim pursuant to s 13(1). Mr Johnson did not serve a payment schedule in accordance with s 14(1) and so became liable to pay the sum of $86,469.18 pursuant to s 14(4) of the Act

45 The Magistrate was correct in deciding that the defence had no prospect of success, the oral variations were precluded from being raised under s 15(4)(ii) and that Mr Johnson was precluded from raising any defence in relation to matters arising under the construction contract. His Honour was also correct, as there was no serious conflict of fact in finding Lianda Constructions was entitled to sue under the Act. Even if Mr Johnston alleged that there was a partial payment, Mr Johnston makes no difference, as there was no payment schedule. The final point as to whether the Magistrate erred by elevating the legislative intention of the Act to provide for a just and speedy resolution, can be answered by once again referring to what Hammerschlag J stated in Ampcontrol . It is that of the principal underlying philosophies of the statutory scheme is to provide a swift remedy to a claimant who invokes it. These words of the Magistrate echo this proposition. There is no error of law.

46 The result is that the appeal fails. The amended summons filed 31 March 2014 is dismissed.

The cross appeal - costs

47 By summons filed 8 April 2014, Lianda Constructions seeks first, leave to cross appeal from the part of the Magistrate's decision in relation to costs; secondly, the costs order that Mr Johnston pay court costs of $444 and professional costs of $1,505 assessed on a default judgment basis be set aside; and thirdly, in lieu of the Local Court costs order, an order that Mr Johnston pay Lianda Construction's costs on an indemnity basis as from 27 November 2013 or as agreed or assessed.

48 The grounds of appeal are that the Magistrate erred in determining costs based on a scale rate for default judgment whereas the proper basis for the award of costs was on a summary judgment application and the Magistrate erred in making his order for costs without submissions of the parties. Counsel for Lianda Constructions submitted that first, there is an arguable case of error with respect to matters of law; secondly, the amount claimed is not an insignificant amount; thirdly, there was no basis for his Honour to award costs on the basis of default judgment; and finally, that the Magistrate erred in not hearing the parties on costs.

49 Counsel for Lianda Constructions referred to a letter from its solicitors dated 25 November 2013 to Mr Johnston's solicitor where it relevantly states:

"We consider it is entirely appropriate to seek summary judgment against your client as a result of its failure to provide a Payment Schedule in accordance with the Building and Construction Industry Security if Payment Act 1999 (NSW) ('Act'). Section 14(4) and 15(2) of the Act clearly provide a right of recovery of claimed amounts when a Payment Schedule is not provided as a debt due and payable through the Court.

We put you on notice that we will be seeking costs should the Motion be successful."

50 Counsel for Mr Johnston submitted that leave to appeal in the cross claim should not be granted because first, the grounds of appeal do not engage the statutory gateway for a grant of leave under ss 39 and 40 of the Local Court Act and do not have any prospects of success; and secondly, that the quantum awards does not raise the important question of principle.

Extension of time and leave to appeal

51 It is contended that this cross appeal was filed out of time and leave is required to extend time. This cross appeal was only brought after the appeal was lodged. In these circumstances I grant leave to extend time to file the cross appeal. Lianda Constructions also requires leave to appeal the costs orders made by the Magistrate (s 40(2)).

52 In Be Financial Pty Ltd v Das [2012] NSWCA 164, Basten JA (with whom Tobias AJA agreed) set out at [32]-[36] the principles to be considered in deciding whether leave to appeal should be granted:

"The principles governing cases such as these have recently been restated in Zelden v Sewell; Henamast Pty Ltd v Sewell [2011] NSWCA 56. As Campbell JA noted (with the agreement of Young JA) at [22]:

"It is of some importance to reiterate the principles that were stated in Carolan v AMF Bowling Pty Limited [1995] NSWCA 69, where Sheller JA said that an applicant for leave must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at. Cole JA relied on a principle that where small claims are involved, it is important that there be early finality in determination of litigation, otherwise the costs that will be involved are likely to swamp the money sum involved in the dispute."

In Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 Campbell JA, with the agreement of Young and Meagher JJA, expanded on his summary of Carolan , noting that Kirby P had recognised "that ordinarily it was appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond [what is] merely arguable": at [46].

...

In Coulter v The Queen [1988] HCA 3; 164 CLR 350, dealing with a challenge to a refusal of the South Australian Full Court to grant leave to appeal in a criminal matter, the majority noted that a leave requirement was a preliminary procedure "recognised by the legislature as a means of enabling the court to control in some measure the volume of appellate work requiring its attention": at 356 (Mason CJ, Wilson and Brennan JJ). That statement is clearly applicable to civil, as well as criminal, appellate jurisdiction.

As the High Court has noted, an application for leave is not a proceeding in the ordinary course of litigation but a preliminary procedure: Collins v The Queen [1975] HCA 60; 133 CLR 120 at 122; Coulter at 356. On the other hand, there is no reason to doubt that s 58 of the Civil Procedure Act 2005 (NSW), requiring a court to act in accordance with "the dictates of justice" when making an order or direction "for the management of proceedings", applies in respect of a leave application. One of the factors to be taken into account pursuant to s 58 is "the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction": s 58(2)(b)(vi). That provision, like s 56, identifying the overriding purpose of the Civil Procedure Act as being to facilitate the just, quick and cheap resolution of the real issues in the dispute, recognises that questions of injustice are relative. Similarly, the requirement that this Court not order a new trial unless it appears that "some substantial wrong or miscarriage" has been occasioned, also reflects a principle of parsimony in requiring that the parties be put to the expense of a second trial: UCPR, r 51.53."

53 The starting point for the award of costs is contained s 98(4)(c) of the Civil Procedure Act 2005 (NSW). It relevantly reads:

"98 Courts powers as to costs

(1) Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

...

(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a) costs up to, or from, a specified stage of the proceedings, or

(b) a specified proportion of the assessed costs, or

(d) such proportion of the assessed costs as does not exceed a specified amount.

..."

54 And UCPR 42.1 and 42.2 read:

"42.1 General Rule that costs follow the event

Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

42.2 General rule as to assessment of costs Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis."

55 The general rule is that costs are payable on a party/party basis. A court should only depart from the general rule and award indemnity costs where the conduct of the party against whom the order is sought is plainly unreasonable: see Sydney City Council v Geftlick [2006] NSWCA 280 at [90].

56 It is important to appreciate that the Magistrate made an order in accordance with UCPR 42.1 that costs follow the event. The Magistrate then assessed the quantum of those costs. He made an order in accordance with s 98(4)(c) and awarded a fixed sum albeit that sum was worked out on a default basis.

57 The award of costs is a discretionary issue. The test to appeal against a discretionary decision is set out in the well known decision of House v The King (1936) 55 CLR 499 at 504-505. The decision to grant leave depends upon the applicant demonstrating something more than that the trial judge was arguably wrong. It has not done so. The cross appeal does not involve a question of general public importance. For these reasons, it is my view that leave to appeal should not be granted.

58 Before I conclude my reasons, I wish to make some brief comments about the costs to the parties in bringing the appeal and cross appeal.

59 I agree with what Beech-Jones J said in Sayed v Deng [2012] NSWSC 851 where at [33] his Honour stated:

"33 The Local Court has a limited monetary jurisdiction. Left unchecked, appeals from its decisions, especially interlocutory decisions, could lead to there being a significant risk that the overall costs of proceedings would be completely disproportionate to the matters in dispute."

60 In the appeal, Mr Johnston's written submissions covered 25 pages and a reply of 6 pages and 21 pages in relation to the cross appeal. Lianda Constructions' written submissions consisted of 22 pages in relation to the appeal and 5 pages in relation to the cross appeal and reply submissions covering 4 pages. Counsel for Mr Johnston relied upon a modest list of authorities. Whereas, counsel for Lianda Constructions relied on 5 cases and cited 29 cases although not to be referenced.

61 The time and money expended on the preparation of written submissions in relation to this appeal and cross appeal on what I consider were two straightforward issues is, in my view, unwarranted.