Focus: Trade Practices Act prevails again in Security of Payment claims
16 April 2009
In brief: A recent Queensland Supreme Court ruling on a payment claim has found that Queensland's security of payment legislation is subject to remedies for misleading and deceptive conduct under the Commonwealth Trade Practices Act 1974. This finding conforms with recent New South Wales authority. The Supreme Court also found that the Queensland legislation did not preclude the court from examining possible defences under the contract. Partner Leighton O'Brien (view CV) and Vacation Clerk Trieste Corby discuss the implications of Austruct v Independent Pub Group for the construction industry.
How does it affect you?
- Parties using the security of payment legislation should exercise care when delivering claims to multiple addressees and discussing their content.
- Attempts at concealing the fact of delivery of a claim under the legislation will not be viewed favourably.
Background
In New South Wales, an argument that the default provisions of the Security of Payment Act 1999 (NSW) do not shut out claims for breaches of the Trade Practices Act 1974 (Cth) (the TPA) that occur during the payment claim process was successfully raised in Bitannia Pty Ltd & Anor v Parkline Constructions Pty Ltd [2006] NSWCA 238. A recent case has recognised that this argument extends to equivalent legislation in Queensland.
The facts in Austruct
Austruct signed a construction management agreement to renovate a hotel with another party who later sold the premises and assigned the renovation contract to Independent Pub Group.
In September and October 2008, invoices submitted by Austruct to Independent Pub Group's architect were not paid. Consequently, Austruct refused to give Independent Pub Group trade certificates, required to open the premises, until the invoices were paid in full. Austruct and Independent Pub Group entered negotiations regarding these two documents.
During the course of these negotiations:
- Austruct sent two similar (but not identical) boxes, one to the architect and the other to the registered office of Independent Pub Group.
- In a conversation with a director of Austruct, the architect was lead to believe the boxes' contents were identical.
- In the box sent to Independent Pub Group was an additional document being a Building and Construction Industry Payments Act 2004 (Qld) (the BCIPA) payment claim. The BCIPA payment claim went unanswered.
Austruct Pty Ltd commenced proceedings in the Queensland Supreme Court for summary judgement against Independent Pub Group under section 19(4)(b)(ii) of the BCIPA. The Independent Pub Group argued their failure to submit a payment schedule was due to misleading and deceptive conduct by Austruct. Consequently, Independent Pub Group were entitled to avoid summary judgement as a remedy for Austruct's contravention of the TPA.
The court's decision
The court followed Brodyn Pty Ltd t/a Time Cost and Quality v Davenport [2004] NSWCA 394; 61 NSWLR 421 and Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; 67 NSWLR 9, and distinguished Cant Contracting v Casella [2006] QCA 538; [2007] 2 Qd R 13 in finding that it was not an issue for the court to decide whether Austruct had an entitlement under its construction management contract to pass on claims by the trade subcontractors. This was not a clear-cut case like Cant where s42 of the Queensland Buildings Services Authority Act overrode the BCIPA by disentitling the builder from making any monetary claim. Whether all of Austruct's claims fell within the contract was a question for decision by an adjudicator and not the court.
The court also found that the phone conversation between the applicant and the architect created a situation that was misleading for the purposes of s52 of the TPA. The court held, on the facts, that the applicant's act of wrongly describing the documents, and not identifying the delivery of the payment claim was a contravention of s52. The court held that if that phone conversation had not taken place, there would have been no breach of s52.
Consequently the court followed Bitannia Pty Ltd v Parkline Constructions Pty Ltd on the effect of misleading and deceptive conduct surrounding the service of a payment claim. The court held that, as with the equivalent New South Wales Security of Payments Act, the BCIPA is subject to the TPA. Therefore the TPA can prevent the making of a summary judgement under s19(4)(b)(ii) where the service of a payment schedule has not been responded to.
Consequences
The courts have shown a willingness to extend the availability of TPA remedies to equivalent legislative provisions in both Queensland and New South Wales. It is likely that the argument can be successfully raised in other states. Even where the legislation itself precludes the raising of a defence or a cross-claim, there may be opportunity for defendants to raise TPA provisions.
Published 16 April 2009
For further information, please contact:
- Leighton O'BrienPartner,
Sydney
Ph: +61 2 9230 4205
Leighton.Obrien@aar.com.au - Nick Rudge Partner,
Melbourne
Ph: +61 3 9613 8544
Nick.Rudge@aar.com.au - Stephen McComishPartner,
Perth
Ph: +61 8 9488 3767
Stephen.McComish@aar.com.au
