Andrew Hales | Karen Hanigan | Heidi Knights
The Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) imposes a strict time limit for responding to a payment claim. Courts will strictly apply the 10 business day period for the provision of a payment schedule.
If, as a matter of fact, a document is delivered electronically and accessed by the recipient, it will be considered to have been ‘provided’ on the day it was accessed. This will be so even if the contract contains a provision deeming a notice delivered electronically after 4:30pm to be given at 9:30am on the next business day following the day of transmission.
Piety Constructions (builder) served a payment claim on Hville FCP (developer) on 2 May 2022 using an electronic information exchange system, ‘Procore’.
At 6.30pm on 16 May 2022, the builder’s senior project officer was sent an email from Procore which contained a link to the payment schedule for less than one third of the payment claim. Between 6.30pm and 8.10pm on 16 May, the officer opened and read the Procore notification, the payment schedule and a number of other documents listed in the Procore notification.
Clause 7.12 of the building contract provided that a notice delivered electronically at or before 4.30pm on a business day shall be deemed to be given on that day. In any other case, the notice shall be deemed to be given at 9:30am on the next business day.
The builder argued that, as a result of the contractual deeming provision, under the SOP Act the developershould be taken to have provided the payment schedule the following business day and on that basis was provisionally liable for the full amount claimed as the payment schedule was provided late.
It was common ground that the officer read the notification, including the payment schedule, on the evening of 16 May 2022. The builder submitted ‘so it was physically, if you like, provided, but legally, which is what we are concerned with, it was legally by contract and by statute provided the following day’.
The builder’s case was dismissed.
Section 14(4) of the SOP Act requires that a recipient of a payment claim must ‘provide’ a payment schedule in response within 10 business days or any shorter period set out in the contract. Failure to comply with this regime can render the recipient provisionally liable for the full amount of the payment claim, even if the recipient would otherwise have had a strong argument to resist full or part payment. The SOP Act does not define when or how a document is ‘provided’.
The court held that priority must be given to what actually occurred to avoid coming to a legal conclusion that was divorced from reality. If a document has actually been received and come to the attention of a person to be served or provided with the document, it does not matter whether or not any facultative regime has been complied with. Accordingly there had been service, provision and receipt.
The court also stated, in obiter, that if clause 7.12 was to be read in the manner proposed by the builder, its effect would be to restrict, or otherwise modify, for the purposes of s 34 of the Act, the meaning of ‘provide’ within the SOP Act to exclude actual provision where a payment schedule is served electronically. It would, to that extent, be void.
Boulus Constructions Pty Ltd v Warrumbungle Shire Council (No 2)  NSWSC 1368
Andrew Hales | Laura-Rose Lynch | William Vu
The definition of a ‘person’ who owes a duty of care under the Design and Building Practitioners Act 2020 (NSW) (DBP Act) is not limited to ‘practitioners’ (as defined in the DBP Act). This means that any person with ‘substantive control’ over the carrying out of building work or design work owes a duty of care, including managing directors and site supervisors.
Boulus Constructions (builder) entered into contract to build a retirement village in Dunedoo on behalf of the Warrumbungle Shire Council (Council). The proceedings relate to the builder’s claims for breach of the contract and the Council’s cross-claim for damages arising from defective work.
The builder sought to amend its List Statement to claim the Council was not entitled to damages as the works were carried out illegally without a development consent. In response, the Council sought to amend its Cross-Claim List Statement to include a claim for breach of the duty of care established by section 37 of the DBP Act by the builder as well as its managing director and project site supervisor. In that regard, section 37(1) provides that ‘[a] person who carries out construction work has a duty of care to exercise reasonable care to avoid economic loss caused by defects’.
The builder opposed that amendment on the basis that the persons subject to the duty of care should be narrowly interpreted and are limited to a ‘person who carries out construction work in their own capacity’, as opposed to a person who acts as an agent for another. The builder argued that a broad interpretation of ‘a person’ could mean the duty of care is potentially owed by thousands of persons involved in a large project, which would have far reaching and negative impacts on the construction industry.
Defence of illegality does not trump the duty of care
Stevenson J held that whether or not the works were carried out illegally did not impact whether the statutory duty was owed under section 37 of the DBP Act. His Honour held that the cases concerning illegality relied on by the builder addressed whether a duty of care was owed at all. Here that question does not arise because the DBP Act says there is a duty.
A ‘person’ is not limited to a ‘practitioner’ for the purposes of section 37
Stevenson J rejected the builder’s argument that the reference to ‘a person’ in section 37 of the DBP Act should be limited to building and design ‘practitioners’ under the DBP Act.
His Honour undertook a careful analysis of how the word ‘person’ was used in the DBP Act. Whilst ‘person’ is not defined, parliament had taken care to define ‘practitioner’ and use that term throughout the DBP Act, whilst ‘person’ is used in section 37. Therefore, the reference to ‘a person’ must mean someone who is not necessarily a practitioner nor a person acting in their own capacity. This was assisted by considering the fourth limb of the definition of ‘construction work’, which is the supervision, coordination and project management or having substantive control over the carrying out of ‘any’ work referred to in the first three limbs of the definition (ie building work, design work, and manufacturing and supply of building products). His Honour held this work necessarily encompasses a wider range of activity than is described in the first three limbs.
His Honour also suggested in obiter that as the DBP Act is expressed to be subject to the Civil Liability Act 2002 (NSW), the proportionate liability regime under Part 4 of the Civil Liability Act thus applies to actions for breach of the section 37 duty. His Honour then reasoned that a person such as the managing director could seek to use that regime to identify concurrent wrongdoers and have their liability for breach of the duty limited.
Conflict of laws and prejudice
The builder also argued the duty of care imposed on a managing director conflicted with the Corporations Act 2001 (Cth) and the director’s independence from a corporation. However, the builder did not substantiate its claims and did not address the fact that the same duty was imposed on the director and the corporation.
His Honour also dismissed submissions that the late addition of a claim for a breach of the duty of care would be prejudicial as the court was not given any evidence of the alleged financial impact on the builder.
Sarah Ferrett | Hazal Gacka | Gemma Galloway