Can misleading or deceptive conduct under the Australian Consumer Law be raised as a defence to a Payment Claim under to Building and Construction Industry Security of Payment Act 1999 (NSW)

22/11/2023

Watson & Watson have been engaged in relation to commercial disputes including building and construction and strata title issues for many years.

Watson & Watson for many years have acted for Contractors, Principals, Builders, Owners and Subcontractors in relation to claims under the Building and Construction Industry Security of Payment Act (SOP Act).

One important development for the Owners and Builders of residential building work under the Home Building Act, is that the Builder now has the benefit of the Building and Construction Industry Security of Payment Act 1999 (NSW) for works undertaken pursuant to Contracts for construction of a residential building, by Contracts made on or after 1 March 2021. 

In our previous articles for example, 25 August 2021, 5 May 2023 and 27 September 2023 we have set out the general provisions, procedures and examples of the operation of the SOP Act.

One possible issue is whether misleading or deceptive conduct under the Australian Consumer Law (“ACL”) can be raised as a defence to a Payment Claim under the Building and Construction Industry Security of Payment 1999.

There are numerous different factual matters that have been raised to attempt to enliven Section 18 of the ACL to raise it as a defence to a Payment Claim.

This was considered recently in the case of Marques Group Pty Limited (Marques Group) v Parkview Constructions Pty Limited (Parkview) [2023] NSWSC625 in June 2023.  The Plaintiff, Marques Group was the subcontractor to the Contractor namely, Parkview.  Marques Group was claiming “outstanding moneys” from Parkview.

On 26 October 2023 Marques Group submitted two Payment Claims one for $1,610,212 (marked Draft) in relation to one project and one for $647,048.42 in relation to another project.

On 3 November Parkview issued a Payment Schedule in which the Contractor stated it was appropriate to pay Marques Group the subcontractor $520,688.21 for one project and $1,264,804,63 for the other project.

By operation of Section 14 of the SOP Act, Parkview was required to make payment of the sums totalling $1,785,492.84 being the amount stated in the Payment Schedule in response to Marques Group’s Payment Claim however Parkview failed to do so.

Marques Group initiated proceedings in the NSW Supreme Court seeking that the Court enter Judgment in its favour against Parkview in the amount that Parkview had stated in its Payment Schedule.

In the Marques Group case, the Contract provided under clause 11 that:

The preconditions of an entitlement of the Sub-Contractor to submit a Payment Claim to Parkview were that the Sub-Contractor has strictly complied with the terms of the Agreement and including without limitation having provided to Parkview the appropriate Statutory Declaration signed by a Director of the Sub-Contractor stating that all employees workers and others have been paid in full”.

In the Marques Group’s case, its agent signed a Statutory Declaration that relatively declared:

“The Contractor is not under any law, insolvent or unable to pay its debts as and when they fall due.”

Parkview the Defendant in its Response List, responded by saying that Marques Group had engaged in misleading or deceptive conduct under Section 18 of the ACL. 

Section 18 of the ACL states:

(1)      A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

Parkview submitted that Marques Group had made various representations and that it had engaged in misleading or deceptive conduct for example, as Marques Group had not paid Superannuation contributions to its employees. 

Parkview asserted that had it known Marques Group’s position in relation to unpaid debts then, it would have reduced the payment nominated in the Payment Schedule to be paid to “$Nil”.

Parkview submitted that their rights under the Australian Consumer Law prevail over any rights granted to the Plaintiff Marques Group under the Building and Construction Industry Security of Payment Act.

Marque Group sought a Summary Disposal of Parkview’s defence.

An Application for a Summary Disposal is not often made or granted however the Courts have power to enable proceedings where either the Plaintiff or Defendant has no prospect of success to be summarily disposed of.

Her Honour referred to the case of Bitannia Pty Limited v Parkline Constructions Pty Limited [2006] in the New South Wales Court of Appeal who found that Section 52 of the Trade Practice Act 1974 (Cth) (“TPA”) the analogist provisions of the current Section 18 of the ACL, was able to be raised as a defence to a Payment Claim under the SOP Act.

Her Honour stated:

“As inherently unattractive as that Defence is, I cannot say that it so clearly untenable that it cannot possibly succeed”.

Her Honour Justice Rees did not summarily dismiss the defence by Parkview. 

A Builder having considered its options usually but not always, may elect to make an Adjudication Application rather than proceed by way of a claim in a Court.

As in all applications, careful consideration of the factual matters and the applicable law should be undertaken to establish the available alternatives to enable you to make an informed decision in often complex circumstances.  Watson & Watson’s recommendation is that you seek advice early so you are aware of your options and alternatives and may have an opportunity to plan for the future.

Please contact Richard Watson, an experienced Building and Constructions Lawyer Accredited Specialist by the Law Society of New South Wales in the stream of Building and Construction by contacting his Personal Assistant Shereen Da Gloria to discuss your matter sooner rather than later.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.