Have you been served? The importance of serving a valid payment claim

By Ziv Ben-Arie, Partner

Duffy Kennedy Pty Ltd v Lainson Holdings Pty Ltd [2016] NSWSC 371

Facts

Duffy Kennedy Pty Ltd (Builder), entered into a contract with Lainson Holdings Pty Ltd (Owner), to construct a residential development in Cronulla.

The Builder served three payment claims pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act). None of the claimed amounts were paid by the Owner, and the Builder sought summary judgement for payment of the claimed amounts.

It is noteworthy that, the Builder had failed to include a supplementary statement with its payment claims, as required by section 13(7) of the Act.

Issue

Whether a failure to include a supplementary statement in proper form is fatal the service of the payment claim and the Respondent’s liability to pay pursuant to s14(4) of the Act.

Finding

  • In addition to the definition provided at section 13(9) of the Act, a supporting statement must identify the sub-contractor or sub-contractors with which a head contractor contracts with. If there is one sub-contractor, they must be identified separately. Multiple sub-contractors should be listed within a schedule as either “subcontractors paid all amounts due and payable” or: subcontractor for which an amount is in dispute and has not been paid.”
  • Both of the payment claims served on the Owner were not compliant with section 13(7) of the Act. The first payment claim was accompanied by a statutory declaration which the Builder argued satisfied the requirements of a supporting statement. However, the statutory declaration failed to identify the sub-contractor(s) that the head contractor contracted with, and was therefore not a supporting statement.

The second payment claim was not accompanied by any supporting statement.

  • The Owner was not liable to pay the claimed amount pursuant to section 14(4) because the payment claims served by the Builder were contrary to section 13(7).

As a result, the Builder’s motion for summary judgement was dismissed, as was the Owner’s motion for a stay of execution. Both parties were to bear their own costs.

Quote

Meagher JA at [35] said:

“The evidence supports the following conclusions. First, the statutory declaration which accompanied the claim…was not a supporting statement within s 13(9). Secondly, no document purporting to be a supporting statement accompanied service of the first claim in respect of which DK seeks judgment, namely Payment Claim 1. Thirdly, no supporting statement accompanied the service of Payment Claim 2…”

at [36] said:

“It follows that the service of each claim was contrary to s 13(7). DK was a head contractor and Lainson was also a sub-contractor. The latter was required to be identified in the supporting statement and a declaration made that all amounts that had become due and payable to Lainson in that capacity had been paid.”

And at [37]:

“There remains to be considered DK’s submission that service contrary to the prohibition in s 13(7) does not have the consequence that there has not been service within s 14(4)(a). The question whether such service is invalid, in the sense that it is not service for the purposes of the Act and does not attract the consequences of such service, was considered by McDougall J in Kitchen Xchange at [34]-[51]. His Honour concluded, relying on the reasoning of Allsop P in Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; 74 NSWLR 190 at [14]-[15], that service contrary to s 13(7) was not service within the meaning of s 14(4). I agree with his Honour’s reasoning and conclusion, which I followed in Kyle Bay Removals Pty Ltd v Dynabuild Project Services Pty Ltd [2016] NSWSC 334.”

Impact

It is imperative when serving a payment claim to ensure it is compliant with Part 3, Division 1 of the Act. The failure to include a supporting statement may not invalidate the payment claim itself, but it will most certainly invalidate the service of the payment claim. This position was also taken in the case of Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602.

This case illuminates the importance of ensuring that each payment claim intended to be a claim under the Act must be accompanied by a supplementary statement in the correct compliant form presented by the regulations.

Questions?

A full copy of this decision can be found here.

For further information, please do not hesitate to contact us.

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Have you been served? The importance of serving a valid payment claim