MAGISTRATES COURT OF SOUTH AUSTRALIA
KO COMMERCIAL P/L V BLD CONSTRUCT P/L
Reasons for Decision of Magistrate Schammer 19 December 2013
Plaintiff: KO COMMERCIAL P/L
Counsel: MS D LANE
Defendant: BLD CONSTRUCT P/L
Counsel: MR R FENWICK ELLIOTT
Hearing Date/s: 16/12/2013
KO COMMERCIAL PTY LTD V BLD CONSTRUCT PTY LTD
1. On 22/10/13 the plaintiff, KO Commercial Ltd (‘the plaintiff) issued proceedings by way of a Claim pursuant to Form 2 against BLD Construct Pty Ltd (‘the defendant’) in the sum of $83,034.95 plus costs. The claim seeks payment of invoices submitted by the plaintiff to the defendant for the provision of certain building works. The claim specifies that the plaintiff seeks summary judgment pursuant to s 15 of the Building and Construction Industry Security of Payment Act SA 2009 (‘the Act’).
2. On 25/10/13 the plaintiff filed an affidavit sworn by its solicitor on that date outlining steps taken to serve the claim on the defendant on 22/10/13. On 29/10/13 the plaintiff filed an affidavit sworn that day by its solicitor attesting, inter alia, that the Court could ‘be satisfied of the circumstances set out in Section 15(1)4 (sic) of the Act’. On that same day (29/10/13) the plaintiff filed a Request to Registrar requesting the Registrar to sign judgment against the defendant in the sum of $61,969.08. The Registrar subsequently entered a default judgment against the defendant in the sum of $62,044.08 (the amount sought, plus costs of $75) on 1/11/13 (‘the first judgment’). The first judgment was entered despite the fact that 21 days had not passed since the claim was purportedly served.
3. On 14/11/13 the plaintiff applied to the Registrar to enter a default judgment against the defendant for the balance of the amount claimed, namely $7,882.66, there having been no defence filed by the defendant within 21 days of purported service of the action. On 14/11/13 the Registrar entered a default judgment against the defendant in the sum of $7,957.66 (being the amount sought, plus costs of $75) (‘the second judgment’).
4. By application dated 20/11/13 the defendant seeks orders:-
1 Setting aside the first judgment and the second judgment.
2 Leave to file a Defence and Counterclaim.
3 Consequential costs orders on a solicitor/client basis.
4 Such further or other orders as necessary.
5. The hearing of the application proceeded by way of argument before me on Monday, 16/12/13. The plaintiff was represented by Ms Lane. The defendant was represented by Mr Fenwick-Elliott.
6 It became apparent that the plaintiff did not oppose the second judgment being set aside, provided there was no ancillary order made that the defendant be entitled to solicitor/client costs with respect to the application.
7 However, the plaintiff opposed the defendant’s application for the first judgment to be set aside.
8 Defence counsel provided to me an aide-memoire outlining, in summary form, its submissions in support of the application. A copy of this document was provided to Ms Lane at the bar table. The majority of the matters outlined in that aide-memoire related to the defendant’s argument that the first judgment should be set aside.
9 At the conclusion of the argument I made the following orders (hereby referred to in their abbreviated form):-
- The second judgment be set aside.
- Continuing the stay on the execution of the first judgment, pending the delivery of these reasons.
THE FIRST JUDGMENT
10 The plaintiffs claim (being the subject of the first judgment) is a claim under s of the Act.
11 S 15 of the Act states:
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 s 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 a 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 a 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 s 15(2)(b) must state that it is made under this Act.
(4) If the claimant commences proceedings under s 15(2)(a)(i) to recover the unpaid portion of the claimcd 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 s 15(1); and
(b) the respondent is not, in those proceedings, entitled –
(i) to bring a cross-claim against the claimant; or
(ii) to raise a defence in relation to matters arising under the construction contract.
12 MCR 60(4) states:
Where a party has been served with an action under either Section 15 or Section 16 of (the Act), and does not file a defence within 21 days of service, or any other period fixed by the Court, the other party, on proof to the Registrar of such service, may only sign judgment against the party in default by filing with the Form 18 an affidavit certifying as to the circumstances required by either Section 15(1) or Section 16(1).
13 The affidavit of Ms Lane sworn 29/10/13 filed with the Form 18 purports to certify as to the circumstances required under s 15(1) of the Act.
14 However, the affidavit and the Form 18 were filed only seven days after the Claim was filed and on any interpretation well before 21 days had passed and no defence filed.
15 The Registrar erred in acting upon the Form 18 filed and the judgment entered on 1/11/13 in the sum of $62,044.08 must be set aside, as the requirements of MCR 60(4) were not complied with.
16 The plaintiff argued that if the judgment entered on 1/11/13 was set aside, it was, in effect, a futile exercise as pursuant to s 15(4)(b) of the Act, the defendant was not entitled to either bring a cross claim against the plaintiff or raise a defence to the claim. As such it was argued that if the first judgment was set aside, there must be summary judgment entered forthwith in favour of her client for the same or a similar sum in any event.
17 The defendant’s application proceeded on the basis that the Court could not be satisfied of the existence of circumstances referred to in s 15(1) (and therefore s 14(4) of the Act) and until the Court was so satisfied, judgment could not be entered in favour of the plaintiff. It was submitted that rather than accept, on face value, a plaintiff’s assertion that the circumstances referred to in s 15(1) existed, the court must undertake an enquiry to this effect. The decisions of Brereton J in Majeed v Mahmud and 4 ors (2007) NSWSC 1413 and the NSW Court of Appeal in Grave v Blazevic Holdings (2010) NSWC 324 were cited in support of this proposition, noting the similarity of the equivalent Act, in NSW, the Building and Construction Industry Security of Payment Act 1999 NSW.
18 Further, it was argued that it was a requirement that this claim, being a Statutory Action, be commenced on a Form 7, rather than a Form 2 as in fact occurred. Had the claim been commenced on a Form 7, then pursuant to MCR 40(1) the Registrar was required to Fix a date, time and place for a Directions Hearing, and provide written notice of that upon the respondent to the application. It was submitted that the Directions Hearing was then the appropriate forum for the Court to undertake the enquiry to determine whether the circumstances referred to in s 15(1) of the Act existed.
19 In this case there was no date for Directions Hearing set under MCR 40(1).
20 There were two limbs to the defendant’s argument that the Court could not be satisfied that the requirements of s 15(1) existed, namely
- The Court could not be satisfied that a valid payment claim had been served on the defendant, the plaintiff being the holder of a restricted licence under the Building Work Contractors Act 1995, and there being no order under s 6(2) of that Act and
- The ‘due date’ referred to in s 15(1 )(b) of the Act had not been determined.
21 Ancillary to this argument was that the affidavit sworn by Ms Lane on 29/10/13 was on information and belief only and it was submitted that an affidavit could not have been filed by a director of the plaintiff attesting to the existence of the required circumstances as the director must have known that the plaintiff only held a restricted licence.
22 The defendant sought to rely on the decision of the Supreme Court of Queensland in Cant Contracting Pty Ltd v Casella (2006) QCA 538, as authority for the proposition that the absence of a building contractor holding a licence raised a triable issue such that the claimant was not entitled to summary judgment. The wording of the relevant legislation in Queensland is different from but not dissimilar to the relevant South Australian legislation.
23 There is an absence of judicial authority in this State as to the correct interpretation of s 15(4) of the Act. In that respect I consider it appropriate for guidance to be had by way of interstate decisions dealing with similar, but not identical, legislation.
2a Those decisions support the defendant’s contention that the Court must make an enquiry into the circumstances to determine if the requirements of s 15(1) of the Act have been met, prior to entering judgment in favour of the plaintiff. As such, the Court must be satisfied that the plaintiff was entitled to a ‘progress payment’ within the meaning of the Act, that a valid ‘payment claim’ has been served in accordance with s 14 of the Act and that the respondent to that payment claim has not provided a ‘payment schedule’ in accordance with s 14(4) of the Act.
25 If that was not the case, then there is the obvious potential for there to be disconformity, depending on which path the plaintiff chooses to proceed pursuant to s 15(2) of the Act.
26 I am satisfied on the affidavit material before me that the defendant has at least an arguable claim that some, if not all, of the invoices referred to in the Claim are not valid ‘payment claims’ for the purposes of s 13 of the Act and in those circumstances the Court cannot be satisfied of the existence of the circumstances as referred to in s 15(1) of the Act, being a prerequisite to judgment being entered in favour of the plaintiff.
27 As such, the first judgment is set aside.
28 As to the question of costs, the plaintiff was on notice as of 18/11/13 that an application would be made to set aside the judgments (see email from Mr Ryan to Ms Lane dated 18/11/13 being Annexure SAR-8 to the affidavit of Mr Ryan sworn 20/11/13).
29 At the argument, Ms Lane did not advance any positive argument to support the default judgment being maintained. While pressed for time, Ms Lane’s submissions primarily focused on responding to the matters raised by defence counsel, rather than asserting any positive basis to refute the defendant’s application.
so There will be an order that the plaintiff pay the defendant’s costs of and incidental to the application to set aside the first judgment. The defendant was put to considerable expense in preparing its submissions and supporting documentation. Some of that material may be used at a later stage. I order the plaintiff pay the defendant’s costs of and incidental to the application to set aside the first judgment on a party/party basis.
THE SECOND JUDGMENT
31 The second judgment was entered on 14/11/13. The plaintiff’s solicitors filed the Request to Sign Judgment approximately 30 minutes after Mr Ryan forwarded an email to Ms Lane advising he was acting and requesting no further action be taken on the pleadings. Ms Lane swore an affidavit on 13/12/13 outlining the circumstances by which that default judgment was entered and attesting to the fact that she had not seen the email when she filed the request at court, nor was she aware at the time of filing the request that the Claim had not in fact been served on the current registered address of the defendant, rather it had been served upon the defendant’s previous registered address.
32 The sole director and secretary of the defendant, Mr Rinaldi, received a copy of the Claim under cover of a letter on 25/10/13. The claim was not served in compliance with MCR 47 and arguably was not served in compliance with s 109X Corporations Act 2001. In any event, if service on Mr Rinaldi was effective service, the 21 days did not elapse until 15/11/13. Further, all of the affidavit material filed by the defendant attests to the defendant having a defence to the claim.
33 The plaintiff’s solicitor, Ms Lane, knew Mr Ryan was acting no later than 15/11/13 as evidenced by the email exchange between the respective solicitors acting for the parties. On 18/11/13 Mr Ryan sent an email to Ms Lane advising her that the judgments were challenged and that an application would be filed and served (seeking to have the judgments set aside) no later than the next Wednesday. The application was duly filed.
34 Carefully weighing all relevant matters I consider the appropriate costs order to Be that the plaintiff is to pay the defendant’s costs of and incidental to the second judgment being set aside, again on a party/party basis.
1. The default judgment obtained by the plaintiff on 1/11/13 in the sum of $62,044.08 be set aside.
2. The plaintiff pay the defendant’s costs of and incidental to the application to set aside both the first judgment and the second judgment on a party/party basis.
3. Service of the Claim on the defendant deemed to have been effective on 25 October 2013.
4. Leave to the defendant to file and serve a Defence within 21 days in the form as set out in Annexure JR4 to the affidavit of James Rinaldi sworn on 20/11/13.
5. Matter adjourned to a Directions Hearing on 18 February 2014 at 9.30 a.m.
6. Liberty to apply.