Building and Construction News March 2008
The following judgement considered a builder’s entitlement to claim progress payments under a contract for work on premises including, but not limited to, work on a part of the premises in which the owner lives or intends to live.
David Hurst Constructions Pty Ltd v Shorten [2008] NSWSC 164
The plaintiff, a builder, sought a summary judgement as the defendants did not respond to a payment claim made by the plaintiff under the Building and Construction Industry Security of Payment Act 1999 (the Act). The defendants submitted that they were not obligated to meet this payment claim, arguing that the contract in question was of the kind outlined in s 7(2)(b) of the Act. This section provides that the Act does not apply to contracts for residential building work where a part of the residence in question is where the person for whom the work is done ‘…resides in or proposes to reside in…’
FACTS:
- On 22 January 2006, the parties contracted for the construction of a block of 10 residential units, for a sum of $4,250,533.64.
- On 21 October 2007, the plaintiff served its 17th progress claim, for $272,649.77, according to s 13 of the Act.
- The defendants did not provide a payment schedule within 10 days of service of the above payment claim, and failed to pay the specified amount.
- The defendant’s had, since the time the contract was made, intended to live in one of the 10 units. Mr Shorten, the first defendant, claimed that he had informed the plaintiff’s director of this intention prior to 22 January 2006 when the contract was entered into.
HELD: Nicholas J of the Supreme Court held that the onus of proving that a contract falls within the exception under the Act in s.7(2)(b) lies with the party asserting that such an exception exists.
His Honour refused to recognise the defendant’s claim that s 7(2)(b) is triggered where a contract includes residential building work on any part of the premises where the party resides or intends to reside.
In considering the ‘natural and ordinary meaning’ of the wording of s 7(2)(b), Nicholas J concluded that nothing in this provision operates to exclude from entitlement to progress payments a contract comprised partly of residential building work of the kind described in s 7(2)(b) and partly of residential building work outside of the ambit of this provision.
His Honour held that, where a contract including work on part or parts of a premises in which the owner resides or intends to reside extends to work on other parts of the premises, such contract will not be limited in its substance to building work of the kind specified in s 7(2)(b).
Therefore builders seeking to make a claim under the Act should not accept a defence from a client that the work does not qualify under the Act simply because part of the claim relates to residential work on premises in which the owner resides. Forum Law were required to assist a builder recently on this point and that builder is now seeking the enforcement of a judgement obtained under the Act, notwithstanding that part of the progress claim related to the client’s residence. Notwithstanding this, the general rule is that the Act does NOT relate to Home Building work.