In Advance Earthmovers Pty Ltd v Fubew Pty Ltd [2009] NSWCA 337, the New South Wales Court of Appeal has found that a corporation cannot be considered a 'resident' of a premises and as a result is liable to claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act). The residential exclusion under the SOP Act was deemed not effective against a corporation. The decision clears the way for building contractors to issue claims under the SOP Act to corporate land owners and developers for disputes concerning residential building work.
Facts
An earthmoving company (Advance) contracted with a corporate land owner (Fubew) to do earthmoving work on Fubew's property. The earthmoving work involved developing an access road prior to construction on the site of a proposed residence for the corporate directors of Fubew.
Advance completed the work and rendered invoices to Fubew. Fubew paid $15,000 of the $95,000 claimed by Advance and disputed the rest.
Advance submitted a claim under the SOP Act and obtained an adjudication determination against Fubew in the sum of $79,120. Advance then obtained summary judgment for that determination against Fubew in the District Court.
Fubew then lodged a claim in the Consumer, Trader & Tenancy Tribunal (CTTT) against Advance claiming it had been overcharged. Separately, Advance filed a Statement of Claim in the District Court claiming breach of contract and quantum meruit (a claim for the reasonable value of the work plus costs), or in the alternative, payment of the SOP Act determination in its favour.
Prior to the determination of the proceedings before the CTTT and the District Court, Advance issued a statutory demand on Fubew relying on the summary judgment. Subsequently, Fubew had the statutory demand set aside in the Supreme Court, pending determination of either the proceedings in the CTTT, or Advance's claim in the District Court. Fubew then filed a motion in the District Court seeking to set aside the summary judgment in favour of Advance and transfer the proceedings to the CTTT. In deciding Fubew's application, the District Court held that it had no jurisdiction to determine the matter and the summary judgment in favour of Advance should be set aside. This decision was overturned in the New South Wales Court of Appeal.
Finding
The key issue before the Court of Appeal was whether Advance's payment claim was excluded by section 7(2)(b) of the SOP Act because it concerned residential building work.
Section 7(2)(b) of the SOP Act states the Act does not apply to:
The Court of Appeal held that because a corporation (ie Fubew) could not 'reside' in a premises, the section 7(2) (b) exclusion in the SOP Act did not apply. Therefore Advance's payment claim under the SOP Act had merit and there was no reasonable defence to that claim. Accordingly, summary judgment in favour of Advance was restored by the Court. The Court of Appeal noted that Fubew did have a right to make a further application to the District Court to set aside the summary judgment however on the material before the Court, it suggested that the prospects of success would be minimal.
Implications
Where a building contractor enters into a contract for residential building work with a corporation (including corporate land owners and corporate developers), the building contractor may use the mechanisms available to it under the SOP Act to claim regular payments, or even suspend work, should a dispute arise under the contract. The same principle is likely to apply where a building contractor enters into a contract for residential building work with a corporate entity such as a trustee on behalf of a trust, or an administrator or liquidator on behalf of an insolvent corporation. Typically this situation will arise where an administrator or liquidator steps into the shoes of an insolvent corporation.
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