Not so summary: Supreme Court refuses SOPA summary judgment over Australian Consumer Law defence
If a principal fails to give a payment schedule in time under the Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOPA), the contractor can sue for the full claimed amount as a debt, and the principal generally cannot raise contractual defences or cross-claims. But that does not guarantee a quick win in court.
In OSB Group Pty Ltd v Complete Hire & Sales Pty Ltd [2024] WASC 310, Musikanth J refused a contractor’s application for summary judgment on an unpaid SOPA payment claim. The principal raised an arguable constitutional question: whether SOPA’s ban on cross-claims is inconsistent with its rights under the Australian Consumer Law (ACL).
Key takeaways
SOPA does not itself give a right to summary judgment. A claimant suing for a SOPA debt must still satisfy the ordinary summary judgment test under the court rules: that there is no real question to be tried.
Construction contracts are broadly defined. An “arrangement” under which one party undertakes to carry out construction work is enough. An argument that negotiations were incomplete is unlikely to defeat a claim.
Contractual-style ACL defences are likely barred. Misleading conduct claims about how the contractor would perform the work are likely to be defences “in relation to matters arising under the construction contract”, which SOPA excludes.
But a constitutional question remains open. It was considered to be arguable that SOPA’s ban on cross-claims is invalid to the extent it prevents a respondent pursuing ACL remedies. That was enough for the summary judgment application to fail.
Background
OSB Group (OSB) says it carried out construction work for Complete Hire & Sales (Complete) on a development forming part of a Pilbara iron ore project.
OSB issued a SOPA payment claim. Complete did not give a payment schedule within the time allowed, and did not pay. OSB sued to recover the claimed amount as a debt under s 27 of SOPA, and applied for summary judgment.
Under s 27(3)(b), a respondent in those proceedings cannot bring a cross-claim, or raise a defence in relation to matters arising under the construction contract. Complete nonetheless argued there were serious questions to be tried.
Complete’s arguments
Complete argued that:
there was no “construction contract”, because OSB’s own evidence showed negotiations on essential terms continued for weeks after the date OSB said the contract was formed
it could defend the claim, including by equitable set-off, on the basis that OSB’s misleading representations about its resources and ability to finish the work in 61 days induced Complete to let OSB onto site
any contract might be declared void under the ACL, so a key element of OSB’s claim might not exist
if SOPA prevented it from raising its ACL rights, s 27(3)(b) was invalid under s 109 of the Constitution to the extent of the inconsistency with the ACL.
The decision
Summary judgment test applies
Musikanth J accepted that SOPA reflects a “pay now, argue later” and “speak up or pay up” approach. But nothing in SOPA itself creates an entitlement to summary enforcement. Summary judgment is granted only in the clearest of cases, and disputed facts are assumed in the defendant’s favour.
There was a construction contract
The Court rejected Complete’s first argument. SOPA defines a construction contract to include any “contract, agreement or other arrangement” under which one party undertakes to carry out construction work for another. Complete’s own evidence showed it permitted OSB to mobilise and carry out the work. That was enough to establish an arrangement, whenever exactly it arose.
ACL defence likely barred under SOPA
Complete relied on the NSW Court of Appeal decision in Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238. In that case, a misleading conduct defence was allowed because the claimant’s conduct in serving the payment claim caused the respondent’s failure to give a payment schedule.
Musikanth J distinguished Bitannia. Here, the alleged representations concerned how OSB would perform the work, and their falsity depended on OSB’s performance under the contract. In his Honour’s preliminary view, such a defence is likely to be “in relation to matters arising under” the contract and barred by s 27(3)(b)(ii). Allowing it would frustrate the scheme.
But the constitutional question was arguable
The fourth argument succeeded. In Bitannia, Basten JA had concluded (in obiter) that the equivalent NSW ban on cross-claims was inconsistent with the Commonwealth consumer protection law. As Complete was not permitted to raise a defence under the ACL due to section 27(3)(b) of the SOPA, there was a serious question to be tried in respect of the asserted constitutional inconsistency invaliding section 27(3)(b)
Summary judgment was refused, and Complete was given unconditional leave to defend.
What this means in practice
For contractors and subcontractors
Even where the respondent missed the payment schedule deadline, a summary judgment application can be resisted if the respondent raises a genuinely arguable defence, including a constitutional one. However, the facts of this case and the ACL claim are unusual and not ordinarily likely to be a basis to resist summary judgement.
For principals and head contractors
Your best protection is still to give a proper payment schedule on time. Defences based on how the work was performed are likely barred if you don’t.
Keep the ACL in view. Where a contractor’s misleading conduct genuinely induced the contract, get advice promptly on how ACL rights may be preserved.
How we can help
Lang Litigation and Construction Law acts for principals, contractors and subcontractors in SOPA recovery proceedings, summary judgment applications and adjudications. If you need help recovering or defending a payment claim, contact us.
This article is general information only and is not legal advice. You should seek specific advice about your circumstances.