This decision involved the successful appeal to the Full Court of the Supreme Court of South Australia against summary judgment granted under the Building and Construction Industry Security of Payment Act 2009 (SA) (‘The Act’).

The appellant Aalborg argued successfully that section 15(4)(b) of the Act did not preclude it from raising estoppel and misleading conduct in answer to proceedings to recover the claimed amount where a payment schedule had not been provided.

Background

Briefly, the Appellant is a Danish company registered as a foreign company in Australia. The Appellant entered into a construction contract with the Respondent, Ottoway Engineering.

Between April 2015 and April 2016 the Respondent had sent 22 invoices by email and in addition delivered some or all of the invoices to the Appellant’s head office in Denmark.  Except for the first invoice, each was expressed to be a payment claim for the purposes of the Act.

The proceedings before the Full Court related to the service of the 23rd invoice, which stated it was made under the Act.  The 23rd invoice was delivered to the Appellant’s registered office in Adelaide but not sent by email or to the office in Denmark.

The Appellant did not provide a payment schedule and it did not pay the amount claimed.

The Respondent commenced proceedings in the Supreme Court of South Australia to recover the unpaid portion of the claimed amount.

At first instance, the Master, in an application for summary judgment, held that there was valid service of the Payment Claim and that due to the operation of s15(4)(b) of the Act, the Appellant could not raise estoppel or misleading or deceptive conduct.

The Appeal

In the Full Court appeal, the Appellant argued that the payment claim had not been properly served and that section 15(4) did not prevent it from raising estoppel or misleading or deceptive conduct in opposition to the claim.

The Appellant claimed that the New South Wales Court of Appeal decision of Falgat Constructions v Equity Australia did not apply in situations where the construction contract mandated service in a manner not at the registered office.  The Appellant relied on Hill as Trustee for the Ashmore Superannuation Benefit Fund v Halo Architectural Design Service Pty Ltd [2013] NSWSC 865 where his Honour Justice Stevenson held, by way of obiter dictum, that the provision of the construction contract that required service in a particular manner meant that service, in a different manner, namely at the registered office was not effective for the purpose of the NSW equivalent of the Act.

The Full Court explained that Hill as Trustee for the Ashmore Superannuation Benefit Fund v Halo Architectural Design Service Pty Ltd [2013] NSWSC 865 is a complex legal issue and is correct in obiter. The Full Court also explained that section 601CX, which applies as the Appellant is a foreign company, is different to 109X in that it is not expressed to apply to ‘any law’. The Full Court refrained from making a determination as to whether 601CX applies to the exclusion of s109X in relation to foreign companies, and whether it applied for laws other than Corporations Act, and whether the law applies to the construction contract, as they came to a conclusion in relation to estoppel and misleading conduct.

The Full Court held, at paragraph 50, that the decision in Hill, albeit obiter, was correct.

The Full Court interpreted the Act in a way which enables estoppel and misleading conduct to be considered at the first step, that is, whether the payment claim has been validly served. This enables the Court to consider the actions of the Respondent in serving the claim rather than being prevented under s 15(4)(b). The Full Court found that:

“s15(4)(b)(ii) does not preclude a respondent (here the Appellant) relying on estoppel on the issue whether the payment claim was served… the raising of such an issue does not comprise a ‘defence in relation to matters arising under the construction contract’ within the meaning of section 15(4)(b)(ii)”.

The Full Court also agreed with the New South Wales Court of Appeal in Bitannia that the respondent (here the Appellant) could rely on misleading conduct as an answer to s 15(2)(a)(i) without bringing a cross claim. This was because the defence did not arise under the contract but was due to the Respondent’s conduct.

The Full Court therefore clearly found that s15(4)(b)(ii) does not prevent a respondent relying on estoppel or misleading conduct as an answer on the issue of whether the payment claim as served.

As the Full Court found that the Appellants could not be precluded from raising estoppel and misleading conduct, the Full Court then also determined that there were reasonable arguments for raising the issues and allowed the appeal.