Sunshine East Pty Ltd v CBEM Holdings Pty Ltd

1. [1]

   By summons filed on 20 April 2023 the plaintiffs seek leave to appeal from a decision of a Judicial Registrar of the District Court pursuant to which summary judgment was entered against them. An interim stay of execution of that judgment was ordered by this Court on 1 May 2023. The stay was continued, by order of 5 May 2023, until further order. The summary judgment entered in the District Court is for $420,952.39. The judgment creditor is CBEM Holdings Pty Ltd (“CBEM”, the defendant in this Court). The sum for which the judgment was entered is a progress amount claimed due to CBEM under a building contract.

2. [2]

   The Judicial Registrar was satisfied that there was no triable defence to CBEM’s progress claim, by force of the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Security of Payment Act”). The plaintiffs/judgment debtors require leave to appeal to this Court: see s 127(2)(d) of the District Court Act 1973 (NSW). The application for leave and the appeal if leave should be granted are not assigned to the Court of Appeal: s 48(1)(iv) and s 48(2)(f) of the Supreme Court Act 1970 (NSW). By default, therefore, pursuant to ss 49 and 53 of the Supreme Court Act the plaintiffs’ summons is assigned to the Common Law Division.

3. [3]

   The issues that the plaintiffs submit are triable and should have led to the Judicial Registrar refusing to enter summary judgment are as follows:

   1. (1)

      Whether the second plaintiff, Chunlin Fan, was a party to the Trade Contract under which CBEM performed the building work for which it claimed the progress payment.

   2. (2)

      Whether that work was “residential building work” within the meaning of the Home Building Act 1989 (NSW) and, if so, whether CBEM performed the work without having in force a contract of insurance as required by that Act, so that CBEM was prohibited from demanding or receiving payment by the operation of s 94.

   3. (3)

      Whether CBEM was unlicensed for the purposes of the Home Building Act in respect of the work and whether it was prohibited from recovering payment of the progress claim for that reason.

4. [4]

   CBEM opposes leave to appeal being granted and relies upon the strictness of the Security of Payment Act regime. CBEM’s progress claim was made under a Trade Contract for civil and stormwater works, dated 3 December 2021. CBEM contends that the plaintiffs were counterparties to the Trade Contract as Principals. The Contract is further described below. It falls within the definition of a “construction contract” in s 4(1) of the Security of Payment Act. The Contract provided for progress claims to be made on the last day of each month, in amounts corresponding with the extent of work completed. The Contract required each progress claim to be paid within 14 days. The Security of Payment Act applies to the Trade Contract by force of s 7(1).

5. [5]

   Part 3 Div 1 of that Act contains the following provisions for enforcement of a contractor’s right to receive unpaid progress claims, (extracted so far as relevant to the circumstances of the present proceedings):

6. [6]

   It is common ground that on 27 October 2022 CBEM served a payment claim upon the plaintiffs for its progress claim No 4 in the amount of $420,952.39, that the plaintiffs have never paid any part of this claim and that they did not provide a payment schedule to CBEM pursuant to s 14, either within the time-limited under the Act or at all. Consequently, s 15 is engaged pursuant to subs (1)(a) and CBEM may “recover the unpaid portion of the claimed amount from the [plaintiff’s], as a debt due to [CBEM]” in the District Court as a “court of competent jurisdiction”. CBEM contends that any defences the plaintiffs sought to raise in the District Court proceedings from which the present application for leave to appeal is brought were precluded by s 15(4)(b)(ii).

The parties

1. [7]

   The parties’ positions as moving or responding litigants, respectively, have reversed from the District Court to this Court. In these reasons, references to “the plaintiffs” will be to the plaintiffs in this Court and otherwise the parties will generally be referred to by name only. CBEM is an earthmoving and civil works contractor. Sunshine East Pty Ltd (“Sunshine East”, the first plaintiff in this Court) was incorporated on 8 August 2019. Its issued capital consists of 1000 ordinary shares, of which 820 are beneficially held by Chunlin Fan (the second plaintiff in this Court) and 180 are beneficially held by his daughter, Xiaojie Fan. The directors of Sunshine East are the two shareholders together with Jianwei Bi. The shareholdings and directorships have remained the same from the date of incorporation to the present.

2. [8]

   Chunlin Fan and his daughter Xiaojie are residents of China. Chunlin Fan is aged in his 60s, does not speak English and visits Australia from time to time on a business visa. It is not apparent from the evidence what, if any, business he actually carries on in Australia. Jianwei Bi came from China to Australia in 2005 as a student and he has remained here since. He obtained permanent residency in 2015. In 2019 Jianwei Bi was introduced to Chunlin Fan by a relative. Since then he has acted as an interpreter for Chunlin Fan during the latter’s visits to Australia. Jianwei Bi caused Sunshine East to be incorporated as a vehicle for Chunlin Fan. There is no evidence that the company has been used for any other purpose than to serve as postbox or point of contact for Jianwei Bi on behalf of Chunlin Fan and to enter into transactions in respect of a property at 506 Galston Road, Dural (“the property”).

3. [9]

   In mid-2019 Jianwei Bi assisted Chunlin Fan to purchase the property, which comprises 37 ha of vacant land. Jianwei Bi has deposed that Chunlin Fan obtained the permission of the Foreign Investment Review Board for the acquisition. Jianwei Bi also assisted Chunlin Fan to engage a Mr Denton, trading as Denton Homes, to apply to Hornsby Shire Council for Development Approval (“DA”) for construction on the land of a dwelling, a secondary dwelling, a machinery shed, another outbuilding, a swimming pool, a three hole golf course, a small lake, a tennis court and other improvements. It appears from Council’s Notice of Determination that by May 2020 extensive site plans, floor plans, elevations, sections, landscape plans and stormwater and wastewater management plans had been prepared and submitted in connection with the DA application. Approval was granted to Denton Homes on 18 August 2020.

Chunlin Fan’s Manor Estate Project Agreement with ASY

1. [10]

   In April 2021 Chunlin Fan requested Jianwei Bi to make arrangements with Allen Young for the latter to assist in building the proposed improvements on the property. Mr Young is the principal of ASY Construction Pty Ltd (“ASY”). He is of Chinese descent and speaks and writes Chinese. Mr Young prepared a Manor Estate Project Agreement (“the Project Agreement”) in the Chinese language. Jianwei Bi informed Chunlin Fan that the agreement “looked okay to me” although by his own acknowledgement Jianwei Bi has never worked in the building industry in Australia or anywhere else and is not familiar with home building or project management. Jianwei Bi has a Masters degree in environmental and business management from the University of Newcastle. The evidence does not disclose that he has any business or work experience of any nature, apart from acting as a local agent of Chunlin Fan to further the latter’s ambition of owning a large home in Australia.

2. [11]

   The Project Agreement was signed on behalf of ASY and Chunlin Fan on 7 and 8 April 2021, respectively. According to its English translation, the Agreement provided that ASY’s obligations would be:

3. [12]

   The Agreement further provided that the “specific work contents” would be as described in six items listed as “Stage 1: Preparation stage” and a further 17 items under the heading “Stage 2: Construction management”. In the preparation stage the Agreement required that ASY would select designers and other consultants, organise and coordinate the design work and, amongst other things, perform the following:

4. [13]

   In the construction management stage the Agreement required that ASY’s obligations would include:

5. [14]

   The Project Agreement stipulated an expected completion date of November 2022. ASY’s fee was agreed at $950,400 inclusive of GST. It was expressly provided that the fee did not include any “Construction insurance fee”. The Agreement prescribed that part of ASY’s fee should be paid by monthly instalments and the balance at the conclusion of the project.

Chunlin Fan’s Construction Management Agreement with ASY

1. [15]

   On 16 April 2021 Chunlin Fan and ASY entered into a further contract that duplicated the arrangement under the Project Agreement for ASY to act as construction manager. This was a Head Contract Construction Management, in the form published by the Master Builders Association of NSW (“the Construction Management Contract”). The form of this document issued by the Association specified on its face that it is “for use in non-residential building projects”. That was either not noticed, not understood or disregarded by the parties who entered into this Contract. There is no evidence that the Project Agreement was expressly rescinded. The Construction Management Contract is broadly consistent with it and does not contain differences of such significance as to evince an implicit intention that the earlier Agreement be wholly replaced. The combined provisions of the two documents must be construed as a whole.

2. [16]

   Chunlin Fan was named as Principal in the Construction Management Agreement and ASY was named as Construction Manager. The copy tendered in evidence bears what seem to be Chinese characters in the execution space for ASY. The placement of those markings is not witnessed by the signature of a director or secretary of ASY. Underneath the Chinese characters there appear the typed words “In the presence of Allen C Young”. No party has submitted that the document is not properly executed by ASY as a corporation. The apparent irregularity of the execution is symptomatic of the general lack of understanding, on the part of Sunshine East, Chunlin Fan, Jianwei Bi and Allen C Young, of the law of the jurisdiction in which these business dealings have been undertaken.

3. [17]

   The Construction Management Contract commenced with the following provision:

4. [18]

   The Contract empowered ASY as the agent of Chunlin Fan to enter into trade contracts for the performance of the works. In cl 6 ASY’s construction duties were specified in a series of paragraphs (a)-(x). Paragraph (j) was as follows:

5. [19]

   Clause 11 made the following provision with respect to entry into “Small Trade Contracts”:

6. [20]

   For the purposes of cl 11(a), Schedule 3 stipulated the following:

Statutory provisions relevant to Issue (2): insurance

1. [21]

   In the Home Building Act 1989 (NSW), “residential building work” is defined in cl 2 of Sch 1 to include, relevantly for present purposes:

2. [22]

   “Dwelling” is defined in cl 3 of Sch 1 in the following terms so far as presently relevant:

3. [23]

   The compulsory insurance provisions of the Home Building Act are to be understood by reference to the statutory warranties that the Act makes binding upon contractors who perform residential building work. Section 7E provides as follows:

4. [24]

   In Sch 2, the statutory warranties that are relevant for present purposes are set out in the following terms:

5. [25]

   Sections 92 and 99 of the Home Building Act require that any person or entity carrying out residential building work must hold insurance against liability for failure to complete the work and for breach of the above statutory warranties. This form of cover is generally referred to in the building industry as homeowners warranty insurance or HBCF insurance. The acronym refers to the Home Building Compensation Fund operated by the New South Wales State insurer, Insurance and Care NSW, commonly known as “icare”. The consequences of not being insured are contained in the following provisions of the Act (extracted only so far as presently relevant):

Home warranty insurance in relation to the works

1. [26]

   Clause 5 of the Construction Management Contract stipulated that ASY would not be liable for the manner in which trade contractors performed their work on the project at 506 Galston Road Dural, or for their failure to complete work in accordance with their respective trade contracts, or for the design of the project. By the terms of this Contract ASY did not undertake to “do any residential building work”, within the meaning of those words in ss 4 and 92 of the Home Building Act, only to coordinate the activities of others in doing such work. ASY was therefore not required to be licensed or to hold insurance against potential liability for the non-completion or inadequate performance of the work. The printed standard terms of the Construction Management Contract, as drafted by the Master Builders Association, did not include any provision for the construction manager, ASY, to take out statutory home warranty insurance. This standardised document is consistent with it having been issued only for use in connection with non-residential building projects.

2. [27]

   Chunlin Fan, or whoever acted on his behalf, and ASY made an inept attempt to address the operation of the home warranty insurance provisions of the Home Building Act in relation to the project, by attaching an “Addendum” to the Construction Management Contract. The Addendum provided as follows:

3. [28]

   The only “contract amount” in the Construction Management Contract was the sum specified as the Construction Manager’s fee in Sch 5, being $864,000 plus GST, that is, $950,400. The Contract did not contain or have annexed to it any figure for the expected costs of construction. However, the evidence includes a schedule dated 6 August 2021 in which a breakdown of the anticipated construction costs is provided, totalling $11,180,000 inclusive of GST. It is reasonable to infer that Chunlin Fan and ASY must have had in mind construction costs of that order when the Construction Management Contract was made.

4. [29]

   ASY’s fee is quantified consistently in both the Project Agreement and the Construction Management Contract. It has been mentioned that by express term of the Project Agreement, ASY’s fee does not include any “Construction insurance fee”. On 25 May 2021 ASY obtained from icare two certificates of insurance “complying with sections 92 and 99 of the Home Building Act 1989”. Chunlin Fan was named on the certificates as the homeowner and ASY, with builder’s licence number 309871C, was named as the contractor. The “Contract Amount” was specified in one certificate as $660,000 for construction work at “Unit 1, 506 Galston Road”. In the other certificate the sum insured was $290,400 for work on “Unit 2”. The total cover was $950,400. That was only the amount of the construction management fee, not the cost of the works. Moreover, as ASY had not contracted to “do any residential work” it had no prospective liability against which it could be insured under ss 92 and 99 of the Act. In my view ASY’s obligations under the Construction Management Contract, to act as an agent of the principals in entering into Trade Contracts and to coordinate and supervise the Trade Contractors’ performance of their work, could not give rise to any losses of the nature identified in s 99(1)(a) and (b) for which ASY could be liable. There was no potential for liability of ASY against which statutory insurance under the Home Building Act could provide cover.

5. [30]

   There is evidence before the Court that Charles Estephen, who traded as Arkitek Projects, acted in conjunction with Allen Young and ASY on the project. The evidence includes emails between Charles Estephen, Allen Young, a building certifier named Peter Moroney trading as Buildingwise Certifiers and Jianwei Bi in July and August 2022. These show that ASY and Jianwei Bi were aware that the insurance obtained by ASY as per the certificates of 26 May 2021 was not in a sufficient amount and did not relate to an appropriate head contract for the purposes of satisfying the insurance requirements of the Home Building Act in respect of any residential building work to be carried out on the property.

6. [31]

   On 1 August 2022 Charles Estephen proposed, in an email to Allen Young and Jianwei Bi, that a lump sum contract for the work should be entered into “just for show” and “to give authorities”. This would be a head contract in the standard BC4 form published by the Master Builders Association, under which ASY as builder would agree to carry out for Chunlin Fan as owner all of the works comprised in the project at a price of $11,180,000. Charles Estephen suggested that upon this sham contract being entered into, Chunlin Fan would write a letter stating that for the time being he wished only to proceed with the main residence and a machinery shed, at a total cost of $4 million. This letter would also be a sham, for the purpose of minimising the insurance premium.

7. [32]

   There is no evidence that this proposal was implemented in any respect. Its significance lies in the fact that it shows Jianwei Bi, as the New South Wales based representative of Chunlin Fan, and ASY, as Chunlin Fan’s agent under the Construction Management Agreement, knew by 1 August 2022 that the insurance certificates issued to ASY on 25 May 2021 did not satisfy the statutory requirement for insurance to cover the risk of liability of whoever was actually going to perform those works. The emails also show that Chunlin Fan understood, through Jianwei Bi and ASY, that the obligation of obtaining the insurance rested with him under the Construction Management Contract.

Trade Contract between Sunshine East, Chunlin Fan and CBEM

1. [33]

   By early December 2021 a Trade Contract had been prepared for the civil and stormwater works of the construction project at the property. The Trade Contract was in the form published by the Master Builders Association for use in conjunction with a Contract Management Agreement such as that between Chunlin Fan as principal and ASY as construction manager. The form of Trade Contract envisaged that it would be made between the principal and the contractor, with the construction manager also a party. The Trade Contract for the civil and stormwater works specified the parties thereto as follows:

2. [34]

   The civil and stormwater works were fully described in the Trade Contract by reference to drawings, the identifying numbers of which were recorded in a schedule. The lump sum contract price was specified as $1,611,078.51 (excluding GST). This price was the subject of a detailed quotation with an itemised breakdown of the components of work and their separate costing. CBEM had submitted that quotation on 19 November 2021 under cover of an email addressed to Jianwei Bi at “robin@sunshineeast.com.au”. That was an address that Jianwei Bi maintained for Sunshine East and through which he sent and received emails on his own behalf, and on behalf of Chunlin Fan and the company.

3. [35]

   The Trade Contract made the following provision with respect to payment:

4. [36]

   On 3 December 2021 the Trade Contract was signed by Allen Young on behalf of ASY on the first page, in the signature space designated “Construction Manager for and on behalf of the Principal”. Chinese characters apparently representing ASY, identical to those that appeared on the Construction Management Contract as referred to at [16] above, were entered in spaces designated for the signature of the Construction Manager at the foot of each of pages 2, 3 and 4 of the Trade Contract. The executed document was returned to CBEM by email from Jianwei Bi on 4 December 2021. The email was copied to Allen Young and Charles Estephen.

Issue (1): Chunlin Fan a party to the Trade Contract with CBEM

1. [37]

   Chunlin Fan became bound by the terms of the Trade Contract because he is named as one of two Principals on the document and, under the Construction Management Agreement, ASY had express actual authority to enter into the Trade Contract as Chunlin Fan’s agent. That is exactly what it did. It was submitted for the plaintiffs that the value of the Trade Contract exceeded $5,000 and that ASY was not authorised to commit Chunlin Fan to the transaction without his prior approval: see the relevant provisions of the Construction Management Contract quoted at [18]-[20] above. However, on the application to this Court for leave to appeal, no evidence has been tendered to show that there is any genuine dispute about prior approval having been given. To the contrary, there is strong circumstantial evidence supporting an affirmative inference that Chunlin Fan did give prior approval for the Trade Contract to be entered into with CBEM, as follows.

2. [38]

   First, Jianwei Bi was present when the signature and markings were affixed to the Trade Contract on behalf of ASY. Jianwei Bi then caused the signed document to be transmitted to CBEM. In view of his very junior and subordinate status relevant to Chunlin Fan, it is improbable that he would have permitted the Trade Contract to be executed and delivered in the form that it was, for some in excess of $1.6 million, with the Principals named as they appear on it, unless Chunlin Fan had conveyed express approval.

3. [39]

   Secondly, an amount of $88,609.32 was paid from a bank account in the name of Sunshine East to CBEM on 9 December 2021. That amount is 5% of the Trade Contract lump sum price. The payment accords with the obligation of the Principals to pay a deposit “to secure labour and materials”. Again taking into account Jianwei Bi’s status, it may readily be inferred that the funds in the bank account of Sunshine East were deposited by Chunlin Fan and that they would not have been disbursed without his authority. By entering into the Construction Management Agreement Chunlin Fan as Principal had authorised ASY to enter into trade contracts in his name. When substantial funds, provided by Chunlin Fan, were paid out to a contractor he must have understood that ASY had exercised its agency authority by committing him to a contract for part of the works. By allowing payment, he admitted implicitly that ASY had acted within its authority to bind him.

4. [40]

   Thirdly, the same reasoning and the same inference applies with respect to the first three progress payments submitted by CBEM. All of them were paid in full from the bank account of Sunshine East, as follows:

5. [41]

   The circumstances in which Sunshine East and Chunlin Fan refused to pay the fourth progress payment do not give rise to any contradiction or weakening of the inference that arises from the significant payments, totalling $562,157.09, that were made between 9 December 2021 and 1 November 2022. CBEM’s progress claim No 4 for the amount of $420,952.39 was served on 27 October 2022. On 1 November 2022 Charles Estephen sent an email to CBEM in the following terms:

6. [42]

   During the hearing of the summons the Court was informed by the plaintiffs’ counsel that the drawings used in in the project had been prepared by Denton Homes, with some modifications by a “feng shui expert” whom Chunlin Fan had engaged, from China. By October 2022 Denton Homes had notified Chunlin Fan and ASY of an objection to the continued use of the drawings, which it was alleged constituted a breach of copyright. Proceedings for an injunction to restrain further use of the drawings were commenced in the Federal Court. This caused Chunlin Fan and ASY to sign a formal termination of the Construction Management Agreement, effective on 28 October 2022. There is no suggestion in the evidence that CBEM was in any way responsible for or at fault with respect to this situation. Rather, it appears that the plaintiffs found themselves unable to continue with the work lawfully and therefore caused it to cease. They have refused ever since to pay the progress instalment due to CBEM for the most recent tranche of work carried out prior to shutting down the site.

7. [43]

   Sunshine East does not dispute that it is bound by the Trade Contract. On the hearing of the plaintiffs’ summons it was acknowledged by their counsel that, as Sunshine East is a named principal to the Trade Contract with CBEM and as one of the company’s directors, Jianwei Bi, was both present at the signing and also transmitted the executed document to CBEM, Sunshine East cannot contest that it is bound by the Contract.

8. [44]

   I am satisfied that Chunlin Fan has no seriously triable defence to CBEM’s claim on the basis of any issue as to whether he was effectively made a party to the Trade Contract. He became bound as a Principal as a result of ASY executing the document on his behalf.

Issue (2): insurance

1. [45]

   The third item in the Preliminaries section of CBEM’s quotation was in the following terms:

2. [46]

   The work for which progress claim No 4 was issued by CBEM on 27 October 2022 is specified in categories that correspond with the breakdown of work items in CBEM’s quotation. The plaintiffs in this Court have not tendered evidence to explain the items claimed by CBEM in any greater detail than what appears on the progress claim and the quotation. Doing the best that I can with the descriptions of work in those documents and taking into account the definition in the Home Building Act, the following items comprised in progress claim No 4 appear to be, arguably “residential building work” for which home owners warranty insurance should have been in place:

3. [47]

   It appears that no homeowners warranty insurance was in force in respect of the above items. The only insurance purportedly obtained under the Home Building Act was that taken out by ASY, as referred to at [29] above, which did not provide any level of indemnity in respect of any contractor who would actually carry out work on the project. It is therefore at least arguable for the plaintiffs that a breach of s 92 of the Home Building Act occurred and that CBEM is not entitled to enforce any remedy in respect of non-payment for those items listed in the preceding paragraph, unless a court determining the final account between the plaintiffs and CBEM should consider that it would be just and equitable for CBEM to recover a quantum meruit pursuant to s 94(1A).

4. [48]

   The issue of whether CBEM’s progress claim is defensible on the ground that no statutory insurance was in force does not warrant a grant of leave to appeal against the Judicial Registrar’s entry of summary judgment, for the following four reasons. First, the amount that has been shown to be affected by this potentially triable issue is only $63,979.32, being 15.2% of the judgment sum. Secondly, if it should be determined in the plaintiffs’ favour that home warranty insurance was required in respect of works to that value, or even to a greater value, there would be a very strong case for the District Court to exercise its jurisdiction under s 94(1A) of the Home Building Act. That follows from the fact that Chunlin Fan, through his agent ASY and his co-director and representative Jianwei Bi, clearly assumed responsibility for securing the insurance and paying the premium. By the terms of the Trade Contract, CBEM would reasonably have understood that ASY and its principals would take out whatever cover was required.

5. [49]

   The absence of insurance arises from the plaintiffs’ failure to fulfil an obligation they assumed. The email correspondence of July 2022 strongly suggests that this was a deliberate decision, directed to minimising expenditure. As CBEM was unlicensed for residential building work, home warranty insurance could not have been issued in its name as the insured. That was either known to the plaintiffs or would have been readily ascertainable by them. If the plaintiffs had taken any step towards obtaining cover for CBEM’s work they would have found, if they did not already know, that their contractor did not hold a licence and could not be insured. The evidence points strongly to an inference that the inability of CBEM to attain homeowners warranty cover would not have been significant to the plaintiffs because they did not wish to incur the cost of the premium in any event.

6. [50]

   On the hearing of a summons of this nature and having regard to the limitations of the evidence, the Court is not able to reach a final conclusion about the parties’ respective states of mind in July 2022 at the time when the plaintiffs and ASY knew of the need for statutory insurance and failed to procure it. However, it is sufficient for the purpose of determining the leave application that it appears, at a prima facie level, that the plaintiffs are now acting discreditably and disingenuously in seeking to resist an obligation to pay CBEM for its work upon the basis of an absence of insurance cover, where that absence arose through the plaintiffs’ conscious decision not to fulfil their own contractual obligations. On the material tendered in this Court, the case for allowing a quantum merit on grounds of justice and equity seems very strong.

7. [51]

   Thirdly, the summary judgment in the District Court is only for the progress payment under the Security of Payment Act. The Act includes the following provision regarding the effect of Pt 3, (comprising ss 13-15 quoted earlier, providing for enforcement of unpaid payment claims):

8. [52]

   The effect of s 32 is that if the plaintiffs can, in separate proceedings in the District Court, demonstrate that they have to some extent overpaid CBEM by satisfying the whole of progress claim No 4 in accordance with the Judicial Registrar’s judgment, then they would be able to recover the amount of the overpayment. On the hearing of the summons for leave to appeal the Court was informed that such proceedings have been commenced. It is very significant to the question whether leave should be granted that the summary judgment entered in the District Court is, in substance, only for the payment of progress claim No 4 on account. Execution of that judgment will not on a final basis deprive the plaintiffs of the opportunity to agitate the consequences of there having been no homeowners warranty insurance. Execution of the judgment will not prevent the plaintiffs from disputing, in another proceeding, CBEM’s entitlement to a quantum meruit under s 94(1A), or how much that quantum should be.

9. [53]

   Fourthly, no evidence was tendered in this Court to suggest that the plaintiffs contend that any part of the work which is the subject of progress claim No 4 was not carried out or was poorly executed. There is no reason to expect that any part of the summary judgment amount will be repayable to the plaintiffs on the taking of a final account in proceedings pursuant to s 32 of the Security of Payment Act.

Issue (3): CBEM unlicensed

1. [54]

   The Home Building Act contains these provisions concerning licensing of builders:

2. [55]

   In contravention of s 4, CBEM entered into the Trade Contract without holding a contractor licence. The plaintiffs contend that s 10 therefore renders the Trade Contract unenforceable and deprives CBEM of any remedy for breach by the plaintiffs, including for their failure to pay progress claim No 4. CBEM submits that the denial of remedies under s 10 does not give rise to a triable issue in the District Court proceedings because the section does not extend so far as to bar recovery of the statutory debt for the progress claim that arises under s 15 of the Security of Payment Act. For this proposition CBEM relies upon Brodyn Pty Ltd v Davenport [2004] NSWCA 394.

3. [56]

   In that case a concreting contractor carried out work for the appellant (“Brodyn”) in the construction of residential townhouses. The contractor served a payment claim under s 13 of the Security of Payment Act and Brodyn responded with a payment schedule under s 14(3), contending that no money was payable. The contractor made an adjudication application under s 15(2)(a)(ii), which resulted in an adjudication in accordance with the provisions of Pt 3 Div 2 of the Act (ss 17-26). The adjudicator determined that Brodyn was required to pay the contractor $180,059. The statutory effect of such an adjudication determination is provided for in s 23(2): the amount determined must be paid within five days or such other period as the adjudicator may determine. Relevant extracts from ss 24 and 25, providing for recovery of the adjudicated amount, are as follows:

4. [57]

   On those facts the Court of Appeal (Hodgson JA, Mason P and Giles JA agreeing) held as follows:

5. [58]

   I am bound by the decision in Brodyn Pty Ltd v Davenport. It was concerned with the statutory remedy under s 25 of the Security of Payment Act (enforcement of an adjudication certificate as a judgment of a court of competent jurisdiction), rather than with the statutory remedy under s 15 (enforcement of an unanswered payment claim in a court of competent jurisdiction). However, there is no basis upon which the reasoning of the Court of Appeal in Brodyn Pty Ltd v Davenport could be distinguished and held inapplicable to a statutory claim under s 15. Such a claim does not involve the steps of referring a disputed payment claim to an adjudicator and securing the adjudicator’s certificate of determination – but those additional steps make no difference to the question of statutory construction that Hodgson JA’s judgment resolved.

6. [59]

   For those reasons I determine Issue (3) in favour of CBEM. I find that there is no serious issue to be tried with respect to the plaintiffs’ liability to pay CBEM’s progress claim No 4, arising from the circumstance that CBEM did not hold a building contractor licence for the work that it undertook and for which it seeks payment.

Orders

1. [60]

   After the hearing of the summons on 16 June 2023 the plaintiffs applied, by notice of motion filed in court on 29 June 2023, for leave to reopen. I granted that leave to the extent of permitting the plaintiffs to read affidavits of their solicitor, Mr Elic Tang affirmed 19 and 27 June 2023, to which there were annexed, inter alia, certificates of insurance issued to ASY in respect of the project works. Having received that evidence and having heard further argument from counsel during the application to re-open on 29 June 2023, I was able to finally determine the Summons forthwith. The following orders were made on 29 June 2023:

   1. (1)

      Order 1 made on 1 May 2023 for stay of execution of judgment of the District Court given and entered in that court on 24 March 2023 is discharged.

   2. (2)

      The summons filed 20 April 2023 is dismissed.

   3. (3)

      The plaintiffs are to pay the defendant’s costs of the proceedings.

2. [61]

   When those orders were pronounced on 29 June 2023, the Court’s reasons were reserved. The reasons are as now set out in this judgment.