Black Sheep Building Pty Ltd v A J Portelli Medical Pty Ltd atf A J Portelli Medical Trust

1. [1]

   On 14 May 2025, Black Sheep Building Pty Ltd entered into a contract with A J Portelli Medical Pty Ltd as trustee for the A J Portelli Medical Trust, for the design and construction of “high physical support accommodation” at Gosford, New South Wales for the sum of almost $14 million. The contract required Black Sheep to construct four dwellings, each containing five high physical support rooms, nurses’ quarters and shared living and kitchen space, and to ensure the development met the National Disability Insurance Scheme Design Standards.

2. [2]

   There is no dispute that:

   1. (1)

      the contract was a “construction contract” within the meaning of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA);

   2. (2)

      Black Sheep carried out certain works towards the project and served various “payment claims” on Portelli purportedly under the SOPA; and

   3. (3)

      Portelli paid part of those payment claims, including most of the 10% deposit.

3. [3]

   In dispute here are two payment claims, in relation to which Portelli did not serve a payment schedule:

   1. (1)

      “Payment Claim 3”, dated and served on 21 August 2025; and

   2. (2)

      “Payment Claim 4”, dated 21 September 2025 and served on 22 September 2025.

4. [4]

   Black Sheep seeks to recover the unpaid portions of those payment claims as a debt pursuant to s 14 and s 15(2)(i) SOPA and moves for summary judgment to that effect.

5. [5]

   Summary judgment ought not be given unless the Court is satisfied that there is no triable issue, of the kind inapt to be determined on a summary basis, about the existence of the circumstances referred to in s 15(1): see Manariti Plumbing Pty Ltd v Universal Property Group Pty Ltd [2025] NSWCA 135 at [35] (Free JA, McHugh and Ball JJA agreeing). Those circumstances include the existence of a valid payment claim and service thereof: Manariti at [36], citing see Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at 441 [52]-[54] (Hodgson JA, Mason P and Giles JA agreeing) and EnerMech Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd (2024) 115 NSWLR 56 at [9] (Basten AJA, Meagher JA and Griffiths AJA agreeing).

6. [6]

   Portelli raises several reasons why there is a triable issue as to whether the payment claims were valid for the purposes of SOPA:

   1. (1)

      The payment claims were not “payment claims” for the purposes of SOPA, because they were intended to be claims or invoices under the contract only.

   2. (2)

      The payment claims were served prematurely, contrary to s 13.

   3. (3)

      The payment claims failed to adequately identify the construction work, to which they related.

   4. (4)

      Black Sheep was prevented from issuing the payment claims under the Act, because it was not insured for “residential” building work under the Home Building Act 1989 (NSW) (HBA): see s 8(2) SOPA and s 92 HBA.

7. [7]

   Portelli did vaguely suggest that further evidence would be necessary for the determination of these issues, without identifying what that evidence would be. I consider that the issues in dispute turn on a proper construction of legislation, the contract and the particular alleged payment claim documents, and the arguments were fully ventilated. There is no serious conflict as to any matter of fact that would prevent summary judgment: see AAN MP Pty Ltd as trustee for the AAN MP Unit Trust v Camilleri [2023] NSWSC 737 at [15].

8. [8]

   For the reasons that follow, I consider Black Sheep is entitled to summary judgment.

Were payment claims issued pursuant to SOPA?

1. [9]

   Portelli submitted that the payment claims were not intended to be issued under SOPA for various reasons, all of which I reject.

2. [10]

   Payment Claim 3 was emailed with a cover email that relevantly provided:

3. [11]

   The payment claim itself stated at the bottom “This Payment Claim is made under the Building and Construction Industry Security of Payment Act 1999”.

4. [12]

   It sought payment for:

   1. (1)

      “Payment ... for contract works (as per trade breakdown)” in the sum of $460,464.25.

   2. (2)

      Payment of shortfall of a previous payment claim for $14,039.96.

   3. (3)

      Liquidated damages for delayed payments and inclement weather.

   4. (4)

      “QS claim assessment (refer Schedule 6 – Special Condition” in the amount of $5,500.

5. [13]

   Portelli raised various concerns about this payment claim.

6. [14]

   First, it was asserted that the payment claim referenced the wrong contracting party, namely “The Trustee for A J Portelli Medical Trust”. The contract was with A J Portelli Medical Pty Ltd. I do not consider this a fatal flaw. The works were obviously carried out at Portelli’s Gosford site as was evident from the covering email. There was no suggestion that there was any other contract on foot between Black Sheep and any other Portelli corporation. The payment claim was sent to the email address identified in the contract. I consider it obvious from the circumstances surrounding the contract that there is identity between the parties to the contract and the payment claim: see eg Giliberto v Kenny (1983) 48 ALR 620 at 623 (Gibbs CJ, Wilson, Brennan, Deane and Dawson JJ agreeing).

7. [15]

   Secondly, Portelli submitted that the covering email and the reference to the “QS” process demonstrated that Black Sheep sought to invoke only the contract provisions about “payment claims” and Payment Claim 3 was therefore not a payment claim under the Act. Portelli accepted that the contract did not, and could not, avoid the statutory scheme, and that it might be possible for both to be engaged. However, the submission was that Black Sheep only engaged the contract. Relevant parts of the contract include:

8. [16]

   I reject Portelli’s submission that the payment claim did not engage the statutory scheme in addition to the contract terms. It clearly stated it was made under the Act. Further, there is no reason to accept that a reference to a “payment claim” in the contract was intended to be a different phrase to that understood in the Act.

9. [17]

   I consider the proper construction of the contract was that the parties agreed that Portelli, as owner, had the option to have a payment claim (which had to be provided by day 21 of the month) assessed by a quantity surveyor, who was required to provide a report within 5 days. It was open to the builder to engage with the quantity surveyor about that assessment and proceed to an “expert mediator”. However, the owner was nevertheless required to serve a payment schedule (and it would appear could use the quantity surveyor report to do so) within the time frame provided for by SOPA, namely within 10 business days of receipt of the payment claim: see s 14 SOPA.

10. [18]

    It was therefore possible for Black Sheep to engage with the contract terms and the statutory scheme when issuing a “payment claim”.

11. [19]

    Therefore, it is necessary to decide whether the payment claim satisfied the requirements of section 13, considered below.

12. [20]

    What is necessary is that a payment claim identifies the work “in a way comprehensible to the respondent to the claim”: see Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (2005) 64 NSWLR 462 (Nepean) at [35] (Hodgson JA, Ipp JA agreeing). A payment claim ought not be treated as a nullity for failure to comply with s 13(2)(a) “unless the failure is patent on its face: at [36]; see also Brookhollow Pty Ltd v R & R Consultants Pty Ltd [2006] NSWSC 1 at [41(iv)] (Palmer J).

13. [21]

    In Clarence Street Pty Ltd v Isis Projects Pty Ltd (2005) 64 NSWLR 448 (Clarence Street) at [33], Mason P (Giles and Santow JJA agreeing) adopted the explanation given by McDougall J, the trial judge, of matters sufficient to “identify the construction work to which the payment claim relates”:

    1. (1)

       An item reference referring to the contractual identification of the work;

    2. (2)

       A single line item description of the work;

    3. (3)

       Particulars of the amount previously completed and claimed, and the amount now said to be complete;

    4. (4)

       A summary that pulls all the details together and states the amount claimed.

14. [22]

    Here, I consider that the “trade break down” attached to Payment Claim 3 sufficiently identified the work alleged to have been completed in a manner consistent with McDougall J’s formula. The trade break down was referrable to the contract’s bill of quantities and would have been understood as such by a reasonable person in the position of Portelli. The bill of quantities was clearly identified in the contract and known to the parties.

15. [23]

    In Fernandes Constructions Pty Ltd v Tahmoor Coal Pty Ltd t/as Centennial Coal [2007] NSWSC 381 at [27] McDougall J indicated that:

    1. (1)

       Whether a document was a valid payment claim was to be determined objectively.

    2. (2)

       The relevant document must be considered as a whole and in context, including the terms of the document and any covering letter or email, and the “factual matrix” known to both parties. See also Total Construction Pty Ltd v Kennedy Civil Contracting Pty Ltd (subject to a Deed of Company Arrangement) [2023] NSWCA 306 at [35]-[38] (Mitchelmore JA, Meagher and Adamson JJA agreeing).

16. [24]

    While the total identified on the payment claim was over $1,000,000, I consider that the payment claim, objectively construed, was for the sum of $480,004.21, as explained in the covering email.

17. [25]

    Portelli submitted that the language of the email demonstrates a future intention rather than a current intention to “claim”, including claiming $5,500 for the quantity surveyor assessment. I do not accept that construction. Black Sheep was entitled to claim $5,500 for any claim “prepared” for the quantity surveyor at Portelli’s option. There was no evidence that Portelli did not take up that option. In any event, a payment claim does not finally determine the parties’ rights, and if Black Sheep was not entitled to that amount, then Portelli could have raised it in a payment schedule or could raise it in final rights litigation: see s 32 SOPA.

18. [26]

    I therefore consider Payment Claim 3 satisfied s 13.

Payment Claim 4

1. [27]

   Portelli had fewer complaints about the format of the later Payment Claim 4. The contracting party was correctly identified. The payment claim referenced SOPA, and there was no covering email to provide any possible confusion.

2. [28]

   Portelli submitted that Payment Claim 4 could not claim for unpaid Payment Claim 3, if the latter was not a valid payment claim. I do not accept that submission. Each payment claim must be considered on its own, and Portelli would need to identify a “patent” error on the face of Payment Claim 4 to challenge it.

3. [29]

   A payment claim may reference other documents. As Mason P explained in Clarence Street at [39]:

4. [30]

   I therefore do not accept that Payment Claim 4 was deficient in its form by including unpaid Payment Claim 3 for $480,004.21, which had included a detailed trade breakdown and explanation of its elements. I note that s 13(6)(b) entitles a payment claim to contain amounts that have been the subject of a previous claim, and s 13(6)(c) permits inclusion of work carried out in a previous month.

5. [31]

   Sensibly, Portelli did not make any oral submissions on the question of whether it was necessary for Black Sheep to finally prove that it had in fact carried out the construction work it alleged. As indicated earlier, a payment claim is merely a claim under SOPA; it does not finally determine the rights of the parties, which are left to final rights litigation.

6. [32]

   I also consider Payment Claim 4 does the same. Further, Payment Claim 4 incorporated the whole of Payment Claim 3, which therefore included the trade break down, which had been attached to it.

Were the payment claims issued prematurely?

1. [33]

   The payment claims in dispute were dated 21 August and 21 September respectively. The reason for that date may be because the special condition required them to be issued to the Quantity Surveyor on that day.

2. [34]

   Portelli submitted that the payment claims were issued prematurely, relying on s 13(1A) and 13(1B) SOPA which provide that:

3. [35]

   Portelli appears to assert that Black Sheep was relying on s 13(1B) by issuing the payment claims on day 21 of each month as being “an earlier date” provided for in the contract. However, Black Sheep disavowed that. It submitted, and I accept, that for work carried out in July 2025 it was entitled to issue a payment claim from 31 July 2025, which it did with Payment Claim 3 on 21 August, which then also complied with the special condition. Similarly, for work carried out in August 2025, Black Sheep was entitled to issue a payment claim from 31 August 2025, which it did with Payment Claim 4 dated 21 September and served on 22 September.

4. [36]

   Portelli relied on Waco Kwikform Ltd v Complete Access Scaffolding (NSW) Pty Ltd [2020] NSWSC 1702, where Stevenson J considered a clause which provided:

5. [37]

   Stevenson J considered at [6] and [10] that to fall within the then-worded s 8(2)(a) SOPA the term of the contract must “expressly nominate ... the day by which the claim for a progress payment may be made”, and that “calls for a provision in the contract that, by its own terms, determines the date by which the payment claim can be made”.

6. [38]

   Here, the legislation has changed, and the language of the special condition is different to that in Waco and is clear: the “Builder’s Payment Claims must be submitted to the Owner’s Quantity Surveyor on the 21st day of the month”.

7. [39]

   Payment Claim 3 was served on Mr Portelli and others on 21 August 2025. Therefore, whether payment claims were to be timed according to subsection (1A) or (1B), Black Sheep complied with the requirements in respect of Payment Claim 3.

8. [40]

   While Payment Claim 4 and the Subcontractor’s Statement bear the date of 21 September 2025, the Payment Claim was served on Portelli on 22 September. Therefore, while Payment Claim 4 did not comply with the special condition, it nevertheless complied with s 13(1B) SOPA, which is relevant for the purposes of this application.

Did the work require insurance under the HBA?

1. [41]

   Black Sheep asserted that it did not need to be insured for the purposes of the HBA to carry out “residential building work” (see sections 4 and 92), and therefore the fact that it was not so insured was no impediment to it issuing valid payment claims: see s 8 SOPA.

2. [42]

   The submission focussed on the fact that builders are only required to be insured for the construction of “dwellings”, as defined in the HBA. Black Sheep submitted that the contract works fell within an exception to the definition of “dwelling” found in cl 3(3)(d) of sch 1 to the HBA: “accommodation (other than self-contained units) specially designed for the aged, persons with disability or children”.

3. [43]

   The parties disputed the carve out of “self-contained units”; Portelli submitted that the buildings were designed as “self-contained units” like share houses, where the whole is taken to be “self-contained”. Black Sheep submitted that the accommodation needed to be considered on an individual basis, and because each resident would only have an ensuite bedroom with shared kitchen, living room, laundry and outside area, the carve out was not engaged. I agree.

4. [44]

   I consider that assistance for this construction is found from other types of accommodation in the exception of s 3(3), for example:

5. [45]

   Each of these types of accommodation suggests shared facilities, with some space available for an individual, probably containing their bedding and possibly a bathroom. Each also suggests accommodation that is not purchased by an individual, but is instead leased, licenced or rented.

6. [46]

   Another commonality between these types of accommodation appears to be that each would be subject to the management of a person or company responsible for the whole building, controlling who can live in the premises, in contrast with premises where a person could own and live independently of sharing any essential living facility or space, such as a kitchen, with others.

7. [47]

   There was no dispute here that the contractual plans for the development showed a building with five ensuite bedrooms, one nurse’s room, and then shared kitchen, laundry, living and dining rooms.

8. [48]

   I do not accept Portelli’s suggestion that the building is analogous with a share house in Newtown. Such a share house is originally designed as a residential dwelling and built to provide a home to be owned by individuals; a design intent absent for the excepted types of accommodation in s 3(3). It makes no difference that the owner of a house may later choose to enter into leases or licences with multiple people to share the space, even if with exclusive use of a particular bedroom.

9. [49]

   I do not accept that I ought to rely on previous legislation or regulations in the same context or otherwise, where the parties agree that the particular language of “self-contained unit” has never previously appeared or been considered. No assistance was gained from the second reading speech.

10. [50]

    Therefore I do not consider Black Sheep was prohibited from issuing the payment claims.

Interest

1. [51]

   Black Sheep claims interest on the unpaid payment claims at the contractual rate of 1% per month pursuant to clause 15(g) of the contract and s 11(2) SOPA.

2. [52]

   Portelli resists the payment of interest, submitting that all that is available for a claim under s 15(2)(a)(i) is the “unpaid portion of the claimed amount”, which did not include interest.

3. [53]

   I do not accept Portelli’s construction.

4. [54]

   Black Sheep is entitled to summary judgment on the unpaid payment claims. It is also entitled to interest on the judgment sum pursuant to s 11(2) SOPA which provides:

5. [55]

   This has occurred in other situations where summary judgment on an unpaid payment claim has been ordered: see eg Richard Crookes Constructions Pty Ltd v Kennedy Civil Contracting Pty Ltd (admins apptd) [2023] NSWSC 99 at [44].

6. [56]

   To find otherwise would require Black Sheep to commence new proceedings to obtain an award of interest in circumstances where Portelli may never bring final rights proceedings to challenge the amount determined under SOPA. Further, the terms of s 11(2) merely mirror what is available in other situations.

Conclusion and appropriate orders

1. [57]

   Black Sheep served payment claims on Portelli, Portelli did not provide a payment schedule within the time required and therefore Portelli is now liable to pay the amount claimed. I accept here that the payment claims were made in good faith and ostensibly comply with s 13(2). Portelli could have raised complaints in a payment schedule and is prohibited from doing so now in an attempt to resist summary judgment: see Nepean at [76] (Ipp JA).

2. [58]

   For all the reasons above, Black Sheep is entitled to summary judgment, and I make the following orders:

   1. (1)

      Parties to confer on appropriate orders to be made to give effect to these reasons and costs, and to send a single communication to the Chambers of Peden J within 5 days of today’s date containing either agreed orders or an indication that no agreement could be reached.

   2. (2)

      Should there be no agreement as to final orders, the matter will be listed for directions on a date to be allocated.