Don't get caught out: What you need to know before applying for summary judgment for a SOP Act ‘statutory debt’

If you’re a contractor or a subcontractor wanting to bring an application for summary judgment for a ‘statutory debt’ under the SOP Act, make sure all your ‘t’s are crossed and your ‘i’s are dotted!  It’s not as easy as it seems.

The recent District Court decision of LHRE Group Pty Ltd v Complete Hire & Sales Pty Ltd[1] gives some useful guidance on the interaction between the Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOP Act) and Rules of Supreme Court 1975 (WA) (RSC).

LHRE v Complete also reminds us what an application for summary judgment must establish in order to be successful. 

LHRE’s application for summary judgment was dismissed because the Court found that there were triable questions as to: 

1. the parties to the construction contract; and 
2. which party was entitled to be paid. 

Key Takeaways – LHRE v Complete

• The ‘relevant circumstances’ under the SOP Act must exist for judgment to be made in favour of the claimant. 
• This requires careful consideration of: 
  • if a statutory debt has arisen under the SOP Act including: 
    • ensuring that a ‘construction contract’ exists; 
    • the relevant terms of, and the parties to, the construction contract; 
    • if a valid payment claim for a progress payment has been made – and who is entitled to that payment; and
    • if the amount due to be paid has not been paid by the due date;
  • if there is an (arguable) defence to the statutory debt claim?  

The SOP Act 

The SOP Act contains a process where, if a valid statutory payment claim for a progress payment is issued by a claimant[2] and the respondent fails to issue a payment schedule within the time required, then:

• the “claimed amount” becomes payable on the due date; and 
• if payment of the “claimed amount” is not made by the due date, then the claimant may recover the “claimed amount” as a debt due.

That is, a statutory debt is created.[3]

To recover the statutory debt, proceedings may be commenced by the claimant and an application for summary judgment may be brought under the RSC. 

If the claimant makes a debt claim under the SOP Act, then the respondent is not, in those proceedings, entitled to bring any cross-claim against the claimant or 'to raise any defence in relation to matters arising under the construction contract’.[4]

LHRE v Complete

LHRE relied on the ‘speak up or pay up’ regime in the SOP Act to bring an application for summary judgment, alleging that a statutory debt existed to which Complete could raise no defence.[5] 

The facts

LHRE, a labour-hire company, claimed that: 

• it was engaged by Complete, a building company, to supply labour for construction work (remedial work) being performed on the Spinifex Hotel in Derby (Hotel). The contract between the parties was partly oral, partly in writing and partly by conduct; 
• LHRE invoiced for works performed under the contract, which were payment claims for progress payments under the SOP Act;
• no payment schedules were issued by Complete in response to LHRE’s payment claims;
• Complete did not pay the amounts due in respect of the payment claims; and 
• LHRE was entitled to recover the monies invoiced for those works as a statutory debt under the SOP Act.

Complete contended, amongst other things, that:

• the identity of the parties is a material fact to LHRE's pleaded claim;
• the SOP Act does not determine whether summary judgment ought to be given.  That question is to be determined in accordance with the ordinary principles applicable to RSC O 14 r 1;
• there was a real question to be tried regarding the parties to the contract (and therefore the existence of a construction contract between the parties to the proceedings).  Complete’s evidence was that it engaged with another entity, OSB Group Pty Ltd and not LHRE, to perform the remedial works; and
• even if the contract was found to exist between LHRE and Complete, then there is a question to be tried as to whether LHRE assigned its entitlement to payment to another party.[6]

The Court’s Decision

The application by LHRE was made pursuant to Order 14 of the RSC.[7] 

The Court stated that it may only give judgment in favour of the claimant in respect of a SOP Act debt claim if it is satisfied that the 'relevant circumstances' under the SOP Act exist.[8]

 The assessment to be made by the Court is not:

“whether or not the position it is likely to succeed at trial. The question is whether it is so obviously correct, and the conclusion so unavoidable, that there is no room for argument about it.”[9]

Issues arose as to the relevant parties to the ‘construction contract’ and the capacity in which the parties were engaging with one another.  As LHRE pleaded that the relevant contract was   partly oral, partly in writing and partly by performance the Court found that:

“(a) this is not a case where recourse may be had to the 'four corners' of an executed, written contract; and

(b) there are in my view triable questions of fact in relation to the matters that are said to give rise to the Asserted Contract and its terms.”

Amongst other things, the Court found that there were triable questions as to: 

• the identity of the contracting parties; and
• an assignment of the entitlement to payment (by reason of the wording included in the payment claims made by LHRE to Complete).

LHRE’s application for summary judgment was dismissed.

[1] [2024] WDC 61 (LHRE v Complete)

[2] A payment claim must be made in writing, and must identify both the amount of the progress payment claimed and the construction work or related goods and services to which the progress payment relates: s 24, SOP Act.

[3] Sections 25 and 27 of the SOP Act. 

[4] Section 27 of the SOP Act. 

[5] At [9] of LHRE v Complete.

[6] The claims for payment submitted by LHRE stated: “All amounts payable under contracts to which this invoice relates, have been transferred to scottish pacific(BFS) pty ltd('ScotPac').

This means your cheques must be made payable to Scot Pac and be sent direct to it at GPO Box 9969 Perth WA 6001 or by our preferred method of payment … … Payment to any other person will not constitute a valid discharge of the debt.”

[7]The Court summarised the requirements of Order 14 at [7] as follows: “(a) the plaintiff must, by affidavit evidence, make out a prima facie case that it has a good cause of action against the defendant, as to the whole or part of which there is no defence; (b) upon the plaintiff doing so, there is an evidentiary onus on the defendant to show cause against the application, by satisfying the court that there is an issue or question in dispute which ought to be tried;  (c) the plaintiff bears the ultimate burden of proof in relation to the application; and (d) the court exercises a discretion in determining whether to give summary judgment in relation to all or part of the claim, or whether to give leave to the defendant, unconditionally or on such terms as it thinks fit, to defend the claim. 

[8] At [21], LHRE v Complete citing s 27(3)(a), s 27(4) of the SOPA Act. 

[9] At [48], LHRE v Complete.