Security of Payment Case - Levadetes Pty Ltd v Iberian
Artisans Pty Ltd  NSWSC 641
In this decision, the NSW Supreme Court considered the meaning
of 'construction contract' under the Building and
Construction Industry Security of Payment Act 1999 (NSW)
(the Act) and the relevant issues to determine
whether an arrangement amounts to a 'construction
contract'. The decision also deals with whether a contract
concerning the carrying out of 'residential building work'
is excluded from the operation of the Act by section 7(2)(b).
Mr Jim Levadetes, Mrs Levadetes and their son, John, were
directors of the plaintiff company (Company). John was the
registered proprietor of a property in Vincentia on which Mr and
Mrs Levadetes decided to demolish the existing house and build a
new one, where they intended to reside on completion. Mr Jim
Levadetes, in his personal capacity, obtained 3 quotations from the
defendant contractor (Iberian) to supply and install marble and
Iberian was instructed to proceed with the work even though the
quotations were not signed or dated. John paid the deposits for the
building work in two payments, from separate bank accounts of the
Company, in amounts different to those set out in the
Iberian sent tax invoices to a separate entity, of which John
and the Company were proprietors. Iberian later served two payment
claims on the Company. In response, the Company provided two
payment schedules which asserted that:
there was no construction contract between the parties,
the subject work was residential building work and therefore
excluded from the Act by virtue of section 7(2)(b).
McDougall J considered whether there was a construction contract
to which the Act applied. The definition of 'construction
contract' includes an 'arrangement' whereby work is
performed for another party. In this case, there was an arrangement
whereby Iberian would perform building work for Mr and Mrs
Levadetes and the Company would pay. Such arrangement was caught by
the definition of 'construction contract' under the
McDougall J then considered whether the building work was
residential building work to which the Act did not apply by virtue
of section 7(2)(b). His Honour considered that the critical issue
was whether the phrase 'the party for whom the work is carried
out' is to be regarded as any party to the arrangement, or only
as the party who makes payment. It was necessary to analyse the
objective intention of the parties at the time the arrangement was
made. In the circumstances, objectively viewed, the parties
intended their arrangement to be that Iberian would supply and
install marble at the proposed residence of Mr and Mrs Levadetes,
on terms that it would be paid by the Company. His Honour noted
that section 7(2)(b) did not restrict the number of parties to a
construction contract and the tripartite arrangement in this case
was entirely consistent with the scheme of the Act.
Contractors should draw from this case the lesson that the term
'construction contract' is interpreted broadly, so that
agreements that are less than a binding contract or agreement can
still be a 'construction contract' under the Act. In
addition if works are residential building works they will not be
afforded the protection of the NSW Act, regardless of whether such
works are paid for by a company. Note that whether residential
building works are excluded from the security of payment
legislation in a particular State depends on provisions of the
relevant legislation for that State.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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