The 2003 amendments to the Building and Construction
Industry Security of Payment Act 1999 (NSW)
(BCISPA)1 went to some length to
discourage actions to frustrate the enforcement of money
payable under it. It has enjoyed a measure of success.
Generally, provided the adjudication complies with the
essential prerequisites set out in Brodyn Pty Limited v
Davenport2, the options to overturn or
frustrate such enforcement action are either very limited or
doomed to fail.
There is however, one line of attack that, if the facts
permit, seems a reliable strategy to overwhelm BCISPA's
defences. The Constitution provides that Commonwealth
legislation generally has precedence over that of the states.
This presents opportunities to press ahead with action to
upseta BCISPA enforcement action, despite that act's
prohibitions and limitations.
Instances of Commonwealth legislation overwhelming the
BCISPA's defences frequently occur in the context of
winding up and bankruptcy action to enforce BCISPA debts,
making those forms of enforcement action unreliable in the
The BCISPA's defences have also been breached where
the adjudication determination was procured by misleading or
deceptive conduct in breach of s52 of the Trade Practices
The recent case of Katherine Pty Limited v The CCD Group
case) demonstrates a further ground by which
BCISPA's defences may be circumvented.
In Katherine's case the respondent faced
adjudicated determinations to a value of $340,000. $100,000 of
that figure related to work done and materials supplied. The
balance was interest calculated in accordance with the terms of
the contract, at an interest rate of 9% per month.
McDougall J was satisfied that such an interest rate well
exceeded the loss actually incurred by the claimant through
late payment, to such an extent that it comprised a penalty,
being a circumstance in which equity would grant relief on the
basis that it is unconscionable.
Unconscionable conduct by a corporation in trade or commerce
is prohibited under s51AA of the Trade Practices Act (Cth).
Section 80 of the Trade Practices Act entitles the court to
make such order as it thinks appropriate against the person who
engaged in the unconscionable conduct, where the court
considers that such orders will compensate the person who has
suffered, or is likely to suffer, loss or damage by the
In Katherine's case, the supremacy of the
Commonwealth legislation barely rated a mention, indeed it was
practically assumed. The claimant's main line of
defence was to propound the interest rate of 9% per month
compounding as not being unconscionable. In the alternative, if
it was, it argued that relief should not be granted in any
McDougall J held that the interest rate of 9% per month was
unconscionable. In respect of the issue as to whether relief
should be granted he noted that the respondent did not have
adequate regard for its own interests and was lax in its
attention to its payment obligations. Despite that, he found
that it would be an injustice to permit the claimant to have
the full benefit of a bargain that is unconscionable.
To relieve the unconscionability, McDougall J upheld the
adjudication to the extent that it related to the actual costs
of goods and services supplied. However, enforcement of the
balance was limited to the extent of the interest rate
applicable from time to time on the claimant's
overdraft bank account, whilst such account was maintained
within its limits.
Part V of the Trade Practices Act, dealing with unfair
practices, presents considerable potential to upset the
enforcement of debts owed under the BCISPA. The grounds of
misleading and deceptive and unconscionable conduct still have
much unexplored potential. Prohibitions on false or misleading
representations (s53 TPA), harassment and coercion (s60 TPA),
unsolicited goods and services (s64 and 65 TPA) and possibly
others remain as yet untouched.
1 the 2003 amending Act is the Building and
Construction Industry Security of Payment Amendment Act
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