In 2023, the decision of the NSW Supreme Court in Sunshine East Pty Ltd v CBEM Holdings Pty Ltd (Sunshine) highlighted a major divergence between NSW and QLD in respect of security of payment legislation applied to unlicensed contractors.
The NSW Court in Sunshine (relying on the NSW Court of Appeal decision in Brodyn), upheld on appeal summary judgment of $420,952.39 obtained by CBEM as an unlicensed contractor (in breach of s10 of the Home Building Act NSW) under s15 of the NSW SOP Act where no payment schedule had been provided by the principal in response to its payment claim.
On appeal, the contractor's entitlement to payment for failures of insurance and licensing were considered.
The Court held, despite that s10 of the Home Building Act NSW (which states if a contractor is unlicensed the subject contract is unenforceable), relief by summary judgment under s15 of the NSW SOP Act (in respect of a payment claim) was unaffected because it was statutory relief under that Act and was not enforcement of the contract.
The decision is in stark contrast to the position in QLD, where an application for summary judgment in respect of a payment claim under the equivalent provision in QLD (s78(2) of the BIF Act) requires a contractor to be licensed.
The key distinction in QLD is the wording of s42(3) of the QBCC Act which (unlike s10 Home Building Act NSW) says an unlicensed contractor “is not entitled to any monetary or other consideration”, except as per s42(4) of the QBCC Act. Several authorities in QLD have confirmed an unlicensed contractor is not entitled to payment under the BIF Act (and predecessor legislation) by summary judgment or otherwise.
To the extent of the insurance failure, the NSW Court found only a small proportion of work was residential building work which required insurance under Part 6 of the Home Building Act.
Further, the Court found the principal had represented to the contractor it would pay that insurance. On that basis, the NSW Court did not proceed further to consider the failures of insurance as that of the contractor.
Interestingly, had that consideration been necessary on the facts, the wording of s94(1)(b) Home Building Act NSW (for uninsured contractors of residential building work) is very similar to that in s42(3) of the QBCC Act (for unlicensed contractors).
Therefore, in the ordinary course, an uninsured contractor in NSW (to the extent of residential building work) would likely not obtain the benefit of the decisions in Brodyn and Sunshine and would not be entitled to payment.
