Case Summary: McDonald v MAK Constructions and Building Services Pty Ltd [2024] NSWCA 63
Background: In early 2022, a residential building contract between Ms. McDonald (the owner) and MAK Constructions (the builder) was terminated due to breach.
The builder sought payment for work done under the Security of Payment Act (SOPA), while the owner pursued damages for alleged defects. Despite obtaining a judgment debt against the owner, the builder faced difficulty enforcing the judgment. The builder applied for a stay of proceedings until the debt was paid.
The primary judge granted the stay, but the builder continued to delay enforcement for six months, prompting the owner to appeal the stay of proceedings.
Some of the Reasons for Judgment
The primary judge misconstrued s32(3) of the SOPA. The right to bring a claim at common law is not limited to ‘after the judgment has been satisfied’.
The judge stated that previous cases were about a stay of the execution of judgment debt rather than a stay on proceedings.
the primary judge failed to consider and assess the strength of the homeowner’s case.
The builder’s failure to take prompt and meaningful steps to enforce the judgment debt sits very uncomfortable with the legislative scheme of providing a speedy and effective means of ensuring cash flow to builders (while not prejudicing the common law rights of the parties)
Conclusion: The Court granted leave to appeal, revoked the District Court’s orders, and denied the stay on the owner’s damages proceedings.
Take Home Points:
Generally, some enforcement options include:
- Garnishee orders: if you have sufficient information about the debtor.
- Statutory demands: if there is not an offsetting claim (or if the offsetting claim concerns a subject covered in the SOPA determination)
- Recovery from the principal: depending on the stage of construction/cashflow.
However, the best time to consider debt recovery is BEFORE trading with a debtor.