Contractors beware! In 470 St Kilda Road Pty Ltd v Robinson  FCA 597 (470 St Kilda Road), the Court found the Chief Operating Officer (COO) of a Contractor who made a false statutory declaration concerning the payment status of subcontractors and suppliers, to be personally liable to compensate the Principal for the payment claim paid by the Principal.
It is generally a requirement of payment claims in building contracts that they be supported by a statutory declaration made by a representative of the party making a payment claim which must declare that all contractors and suppliers have been paid for all work which was due to be paid.
In 470 St Kilda Road, the Principal argued that the COO had engaged in misleading and deceptive conduct in contravention of section 18 of the Australian Consumer Law by making a false statutory declaration. Section 18 provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
In this case, the COO had certified in a statutory declaration, that at the time of submitting a payment claim, to his knowledge all subcontractors and suppliers had been paid in full all monies which had become payable. It was found by the Court that the Declarant COO had failed to take adequate steps to inform himself of the true status of monies outstanding before making such a declaration.
The Court held:
- The statutory declaration is a solemn promise containing an acknowledgement that it is true and correct and is made in the belief that making a false declaration will render the maker liable to the penalties of perjury.
- The declaration is an absolute statement to the effect that to the knowledge of the COO, all subcontractors and suppliers had been paid in full all monies which had become payable, which was materially untrue.
- The statement that the COO had to the best of his knowledge and belief made all reasonable enquiries before making the declaration was misleading or deceptive or likely to mislead or deceive.
In this case, causation was proved by the Principal establishing that disclosure of the true status of unpaid contractor and supplier claims would have caused action different from that which had in fact been taken, which was to pay the payment claim accompanied by the false statutory declaration.
It was also argued by the COO that liability should be apportioned by 50% with the Contractor on the basis the declaration was made for the Contractor, pursuant to a contractual requirement of the Contractor and for the benefit of the Contractor. The Court rejected this argument on the basis there was nothing to suggest the Contractor mislead the COO or caused him to make the statutory declaration. Further, the declaration made it clear that it was the COO who made the enquiries and it was his own knowledge in respect of the declaration was made.
This case provides an example of a circumstance in which, despite the Contractor ultimately being placed into liquidation, the Principal was able to obtain a judgment against one of the Contractor’s officers.
For more information, please contact ERA Legal.