Can a Statutory Declaration Submitted in Support of a Payment Claim Amount to Misleading And Deceptive Conduct?

statutory declaration

Building and construction contracts often require that before a contractor is paid, the contractor must give the principal a statutory declaration, to the effect that the contractor’s employees, sub-contractors and suppliers have been paid all moneys due and payable to them under the contract.

In a recent case the Federal Court was required to consider whether a statutory declaration by a contractor, which falsely declared that all workers, subcontractors and suppliers had been paid, was misleading and deceptive under section 18 of the Australian Consumer Law.

Facts

In October 2010 a contractor, Reed Constructions Australia Pty Ltd (Reed) entered into a design and construct contract with 470 St Kilda Road Pty Ltd (the principal) for the redevelopment of an office building located at 470 St Kilda Road in Melbourne.  The work involved converting the office building into a 14 storey residential apartment building to be known as “The Leopold”.

Work was completed in May 2012.  In July 2012 Reed went into liquidation.

The contract provided for Reed to make payment claims on the 28th day of each month for work undertaken in that month.

The parties agreed that the requirement in the contract to provide “documentary evidence” in support of a payment claim would include Reed providing to the principal a statutory declaration as to the due payment of workers, subcontractors and suppliers.

The disputed statutory declaration (which was completed on behalf of Reed by Mr Robinson, its Chief Operating Officer, who was also a Justice of the Peace) stated:

“PROGRESS PAYMENT NO:          15, 12 December 2011

CONTRACTOR:                                  Reed Constructions Australia Pty Ltd

PROJECT:                                             Leopold, 470 St Kilda Road, Melbourne, VIC, 3000

PRINCIPAL:                                         470 St Kilda Road

STATUTORY DECLARATION

I Glenn Robinson, Chief Operating Officer, of Reed Constructions Australia Pty Ltd do solemnly and sincerely declare as follows:

I am the contractor or authorized employee of the contractor entitled to make the claim for progress payment as detailed above. That to the best of my knowledge and belief having made all reasonable enquiries, at this date –

– all workmen who are or at any time have been engaged on the work under the Contract have [sic] paid in full amounts which have become due to them by virtue of their employment on the work under the Contract as wages and allowances of every kind required to be paid by or under any statute, ordinance of subordinate legislation, or by any relevant award, determination, judgment or order of any competent court, board, commission or other industrial tribunal or by any relevant industrial agreement that is enforced in the State in which the word under the Contract has been carried out and to the latest date at which such wages and allowances are payable.

– all sub-contractors or suppliers of materials who are or at any time have been engaged on the work under the Contract have been paid in full all monies which have become payable to the sub-contractor under terms of the sub-contract or to the supplier of materials under the terms of agreement for supply.

– no disputes exist with workmen, sub-contractors or suppliers.

– all insurances required under the Contract are current and all premiums have been paid.

I ACKNOWLEDGE that this declaration is true and correct and I make if in the belief that a person making a false declaration is liable to the penalties of perjury.

DECLARED at North Sydney

in the state of NSW this 12th day of December 2011…”

Reed subsequently issued a tax invoice for $1,426,641.70 which was paid by the principal.

The statutory declaration was false as approximately half of the amount claimed comprised overdue amounts payable to the contractor’s workers, subcontractors and suppliers.

As Reed went into liquidation and returned nothing to unsecured creditors, including the principal, the principal sought to recover from Mr Robinson, by way of damages, the full amount paid to Reed under the payment claim ($1,426,641.70).

The principal sued Mr Robinson under section 18 of the Australian Consumer Law, which 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.”

The result

Mr Robinson admitted that:

  • he had made the statutory declaration in trade or commerce for the purpose of procuring payment by the principal to Reed of the amount of the invoice
  • he knew and intended that the principal would rely on the statutory declaration in making that payment.

The Court found that Mr Robinson’s statement that he had made all reasonable enquiries (in the 2nd paragraph of the statutory declaration), was misleading and deceptive, in light of:

  • his knowledge of Reed’s dire cash flow problems
  • the fact that Reed had recently failed to pay all subcontractors and suppliers in full
  • the fact that critical path subcontractors had recently threatened to block or cease supply to the project
  • his failure to make any up-to-date enquiries of persons who had access to the financial accounts (which would have revealed that all subcontractors and suppliers had not been paid)
  • his failure to look at any actual invoices or any relevant recent monthly reports
  • his failure to make any enquiries of the actual trading terms of all relevant subcontractors and suppliers.

The Court rejected a submission by Mr Robinson that his statutory declaration was simply a statement as to his “state of mind”, and not an absolute statement to the effect that all workers, subcontractors and suppliers had been paid in full.

To the contrary the Court held that the declaration was an absolute statement to the effect that all workers, subcontractors and suppliers had been paid in full, which was materially untrue.

Further that a statutory declaration is:

a solemn promise, containing, as the legislation requires, 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 Court further held that the principal had suffered loss and damage by reason of the statutory declaration, because the evidence established that if the true position had been disclosed by Mr Robinson, the principal would not have paid the invoice.

Accordingly the Court ordered that Mr Robinson pay the principal the amount of $1,426,641.70 plus interest.

Comment

This case illustrates that any person required to complete a statutory declaration on behalf of a contractor, in support of a payment claim, should exercise extreme care in doing so.

In order to minimise the risk of liability all necessary and reasonable enquiries should be undertaken to verify the matters set out in the statutory declaration, before it is signed.  Preferably a written record should be made of those inquiries.

Case Citation

The case is 470 St Kilda Road Pty Ltd v Robinson [2017] FCA 597 (30 May 2017).

For more information on misleading and deceptive conduct please click here.

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