The Court of Appeal of New South Wales in Advance Earthmovers Pty Ltd v Fubew Pty Ltd [2009] NSWCA 337 held that the security of payment legislation applies to residential building work if the principal is a corporation, instead of an individual.

In that case the principal is a company that owns a property in the Southern Highlands and the directors of the company wanted to construct residence on that Southern Highlands property for the directors themselves to live in. Before actual construction of the residence, the principal contracted with Advance Earthmovers to do some earthmoving work on the property in preparation for an access road.

Disputes over payment arose and Advance Earthmovers sought to rely upon the security of payment legislation to recover payments. Section 7(2)(b) of the Building and Construction Industry Security of Payment

Act 1999 ("the Act") provides that the Act does not apply to contracts to do residential building work if the owner resides in or proposes to reside in the premises. The principal sought to rely on the above section and argued Advance Earthmovers cannot rely upon the Act because its directors intended to reside in the property once building is completed.

The Court of Appeal rejected the above argument of the principal. It was held at the outset that for the exclusion in s 7(2)(b) to apply, a party to the construction contract (here the principal company, not the directors) must reside or propose to reside in the premises on which the residential building work under the construction contract is to be carried out. The Court of Appeal went on to hold that "assigning a residence to a corporation is a highly artificial action mandated by the statute being considered". A home is where natural persons eat, drink and sometimes marry but "[A] corporation cannot eat, drink or marry", says the Court of Appeal. Hence it was held that a corporation cannot be regarded as a "resident" which is capable of residing in or intending to reside in the Southern Highlands property.