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SECURITY OF PAYMENT QUESTIONS AND ANSWERS
13 Payment claims
(1) A person referred to in section 8 who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.
(1A) A payment claim may be served on and from the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and on and from the last day of each subsequent named month.
(1B) However, if the construction contract concerned makes provision for an earlier date for the serving of a payment claim in any particular named month, the claim may be served on and from that date instead of on and from the last day of that month.
(1C) In the case of a construction contract that has been terminated, a payment claim may be served on and from the date of termination.
(2) A payment claim--
(a) must identify the construction work (or related goods and services) to which the progress payment relates, and
(b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and
(c) must state that it is made under this Act.
(3) The claimed amount may include any amount--
(a) that the respondent is liable to pay the claimant under section 27(2A), or
(b) that is held under the construction contract by the respondent and that the claimant claims is due for release.
(4) A payment claim may be served only within--
(a) the period determined by or in accordance with the terms of the construction contract, or
(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),
whichever is the later.
(5) Except as otherwise provided for in the construction contract, a claimant may only serve one payment claim in any particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in that month.
(6) Subsection (5) does not prevent the claimant from--
(a) serving a single payment claim in respect of more than one progress payment, or
(b) including in a payment claim an amount that has been the subject of a previous claim, or
(c) serving a payment claim in a particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in a previous named month.
(7) A head contractor must not serve a payment claim on the principal unless the claim is accompanied by a supporting statement that indicates that it relates to that payment claim.
Maximum penalty—1,000 penalty units in the case of a corporation or 200 penalty units in the case of an individual.
(8) A head contractor must not serve a payment claim on the principal accompanied by a supporting statement knowing that the statement is false or misleading in a material particular in the particular circumstances.
Maximum penalty—1,000 penalty units in the case of a corporation or 200 penalty units or 3 months imprisonment (or both) in the case of an individual.
(9) In this section--
supporting statement means a statement that is in the form approved by the Secretary and (without limitation) that includes a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned.
Note--
An offence against subsection (7) or (8) committed by a corporation is an executive liability offence attracting executive liability for a director or other person involved in the management of the corporation—see section 34D.
Who can make a payment claim?
Any company or person who is, or claims to be, entitled to a progress payment and:
1. who provides construction work or related services under a construction contract,
2. where the construction site is in New South Wales (section 7 (4) of the NSW Act)
3. within 12 months before the service of the payment claim (section 13 (4)), or if the contract provides a longer period, that longer period (section 13 (4)).
4. who is not an employee of the respondent (section 7 (3) (a) of the NSW Act), and
5. who is entitled to be paid for the value of that work or those services (see section 7 (2) - contracts of loan, guarantee or insurance or where the consideration is not related to the value of the goods and services supplied are excluded);
can make a payment claim.
Do you have to first establish that you are entitled to a payment before you can serve a payment claim?
No. You just have to claim that you are. As a result of the 2002 amendments it is now only necessary for the claimant to claim to be entitled to a progress claim. The earlier legislation conferred the right only on a "person who was entitled to a progress payment" (see the comments of Austin J in Jemzone v Trytan [2002] NSWSC 395 at para 38 which gave rise to the amendment).
Do the words "is or may be liable to make the payment" in section 13 mean that a payment claim may be served on anyone who "may be liable"?
No. The person must be a party to the construction contract. See Grave v Blazevic Holdings [2010] NSWCA 324. Per McDougall JA , with whom the Court agreed,
36 For those reasons, I conclude that the primary judge erred in his construction and application of ss 14 and 15 of the Security of Payment Act. He erred because the defence proposed by the applicant was not one foreclosed by s 15(4)(b)(ii). A defence that "I am not a party to, and thus not liable under, the construction contract" is not a defence arising under the contract sued upon. It is a denial of the existence, as between applicant and respondent, of any such contract.
Does all of the work the subject of a payment claim have to have been performed less than 12 months before it is served?
No. Not all of the work needs to be less than 12 months old, so long as some of it is less than 12 months old, the whole of the unpaid work can be claimed for.
Per Einstein J in Leighton Contractors Limited v Campbelltown Catholic Club Limited [2003] NSWSC 1103 at para [94] also Barclay Mowlem Construction Limited v Estate Property Holdings Pty Limited [2004] NSWSC 649 at paras 23 and 24 also Property & Equity Developments v Parnell [2004] NSWSC 1035.
When do you need to serve a supporting statement under the Act?
When a head contractor serves a payment claim on a principal the payment claim must now be accompanied by a supporting statement which includes a declaration that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned. Failure by a head contractor to serve a supporting statement with a payment claim, or service of one which is false and misleading, is now a criminal offence. The Regulations provide that where the obligation to pay a subcontractor is disputed that must be referred to in an attachment to the supporting statement.
What happens if you serve a payment claim without supporting statement?
Service of a payment claim without supporting statement where one is required is not good service of the payment claim under the Act. see Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 (5 November 2014)
WHAT CAN YOU CLAIM FOR?
Can you claim for damages for breach of contract or for lost opportunity?
No. You can only claim for the value of work done, not damages for breach of contract or for loss of an opportunity. See Quasar Constructions v Demtech Pty Ltd [2004] NSWSC 116 at para 34. In that case the adjudicator awarded the claimant builder the whole of the lump sum contract price even though the builder had not completed the works. The adjudicator's award was quashed by the Court as it was really an award in the nature of damages, not an award for the value of work done.
Can you claim for delay damages provided for under the contract?
Yes. For example, If delay damages are made recoverable under the contract, that is an acceptable claim and an award can be made in respect to such damages. Coordinated Construction Co. Pty. Ltd. v. Climatech (Canberra) Pty. Ltd. & Ors. [2005] NSWCA 229 The Court of Appeal in paras 40-45 firmly concluded that delay costs of the kind provided for in the contract can be claimed in a payment claim:
40 Further, in the case of a construction contract that provides that progress payments include certain amounts, s.9(a) strongly suggests that such amounts are to be included in progress payments required by the Act, whether or not they are for construction work or related goods and services; and in my opinion, to put it at its lowest, that in turn suggests that any requirement from s.13 and the definition of ""claimed amount"" that the progress payment must be for construction work carried out or for related goods and services supplied should not be given a narrow construction or effect. I do not say that it would be sufficient that an amount be ""in respect of"" or ""in relation to"" construction work carried out or related goods and services applied; but I do say that ""for"" should not be construed narrowly.
41 In my opinion, the circumstance that a particular amount may be characterised by a contract as ""damages"" or ""interest"" cannot be conclusive as to whether or not such an amount is for construction work carried out or for related goods and services supplied. Rather, any amount that a construction contract requires to be paid as part of the total price of construction work is generally, in my opinion, an amount due for that construction work, even if the contract labels it as ""damages"" or ""interest""; while on the other hand, any amount which is truly payable as damages for breach of contract is generally not an amount due for that construction work.
42 Under the contract in this case, delay damages are payable only if an EOT is for a compensable cause, that is, in general some act or omission of the head contractor or the superintendent or the sub-contract superintendent; but nevertheless, they are not of their nature damages for breach but rather are additional amounts which may become due and payable under the contract (cl.34.9) and which are then to be included in progress payments (cl.37.1). They are therefore prima facie within s.9(a) of the Act.
43 If in substance they represent the increased cost or price of construction work actually carried out, in my opinion they are clearly for construction work carried out. If they represent the cost or price of goods or services actually supplied in connection with the construction work under the contract, they are for related goods or services supplied, even if not for construction work carried out.
44 If they represent off-site costs (such as office overheads) or other on-site costs, it may be a question of fact and degree whether they are for construction work carried out or for related goods and services supplied. They would in my opinion properly be regarded at least as part of the price for the totality of the construction work when completed. And it would seem artificial to say that they are excluded from the Act if they are not referable to work that has already been carried out, particularly when s.9(b) refers to the value of construction work undertaken to be carried out and related goods and services undertaken to be supplied. However, it is not necessary in this case altogether to exclude the possibility that some delay damages claimed under this contract might possibly not be for construction work carried out or related goods and services supplied within the definition of ""claimed amount"" in s.4; but it is certainly not obvious that this is so in relation to any of the claims in this case.
45 It follows from this discussion that delay damages and interest under this contract could be claimed to be due for construction work carried out or for related goods and services supplied; and in my opinion, even if s.13 is construed as limiting claims to claims for payment for construction work carried out or for related goods and services supplied, it would be for the adjudicator to determine whether or not such amounts should be included in the amount determined, having regard particularly to s.9(a) and other provisions of the Act and the contract. This appears to be what each adjudicator did; and I am not satisfied even that any error of law on the face of the record has been established, much less an error of the kind that could invalidate a decision.
Indeed if the contract makes provision for an estimate of losses by the builder for delay to be payable by the owners, the adjudicator is entitled to go through that estimating process even though he is really assessing damages. That is, so long as the contract provides for it, it can be claimed. See Bergin J in Shell Refining (Australia) Pty Limited v A J Mayr Engineering Pty Limited [2006] NSWSC 94
30 The adjudicator went further and referred to the General Conditions of Contract and said:
It appears to me that clause 2.6 gives the claimant a contractual right to delay damages caused by acts or omissions of the respondent. This is just what the subject claims are alleged to be for. Whether the claims can be categorised as a "global claim" as alleged by the [plaintiff] is irrelevant. They are a claims for alleged costs which fall within the definition of Delay Costs.
31 I am not satisfied that the adjudicator failed to consider whether the defendant had established a nexus between delays and costs said to have been incurred.
Is repeating earlier payment claims an abuse?
No. The NSW Act acknowledges that a claim may be advanced more than once. In Allpro Building Services v C&V Engineering Services [2009] NSWSC 1247 McDougal J said:
25 Mr Kalyk sought to submit further, and in more general terms, the payment claim of 2 October 2009 repeated earlier payment claims that had been advanced at different times. However, even if that is so, it does not mean that there is an abuse of process or an issue estoppel. Those concepts become relevant to the extent that any of the payment claims have been the subject of prior adjudication (or, of course, of Court proceedings) or to the extent that any of those invoices is being propounded in a way that makes it relevantly an abuse of process. Repetition by itself does not seem to do so, particularly in circumstances where the Act acknowledges in at least two places that a claim may be advanced more than once (see s 13(6) and s 22(4)).
Can payment claims cover, for example, losses and expenses under the contract such as delay costs or losses and expenses arising from suspension of work by the claimant pursuant to the NSW Act?
Yes. Hodgson JA in Brodyn Pty. Ltd. t/as Time Cost and Quality v. Davenport & Anor. [2004] NSWCA 394 said:
64 In my opinion, as submitted by Mr. Fisher for Dasein, this view is supported by s.13(6), which indicates that successive payment claims do not necessarily have to be in respect of additional work; and especially by s.13(3)(a), which provides for inclusion in payment claims of amounts for which the respondent is liable under s.27(2A). Losses and expenses arising from suspension of work could arise progressively for a substantial time after work has ceased on a project, and s.13(3)(a) expressly contemplates that further payment claims for these losses and expenses may be made progressively.
Can you suspend work for failure to pay interest alone?
Yes if the interest has been made the subject of an adjudiciotn ceritifcate, No if it is just interest tha accrues in respect of an unpaid scheduled amoint where the scheduled amount itslef has been paid. See para 59 the judgment of Parker J in Galileo Miranda Nominee Pty Ltd v Duffy Kennedy Pty Ltd [2019] NSWSC 1157 (6 September 2019)
59. In my view, the better conclusion is that, for the purposes of s 27(2), the “amount that is payable” under s 16(1) is the amount specified in the payment schedule and does not include interest under s 11. It follows that DK was not entitled to continue the suspension of works after 28 March.
How frequently can you make a payment claim?
This depends upon whether the contract nominates reference dates or, where it does not, the reference dates are as implied by section 8 as the last day of the named month.
Section 13(5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
If the contract specifies the reference dates such as a provision requiring progress claims to be made fortnightly, or, for example, on the fifteenth day of the month, or at lock up stage, or that no reference dates arise after the contract is terminated, then the claimant can only claim once with respect to each of those dates as allowed by the contract.
If there is no reference date specified by the contract there is no date "determined by or in accordance with the contract" and in those circumstances the Act provides that a reference date arises only once per calendar month (sections 8 (2) and 13 (5)), on the last day of the month, and then each month thereafter until 12 months after the last work was done. There have been recent decisions to the effect that a claimant can only make a payment claim in respect of a reference date in respect of a month in which construction work was performed. This was based on an interpretation of the expression named month by Stevenson J in Grid Projects NSW Pty Ltd v Proyalbi Organic Set Plaster Pty Ltd [2012] NSWSC 1571. In that case Stevenson J interpreted the expression "named month" as used in section 8 of the Act as meaning the month in which work was done or services provided. This was recently held to be incorrect by McDougall J in Broadview Windows Pty Ltd v Architectural Project Specialists Pty Ltd [2015] NSWSC 955. McDougall J said that had to be incorrect because the meaning of the expression "named month" was determined by the Interpretation Act 1987 (NSW) which defined "named month" as meaning January, February .....December and in view of the still binding decision of the Court of Appeal in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 that the reference dates continue to arise for 12 months from the cessation of work whether work has been done in that month or not.
Is the existence of a reference date a jurisdictional fact?
Yes it is. The High Court of Australia in Southern Han Breakfast Point Pty Ltd (in Liq.) v Lewence Construction Pty Ltd [2016] HCA 52 unanimously held that the existence of a "reference date" is a precondition to making a valid payment claim under the Building and Construction Industry Security of Payment Act NSW 1991 and any adjudication determination consequent upon an invalid payment claim is void and of no effect.
Can you make a payment claim after the work is finished?
Yes. So long as the contract does not say otherwise. you have twelve monthly reference dates after the work is completed, with a final claim after the defects liability period if there is one. See the comments of McDougall J at paragraph 30 of his judgment in The Trustees of the Roman Catholic Church for the Diocese of Lismore v TF Woollam and Son [2012] NSWSC 1559 .
Can the performance of rectification work give rise to a further reference date?.
Yes. see the comments of Stevenson J in Pinnacle Construction Group Pty Ltd v Dimension Joinery & Interiors Pty Ltd [2018] NSWSC 894 (15 June 2018)
paras 33 to 39 . The logic was that by doing the rectification work the claimant made itself entitled to money being withheld in respect of that work.
Can you make a payment claim after the contract is terminated?
This is uncertain at the moment. In Grid Projects Stevenson J decided that the termination of the contract prevented any further reference dates arising and even if work had been done since the last payment claim, that work did not give rise to a further reference date if the contract had been terminated. Grid Projects is currently on appeal. In Broadview Windows Pty Ltd v Architectural Project Specialists Pty Ltd [2015] NSWSC 955, McDougall J said that had to be incorrect in view of the binding decisions of the Court of Appeal that the reference dates continue to arise for 12 months from the cessation of work. That is, reference dates continue to arise despite the termination of the contract. Remember however that the Act allows the contract to specify when reference dates arise, only providing for monthly reference dates if the contract fails to so provide. In cases where the contract says or clearly implies that reference dates do not arise after termination, such as a termination clause which sets out a code of conduct for the parties to resolve outstanding entitlements to payment, then unless the code is viewed as an attempt to avoid the provisions of the Act, it will prevail.
PAYMENT SCHEDULES
The NSW Act provides:
14 Payment schedules
(1) A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.
(2) A payment schedule:
(a) must identify the payment claim to which it relates, and
(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).
(3) If the scheduled amount is less than the claimed amount, the (1) A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.
(2) A payment schedule:
(a) must identify the payment claim to which it relates, and
(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).
(3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment.
(4) If:
(a) a claimant serves a payment claim on a respondent, and
(b) the respondent does not provide a payment schedule to the claimant:
(i) within the time required by the relevant construction contract, or
(ii) within 10 business days after the payment claim is served,
whichever time expires earlier,
the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.
What does "provided with a payment schedule" mean?
Section 14 of the NSW Act says that the claimant must be "provided" with a payment schedule. In Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 the Court of Appeal decided that this means the same thing as "served" and that the service provisions apply.
Hodgson AJ said, with the approval of the whole Court:
61 The use of the word "provide" rather than the word "serve" does carry a suggestion that a different meaning is intended, and that accordingly s.31 does not apply in the case of the word "provide". Against this, however, I do not think the legislature would have (1) used a problematic word like "provide" with the intention that it have a different meaning from "serve", (2) given useful instructions as to how service may be effected, yet (3) given no instructions whatsoever as to how provision may be effected. When this consideration is combined with the consideration raised in the previous paragraph, in my opinion this justifies the conclusion, reached by the primary judge in this case, that "provide" does not mean anything different from "serve", and that s.31 applies to "provision" as well as to "service".
In the same case Hunt and Handley AJJ also said:
65 I agree with the orders proposed by Hodgson JA, and with his reasons except in relation to two matters referred to in pars [55] and [56] of his judgment, but which nevertheless do not affect the orders he has proposed.
66 The service of a document on a company is effected by posting it to the company's registered office: Corporations Act 2001, s 109X(1)(a). If the company does not change its registered address, but chooses to redirect its mail to another address, then, in my respectful opinion, s 109X continues to operate to constitute the posting of the document to that registered office as service on the company, notwithstanding the company's order redirecting its mail.
67 That document is deemed to have been served on the company at the time when it would have been delivered to that address in the ordinary course of post, unless the contrary is proved by the company: Acts Interpretation Act 1901, s 29. The company is entitled to prove that the document arrived at its registered office at a different time from that if the document had been delivered to that address in the ordinary course of post. However, it does not do so, again in my respectful opinion, by proving that it arrived at the address to which it had diverted its mail at a different time from that on which the document would have been delivered to its registered office in the ordinary course of post.
68 Section 31 of the Building and Construction Industry Security of Payment Act 1999 permits service of a document on a person by sending it by post to that person's ordinary place of business. In the present case, the evidence is that the appellant continued to use its registered office as its ordinary place of business notwithstanding the diversion of its mail to another address. I therefore do not regard it as even arguable that the time the document arrived at the address to which the mail had been diverted was the time of service on the appellant.
69 It follows also that I do not agree with the last sentence of par [56].
When must you provide a payment schedule?
The respondent must provide a payment schedule WITHIN THE TIME REQUIRED BY THE RELEVANT CONSTRUCTION CONTRACT, or within 10 business days after the payment claim is served, WHICHEVER TIME EXPIRES EARLIER, (section 14(4)(b)(2). If the contract provides for a shorter time than ten business days to provide a payment schedule, provide it within that time. Time begins to run from midnight on the day of service, that is the first day is the first business day after the day of service. A business day means any day other than a Saturday, Sunday, pubic holiday or 27, 28, 29, 30 or 31 December.(section 4)
In Thiess Pty Ltd & Anor v Lane Cove Tunnel Nominee Company Pty Ltd & Anor [2009] NSWCA 53 the respondent almost came to serious grief with respect to this provision. In that case the relevant clause, Clause 14.3A, provided:
"The Trustee must issue a payment schedule within 4 Business Days of receipt of the payment claim (including the payment claim made pursuant to clause 14.6(a)). The payment schedule must identify the payment claim to which it relates and if it is for an amount less than the claimed amount, the payment schedule must indicate why the amount stated in the payment schedule as payable is less and if it is less because the Trustee is withholding payment for any reason, the Trustee's reasons for withholding payment, provided that the amount stated in the payment schedule may not be less than the amount certified by the Independent Verifier under the certificate referred to in clause 14.2(a) except as otherwise expressly provided by this deed, including clauses 14.5, 14.10 and 14.12."
In this case, despite the clear similarity between the terms of the clause and the NSW Act, the Judge at first instance, and the Court of Appeal, albeit for different reasons, held that this clause dealt only with contractual progress claims and not with payment claims under the NSW Act. The decision was a difficult one and any respondent would be mad not to serve the best payment schedule it could within the shorter period.
Who can provide a payment schedule?
The payment schedule must be ideally be provided by the respondent, or an agent of the respondent, but not the architect or superintendent. See Leighton Contractors Pty Ltd v Campbelltown Catholic Club Pty Ltd [2003] NSWSC 1103 para 107. This is because the Architect or Superintendent, when issuing progress certificates is acting as an independent certifier and not as the agent of the Principal. The better practice may be, where there is a competent superintendent who has issued a progress certificate in relation to the payment claim, is to have the superintendent issue the progress certificate with a covering letter saying:"This is Not A Payment Schedule" and then have the principal issue the payment schedule, which can be a letter headed "Payment Schedule" stating in that letter the amount you intend to pay (which will be the amount certified by the superintendent in the progress certificate) and then saying: "The reasons for non payment given in the attached progress certificate are adopted as part of the payment schedule." and attach the progress certificate to the payment schedule. Send the payment schedule to the claimant within ten business days, ideally by facsimile so you can prove service under the NSW Act. See Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd & Ors [2005] NSWSC 439 where it was held that a solicitor cannot provide a payment schedule under the NSW Act. But also see Baulderstone Hornibrook Pty Ltd v Queensland Investment Corporation Ltd [2006] NSWSC 522 esp para 39 and Lewance Construction Pty Ltd -v- Southern Han Breakfast Point Pty Ltd [2014] NSWSC 1726 a case where the parties had accepted through a course of dealing, that the superintendent had the authority to provide payment schedules. The summary is that you can now probably get away with the superintendent providing the payment schedules but it is a bit risky.
What does "indicate" reasons for non payment mean?
The term "indicate" could even involve reference to documents not included in the payment claim (see Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd & Anor [2009] NSWCA 157 which dealt with the interpretation of that term with respect to payment schedules) Per Giles JA:
50 In my opinion, indication within s 14(3) does not exclude what the adjudicator described as incorporation by reference of material extrinsic to the payment schedule. The adjudicator appears to have thought that provision involving physical receipt meant that regard could not be had to anything not physically received with the payment schedule. That can not be so. As a simple illustration, a payment schedule will commonly refer to provisions of the construction contract; it would make no sense that the construction contract, or the relevant provisions, had to be set out in full or attached although known to the parties and the basis for their relationship. It would equally be neither common sense nor a practical application of s 14(3) to deny indication by reference to correspondence in which reasons have been fully set out simply because a copy of the correspondence is not physically attached to or provided with the payment schedule.
What should be in a payment schedule?
The short answer is: everything. That is, everything which can justify your client not paying the payment claim. If you do not refer to it in the payment schedule you cannot rely upon it in the adjudication. As per McDougall J in Kembla Coal & Coke v Select Civil & Ors [2004] NSWSC 628 at para 34:
"It would follow that the adjudicator cannot determine the entitlement of the claimant by reference to any "defence" that is not contained in the payment schedule (or in any other "matter" to which the adjudicator can have regard under s 22(2)). Conversely, the adjudicator is required to determine only those matters that are raised in the material to which, under s 22(2), he or she can have regard."
That includes:
Any significant factual circumstance such as:
That the work being charged for is not construction work
That the work is not within the ambit of the NSW Act being residential building work in which the respondents reside or intend to reside
That the payment claim is being served more than 12 months after the last work was performed under the project.
That the work is not adequately identified
That the claim is premature under the contract
That the work has a lesser value than that claimed by the claimant
That the respondent has a counter claim arising under the contract such as a claim for liquidated damages or a backcharge.
That the claim of the claimant in respect of delay costs is not justified:
o in terms of the period of the delay
o in terms of the cost of the delay
o that the claimant has not properly applied under the contract for extensions of time
o that the claimant has not properly applied under the contract for delay costs
o that the cause of delay was not a compensable cause under the contract.
What level of particularity should go into a payment schedule?
You do not have to give full particulars so long as you "indicate" the essence of the reason for with holding payment sufficiently to enable the claimant to make a decision whether or not to pursue the claim and to understand the nature of the case it will have to meet in an adjudication. Multiplex Constructions v Luikens [2003] NSWSC 1140 para 78. However generally the more the better.
Can a payment schedule be so lacking in particularity that it is not a payment schedule at all?
Yes. See Joye Group Pty Ltd v Cemco Projects Pty Ltd [2021] NSWCA 211 In that case a email response to payment claims which merely said: “Please be advised that no payment for above Invoices, until all works been completed [sic].” and copies of the invoices (payment claims) were attached to the email, It was held not to be a valid payment schedule. In that case the purported payment schedule was in response to two payment claims from the claimant. That was not held to invalidate it but the lack of specificity was such as to leave the claimant without any idea as to the reasons the respondent was withholding payment and was an example of the kind of problem contemplated by Palmer J in Multiplex Constructions Pty Ltd v Luikens[6] i;
“[67] ... The evident purpose of s 13(1) and (2), s 14(1), (2) and (3), and s 20(2B) is to require the parties to define clearly, expressly and as early as possible what are the issues in dispute between them; the issues so defined are the only issues which the parties are entitled to agitate in their dispute and they are the only issues which the adjudicator is entitled to determine under s 22. It would be entirely inimical to the quick and efficient adjudication of disputes which the scheme of the Act envisages if a respondent were able to reject a payment claim, serve a payment schedule which said nothing except that the claim was rejected, and then ‘ambush’ the claimant by disclosing for the first time in its adjudication response that the reasons for the rejection were founded upon a certain construction of the contractual terms or upon a variety of calculations, valuations and assessments said to be made in accordance with the contractual terms but which the claimant has had no prior opportunity of checking or disputing. In my opinion, the express words of s 14(3) and s 20(2B) are designed to prevent this from happening.
This does however leave the clamant and its advisors in the position of having to make a judgment call as to whether to commence legal proceedings or to go to adjudication. Tactically the best course might be to commence an adjudication and, if the respondent tries to invalidate the adjudication by saying that the payment schedule was invalid, you will immediately have an admission that the claimed amount is due and payable under section 16 of the Act.
What does 'indicate the amount of the payment' mean in section 14(2)(b)?
In Barclay Mowlem v Tesrol Walsh Bay [2004] NSWSC 1232, where Mc Dougall J held that a letter, which did not so much state an amount as merely implied (with reasons) that no payment would be made, was a valid payment schedule complying with section 14(2)(b).
15 There is a question as to whether "nothing" or "nil" or "zero" is "an amount" for the purposes of s 14(2)(b ). In the context of the Act, and regardless of mathematical and philosophical considerations, I think that it is. That is because a respondent who proposes to pay nothing is clearly proposing to pay less than the claimed amount. In those circumstances, as s 14(3) makes clear, the claimant should know why. For example, the claimant would need to decide whether to take the next step, of seeking adjudication. It seems to me that a practical, rather than a mathematical or philosophical, approach is required. A practical approach would include within "the amount" the concept of a nil payment. Some support for this is, I think, obtained from the words "(if any)" that followed the word "amount" in s 14(2)(b ).
16 Further, the alternative view would mean that where a respondent proposed to pay nothing, a valid payment schedule need only identify the payment claim to which it relates (s 14(2)(a)). It need not, on the alternative view, say anything more: an obvious absurdity. I do not think that the legislature intended that a respondent who proposed to pay nothing need comply only with s 14(2)(a).
17 When one reads the 18 May letter, I think that it emerges clearly that TWB did not propose to pay BMC anything in respect of the payment claim. In other words, I think, it is plain from the letter, read as a whole, that TWB proposed in it to pay nothing in respect of the payment claim.
18 If it were necessary to do so, I would consider that the context known to the parties supports this view. For example, the letter of 12 May 2004 (referred to in that part of the 18 May letter that deals with the extension of time costs) said that the claim was "surprising" and "invalid".
19 I therefore conclude that the 18 May letter satisfies the requirements of s 14(2)(b ). That is so a fortiori if, contrary to my view "nothing" is not an amount for the purposes of s 14(2)(b ).
Is there need for quantification in a payment schedule?
Yes. There is a tendency for some respondents to state a scheduled amount as "nil" and then make vague assertions about how the payment claim should be reduced. There is no point making an objection that an amount claimed is too high if you are not going to propose an alternative amount.(and justify the difference). It is not the function of the adjudicator to work out what the respondent's case is. The respondent really needs to propose a dollar figure, ideally with an expert opinion to support it. Sometimes you can get away with it and give the specific dollar value in the adjudication response but only if it is already ascertainable from the payment schedule. Basically, give the adjudicator something to work with. See paras 80 tp 90 of the judgment of Rohman in Maxstra NSW Pty Ltd v Blacklabel Services Pty Ltd [2013] NSWSC 406 (24 April 2013)
Can the reason indicated for non payment be a claim for general damages?
Generally No. Such a claim is beyond the jurisdiction of the adjudicator. You can only claim for the value of work done, not damages for breach of contract or for loss of an opportunity. See Quasar Constructions v Demtech Pty Ltd [2004] NSWSC 116 at para 34. In that case the adjudicator awarded the claimant builder the whole of the lump sum contract price even though the builder had not completed the works. The adjudicator's award was quashed by the Court as it was really an award in the nature of damages, not an award for the value of work done. However - if the contract makes provision for an estimate of losses by the builder for delay for example to be payable by the owners, the adjudicator is entitled to go through that estimating process even though he is really estimating damages. That is, so long as the contract provides for it, it can be claimed. See Bergin J in Shell Refining (Australia) Pty Limited v A J Mayr Engineering Pty Limited [2006] NSWSC 94
What is the "due date"?
Section 11 provides as follows:
Due date for payment
11 Due date for payment
(1) Subject to this section and any other law, a progress payment to be made under a construction contract is payable in accordance with the applicable terms of the contract.
(1A) A progress payment to be made by a principal to a head contractor under a construction contract becomes due and payable on:
(a) the date occurring 15 business days after a payment claim is made under Part 3 in relation to the payment, except to the extent paragraph (b) applies, or
(b) an earlier date as provided in accordance with the terms of the contract.
Note : This Act does not apply to a progress payment to be made by a principal to a head contractor under an exempt residential construction contract. (See section 7 (2) (b).) Subsection (1C) applies to progress payments under a construction contract that is connected with an exempt residential construction contract.
(1B) A progress payment to be made to a subcontractor under a construction contract (other than a construction contract that is connected with an exempt residential construction contract) becomes due and payable on:
(a) the date occurring 30 business days after a payment claim is made under Part 3 in relation to the payment, except to the extent paragraph (b) applies, or
(b) an earlier date as provided in accordance with the terms of the contract.
(1C) A progress payment to be made under a construction contract that is connected with an exempt residential construction contract becomes due and payable:
(a) on the date on which the payment becomes due and payable in accordance with the terms of the contract, or
(b) if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made under Part 3 in relation to the payment.
(2) Interest is payable on the unpaid amount of a progress payment that has become due and payable at the rate:
(a) prescribed under section 101 of the Civil Procedure Act 2005 , or
(b) specified under the construction contract, whichever is the greater.
(3) If a progress payment becomes due and payable, the claimant is entitled to exercise a lien in respect of the unpaid amount over any unfixed plant or materials supplied by the claimant for use in connection with the carrying out of construction work for the respondent.
(4) Any lien or charge over the unfixed plant or materials existing before the date on which the progress payment becomes due and payable takes priority over a lien under subsection (3).
(5) Subsection (3) does not confer on the claimant any right against a third party who is the owner of the unfixed plant or materials.
(6) Except as otherwise provided by this section, the rules and principles of the common law and equity apply to the determination of priorities between a lien under subsection (3) over any unfixed plant and materials and any other interest in the plant and materials.
(7) Section 73 (2) of the Personal Property Securities Act 2009 of the Commonwealth is declared to apply to liens under subsection (3).
(8) A provision in a construction contract has no effect to the extent it allows for payment of a progress payment later than the relevant date it becomes due and payable under subsection (1A) or (1B).
When can the claimant exercise a lien over unfixed plant and materials?
(3) If a progress payment becomes due and payable, the claimant is entitled to exercise a lien in respect of the unpaid amount over any unfixed plant or materials supplied by the claimant for use in connection with the carrying out of construction work for the respondent.
(4) Any lien or charge over the unfixed plant or materials existing before the date on which the progress payment becomes due and payable takes priority over a lien under subsection (3).
(5) Subsection (3) does not confer on the claimant any right against a third party who is the owner of the unfixed plant or materials.
(6) Except as otherwise provided by this section, the rules and principles of the common law and equity apply to the determination of priorities between a lien under subsection (3) over any unfixed plant and materials and any other interest in the plant and materials.
(7) Section 73 (2) of the Personal Property Securities Act 2009 of the Commonwealth is declared to apply to liens under subsection (3).
What are the options of a claimant if there is no payment schedule?
Section 15 provides that
15 Consequences of not paying claimant where no payment schedule
(1) This section applies if the respondent:
(a) becomes liable to pay the claimed amount to the claimant under section 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and
(b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
(2) In those circumstances, the claimant:
(a) may:
(i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or
(ii) make an adjudication application under section 17 (1) (b) in relation to the payment claim, and
(b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.
(3) A notice referred to in subsection (2) (b) must state that it is made under this Act.
(4) If the claimant commences proceedings under subsection (2) (a) (i) to recover the unpaid portion of the claimed amount from the respondent as a debt:
(a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and
(b) the respondent is not, in those proceedings, entitled:
(i) to bring any cross-claim against the claimant, or
(ii) to raise any defence in relation to matters arising under the construction contract.
Should you combine your claim under section 15(2)(a)(i) with an alternate claim under the contract?
Definitely not. In order to get the benefit of speed of resolution the Act is intended to provide you must, after the defence is filed by the respondent, seek a summary judgment where there are no disputes as to fact, or a separate proceedings where there are (the usual disputes are ones of service or that the work is inadequately identified in the payment claim.)
Is a dispute concerning s 15(2)(a)(i) of the SOP Act arbitrable?.
No. In Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd [2011] NSWSC 195 in a case where Ball J found that the parties had, after a dispute had arisen, agreed to arbitrate all disputes before a certain date, but that agreement was not enforceable with respect to a claim under section 15.
45...................Provisions such as s 43 of the Insurance Contracts Act and s 7C of the Home Building Act are necessary precisely because, on the face of it, disputes under contracts of those types are arbitrable. The same could not be said of disputes under the SOP Act. Moreover, s 15(2)(a)(i) is part of the mechanism established to give effect to the adjudication process and the policy underlying it. It seems odd if one aspect of that process could be made the subject of an arbitration when all other aspects of it could not. Finally, s 15(2)(a)(i) specifically says that the claimant may bring proceedings in any court of competent jurisdiction. In doing so, it gives the claimant a right. Section 34 of the SOP Act makes it clear that the claimant cannot contract out of that right. Elsewhere, the Act recognises that disputes under construction contracts may be the subject of arbitration. In particular, as I have said, s 32(3) confers powers on arbitrators (as well as courts). However, s 15(2)(a)(i) confers a right to bring a claim in a court. It makes no reference to arbitration. If the legislature had intended the section to include an arbitration, it would have specifically said something about arbitration in the section, as it did in s 32(3). In my opinion, a provision of an arbitration agreement that prevents a party from exercising a right under s 15(2)(a)(i) to bring proceedings in a court of competent jurisdiction is, to that extent, void under s 34 of the SOP Act.
If a payment claim was not responded to by a payment schedule and a later payment claim was served with respect to the same work, which was responded to by a payment schedule, does the claimant lose its rights under section 15(2) (i) to have the earlier payment claim pursued in a Court?
No. See the judgment of Stevenson J in State Asphalt Services Pty Ltd v Leighton Contractors Pty Ltd [2013] NSWSC 528 (9 May 2013) where he held that serving a later payment claim did not deprive the claimant of the rights accrued under section 15(2)(i) to pursue the earlier claim in Court .
If the claimant is aware that the payment claim will be disputed and the respondent fails to provide a payment schedule through inadvertence, make the subsequent pursuit of that claim through Court proceedings under section 15(2) (i) an abuse of process?
No. See the judgment of Stevenson J in State Asphalt Services Pty Ltd v Leighton Contractors Pty Ltd [2013] NSWSC 528 (9 May 2013) where he said however that "Such circumstances might be relevant to the question of whether there should be a stay of any judgment so obtained."
144. A claimant might serve a payment claim knowing (for example, because of discussions which took place before service of the payment claim, or even during the ten business days during which the respondent could serve a payment schedule) that the claim was disputed. It may be that the respondent, through ignorance of the provisions of the Act, or through "illness, accident or other unforeseeable and unavoidable circumstances" (Bitannia at [62] per Basten JA), failed to serve a payment schedule in time, or at all. In these circumstances, in my opinion, the claimant's knowledge of the respondent's view of the merits of its claim would not, without more, render proceedings subsequently brought by the claimant, in exercise of its rights under the Act, an abuse of process.
145. Such circumstances might be relevant to the question of whether there should be a stay of any judgment so obtained (see, eg, Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421 at [85] per Hodgson JA (with whom Mason P and Giles JA agreed); Bitannia at [5] per Hodgson JA and at [62] per Basten JA).
QLD: In R J Neller Building Pty Limited v Ainsworth [2008] QCA 397; [2009] 1 Qd R 390 at [40]. Keane JA observed that, as a matter of policy, the legislature has assigned the risk of insolvency to the principal, rather than to the builder, in the first instance. These and other observations of Keane JA were quoted with approval by McDougallJ in the Supreme Court of NSW in Kingston Building (Australia) v Dial D [2013] NSWSC 2010 (13 December 2013)
When can you serve a section 17(2) notice?
Only after the ten business days given the respondent to provide a payment schedule. Do it before then and it's premature and invalid.
Jantom Construction Pty Ltd -v- S&V Quality Interiors (NSW) Pty Ltd [2011] NSWSC 670 per Hammershlag J:
7. The payment claim in this case was delivered on 9 March 2011. The plaintiff (the respondent to the claim) thus had up to and including 23 March 2011 to pay it and failing that the first defendant could on the next day give notice of its intention to apply for adjudication of the payment claim.
8. In saying that an adjudication application to which subs (1)(b) applies cannot be made unless the circumstances in ss 17(2)(a) and (b) have occurred, the Act makes it clear that the described period of 20 business days within which the application may be made only commences after the due date for payment and that notice of an adjudication application cannot be given earlier. A purported notice under s 17(2)(a) given too early deprives the respondent of the full statutory period provided for by s 16(1)(b)(ii) read with s 17(2)(b) of the Act and is invalid and of no effect. A valid notice is an essential pre-requisite for a valid adjudication application and the valid subsequent appointment of the adjudicator.
9. It follows that the adjudication application in this case was ineffective with the consequence that the adjudication determination was made without jurisdiction and is liable to be quashed; see Chase Oyster Bar v Hamo Industries [2010] NSWCA 190.
What happens when you serve a section 17(2) notice?
When you serve a section 17(2) notice you do not lose your rights to go to Court.
(A section 17(2) notice is a notice to the respondent that they have failed to provide a payment schedule within ten business days and that the claimant intends to proceed to adjudication and that the respondent has a further five business days in which to serve a payment schedule.)
See Cromer Excavations Pty Ltd v Cruz Concreting Services Pty Ltd [2011] NSWSC 51 at para 32 where the comments to the contrary effect of Einstein J in Rojo Building Pty Limited v Jillcris Pty Limited [2006] NSWSC 309 were not followed.
In Cromer Davies J said:
45It follows, therefore, that the giving of a notice under s 17(2) does not, without anything more, amount to an election between the remedies provided in s 15(2)(a). That is the more so when, as here, there is no evidence that the respondent has acted in any way on the basis that the s 17(2) notice has been served, whether by providing the payment schedule that s 17(2)(b) provides for, or otherwise.
46For these reasons, Cromer has not made an election that prevents the claim made in the present proceedings.
What happens when the respondent serves a payment schedule in response to a section 17(2) notice?
Cromer Excavations Pty Ltd v Cruz Concreting Services Pty Ltd [2011] NSWSC 51 The claimant probably cannot proceed to curial proceedings. (See discussion of Einstein's decison in Rojo Building Pty Limited v Jillcris Pty Limited [2006] NSWSC 309.
42 It must be said that Einstein J did not have the full detail of the facts in evidence before him and appears to have been influenced by the fact that his view was that a payment schedule had been provided in response to the s 17(2) notice.
What happens when you serve an adjudication application after a section 17(2) notice?
The claimant cannot proceed to curial proceedings
Cromer Excavations Pty Ltd v Cruz Concreting Services Pty Ltd [2011] NSWSC 51
44 In Kell & Rigby Bergin J appeared to distinguish the notice of intention to make the adjudication application and the making of the application itself - see at [24]. Similarly, McDougall J in Rojo at [63] stressed that the adjudication application itself could not be made until the s 17(2) notice had been given and that the giving of the notice was not the making of the application. In the light of what s 17(3) prescribes in relation to the adjudication application, the distinction between the notice of intention and the application itself must be a correct distinction.
What are the formal requirements of a payment schedule?
It does not need to be signed by anyone: Baulderstone Hornibrook Pty Ltd v Queensland Investment Corporation Ltd [2006] NSWSC 522 paras 38 to 42:
38 The payment schedule on its face identifies the entity providing it as "Queensland Investment Corporation (Respondent)". The typed segment of the payment schedule reads:
"Signed:
Queensland Investment Corporation."
39 As already observed:
i. it was not necessary for any signature to appear upon the document atall;
ii. it was not necessary for QIC to sign the payment schedule at all.
40 In fact Mr Young a partner of Allens, signed the document "for Queensland Investment Corporation".
41 The Progress Payment Certificate for Payment Claim 42 signed by Mr Aquilina of APP Corporation Pty Ltd as "Principal's Representative" [which as already indicated was a part of the payment schedule] had been addressed to BHPL and copied to Mr McCondach.
42 These facts are sufficient to prove that the payment schedule was provided by QIC. It was entirely unnecessary to go any further.
It does not need to refer to itself as a payment schedule, it does not need to refer to the NSW Act. Springs Golf Club Pty Ltd v Profile Golf Pty Ltd [2006] NSWSC 344 per Rein J
37 The letter is not explicitly expressed as an offer, nor does it state that the amount previously offered was an offer that went beyond what was accepted by Springs as payable by it. What is important, I think, is that it was a response to a formal payment claim that had been made. A claim having been made pursuant to the Act and expressed to be so made, the letter ought be construed liberally as a response with significance under the Act. The fact that an offer had been made of the same amount previously (whether or not expressed previously to be without prejudice and whether or not expressed previously to be an amount greater than the amount said by Springs to be owing, neither of which appears to be the case) does not preclude the letter meeting the requirements of s 14. The letter considered as a response to the payment claim, which its heading expressed it to be, states the total amount that Springs was, and inferentially, continues to be, prepared to pay. If there is a qualification, it is that the stated amount is all that it is prepared to pay. In my view, the amount that Springs proposes to pay ("the scheduled amount") is thereby indicated.
If there is no payment schedule can the claimant serve notice of its intention to suspend work on the project under section 27 of the NSW Act.?
Yes, but a word of warning. If the claimant decides to suspend work under the contract as a result of non payment he can only do that if he has served a notice informing the respondent of that, which notice, to be valid, must contain words to the following effect:"This is a notice of suspension under the Building and Construction Industry Security of Payment Act 1999". If it does not, the notice is invalid and the claimant is in breach of contract. If the respondent takes advantage of this and accepts the suspension as a repudiation of the contract then the contract will have been wrongfully repudiated by the claimant with all the dire consequences that can follow from that.
Which option should you choose - court or adjudication?
Adjudication is faster
If your payment claim can be well documented and easily justified in terms of the construction contract, then the quickest way to get your money is by making an adjudication application under section 17 (1) (b).
In order to do that you must serve a section 17(2) notice notifying the respondent within 20 business immediately following the due date for payment of your intention to apply for an adjudication and you must give the respondent the opportunity to provide you with a payment schedule within 5 days after that notification.
but court has fewer hurdles
Where the payment claim is not well documented or not easily justified in terms of the construction contract, then there seems to be a view that the safer way in terms of your client's claim may be by the slightly longer method of filing a statement of liquidated claim and seeking summary judgment as in such a proceeding, the respondent cannot raise cross claims or any defence in relation to matters arising under the construction contract. Walter Construction Group Pty Ltd v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266.
THE ADJUDICATION APPLICATION
When must you lodge an adjudication application?
If a payment schedule was provided within ten business days of the service of the payment claim - The claimant must make an adjudication application within ten business days after the claimant received the payment schedule. Be careful to note when you received the payment schedule in calculating the days. I once sent a payment schedule off at 5 minutes to midnight on the day before the last day. The claimant picked it up out of his fax machine the next morning and didn't read the date/time. He must have assumed that it was sent that morning because he then applied for adjudication one day late and I was able to have the adjudication halted on that basis. When pressed for time you can send the adjudication application to the authorised nominating authority by facsimile with a hard copy later.
What must an adjudication application contain?
Sections 17 (3) (f)and (g) and (h) require that the adjudication application identify the payment claim and the payment schedule to which it relates and be accompanied by the application fee of the authorised nominating authority
What may an adjudication application contain?
Section 17 (3) (h) provides that an adjudication application "may contain such submissions relevant to the application as the client chooses to include". This does not expressly authorise supporting materials to the claimant's claim being included in the adjudication application, but it appears to have been accepted by the courts that such supporting materials may be included (see Austruc v ACA v Sarlos and Anor [2004] NSWSC 131 at paras 67 to 69 which say that "submissions"in section 17(3), section 20 and section 22 may include documents and statutory declarations in support). There is a potential anomaly here which is that, in order to be valid, a payment claim does not have to be comprehensible in terms of its supporting materials and yet the supporting materials may be included in the adjudication application, but if the materials bring to the attention of the respondent grounds of objection for the first time, the respondent may be disadvantaged in that it has not referred to these grounds of objection in its payment schedule.(See the discussion of this problem by Einstein J in John Holland Pty Limited v Cardno MBK (NSW) Pty Limited & Ors [2004] NSWSC 258 paras 22 and 23.)
22 The primary touchstone it seems to me, is section 20 (2B). Whilst a claimant which provides the most minimal amount of information in its payment claim may even so, be seen to technically comply with section 13, such a claimant will expose itself to an abortive adjudication determination if it be that:
A the respondent is simply unable to discern from the content of the payment claim, sufficient detail of that claim to be in a position to meaningfully verify or reject the claim: hence not then being in a position to do otherwise than to reject the whole of the claim on the basis of its inability to verify any part of the claim;
A the claimant then elects to include the missing detail in the adjudication application with the inexorable consequence that the respondent is barred by section 20 (2B) from dealing with that detail/matter in its adjudication response;
A the adjudicator relies in determining the adjudication application upon the detail supportive of the payment claim which first emerged as part of the adjudication application
23 For those reasons whilst it is not permissible to construe section 13 as providing that in order to be a valid payment claim, such a claim must do more than satisfy the requirements stipulated for by subsection 2 (a), (b) and (c), the consequence to a claimant which does not include sufficient detail of that claim to be in a position to permit the respondent to meaningfully verify or reject the claim, may indeed be to abort any determination As a practical matter most adjudicators would not reject any submissions or evidence in the adjudication response in relation to the additional grounds of objection in such circumstances.
How should you draft an adjudication application?
The adjudication application is usually the only opportunity that the claimant will get to put his or her case to the adjudicator so it has to be complete and persuasive. It should contain a copy of the payment claim, the payment schedule (see section 17 (3) (f) and (g), the construction contract if it is in writing or details of the terms of the construction contract if it is an oral contract. It should also contain submissions and evidence to refute any of the reasons for non payment given in the payment schedule.
How should you serve an adjudication application?
You could use any of the methods set out in section 31, however the practical fact that you need to serve the adjudicator with a tabbed up hard copy for his or her convenience, and the requirement that you serve the respondent with an identical copy (See Richard Shorten and Anor v David Hurst Constuctions Pty Limited and Anor; David Hurst Constructions v Richard William Shorten and Anor [ 2008] NSWSC 546 (5 June 2008) means that the ideal method of service is by commercial agent or by courier, where the courier receives a signed receipt for the document. When in doubt or when short of time, serve by email and follow up with a hard copy later. The service of the email if effective starts the time running as time begins to run from the date of the first service of a complete copy of the document.
When does service by fax take effect?
The contract must contemplate service by facsimile for it to be good service. For service by fax to be effective, it must just lodge in the memory of the recipient's facsimile machine. It does not have to be printed out. So long as the sender's facsimile transmission report says OK the fax is presumed to have been received See paras 23 -28 of Zebicon Pty Ltd v Remo Constructions Pty Ltd [2008] NSWSC 1408.
23 I find that payment claim 11 was sent "by facsimile" to Remo's ordinary place of business on 19 July 2008. That is an available - indeed, I think, the only rational - inference from Mr Zerilli's evidence and the transmission report. As I have said, it is fortified by the absence of any other suggested candidate for the role of the six page document shown to have been sent on that day.
24 Was it received? It is not necessary that the document should have come to the attention of anyone at Remo's ordinary place of business. See Hodgson JA in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 at [62], [63]. Although what his Honour there said was obiter, it commanded the support of Handley JA and Hunt AJA. I do not regard myself as at liberty to take a different view. (On this, see Austin J in Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 at [65].) Nor do I see it as a relevant point of distinction that Hodgson JA was talking of receipt in the context of s 17(3)(c) of the Act, rather than that of s 31(1)(c).
25 Thus, I conclude, for the purposes of s 31(1)(c) of the Act, Remo would have received payment claim 11 on 19 July 2008 if that document had been received into the memory of Remo's fax machine on that date. I do not think that it is necessary, in terms of receipt, for the document to have been printed out. If it were, a respondent could avoid facsimile service of a document by keeping its fax machine perpetually empty of paper.
26 In my view, it can be inferred from the "OK" result indicated by Zebicon's transmission report that communication was established between Zebicon's fax machine and Remo's fax machine on 19 July 2008 and that the message - the data into which Zebicon's machine had transformed payment claim 11 - was delivered to Remo's machine. If communication had not been established, or the message had not been delivered, the result would not have been "OK".
27 In this context, I bear in mind that Remo could have called evidence as to the nature of the fault, and as to whether it was possible that a sender could receive an "OK" report for a message that in fact had not been received into the recipient machine's memory. It did not do so, although at an interlocutory hearing Mr Hicks referred to the fact that Remo was considering obtaining and calling expert opinion. I bear in mind also the observation of Lord Mansfield CJ in Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970 that "all evidence is to be weighed according to the power of one side to have produced, and the power of the other to have contradicted". (Subsequent citations of his Lordship's words do nothing to diminish their authority: see, by way of example only, Dixon CJ in Hampton Court Limited v Crookes (1957) 97 CLR 367 at 371 and Gleeson CJ in Swain v Waverley Municipal Council (29005) 220 CLR 517 at 525 [17].)
28 I conclude that Remo did receive payment claim 11 on 19 July 2008, because I think the evidence of Mr Zerilli, coupled with the transmission report, leads to an unrebutted inference that the document was transmitted to and received into the memory of Remo's fax machine on that day.
When must you serve an adjudication application?
There is no specific time but you must serve an adjudication application promptly. (See Niclin Constructions Pty Ltd v SHA Premier Constructions Pty Ltd & Anor [2019] QSC 91 (18 February 2019). Twelve business days after lodging with the adjudication authority is too late) Section 17 (5) does not require that the respondent be served within any set period of time, but the respondent is not obliged to provide an adjudication response until 5 business days after service of the adjudication application or 2 business days after receipt of the adjudicator's notice of acceptance of the application, which ever comes later. Since the adjudicator must finish the adjudication within ten business days of accepting the application, excessive tardiness in serving the application on the respondent may result in the adjudication being aborted as the adjudicator may not have the time to complete the adjudication. (The parties can extend the time for the adjudication, but only by agreement)
Why is the adjudicator's acceptance important?
The respondent is not obliged to lodge an adjudication response until 5 business days after service of the adjudication application or 2 business days after receipt of the adjudicator's notice of acceptance of the application.
THE ADJUDICATION RESPONSE
When can you serve one?
Section 20 (2A) you can lodge an adjudication response only if you have previously provided a payment schedule to the claimant in accordance with sections 14 (4) or 17 (2) (b).
When you must lodge it?
Within five business days after service of the adjudication application or within two business days after receipt of the adjudicator's notice of acceptance of the application, which ever comes later. (see section 17 (5)
What it can contain?
The respondent can only include in the adjudication response reasons which have already been included in the payment schedule.(see section 20 (2B) What this means is that you may have to be ingenious in your interpretation of the payment schedule if your client drafted it without reference to you. Also if the adjudication application was served too late, the adjudication response is where you can raise the matter. The claimant may say it is not in support of the payment schedule but since the failure to lodge the adjudication application in time could only occur after the payment schedule, that argument falls apart, and it is a critical matter for the adjudicator to decide.
How do you draft your adjudication response?
Always draft your adjudication response with an eye to the payment schedule. Each of the headings should be words in the payment schedule and the submissions under that heading should be supplemental or supportive of those words. If new matter has been raised by the adjudication application which gives rise to further objections, try to fit those objections into one of the general categories of objection in the payment schedule. If that is not possible submit something along these lines: "We made a general objection to this in the payment schedule because the payment claim was not in sufficient detail. Now the adjudication application has provided the detail we are in a position to supplement our general objection and we do so herewith."
How do you serve your adjudication response?
Any of the methods set out in section 31, however the size of the usual adjudication response and the fact that it often contains photographs and other items which cannot be faxed in useful form means that the ideal method of service is by courier, where the courier receives a signed receipt for the document. When in doubt or when short of time, serve by fax first.
When must you serve your adjudication response?
The respondent is obliged to lodge an adjudication response within 5 business days after service of the adjudication application or 2 business days after receipt of the adjudicator's notice of acceptance of the application. Presumably it should be served in that time as well although the NSW Act is not specific on the point.
What if there is a dispute about date of service of an adjudication response?
If the claimant says that the adjudication response was lodged too late, the respondent must be allowed the right to argue the matter before the adjudicator - if not it is a breach of natural justice (see TQM v Dasein [2004] NSWSC 1216). Further, if it can be proved in a Court that service of one of the critical documents has not been effected, then the adjudicator's determination is a nullity for lack of jurisdiction. Steel v Beks [2010] NSWSC 1404.
Can You Interfere With The Adjudication Process?
This is not encouraged. See Palmer J's comments in Lifestyle Retirement Projects No 2 Pty Ltd v Parisi Homes Pty Ltd & Anor [2005] NSWSC 411:
4 I think that the Plaintiff''s application should be declined. It has been made clear by McDougall J in Australian Remediation Services Pty Ltd v Earth Tech Engineering Pty Ltd [2005] NSWSC 362 and in the authorities to which his Honour there refers that the existence of a fact necessary for the validity of an adjudication is a matter within the competence of the adjudicator to determine. If an adjudicator erroneously finds a fact essential to jurisdiction and an adjudication certificate issues accordingly, it is always open to a party adversely affected to seek to set aside any judgment sought to be entered under s.25(1) of the NSW Act on the ground that the adjudication was, in truth, a nullity because an essential ingredient of jurisdiction was absent: Brodyn Pty Ltd v Davenport [2004] NSWCA 394, at para 42 per Hodgson JA, with whom the other members of the Court agreed.
5 In the present case the adjudicator may find that the payment claim was served outside the prescribed time or that the payment schedule was served within the prescribed time. In either case, the Plaintiff would have no complaint about jurisdiction. If the adjudicator found either fact adversely to the Plaintiff, the Plaintiff still has the chance to set aside any judgment entered under s.25(1) in the way I have explained.
6 In these circumstances, it seems to me to be contrary to authority and contrary to the policy of the NSW Act to entertain this application. I respectfully adopt what was said by McDougall J in Australian Remediation Services Pty Ltd v Earth Tech Engineering Pty Ltd (supra) at para.13:
""... the legislature has made it quite clear that it is adjudicators under the Act who are the primary organs for the resolution of these disputes. The power of this Court comes in either to enforce the determination (a power shared with other courts) or, in the limited circumstances described in Brodyn, to restrain enforcement of the determination. The whole scheme of the Act, as Palmer J said in Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140, is one of ''pay now, argue later''. It is clear from the provisions of s.32 of the Act that the time for final adjustment of rights and remedies is later.
Injunctions sought to restrain an adjudicator on the ground of lack of jurisdiction are generally answered by the Court saying that the adjudicator must decide whether he has jurisdiction or not. Para 14 of Boutique Developments Limited v Construction & Contract Services Pty Limited & Anor [2007] NSWSC 1042 . That decision is now however not beyond questioning as a result of Chase Oyster Bar.
Can you get away with only serving an incomplete or defective adjudication application?
No. You had better be able to prove that you served the respondent with a copy reasonably identical to that which was lodged with the adjudicator.
See Richard Shorten and Anor v David Hurst Constuctions Pty Limited and Anor; David Hurst Constructions v Richard William Shorten and Anor [ 2008] NSWSC 546 (5 June 2008. In that case the Court found that the solicitors for the claimant had provided the adjudication authority with an original adjudication application contained in three ring folders identified by volume, and documents therein were stapled. They provided a box of loose paper to the respondent, which, the Court found, was missing a number of pages.
The Court ruled against the claimant on the ground it could not profit from its own wrong. His Honour then also said:
74 It is also very arguable that the failure to serve the whole of the adjudication application on the plaintiffs constitutes a critical lacuna in the arbitrator's jurisdictions and therefore by itself renders the arbitrator's decision a nullity. On this view, service of the entirety of the application is what is sometimes called 'a jurisdictional fact'.
It is the writer's respectful view that the second ground is as arguable as the first, and both are correct. Service of a copy of the adjudication application which is, for all reasonable and practical purposes, the same as that lodged with the adjudication authority is essential to the validity of the adjudication.
RESTRAINTS ON THE ADJUDICATOR
Can an adjudicator make a different decision to an earlier adjudicator?
No.
Section 22 (4) of the NSW Act reads as follows:
(4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined:
(a) the value of any construction work carried out under a construction contract, or
(b) the value of any related goods and services supplied under a construction contract,
the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.
What happens if the payment claim attempts to reagitate claims decided by an earlier adjudication?
The claimant may expose itself to interference by the Court.
In Urban Traders v Paul Michael [2009] NSWSC 1072, McDougall J said
28 Rein J concluded in Perform that there was an issue estoppel, and that there was also an abuse of process, because the builder in that case had sought to reagitate, in a subsequent adjudication, claims decided by an earlier adjudication. In those circumstances, his Honour said, the Court could and should intervene to prevent the later adjudication from proceeding. His Honour gave five reasons for that at [47]. I paraphrase those reasons as follows:
(1) a subsequent payment claim seeking to reagitate matters determined in an earlier adjudication "is not… within the intent of the Act" and "is not… permitted by the Act", and hence is not a payment claim for the purposes of the Act;
(2) the remedies for abuse of process or issue estoppel are dismissal or permanent stay, remedies that an adjudicator cannot grant;
(3) it is no answer to say that the respondent can raise the issue estoppel before the adjudicator, because requiring, or leaving, the respondent to do that is the very abuse that ought to be restrained;
(4) the Act aims to provide a speedy determination of claims for payment on an interim basis, not to burden parties to construction contracts with a repetitious and quasi-litigious process; and
(5) a determination under the Act is not final, but a means of enforcing interim payment; an unsuccessful party (claimant or respondent) retains all of its rights and remedies at law.
29 Thus, his Honour said at [50], "[w]here steps have been taken in breach of and/or against the intent of a statutory scheme… it is part of this Court's function to step in and prevent that occurring."
Does reagitation of an issue in a payment claim totally invalidate it?
Probably not. So long as the later payment claim is not identical or the repetition in it is not "substantial and unseverable". The adjudication can still go ahead, without the repetitious part of the claim. In Urban Traders v Paul Michael [2009] NSWSC 1072 McDougall J said, in injuncting certain parts of a payment claim but leaving the rest to be adjudicated:
32 In Perform, it appears from Rein J's reasons at [22] that there was a complete correspondence between the first and second claims, in the sense that the second claim raised nothing that had not been raised in the first.
33 There was no such exact correspondence in Cadence. However, Hammerschlag J said at [5], "even though [the second claim] is not exactly the same as the earlier claim, a substantial and unseverable part of it has already been adjudicated". His Honour's reasons at [13], [17], [19] and [20] show why this is so. Accordingly, his Honour held that the adjudication should not go forward. It does not follow that his Honour would have made the same order if the repetitious claims were not "substantial and unseverable".
What does "reagitation of an issue" mean?
In Urban Traders v Paul Michael [2009] NSWSC 1072 McDougall J said
38 In the context of the Act (i.e., when asking whether there has been an abuse of the processes established by the Act), the essence of abuse of process is what Allsop P in Dualcorp described as:
(1) the "repetitious use of the adjudication process to require an adjudicator or successive adjudicators to execute the same statutory task in respect of the same claim on successive occasions" (at [2]);
(2) the use of the Act "to re-ignite the adjudication process at will in order to have a second or third or fourth go at the process provided by the Act merely because [the claimant] is dissatisfied with the result of the first adjudication" (again, at [2]); or
(3) "repetitious re-agitation of the same issues" (at [16]).
39 Similarly, in Perform, the essence of Rein J's reasons for concluding that there was an abuse of process was that, where an adjudication had been conducted and a determination given, the dissatisfied claimant sought to propound a claim, differently framed, for the very same works, goods or services (see at [42], [46]).
40 Again, in Cadence at [56], Hammerschlag J made it clear that the abuse of process lay in the fact that the claimant was seeking to re-agitate a payment claim that had been made and adjudicated upon.
41 It does not follow from the decisions to which I have referred that every repetition, in a subsequent payment claim, of a claim made in an earlier payment must amount to an abuse of process. That is so even if that earlier payment claim has been the subject of an adjudicator's determination. The relevant concept is not abuse of process at large. It is abuse of the processes of the Act: specifically, the processes of the Act designed to ensure that builders and subcontractors (and of course others) received prompt and progressive payment for construction work performed or related goods and services provided. The question of whether there has been an abuse the processes of the Act must take into account relevant provisions of the Act. Specifically:
(1) s 13(6) of the Act recognises that a claimant may include in a payment claim an amount that has been the subject of a previous payment claim; and
(2) s 22(4) of the Act deals, to an extent, with a repeated claim by providing that if particular construction work or related goods and services have been valued by an adjudicator, an adjudicator in a subsequent adjudication application is to give them the same value unless satisfied that the value has changed since that previous determination.
42 Further, whether or not the repetition of a claim amounts to an abuse of process requires consideration of all relevant contextual facts. In addition, it requires consideration of the reasons why the courts intervene to prevent abuse of process. Those reasons include intervention to prevent a person from being vexed by having to reargue an issue already authoritatively decided. Thus, in deciding whether a repetition of a claim amounts to abuse of process, it may be relevant to take into consideration whether, because of fresh claims that are advanced, the respondent will be required to defend itself in any event.
43 I do not think that it is possible to state in some exhaustive fashion what combination of factors, including repetition, will lead to the conclusion that there is an abuse of process. (See, as to this, French CJ, Gummow, Hayne and Crennan JJ in Jeffery & Katauskas Pty Limited v SST Consulting Pty Limited [2009] HCA 43 at [27].) My concern is simply to make it clear that, in my opinion, it would be inconsistent with the provisions of the Act to which I have referred above to hold that repetition, by itself and without more, always amounts to abuse of process.
QLD - VK Property Group Pty Ltd v Conias Properties Pty Ltd [2011] QSC 54 per Boddice J:
24 In any event, s 17(6) of the Act does not impose any restriction upon the generally expressed entitlement in s 17(1), namely an entitlement to claim an unpaid amount of work done earlier before an earlier reference date, whether or not it was claimed in an earlier payment claim. The effect of s 17(6) of the Act is merely to ensure that no implication may be drawn that s 17(5) precludes a claimant from making a payment claim for an unpaid amount claimed in a previous claim.19 There is no general implication in the Act against "re-agitation" of a payment claim in a subsequent payment claim where there has been no adjudication determination.
What constitutes an abuse of process under the NSW Act?
In Urban Traders v Paul Michael [2009] NSWSC 1072 McDougall J said:
43 I do not think that it is possible to state in some exhaustive fashion what combination of factors, including repetition, will lead to the conclusion that there is an abuse of process.
It seems clear that what Allsop P in Dualcorp described as:
(1) the "repetitious use of the adjudication process to require an adjudicator or successive adjudicators to execute the same statutory task in respect of the same claim on successive occasions" (at [2]);
can be an abuse of process. The categories are, however, not closed.
See also Ku-Ring-Gai Council v Ichor Constructions Pty Ltd [2014] NSWSC 1534 even where the adjudicator expressly says he or she is not deciding an issue (in this case because, although the adjudicator thought there was a valid claim, the evidence before him was inadequate to allow him to assess it) the fact that the respondent had to address and answer it means that, although there is no estoppel arising from the adjudicator's decision it is still an abuse of process by the claimant and should not be alowed to proceed.
Can you get injunctive relief for abuse of process under the NSW Act?
In Filadelfia Projects Pty Limited v EntirITy Business Services Pty Limited [2009] NSWSC 1468, Gzell J refused to restrain a claimant from seeking adjudication of a payment claim under the Building and Construction Industry Security of Payment Act 1999 in circumstances where the purported respondent had been party to contract with third party who subcontracted to the claimant who had, during the period of the contract made its payment claims under the NSW Act on that third party. When the subcontract was terminated however, the claimant then made a claim on the respondent (27 folders of payment claim) and the respondent sought injunctive relief on the grounds it was an abuse of the processes of the NSW Act seeking relief form having to serve a payment schedule.
Gzell J refused a restraining order as he did not view the service of the payment claim alone as constituting an abuse, but he reserved on the issue of substantive relief.
15 What is put in support of the application is that non-parties should not be burdened with performance under the Act. The payment claim was comprised in 29 lever arch files and the difficulty will arise with respect to the adjudication response.
16 There is, however, in my view a vast difference between the founding of an abuse of process on the non-authorised repetitious appeal to the processes of the Building and Construction Industry Security of Payment Act and the factual determination in this case of whether Filadelfia is a party to a construction contract that would enliven an adjudicator's jurisdiction under the Act.
17 While it may be so that similar burdens may be suffered if the question is not determined before the necessity to lodge an adjudication response arises, that does not mean that lodging adjudication documents under the Act against a person who turns out not to be a party to a construction contract is itself an abuse of process.
18 The question whether Filadelfia is party to a construction contract for the purposes of the Building and Construction Industry Security of Payment Act will be determined under the summons filed today in due course.
What this seems to mean is that the Court will not interfere with the process itself, but will grant relief if the purported respondent is not a party to the construction contract, that being a "Brodyn essential" in any event. In the instant case, on the facts given, it seems highly likely that an adjudicator would find that he had no jurisdiction in any event.
Can an adjudicator ignore notice provisions in the contract?
No. Where there are notice provisions in the contract which, if not followed, preclude the client for claiming payment for work, those notice provisions are binding and are not in breach of section 34. See John Goss Projects Pty Limited v Leighton Contractors Pty Limited [2006] NSWSC 798 paras 81 and 82.
Can an adjudicator make a decision contrary to a certification by an architect or a superintendent?
Yes. In Abacus v Davenport & Ors [2003] NSWSC 1027 McDougall J said:
39 In the present case, what Mr Davenport was required to do was to undertake for himself the task that the architect had purported to undertake. He was not required simply and only to apply his rubber stamp and initials to the results of the architect's labours.
Can a Superintendent determine in relation to a later progress claim, that monies paid pursuant to a adjudication award were not properly payable and deduct them from the later progress claim?
Yes in NSW but possibly not in Queensland. In John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 140 the NSW Court of Appeal held that such conduct by a superintendent, at least in determining a final claim, was not a breach of section 34 of the Act. Presumably the superintendent may make such an adjustment in any progress claim after the adjudication award was paid.
62 It is not correct that retention of security "undoes" an adjudicator's determination, or that a superintendent who in performing his contractual function comes to a determination negates a statutory right to retain an adjudicated amount. The adjudicator's determination remains, and brings payment of the adjudicated amount, but that is interim and subject to a different position being established in relation to payment for the relevant work or related goods and services, contractually or in proceedings. If in civil proceedings it is decided that the contractor was entitled to $10 or $30, rather than the $20 determined by the adjudicator, that does not undo the adjudicator's determination. It has done its work in ensuring "prompt interim progress payment on account, pending final determination of all disputes" (per Ipp JA in Brewarrina Shire Council v Beckhaus Civil Pty Ltd at [219], above). So also if, in the manner earlier described, the contractual mechanisms result in a contractual obligation on the principal to pay the contractor or the contractor to pay the principal. The contractor's right under the Act is to receive the adjudicated amount, but subject to final determination, and if the final determination involves the superintendent determining that the contractor was entitled to $10 or $30, rather than the $20 determined by the adjudicator, the superintendent is not negating the contractor's statutory right.
63 Section 34 of the Act requires that the contractual provision exclude, modify or restrict, or have the effect of excluding, modifying or restricting, "the operation of this Act". The Act operated to require that the RTA pay the adjudicated amounts to John Holland, and it did so. (In relation to the Detonator Dump monies, it may be taken that it has done so or will do so if the challenge to the adjudicator's determination has failed or fails). There is no effect contrary to that operation of the Act if, in the final determination of the position between the parties, one party has to pay money to the other because the final arbiter takes a different view from that of the adjudicator. Section 32 of the Act preserves the final determination, by the contractual mechanism or by proceedings. Nor is there an effect contrary to that operation of the Act if security provided under the contract is retained, the contract on its proper construction and operation so permitting, to satisfy John Holland's obligation to pay money to the RTA if that is the outcome of the final determination.
But Possibly not in Queensland. In Queensland, John Holland Pty Ltd v Roads and Traffic Authority of New South Wales decision was distinguished on the grounds that the contractual provisions in the two cases were not alike by the Queensland Court of Appeal in Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd [2009] QCA 329 but in terms which suggest that the Queensland Courts may be more ready to support full effect being given to an adjudication determination
Can an adjudicator consider issues raised by the respondent where no payment schedule has been provided?
Yes. For example, where there is a jurisdictional issue, or an issue which could not have been dealt with by a payment schedule, such as the adjudication application being made out of time.
Can a claimant withdraw part of its claim?
Yes. See Urban Traders v Paul Michael [2009] NSWSC 1072 per McDougall J:
61 It follows, in my view, that any adjudication should proceed on the basis that the builder is not to propound, and the adjudicator is not required to (and should not) consider the reagitated variation claims.
62 Essentially for the reasons given by Rein J in Perform at [47] (which I have paraphrased at [28] above), I think that it is appropriate to prevent those reagitated claims from going forward, rather than to leave it to an adjudicator to seek to deal with them.
63 Dr Greinke submitted that it was not clear that a claimant could "withdraw" part of its claim. I do not see why this is so. I would have thought an adjudicator who was told that specifically identified claims were not pressed, and should not be decided, would not enter upon their consideration: particularly if the reasons for doing so had been explained (as I hope they have) in a judgment of this Court. In any event, given that I propose to grant appropriate injunctive relief (the substance of which I outline in the following paragraph), it does not seem to me to matter a great deal whether or not any part of a claim can be "withdrawn".
Can the adjudicator consider things which were not raised in submissions?
Yes. However, the adjudicator must allow the parties the opportunity of being heard on the point he or she has picked out. In Coordinated Construction Co Pty Ltd v J.M. Hargreaves (NSW) Pty Ltd [2005] NSWCA 228 at [52]-[53], in obiter dicta, Hodgson JA remarked.:
52 The task of the adjudicator is to determine the amount of the progress payment to be paid by the respondent to the claimant; and in my opinion that requires determination, on the material available to the adjudicator and to the best of the adjudicator's ability, of the amount that is properly payable. Section 22(2) says that the adjudicator is to consider only the provisions of the Act and the contract, the payment claim and the claimant's submissions duly made, the payment schedule and the respondent's submissions duly made, and the results of any inspection; but that does not mean that the consideration of the provisions of the Act and the contract and of the merits of the payment claim is limited to issues actually raised by submissions duly made: see The Minister for Commerce v. Contrax Plumbing (NSW) Pty. Ltd. [2005] NSWCA 142 at [33]-[36]. The adjudicator's duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim. The adjudicator may very readily find in favour of the claimant on the merits of the claim if no relevant material is put by the respondent; but the absence of such material does not mean that the adjudicator can simply award the amount of the claim without any addressing of its merits.
53 Indeed, my tentative view is that, if an adjudicator determined the progress payment at the amount claimed simply because he or she rejected the relevance of the respondent's material, this could be such a failure to address the task set by the Act as to render the determination void.
THE ADJUDICATOR'S AWARD
What You Can Do About the Award Itself?
You can have it set aside for error of law on the face of the record or for breach of natural justice or for jurisdictional error. You can also have it voided for fraud as per Ball J in QC Communications NSW Pty Ltd v CivComm Pty Ltd [2016] NSWSC 1095 (12 August 2016)
Is breach of the time limits in the Act jurisdictional error?
In New South Wales, yes. In Chase Oyster Bar v Hamo Industries [2010] NSWCA 190 at para 102:
Although, as noted by Gibbs J in Buck v Bavone, the Court may be slow to intervene where authority depends upon a matter of "opinion or policy or taste", that will not be so where authority depends upon a straightforward calculation of time, as in the present case.
So, carefully check the documents and the times of service and lodging to see if, for example, as in Chase, the section 17(2) notice was served too late.
In QLD there is obiter dicta which also says yes. In De Neefe Signs Pty Ltd v Build1 (Qld) Pty Ltd; Traffic Technologies Traffic Hire Pty Ltd v Build1 (Qld) Pty Ltd [2010] QSC 279 a section 21 (2) (a) notice (the Qld equivalent of a section 17(2) notice) was alleged to have been served late and Fryberg J said:
[48] It follows that if I were wrong in my conclusion that the notice was given within the time described in s 21(2)(a), the purported adjudication application made on 30 April 2010 would be a nullity, as would the decision of that application. But I must determine this case on the basis of that conclusion.
What is an error of law as opposed to an error of fact?
See paras 70 to 74 of the judgment of Rohman J in Maxstra NSW Pty Ltd v Blacklabel Services Pty Ltd [2013] NSWSC 406 (24 April 2013)
ACT Sections 43 and 44 of the Building and Construction Industry (Security of Payment Act 2009 (ACT) provide for review by the Supreme Court.
Can you have it set aside for failure to follow earlier adjudicator's determination as to value?
Yes (In Rothnere v Quasar & Ors McDougall J held that failure to comply with section 22 (4) (following an earlier adjudicator's determination as to value) was not an essential requirement of the NSW Act. He also noted however that the earlier adjudicator's decision was not as to value but as to whether an item was a variation and the earlier adjudicator did not actually assess the value of the item.- see paras 18 and 37 - 40.) See De Martin & Gasparini Pty Limited v State Concrete Pty Limted & Ors [2006] NSWSC 31 for an example of where an adjudication was held void for (inter alia) this reason. This is probably an error within jurisdiction and would not fall foul of the new principles outlined by the Court of Appeal in Chase Oyster Bar v Hammo
In Lifestyle Retirement Projects No 2 v Parisi Homes [2005] NSWSC 705 Campbell J held that service of a payment claim within 12 months after construction work was last carried out was not a "basic and essential requirement" to the validity of an adjudication. This is however questionable now in the light of the decision of the Court of Appeal in Chase Oyster Bar v Hammo which said that all time limits in an Act such as this are jurisdictional issues.
What is jurisdictional error?
The adjudicator must determine the dispute raised by the payment claim and the payment schedule, not a different dispute raised by the adjudication application. If he does that the adjudication is void. See Energy Australia v Downer Construction (Australia) Pty Ltd & Ors [2006] NSWSC 52 where the claim in the adjudication was different and more extensive than the claim in the payment claim and the adjudicator went on to make an award based on the more extensive claim the adjudicator when doing so is guilty of jursidictional error.
Jurisdictional error can arise if there has been any failure by the adjudicator to exercise the jurisdiction given to him by the NSW Act. This can extend to not just the fundamental processes whereby the adjudicator becomes seized of jurisdiction but also how the adjudicator conducts himself in relation to that jurisdiction.
In Bauen Constructions v Westwood Interiors [2010] NSWSC 1359, McDougall J said:
27 On the face of things, therefore, there is jurisdictional error because the adjudicator failed to exercise the jurisdiction given to him by the Act. In a somewhat analogous situation, in Musico v Davenport [2003] NSWSC 977, I referred to an adjudicator's failure to have regard to relevant provisions of the construction contract with which that case was concerned (and noted s 22(2)(b) of the Act, requiring consideration of the provisions of the construction contract), and said that the adjudicator "therefore failed to carry out the task that the Act requires to be carried out in the manner that the Act requires it to be carried out". It followed, I said in that case, that the adjudicator "failed to exercise the jurisdiction given to him by the Act".
28 For the same reasons, I think that in relation to the issue with which I am presently concerned, the adjudicator failed to exercise the jurisdiction given to him by the Act. That is why I said, earlier, that there is jurisdictional error in the approach taken.
(2) Denial of natural justice Also see Emergency Services Superannuation Board v Davenport & Anor [2004] NSWSC 697 at para 37. See De Martin & Gasparini Pty Limited v State Concrete Pty Limted & Ors [2006] NSWSC 31 where the adjudicator ignored an agreement between the parties as to the amount that had been paid.
(3) Fraud in which the adjudicator is complicit.
The Power of Courts to Intervene in the Process
The provisions in sections 15 and 24 of the amending act which excluded cross claims and defences based upon the contract did not mean however that it was intended totally to exclude the courts from any supervision of the process and later in the Second Reading Speech the Minister said:
There will be some instances where a court may set aside the judgment. The respondent may be able to demonstrate to the court that the requirements of the NSW Act have not been complied with; for example, that there has not been a valid adjudication. But in proceedings to set aside the judgment the respondent will not be entitled to bring a cross claim or to raise any defence in relation to matters arising under the construction contract or to challenge the determination by the adjudicator.This means that parliament contemplated there would be some involvement of the Courts in the operation of the NSW Act. The question to be decided was the extent of that involvement.
There are two issues in respect of which judicial review might occur:
In respect of the validity of a payment claim.
After an adjudication in respect of the validity of the adjudication.
Judicial Review of the Validity of A Payment Claim
This involves the threshold issue as to whether the initiating document is a valid claim under Section 13 of the Building & Construction Industry Security of Payments Act 1999.
Section 13(2) provides that:
A payment claim:
(a) must identify the construction work (or related goods and services) to which the progress payment relates, and
(b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and
(c) must state that it is made under this Act.
Claims for relief in this area have involved issues of :
whether the document purporting to be a payment claim sufficiently identified the construction work the subject matter of the claim ,
whether the document claimed a payment for other than construction work; and
whether the claim complied with the formal requirements of section 13.
Identification of the Construction Work to Which the Progress Claim Relates
In Parist Holdings Pty Ltd v WT Partnership Australia Pty Ltd it was held that the payment claim itself did not need to specifically identify the work the subject of the claim so long as it annexed invoices and other documents which did so. In that case Nicholas J said in para 28:
28 It must be clear on the face of the document(s) which constitute the statutory payment claim that the information conveyed meets the requirements of s 13(2). "The test is an objective one. In deciding the meaning conveyed by a notice a court will ask whether a reasonable person who had considered the notice as a whole and given it fair and proper consideration would be left in any doubt as to its meaning (Walter Construction Group Pty Ltd para 82).
Whether the Payment Claim is in Respect of Construction Work
in Parist Holdings it was also decided that the inclusion of a disputed item in a payment claim (a claim which was arguably a claim for damages as opposed to a claim for construction work within the meaning of the NSW Act), where there were other items which were indisputably construction work, does not render a payment claim invalid. Where, however, the payment claim is solely for say, delay costs, which do not come within the definition of construction work, then it seems that the payment claim may be invalid. This raises the interesting anomaly, which will be discussed later, that whilst claims for delay costs under the contract are not "construction work" they can still be the subject of an award by an adjudicator.
Can an adjudicator seek payment if he determines that the adjudication is invalid?
Yes. See Alucity Architectural Product Supply Pty Ltd -v- Australian Solutions Centre; Alucity Architectural Product Supply Pty Ltd -v- Paul J Hick [2016] NSWSC 608 (13 May 2016) where the adjudication application was referred by the authorised nominating authority to an adjudicator who accepted appointment and then determined that the payment claim was invalid and as a result he had no jurisdiction to determine the claim – The claimant argued that the fees paid to the nominating authority and adjudicator were recoverable by the claimant on the basis that there had been a total failure of consideration and the authority and the adjudicator would be unjustly enriched if they were entitled to retain the fees paid to them Hammerschlag J -the doctrine of total failure of consideration had no application in the circumstances - the authority and the adjudicator had not been enriched and it was not unjust for them to retain the fees – no claim for restitution lies
The Formal Requirements of Section 13
In the early days of the legislation the Court took the approach that the issuing of a payment claim has such serious consequences for the recipient that it must be clear on the face of the document that it purports to be a payment claim made under the NSW Act. Any defect on the face of the document is not overcome by evidence that the recipient was not mislead. This was the view of Austin J in Jemzone v Trytan , a case involving a statutory demand for a statutory debt arising from a respondent's failure to provide a payment schedule within time. Austin J said in paragraph 45
45. Section 13 (2) (c) requires a payment claim to "state that it is made under this Act". The document in question states: "This invoice is subject to the Building & Construction Industry Security of Payments Act 1999, number 46".
46. This is not a statement that the document is a payment claim made under the NSW Act. I do not accept this submission by the plaintiff that a payment claim should expressly draw the recipients attention to the Act and the provisions concerning the issuing of a payment schedule. Section 13 (2) makes no such requirement. Since, however, the issuing of the proper payment claim has the serious consequences for the recipient of requiring full payment regardless of any genuine dispute or offsetting claim, unless a payment schedule is lodged within time, it must be clear on the face of the document that it purports to be a payment claim made under the Act. The defect on the face of the document is not overcome by evidence that the recipient was not mislead. The requirement was not satisfied in the present case
The Court is now quite forgiving as to minor errors or abbreviations as occurred in Hawkins Construction v Mac's Industrial Pipework where the Windeyer J was prepared to overlook spelling errors and abbreviations in the name of the NSW Act such as "Building Construction Ind Security of Payments Act 1999", presumably because, despite the errors it was, as Austin J required in Jemzone, "clear on the face of the document that it purports to be a payment claim made under the Act"
As a contrast to Jemzone, in Fernandes Constructions v Tahmoor Coal (trading as Centennial Coal) [2007] NSWSC 381
McDougall J took a far more relaxed view. In that case the words used were:“This invoice is prepared under the Building and Construction Industry security [sic] of payments [sic] Act 1999.”
His Honour said:
37 In my view, the approach to construction of a document purporting (or alleged) to be a payment claim under the Act should reflect in substance the approach to the construction of commercial contracts that has been laid down by decisions of the highest authority. I refer to the observation of Lord Wright in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at 514, that the courts should construe commercial contracts “fairly and broadly, without being too astute or subtle in finding defects”. Barwick CJ expressed a similar view in The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429 at 437: in searching for the parties’ intention, “no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.”
38 Thus, the question is whether, taking a fair but broad approach, without being pedantic or astute to find defects, the document in question would convey to its recipient that the claimant intended by the document to engage the operation of the Act. As I have said before, that question is to be resolved objectively, having regard to all relevant matters of context.
The principal appears to be that the document must be such as to leave no reasonable person in any doubt that it was a payment claim under the NSW Act.
Effect of invalidity of payment claim on an adjudication.
Whilst an invalid payment claim can be used under section 15(4)(a) of the NSW Act to oppose the entry of a summary judgment under section 15(2) (a) (i) where a respondent has failed to provide an payment schedule within ten business days, as a consequence of the decision in Chase Oyster Bar, where there has been an adjudication an invalid payment claim will probably invalidate a subsequent adjudication.
After An Adjudication
The relationship between the adjudication process and the Court was considered in some depth in the judgment of McDougall J in Musico & Ors v Davenport & Ors [2003] NSWSC 977.
In summary, McDougall J's conclusions were that:
1. There was power in the Supreme Court to grant relief in the nature of certiorari for manifest error of law on the face of the record and for breaches of natural justice. McDougall J's judgment in this regard has been cited with approval by Gzell J in Abacus Funds Management Ltd v Davenport at paragraphs 21 and 22, Einstein J in Brodyn Pty Ltd v Davenport , at paragraph 19, Palmer J in Multiplex Constructions Pty Ltd v Luikens and Anor at paragraph 32. There has been no judicial dissent on the matter and so, despite the short period of time since the handing down of the judgment in Musico, the issue now appears to be a matter of settled law.
2. The restrictions on reviewing judgments in section 25(4) (a) (ii) only prohibit an application to set aside the judgment as opposed to an application to quash one for reviewable error. However Gzell J in Brodyn Pty Ltd v Davenport & Anor , took the opposite view that, even if there was jurisdictional error, when an adjudicator's determination had been registered as a judgment in a court, in order to have that judgment set aside you had to challenge the adjudicator's determination, albeit by application, not to the court in question which was the District Court, but to the Supreme Court on a prerogative writ, and that the express words of section 25 forbade you doing so. It is submitted that probably McDougall J's view is the better view as an adjudicator's award which is void for jurisdictional error would in turn avoid the registration of any judgment based upon it.
3. Because of the restriction in section 25(4)(a) (iii) on challenging an adjudicator's determination, judicial review can only be available where the manifest error of law goes to an issue involving jurisdiction. McDougall J's view that the Supreme Court is, as a result of the nature of the privative clauses in the Act, limited to reviewing only errors of law going to the issue of jurisdiction, has been generally accepted by the other justices of the Supreme Court as being correct. This has placed a serious limitation on the ability of the Supreme Court to in attempting to ameliorate the harsher aspects of the functioning of the NSW Act.
4. The usual requirements of natural justice are limited, although not excluded, by the terms of the NSW Act. Natural justice still applies but only to the extent that it is not limited by the terms of the NSW Act which in section 21(2) provides that the adjudicator is not to consider an application response unless it was made before the end of the period within which the respondent may lodge such a response.
5. The general approach of the Court to an application should be guided by the the clear intent of Parliament to provide for informal and speedy determinations which can be corrected later in a final hearing.
6. The "record" which the Court can consider includes all of the documents produced for the purposes of the adjudication.
In the period since 3 November 2003 when the judgment in Musico was handed down McDougall J's conclusions have been commented upon, and referred to with approval, in a number of cases and reflect the approach of most, although not all, judges to these matters. It is therefore of benefit to consider these conclusions in detail, along with some of those comments and references:
Can An Adjudicator Correct His Or Her Own Decision?
Yes Section 22(5) of the Act provides:
(5) If the adjudicator's determination contains:
(a) a clerical mistake, or
(b) an error arising from an accidental slip or omission, or
(c) a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or
(d) a defect of form,
the adjudicator may, on the adjudicator's own initiative or on the application of the claimant or the respondent, correct the determination.
This section is called "the slip rule" and allows the adjudicator to correct obvious and simple errors, usually of a mathematical nature. It does not however allow for the correction of complex errors : See the problems faced by the Qld Supreme Court in Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd & Ors [2012] QSC 373 where a simple mathematical error was compounded with a question of differentiating between various transport rates under the contract.
The Restrictions on Setting Aside Judgments- Whether Section 25(4)(a)(ii) Only Prohibits An Application to Set Aside the Judgment As Opposed to An Application in the Nature of Certiorari.
McDougall J considered the implications of Section 25(4)(a)(ii) and said:
37 The limitations on the ability of a respondent to set aside a judgment flowing from the filing of an adjudication certificate cannot in terms apply where the respondent is seeking not to pursue that course but to quash the determination upon the ground that it is fatally vitiated by (for example) denial of natural justice, or manifest error of law. There is no basis for reading the prohibitions in s 25(4)(a) as extending beyond the context to which they are expressed to apply: namely, an application to set aside judgment.
Because of the Restriction in Section 25(4)(a) (iii) on Challenging An Adjudicator's Determination Judicial Review Can Only Be Available Where the Manifest Error of Law Goes to An Issue Involving Jurisdiction
McDougall J considered the implications of Section 25(4)(a) (iii) and said at para 52:
52 I therefore conclude that, where the determination of a dispute submitted to an adjudicator under the Act requires the adjudicator to consider issues of law, the adjudicator will not fall into jurisdictional error simply because he or she makes an error of law in the consideration and determination of those issues. It would be otherwise, as the High Court pointed out in Craig (echoing, I think, what Lord Reid said in Anisminic), if the error of law causes the adjudicator to make one or other (or more) of the jurisdictional errors that the court identified: in such a case, relief would lie, subject to any relevant discretionary considerations.
And later at para 54 and 55:
54 I therefore conclude that relief will lie where jurisdictional error, including jurisdictional error of law on the face of the record, is shown. However, I do not think that relief will lie to quash the determination of an adjudicator upon the basis of non-jurisdictional error. That is because, in my view, the legislative scheme set out in s 25(4) of the Act is inconsistent with the availability of this ground of review.
55 By s 25(4)(a)(iii), a respondent seeking to set aside a judgment based on an adjudication certificate cannot challenge the adjudicator's determination. That must mean that in any such proceedings, the judgment cannot be set aside upon the basis that the adjudicator (for example) erred in law in some step of his or her reasoning. It would be quite inconsistent with the legislative intention that is evident in s 25(4) to permit a challenge to be raised, by way of relief in the nature of prerogative relief, upon the ground of error of law. The legislature could hardly be taken to have intended that, having forbidden entry by the front door, it was nonetheless happy for access to be obtained from the rear.
McDougall J's view that the Supreme Court is, as a result of the nature of the privative clauses in the NSW Act, limited to reviewing only errors of law going to the issue of jurisdiction, was generally accepted as being correct prior to the decision of Brodyn. Since Brodyn has now been overruled, with respect to the availability of certiorari, by a court in which McDougall J gave the judgment of the Court, it would seem that his earlier pronouncements may bear further consideration. What is Manifest Error of Law Going to An Issue Involving Jurisdiction?
An Error of Jurisdictional Fact As Opposed to An Error of Law Going to Jurisdiction, May Not Be Reviewable Under Certiorari.
The old formula for certiorari was that relief under it was available when there had been an error of law on the face of the record or a breach of the rules of natural justice. In that regard, Bergin J said in Pasquale Lucchitti Trading as Palluc Enterprises and Ors v Tolco Pty Limited and Anor
38 The adjudicator considered the point raised as to whether there was a jurisdictional question, that is whether the claim was out of time. He disagreed with the submissions put by the plaintiffs. Assuming that I am wrong in respect of what I have referred to as the adjudicator's consideration of matters contained in paras 1 and 2 of the response, notwithstanding his statement that he had not had regard to them, I am not persuaded that it is a jurisdictional error.
The jurisdictional issue being raised was whether the payment claim was served out of time, that is, more than 12 months after the last construction work was done. On the evidence before him the adjudicator had decided, as a matter of fact, that the payment claim was served just within the twelve month period. One would have thought perhaps that that might have been an issue going to jurisdiction but perhaps it is not a jurisdictional error of law as it would have been if the adjudicator had determined that the payment claim was served outside the twelve month period, but had still determined that he had power to adjudicate the matter. That is, that the adjudicator might make an error as to a jurisdictional fact such as when the last construction work was done under the construction contract, but so long as he applied the law correctly to those erroneously determined factual circumstances there would not be an error of law on the face of the record.
Can a determination be set aside because of failure of the adjudicator to conduct him or herself in good faith?
Yes. Timwin Constructions v Facade Innovations [2005] NSWSC 548. The adjudicator has to give consideration to the submissions of both parties or there is a breach of the good faith requirements.
Failure to conduct him or herself in good faith may be evidenced by a failure to consider issues raised by the parties. Lanskey v Noxequin [2005] NSWSC 963.
This lack of good faith that will avoid an award may not be the same as the lack of good faith which losses an adjudicator his protection under section 30 of the NSW Act See Mc Dougall J 's comments in De Martin & Gasparini Pty Limited v State Concrete Pty Limited & Ors [2006] NSWSC 31 at para 17.
Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129.
This line of authority was approved by Basten JA in Bitannia Pty Ltd & Anor V Parkline Constructions Pty Ltd [2006] NSWCA 238. When discussing whether a payment claim must be made in good faith he said:
75 By contrast, there is good reason to suppose that the powers conferred on an adjudicator must be exercised in good faith and for the purposes for which they are conferred. The case law in favour of that proposition is discussed in the decisions of this Court referred to above and with expansive treatment by Brereton J in Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd [2005] NSWSC 1129 at [63]-[117]. It is possible that the language of "good faith" has been imported from this separate situation to that of the essential preconditions to a valid claim. However, and with respect to the views of Santow and Ipp JJA (to the extent that they are to the contrary) there is, in my view, no separate precondition to the making of a valid payment claim under s 13 of the Building Payment Act, requiring, as a precondition to enforcement action under s 15, proof that the claimant has made the claim with a bona fide belief in its entitlement to the moneys claimed.
Does a claimant lose its rights to seek to recover under a construction contract as a result of failure to provide a statutory declaration as provided for in s.127(5) of the Industrial Relations Act 1996?
Probably not. See the comments of Hodgson AJ on this point in Brodyn Pty. Ltd. t/as Time Cost and Quality v. Davenport & Anor. [2004] NSWCA 394:
76 As regards the lack of provision of a statutory declaration, Brodyn did not refer the adjudicator to the alteration to cl.42.1 referred to above, and did not suggest that the direction in writing referred to in cl.43.1 had been given. It made no reference to the provisions of s.127(5) of the Industrial Relations Act 1996, which authorise a principal contractor to withhold payment to a subcontract until the subcontractor gives a written statement that employees have been paid for work done in the relevant period.
77 Accordingly, even if ss.9 and 10 of the Act permit this matter to be taken into account, which is questionable, the failure of the adjudicator to mention the bald reference made by Brodyn to breach of cl.43 could not in these circumstances amount to a denial of natural justice.
In Queensland failure to comply with contractual provisions requiring such a statutory declaration have been held not to prevent the making of a payment claim John Holland Pty Ltd v Coastal Dredging & Construction Pty Limited [2012] QCA 150. Fraser JA who delivered the leading judgment in John Holland explained the nature of the statutory entitlement to progress claims conferred by s 12 of the Act at [18]:
"Section 12 confers upon a person who has undertaken to carry out constr uction work a statutory entitlement to recover a progress payment from each "reference date under a construction contract", which is defined to mean, so far as is presently relevant, "a date stated in, or worked out under, the contract as the date on which a claim for a progress payment may be made for construction work carried out or undertaken to be carried out, ...under the contract...". Accordingly, the contractual provisions to which reference may be made for the purpose of ascertaining the "reference date" are those which state, or provide for the working out of, the date on which a progress payment claim "may be made". The latter expression refers to an entitlement to make a progress claim. It does not comprehend reference to warranties which concern the form and content of progress claims or the consequences of breaching warranties about the form and content of progress claims."
Fraser JA concluded at [21] that if the impugned clauses operated to defer what would have been the subcontractor's statutory entitlement to a progress payment from the reference date ascertained in accordance with the Act, they would be void under s 99 of the Act. It is also relevant to refer to the statement made by Fraser JA at [19]:
Bearing in mind the statutory object and the role of s 12 and the definition of "reference date" in giving effect to that object, those provisions are incapable of justifying an implication that the date upon which the statutory entitlement to a progress payment accrues may be qualified by contractual provisions other than those captured by the unambiguous terms of the definition of "reference date".
Does a claimant lose its rights to seek to recover under a construction contract as a result of breaches of the Home Building Act?
No. At least, not in New South Wales. Hodgson AJ was quite firm on this in Brodyn Pty. Ltd. t/as Time Cost and Quality v. Davenport & Anor. [2004] NSWCA 394 where he said at paragraph 80:
80 Section 94 of the HBA is in the following terms:
94 Effect of failure to insure residential building work
(1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work), the contractor who did the work:
(a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and
(b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit).
(1A) Despite section 92 (2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis.
(1B) A contractor who applies to a court or tribunal for a remedy under section, or who is awarded money under this section, is not guilty of an offence under section 92 (2) by virtue only of that fact.
(1C) Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A):
(a) in relation to any contract - the court or tribunal may have regard to the impact on the resale price of the property if no contract of insurance is provided, and
(b) in relation only to a contract entered into before 30 July 1999 - the court or tribunal is not to be limited by the fact that the required contract of insurance was not obtained until after the date of the contract.
(2) However, the contractor remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by the contractor.
(3) Residential building work that is uninsured work at the time the work is done ceases to be uninsured work for the purposes of this section if the required contract of insurance for the work is subsequently obtained.
(4) If a person commenced residential building work before 30 July 1999 and entered into a contract of insurance that complies with this Act in relation to that work after the contract for the residential building work was entered into, that contract of insurance is, for the purposes of this section or any previous version of this section, taken to have been in force in relation to the residential building work done under the contract for the residential building work whether that work was done before or after the contract of insurance was entered into.
Note. If a contract of insurance is in force in relation to part of the this residential building work, this section applies only in relation to the part of the work that is not insured.
81 It was submitted for Brodyn that, because Dasein did not have a licence under the HBA, the subcontract was illegal (s.4) and unenforceable (s.10). Accordingly, Dasein was not entitled to any progress payment.
82 In my opinion, the civil consequences for an unlicensed contractor for its breach of s.4 are those set out in s.10, and not any wider deprivation of remedies. In my opinion this is confirmed by the different provisions of s.94, which explicitly precludes, in the event of breach of the insurance provisions, the obtaining of a quantum meruit unless a court considers it just and equitable. In my opinion, the remedy given by the Act is not of the nature of damages or any other remedy in respect of breach of contract nor is it enforcement of the contract: it is a statutory remedy, albeit one that in part makes reference to the terms of a contract, and thus it is not affected by s.10 of the HBA.
83 Accordingly, in my opinion Dasein's failure to have a licence could not be a ground on which the adjudicator's determination could be considered void, or for otherwise giving relief in respect of the determination.
NB the Queensland Court of Appeal took the opposite approach when dealing with the relationship between the Queensland Building and Construction Industry Payments Act 2004 and similar provisions in the Qeensland Building Services Authority Act 1991 see Zullo Enterprises P/L & Ors v Sutton [1998] QCA 417 (15 December 1998)
How full should your reasons be?
Very full.
The Court must be satisfied that the adjudicator has "considered" everything the NSW Act requires him or her to consider. In Bauen Constructions v Westwood Interiors [2010] NSWSC 1359 McDougall J said:
27 On the face of things, therefore, there is jurisdictional error because the adjudicator failed to exercise the jurisdiction given to him by the Act. In a somewhat analogous situation, in Musico v Davenport [2003] NSWSC 977, I referred to an adjudicator's failure to have regard to relevant provisions of the construction contract with which that case was concerned (and noted s 22(2)(b) of the Act, requiring consideration of the provisions of the construction contract), and said that the adjudicator "therefore failed to carry out the task that the Act requires to be carried out in the manner that the Act requires it to be carried out". It followed, I said in that case, that the adjudicator "failed to exercise the jurisdiction given to him by the Act".
Can you have an adjudicator removed for apprehended bias on the part of the adjudicator?
Yes. In Reiby Street v Winterton [2005] NSWSC 545 (16 June 2005) an adjudication determination was made on progress payment pursuant to the Building and Construction Industry Security of Payments Act 1999. When the adjudicator was appointed one of the parties requested a review of the Master Builder's Association's nomination of the adjudicator on the basis of apprehended bias because of a previous "dispute" between the party and the adjudicator over fees of another matter. The Master Builder's Association chose not to replace the adjudicator. The Court considered whether there was apprehended bias in the circumstances and whether the party was estopped from seeking an order in the nature of certiorari as a consequence of that party having made an election by continuing with the adjudication process . That is, whether there was a waiver to the right of objection on the basis of apprehended bias by continuing with the adjudication process. Master Macready held that there was no waiver and there was apprehended bias and that the determination was void.
Is an adjudicator obliged to give reasons for his determination?
Yes. On any disputed item he or she must do so. The parties to an adjudication application are still entitled to see some intellectual process that leads to the conclusion, particularly where, in many cases, very substantial sums of money are involved. In Bauen Constructions v Westwood Interiors [2010] NSWSC 1359, McDougall J said:
36 I turn to para 11 of the determination. In that paragraph, the adjudicator dealt with the dispute as to the percentage of works that are complete. It is clear, from the way he approached it, that there was an assertion of particular percentages of completion made by Westwood and an assertion of lesser percentages of completion made by Bauen. From the material in the payment claim and payment schedule (and adjudication application and adjudication response) to which I was taken, it appears that there was no more than assertion against assertion. The adjudicator dealt with that by saying that he saw no reason for not accepting one assertion rather than the other, and thus accepting the valuation flowing from the assertion which he preferred.
37 It was submitted for Bauen that in proceeding that way, the adjudicator did not comply with his obligation to give reasons; or alternatively, to the extent that those were his reasons, that they show that he did not carry out the task of making a determination. Reliance was placed on the decision of the Court of Appeal in Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32.
38 In that case, as appears from the reasons of Giles JA, (with whom Santow and Tobias JJA agreed) at [14], the adjudicator had before him, as the adjudicator here had before him, assessment versus assessment, or assertion versus assertion, in each case unsupported by evidence that would enable him independently to determine the outcome. The adjudicator preferred one party's assertion to the other because, in another respect, quite unrelated, that other party had put propositions which the adjudicator described as "unmeritorious challenges", and had asserted "completely unjustified deductions".
39 In those circumstances, Giles JA said that the adjudicator did not carry out the task given to him by the Act. The reasons that the adjudicator gave did not support the conclusion, and thus there was a failure to perform the statutory function. I set out his Honour's reasons at [26] to [28]:
26 With respect to the trial judge, I consider that the fundamental vice in the adjudicator's determination can be shortly explained without embarking on an exegesis of the reference in Brodyn Pty Ltd v Davenport to a bona fide attempt to exercise the statutory power. Section 22 of the Act required that the adjudicator determine an adjudicated amount (s 22(1)) by considering particular matters (s 22(2)). The adjudicator had to make a determination, and he did not make a determination if he arrived at an adjudicated amount by a process wholly unrelated to a consideration of those matters. But that is what the adjudicator did. He stated expressly in his reasons that he did not have evidence on which he could independently arrive at the value of the completed work, and that he adopted the appellant's valuation in preference to that of the respondent because of the respondent's unmeritorious challenges to the validity of the payment claim.
27 On the face of the determination, the adjudicator simply did not perform the task required by the Act, and his purported determination was not given greater respectability by the reference to his inclination "to believe the claimant rather than the respondent": the unmeritorious challenges were not a basis for belief or disbelief, and in any event it was not correct to speak of believing a corporate body. The adjudicator did not comply with an essential precondition to the existence of a valid determination.
28 That is sufficient for the disposal of the appeal, and it is not necessary to consider failure to have regard to relevant contractual provisions or failure to have regard to the payment schedule. I should not be taken to approve by silence all that the trial judge said.
40 In this case, para 11 of the determination gives no intellectual justification for the decision that was made. It does not involve any process of consideration or reasoning; it is, in my view, an abdication of the obligation to reason. As Mr Christie of Senior Counsel (who appeared with Mr Shipway of counsel for Bauen) submitted, if para 11 were a sufficient statement of reasons, adjudicators could deal with applications very quickly and their determinations would be very short. Whilst ordinarily one should be wary of "floodgates" arguments, I think that there is substance in that submission. I repeat that it is not appropriate to expect the detail of reasoning from adjudicators that litigants rightly expect from judges of this Court, from judges of equivalent courts, and from judges of intermediate and ultimate appellate courts. But the parties to an adjudication application are still entitled to see some intellectual process that leads to the conclusion, particularly where, in many cases, very substantial sums of money are involved.
41 In those circumstances, it seems to me, this is again a case of jurisdictional error, because on the face of the reasons, and by application of what was said in Halkat, the adjudicator did not perform his statutory function; and of denial of natural justice.
Is an adjudicator bound to give reasons for the value of a variation where that value has not been disputed in the payment schedule?
No. In Integral Energy Australia v Kinsley & Associates Pty Limited [2009] NSWSC 64 the contract provided:
"3.1 Authorised Variations
The Contractor must not vary the Services except as directed by Integral Energy and as otherwise provided in this clause 3.
3.3 Revision of Service Fees and Timetable
(a) …
(b) the rate or price of each variation must be determined by agreement between the parties, or in the absence of such agreement then a fair reasonable valuation of the variation will be made by Integral Energy and the Service Fees will be adjusted accordingly.
(c) …
(d) The Contractor is not entitled to any payment (pursuant to this Agreement or otherwise at common law or equity) in relation to any variation except as provided in clause 3.3(B)."
In each case of a claim for a variation, the respondent, in its payment schedule, merely stated that it had rejected the claimant's claim in whole or in part and nothing more. The claimant, in the adjudication response tired to agitate other issues, such as whether the work was within the scope of works and was of the value claimed y the claimant. The adjudicator rejected the assertion by the respondent that it could finally determine a claim for variations and, since the respondent had not raised the other issues in its payment schedule, simply determined for the claimant on the values it claimed without going into an assessment of the value of the work. On appeal to the Supreme Court the respondent argued that that meant that the adjudicator had not given reasons. Hammerschlag J rejected this.
44 In the present case the adjudicator attended to all the submissions duly made by both parties. The plaintiff, having not challenged the value of the work, and having not made any submission in that regard, the adjudicator was not, in my view, obliged to engage in a valuation process. The issue was not raised before him: (see for example Plaza West Pty Limited v Simon's Earthworks [2008] NSWCA 279 at [34]).
45 It follows that there was no failure by the adjudicator to include the reasons for his determination as required by s 22(3)(2) of the Act and the plaintiff's challenge accordingly fails.
It is worth noting that, in referring the matter to the Supreme Court, the respondent did not even attempt to argue that the adjudicator was bound by the respondent's decisions as to variations. This was probably because even if the adjudicator was wrong on that count, his error would have ben an error of law which did not go to jurisdiction. In any event the decision in Abacus v Davenport & Ors [2003] 1027 that an adjudicator is not bound by determinations of a superintendent would probably have indicated it was not a viable point anyway.
Can you oppose the entry of judgment pursuant to an adjudicator's award?
There's no point in trying. Attempts have been made to seek injunctions against the issuing of an adjudication certificate by the nominating authority. Originally the motivation was that the mistaken belief that if the certificate was then registered as a judgment, the judgment entered was immutable. This view was soon corrected by the Court of Appeal. The later attempts of this kind are apparently for the purpose of avoiding the compulsory provision of security of the whole amount of the award as contemplated by section 25(4)(b) of the NSW Act. It did not work in the case of Australian Remediation Services v Earth Tech Engineering [2005] NSWSC 715 where Campbell J simply granted the injunction but imposed an equivalent requirement of security in the form of a bank guarantee.
Is there any advantage in opposing the entry of judgment pursuant to an adjudicator's award as opposed to seeking judicial review?
No. In the past it has been thought that before judgment judicial review on the ground of jurisdictional error might have been more available than after judgment, but this does not seem to be the case. However see Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129 Brereton J at para 39
39 The context of Brodyn was an adjudication which had already been registered as a judgment, so as to attract the protection of s 25(4). A consequence was that while it was necessary for the Court to consider whether the determination was at law a determination at all, it was unnecessary to consider circumstances in which the adjudication determination had not yet been registered so as to obtain the protection of s 25(4) -- and, in particular, whether in such circumstances judicial review of a determination might be available on grounds which fell short of jurisdictional error. However, this distinction has not been recognised in subsequent cases -- such as Hargreaves and Climatech - which have applied Brodyn in circumstances where the adjudication determination had not yet been registered, although it might be expected that judicial review would be more liberally available before an adjudication certificate was filed to take effect as a judgment, thereby gaining the protection of s 25(4), than after [cf Solution 6 Holdings Pty Ltd v Industrial Relations Commission of New South Wales (2004) 60 NSWLR 558, 588 [122], 589 [125] (Spigelman CJ, 597 [160] (Mason P), [161], 600 [183])]. It is not, therefore, open to me to distinguish Brodyn on that ground.
Can you attempt to set aside the judgment based on the failure to comply with the essentials?
Yes. Where there has been a failure to provide a payment schedule it may still be possible to resist the entry of a judgment under section 15 of the NSW Act if you can show that the requirements of the NSW Act have not been met (see section 15(4)(a). Those requirements are that there must be a construction contract, under which work has been performed and that the respondent is a party to that construction contract and that a validly endorsed payment claim was properly served and the payment claim identified the work the subject of the claim and that the payment claim was served within 12 months of the last work being done.
The NSW Act only requires that the payment claim "identify" the work.
7. McDougall J in Isis Projects v Clarence Street [2004] NSWSC 714 at paras 36 and 37, observed that:
37 In principle, I think, the requirement in s 13(2)(a) that a payment claim must identify the construction work to which the progress payment relates is capable of being satisfied where:
(1) The payment claim gives an item reference which, in the absence of evidence to the contrary, is to be taken as referring to the contractual or other identification of the work;
(2) That reference is supplemented by a single line item description of the work;
(3) Particulars are given of the amount previously completed and claimed and the amount now said to be complete;
(4) There is a summary that pulls all the details together and states the amount claimed.
However in Coordinated Construction Co. Pty. Ltd. v. Climatech (Canberra) Pty. Ltd. & Ors. [2005] NSWCA 229 Basten JA observed [at 42]:
42 In John Holland v Cardno MBK, Einstein J expressed the view that, in order to satisfy the statutory scheme, a payment claim did not need to be ""comprehensible by the respondent in terms of its supporting materials"": ibid at [21]. However, as Hodgson JA notes at [25] above, the claim must ""identify"" the work, goods or services to which the payment sought relates. The term ""identify"" should be given a purposive construction: what must be done must be sufficient to draw the attention of the principal to the fact that an entitlement to a payment is asserted, arising under the contract to which both the contractor and the principal are parties. In that sense, the claim, to be valid, must be reasonably comprehensible to the other party. If the entitlement does not arise absent the supply of supporting documentation, then the claim must be accompanied by that documentation, unless it has already been provided.
Here Basten JA proposes another test, which is whether the payment claim is sufficient to draw the attention of the principal to the fact that an entitlement arising under the contract to payment is asserted. That test has the benefit of being flexible and able to take into account the things that the parties themselves require, as part of the context of the contact and the nature of the project, to give rise to an entitlement.
What if the payment claim relates to work over 12 months ago?
Section 13 (4) provides:
(4) A payment claim may be served only within:
(a) the period determined by or in accordance with the terms of the construction contract, or
(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),
whichever is the later.
This has been held to refer to the last work done on the project so that if the work on the site was done within the last 12 months the right to claim for tother work done more than 12 months ago persists - per Einstein J in Leighton Contractors Pty Limited v Campbelltown Catholic Club Limited, Campbelltown Catholic Club Limited v Leighton Contractors Pty Limited [2003] NSWSC 1103:
91 It would seem unlikely that the legislature would have intended that a payment claim in respect of any particular item of construction work [as for example the laying of a particular brick] could only be served within the period of 12 months after completion of the work comprising that particular item.
92 Possibly the same may also be said in relation to it being unlikely that the legislature would have intended that a payment claim in respect of a particular unit of construction work [as for example the laying of a brick course or concourse] could only be served within the period of 12 months after completion of the work comprising that unit of construction work. On the other hand perhaps it is arguable that the legislature may have so intended.
93 The legislature in fact enacted section 13 (4) in the following terms:
"A payment claim may be served only within….
(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related good and services to which the claim relates were last supplied)…"
94 To my mind properly construed the subsection in its reference to "the construction work to which the claim relates" should be regarded as referring in a general way to the construction work or to the related goods and services. Hence as long as any item of construction work to which the claim relates [in that general sense], was carried on during the 12 month period prior to the service of a payment claim, that payment claim could also, unexceptionally, include items of construction work carried on prior to that 12 month period
Also, in terms of the effect on an adjudication, Palmer J said in Brookhollow Pty Ltd v R&R Consultants Pty Ltd & Anor [2006] NSWSC 1
63 In a contested adjudication, the adjudicator need consider only those provisions of the Act and of the contract which are relevant to the issues formulated by the parties in their submissions. In an adjudication in which the respondent does not participate the position of the adjudicator is, in my opinion, analogous to that of the Court when a plaintiff seeks the entry of judgment in default of an appearance by the defendant or where the defendant has failed to file a defence. In such a case, the Court still has a duty to decide the case according to truth and fact and if the plaintiff's case appears on the face of the pleading or on the plaintiff's evidence (or lack of it) to be fatally flawed, then the Court will refuse to enter judgment: Charles v Shepherd [1892] 2 QB 622, at 624, 625; Gramophone Company Ltd v Magazine Holder Company (1911) 28 RPC 221, at 225; Termijtelen v Van Arkel (1974) 1 NSWLR 525, at 529; Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (unrep.) NSWSC Young J, 31 May 1991.
64 In my opinion, where the respondent has not participated in the adjudication process so that the payment claim is undefended, s.22(2) requires the adjudicator to address in good faith such issues arising from the need to conform with the provisions of the Act and of the contract as manifestly appear on the face of the payment claim, the adjudication application and any supporting material. In most cases, the consideration will be confined to:
- whether there is in existence a construction contract between the parties and whether the payment claim is made pursuant to that contract;
- whether the payment claim reasonably purports on its face to comply with the requirements of s.13(2);
- whether there is evidence that the payment claim has been served on the respondent;
- what the contract provides, if anything, about the particular claim made in the payment claim and the time for payment;
- whether the claimant says that it has done the work for which the payment has been claimed but has not received payment.
65 If a fatal flaw in compliance with the Act or the contract is manifestly apparent from a consideration of these matters, the adjudicator will refuse to make a determination in favour of the claimant. If no fatal flaw appears, the adjudicator is entitled to make a determination in favour of the claimant even if a more penetrating analysis of the claim and the provisions of the Act or the contract would have revealed a flaw upon which the respondent could successfully have relied. In this regard, it must always be borne in mind that the adjudicator's determination is not final and binding on the parties; whatever defence to the claim the adjudicator may have overlooked in making the determination in this summary and provisional way may always be taken up by the respondent in civil proceedings to determine liability on a final basis: s.32.
In the Queensland Supreme Court, Lyons J in the case of GW Enterprises Pty Ltd v Xentex Industries Pty Ltd & Ors [2006] QSC 399 said that lateness in the payment claim must be raised in the payment schedule or it cannot be raised at all. This appears to clash with the view of Palmer J in Brookhollow.
What if part of the payment claim is for work which is not strictly construction work?
In Coordinated Construction Co. Pty. Ltd. v. J.M. Hargreaves (NSW) Pty. Ltd. & Ors. [2005] NSWCA 228 two judges of the Court, Hodgson JA and Basten JA disagreed:
Hodgson JA said:
50 Before concluding, I wish to note what I believe may be an important error in the judgment of the primary judge, not bearing on the outcome of the case. In the second half of para.[51] of his judgment, the primary judge said this:
An adjudicator is bound to consider the provisions of the Act, the provisions to the construction contract, the payment claim and payment schedule and submissions made by the claimant and respondent respectively and the results of any inspection: s 22(2). It seems to follow from all this that, if the point that an amount claimed is not "for" construction work is not taken in the payment schedule, it cannot thereafter be relied upon by the respondent in the adjudication process. The adjudicator would be bound to determine the matter on the basis of the material to which she or he could properly have regard; and if the adjudicator decided that all the reasons advanced by the respondent were invalid, the adjudicator would determine the amount of the progress payment in favour of the claimant.
51 That passage could be read as asserting that, if a respondent to a payment claim does not raise any relevant grounds for denying or reducing the progress claim made by the claimant, then the adjudicator automatically determines the progress claim at the amount claimed by the claimant. My tentative view is that such an assertion would be incorrect. 52 The task of the adjudicator is to determine the amount of the progress payment to be paid by the respondent to the claimant; and in my opinion that requires determination, on the material available to the adjudicator and to the best of the adjudicator's ability, of the amount that is properly payable. Section 22(2) says that the adjudicator is to consider only the provisions of the Act and the contract, the payment claim and the claimant's submissions duly made, the payment schedule and the respondent's submissions duly made, and the results of any inspection; but that does not mean that the consideration of the provisions of the Act and the contract and of the merits of the payment claim is limited to issues actually raised by submissions duly made: see The Minister for Commerce v. Contrax Plumbing (NSW) Pty. Ltd. [2005] NSWCA 142 at [33]-[36]. The adjudicator's duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim. The adjudicator may very readily find in favour of the claimant on the merits of the claim if no relevant material is put by the respondent; but the absence of such material does not mean that the adjudicator can simply award the amount of the claim without any addressing of its merits.
53 Indeed, my tentative view is that, if an adjudicator determined the progress payment at the amount claimed simply because he or she rejected the relevance of the respondent's material, this could be such a failure to address the task set by the Act as to render the determination void.
Basten AJ said:
64 At [50]-[53] Hodgson JA takes issue with a passage in the judgment of McDougall J below, part of which is set out at [50]. In substance the issue in dispute, as I understand it, is this: if, on a proper construction of the Act and the contract, the adjudicator comes to the view that a particular item in the payment claim is not justified, he or she will nevertheless be required to allow the item if an appropriate objection was not taken by the respondent in its payment schedule. In the passage from the judgment below, set out at [50] above, reliance for this conclusion would appear to be rooted squarely in s 22(2) of the Act. However, when read in context, the primary judge expressly placed weight upon a number of other provisions of the Act, to which attention should be given. Before turning to those, it is convenient to note the scope and operation of s 22(2). The provision is set out in full at [29] above.
65 According to the well-known principles governing judicial review under the general law, a decision-maker will fail to exercise a statutory power if he or she fails to take into account a mandatory consideration. Similarly, there will be a failure properly to exercise the statutory jurisdiction where the decision-maker takes into account an impermissible consideration. The same principles are found in the Administrative Decisions (Judicial Review) Act 1977 (Cth), discussed by Mason J in Minister for Aboriginal Affairs v Peko Wallsend Ltd (1986) 162 CLR 24 at 39-40. As his Honour noted (at p.40), many statutory discretions are in their terms unconfined and the considerations will therefore be unconfined "except in so far as there may be found in the subject-matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard …". Section 22(2) of the Act is an exception to this rule: indeed, it has a dual function. On the one hand, it prescribes matters to which the adjudicator is required to have regard; on the other hand, it identifies those matters as the "only" matters to which the adjudicator is to have regard. At least on its face, the list is exhaustive.
66 If that were the whole of the story, the conclusion suggested by Hodgson JA, namely that the adjudicator would be entitled to disallow an item on the basis of the contract and the nature of the claim made, would be made good. The fact that the payment schedule prepared by the respondent did not identify the reason for disallowance would not mean that the adjudicator had failed to take account of a mandatory consideration, or had had regard to an impermissible consideration. However, McDougall J based his reasoning to a contrary conclusion in part on other statutory provisions, in addition to s 22(2), including ss 14(3) and 20(2B). Sub-section 14(3) requires that where a payment schedule indicates an amount of a payment which is less than that the amount of the claim, the schedule must indicate why the amount is less and, if a respondent is withholding payment, the reason for that action. Where the payment schedule indicates an amount which is less than the amount claimed, the claimant may apply for adjudication of its payment claim: s 17(1)(a). Where such an application is made, the respondent may lodge a response to the claimant's adjudication application. That response may contain relevant submissions (s 20(2)(c)), but, subs (2B) provides:
"The respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant."
In the light of this express restriction on the response which can be provided to the adjudicator, there is merit in the conclusion that the adjudicator is not entitled to go beyond the terms of the response, in rejecting part or all of the claim. That was the conclusion reached by McDougall J.
67 It is not necessary to resolve this difference of opinion in the present case, nor would I wish to do so. There are factors, not referred to at [50] above and not expressly identified McDougall J, which militate against the conclusion just identified. For example, the claimant may make an adjudication application in circumstances where the respondent has failed to provide a payment schedule at all: see ss 15(1)(a) and (2)(a)(ii) and 17(1)(b). Whether, in the light of s 20(2B) the respondent can give any reasons for withholding payment at all in such a case, is unclear. It is also unclear whether it is intended, in that event, that the adjudicator must allow the claim in full. These issues require consideration. They are dealt with further in a different context in Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229 at [40]-[42].
68 The judgment of this Court in The Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142 was handed down after the decision of McDougall J in the present case. Accordingly the reasoning relied on by Hodgson JA in that case at [33]-[36] and relied on at [50] above, was not considered by the primary judge. However, it follows from what I have said that I am not persuaded that the reasoning in those paragraphs of Contrax is correct, but a similar conclusion may be attainable by a different course.
How fast do you have to move?
Festina Lente. Gzell J in Brodyn Pty Ltd v Davenport & Anor , took the view that, even if there was jurisdictional error, when an adjudicator's determination had been registered as a judgment in a court, in order to have that judgment set aside you had to challenge the adjudicator's determination, albeit by application, not to the court in question, which was the District Court, but to the Supreme Court on a prerogative writ, and that the express words of section 25 forbade you doing so. This was overruled by the Court of Appeal in Brodyn Pty Ltd v Davenport [2004] NSWCA 394 para 42 where it was held that a party may apply to the court in which a judgment has already been entered pursuant to section 25(1) to have the judgment set aside on the ground that the adjudication founding it was not in law an adjudication at all. See the comments of Palmer J in Co-ordinated Constructions Co Pty Ltd v J.M. Hargreaves Pty Ltd [2004] NSWSC 1206 (30 November 2004), para 9. In Maine & Anor v Chelia & Ors [No2} NSWSC 425 (20 April 2005) in para 4 Palmer J rejected an application for an interlocutory application to the Supreme Court to restrain any further step in an allegedly invalid adjudication saying that the party adversely affected could seek to set aside any judgment sought to be entered under section25 (1) of the Act. In Energy Australia v Downer Construction (Australia ) Pty Limited [2005] NSWSC 1042 there was a similar result.
What happens if an adjudicator's award has been set aside?
Where the adjudicator's award has been quashed for error of law going to jurisdiction, that is, a voidable decision has been made void by order of the Court, it has been held that what that means is that, in essence, the adjudicator has failed to carry out the adjudication within the ten business day time limit and section 26 (3) of the NSW Act applies. That section gives the claimant a further five days to make a new adjudication application in such circumstances. See Multiplex Constructions v Luikens [2003] NSWSC 1140 para 103. If the determination is declared void, as opposed to voidable, then the period of five days will already have expired. Cardinal Project Services v Hanave [2010] NSWSC 1367. This could be critically important if the work is completed and the payment claim the subject of the adjudication was the final claim, meaning that the claimant cannot make another one.
How do you enforce an adjudicator's award?
That adjudicator's award may be registered as a judgment in a court of competent jurisdiction. The award must be accompanied by an affidavit by the claimant (or where the claimant is a company, by a member or officer of that company - usually a director - see the Uniform Civil Procedure Rules 2005 Pt 35 R 35.3 (1) (b)) stating whether the debt or any part of it has been paid.
Can you serve a statutory demand based upon an adjudicator's award?
Yes, but only for the portion of the debt not subject to an offsetting claim Brereton J In the matter of Douglas Aerospace Pty Ltd [2015] NSWSC 167 (9 March 2015)
98. In my view, a curial proceeding in which a party to a construction contract seeks, by way of enforcing its contractual rights, a declaration that an adjudicated amount is not truly due and payable is in a position closely analogous to one who applies to set aside a judgment, or to appeal from a judgment – essentially, the contention is that the adjudication, and thus the judgment founded on it, is wrong. Despite the width of the concept of “offsetting claim”, it has never been thought to extend to an appeal from, or application to set aside, a judgment. In the absence of payment of an amount of which restitution might be claimed, there is nothing to be set off against the judgment debt, but only a contention that the adjudication is in error. A contention that a debt does not exist is not a “counterclaim, set-off or cross-demand”. Such a contention denies the debt, whereas a counterclaim, set-off or cross-demand admits it, but asserts that there is a countervailing liability. That the curial proceedings might produce a different result is no different from an appeal. The general principle that an appeal or application to set aside a judgment does not found a genuine dispute, or (at least without more) provide some other reason to set aside a demand, supports the conclusion that a claim that an adjudication does not reflect the true contractual rights of the parties does not amount to an offsetting claim.
99. Moreover, as Pullin JA pointed out, there is no restitutionary claim unless money has been paid over, and if money had been paid over there would be no statutory demand. In Collier Nominees Pty Ltd v Consolidated Constructions Pty Ltd (NSWSC, unreported, 3 July 1998, BC9803056), Santow J, as he then was, pointed out that the definition of “offsetting claim” refers to a claim the company has – not one that it will have – against the respondent. The company will not have a restitutionary claim under s 32 unless and until it has paid money to the claimant.
100. In my opinion, therefore, the existence or pendency of an arguable claim that an adjudication does not reflect the true legal rights of the parties – involving no cross-claim for damages, and where there has been no payment and thus no complete claim for restitution – cannot be an offsetting claim for the purposes of s 459H(1)(b). It follows that, far from being satisfied in this respect that the decision in Diploma is plainly wrong, I respectfully accept its correctness. It also follows that what I said in the last sentence of [23] in Prime City should no longer be regarded as correct..
The usual procedure when you have a judgment against a company is that you commence recovery action by serving a statutory demand. In the case of Max Cooper v Booth, which involved an application to set aside a statutory demand, Master Macready held that the provisions of section 25 (4) do not prevent the pleading of cross claims or set offs or other defences in proceedings (NOT BEING MATTERS ALREADY DEALT WITH IN THE ADJUDICATION) to set aside a statutory demands so long as they are not frivolous or vexatious. Master Macready then varied the statutory demand by deducting from it the amount of an offsetting claim by the plaintiff. Where the respondent's claimed offset exceeds the statutory demand, things get a little more complicated. The respondent can seek to set aside the whole of the statutory demand based on the offsetting claim. See the judgment of Barrett J in Greenaways Australia Pty Ltd v CBC Management Pty Ltd [2004]NSWSC 1186. Naturally the respondent has to be pretty convincing to the court, but if its offsetting claim is clearly more than the adjudicator's award, then the court will, as a matter of convenience, allow the offset. In order to avoid the winding up order however the respondent must be able to show the Court that they are setting about the "Claw back " proceedings under section 32. If not- in Peekhrst P/L v Wallace & Anor [2007] QSC 159 in the Qld Supreme Court, Douglas J found that delay in that regard and in other regards justified the statutory demand not being set aside.
Can you get a Mareva Order or freezing order to assist recovery of an adjudicated amount?
Yes. See McDougall J's judgment in Downer EDI Engineering v Taralga Wind Farm Nominees No.2 [2014] NSWSC 971 (18 July 2014)
Can a claimant demand that the respondent pay the adjudicated amount into Court ?
Yes. In Nazero Group Pty Limited v Top Quality Construction Pty Limited [2015] NSWSC 232 (17 March 2015)
Hammerschlag J said in paras 40 to 44:
40. The starting point in the exercise of the discretion to make the orders sought here is the general policy aims of the Act, and specific aims of particular pertinent sections. A general policy aim of the Act is to give enforceable rights to progress payments. Another is to ensure the speedy and effective determination of disputes about them. Specific provisions of the Act aim to put a claimant who has the benefit of an adjudication in its favour in a strong position, so much so that it is entitled to automatic judgment. Section 23(2) of the Act imposes a statutory obligation to pay an adjudicated amount before the relevant date. Coupled with this is the burden placed by s 25(4)(b) of the Act on a respondent who commences proceedings to have a judgment set aside to pay into Court, with the corresponding benefit of the security such payment gives the claimant. Where the claimant has not yet obtained judgment, the respondent remains under the statutory obligation to pay. McDougall J’s reference in Filadelfia to “analogy with s 25(4)”, is recognition of the fact that from a policy point of view, such a respondent has no less an obligation to pay than one against who judgment has been obtained.
41. The presence in the Act of s 25(4)(b) gives rise to no implication that the discretion of the Court to make the kind of orders sought here is narrowed. If anything, the fact that discretion is removed in only the particular circumstances where the section applies, indicates that there is discretion in all other circumstances.
42. The policy of the Act, as reflected in s 25(4)(b), is that a claimant is to be given protection of payment into Court when a respondent seeks, whether by injunction or otherwise, to inhibit the claimant’s enforcement of an adjudication in its favour. Pendente lite, Top Quality is being held out of payment, with the risk attendant on delay, notwithstanding the statutory obligation on Nazero to pay. It is open to Top Quality to file the adjudication certificate, in which event Nazero would have little option but to seek to have the judgment set aside to protect its position, in which event, s 25(4)(b) of the Act would mandate payment into Court. Here, by happenstance, the section does not apply because the further step has not yet occurred. Top Quality would have to take that step to enforce its statutory right to payment. The only difference is that these proceedings have intervened. The policy of the Act is not served by removing Top Quality’s protection pending determination of Nazero’s challenge even though s 25(4)(b) of the Act does not apply in terms.
43. The present position might also be thought to be a close analogue to injunctive proceedings where, pending final determination, Top Quality is practically being held out of its payment. Were it an actual injunction, the usual undertaking as to damages would have to be given.
44. It is not apt to describe a requirement to pay into Court an amount the subject of a statutory obligation to pay, pending a challenge to that obligation, as a fetter on the right to make the challenge. It may be a practical inhibition, depending on the specific financial circumstances of the challenger. This could be a factor relevant to the exercise of discretion, but in the present case, Nazero leads no evidence of hardship.
How do you stave off enforcement of an adjudicator's award?
Since the adjudicator's award is not a final judgment, in circumstances where there are grounds to believe that the claimant will not be able to repay the award at the end of the "claw back" proceedings, such as when the claimant is insolvent such as under administration or in liquidation , if an attempt is made to enforce the judgment based upon the award, you can do a number of things:
Can you get a stay of a judgment made under the provisions of the NSW Act on the basis of the claimant's inability to repay?
The Short answer - Only if the claimant is absolutely, without doubt, insolvent. The argument for the stay is that after payment of the judgment the right of the respondent to seek final resolution in later legal proceedings by pursuing those cross claims may be illusory if, in the meantime, the claimant becomes insolvent.
The Long Answer - Maybe. See the comments by Parker J in A-Tech Australia Pty Ltd v Top Pacific Construction Aust Pty Ltd (No 2) [2019] NSWSC 624 (27 May 2019) paras 22 to 28
22.In support of the application for a stay counsel for TPC referred to decisions of this Court which have emphasised that a judgment under the Act, although enforceable, is interim in the sense that it does not finally determine the legal entitlements of the parties. Counsel referred in particular to the judgment of Nicholas J in Parist Holdings Pty Ltd v WT Partnership Australia Pty Ltd [2003] NSWSC 365 at [19].
23In my view, earlier authorities must be considered with some caution in view of the subsequent amendments. In Parist Holdings, Nicholas J referred to the original Second Reading Speech from September 1999 and not to the Second Reading Speech for the amendment Act. (It may be that the case was argued before his Honour on the Act in its original form).
24This does not mean that the interim nature of the entitlements created by the Act is irrelevant to a stay application. Where the evidence establishes that if payment is made, it will for practical purposes be final, then the interim nature of the procedure is a significant factor.
25.I think this can be discerned from cases where stays have been granted under the Act. In Grosvenor Constructions (NSW) Pty Limited (in administration) v Musico & Ors [2004] NSWSC 344, a decision referred to specifically by counsel for TPC, the contractor was in administration. In Veolia Water Solutions v Kruger Engineering [No 3] [2007] NSWSC 459 the contractor had been under administration and was operating under a Deed of Company Arrangement. In both of these cases it was clear that, once payment was made, if the claims against the contractor were later to succeed, the applicant's recovery would only be cents in the dollar.
26.In Greenwood Futures v DSD Builders (No 2) [2018] NSWSC 1471 the contractor company was not in administration or liquidation, but the evidence before McDougall J showed that those in control of the company had engaged in the past in a pattern of phoenix trading and there was reason to doubt whether the contractor company would continue to be able to trade profitably.
27In Hakea, Ball J found that, having regard to the contractor company's declining trading business, there was a substantial risk that it would be wound up in the near future and that it would prove to be insolvent, whether or not the moneys owing under the Act were paid. His Honour was satisfied that on the facts there was little prospect that the applicants would be able to recover any amount which they paid to the contractor.
28There is nothing like that in the present case. There is no evidence that ATA is trading other than normally; all there is evidence of is that it is a $1 company. That, without more, does not establish that if the money was paid to ATA it would be unable to repay it. That is the relevant risk, and it depends upon the actual facts concerning the company's financial position and trading prospects. There is simply no evidence on those questions before the Court.
also see the comments of Bell j in paras 4, 5 and 6 of Hakea Holdings Pty Limited v Denham Constructions Pty Ltd; BaptistCare NSW & ACT v Denham Constructions Pty Ltd [2016] NSWSC 1120 (16 August 2016) in which she said:
Relevant legal principles
It is common ground that the court has power to grant a stay of a judgment, or an injunction restraining the registration of a judgment, based on an adjudication certificate. As Hodgson JA explained in Brodyn Pty Ltd t/as Time Cost & Quality v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421 at [85]:
A court in which judgment for recovery of money has been given can stay execution of that judgment. A party against whom there was a substantial judgment could apply for a stay of execution on the grounds that it had a greater claim against the judgment creditor, for which it would shortly obtain judgment, and that, if the judgment money was paid, it would be irrecoverable; and the court could in its discretion grant a stay, on terms if it thought appropriate. I see no reason why a judgment under s.25 of the Act could not be stayed on that kind of basis, although the policy of the Act that progress payments be made would be a discretionary factor weighing against such relief.
See also Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238 at [61].
In determining whether to grant a stay or an injunction, the court must balance two competing policies of the SOP Act. One is that contractors should be paid promptly for the work that they have done. The other is that any payment under the Act is not intended to affect the rights of the parties under the relevant construction contract. To give effect to the second of these policies, the SOP Act specifically provides in s 32 that the court or tribunal hearing a dispute under the relevant construction contract may make such orders as it considers appropriate for the restitution of any amount paid as a result of an adjudication determination. That right may prove to be worthless if the contractor is or becomes insolvent.
The factors that the court will take into account in balancing the competing policies include the following:
(a) the strength of the applicant’s claim: see Veolia Water Solutions v Kruger Engineering Australia Pty Ltd (No 3) [2007] NSWSC 459 at [73]; Romaldi Constructions Pty Ltd v Adelaide Interior Linings Pty Ltd (No 2) [2013] SASCFC 124 at [95] (where Blue J (with whom Sulan and Stanley JJ agreed) described the factor as “an important criterion”); RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397 at [19], [36] per Keane JA (with whom Fraser JA and Fryberg J agreed);
(b) the basis of the applicant’s claim. Obviously, an important factor is whether the applicant challenges the adjudicator’s determination. Another important factor is whether the applicant challenges the debt the subject of the adjudication determination. The absence of a challenge to the debt is a powerful factor against the grant of a stay: Romaldi at [110];
(c) the likelihood that the contractor will be unable to repay the amount the subject of the determination. It is accepted in this context that the policy of the Act is generally to place the risk of insolvency on the applicant: R J Neller at [40]. However, where there are strong reasons for believing that the applicant will be unable to recover any amount paid, that fact favours granting a stay: Veolia at [36]-[39];
(d) the risk that the contractor will become insolvent if a stay is granted: Romaldi at [101].
In RSA v VDM CCE and VDM CCE v RSA [2012] NSWSC 861 (20 July 2012) , McDougall J analysed the nature of the power to grant a stay very carefully. In that case the claimant, although still solvent, had ceased operating as a construction company. That meant that one of the purposes of the Act, to keep contractors going and paying subcontractors etc was no longer relevant. He quoted Einstein J in Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd & Ors:
12. In Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd & Ors [2005] NSWSC 571, Einstein J referred at [54] to the decision in Herscho as justifying the proposition that the risk of prejudice must be "a very high risk", and in any event "more than merely a real risk" if a stay were to be granted. With great respect, I think that this is putting too high a burden on the words of Hodgson JA, which clearly were directed not at laying down some general principle but at the facts of the particular case.
Of more moment is what Einstein J said in Taylor Projects at [59]:
59The principle in Grosvenor is only applicable where the claimant is either actually, or very close to, insolvent. Were it otherwise then the stay itself may drive the claimant into the very insolvency which the interim payment regime of the Act is designed to prevent. Such a result would be unjust in circumstances where:
prima facie there is a debt due from the respondent to the claimant;
the final amounts due between the parties may not be ascertained for weeks, months or years;
the Court is in no position to assess the relative merits of the parties on the final claims;
the financial situation of the respondent may itself deteriorate so that the claimant loses for all time the benefit of the right which is now prima facie enforceable;
there is nothing in the Act which suggests a claimant's entitlement to receive the interim payments depends upon it establishing a capacity to repay those sums if there is a final determination unfavourable to it;
the claimant is deprived of the very funds the Act contemplated would be made available to it to pay its own employees and suppliers.
The features that emerge from that paragraph include:
(1)one of the matters that the Court is required to consider, and that it should be astute to prevent, is driving the claimant (as that term is used in the NSW Act) into insolvency (being the state of affairs that the NSW Act sought to prevent) by granting a stay;
(2)the Court should seek to protect the claimant against a deterioration in the respondent's financial position; and
(3) one of the fundamental purposes of the NSW Act is to ensure that claimants are put in funds to pay their own employees and suppliers.
It is apparent, when one looks at the matters listed by Einstein J in [59], that his Honour was not proceeding on the simplistic analysis of the need to demonstrate "very high risk" but, rather, that he was balancing the possibility of detriment to the respondent on the one hand, with the possibility of detriment to the claimant on the other, and taking into account, as a moderating factor, the policy of the Act.
As to the Queensland Act, Keane JA (who spoke with the concurrence of Fraser JA and Fryberg J) said in RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397; [2009] 1 Qd R 390 at [40] that one of the features of the Queensland Act was that, as a matter of legislative policy, it assigned, the risk of insolvency to respondents rather than claimants. In those circumstances, as his Honour said at [41], the mere existence of the risk of the claimant's insolvency would not of itself justify a stay. There must be something else which, together with that risk, justified keeping a claimant out of its statutory right.
Western Australia - Beech J said, in Hammersley Iron Pty Ltd v James [2015] WASC 10, a case where the insolvent claimant sought leave to enforce the adjudicator's award, that there was a need to ensure that the respondent did not, when granted a stay, avoid payment without ever having to prove its cross claim:
The exercise of discretion under s 43
170 In my view, in the circumstances of this case, as I have outlined them, the application for leave to enforce the adjudication determination should not be granted. In essence, that is because:
(1) Hamersley has established a serious question to be tried that it has a counterclaim exceeding the Adjudicated Sum;
(2) Hamersley's counterclaim constitutes mutual dealings for the purposes of s 553C of the Corporations Act;
(3) s 553C operated as at the date of the administration to mean that the Adjudicated Sum and Hamersley's counterclaim must both be taken account of in determining the net balance payable by one party to the other; and
(4) there is, at least, a serious question to be tried that the balance, assessed as required by s 533C, lies in favour of Hamersley.
171 To my mind, to grant leave to enforce the determination in these circumstances would defeat the purpose and object of s 553C. A grant of leave to enforce would mean that Forge would receive from Hamersley the full amount of the Adjudicated Sum, whereas Hamersley would be left to prove in the liquidation of Forge in respect of its counterclaim. Moreover, in circumstances where Forge as contractor is insolvent, and in liquidation, the object of the Construction Contracts Act - keeping the money flowing in the contracting chain by enforcing timely payment and sidelining protracted and complex disputes - does not demand the grant of leave to enforce the adjudication determination.
172 For these reasons, I consider that s 553C requires that leave to enforce be declined, or, alternatively, the operation of that section in the circumstances of this case provides a good reason to decline to grant leave to enforce the adjudication determination.
173 In my opinion, the application for leave to enforce should be stayed, not dismissed. At this stage, Hamersley has not proved its counterclaim. Rather, it has only demonstrated a serious question to be tried. If this application is dismissed, and if Hamersley did not pursue proceedings to advance its counterclaim, Hamersley would avoid payment of the Adjudicated Sum without ever having proved its counterclaim. In the circumstances I think justice between the parties requires that this application for leave be stayed pending resolution, by legal proceedings or by agreement, of Hamersley's counterclaim.
This problem was adverted to by Palmer J in Multiplex Constructions Pty Ltd v Luikens and Anor wherein he said:
21 Again, a respondent may choose to pay a statutory demand founded on an adjudicator's judgment and may successfully contest liability for the payment in subsequent litigation only to find that the claimant has since become insolvent and that the money paid under the "interim judgment" is now irrecoverable.
The problem also arose in a more direct form in the case of Grosvenor Constructions (NSW) Pty Limited (in administration) v Musico & Ors [2004] NSWSC 344. In that case Einstein J ordered that a judgment based on an adjudicator's award be stayed in a case where the claimant was in administration. The stay was to allow the respondent to seek resolution of the cross claims available to it. The stay was granted because:
35 In the present case, if no stay is granted, an interim arrangement would be in practice converted into a final order. The effect of not granting a stay would be that the defendants' rights to recoup the adjudicated amount in the "appeal" pursuant to section 32 of the Act would be rendered nugatory, and the defendants would thus suffer irreparable prejudice.
The stay was to allow the respondent to seek resolution of the cross claims available to it because if no stay was granted, an interim arrangement would be in practice converted into a final order, and instead of getting the full benefit of its set off the respondent would just be an unsecured creditor for that amount in the administration. Although this will make the recovery of monies for liquidators and administrators a little harder, the NSW Act still provides a claimant liquidator or administrator with a significant advantage in that the respondent will have to secure the debt. In his judgment Einstein J quoted with approval some English cases (they have a similar Act in the UK) in which the respondent was required to pay the adjudicated amount to the Court or to a stakeholder pending the resolution of the cross claims. That is a considerable tactical benefit to the claimant liquidator or administrator in that the respondent is then faced with the question of whether it really has a case. If not, it might as well agree to the immediate release of the money to the claimant and thereby avoid having to also pay an order for costs when it fails on its cross claim. Certainly it leaves the claimant liquidator or administrator in a good bargaining position.
Where the claimant is not in administration or liquidation then there must be shown a more than serious risk that the money will not be repaid to give rise to a stay. This was the attitude of the Court of Appeal in Herscho v Expile Pty Limited [2004] NSWCA 468 where at para 3 Hodgson JA said: "...having regard to the policy of the Act, there is sound reason for making stays less readily available in such cases, and perhaps looking for more than "a real risk of prejudice" if a stay is not granted. Also see "Amirbeaggi and Anor v Matrix Group Co Pty Limited [2020] NSWSC 827 (30 June 2020)
Queensland: The Queensland Court of Appeal took a very similar stand with some very interesting additional observations in R J Neller Building P/L v Ainsworth [2008] QCA 397 per Keane JA
[40] The BCIP Act proceeds on the assumption that the interruption of a builder's cash flow may cause the financial failure of the builder before the rights and wrongs of claim and counterclaim between builder and owner can be finally determined by the courts. On that assumption, the BCIP Act seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash in circumstances where the builder's financial failure, and inability to repay, could be expected to eventuate. Accordingly, the risk that a builder might not be able to refund moneys ultimately found to be due to a non-residential owner after a successful action by the owner must, I think, be regarded as a risk which, as a matter of policy in the commercial context in which the BCIP Act applies, the legislature has, prima facie at least, assigned to the owner.
[41] The mere existence of the very kind of risk on which the provisions of the BCIP Act in favour of the builder are predicated would not ordinarily be sufficient of itself to justify a stay of an execution warrant based on the registration of a certificate of adjudication. There may, of course, be other circumstances, which, together with this risk, justify the staying of a warrant of execution based on the registration of an adjudication certificate. For example, the builder may have engaged in tactics calculated to delay the ultimate determination of the rights and liabilities of the parties so as unfairly to increase the owner's exposure to the risk of the builder's insolvency. Or the builder may have restructured its financial affairs after the making of the building contract so as to increase the risk to the owner of the possible inability of the builder to meet its liabilities to the owner when they are ultimately declared by the courts. In this case there are no such circumstances.
Victoria: Vickery J took a similar approach in Asian Pacific Building Corporation Pty Ltd v Aircon Duct Fabrication Pty Ltd & Ors (No 2) [2010] VSC 340 (6 August 2010)
Can you get security for costs?
Hodgson JA in the Court of Appeal in Procorp Pty Ltd v Napoli Excavations & Contracting Pty Ltd (No 2) [2006] NSWCA 147 held that it was appropriate for a claimant to seek security against a respondent for the costs of an appeal initiated by the respondent in relation to an adjudication award. Quare whether such an order would be granted against a respondent who has brought proceedings under section 32 of the NSW Act. (See para 12)
Can the respondent recover overpayments?
That right is expressly preserved by section 32 of the NSW Act which provides that the contractual and other rights of a respondent are unaffected by the adjudicator's award and provides that in any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal must allow for any amount paid to a party to the contract under the NSW Act and, where appropriate, make orders for the restitution of any amount overpaid. The scheme is one which has always only set out to provide interim relief to claimants who, on a brief review of the matter appear to have been unfairly deprived of monies which they are owed.
Can you invalidate a retention clause as a pay when paid clause?
Retention clauses often make the payment of retention monies dependent on the practical completion and final completion of work under the head contract. This "makes the liability to pay money owing, or the due date for payment of money owing, contingent or dependent on the operation of another contract." and the term is a "pay when paid" provision under section 12 (1) of the NSW Act which provides that it "has no effect in relation to any payment for construction work carried out or undertaken to be carried out ... under the contract."Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5 and Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4).
Where the retention clause makes the payment dependent on practical completion and final completion of work under the subcontract then section 12(1) does not apply as the due date for payment is not "contingent or dependent on the operation of another contract."
Can you get a Mareva Order to assist in the recovery of an adjudicated amount?
SERVICE GENERALLY
How do you effect service under the Act?
Section 31 provides:
31 Service of notices
(1) Any notice that by or under this Act is authorised or required to be served on a person may be served on the person:
(a) by delivering it to the person personally, or
(b) by lodging it during normal office hours at the person’s ordinary place of business, or
(c) by sending it by post addressed to the person’s ordinary place of business, or
(d) by email to an email address specified by the person for the service of notices of that kind, or
(d1) by any other method authorised by the regulations for the service of notices of that kind, or
(e) in such other manner as may be provided under the construction contract concerned.
(2) Service of a notice that is sent to a person’s ordinary place of business, as referred to in subsection (1) (c), is taken to have been effected when the notice is received at that place.
(3) The provisions of this section are in addition to, and do not limit or exclude, the provisions of any other law with respect to the service of notices. (UP TO DATE AS AT 27 APRIL 2017)
Note that under section 31 (3) you are able to serve a payment claim at the registered office of a company in accordance with the Corporations Act. Per Giles AJ in Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78 at paragraph 29:
29Further again, the saving in s 31(3) permits service by leaving at or posting to a company's registered office: Corporations Act 2001 (C'th), s 109X(1)(a). A registered office is often an address maintained for the purpose, not at the company's place of business. The legislature has seen as acceptable service by leaving a notice at or posting it to a registered office where no one may have knowledge of the relevant works, and which may be at a remote location. It is difficult, then, to see necessity to read down s 31(1)(c) in order to avoid that possible situation.
NOTE THAT SERVICE BY FACSIMILE IS NOW NO LONGER GOOD SERVICE UNLESS IT IS PROVIDED FOR IN THE CONSTRUCTION CONTRACT CONCERNED
What happens when you serve multiple copies of a document?
This frequently occurs when, for abundant caution, and to ensure service occurs on time, a party may serve a full set of documents in more than one way, such as both by facsimile and by delivery. With service of any notices under the Act, what must be kept in mind is the critical importance of recording when the document is served. In the case of a payment claim, from the time it is served, the respondent's ten days to provide a payment schedule begins to run. You must be able to prove not only that a document was served, but the date, and indeed sometimes even the actual time, of service.
If you serve multiple copies of a document then the first valid service, either in accordance with section 31 of the Act or in accordance with the Corporations Act 2001, is taken as the service of the document and time beings to run from that service. Rein J in JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737 said:
25 The question then is whether the decision in Falgat means that service on 8 December started a fresh period of 10 days. If the words "has been served with" is substituted for "receives" in s 17(3)(c) so that it reads:
"in the case of an application under subs (1)(a)(i) - must be made within 10 business days after the claimant [has been served with] the payment schedule"
the answer to the question when does time start to run, is "from when the claimant was served with the payment schedule". Castleplex was served with the payment schedule on 7 December and again I do not think that service of another copy on 8 December (accepting that it was service) means that time starts running again.
26 In a sense, the rights of the claimant to an adjudication have commenced to run once the other party to the building contract has provided its response by means of the payment schedule. In the absence of an argument based on estoppel arising out of some confusing conduct on the part of the builder, I do not think that the process initiated by the service of the payment schedule on 7 December has come to an end because a second copy was served the following day. If it is said that service of the same payment schedule on the second occasion commenced its own chain, then there were two sets of process deriving from the one payment claim - a most unsatisfactory state of affairs in respect of a statutory regime designed "to provide a speedy and effective means of ensuring that progress payments are made during the course of administration a construction contract without undue formality or resort to the law": see Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd (2005) 21 BCL 364; [2005] NSWCA 229 at [49] per Basten JA. I do not think the Act could have intended that second valid service of documents within time would activate a second regime for payment.
27 The need for certainty of timing seems to me to be best accommodated by taking the first date of valid service of a payment schedule as the date from which time commences to run.
What happens if you try to effect service on a solicitor?
Service on a solicitor is not an accepted method of service under the Act so service only occurs when the respondent actually receives the document. See Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSWSC 903 at para 55. Also see Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 at para 58.
What are the best ways of serving documents under the Act?
With service of any notices under the Act, what must be kept in mind is the critical importance of recording when the document is served. In the case of a payment claim, from the time it is served, the respondent's ten days to provide a payment schedule begins to run. You must be able to prove not only that a document was served, but the date of service, sometimes even the time of service. Some of the above methods of service do not allow you to do that with any certainty. For example, under section 31 (2), service of a payment claim by post to the respondent's ordinary place of business is only effected when the notice is received. The sender of the notice will therefore be unaware of the date of service and the date on which the respondent's ten days to provide a payment schedule begins to run and, if the respondent does not provide a payment schedule, the claimant will be unaware of the final date for serving a notice under section 17 (2). This illustrates that, for the comfort of knowing what the critical dates are, the ideal method of service of a payment claim, payment schedule or section 17 2) notice is by email or facsimile if that is provided for in the contract, or, if the respondent does not have a facsimile, by personal service, ideally by a commercial agent who can fill out a statutory declaration as to service. The advantages of service by facsimile are that it is quick, easily provable both as to service and the date and time of service and cheap warning service by email is less easily provable and should be supplemented by personal service on a registered office or at the address for service under the contract. The problem with service of an adjudication application or an adjudication response is that the document may comprise one or a number of folders and may be so large it will "bounce" if emailed. Personal service, ideally by a commercial agent who can fill out a statutory declaration as to service, is the best way. If you have time problems in lodging such a document with an adjudication authority, if you are still in ordinary business hours, send a scanned copy via email and immediately telephone the adjudication authority to ask that they confirm receipt. (they usually do anyway but it never hurts to ask). You can then send the hard copy by courier as the lodgement has already occurred.
If it is after business hours send the whole document by email or facsimile before midnight and service will have been effected on that day. You can then send the hard copy by courier as the lodgement has already occurred.
Can a solicitor serve a payment claim?
Yes. In Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129 Brereton J at para 23 described a suggestion that a solicitor could not serve a payment claim on his client's behalf as "nonsense".
Can you serve a document at a registered business office after normal office hours?
Yes, but the service takes effect the next business day.
Section 31 (1) (b) provides that a document may be served : (b) by lodging it during normal office hours at the person's ordinary place of business,
If service is effected after normal office hours then the service is effected at the next recommencement of normal office hours. In Falgat Constructions Pty Limited v Equity Australia Corporation Pty Limited [2006] NSWCA 259 Hodgson J. A. said:
"62 There remains the question of whether the time at which service or provision has taken effect is also the time at which a document is received, for the purposes of s.17(3)(b) (and see also s.17(2)(b) and s.21). I note that the word "receive" is also used in s.31(2), but used in the context of "received at that place". In my opinion, mail delivered to a registered office or place of business is received at that place when it is put into the mail box of that registered office or place of business, without the necessity of anyone actually seeing it.
63 In my opinion, the word "receive" in s.17(3)(c) does not necessarily require that the document come to the notice of a person authorised to deal with the document on behalf of the claimant. In general, in my opinion, it would be satisfied once the document has arrived at the claimant's registered office or place of business and is there during normal office hours. There may be circumstances in which service or provision has been effected within s.109X of the Corporations Act or s.31 of the Act, but the document has not been received, but I find it difficult to identify any such circumstances."
Also see Macready AJ in Diddy Boy v Design [2009] NSWSC 14 para 26.
26 Thus the adjudication application was served within the time limit and on 21 December 2008 given the time of service of 7:50 p.m. on 20 December 2008.
What if the recipient of the documents has requested that documents be served in a certain way?
(e) in such other manner as may be provided under the construction contract concerned.
In Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 Austin J said
15 The circumstances surrounding the making of the subcontract are in dispute. It appears that the plaintiff's project manager, Ray Ward, invited the first defendant to tender for the works in about January 2006, and subsequently the first defendant submitted a tender to Mr Ward at Conjola. Ruairi O'Connor, the sole director and major shareholder of the first defendant, attended a meeting on 10 July 2006 with Frank O'Connell, a director of the plaintiff, to discuss the tender. His evidence, which I accept on this point, was that Mr O'Connell told him the plaintiff wanted the first defendant to start the job straight away.
16 Mr O'Connor attended the plaintiff's site office on 11 July and Mr Ward told him to submit all correspondence and invoices to the site office, and provided him with a facsimile number, 4456 1433. I accept Mr O'Connor's evidence on these matters because it is confirmed by evidence of transmission of progress claims to that facsimile number and their subsequent payment.
36 The plaintiff's address is in Newington in suburban Sydney and has never been at Conjola. Nevertheless, the invoice was received at the project site office and transmitted from the project site to Mr O'Connell, and he received it about 2 days later, according to his evidence. If (contrary to my finding) there had been a formal subcontract as claimed by Mr O'Connell, the contract would have required transmission of documents to the plaintiff at its address in Newington or at a post office box address in Silverwater, or to another facsimile number or another e-mail address. But the evidence establishes that even if the formal subcontract had been in place, its provisions concerning service of documents on the plaintiff would have been overridden by Mr Ward's specific instruction to Mr O'Connor, with which Mr O'Connor subsequently complied by transmitting documents to the fax number supplied by Mr Ward to which the plaintiff subsequently responded. That constituted service of the payment claim authorised by s 31(1)(e), because Mr Ward's instruction formed part of the contract between the parties. My conclusion, therefore, is that, whether or not the formal subcontract was in place, the final progress claim for $243,975 was validly made on the plaintiff on 19 June 2007.
When does service by facsimile take effect?
Taylor Projects Group Pty Limited v Brick Dept Pty Limited & Ors [2005] NSWSC 452 Service of a notice by facsimile takes effect the moment the faxed document appears in the recipient's facsimile machine. It does not have to be sent in business hours.
So long as the fax is received into the memory of the recipients facsimile machine it has been served. It does not need to have been printed out.
Zebicon Pty Ltd v Remo Constructions Pty Ltd [2008] NSWSC 1408
23 I find that payment claim 11 was sent "by facsimile" to Remo's ordinary place of business on 19 July 2008. That is an available - indeed, I think, the only rational - inference from Mr Zerilli's evidence and the transmission report. As I have said, it is fortified by the absence of any other suggested candidate for the role of the six page document shown to have been sent on that day.
24 Was it received? It is not necessary that the document should have come to the attention of anyone at Remo's ordinary place of business. See Hodgson JA in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 at [62], [63]. Although what his Honour there said was obiter, it commanded the support of Handley JA and Hunt AJA. I do not regard myself as at liberty to take a different view. (On this, see Austin J in Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 at [65].) Nor do I see it as a relevant point of distinction that Hodgson JA was talking of receipt in the context of s 17(3)(c) of the Act, rather than that of s 31(1)(c).
25 Thus, I conclude, for the purposes of s 31(1)(c) of the Act, Remo would have received payment claim 11 on 19 July 2008 if that document had been received into the memory of Remo's fax machine on that date. I do not think that it is necessary, in terms of receipt, for the document to have been printed out. If it were, a respondent could avoid facsimile service of a document by keeping its fax machine perpetually empty of paper.
26 In my view, it can be inferred from the "OK" result indicated by Zebicon's transmission report that communication was established between Zebicon's fax machine and Remo's fax machine on 19 July 2008 and that the message - the data into which Zebicon's machine had transformed payment claim 11 - was delivered to Remo's machine. If communication had not been established, or the message had not been delivered, the result would not have been "OK".
Should you serve documents with other documents?
It is not a good idea to serve a payment claim under a covering letter dealing with other issues or in a format or circumstances under which it might be viewed as anything other than a payment claim. See Leighton Contractors Pty Ltd v Campbelltown Catholic Club Pty Ltd [2003] NSWSC 1103 paras 59 to 65 in which a claimant only very narrowly escaped coming to grief for this reason.
If you serve both by facsimile and by hard copy when does service take effect?
In JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737 paras 25 to 27 Rein J ruled that where the same document was served twice, time begins to run from the date and time of the first effective service.
What happens when there are multiple places of business?
Per Hodgson AJ in Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78 at paragraph 39:
39On that approach, "the person's ordinary place of business" in s 31(1)(c) would include a head office in which business is ordinarily carried on in relation to the whole of the person's business, as well as a branch office in which business is carried on in relation to the particular construction contract. Thus in this case, service by facsimile to the appellant's head office was sufficient.
What happens when you serve multiple copies of a document?
This frequently occurs when, for abundant caution, and to ensure service occurs on time, a party may serve a full set of documents in more than one way, such as both by facsimile and by delivery. With service of any notices under the NSW Act, what must be kept in mind is the critical importance of recording when the document is served. In the case of a payment claim, from the time it is served, the respondent's ten days to provide a payment schedule begins to run. You must be able to prove not only that a document was first effectively served, but the date, and indeed sometimes even the actual time, of service.
If you serve multiple copies of a document then the first valid service, either in accordance with section 31 of the NSW Act or in accordance with the Corporations Act 2001, is taken as the service of the document and time beings to run from that service. Rein J in JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737 said:
25 The question then is whether the decision in Falgat means that service on 8 December started a fresh period of 10 days. If the words "has been served with" is substituted for "receives" in s 17(3)(c) so that it reads:
"in the case of an application under subs (1)(a)(i) - must be made within 10 business days after the claimant [has been served with] the payment schedule"
the answer to the question when does time start to run, is "from when the claimant was served with the payment schedule". Castleplex was served with the payment schedule on 7 December and again I do not think that service of another copy on 8 December (accepting that it was service) means that time starts running again.
26 In a sense, the rights of the claimant to an adjudication have commenced to run once the other party to the building contract has provided its response by means of the payment schedule. In the absence of an argument based on estoppel arising out of some confusing conduct on the part of the builder, I do not think that the process initiated by the service of the payment schedule on 7 December has come to an end because a second copy was served the following day. If it is said that service of the same payment schedule on the second occasion commenced its own chain, then there were two sets of process deriving from the one payment claim - a most unsatisfactory state of affairs in respect of a statutory regime designed "to provide a speedy and effective means of ensuring that progress payments are made during the course of administration a construction contract without undue formality or resort to the law": see Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd (2005) 21 BCL 364; [2005] NSWCA 229 at [49] per Basten JA. I do not think the Act could have intended that second valid service of documents within time would activate a second regime for payment.
27 The need for certainty of timing seems to me to be best accommodated by taking the first date of valid service of a payment schedule as the date from which time commences to run.
What happens if you try to effect service on a solicitor?
Service on a solicitor is not an accepted method of service under the NSW Act so service only occurs when the respondent actually receives the document. See Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSWSC 903 at para 55. Also see Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 at para 58.
What are the best methods of service?
With service of any notices under the NSW Act, what must be kept in mind is the critical importance of recording when the document is served. In the case of a payment claim, from the time it is served, the respondent's ten days to provide a payment schedule begins to run. You must be able to prove not only that a document was served, but the date of service. Some of the above methods of service do not allow you to do that with any certainty. For example, under section 31 (2), service of a payment claim by post to the respondent's ordinary place of business is only effected when the notice is received. The sender of the notice will therefore be unaware of the date of service and the date on which the respondent's ten days to provide a payment schedule begins to run and, if the respondent does not provide a payment schedule, the claimant will be unaware of the final date for serving a notice under section 17 (2).
This illustrates that, for the comfort of knowing what the critical dates are, the ideal method of service is by facsimile, or, if the respondent does not have a facsimile, by personal service, ideally by a commercial agent who can fill out an affidavit of service. The advantages of service by email are that it is quick, easily provable both as to service and the date of service and cheap.
Is it good service at a registered office if you do not place document wholly within the recipient's office?
It is not. Someone could steal it. In Sand Excavation Pty Ltd v Nahas Constructions Pty Ltd [2011] NSWSC 184 Associate Justice Macready said
48. It seems clear on the evidence that, because of its size, the payment schedule was not able to fit entirely under the door of the plaintiff's office. Ms Orlievsky says that when she collected the package it was stuck under the door and the door had to be opened to force the package out. The defendant's witnesses accepted that the payment schedule could not (and did not) go all the way inside the plaintiff's office.
49. The defendant referred to a number of cases, most of which referred to the situation that applies when a document is served at a letterbox.
50. In Career Trading Online Pty Ltd v BES Trading Solutions Pty Ltd; Buckland [2010] NSWSC 460, the court had to deal with a statutory demand which had been served by sliding the demand wholly under a glass door of a closed accountancy practice on Christmas Eve. At [27] Barrett J said:
"It follows that the action of Ms Buckland is depositing the envelope containing the two statutory demands under the glass doors at the street frontage so as to be wholly within the premises behind those doors constituted "leaving" each such document "at" the registered office of the plaintiff. Each statutory demand was therefore served on the plaintiff on 23 December 2009."
51. In the instant case, the demand was not wholly within the office and a passing stranger could have taken it from the outside of the office. Therefore, as it was not within the control and possession of the occupants of the office, I would have thought that it was not left at the registered office.
Is it good service at a registered office if you leave the document in a letterbox outside the registered office?
No. In a case involving service of a statutory demand, placing it after hours in the outside letterbox of the recipient's registered office was held not to constitute good service : James v Ash Electrical Services Pty Ltd [2008] NSWSC 1112
What does "normal office hours mean?
Section 31 of the Act provides that a notice may be served "in normal office hours". That expression is undefined but in Sand Excavation Pty Ltd v Nahas Constructions Pty Ltd [2011] NSWSC 184 Associate Justice Macready said:
The evidence suggests that Mr Hiatt was at the plaintiff's office from 7am on 13 May 2010 and that Ms Orlievsky usually arrived at about 10am. On the basis that the payment schedule had been served at 8.15am, this would seem to be within normal office hours on 13 May 2010. However, normal office hours is an expression which refers to the general operation of an office. In this case there is not sufficient evidence to determine this point.
If a document has been delivered but not actually come to the attention of the intended recipient, is that good service?
Yes. In Kittu Randhawa -v- Monica Benavides Serrato [2009] NSWSC 170 a respondent claimed that an adjudicator's determination was invalid because receipt of notice of adjudicator's acceptance had been alleged not to have been received by the respondent. It was established that the notice was posted and accepted that the notice did not come to the attention of the respondent. Hammerschlag J made a distinction between non-delivery and not coming to the attention of the recipient. Under section 31(2) of the NSW Act and section 160 of the Evidence Act 1995 (NSW) the sender of a postal article has the benefit of a presumption of delivery which the respondent cannot rebut by showing non-receipt by recipient, as opposed to non-delivery and so the adjudication was valid.
If an obviously incomplete payment claim is served followed by a complete one, is the first service effective to start time running?
No. Service occurs when the complete one is served. In Chase Oyster Bar v Hamo Industries [2010] NSWSC 332 McDougall J said:
13 For reasons that are not entirely clear, Hamo delivered the payment claim (or part of it) by facsimile transmission on 22 December 2009, and the whole of it, by post, sent on 23 December 2009.
14 In form, the payment claim comprised a one-page tax invoice, number 71, which bore the notation that it was made under the provisions of the Act. The document that was sent by facsimile transmission comprised that one page only and did not include copies of the invoices and time sheets that were said in the text of the document to form part of it. The document that was sent by post the following day included not only the first page (the actual tax invoice) but also the supporting documents.
15 There was no evidence of the date of actual receipt of the document that was posted. There was however confirmation of correct transmission of the page that had been sent by facsimile transmission on 22 December 2009. It was common ground that this document was sent and received that day.
37 I think the better view is that it was the posting of the letter rather than the sending of the facsimile transmission that constituted service. That is because the document that was sent by facsimile transmission was on its face incomplete. It is at least arguable that, without the supporting documentation, it would not have been possible for Chase to understand how it was that the value of the work to date was calculated. That is a matter of particular significance when, at least on the face of the payment claim, the work was charged for on a "cost plus" basis.
Can a solicitor serve a payment claim?
Yes. In Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129 Brereton J at para 23 described a suggestion that a solicitor could not serve a payment claim on his client's behalf as "nonsense".
What is a claimant or respondent's "ordinary place of business"?
Hammerschlag J said in Parsons Brinckerhoff Australia Pty Ltd v Downer EDI Works Pty Ltd [2010] NSWSC 1295:
16 To my mind the word "ordinary" in the phrase "ordinary place of business" connotes"usual"; see Jones (as Trustee of the property of Heather MacNeil-Brown, A Bankrupt) v Southall & Bourke Pty Ltd [2004] FCA 539 at [42]. I think that the ordinary place of a person's business includes any place at or from which the person usually engages in activities which form a not insignificant part of the person's business.
Can you serve a document at a registered business office after normal office hours?
Yes, but the service takes effect the next business day.
Section 31 (1) (b) provides that a document may be served : (b) by lodging it during normal office hours at the person's ordinary place of business,
If service is effected after normal office hours is service effected at the next recommencement of normal office hours? In Falgat Constructions Pty Limited v Equity Australia Corporation Pty Limited [2006] NSWCA 259 Hodgson J. A. said:
"62 There remains the question of whether the time at which service or provision has taken effect is also the time at which a document is received, for the purposes of s.17(3)(b) (and see also s.17(2)(b) and s.21). I note that the word "receive" is also used in s.31(2), but used in the context of "received at that place". In my opinion, mail delivered to a registered office or place of business is received at that place when it is put into the mail box of that registered office or place of business, without the necessity of anyone actually seeing it.
63 In my opinion, the word "receive" in s.17(3)(c) does not necessarily require that the document come to the notice of a person authorised to deal with the document on behalf of the claimant. In general, in my opinion, it would be satisfied once the document has arrived at the claimant's registered office or place of business and is there during normal office hours. There may be circumstances in which service or provision has been effected within s.109X of the Corporations Act or s.31 of the Act, but the document has not been received, but I find it difficult to identify any such circumstances."
Also see Macready AJ in Diddy Boy v Design [2009] NSWSC 14 para 26.
26 Thus the adjudication application was served within the time limit and on 21 December 2008 given the time of service of 7:50 p.m. on 20 December 2008.
What if the recipient of the documents has requested that documents be served in a certain way?
(e) in such other manner as may be provided under the construction contract concerned.
In Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 Austin J said
15 The circumstances surrounding the making of the subcontract are in dispute. It appears that the plaintiff's project manager, Ray Ward, invited the first defendant to tender for the works in about January 2006, and subsequently the first defendant submitted a tender to Mr Ward at Conjola. Ruairi O'Connor, the sole director and major shareholder of the first defendant, attended a meeting on 10 July 2006 with Frank O'Connell, a director of the plaintiff, to discuss the tender. His evidence, which I accept on this point, was that Mr O'Connell told him the plaintiff wanted the first defendant to start the job straight away.
16 Mr O'Connor attended the plaintiff's site office on 11 July and Mr Ward told him to submit all correspondence and invoices to the site office, and provided him with a facsimile number, 4456 1433. I accept Mr O'Connor's evidence on these matters because it is confirmed by evidence of transmission of progress claims to that facsimile number and their subsequent payment.
36 The plaintiff's address is in Newington in suburban Sydney and has never been at Conjola. Nevertheless, the invoice was received at the project site office and transmitted from the project site to Mr O'Connell, and he received it about 2 days later, according to his evidence. If (contrary to my finding) there had been a formal subcontract as claimed by Mr O'Connell, the contract would have required transmission of documents to the plaintiff at its address in Newington or at a post office box address in Silverwater, or to another facsimile number or another e-mail address. But the evidence establishes that even if the formal subcontract had been in place, its provisions concerning service of documents on the plaintiff would have been overridden by Mr Ward's specific instruction to Mr O'Connor, with which Mr O'Connor subsequently complied by transmitting documents to the fax number supplied by Mr Ward to which the plaintiff subsequently responded. That constituted service of the payment claim authorised by s 31(1)(e), because Mr Ward's instruction formed part of the contract between the parties. My conclusion, therefore, is that, whether or not the formal subcontract was in place, the final progress claim for $243,975 was validly made on the plaintiff on 19 June 2007.
When does service by facsimile take effect?
Taylor Projects Group Pty Limited v Brick Dept Pty Limited & Ors [2005] NSWSC 452 Service of a notice by facsimile takes effect the moment the faxed document appears in the recipient's facsimile machine. It does not have to be sent in business hours.
So long as the fax is received into the memory of the recipients facsimile machine it has been served. It does not need to have been printed out.
Zebicon Pty Ltd v Remo Constructions Pty Ltd [2008] NSWSC 1408
23 I find that payment claim 11 was sent "by facsimile" to Remo's ordinary place of business on 19 July 2008. That is an available - indeed, I think, the only rational - inference from Mr Zerilli's evidence and the transmission report. As I have said, it is fortified by the absence of any other suggested candidate for the role of the six page document shown to have been sent on that day.
24 Was it received? It is not necessary that the document should have come to the attention of anyone at Remo's ordinary place of business. See Hodgson JA in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 at [62], [63]. Although what his Honour there said was obiter, it commanded the support of Handley JA and Hunt AJA. I do not regard myself as at liberty to take a different view. (On this, see Austin J in Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 at [65].) Nor do I see it as a relevant point of distinction that Hodgson JA was talking of receipt in the context of s 17(3)(c) of the Act, rather than that of s 31(1)(c).
25 Thus, I conclude, for the purposes of s 31(1)(c) of the Act, Remo would have received payment claim 11 on 19 July 2008 if that document had been received into the memory of Remo's fax machine on that date. I do not think that it is necessary, in terms of receipt, for the document to have been printed out. If it were, a respondent could avoid facsimile service of a document by keeping its fax machine perpetually empty of paper.
26 In my view, it can be inferred from the "OK" result indicated by Zebicon's transmission report that communication was established between Zebicon's fax machine and Remo's fax machine on 19 July 2008 and that the message - the data into which Zebicon's machine had transformed payment claim 11 - was delivered to Remo's machine. If communication had not been established, or the message had not been delivered, the result would not have been "OK".
Should you serve documents with other documents?
It is not a good idea to serve a payment claim under a covering letter dealing with other issues or in a format or circumstances under which it might be viewed as anything other than a payment claim. See Leighton Contractors Pty Ltd v Campbelltown Catholic Club Pty Ltd [2003] NSWSC 1103 paras 59 to 65 in which a claimant only very narrowly escaped coming to grief for this reason.
If you serve both by facsimile and by hard copy when does service take effect?
In JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737 paras 25 to 27 Rein J ruled that where the same document was served twice, time begins to run from the date and time of the first effective service.
When documents are served by email, when does service take effect?
The Electronic Transactions Act 2000 provides that the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee
If an email is sent to an address designated by the addressee it is viewed under the ET Act as being received when it becomes capable of being retrieved. For example if the email is sent to the respondent’s ordinary email address.
If however it is not sent to the resppondent’s ordinary emailaddress but say, to a private email address, then it is not viewed under the ET Act as being received until both:
(i) the electronic communication has become capable of being retrieved by the addressee at that address, and
(ii) the addressee has become aware that the electronic communication has been sent to that address.
SEE SECTION 13A BELOW:
Section 13A of the Electronic Transactions Act.
Section 13A provides:
Time of receipt
(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication:
(a) the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee, or
(b) the time of receipt of the electronic communication at another electronic address of the addressee is the time when both:
(i) the electronic communication has become capable of being retrieved by the addressee at that address, and
(ii) the addressee has become aware that the electronic communication has been sent to that address.
(2) For the purposes of subsection (1), unless otherwise agreed between the originator and the addressee of the electronic communication, it is to be assumed that the electronic communication is capable of being retrieved by the addressee when it reaches the addressee's electronic address.
(3) Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been received under section 13B.
In Bauen Constructions Pty Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123 Sackar J said:
Bauen says this Act applies and I should find that the words "becomes capable of being retrieved by the addressee at an electronic address..." aptly describes the position here. Clearly the email was received, albeit it was caught by the spam filter. The words "capable of being retrieved" are ample in their reach. They certainly do not require an email to be opened, let alone read. Again the Oxford dictionary defines "retrieve" in its primary sense as "to get or bring back from somewhere". In its secondary sense it is said to mean "to find or extract (information stored in a computer)". According to the evidence when an email is caught by the Adjudicate Today spam filter, it is nonetheless archived and accessible by Adjudicate Today via its external IT consultant.
In my opinion this Act enables Bauen to contend that if an email is sent, but not opened or read, but it is capable of being retrieved, it has been received by Adjudicate Today. Once received in my view it has been "lodged" on any view of that word.
It is accepted the response although "lodged" in time was not considered by Adjudicate Today and it follows that Bauen has been denied natural justice, the adjudication having proceeded in the absence of Bauen being heard. For this reason alone both adjudications should be set aside.
Can the parties agree to suspend the time limits imposed by the NSW Act?
Not quite, but in Barclay Mowlem Construction v Tesrol Walsh Bay [2004] NSWSC 716 at paras 16 to 22, it was alleged by one of the parties that there had been an agreement between the parties that they would take no further step in response to the claim pending attempts to resolve the dispute. This was held to give rise to a viable argument that there was a right to an estoppel such as to prevent summary judgment being ordered. Be careful what is said in negotiations.
Can a payment claim be served during the course of litigation?
Yes. Where a claimant has commenced court proceedings in respect of a progress claim it is not precluded from serving a payment claim in respect of the same progress claim and seeking adjudication. Both sets of proceedings can proceed concurrently. There is no express provision in the NSW Act that requires statutory proceedings to be completed before court proceedings are commenced, and the general provisions of the NSW Act do not have this effect. (See the decision of the Court of Appeal in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49.)
Further where the contractor has appealed a declaration that the adjudication determination is void, the contractor may also serve another payment claim including the same work and commence another adjudication. Halkat Electrical Contractors Pty. Ltd. v. Holmwood Holdings Pty. Ltd. [2006] NSWCA 125.
Is strict compliance with the rules as to service necessary?
No. In Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 delivering the judgement of the Court of Appeal, Hodgson AJ said:
56 For those reasons, in my opinion, irrespective of fine questions of construction arising under the Act itself, the payment schedule was provided to Falgat at 4.22pm on 22 October 2004 when it was placed under the door at Falgat's registered office, this being during normal office hours. It also would have been provided no later than 27 October 2005 if the copy posted to Falgat was placed in Falgat's box at Kellyville post office on that day; and Falgat did not discharge its onus of proving it was not placed in the box on that day.
57 Accordingly, it is not strictly necessary to express a view as to fine questions of construction under the Act. However, it is in my opinion appropriate to express views about this, because of the importance of clarity on this matter.
58 In the first place, in my opinion it is clear that if a document has actually been received and come to the attention of a person to be served or provided with the document, or of a person with authority to deal with such a document on behalf of a person or corporation to be served or provided with the document, it does not matter whether or not any facultative regime has been complied with: see Howship Holdings Pty. Limited v. Leslie (1996) 41 NSWLR 542; Mohamed v. Farah [2004] NSWSC 482 at [42]-[44]. In such a case, there has been service, provision and receipt.
Can you serve document by email?
Yes. First because it does not really matter how the document is served, so long as it is actually served. second because the Act now provides for service by email.
In Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 delivering the judgement of the Court of Appeal, Hodgson AJ said:
56 For those reasons, in my opinion, irrespective of fine questions of construction arising under the Act itself, the payment schedule was provided to Falgat at 4.22pm on 22 October 2004 when it was placed under the door at Falgat's registered office, this being during normal office hours. It also would have been provided no later than 27 October 2005 if the copy posted to Falgat was placed in Falgat's box at Kellyville post office on that day; and Falgat did not discharge its onus of proving it was not placed in the box on that day.
57 Accordingly, it is not strictly necessary to express a view as to fine questions of construction under the Act. However, it is in my opinion appropriate to express views about this, because of the importance of clarity on this matter.
58 In the first place, in my opinion it is clear that if a document has actually been received and come to the attention of a person to be served or provided with the document, or of a person with authority to deal with such a document on behalf of a person or corporation to be served or provided with the document, it does not matter whether or not any facultative regime has been complied with: see Howship Holdings Pty. Limited v. Leslie (1996) 41 NSWLR 542; Mohamed v. Farah [2004] NSWSC 482 at [42]-[44]. In such a case, there has been service, provision and receipt.
Third, because Section 13A of the Electronic Transactions Act says you can.
Section 13A provides:
Time of receipt
(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication:
(a) the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee, or
(b) the time of receipt of the electronic communication at another electronic address of the addressee is the time when both:
(i) the electronic communication has become capable of being retrieved by the addressee at that address, and
(ii) the addressee has become aware that the electronic communication has been sent to that address.
(2) For the purposes of subsection (1), unless otherwise agreed between the originator and the addressee of the electronic communication, it is to be assumed that the electronic communication is capable of being retrieved by the addressee when it reaches the addressee's electronic address.
(3) Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been received under section 13B.
Does an email have to be opened or read or is it enough that it has been received?
It is enough that it has been received: See para 78 of Bauen Constructions Pty Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123 per Sackar J :
78. In my opinion this Act enables Bauen to contend that if an email is sent, but not opened or read, but it is capable of being retrieved, it has been received by Adjudicate Today. Once received in my view it has been "lodged" on any view of that word.
There are problems however as to when a communication is taken to have been received. See:Reed Constructions Pty Limited v Eire Contractors Pty Limited [2009] NSWSC 678 an email is not considered received at the time it was sent, but only when it is received.
Can you effect service by email and drop box?
No. See Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd and Anor [2014] QSC 30. In that case Phillip McMurdo J was considering a case where an email was sent to the adjudication authority with the facility to down load the adjudication application from a drop box and a copy of that email was sent to the respondent. In ruling that this was not proper service under the Queensland Act or the Queensland Electronic Transactions Act, Phillip McMurdo J said:
[37] Actual service does not require the recipient to read the document. But it does require something in the nature of a receipt of the document. A document can be served in this sense although it is in electronic form. But it was insufficient for the document and its whereabouts to be identified absent something in the nature of its receipt. The purported service by the use of the Dropbox facility may have been a practical and convenient way for CGE to be directed to and to use the documents. But at least until 2 September 2013 (when Mr How became aware of the contents of the Dropboxes), it did not result “in the person to be served becoming aware of the contents of the document”.[14]
Phillip McMurdo Js decision is likely to be adopted by the New South Wales Courts
How do the provisions of section 26A work when the respondent goes into liquidation?
They do not work well when the respondent goes into liquidation in that the pursuit of the money then falls foul of the preference provisions of the Corporations Act. See NSW Land and Housing Corporation -v- DJ's Home and Property Maintenance Pty Ltd (in liquidation) [2013] NSWSC 1167 (23 August 2013)
Contact Us
www.petermerity.com.au
Telephone 02 9689 3992
Facsimile 02 9633 2313
Suite 7, Level 1, 2-6 Castlereagh St Penrith NSW
Liability Limited by a Scheme approved under Professional Standards Legislation.
(1) A person referred to in section 8 who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.
(1A) A payment claim may be served on and from the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and on and from the last day of each subsequent named month.
(1B) However, if the construction contract concerned makes provision for an earlier date for the serving of a payment claim in any particular named month, the claim may be served on and from that date instead of on and from the last day of that month.
(1C) In the case of a construction contract that has been terminated, a payment claim may be served on and from the date of termination.
(2) A payment claim--
(a) must identify the construction work (or related goods and services) to which the progress payment relates, and
(b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and
(c) must state that it is made under this Act.
(3) The claimed amount may include any amount--
(a) that the respondent is liable to pay the claimant under section 27(2A), or
(b) that is held under the construction contract by the respondent and that the claimant claims is due for release.
(4) A payment claim may be served only within--
(a) the period determined by or in accordance with the terms of the construction contract, or
(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),
whichever is the later.
(5) Except as otherwise provided for in the construction contract, a claimant may only serve one payment claim in any particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in that month.
(6) Subsection (5) does not prevent the claimant from--
(a) serving a single payment claim in respect of more than one progress payment, or
(b) including in a payment claim an amount that has been the subject of a previous claim, or
(c) serving a payment claim in a particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in a previous named month.
(7) A head contractor must not serve a payment claim on the principal unless the claim is accompanied by a supporting statement that indicates that it relates to that payment claim.
Maximum penalty—1,000 penalty units in the case of a corporation or 200 penalty units in the case of an individual.
(8) A head contractor must not serve a payment claim on the principal accompanied by a supporting statement knowing that the statement is false or misleading in a material particular in the particular circumstances.
Maximum penalty—1,000 penalty units in the case of a corporation or 200 penalty units or 3 months imprisonment (or both) in the case of an individual.
(9) In this section--
supporting statement means a statement that is in the form approved by the Secretary and (without limitation) that includes a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned.
Note--
An offence against subsection (7) or (8) committed by a corporation is an executive liability offence attracting executive liability for a director or other person involved in the management of the corporation—see section 34D.
Who can make a payment claim?
Any company or person who is, or claims to be, entitled to a progress payment and:
1. who provides construction work or related services under a construction contract,
2. where the construction site is in New South Wales (section 7 (4) of the NSW Act)
3. within 12 months before the service of the payment claim (section 13 (4)), or if the contract provides a longer period, that longer period (section 13 (4)).
4. who is not an employee of the respondent (section 7 (3) (a) of the NSW Act), and
5. who is entitled to be paid for the value of that work or those services (see section 7 (2) - contracts of loan, guarantee or insurance or where the consideration is not related to the value of the goods and services supplied are excluded);
can make a payment claim.
Do you have to first establish that you are entitled to a payment before you can serve a payment claim?
No. You just have to claim that you are. As a result of the 2002 amendments it is now only necessary for the claimant to claim to be entitled to a progress claim. The earlier legislation conferred the right only on a "person who was entitled to a progress payment" (see the comments of Austin J in Jemzone v Trytan [2002] NSWSC 395 at para 38 which gave rise to the amendment).
Do the words "is or may be liable to make the payment" in section 13 mean that a payment claim may be served on anyone who "may be liable"?
No. The person must be a party to the construction contract. See Grave v Blazevic Holdings [2010] NSWCA 324. Per McDougall JA , with whom the Court agreed,
36 For those reasons, I conclude that the primary judge erred in his construction and application of ss 14 and 15 of the Security of Payment Act. He erred because the defence proposed by the applicant was not one foreclosed by s 15(4)(b)(ii). A defence that "I am not a party to, and thus not liable under, the construction contract" is not a defence arising under the contract sued upon. It is a denial of the existence, as between applicant and respondent, of any such contract.
Does all of the work the subject of a payment claim have to have been performed less than 12 months before it is served?
No. Not all of the work needs to be less than 12 months old, so long as some of it is less than 12 months old, the whole of the unpaid work can be claimed for.
Per Einstein J in Leighton Contractors Limited v Campbelltown Catholic Club Limited [2003] NSWSC 1103 at para [94] also Barclay Mowlem Construction Limited v Estate Property Holdings Pty Limited [2004] NSWSC 649 at paras 23 and 24 also Property & Equity Developments v Parnell [2004] NSWSC 1035.
When do you need to serve a supporting statement under the Act?
When a head contractor serves a payment claim on a principal the payment claim must now be accompanied by a supporting statement which includes a declaration that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned. Failure by a head contractor to serve a supporting statement with a payment claim, or service of one which is false and misleading, is now a criminal offence. The Regulations provide that where the obligation to pay a subcontractor is disputed that must be referred to in an attachment to the supporting statement.
What happens if you serve a payment claim without supporting statement?
Service of a payment claim without supporting statement where one is required is not good service of the payment claim under the Act. see Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 (5 November 2014)
WHAT CAN YOU CLAIM FOR?
Can you claim for damages for breach of contract or for lost opportunity?
No. You can only claim for the value of work done, not damages for breach of contract or for loss of an opportunity. See Quasar Constructions v Demtech Pty Ltd [2004] NSWSC 116 at para 34. In that case the adjudicator awarded the claimant builder the whole of the lump sum contract price even though the builder had not completed the works. The adjudicator's award was quashed by the Court as it was really an award in the nature of damages, not an award for the value of work done.
Can you claim for delay damages provided for under the contract?
Yes. For example, If delay damages are made recoverable under the contract, that is an acceptable claim and an award can be made in respect to such damages. Coordinated Construction Co. Pty. Ltd. v. Climatech (Canberra) Pty. Ltd. & Ors. [2005] NSWCA 229 The Court of Appeal in paras 40-45 firmly concluded that delay costs of the kind provided for in the contract can be claimed in a payment claim:
40 Further, in the case of a construction contract that provides that progress payments include certain amounts, s.9(a) strongly suggests that such amounts are to be included in progress payments required by the Act, whether or not they are for construction work or related goods and services; and in my opinion, to put it at its lowest, that in turn suggests that any requirement from s.13 and the definition of ""claimed amount"" that the progress payment must be for construction work carried out or for related goods and services supplied should not be given a narrow construction or effect. I do not say that it would be sufficient that an amount be ""in respect of"" or ""in relation to"" construction work carried out or related goods and services applied; but I do say that ""for"" should not be construed narrowly.
41 In my opinion, the circumstance that a particular amount may be characterised by a contract as ""damages"" or ""interest"" cannot be conclusive as to whether or not such an amount is for construction work carried out or for related goods and services supplied. Rather, any amount that a construction contract requires to be paid as part of the total price of construction work is generally, in my opinion, an amount due for that construction work, even if the contract labels it as ""damages"" or ""interest""; while on the other hand, any amount which is truly payable as damages for breach of contract is generally not an amount due for that construction work.
42 Under the contract in this case, delay damages are payable only if an EOT is for a compensable cause, that is, in general some act or omission of the head contractor or the superintendent or the sub-contract superintendent; but nevertheless, they are not of their nature damages for breach but rather are additional amounts which may become due and payable under the contract (cl.34.9) and which are then to be included in progress payments (cl.37.1). They are therefore prima facie within s.9(a) of the Act.
43 If in substance they represent the increased cost or price of construction work actually carried out, in my opinion they are clearly for construction work carried out. If they represent the cost or price of goods or services actually supplied in connection with the construction work under the contract, they are for related goods or services supplied, even if not for construction work carried out.
44 If they represent off-site costs (such as office overheads) or other on-site costs, it may be a question of fact and degree whether they are for construction work carried out or for related goods and services supplied. They would in my opinion properly be regarded at least as part of the price for the totality of the construction work when completed. And it would seem artificial to say that they are excluded from the Act if they are not referable to work that has already been carried out, particularly when s.9(b) refers to the value of construction work undertaken to be carried out and related goods and services undertaken to be supplied. However, it is not necessary in this case altogether to exclude the possibility that some delay damages claimed under this contract might possibly not be for construction work carried out or related goods and services supplied within the definition of ""claimed amount"" in s.4; but it is certainly not obvious that this is so in relation to any of the claims in this case.
45 It follows from this discussion that delay damages and interest under this contract could be claimed to be due for construction work carried out or for related goods and services supplied; and in my opinion, even if s.13 is construed as limiting claims to claims for payment for construction work carried out or for related goods and services supplied, it would be for the adjudicator to determine whether or not such amounts should be included in the amount determined, having regard particularly to s.9(a) and other provisions of the Act and the contract. This appears to be what each adjudicator did; and I am not satisfied even that any error of law on the face of the record has been established, much less an error of the kind that could invalidate a decision.
Indeed if the contract makes provision for an estimate of losses by the builder for delay to be payable by the owners, the adjudicator is entitled to go through that estimating process even though he is really assessing damages. That is, so long as the contract provides for it, it can be claimed. See Bergin J in Shell Refining (Australia) Pty Limited v A J Mayr Engineering Pty Limited [2006] NSWSC 94
30 The adjudicator went further and referred to the General Conditions of Contract and said:
It appears to me that clause 2.6 gives the claimant a contractual right to delay damages caused by acts or omissions of the respondent. This is just what the subject claims are alleged to be for. Whether the claims can be categorised as a "global claim" as alleged by the [plaintiff] is irrelevant. They are a claims for alleged costs which fall within the definition of Delay Costs.
31 I am not satisfied that the adjudicator failed to consider whether the defendant had established a nexus between delays and costs said to have been incurred.
Is repeating earlier payment claims an abuse?
No. The NSW Act acknowledges that a claim may be advanced more than once. In Allpro Building Services v C&V Engineering Services [2009] NSWSC 1247 McDougal J said:
25 Mr Kalyk sought to submit further, and in more general terms, the payment claim of 2 October 2009 repeated earlier payment claims that had been advanced at different times. However, even if that is so, it does not mean that there is an abuse of process or an issue estoppel. Those concepts become relevant to the extent that any of the payment claims have been the subject of prior adjudication (or, of course, of Court proceedings) or to the extent that any of those invoices is being propounded in a way that makes it relevantly an abuse of process. Repetition by itself does not seem to do so, particularly in circumstances where the Act acknowledges in at least two places that a claim may be advanced more than once (see s 13(6) and s 22(4)).
Can payment claims cover, for example, losses and expenses under the contract such as delay costs or losses and expenses arising from suspension of work by the claimant pursuant to the NSW Act?
Yes. Hodgson JA in Brodyn Pty. Ltd. t/as Time Cost and Quality v. Davenport & Anor. [2004] NSWCA 394 said:
64 In my opinion, as submitted by Mr. Fisher for Dasein, this view is supported by s.13(6), which indicates that successive payment claims do not necessarily have to be in respect of additional work; and especially by s.13(3)(a), which provides for inclusion in payment claims of amounts for which the respondent is liable under s.27(2A). Losses and expenses arising from suspension of work could arise progressively for a substantial time after work has ceased on a project, and s.13(3)(a) expressly contemplates that further payment claims for these losses and expenses may be made progressively.
Can you suspend work for failure to pay interest alone?
Yes if the interest has been made the subject of an adjudiciotn ceritifcate, No if it is just interest tha accrues in respect of an unpaid scheduled amoint where the scheduled amount itslef has been paid. See para 59 the judgment of Parker J in Galileo Miranda Nominee Pty Ltd v Duffy Kennedy Pty Ltd [2019] NSWSC 1157 (6 September 2019)
59. In my view, the better conclusion is that, for the purposes of s 27(2), the “amount that is payable” under s 16(1) is the amount specified in the payment schedule and does not include interest under s 11. It follows that DK was not entitled to continue the suspension of works after 28 March.
How frequently can you make a payment claim?
This depends upon whether the contract nominates reference dates or, where it does not, the reference dates are as implied by section 8 as the last day of the named month.
Section 13(5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
If the contract specifies the reference dates such as a provision requiring progress claims to be made fortnightly, or, for example, on the fifteenth day of the month, or at lock up stage, or that no reference dates arise after the contract is terminated, then the claimant can only claim once with respect to each of those dates as allowed by the contract.
If there is no reference date specified by the contract there is no date "determined by or in accordance with the contract" and in those circumstances the Act provides that a reference date arises only once per calendar month (sections 8 (2) and 13 (5)), on the last day of the month, and then each month thereafter until 12 months after the last work was done. There have been recent decisions to the effect that a claimant can only make a payment claim in respect of a reference date in respect of a month in which construction work was performed. This was based on an interpretation of the expression named month by Stevenson J in Grid Projects NSW Pty Ltd v Proyalbi Organic Set Plaster Pty Ltd [2012] NSWSC 1571. In that case Stevenson J interpreted the expression "named month" as used in section 8 of the Act as meaning the month in which work was done or services provided. This was recently held to be incorrect by McDougall J in Broadview Windows Pty Ltd v Architectural Project Specialists Pty Ltd [2015] NSWSC 955. McDougall J said that had to be incorrect because the meaning of the expression "named month" was determined by the Interpretation Act 1987 (NSW) which defined "named month" as meaning January, February .....December and in view of the still binding decision of the Court of Appeal in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 that the reference dates continue to arise for 12 months from the cessation of work whether work has been done in that month or not.
Is the existence of a reference date a jurisdictional fact?
Yes it is. The High Court of Australia in Southern Han Breakfast Point Pty Ltd (in Liq.) v Lewence Construction Pty Ltd [2016] HCA 52 unanimously held that the existence of a "reference date" is a precondition to making a valid payment claim under the Building and Construction Industry Security of Payment Act NSW 1991 and any adjudication determination consequent upon an invalid payment claim is void and of no effect.
Can you make a payment claim after the work is finished?
Yes. So long as the contract does not say otherwise. you have twelve monthly reference dates after the work is completed, with a final claim after the defects liability period if there is one. See the comments of McDougall J at paragraph 30 of his judgment in The Trustees of the Roman Catholic Church for the Diocese of Lismore v TF Woollam and Son [2012] NSWSC 1559 .
Can the performance of rectification work give rise to a further reference date?.
Yes. see the comments of Stevenson J in Pinnacle Construction Group Pty Ltd v Dimension Joinery & Interiors Pty Ltd [2018] NSWSC 894 (15 June 2018)
paras 33 to 39 . The logic was that by doing the rectification work the claimant made itself entitled to money being withheld in respect of that work.
Can you make a payment claim after the contract is terminated?
This is uncertain at the moment. In Grid Projects Stevenson J decided that the termination of the contract prevented any further reference dates arising and even if work had been done since the last payment claim, that work did not give rise to a further reference date if the contract had been terminated. Grid Projects is currently on appeal. In Broadview Windows Pty Ltd v Architectural Project Specialists Pty Ltd [2015] NSWSC 955, McDougall J said that had to be incorrect in view of the binding decisions of the Court of Appeal that the reference dates continue to arise for 12 months from the cessation of work. That is, reference dates continue to arise despite the termination of the contract. Remember however that the Act allows the contract to specify when reference dates arise, only providing for monthly reference dates if the contract fails to so provide. In cases where the contract says or clearly implies that reference dates do not arise after termination, such as a termination clause which sets out a code of conduct for the parties to resolve outstanding entitlements to payment, then unless the code is viewed as an attempt to avoid the provisions of the Act, it will prevail.
PAYMENT SCHEDULES
The NSW Act provides:
14 Payment schedules
(1) A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.
(2) A payment schedule:
(a) must identify the payment claim to which it relates, and
(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).
(3) If the scheduled amount is less than the claimed amount, the (1) A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.
(2) A payment schedule:
(a) must identify the payment claim to which it relates, and
(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).
(3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment.
(4) If:
(a) a claimant serves a payment claim on a respondent, and
(b) the respondent does not provide a payment schedule to the claimant:
(i) within the time required by the relevant construction contract, or
(ii) within 10 business days after the payment claim is served,
whichever time expires earlier,
the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.
What does "provided with a payment schedule" mean?
Section 14 of the NSW Act says that the claimant must be "provided" with a payment schedule. In Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 the Court of Appeal decided that this means the same thing as "served" and that the service provisions apply.
Hodgson AJ said, with the approval of the whole Court:
61 The use of the word "provide" rather than the word "serve" does carry a suggestion that a different meaning is intended, and that accordingly s.31 does not apply in the case of the word "provide". Against this, however, I do not think the legislature would have (1) used a problematic word like "provide" with the intention that it have a different meaning from "serve", (2) given useful instructions as to how service may be effected, yet (3) given no instructions whatsoever as to how provision may be effected. When this consideration is combined with the consideration raised in the previous paragraph, in my opinion this justifies the conclusion, reached by the primary judge in this case, that "provide" does not mean anything different from "serve", and that s.31 applies to "provision" as well as to "service".
In the same case Hunt and Handley AJJ also said:
65 I agree with the orders proposed by Hodgson JA, and with his reasons except in relation to two matters referred to in pars [55] and [56] of his judgment, but which nevertheless do not affect the orders he has proposed.
66 The service of a document on a company is effected by posting it to the company's registered office: Corporations Act 2001, s 109X(1)(a). If the company does not change its registered address, but chooses to redirect its mail to another address, then, in my respectful opinion, s 109X continues to operate to constitute the posting of the document to that registered office as service on the company, notwithstanding the company's order redirecting its mail.
67 That document is deemed to have been served on the company at the time when it would have been delivered to that address in the ordinary course of post, unless the contrary is proved by the company: Acts Interpretation Act 1901, s 29. The company is entitled to prove that the document arrived at its registered office at a different time from that if the document had been delivered to that address in the ordinary course of post. However, it does not do so, again in my respectful opinion, by proving that it arrived at the address to which it had diverted its mail at a different time from that on which the document would have been delivered to its registered office in the ordinary course of post.
68 Section 31 of the Building and Construction Industry Security of Payment Act 1999 permits service of a document on a person by sending it by post to that person's ordinary place of business. In the present case, the evidence is that the appellant continued to use its registered office as its ordinary place of business notwithstanding the diversion of its mail to another address. I therefore do not regard it as even arguable that the time the document arrived at the address to which the mail had been diverted was the time of service on the appellant.
69 It follows also that I do not agree with the last sentence of par [56].
When must you provide a payment schedule?
The respondent must provide a payment schedule WITHIN THE TIME REQUIRED BY THE RELEVANT CONSTRUCTION CONTRACT, or within 10 business days after the payment claim is served, WHICHEVER TIME EXPIRES EARLIER, (section 14(4)(b)(2). If the contract provides for a shorter time than ten business days to provide a payment schedule, provide it within that time. Time begins to run from midnight on the day of service, that is the first day is the first business day after the day of service. A business day means any day other than a Saturday, Sunday, pubic holiday or 27, 28, 29, 30 or 31 December.(section 4)
In Thiess Pty Ltd & Anor v Lane Cove Tunnel Nominee Company Pty Ltd & Anor [2009] NSWCA 53 the respondent almost came to serious grief with respect to this provision. In that case the relevant clause, Clause 14.3A, provided:
"The Trustee must issue a payment schedule within 4 Business Days of receipt of the payment claim (including the payment claim made pursuant to clause 14.6(a)). The payment schedule must identify the payment claim to which it relates and if it is for an amount less than the claimed amount, the payment schedule must indicate why the amount stated in the payment schedule as payable is less and if it is less because the Trustee is withholding payment for any reason, the Trustee's reasons for withholding payment, provided that the amount stated in the payment schedule may not be less than the amount certified by the Independent Verifier under the certificate referred to in clause 14.2(a) except as otherwise expressly provided by this deed, including clauses 14.5, 14.10 and 14.12."
In this case, despite the clear similarity between the terms of the clause and the NSW Act, the Judge at first instance, and the Court of Appeal, albeit for different reasons, held that this clause dealt only with contractual progress claims and not with payment claims under the NSW Act. The decision was a difficult one and any respondent would be mad not to serve the best payment schedule it could within the shorter period.
Who can provide a payment schedule?
The payment schedule must be ideally be provided by the respondent, or an agent of the respondent, but not the architect or superintendent. See Leighton Contractors Pty Ltd v Campbelltown Catholic Club Pty Ltd [2003] NSWSC 1103 para 107. This is because the Architect or Superintendent, when issuing progress certificates is acting as an independent certifier and not as the agent of the Principal. The better practice may be, where there is a competent superintendent who has issued a progress certificate in relation to the payment claim, is to have the superintendent issue the progress certificate with a covering letter saying:"This is Not A Payment Schedule" and then have the principal issue the payment schedule, which can be a letter headed "Payment Schedule" stating in that letter the amount you intend to pay (which will be the amount certified by the superintendent in the progress certificate) and then saying: "The reasons for non payment given in the attached progress certificate are adopted as part of the payment schedule." and attach the progress certificate to the payment schedule. Send the payment schedule to the claimant within ten business days, ideally by facsimile so you can prove service under the NSW Act. See Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd & Ors [2005] NSWSC 439 where it was held that a solicitor cannot provide a payment schedule under the NSW Act. But also see Baulderstone Hornibrook Pty Ltd v Queensland Investment Corporation Ltd [2006] NSWSC 522 esp para 39 and Lewance Construction Pty Ltd -v- Southern Han Breakfast Point Pty Ltd [2014] NSWSC 1726 a case where the parties had accepted through a course of dealing, that the superintendent had the authority to provide payment schedules. The summary is that you can now probably get away with the superintendent providing the payment schedules but it is a bit risky.
What does "indicate" reasons for non payment mean?
The term "indicate" could even involve reference to documents not included in the payment claim (see Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd & Anor [2009] NSWCA 157 which dealt with the interpretation of that term with respect to payment schedules) Per Giles JA:
50 In my opinion, indication within s 14(3) does not exclude what the adjudicator described as incorporation by reference of material extrinsic to the payment schedule. The adjudicator appears to have thought that provision involving physical receipt meant that regard could not be had to anything not physically received with the payment schedule. That can not be so. As a simple illustration, a payment schedule will commonly refer to provisions of the construction contract; it would make no sense that the construction contract, or the relevant provisions, had to be set out in full or attached although known to the parties and the basis for their relationship. It would equally be neither common sense nor a practical application of s 14(3) to deny indication by reference to correspondence in which reasons have been fully set out simply because a copy of the correspondence is not physically attached to or provided with the payment schedule.
What should be in a payment schedule?
The short answer is: everything. That is, everything which can justify your client not paying the payment claim. If you do not refer to it in the payment schedule you cannot rely upon it in the adjudication. As per McDougall J in Kembla Coal & Coke v Select Civil & Ors [2004] NSWSC 628 at para 34:
"It would follow that the adjudicator cannot determine the entitlement of the claimant by reference to any "defence" that is not contained in the payment schedule (or in any other "matter" to which the adjudicator can have regard under s 22(2)). Conversely, the adjudicator is required to determine only those matters that are raised in the material to which, under s 22(2), he or she can have regard."
That includes:
Any significant factual circumstance such as:
That the work being charged for is not construction work
That the work is not within the ambit of the NSW Act being residential building work in which the respondents reside or intend to reside
That the payment claim is being served more than 12 months after the last work was performed under the project.
That the work is not adequately identified
That the claim is premature under the contract
That the work has a lesser value than that claimed by the claimant
That the respondent has a counter claim arising under the contract such as a claim for liquidated damages or a backcharge.
That the claim of the claimant in respect of delay costs is not justified:
o in terms of the period of the delay
o in terms of the cost of the delay
o that the claimant has not properly applied under the contract for extensions of time
o that the claimant has not properly applied under the contract for delay costs
o that the cause of delay was not a compensable cause under the contract.
What level of particularity should go into a payment schedule?
You do not have to give full particulars so long as you "indicate" the essence of the reason for with holding payment sufficiently to enable the claimant to make a decision whether or not to pursue the claim and to understand the nature of the case it will have to meet in an adjudication. Multiplex Constructions v Luikens [2003] NSWSC 1140 para 78. However generally the more the better.
Can a payment schedule be so lacking in particularity that it is not a payment schedule at all?
Yes. See Joye Group Pty Ltd v Cemco Projects Pty Ltd [2021] NSWCA 211 In that case a email response to payment claims which merely said: “Please be advised that no payment for above Invoices, until all works been completed [sic].” and copies of the invoices (payment claims) were attached to the email, It was held not to be a valid payment schedule. In that case the purported payment schedule was in response to two payment claims from the claimant. That was not held to invalidate it but the lack of specificity was such as to leave the claimant without any idea as to the reasons the respondent was withholding payment and was an example of the kind of problem contemplated by Palmer J in Multiplex Constructions Pty Ltd v Luikens[6] i;
“[67] ... The evident purpose of s 13(1) and (2), s 14(1), (2) and (3), and s 20(2B) is to require the parties to define clearly, expressly and as early as possible what are the issues in dispute between them; the issues so defined are the only issues which the parties are entitled to agitate in their dispute and they are the only issues which the adjudicator is entitled to determine under s 22. It would be entirely inimical to the quick and efficient adjudication of disputes which the scheme of the Act envisages if a respondent were able to reject a payment claim, serve a payment schedule which said nothing except that the claim was rejected, and then ‘ambush’ the claimant by disclosing for the first time in its adjudication response that the reasons for the rejection were founded upon a certain construction of the contractual terms or upon a variety of calculations, valuations and assessments said to be made in accordance with the contractual terms but which the claimant has had no prior opportunity of checking or disputing. In my opinion, the express words of s 14(3) and s 20(2B) are designed to prevent this from happening.
This does however leave the clamant and its advisors in the position of having to make a judgment call as to whether to commence legal proceedings or to go to adjudication. Tactically the best course might be to commence an adjudication and, if the respondent tries to invalidate the adjudication by saying that the payment schedule was invalid, you will immediately have an admission that the claimed amount is due and payable under section 16 of the Act.
What does 'indicate the amount of the payment' mean in section 14(2)(b)?
In Barclay Mowlem v Tesrol Walsh Bay [2004] NSWSC 1232, where Mc Dougall J held that a letter, which did not so much state an amount as merely implied (with reasons) that no payment would be made, was a valid payment schedule complying with section 14(2)(b).
15 There is a question as to whether "nothing" or "nil" or "zero" is "an amount" for the purposes of s 14(2)(b ). In the context of the Act, and regardless of mathematical and philosophical considerations, I think that it is. That is because a respondent who proposes to pay nothing is clearly proposing to pay less than the claimed amount. In those circumstances, as s 14(3) makes clear, the claimant should know why. For example, the claimant would need to decide whether to take the next step, of seeking adjudication. It seems to me that a practical, rather than a mathematical or philosophical, approach is required. A practical approach would include within "the amount" the concept of a nil payment. Some support for this is, I think, obtained from the words "(if any)" that followed the word "amount" in s 14(2)(b ).
16 Further, the alternative view would mean that where a respondent proposed to pay nothing, a valid payment schedule need only identify the payment claim to which it relates (s 14(2)(a)). It need not, on the alternative view, say anything more: an obvious absurdity. I do not think that the legislature intended that a respondent who proposed to pay nothing need comply only with s 14(2)(a).
17 When one reads the 18 May letter, I think that it emerges clearly that TWB did not propose to pay BMC anything in respect of the payment claim. In other words, I think, it is plain from the letter, read as a whole, that TWB proposed in it to pay nothing in respect of the payment claim.
18 If it were necessary to do so, I would consider that the context known to the parties supports this view. For example, the letter of 12 May 2004 (referred to in that part of the 18 May letter that deals with the extension of time costs) said that the claim was "surprising" and "invalid".
19 I therefore conclude that the 18 May letter satisfies the requirements of s 14(2)(b ). That is so a fortiori if, contrary to my view "nothing" is not an amount for the purposes of s 14(2)(b ).
Is there need for quantification in a payment schedule?
Yes. There is a tendency for some respondents to state a scheduled amount as "nil" and then make vague assertions about how the payment claim should be reduced. There is no point making an objection that an amount claimed is too high if you are not going to propose an alternative amount.(and justify the difference). It is not the function of the adjudicator to work out what the respondent's case is. The respondent really needs to propose a dollar figure, ideally with an expert opinion to support it. Sometimes you can get away with it and give the specific dollar value in the adjudication response but only if it is already ascertainable from the payment schedule. Basically, give the adjudicator something to work with. See paras 80 tp 90 of the judgment of Rohman in Maxstra NSW Pty Ltd v Blacklabel Services Pty Ltd [2013] NSWSC 406 (24 April 2013)
Can the reason indicated for non payment be a claim for general damages?
Generally No. Such a claim is beyond the jurisdiction of the adjudicator. You can only claim for the value of work done, not damages for breach of contract or for loss of an opportunity. See Quasar Constructions v Demtech Pty Ltd [2004] NSWSC 116 at para 34. In that case the adjudicator awarded the claimant builder the whole of the lump sum contract price even though the builder had not completed the works. The adjudicator's award was quashed by the Court as it was really an award in the nature of damages, not an award for the value of work done. However - if the contract makes provision for an estimate of losses by the builder for delay for example to be payable by the owners, the adjudicator is entitled to go through that estimating process even though he is really estimating damages. That is, so long as the contract provides for it, it can be claimed. See Bergin J in Shell Refining (Australia) Pty Limited v A J Mayr Engineering Pty Limited [2006] NSWSC 94
What is the "due date"?
Section 11 provides as follows:
Due date for payment
11 Due date for payment
(1) Subject to this section and any other law, a progress payment to be made under a construction contract is payable in accordance with the applicable terms of the contract.
(1A) A progress payment to be made by a principal to a head contractor under a construction contract becomes due and payable on:
(a) the date occurring 15 business days after a payment claim is made under Part 3 in relation to the payment, except to the extent paragraph (b) applies, or
(b) an earlier date as provided in accordance with the terms of the contract.
Note : This Act does not apply to a progress payment to be made by a principal to a head contractor under an exempt residential construction contract. (See section 7 (2) (b).) Subsection (1C) applies to progress payments under a construction contract that is connected with an exempt residential construction contract.
(1B) A progress payment to be made to a subcontractor under a construction contract (other than a construction contract that is connected with an exempt residential construction contract) becomes due and payable on:
(a) the date occurring 30 business days after a payment claim is made under Part 3 in relation to the payment, except to the extent paragraph (b) applies, or
(b) an earlier date as provided in accordance with the terms of the contract.
(1C) A progress payment to be made under a construction contract that is connected with an exempt residential construction contract becomes due and payable:
(a) on the date on which the payment becomes due and payable in accordance with the terms of the contract, or
(b) if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made under Part 3 in relation to the payment.
(2) Interest is payable on the unpaid amount of a progress payment that has become due and payable at the rate:
(a) prescribed under section 101 of the Civil Procedure Act 2005 , or
(b) specified under the construction contract, whichever is the greater.
(3) If a progress payment becomes due and payable, the claimant is entitled to exercise a lien in respect of the unpaid amount over any unfixed plant or materials supplied by the claimant for use in connection with the carrying out of construction work for the respondent.
(4) Any lien or charge over the unfixed plant or materials existing before the date on which the progress payment becomes due and payable takes priority over a lien under subsection (3).
(5) Subsection (3) does not confer on the claimant any right against a third party who is the owner of the unfixed plant or materials.
(6) Except as otherwise provided by this section, the rules and principles of the common law and equity apply to the determination of priorities between a lien under subsection (3) over any unfixed plant and materials and any other interest in the plant and materials.
(7) Section 73 (2) of the Personal Property Securities Act 2009 of the Commonwealth is declared to apply to liens under subsection (3).
(8) A provision in a construction contract has no effect to the extent it allows for payment of a progress payment later than the relevant date it becomes due and payable under subsection (1A) or (1B).
When can the claimant exercise a lien over unfixed plant and materials?
(3) If a progress payment becomes due and payable, the claimant is entitled to exercise a lien in respect of the unpaid amount over any unfixed plant or materials supplied by the claimant for use in connection with the carrying out of construction work for the respondent.
(4) Any lien or charge over the unfixed plant or materials existing before the date on which the progress payment becomes due and payable takes priority over a lien under subsection (3).
(5) Subsection (3) does not confer on the claimant any right against a third party who is the owner of the unfixed plant or materials.
(6) Except as otherwise provided by this section, the rules and principles of the common law and equity apply to the determination of priorities between a lien under subsection (3) over any unfixed plant and materials and any other interest in the plant and materials.
(7) Section 73 (2) of the Personal Property Securities Act 2009 of the Commonwealth is declared to apply to liens under subsection (3).
What are the options of a claimant if there is no payment schedule?
Section 15 provides that
15 Consequences of not paying claimant where no payment schedule
(1) This section applies if the respondent:
(a) becomes liable to pay the claimed amount to the claimant under section 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and
(b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
(2) In those circumstances, the claimant:
(a) may:
(i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or
(ii) make an adjudication application under section 17 (1) (b) in relation to the payment claim, and
(b) may serve notice on the respondent of the claimant's intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.
(3) A notice referred to in subsection (2) (b) must state that it is made under this Act.
(4) If the claimant commences proceedings under subsection (2) (a) (i) to recover the unpaid portion of the claimed amount from the respondent as a debt:
(a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and
(b) the respondent is not, in those proceedings, entitled:
(i) to bring any cross-claim against the claimant, or
(ii) to raise any defence in relation to matters arising under the construction contract.
Should you combine your claim under section 15(2)(a)(i) with an alternate claim under the contract?
Definitely not. In order to get the benefit of speed of resolution the Act is intended to provide you must, after the defence is filed by the respondent, seek a summary judgment where there are no disputes as to fact, or a separate proceedings where there are (the usual disputes are ones of service or that the work is inadequately identified in the payment claim.)
Is a dispute concerning s 15(2)(a)(i) of the SOP Act arbitrable?.
No. In Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd [2011] NSWSC 195 in a case where Ball J found that the parties had, after a dispute had arisen, agreed to arbitrate all disputes before a certain date, but that agreement was not enforceable with respect to a claim under section 15.
45...................Provisions such as s 43 of the Insurance Contracts Act and s 7C of the Home Building Act are necessary precisely because, on the face of it, disputes under contracts of those types are arbitrable. The same could not be said of disputes under the SOP Act. Moreover, s 15(2)(a)(i) is part of the mechanism established to give effect to the adjudication process and the policy underlying it. It seems odd if one aspect of that process could be made the subject of an arbitration when all other aspects of it could not. Finally, s 15(2)(a)(i) specifically says that the claimant may bring proceedings in any court of competent jurisdiction. In doing so, it gives the claimant a right. Section 34 of the SOP Act makes it clear that the claimant cannot contract out of that right. Elsewhere, the Act recognises that disputes under construction contracts may be the subject of arbitration. In particular, as I have said, s 32(3) confers powers on arbitrators (as well as courts). However, s 15(2)(a)(i) confers a right to bring a claim in a court. It makes no reference to arbitration. If the legislature had intended the section to include an arbitration, it would have specifically said something about arbitration in the section, as it did in s 32(3). In my opinion, a provision of an arbitration agreement that prevents a party from exercising a right under s 15(2)(a)(i) to bring proceedings in a court of competent jurisdiction is, to that extent, void under s 34 of the SOP Act.
If a payment claim was not responded to by a payment schedule and a later payment claim was served with respect to the same work, which was responded to by a payment schedule, does the claimant lose its rights under section 15(2) (i) to have the earlier payment claim pursued in a Court?
No. See the judgment of Stevenson J in State Asphalt Services Pty Ltd v Leighton Contractors Pty Ltd [2013] NSWSC 528 (9 May 2013) where he held that serving a later payment claim did not deprive the claimant of the rights accrued under section 15(2)(i) to pursue the earlier claim in Court .
If the claimant is aware that the payment claim will be disputed and the respondent fails to provide a payment schedule through inadvertence, make the subsequent pursuit of that claim through Court proceedings under section 15(2) (i) an abuse of process?
No. See the judgment of Stevenson J in State Asphalt Services Pty Ltd v Leighton Contractors Pty Ltd [2013] NSWSC 528 (9 May 2013) where he said however that "Such circumstances might be relevant to the question of whether there should be a stay of any judgment so obtained."
144. A claimant might serve a payment claim knowing (for example, because of discussions which took place before service of the payment claim, or even during the ten business days during which the respondent could serve a payment schedule) that the claim was disputed. It may be that the respondent, through ignorance of the provisions of the Act, or through "illness, accident or other unforeseeable and unavoidable circumstances" (Bitannia at [62] per Basten JA), failed to serve a payment schedule in time, or at all. In these circumstances, in my opinion, the claimant's knowledge of the respondent's view of the merits of its claim would not, without more, render proceedings subsequently brought by the claimant, in exercise of its rights under the Act, an abuse of process.
145. Such circumstances might be relevant to the question of whether there should be a stay of any judgment so obtained (see, eg, Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421 at [85] per Hodgson JA (with whom Mason P and Giles JA agreed); Bitannia at [5] per Hodgson JA and at [62] per Basten JA).
QLD: In R J Neller Building Pty Limited v Ainsworth [2008] QCA 397; [2009] 1 Qd R 390 at [40]. Keane JA observed that, as a matter of policy, the legislature has assigned the risk of insolvency to the principal, rather than to the builder, in the first instance. These and other observations of Keane JA were quoted with approval by McDougallJ in the Supreme Court of NSW in Kingston Building (Australia) v Dial D [2013] NSWSC 2010 (13 December 2013)
When can you serve a section 17(2) notice?
Only after the ten business days given the respondent to provide a payment schedule. Do it before then and it's premature and invalid.
Jantom Construction Pty Ltd -v- S&V Quality Interiors (NSW) Pty Ltd [2011] NSWSC 670 per Hammershlag J:
7. The payment claim in this case was delivered on 9 March 2011. The plaintiff (the respondent to the claim) thus had up to and including 23 March 2011 to pay it and failing that the first defendant could on the next day give notice of its intention to apply for adjudication of the payment claim.
8. In saying that an adjudication application to which subs (1)(b) applies cannot be made unless the circumstances in ss 17(2)(a) and (b) have occurred, the Act makes it clear that the described period of 20 business days within which the application may be made only commences after the due date for payment and that notice of an adjudication application cannot be given earlier. A purported notice under s 17(2)(a) given too early deprives the respondent of the full statutory period provided for by s 16(1)(b)(ii) read with s 17(2)(b) of the Act and is invalid and of no effect. A valid notice is an essential pre-requisite for a valid adjudication application and the valid subsequent appointment of the adjudicator.
9. It follows that the adjudication application in this case was ineffective with the consequence that the adjudication determination was made without jurisdiction and is liable to be quashed; see Chase Oyster Bar v Hamo Industries [2010] NSWCA 190.
What happens when you serve a section 17(2) notice?
When you serve a section 17(2) notice you do not lose your rights to go to Court.
(A section 17(2) notice is a notice to the respondent that they have failed to provide a payment schedule within ten business days and that the claimant intends to proceed to adjudication and that the respondent has a further five business days in which to serve a payment schedule.)
See Cromer Excavations Pty Ltd v Cruz Concreting Services Pty Ltd [2011] NSWSC 51 at para 32 where the comments to the contrary effect of Einstein J in Rojo Building Pty Limited v Jillcris Pty Limited [2006] NSWSC 309 were not followed.
In Cromer Davies J said:
45It follows, therefore, that the giving of a notice under s 17(2) does not, without anything more, amount to an election between the remedies provided in s 15(2)(a). That is the more so when, as here, there is no evidence that the respondent has acted in any way on the basis that the s 17(2) notice has been served, whether by providing the payment schedule that s 17(2)(b) provides for, or otherwise.
46For these reasons, Cromer has not made an election that prevents the claim made in the present proceedings.
What happens when the respondent serves a payment schedule in response to a section 17(2) notice?
Cromer Excavations Pty Ltd v Cruz Concreting Services Pty Ltd [2011] NSWSC 51 The claimant probably cannot proceed to curial proceedings. (See discussion of Einstein's decison in Rojo Building Pty Limited v Jillcris Pty Limited [2006] NSWSC 309.
42 It must be said that Einstein J did not have the full detail of the facts in evidence before him and appears to have been influenced by the fact that his view was that a payment schedule had been provided in response to the s 17(2) notice.
What happens when you serve an adjudication application after a section 17(2) notice?
The claimant cannot proceed to curial proceedings
Cromer Excavations Pty Ltd v Cruz Concreting Services Pty Ltd [2011] NSWSC 51
44 In Kell & Rigby Bergin J appeared to distinguish the notice of intention to make the adjudication application and the making of the application itself - see at [24]. Similarly, McDougall J in Rojo at [63] stressed that the adjudication application itself could not be made until the s 17(2) notice had been given and that the giving of the notice was not the making of the application. In the light of what s 17(3) prescribes in relation to the adjudication application, the distinction between the notice of intention and the application itself must be a correct distinction.
What are the formal requirements of a payment schedule?
It does not need to be signed by anyone: Baulderstone Hornibrook Pty Ltd v Queensland Investment Corporation Ltd [2006] NSWSC 522 paras 38 to 42:
38 The payment schedule on its face identifies the entity providing it as "Queensland Investment Corporation (Respondent)". The typed segment of the payment schedule reads:
"Signed:
Queensland Investment Corporation."
39 As already observed:
i. it was not necessary for any signature to appear upon the document atall;
ii. it was not necessary for QIC to sign the payment schedule at all.
40 In fact Mr Young a partner of Allens, signed the document "for Queensland Investment Corporation".
41 The Progress Payment Certificate for Payment Claim 42 signed by Mr Aquilina of APP Corporation Pty Ltd as "Principal's Representative" [which as already indicated was a part of the payment schedule] had been addressed to BHPL and copied to Mr McCondach.
42 These facts are sufficient to prove that the payment schedule was provided by QIC. It was entirely unnecessary to go any further.
It does not need to refer to itself as a payment schedule, it does not need to refer to the NSW Act. Springs Golf Club Pty Ltd v Profile Golf Pty Ltd [2006] NSWSC 344 per Rein J
37 The letter is not explicitly expressed as an offer, nor does it state that the amount previously offered was an offer that went beyond what was accepted by Springs as payable by it. What is important, I think, is that it was a response to a formal payment claim that had been made. A claim having been made pursuant to the Act and expressed to be so made, the letter ought be construed liberally as a response with significance under the Act. The fact that an offer had been made of the same amount previously (whether or not expressed previously to be without prejudice and whether or not expressed previously to be an amount greater than the amount said by Springs to be owing, neither of which appears to be the case) does not preclude the letter meeting the requirements of s 14. The letter considered as a response to the payment claim, which its heading expressed it to be, states the total amount that Springs was, and inferentially, continues to be, prepared to pay. If there is a qualification, it is that the stated amount is all that it is prepared to pay. In my view, the amount that Springs proposes to pay ("the scheduled amount") is thereby indicated.
If there is no payment schedule can the claimant serve notice of its intention to suspend work on the project under section 27 of the NSW Act.?
Yes, but a word of warning. If the claimant decides to suspend work under the contract as a result of non payment he can only do that if he has served a notice informing the respondent of that, which notice, to be valid, must contain words to the following effect:"This is a notice of suspension under the Building and Construction Industry Security of Payment Act 1999". If it does not, the notice is invalid and the claimant is in breach of contract. If the respondent takes advantage of this and accepts the suspension as a repudiation of the contract then the contract will have been wrongfully repudiated by the claimant with all the dire consequences that can follow from that.
Which option should you choose - court or adjudication?
Adjudication is faster
If your payment claim can be well documented and easily justified in terms of the construction contract, then the quickest way to get your money is by making an adjudication application under section 17 (1) (b).
In order to do that you must serve a section 17(2) notice notifying the respondent within 20 business immediately following the due date for payment of your intention to apply for an adjudication and you must give the respondent the opportunity to provide you with a payment schedule within 5 days after that notification.
but court has fewer hurdles
Where the payment claim is not well documented or not easily justified in terms of the construction contract, then there seems to be a view that the safer way in terms of your client's claim may be by the slightly longer method of filing a statement of liquidated claim and seeking summary judgment as in such a proceeding, the respondent cannot raise cross claims or any defence in relation to matters arising under the construction contract. Walter Construction Group Pty Ltd v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266.
THE ADJUDICATION APPLICATION
When must you lodge an adjudication application?
If a payment schedule was provided within ten business days of the service of the payment claim - The claimant must make an adjudication application within ten business days after the claimant received the payment schedule. Be careful to note when you received the payment schedule in calculating the days. I once sent a payment schedule off at 5 minutes to midnight on the day before the last day. The claimant picked it up out of his fax machine the next morning and didn't read the date/time. He must have assumed that it was sent that morning because he then applied for adjudication one day late and I was able to have the adjudication halted on that basis. When pressed for time you can send the adjudication application to the authorised nominating authority by facsimile with a hard copy later.
What must an adjudication application contain?
Sections 17 (3) (f)and (g) and (h) require that the adjudication application identify the payment claim and the payment schedule to which it relates and be accompanied by the application fee of the authorised nominating authority
What may an adjudication application contain?
Section 17 (3) (h) provides that an adjudication application "may contain such submissions relevant to the application as the client chooses to include". This does not expressly authorise supporting materials to the claimant's claim being included in the adjudication application, but it appears to have been accepted by the courts that such supporting materials may be included (see Austruc v ACA v Sarlos and Anor [2004] NSWSC 131 at paras 67 to 69 which say that "submissions"in section 17(3), section 20 and section 22 may include documents and statutory declarations in support). There is a potential anomaly here which is that, in order to be valid, a payment claim does not have to be comprehensible in terms of its supporting materials and yet the supporting materials may be included in the adjudication application, but if the materials bring to the attention of the respondent grounds of objection for the first time, the respondent may be disadvantaged in that it has not referred to these grounds of objection in its payment schedule.(See the discussion of this problem by Einstein J in John Holland Pty Limited v Cardno MBK (NSW) Pty Limited & Ors [2004] NSWSC 258 paras 22 and 23.)
22 The primary touchstone it seems to me, is section 20 (2B). Whilst a claimant which provides the most minimal amount of information in its payment claim may even so, be seen to technically comply with section 13, such a claimant will expose itself to an abortive adjudication determination if it be that:
A the respondent is simply unable to discern from the content of the payment claim, sufficient detail of that claim to be in a position to meaningfully verify or reject the claim: hence not then being in a position to do otherwise than to reject the whole of the claim on the basis of its inability to verify any part of the claim;
A the claimant then elects to include the missing detail in the adjudication application with the inexorable consequence that the respondent is barred by section 20 (2B) from dealing with that detail/matter in its adjudication response;
A the adjudicator relies in determining the adjudication application upon the detail supportive of the payment claim which first emerged as part of the adjudication application
23 For those reasons whilst it is not permissible to construe section 13 as providing that in order to be a valid payment claim, such a claim must do more than satisfy the requirements stipulated for by subsection 2 (a), (b) and (c), the consequence to a claimant which does not include sufficient detail of that claim to be in a position to permit the respondent to meaningfully verify or reject the claim, may indeed be to abort any determination As a practical matter most adjudicators would not reject any submissions or evidence in the adjudication response in relation to the additional grounds of objection in such circumstances.
How should you draft an adjudication application?
The adjudication application is usually the only opportunity that the claimant will get to put his or her case to the adjudicator so it has to be complete and persuasive. It should contain a copy of the payment claim, the payment schedule (see section 17 (3) (f) and (g), the construction contract if it is in writing or details of the terms of the construction contract if it is an oral contract. It should also contain submissions and evidence to refute any of the reasons for non payment given in the payment schedule.
How should you serve an adjudication application?
You could use any of the methods set out in section 31, however the practical fact that you need to serve the adjudicator with a tabbed up hard copy for his or her convenience, and the requirement that you serve the respondent with an identical copy (See Richard Shorten and Anor v David Hurst Constuctions Pty Limited and Anor; David Hurst Constructions v Richard William Shorten and Anor [ 2008] NSWSC 546 (5 June 2008) means that the ideal method of service is by commercial agent or by courier, where the courier receives a signed receipt for the document. When in doubt or when short of time, serve by email and follow up with a hard copy later. The service of the email if effective starts the time running as time begins to run from the date of the first service of a complete copy of the document.
When does service by fax take effect?
The contract must contemplate service by facsimile for it to be good service. For service by fax to be effective, it must just lodge in the memory of the recipient's facsimile machine. It does not have to be printed out. So long as the sender's facsimile transmission report says OK the fax is presumed to have been received See paras 23 -28 of Zebicon Pty Ltd v Remo Constructions Pty Ltd [2008] NSWSC 1408.
23 I find that payment claim 11 was sent "by facsimile" to Remo's ordinary place of business on 19 July 2008. That is an available - indeed, I think, the only rational - inference from Mr Zerilli's evidence and the transmission report. As I have said, it is fortified by the absence of any other suggested candidate for the role of the six page document shown to have been sent on that day.
24 Was it received? It is not necessary that the document should have come to the attention of anyone at Remo's ordinary place of business. See Hodgson JA in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 at [62], [63]. Although what his Honour there said was obiter, it commanded the support of Handley JA and Hunt AJA. I do not regard myself as at liberty to take a different view. (On this, see Austin J in Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 at [65].) Nor do I see it as a relevant point of distinction that Hodgson JA was talking of receipt in the context of s 17(3)(c) of the Act, rather than that of s 31(1)(c).
25 Thus, I conclude, for the purposes of s 31(1)(c) of the Act, Remo would have received payment claim 11 on 19 July 2008 if that document had been received into the memory of Remo's fax machine on that date. I do not think that it is necessary, in terms of receipt, for the document to have been printed out. If it were, a respondent could avoid facsimile service of a document by keeping its fax machine perpetually empty of paper.
26 In my view, it can be inferred from the "OK" result indicated by Zebicon's transmission report that communication was established between Zebicon's fax machine and Remo's fax machine on 19 July 2008 and that the message - the data into which Zebicon's machine had transformed payment claim 11 - was delivered to Remo's machine. If communication had not been established, or the message had not been delivered, the result would not have been "OK".
27 In this context, I bear in mind that Remo could have called evidence as to the nature of the fault, and as to whether it was possible that a sender could receive an "OK" report for a message that in fact had not been received into the recipient machine's memory. It did not do so, although at an interlocutory hearing Mr Hicks referred to the fact that Remo was considering obtaining and calling expert opinion. I bear in mind also the observation of Lord Mansfield CJ in Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970 that "all evidence is to be weighed according to the power of one side to have produced, and the power of the other to have contradicted". (Subsequent citations of his Lordship's words do nothing to diminish their authority: see, by way of example only, Dixon CJ in Hampton Court Limited v Crookes (1957) 97 CLR 367 at 371 and Gleeson CJ in Swain v Waverley Municipal Council (29005) 220 CLR 517 at 525 [17].)
28 I conclude that Remo did receive payment claim 11 on 19 July 2008, because I think the evidence of Mr Zerilli, coupled with the transmission report, leads to an unrebutted inference that the document was transmitted to and received into the memory of Remo's fax machine on that day.
When must you serve an adjudication application?
There is no specific time but you must serve an adjudication application promptly. (See Niclin Constructions Pty Ltd v SHA Premier Constructions Pty Ltd & Anor [2019] QSC 91 (18 February 2019). Twelve business days after lodging with the adjudication authority is too late) Section 17 (5) does not require that the respondent be served within any set period of time, but the respondent is not obliged to provide an adjudication response until 5 business days after service of the adjudication application or 2 business days after receipt of the adjudicator's notice of acceptance of the application, which ever comes later. Since the adjudicator must finish the adjudication within ten business days of accepting the application, excessive tardiness in serving the application on the respondent may result in the adjudication being aborted as the adjudicator may not have the time to complete the adjudication. (The parties can extend the time for the adjudication, but only by agreement)
Why is the adjudicator's acceptance important?
The respondent is not obliged to lodge an adjudication response until 5 business days after service of the adjudication application or 2 business days after receipt of the adjudicator's notice of acceptance of the application.
THE ADJUDICATION RESPONSE
When can you serve one?
Section 20 (2A) you can lodge an adjudication response only if you have previously provided a payment schedule to the claimant in accordance with sections 14 (4) or 17 (2) (b).
When you must lodge it?
Within five business days after service of the adjudication application or within two business days after receipt of the adjudicator's notice of acceptance of the application, which ever comes later. (see section 17 (5)
What it can contain?
The respondent can only include in the adjudication response reasons which have already been included in the payment schedule.(see section 20 (2B) What this means is that you may have to be ingenious in your interpretation of the payment schedule if your client drafted it without reference to you. Also if the adjudication application was served too late, the adjudication response is where you can raise the matter. The claimant may say it is not in support of the payment schedule but since the failure to lodge the adjudication application in time could only occur after the payment schedule, that argument falls apart, and it is a critical matter for the adjudicator to decide.
How do you draft your adjudication response?
Always draft your adjudication response with an eye to the payment schedule. Each of the headings should be words in the payment schedule and the submissions under that heading should be supplemental or supportive of those words. If new matter has been raised by the adjudication application which gives rise to further objections, try to fit those objections into one of the general categories of objection in the payment schedule. If that is not possible submit something along these lines: "We made a general objection to this in the payment schedule because the payment claim was not in sufficient detail. Now the adjudication application has provided the detail we are in a position to supplement our general objection and we do so herewith."
How do you serve your adjudication response?
Any of the methods set out in section 31, however the size of the usual adjudication response and the fact that it often contains photographs and other items which cannot be faxed in useful form means that the ideal method of service is by courier, where the courier receives a signed receipt for the document. When in doubt or when short of time, serve by fax first.
When must you serve your adjudication response?
The respondent is obliged to lodge an adjudication response within 5 business days after service of the adjudication application or 2 business days after receipt of the adjudicator's notice of acceptance of the application. Presumably it should be served in that time as well although the NSW Act is not specific on the point.
What if there is a dispute about date of service of an adjudication response?
If the claimant says that the adjudication response was lodged too late, the respondent must be allowed the right to argue the matter before the adjudicator - if not it is a breach of natural justice (see TQM v Dasein [2004] NSWSC 1216). Further, if it can be proved in a Court that service of one of the critical documents has not been effected, then the adjudicator's determination is a nullity for lack of jurisdiction. Steel v Beks [2010] NSWSC 1404.
Can You Interfere With The Adjudication Process?
This is not encouraged. See Palmer J's comments in Lifestyle Retirement Projects No 2 Pty Ltd v Parisi Homes Pty Ltd & Anor [2005] NSWSC 411:
4 I think that the Plaintiff''s application should be declined. It has been made clear by McDougall J in Australian Remediation Services Pty Ltd v Earth Tech Engineering Pty Ltd [2005] NSWSC 362 and in the authorities to which his Honour there refers that the existence of a fact necessary for the validity of an adjudication is a matter within the competence of the adjudicator to determine. If an adjudicator erroneously finds a fact essential to jurisdiction and an adjudication certificate issues accordingly, it is always open to a party adversely affected to seek to set aside any judgment sought to be entered under s.25(1) of the NSW Act on the ground that the adjudication was, in truth, a nullity because an essential ingredient of jurisdiction was absent: Brodyn Pty Ltd v Davenport [2004] NSWCA 394, at para 42 per Hodgson JA, with whom the other members of the Court agreed.
5 In the present case the adjudicator may find that the payment claim was served outside the prescribed time or that the payment schedule was served within the prescribed time. In either case, the Plaintiff would have no complaint about jurisdiction. If the adjudicator found either fact adversely to the Plaintiff, the Plaintiff still has the chance to set aside any judgment entered under s.25(1) in the way I have explained.
6 In these circumstances, it seems to me to be contrary to authority and contrary to the policy of the NSW Act to entertain this application. I respectfully adopt what was said by McDougall J in Australian Remediation Services Pty Ltd v Earth Tech Engineering Pty Ltd (supra) at para.13:
""... the legislature has made it quite clear that it is adjudicators under the Act who are the primary organs for the resolution of these disputes. The power of this Court comes in either to enforce the determination (a power shared with other courts) or, in the limited circumstances described in Brodyn, to restrain enforcement of the determination. The whole scheme of the Act, as Palmer J said in Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140, is one of ''pay now, argue later''. It is clear from the provisions of s.32 of the Act that the time for final adjustment of rights and remedies is later.
Injunctions sought to restrain an adjudicator on the ground of lack of jurisdiction are generally answered by the Court saying that the adjudicator must decide whether he has jurisdiction or not. Para 14 of Boutique Developments Limited v Construction & Contract Services Pty Limited & Anor [2007] NSWSC 1042 . That decision is now however not beyond questioning as a result of Chase Oyster Bar.
Can you get away with only serving an incomplete or defective adjudication application?
No. You had better be able to prove that you served the respondent with a copy reasonably identical to that which was lodged with the adjudicator.
See Richard Shorten and Anor v David Hurst Constuctions Pty Limited and Anor; David Hurst Constructions v Richard William Shorten and Anor [ 2008] NSWSC 546 (5 June 2008. In that case the Court found that the solicitors for the claimant had provided the adjudication authority with an original adjudication application contained in three ring folders identified by volume, and documents therein were stapled. They provided a box of loose paper to the respondent, which, the Court found, was missing a number of pages.
The Court ruled against the claimant on the ground it could not profit from its own wrong. His Honour then also said:
74 It is also very arguable that the failure to serve the whole of the adjudication application on the plaintiffs constitutes a critical lacuna in the arbitrator's jurisdictions and therefore by itself renders the arbitrator's decision a nullity. On this view, service of the entirety of the application is what is sometimes called 'a jurisdictional fact'.
It is the writer's respectful view that the second ground is as arguable as the first, and both are correct. Service of a copy of the adjudication application which is, for all reasonable and practical purposes, the same as that lodged with the adjudication authority is essential to the validity of the adjudication.
RESTRAINTS ON THE ADJUDICATOR
Can an adjudicator make a different decision to an earlier adjudicator?
No.
Section 22 (4) of the NSW Act reads as follows:
(4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined:
(a) the value of any construction work carried out under a construction contract, or
(b) the value of any related goods and services supplied under a construction contract,
the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.
What happens if the payment claim attempts to reagitate claims decided by an earlier adjudication?
The claimant may expose itself to interference by the Court.
In Urban Traders v Paul Michael [2009] NSWSC 1072, McDougall J said
28 Rein J concluded in Perform that there was an issue estoppel, and that there was also an abuse of process, because the builder in that case had sought to reagitate, in a subsequent adjudication, claims decided by an earlier adjudication. In those circumstances, his Honour said, the Court could and should intervene to prevent the later adjudication from proceeding. His Honour gave five reasons for that at [47]. I paraphrase those reasons as follows:
(1) a subsequent payment claim seeking to reagitate matters determined in an earlier adjudication "is not… within the intent of the Act" and "is not… permitted by the Act", and hence is not a payment claim for the purposes of the Act;
(2) the remedies for abuse of process or issue estoppel are dismissal or permanent stay, remedies that an adjudicator cannot grant;
(3) it is no answer to say that the respondent can raise the issue estoppel before the adjudicator, because requiring, or leaving, the respondent to do that is the very abuse that ought to be restrained;
(4) the Act aims to provide a speedy determination of claims for payment on an interim basis, not to burden parties to construction contracts with a repetitious and quasi-litigious process; and
(5) a determination under the Act is not final, but a means of enforcing interim payment; an unsuccessful party (claimant or respondent) retains all of its rights and remedies at law.
29 Thus, his Honour said at [50], "[w]here steps have been taken in breach of and/or against the intent of a statutory scheme… it is part of this Court's function to step in and prevent that occurring."
Does reagitation of an issue in a payment claim totally invalidate it?
Probably not. So long as the later payment claim is not identical or the repetition in it is not "substantial and unseverable". The adjudication can still go ahead, without the repetitious part of the claim. In Urban Traders v Paul Michael [2009] NSWSC 1072 McDougall J said, in injuncting certain parts of a payment claim but leaving the rest to be adjudicated:
32 In Perform, it appears from Rein J's reasons at [22] that there was a complete correspondence between the first and second claims, in the sense that the second claim raised nothing that had not been raised in the first.
33 There was no such exact correspondence in Cadence. However, Hammerschlag J said at [5], "even though [the second claim] is not exactly the same as the earlier claim, a substantial and unseverable part of it has already been adjudicated". His Honour's reasons at [13], [17], [19] and [20] show why this is so. Accordingly, his Honour held that the adjudication should not go forward. It does not follow that his Honour would have made the same order if the repetitious claims were not "substantial and unseverable".
What does "reagitation of an issue" mean?
In Urban Traders v Paul Michael [2009] NSWSC 1072 McDougall J said
38 In the context of the Act (i.e., when asking whether there has been an abuse of the processes established by the Act), the essence of abuse of process is what Allsop P in Dualcorp described as:
(1) the "repetitious use of the adjudication process to require an adjudicator or successive adjudicators to execute the same statutory task in respect of the same claim on successive occasions" (at [2]);
(2) the use of the Act "to re-ignite the adjudication process at will in order to have a second or third or fourth go at the process provided by the Act merely because [the claimant] is dissatisfied with the result of the first adjudication" (again, at [2]); or
(3) "repetitious re-agitation of the same issues" (at [16]).
39 Similarly, in Perform, the essence of Rein J's reasons for concluding that there was an abuse of process was that, where an adjudication had been conducted and a determination given, the dissatisfied claimant sought to propound a claim, differently framed, for the very same works, goods or services (see at [42], [46]).
40 Again, in Cadence at [56], Hammerschlag J made it clear that the abuse of process lay in the fact that the claimant was seeking to re-agitate a payment claim that had been made and adjudicated upon.
41 It does not follow from the decisions to which I have referred that every repetition, in a subsequent payment claim, of a claim made in an earlier payment must amount to an abuse of process. That is so even if that earlier payment claim has been the subject of an adjudicator's determination. The relevant concept is not abuse of process at large. It is abuse of the processes of the Act: specifically, the processes of the Act designed to ensure that builders and subcontractors (and of course others) received prompt and progressive payment for construction work performed or related goods and services provided. The question of whether there has been an abuse the processes of the Act must take into account relevant provisions of the Act. Specifically:
(1) s 13(6) of the Act recognises that a claimant may include in a payment claim an amount that has been the subject of a previous payment claim; and
(2) s 22(4) of the Act deals, to an extent, with a repeated claim by providing that if particular construction work or related goods and services have been valued by an adjudicator, an adjudicator in a subsequent adjudication application is to give them the same value unless satisfied that the value has changed since that previous determination.
42 Further, whether or not the repetition of a claim amounts to an abuse of process requires consideration of all relevant contextual facts. In addition, it requires consideration of the reasons why the courts intervene to prevent abuse of process. Those reasons include intervention to prevent a person from being vexed by having to reargue an issue already authoritatively decided. Thus, in deciding whether a repetition of a claim amounts to abuse of process, it may be relevant to take into consideration whether, because of fresh claims that are advanced, the respondent will be required to defend itself in any event.
43 I do not think that it is possible to state in some exhaustive fashion what combination of factors, including repetition, will lead to the conclusion that there is an abuse of process. (See, as to this, French CJ, Gummow, Hayne and Crennan JJ in Jeffery & Katauskas Pty Limited v SST Consulting Pty Limited [2009] HCA 43 at [27].) My concern is simply to make it clear that, in my opinion, it would be inconsistent with the provisions of the Act to which I have referred above to hold that repetition, by itself and without more, always amounts to abuse of process.
QLD - VK Property Group Pty Ltd v Conias Properties Pty Ltd [2011] QSC 54 per Boddice J:
24 In any event, s 17(6) of the Act does not impose any restriction upon the generally expressed entitlement in s 17(1), namely an entitlement to claim an unpaid amount of work done earlier before an earlier reference date, whether or not it was claimed in an earlier payment claim. The effect of s 17(6) of the Act is merely to ensure that no implication may be drawn that s 17(5) precludes a claimant from making a payment claim for an unpaid amount claimed in a previous claim.19 There is no general implication in the Act against "re-agitation" of a payment claim in a subsequent payment claim where there has been no adjudication determination.
What constitutes an abuse of process under the NSW Act?
In Urban Traders v Paul Michael [2009] NSWSC 1072 McDougall J said:
43 I do not think that it is possible to state in some exhaustive fashion what combination of factors, including repetition, will lead to the conclusion that there is an abuse of process.
It seems clear that what Allsop P in Dualcorp described as:
(1) the "repetitious use of the adjudication process to require an adjudicator or successive adjudicators to execute the same statutory task in respect of the same claim on successive occasions" (at [2]);
can be an abuse of process. The categories are, however, not closed.
See also Ku-Ring-Gai Council v Ichor Constructions Pty Ltd [2014] NSWSC 1534 even where the adjudicator expressly says he or she is not deciding an issue (in this case because, although the adjudicator thought there was a valid claim, the evidence before him was inadequate to allow him to assess it) the fact that the respondent had to address and answer it means that, although there is no estoppel arising from the adjudicator's decision it is still an abuse of process by the claimant and should not be alowed to proceed.
Can you get injunctive relief for abuse of process under the NSW Act?
In Filadelfia Projects Pty Limited v EntirITy Business Services Pty Limited [2009] NSWSC 1468, Gzell J refused to restrain a claimant from seeking adjudication of a payment claim under the Building and Construction Industry Security of Payment Act 1999 in circumstances where the purported respondent had been party to contract with third party who subcontracted to the claimant who had, during the period of the contract made its payment claims under the NSW Act on that third party. When the subcontract was terminated however, the claimant then made a claim on the respondent (27 folders of payment claim) and the respondent sought injunctive relief on the grounds it was an abuse of the processes of the NSW Act seeking relief form having to serve a payment schedule.
Gzell J refused a restraining order as he did not view the service of the payment claim alone as constituting an abuse, but he reserved on the issue of substantive relief.
15 What is put in support of the application is that non-parties should not be burdened with performance under the Act. The payment claim was comprised in 29 lever arch files and the difficulty will arise with respect to the adjudication response.
16 There is, however, in my view a vast difference between the founding of an abuse of process on the non-authorised repetitious appeal to the processes of the Building and Construction Industry Security of Payment Act and the factual determination in this case of whether Filadelfia is a party to a construction contract that would enliven an adjudicator's jurisdiction under the Act.
17 While it may be so that similar burdens may be suffered if the question is not determined before the necessity to lodge an adjudication response arises, that does not mean that lodging adjudication documents under the Act against a person who turns out not to be a party to a construction contract is itself an abuse of process.
18 The question whether Filadelfia is party to a construction contract for the purposes of the Building and Construction Industry Security of Payment Act will be determined under the summons filed today in due course.
What this seems to mean is that the Court will not interfere with the process itself, but will grant relief if the purported respondent is not a party to the construction contract, that being a "Brodyn essential" in any event. In the instant case, on the facts given, it seems highly likely that an adjudicator would find that he had no jurisdiction in any event.
Can an adjudicator ignore notice provisions in the contract?
No. Where there are notice provisions in the contract which, if not followed, preclude the client for claiming payment for work, those notice provisions are binding and are not in breach of section 34. See John Goss Projects Pty Limited v Leighton Contractors Pty Limited [2006] NSWSC 798 paras 81 and 82.
Can an adjudicator make a decision contrary to a certification by an architect or a superintendent?
Yes. In Abacus v Davenport & Ors [2003] NSWSC 1027 McDougall J said:
39 In the present case, what Mr Davenport was required to do was to undertake for himself the task that the architect had purported to undertake. He was not required simply and only to apply his rubber stamp and initials to the results of the architect's labours.
Can a Superintendent determine in relation to a later progress claim, that monies paid pursuant to a adjudication award were not properly payable and deduct them from the later progress claim?
Yes in NSW but possibly not in Queensland. In John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 140 the NSW Court of Appeal held that such conduct by a superintendent, at least in determining a final claim, was not a breach of section 34 of the Act. Presumably the superintendent may make such an adjustment in any progress claim after the adjudication award was paid.
62 It is not correct that retention of security "undoes" an adjudicator's determination, or that a superintendent who in performing his contractual function comes to a determination negates a statutory right to retain an adjudicated amount. The adjudicator's determination remains, and brings payment of the adjudicated amount, but that is interim and subject to a different position being established in relation to payment for the relevant work or related goods and services, contractually or in proceedings. If in civil proceedings it is decided that the contractor was entitled to $10 or $30, rather than the $20 determined by the adjudicator, that does not undo the adjudicator's determination. It has done its work in ensuring "prompt interim progress payment on account, pending final determination of all disputes" (per Ipp JA in Brewarrina Shire Council v Beckhaus Civil Pty Ltd at [219], above). So also if, in the manner earlier described, the contractual mechanisms result in a contractual obligation on the principal to pay the contractor or the contractor to pay the principal. The contractor's right under the Act is to receive the adjudicated amount, but subject to final determination, and if the final determination involves the superintendent determining that the contractor was entitled to $10 or $30, rather than the $20 determined by the adjudicator, the superintendent is not negating the contractor's statutory right.
63 Section 34 of the Act requires that the contractual provision exclude, modify or restrict, or have the effect of excluding, modifying or restricting, "the operation of this Act". The Act operated to require that the RTA pay the adjudicated amounts to John Holland, and it did so. (In relation to the Detonator Dump monies, it may be taken that it has done so or will do so if the challenge to the adjudicator's determination has failed or fails). There is no effect contrary to that operation of the Act if, in the final determination of the position between the parties, one party has to pay money to the other because the final arbiter takes a different view from that of the adjudicator. Section 32 of the Act preserves the final determination, by the contractual mechanism or by proceedings. Nor is there an effect contrary to that operation of the Act if security provided under the contract is retained, the contract on its proper construction and operation so permitting, to satisfy John Holland's obligation to pay money to the RTA if that is the outcome of the final determination.
But Possibly not in Queensland. In Queensland, John Holland Pty Ltd v Roads and Traffic Authority of New South Wales decision was distinguished on the grounds that the contractual provisions in the two cases were not alike by the Queensland Court of Appeal in Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd [2009] QCA 329 but in terms which suggest that the Queensland Courts may be more ready to support full effect being given to an adjudication determination
Can an adjudicator consider issues raised by the respondent where no payment schedule has been provided?
Yes. For example, where there is a jurisdictional issue, or an issue which could not have been dealt with by a payment schedule, such as the adjudication application being made out of time.
Can a claimant withdraw part of its claim?
Yes. See Urban Traders v Paul Michael [2009] NSWSC 1072 per McDougall J:
61 It follows, in my view, that any adjudication should proceed on the basis that the builder is not to propound, and the adjudicator is not required to (and should not) consider the reagitated variation claims.
62 Essentially for the reasons given by Rein J in Perform at [47] (which I have paraphrased at [28] above), I think that it is appropriate to prevent those reagitated claims from going forward, rather than to leave it to an adjudicator to seek to deal with them.
63 Dr Greinke submitted that it was not clear that a claimant could "withdraw" part of its claim. I do not see why this is so. I would have thought an adjudicator who was told that specifically identified claims were not pressed, and should not be decided, would not enter upon their consideration: particularly if the reasons for doing so had been explained (as I hope they have) in a judgment of this Court. In any event, given that I propose to grant appropriate injunctive relief (the substance of which I outline in the following paragraph), it does not seem to me to matter a great deal whether or not any part of a claim can be "withdrawn".
Can the adjudicator consider things which were not raised in submissions?
Yes. However, the adjudicator must allow the parties the opportunity of being heard on the point he or she has picked out. In Coordinated Construction Co Pty Ltd v J.M. Hargreaves (NSW) Pty Ltd [2005] NSWCA 228 at [52]-[53], in obiter dicta, Hodgson JA remarked.:
52 The task of the adjudicator is to determine the amount of the progress payment to be paid by the respondent to the claimant; and in my opinion that requires determination, on the material available to the adjudicator and to the best of the adjudicator's ability, of the amount that is properly payable. Section 22(2) says that the adjudicator is to consider only the provisions of the Act and the contract, the payment claim and the claimant's submissions duly made, the payment schedule and the respondent's submissions duly made, and the results of any inspection; but that does not mean that the consideration of the provisions of the Act and the contract and of the merits of the payment claim is limited to issues actually raised by submissions duly made: see The Minister for Commerce v. Contrax Plumbing (NSW) Pty. Ltd. [2005] NSWCA 142 at [33]-[36]. The adjudicator's duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim. The adjudicator may very readily find in favour of the claimant on the merits of the claim if no relevant material is put by the respondent; but the absence of such material does not mean that the adjudicator can simply award the amount of the claim without any addressing of its merits.
53 Indeed, my tentative view is that, if an adjudicator determined the progress payment at the amount claimed simply because he or she rejected the relevance of the respondent's material, this could be such a failure to address the task set by the Act as to render the determination void.
THE ADJUDICATOR'S AWARD
What You Can Do About the Award Itself?
You can have it set aside for error of law on the face of the record or for breach of natural justice or for jurisdictional error. You can also have it voided for fraud as per Ball J in QC Communications NSW Pty Ltd v CivComm Pty Ltd [2016] NSWSC 1095 (12 August 2016)
Is breach of the time limits in the Act jurisdictional error?
In New South Wales, yes. In Chase Oyster Bar v Hamo Industries [2010] NSWCA 190 at para 102:
Although, as noted by Gibbs J in Buck v Bavone, the Court may be slow to intervene where authority depends upon a matter of "opinion or policy or taste", that will not be so where authority depends upon a straightforward calculation of time, as in the present case.
So, carefully check the documents and the times of service and lodging to see if, for example, as in Chase, the section 17(2) notice was served too late.
In QLD there is obiter dicta which also says yes. In De Neefe Signs Pty Ltd v Build1 (Qld) Pty Ltd; Traffic Technologies Traffic Hire Pty Ltd v Build1 (Qld) Pty Ltd [2010] QSC 279 a section 21 (2) (a) notice (the Qld equivalent of a section 17(2) notice) was alleged to have been served late and Fryberg J said:
[48] It follows that if I were wrong in my conclusion that the notice was given within the time described in s 21(2)(a), the purported adjudication application made on 30 April 2010 would be a nullity, as would the decision of that application. But I must determine this case on the basis of that conclusion.
What is an error of law as opposed to an error of fact?
See paras 70 to 74 of the judgment of Rohman J in Maxstra NSW Pty Ltd v Blacklabel Services Pty Ltd [2013] NSWSC 406 (24 April 2013)
ACT Sections 43 and 44 of the Building and Construction Industry (Security of Payment Act 2009 (ACT) provide for review by the Supreme Court.
Can you have it set aside for failure to follow earlier adjudicator's determination as to value?
Yes (In Rothnere v Quasar & Ors McDougall J held that failure to comply with section 22 (4) (following an earlier adjudicator's determination as to value) was not an essential requirement of the NSW Act. He also noted however that the earlier adjudicator's decision was not as to value but as to whether an item was a variation and the earlier adjudicator did not actually assess the value of the item.- see paras 18 and 37 - 40.) See De Martin & Gasparini Pty Limited v State Concrete Pty Limted & Ors [2006] NSWSC 31 for an example of where an adjudication was held void for (inter alia) this reason. This is probably an error within jurisdiction and would not fall foul of the new principles outlined by the Court of Appeal in Chase Oyster Bar v Hammo
In Lifestyle Retirement Projects No 2 v Parisi Homes [2005] NSWSC 705 Campbell J held that service of a payment claim within 12 months after construction work was last carried out was not a "basic and essential requirement" to the validity of an adjudication. This is however questionable now in the light of the decision of the Court of Appeal in Chase Oyster Bar v Hammo which said that all time limits in an Act such as this are jurisdictional issues.
What is jurisdictional error?
The adjudicator must determine the dispute raised by the payment claim and the payment schedule, not a different dispute raised by the adjudication application. If he does that the adjudication is void. See Energy Australia v Downer Construction (Australia) Pty Ltd & Ors [2006] NSWSC 52 where the claim in the adjudication was different and more extensive than the claim in the payment claim and the adjudicator went on to make an award based on the more extensive claim the adjudicator when doing so is guilty of jursidictional error.
Jurisdictional error can arise if there has been any failure by the adjudicator to exercise the jurisdiction given to him by the NSW Act. This can extend to not just the fundamental processes whereby the adjudicator becomes seized of jurisdiction but also how the adjudicator conducts himself in relation to that jurisdiction.
In Bauen Constructions v Westwood Interiors [2010] NSWSC 1359, McDougall J said:
27 On the face of things, therefore, there is jurisdictional error because the adjudicator failed to exercise the jurisdiction given to him by the Act. In a somewhat analogous situation, in Musico v Davenport [2003] NSWSC 977, I referred to an adjudicator's failure to have regard to relevant provisions of the construction contract with which that case was concerned (and noted s 22(2)(b) of the Act, requiring consideration of the provisions of the construction contract), and said that the adjudicator "therefore failed to carry out the task that the Act requires to be carried out in the manner that the Act requires it to be carried out". It followed, I said in that case, that the adjudicator "failed to exercise the jurisdiction given to him by the Act".
28 For the same reasons, I think that in relation to the issue with which I am presently concerned, the adjudicator failed to exercise the jurisdiction given to him by the Act. That is why I said, earlier, that there is jurisdictional error in the approach taken.
(2) Denial of natural justice Also see Emergency Services Superannuation Board v Davenport & Anor [2004] NSWSC 697 at para 37. See De Martin & Gasparini Pty Limited v State Concrete Pty Limted & Ors [2006] NSWSC 31 where the adjudicator ignored an agreement between the parties as to the amount that had been paid.
(3) Fraud in which the adjudicator is complicit.
The Power of Courts to Intervene in the Process
The provisions in sections 15 and 24 of the amending act which excluded cross claims and defences based upon the contract did not mean however that it was intended totally to exclude the courts from any supervision of the process and later in the Second Reading Speech the Minister said:
There will be some instances where a court may set aside the judgment. The respondent may be able to demonstrate to the court that the requirements of the NSW Act have not been complied with; for example, that there has not been a valid adjudication. But in proceedings to set aside the judgment the respondent will not be entitled to bring a cross claim or to raise any defence in relation to matters arising under the construction contract or to challenge the determination by the adjudicator.This means that parliament contemplated there would be some involvement of the Courts in the operation of the NSW Act. The question to be decided was the extent of that involvement.
There are two issues in respect of which judicial review might occur:
In respect of the validity of a payment claim.
After an adjudication in respect of the validity of the adjudication.
Judicial Review of the Validity of A Payment Claim
This involves the threshold issue as to whether the initiating document is a valid claim under Section 13 of the Building & Construction Industry Security of Payments Act 1999.
Section 13(2) provides that:
A payment claim:
(a) must identify the construction work (or related goods and services) to which the progress payment relates, and
(b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and
(c) must state that it is made under this Act.
Claims for relief in this area have involved issues of :
whether the document purporting to be a payment claim sufficiently identified the construction work the subject matter of the claim ,
whether the document claimed a payment for other than construction work; and
whether the claim complied with the formal requirements of section 13.
Identification of the Construction Work to Which the Progress Claim Relates
In Parist Holdings Pty Ltd v WT Partnership Australia Pty Ltd it was held that the payment claim itself did not need to specifically identify the work the subject of the claim so long as it annexed invoices and other documents which did so. In that case Nicholas J said in para 28:
28 It must be clear on the face of the document(s) which constitute the statutory payment claim that the information conveyed meets the requirements of s 13(2). "The test is an objective one. In deciding the meaning conveyed by a notice a court will ask whether a reasonable person who had considered the notice as a whole and given it fair and proper consideration would be left in any doubt as to its meaning (Walter Construction Group Pty Ltd para 82).
Whether the Payment Claim is in Respect of Construction Work
in Parist Holdings it was also decided that the inclusion of a disputed item in a payment claim (a claim which was arguably a claim for damages as opposed to a claim for construction work within the meaning of the NSW Act), where there were other items which were indisputably construction work, does not render a payment claim invalid. Where, however, the payment claim is solely for say, delay costs, which do not come within the definition of construction work, then it seems that the payment claim may be invalid. This raises the interesting anomaly, which will be discussed later, that whilst claims for delay costs under the contract are not "construction work" they can still be the subject of an award by an adjudicator.
Can an adjudicator seek payment if he determines that the adjudication is invalid?
Yes. See Alucity Architectural Product Supply Pty Ltd -v- Australian Solutions Centre; Alucity Architectural Product Supply Pty Ltd -v- Paul J Hick [2016] NSWSC 608 (13 May 2016) where the adjudication application was referred by the authorised nominating authority to an adjudicator who accepted appointment and then determined that the payment claim was invalid and as a result he had no jurisdiction to determine the claim – The claimant argued that the fees paid to the nominating authority and adjudicator were recoverable by the claimant on the basis that there had been a total failure of consideration and the authority and the adjudicator would be unjustly enriched if they were entitled to retain the fees paid to them Hammerschlag J -the doctrine of total failure of consideration had no application in the circumstances - the authority and the adjudicator had not been enriched and it was not unjust for them to retain the fees – no claim for restitution lies
The Formal Requirements of Section 13
In the early days of the legislation the Court took the approach that the issuing of a payment claim has such serious consequences for the recipient that it must be clear on the face of the document that it purports to be a payment claim made under the NSW Act. Any defect on the face of the document is not overcome by evidence that the recipient was not mislead. This was the view of Austin J in Jemzone v Trytan , a case involving a statutory demand for a statutory debt arising from a respondent's failure to provide a payment schedule within time. Austin J said in paragraph 45
45. Section 13 (2) (c) requires a payment claim to "state that it is made under this Act". The document in question states: "This invoice is subject to the Building & Construction Industry Security of Payments Act 1999, number 46".
46. This is not a statement that the document is a payment claim made under the NSW Act. I do not accept this submission by the plaintiff that a payment claim should expressly draw the recipients attention to the Act and the provisions concerning the issuing of a payment schedule. Section 13 (2) makes no such requirement. Since, however, the issuing of the proper payment claim has the serious consequences for the recipient of requiring full payment regardless of any genuine dispute or offsetting claim, unless a payment schedule is lodged within time, it must be clear on the face of the document that it purports to be a payment claim made under the Act. The defect on the face of the document is not overcome by evidence that the recipient was not mislead. The requirement was not satisfied in the present case
The Court is now quite forgiving as to minor errors or abbreviations as occurred in Hawkins Construction v Mac's Industrial Pipework where the Windeyer J was prepared to overlook spelling errors and abbreviations in the name of the NSW Act such as "Building Construction Ind Security of Payments Act 1999", presumably because, despite the errors it was, as Austin J required in Jemzone, "clear on the face of the document that it purports to be a payment claim made under the Act"
As a contrast to Jemzone, in Fernandes Constructions v Tahmoor Coal (trading as Centennial Coal) [2007] NSWSC 381
McDougall J took a far more relaxed view. In that case the words used were:“This invoice is prepared under the Building and Construction Industry security [sic] of payments [sic] Act 1999.”
His Honour said:
37 In my view, the approach to construction of a document purporting (or alleged) to be a payment claim under the Act should reflect in substance the approach to the construction of commercial contracts that has been laid down by decisions of the highest authority. I refer to the observation of Lord Wright in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at 514, that the courts should construe commercial contracts “fairly and broadly, without being too astute or subtle in finding defects”. Barwick CJ expressed a similar view in The Council of the Upper Hunter County District v Australian Chilling and Freezing Co Limited (1968) 118 CLR 429 at 437: in searching for the parties’ intention, “no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.”
38 Thus, the question is whether, taking a fair but broad approach, without being pedantic or astute to find defects, the document in question would convey to its recipient that the claimant intended by the document to engage the operation of the Act. As I have said before, that question is to be resolved objectively, having regard to all relevant matters of context.
The principal appears to be that the document must be such as to leave no reasonable person in any doubt that it was a payment claim under the NSW Act.
Effect of invalidity of payment claim on an adjudication.
Whilst an invalid payment claim can be used under section 15(4)(a) of the NSW Act to oppose the entry of a summary judgment under section 15(2) (a) (i) where a respondent has failed to provide an payment schedule within ten business days, as a consequence of the decision in Chase Oyster Bar, where there has been an adjudication an invalid payment claim will probably invalidate a subsequent adjudication.
After An Adjudication
The relationship between the adjudication process and the Court was considered in some depth in the judgment of McDougall J in Musico & Ors v Davenport & Ors [2003] NSWSC 977.
In summary, McDougall J's conclusions were that:
1. There was power in the Supreme Court to grant relief in the nature of certiorari for manifest error of law on the face of the record and for breaches of natural justice. McDougall J's judgment in this regard has been cited with approval by Gzell J in Abacus Funds Management Ltd v Davenport at paragraphs 21 and 22, Einstein J in Brodyn Pty Ltd v Davenport , at paragraph 19, Palmer J in Multiplex Constructions Pty Ltd v Luikens and Anor at paragraph 32. There has been no judicial dissent on the matter and so, despite the short period of time since the handing down of the judgment in Musico, the issue now appears to be a matter of settled law.
2. The restrictions on reviewing judgments in section 25(4) (a) (ii) only prohibit an application to set aside the judgment as opposed to an application to quash one for reviewable error. However Gzell J in Brodyn Pty Ltd v Davenport & Anor , took the opposite view that, even if there was jurisdictional error, when an adjudicator's determination had been registered as a judgment in a court, in order to have that judgment set aside you had to challenge the adjudicator's determination, albeit by application, not to the court in question which was the District Court, but to the Supreme Court on a prerogative writ, and that the express words of section 25 forbade you doing so. It is submitted that probably McDougall J's view is the better view as an adjudicator's award which is void for jurisdictional error would in turn avoid the registration of any judgment based upon it.
3. Because of the restriction in section 25(4)(a) (iii) on challenging an adjudicator's determination, judicial review can only be available where the manifest error of law goes to an issue involving jurisdiction. McDougall J's view that the Supreme Court is, as a result of the nature of the privative clauses in the Act, limited to reviewing only errors of law going to the issue of jurisdiction, has been generally accepted by the other justices of the Supreme Court as being correct. This has placed a serious limitation on the ability of the Supreme Court to in attempting to ameliorate the harsher aspects of the functioning of the NSW Act.
4. The usual requirements of natural justice are limited, although not excluded, by the terms of the NSW Act. Natural justice still applies but only to the extent that it is not limited by the terms of the NSW Act which in section 21(2) provides that the adjudicator is not to consider an application response unless it was made before the end of the period within which the respondent may lodge such a response.
5. The general approach of the Court to an application should be guided by the the clear intent of Parliament to provide for informal and speedy determinations which can be corrected later in a final hearing.
6. The "record" which the Court can consider includes all of the documents produced for the purposes of the adjudication.
In the period since 3 November 2003 when the judgment in Musico was handed down McDougall J's conclusions have been commented upon, and referred to with approval, in a number of cases and reflect the approach of most, although not all, judges to these matters. It is therefore of benefit to consider these conclusions in detail, along with some of those comments and references:
Can An Adjudicator Correct His Or Her Own Decision?
Yes Section 22(5) of the Act provides:
(5) If the adjudicator's determination contains:
(a) a clerical mistake, or
(b) an error arising from an accidental slip or omission, or
(c) a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or
(d) a defect of form,
the adjudicator may, on the adjudicator's own initiative or on the application of the claimant or the respondent, correct the determination.
This section is called "the slip rule" and allows the adjudicator to correct obvious and simple errors, usually of a mathematical nature. It does not however allow for the correction of complex errors : See the problems faced by the Qld Supreme Court in Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd & Ors [2012] QSC 373 where a simple mathematical error was compounded with a question of differentiating between various transport rates under the contract.
The Restrictions on Setting Aside Judgments- Whether Section 25(4)(a)(ii) Only Prohibits An Application to Set Aside the Judgment As Opposed to An Application in the Nature of Certiorari.
McDougall J considered the implications of Section 25(4)(a)(ii) and said:
37 The limitations on the ability of a respondent to set aside a judgment flowing from the filing of an adjudication certificate cannot in terms apply where the respondent is seeking not to pursue that course but to quash the determination upon the ground that it is fatally vitiated by (for example) denial of natural justice, or manifest error of law. There is no basis for reading the prohibitions in s 25(4)(a) as extending beyond the context to which they are expressed to apply: namely, an application to set aside judgment.
Because of the Restriction in Section 25(4)(a) (iii) on Challenging An Adjudicator's Determination Judicial Review Can Only Be Available Where the Manifest Error of Law Goes to An Issue Involving Jurisdiction
McDougall J considered the implications of Section 25(4)(a) (iii) and said at para 52:
52 I therefore conclude that, where the determination of a dispute submitted to an adjudicator under the Act requires the adjudicator to consider issues of law, the adjudicator will not fall into jurisdictional error simply because he or she makes an error of law in the consideration and determination of those issues. It would be otherwise, as the High Court pointed out in Craig (echoing, I think, what Lord Reid said in Anisminic), if the error of law causes the adjudicator to make one or other (or more) of the jurisdictional errors that the court identified: in such a case, relief would lie, subject to any relevant discretionary considerations.
And later at para 54 and 55:
54 I therefore conclude that relief will lie where jurisdictional error, including jurisdictional error of law on the face of the record, is shown. However, I do not think that relief will lie to quash the determination of an adjudicator upon the basis of non-jurisdictional error. That is because, in my view, the legislative scheme set out in s 25(4) of the Act is inconsistent with the availability of this ground of review.
55 By s 25(4)(a)(iii), a respondent seeking to set aside a judgment based on an adjudication certificate cannot challenge the adjudicator's determination. That must mean that in any such proceedings, the judgment cannot be set aside upon the basis that the adjudicator (for example) erred in law in some step of his or her reasoning. It would be quite inconsistent with the legislative intention that is evident in s 25(4) to permit a challenge to be raised, by way of relief in the nature of prerogative relief, upon the ground of error of law. The legislature could hardly be taken to have intended that, having forbidden entry by the front door, it was nonetheless happy for access to be obtained from the rear.
McDougall J's view that the Supreme Court is, as a result of the nature of the privative clauses in the NSW Act, limited to reviewing only errors of law going to the issue of jurisdiction, was generally accepted as being correct prior to the decision of Brodyn. Since Brodyn has now been overruled, with respect to the availability of certiorari, by a court in which McDougall J gave the judgment of the Court, it would seem that his earlier pronouncements may bear further consideration. What is Manifest Error of Law Going to An Issue Involving Jurisdiction?
An Error of Jurisdictional Fact As Opposed to An Error of Law Going to Jurisdiction, May Not Be Reviewable Under Certiorari.
The old formula for certiorari was that relief under it was available when there had been an error of law on the face of the record or a breach of the rules of natural justice. In that regard, Bergin J said in Pasquale Lucchitti Trading as Palluc Enterprises and Ors v Tolco Pty Limited and Anor
38 The adjudicator considered the point raised as to whether there was a jurisdictional question, that is whether the claim was out of time. He disagreed with the submissions put by the plaintiffs. Assuming that I am wrong in respect of what I have referred to as the adjudicator's consideration of matters contained in paras 1 and 2 of the response, notwithstanding his statement that he had not had regard to them, I am not persuaded that it is a jurisdictional error.
The jurisdictional issue being raised was whether the payment claim was served out of time, that is, more than 12 months after the last construction work was done. On the evidence before him the adjudicator had decided, as a matter of fact, that the payment claim was served just within the twelve month period. One would have thought perhaps that that might have been an issue going to jurisdiction but perhaps it is not a jurisdictional error of law as it would have been if the adjudicator had determined that the payment claim was served outside the twelve month period, but had still determined that he had power to adjudicate the matter. That is, that the adjudicator might make an error as to a jurisdictional fact such as when the last construction work was done under the construction contract, but so long as he applied the law correctly to those erroneously determined factual circumstances there would not be an error of law on the face of the record.
Can a determination be set aside because of failure of the adjudicator to conduct him or herself in good faith?
Yes. Timwin Constructions v Facade Innovations [2005] NSWSC 548. The adjudicator has to give consideration to the submissions of both parties or there is a breach of the good faith requirements.
Failure to conduct him or herself in good faith may be evidenced by a failure to consider issues raised by the parties. Lanskey v Noxequin [2005] NSWSC 963.
This lack of good faith that will avoid an award may not be the same as the lack of good faith which losses an adjudicator his protection under section 30 of the NSW Act See Mc Dougall J 's comments in De Martin & Gasparini Pty Limited v State Concrete Pty Limited & Ors [2006] NSWSC 31 at para 17.
Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129.
This line of authority was approved by Basten JA in Bitannia Pty Ltd & Anor V Parkline Constructions Pty Ltd [2006] NSWCA 238. When discussing whether a payment claim must be made in good faith he said:
75 By contrast, there is good reason to suppose that the powers conferred on an adjudicator must be exercised in good faith and for the purposes for which they are conferred. The case law in favour of that proposition is discussed in the decisions of this Court referred to above and with expansive treatment by Brereton J in Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd [2005] NSWSC 1129 at [63]-[117]. It is possible that the language of "good faith" has been imported from this separate situation to that of the essential preconditions to a valid claim. However, and with respect to the views of Santow and Ipp JJA (to the extent that they are to the contrary) there is, in my view, no separate precondition to the making of a valid payment claim under s 13 of the Building Payment Act, requiring, as a precondition to enforcement action under s 15, proof that the claimant has made the claim with a bona fide belief in its entitlement to the moneys claimed.
Does a claimant lose its rights to seek to recover under a construction contract as a result of failure to provide a statutory declaration as provided for in s.127(5) of the Industrial Relations Act 1996?
Probably not. See the comments of Hodgson AJ on this point in Brodyn Pty. Ltd. t/as Time Cost and Quality v. Davenport & Anor. [2004] NSWCA 394:
76 As regards the lack of provision of a statutory declaration, Brodyn did not refer the adjudicator to the alteration to cl.42.1 referred to above, and did not suggest that the direction in writing referred to in cl.43.1 had been given. It made no reference to the provisions of s.127(5) of the Industrial Relations Act 1996, which authorise a principal contractor to withhold payment to a subcontract until the subcontractor gives a written statement that employees have been paid for work done in the relevant period.
77 Accordingly, even if ss.9 and 10 of the Act permit this matter to be taken into account, which is questionable, the failure of the adjudicator to mention the bald reference made by Brodyn to breach of cl.43 could not in these circumstances amount to a denial of natural justice.
In Queensland failure to comply with contractual provisions requiring such a statutory declaration have been held not to prevent the making of a payment claim John Holland Pty Ltd v Coastal Dredging & Construction Pty Limited [2012] QCA 150. Fraser JA who delivered the leading judgment in John Holland explained the nature of the statutory entitlement to progress claims conferred by s 12 of the Act at [18]:
"Section 12 confers upon a person who has undertaken to carry out constr uction work a statutory entitlement to recover a progress payment from each "reference date under a construction contract", which is defined to mean, so far as is presently relevant, "a date stated in, or worked out under, the contract as the date on which a claim for a progress payment may be made for construction work carried out or undertaken to be carried out, ...under the contract...". Accordingly, the contractual provisions to which reference may be made for the purpose of ascertaining the "reference date" are those which state, or provide for the working out of, the date on which a progress payment claim "may be made". The latter expression refers to an entitlement to make a progress claim. It does not comprehend reference to warranties which concern the form and content of progress claims or the consequences of breaching warranties about the form and content of progress claims."
Fraser JA concluded at [21] that if the impugned clauses operated to defer what would have been the subcontractor's statutory entitlement to a progress payment from the reference date ascertained in accordance with the Act, they would be void under s 99 of the Act. It is also relevant to refer to the statement made by Fraser JA at [19]:
Bearing in mind the statutory object and the role of s 12 and the definition of "reference date" in giving effect to that object, those provisions are incapable of justifying an implication that the date upon which the statutory entitlement to a progress payment accrues may be qualified by contractual provisions other than those captured by the unambiguous terms of the definition of "reference date".
Does a claimant lose its rights to seek to recover under a construction contract as a result of breaches of the Home Building Act?
No. At least, not in New South Wales. Hodgson AJ was quite firm on this in Brodyn Pty. Ltd. t/as Time Cost and Quality v. Davenport & Anor. [2004] NSWCA 394 where he said at paragraph 80:
80 Section 94 of the HBA is in the following terms:
94 Effect of failure to insure residential building work
(1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work), the contractor who did the work:
(a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and
(b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit).
(1A) Despite section 92 (2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis.
(1B) A contractor who applies to a court or tribunal for a remedy under section, or who is awarded money under this section, is not guilty of an offence under section 92 (2) by virtue only of that fact.
(1C) Without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A):
(a) in relation to any contract - the court or tribunal may have regard to the impact on the resale price of the property if no contract of insurance is provided, and
(b) in relation only to a contract entered into before 30 July 1999 - the court or tribunal is not to be limited by the fact that the required contract of insurance was not obtained until after the date of the contract.
(2) However, the contractor remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by the contractor.
(3) Residential building work that is uninsured work at the time the work is done ceases to be uninsured work for the purposes of this section if the required contract of insurance for the work is subsequently obtained.
(4) If a person commenced residential building work before 30 July 1999 and entered into a contract of insurance that complies with this Act in relation to that work after the contract for the residential building work was entered into, that contract of insurance is, for the purposes of this section or any previous version of this section, taken to have been in force in relation to the residential building work done under the contract for the residential building work whether that work was done before or after the contract of insurance was entered into.
Note. If a contract of insurance is in force in relation to part of the this residential building work, this section applies only in relation to the part of the work that is not insured.
81 It was submitted for Brodyn that, because Dasein did not have a licence under the HBA, the subcontract was illegal (s.4) and unenforceable (s.10). Accordingly, Dasein was not entitled to any progress payment.
82 In my opinion, the civil consequences for an unlicensed contractor for its breach of s.4 are those set out in s.10, and not any wider deprivation of remedies. In my opinion this is confirmed by the different provisions of s.94, which explicitly precludes, in the event of breach of the insurance provisions, the obtaining of a quantum meruit unless a court considers it just and equitable. In my opinion, the remedy given by the Act is not of the nature of damages or any other remedy in respect of breach of contract nor is it enforcement of the contract: it is a statutory remedy, albeit one that in part makes reference to the terms of a contract, and thus it is not affected by s.10 of the HBA.
83 Accordingly, in my opinion Dasein's failure to have a licence could not be a ground on which the adjudicator's determination could be considered void, or for otherwise giving relief in respect of the determination.
NB the Queensland Court of Appeal took the opposite approach when dealing with the relationship between the Queensland Building and Construction Industry Payments Act 2004 and similar provisions in the Qeensland Building Services Authority Act 1991 see Zullo Enterprises P/L & Ors v Sutton [1998] QCA 417 (15 December 1998)
How full should your reasons be?
Very full.
The Court must be satisfied that the adjudicator has "considered" everything the NSW Act requires him or her to consider. In Bauen Constructions v Westwood Interiors [2010] NSWSC 1359 McDougall J said:
27 On the face of things, therefore, there is jurisdictional error because the adjudicator failed to exercise the jurisdiction given to him by the Act. In a somewhat analogous situation, in Musico v Davenport [2003] NSWSC 977, I referred to an adjudicator's failure to have regard to relevant provisions of the construction contract with which that case was concerned (and noted s 22(2)(b) of the Act, requiring consideration of the provisions of the construction contract), and said that the adjudicator "therefore failed to carry out the task that the Act requires to be carried out in the manner that the Act requires it to be carried out". It followed, I said in that case, that the adjudicator "failed to exercise the jurisdiction given to him by the Act".
Can you have an adjudicator removed for apprehended bias on the part of the adjudicator?
Yes. In Reiby Street v Winterton [2005] NSWSC 545 (16 June 2005) an adjudication determination was made on progress payment pursuant to the Building and Construction Industry Security of Payments Act 1999. When the adjudicator was appointed one of the parties requested a review of the Master Builder's Association's nomination of the adjudicator on the basis of apprehended bias because of a previous "dispute" between the party and the adjudicator over fees of another matter. The Master Builder's Association chose not to replace the adjudicator. The Court considered whether there was apprehended bias in the circumstances and whether the party was estopped from seeking an order in the nature of certiorari as a consequence of that party having made an election by continuing with the adjudication process . That is, whether there was a waiver to the right of objection on the basis of apprehended bias by continuing with the adjudication process. Master Macready held that there was no waiver and there was apprehended bias and that the determination was void.
Is an adjudicator obliged to give reasons for his determination?
Yes. On any disputed item he or she must do so. The parties to an adjudication application are still entitled to see some intellectual process that leads to the conclusion, particularly where, in many cases, very substantial sums of money are involved. In Bauen Constructions v Westwood Interiors [2010] NSWSC 1359, McDougall J said:
36 I turn to para 11 of the determination. In that paragraph, the adjudicator dealt with the dispute as to the percentage of works that are complete. It is clear, from the way he approached it, that there was an assertion of particular percentages of completion made by Westwood and an assertion of lesser percentages of completion made by Bauen. From the material in the payment claim and payment schedule (and adjudication application and adjudication response) to which I was taken, it appears that there was no more than assertion against assertion. The adjudicator dealt with that by saying that he saw no reason for not accepting one assertion rather than the other, and thus accepting the valuation flowing from the assertion which he preferred.
37 It was submitted for Bauen that in proceeding that way, the adjudicator did not comply with his obligation to give reasons; or alternatively, to the extent that those were his reasons, that they show that he did not carry out the task of making a determination. Reliance was placed on the decision of the Court of Appeal in Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32.
38 In that case, as appears from the reasons of Giles JA, (with whom Santow and Tobias JJA agreed) at [14], the adjudicator had before him, as the adjudicator here had before him, assessment versus assessment, or assertion versus assertion, in each case unsupported by evidence that would enable him independently to determine the outcome. The adjudicator preferred one party's assertion to the other because, in another respect, quite unrelated, that other party had put propositions which the adjudicator described as "unmeritorious challenges", and had asserted "completely unjustified deductions".
39 In those circumstances, Giles JA said that the adjudicator did not carry out the task given to him by the Act. The reasons that the adjudicator gave did not support the conclusion, and thus there was a failure to perform the statutory function. I set out his Honour's reasons at [26] to [28]:
26 With respect to the trial judge, I consider that the fundamental vice in the adjudicator's determination can be shortly explained without embarking on an exegesis of the reference in Brodyn Pty Ltd v Davenport to a bona fide attempt to exercise the statutory power. Section 22 of the Act required that the adjudicator determine an adjudicated amount (s 22(1)) by considering particular matters (s 22(2)). The adjudicator had to make a determination, and he did not make a determination if he arrived at an adjudicated amount by a process wholly unrelated to a consideration of those matters. But that is what the adjudicator did. He stated expressly in his reasons that he did not have evidence on which he could independently arrive at the value of the completed work, and that he adopted the appellant's valuation in preference to that of the respondent because of the respondent's unmeritorious challenges to the validity of the payment claim.
27 On the face of the determination, the adjudicator simply did not perform the task required by the Act, and his purported determination was not given greater respectability by the reference to his inclination "to believe the claimant rather than the respondent": the unmeritorious challenges were not a basis for belief or disbelief, and in any event it was not correct to speak of believing a corporate body. The adjudicator did not comply with an essential precondition to the existence of a valid determination.
28 That is sufficient for the disposal of the appeal, and it is not necessary to consider failure to have regard to relevant contractual provisions or failure to have regard to the payment schedule. I should not be taken to approve by silence all that the trial judge said.
40 In this case, para 11 of the determination gives no intellectual justification for the decision that was made. It does not involve any process of consideration or reasoning; it is, in my view, an abdication of the obligation to reason. As Mr Christie of Senior Counsel (who appeared with Mr Shipway of counsel for Bauen) submitted, if para 11 were a sufficient statement of reasons, adjudicators could deal with applications very quickly and their determinations would be very short. Whilst ordinarily one should be wary of "floodgates" arguments, I think that there is substance in that submission. I repeat that it is not appropriate to expect the detail of reasoning from adjudicators that litigants rightly expect from judges of this Court, from judges of equivalent courts, and from judges of intermediate and ultimate appellate courts. But the parties to an adjudication application are still entitled to see some intellectual process that leads to the conclusion, particularly where, in many cases, very substantial sums of money are involved.
41 In those circumstances, it seems to me, this is again a case of jurisdictional error, because on the face of the reasons, and by application of what was said in Halkat, the adjudicator did not perform his statutory function; and of denial of natural justice.
Is an adjudicator bound to give reasons for the value of a variation where that value has not been disputed in the payment schedule?
No. In Integral Energy Australia v Kinsley & Associates Pty Limited [2009] NSWSC 64 the contract provided:
"3.1 Authorised Variations
The Contractor must not vary the Services except as directed by Integral Energy and as otherwise provided in this clause 3.
3.3 Revision of Service Fees and Timetable
(a) …
(b) the rate or price of each variation must be determined by agreement between the parties, or in the absence of such agreement then a fair reasonable valuation of the variation will be made by Integral Energy and the Service Fees will be adjusted accordingly.
(c) …
(d) The Contractor is not entitled to any payment (pursuant to this Agreement or otherwise at common law or equity) in relation to any variation except as provided in clause 3.3(B)."
In each case of a claim for a variation, the respondent, in its payment schedule, merely stated that it had rejected the claimant's claim in whole or in part and nothing more. The claimant, in the adjudication response tired to agitate other issues, such as whether the work was within the scope of works and was of the value claimed y the claimant. The adjudicator rejected the assertion by the respondent that it could finally determine a claim for variations and, since the respondent had not raised the other issues in its payment schedule, simply determined for the claimant on the values it claimed without going into an assessment of the value of the work. On appeal to the Supreme Court the respondent argued that that meant that the adjudicator had not given reasons. Hammerschlag J rejected this.
44 In the present case the adjudicator attended to all the submissions duly made by both parties. The plaintiff, having not challenged the value of the work, and having not made any submission in that regard, the adjudicator was not, in my view, obliged to engage in a valuation process. The issue was not raised before him: (see for example Plaza West Pty Limited v Simon's Earthworks [2008] NSWCA 279 at [34]).
45 It follows that there was no failure by the adjudicator to include the reasons for his determination as required by s 22(3)(2) of the Act and the plaintiff's challenge accordingly fails.
It is worth noting that, in referring the matter to the Supreme Court, the respondent did not even attempt to argue that the adjudicator was bound by the respondent's decisions as to variations. This was probably because even if the adjudicator was wrong on that count, his error would have ben an error of law which did not go to jurisdiction. In any event the decision in Abacus v Davenport & Ors [2003] 1027 that an adjudicator is not bound by determinations of a superintendent would probably have indicated it was not a viable point anyway.
Can you oppose the entry of judgment pursuant to an adjudicator's award?
There's no point in trying. Attempts have been made to seek injunctions against the issuing of an adjudication certificate by the nominating authority. Originally the motivation was that the mistaken belief that if the certificate was then registered as a judgment, the judgment entered was immutable. This view was soon corrected by the Court of Appeal. The later attempts of this kind are apparently for the purpose of avoiding the compulsory provision of security of the whole amount of the award as contemplated by section 25(4)(b) of the NSW Act. It did not work in the case of Australian Remediation Services v Earth Tech Engineering [2005] NSWSC 715 where Campbell J simply granted the injunction but imposed an equivalent requirement of security in the form of a bank guarantee.
Is there any advantage in opposing the entry of judgment pursuant to an adjudicator's award as opposed to seeking judicial review?
No. In the past it has been thought that before judgment judicial review on the ground of jurisdictional error might have been more available than after judgment, but this does not seem to be the case. However see Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129 Brereton J at para 39
39 The context of Brodyn was an adjudication which had already been registered as a judgment, so as to attract the protection of s 25(4). A consequence was that while it was necessary for the Court to consider whether the determination was at law a determination at all, it was unnecessary to consider circumstances in which the adjudication determination had not yet been registered so as to obtain the protection of s 25(4) -- and, in particular, whether in such circumstances judicial review of a determination might be available on grounds which fell short of jurisdictional error. However, this distinction has not been recognised in subsequent cases -- such as Hargreaves and Climatech - which have applied Brodyn in circumstances where the adjudication determination had not yet been registered, although it might be expected that judicial review would be more liberally available before an adjudication certificate was filed to take effect as a judgment, thereby gaining the protection of s 25(4), than after [cf Solution 6 Holdings Pty Ltd v Industrial Relations Commission of New South Wales (2004) 60 NSWLR 558, 588 [122], 589 [125] (Spigelman CJ, 597 [160] (Mason P), [161], 600 [183])]. It is not, therefore, open to me to distinguish Brodyn on that ground.
Can you attempt to set aside the judgment based on the failure to comply with the essentials?
Yes. Where there has been a failure to provide a payment schedule it may still be possible to resist the entry of a judgment under section 15 of the NSW Act if you can show that the requirements of the NSW Act have not been met (see section 15(4)(a). Those requirements are that there must be a construction contract, under which work has been performed and that the respondent is a party to that construction contract and that a validly endorsed payment claim was properly served and the payment claim identified the work the subject of the claim and that the payment claim was served within 12 months of the last work being done.
The NSW Act only requires that the payment claim "identify" the work.
7. McDougall J in Isis Projects v Clarence Street [2004] NSWSC 714 at paras 36 and 37, observed that:
37 In principle, I think, the requirement in s 13(2)(a) that a payment claim must identify the construction work to which the progress payment relates is capable of being satisfied where:
(1) The payment claim gives an item reference which, in the absence of evidence to the contrary, is to be taken as referring to the contractual or other identification of the work;
(2) That reference is supplemented by a single line item description of the work;
(3) Particulars are given of the amount previously completed and claimed and the amount now said to be complete;
(4) There is a summary that pulls all the details together and states the amount claimed.
However in Coordinated Construction Co. Pty. Ltd. v. Climatech (Canberra) Pty. Ltd. & Ors. [2005] NSWCA 229 Basten JA observed [at 42]:
42 In John Holland v Cardno MBK, Einstein J expressed the view that, in order to satisfy the statutory scheme, a payment claim did not need to be ""comprehensible by the respondent in terms of its supporting materials"": ibid at [21]. However, as Hodgson JA notes at [25] above, the claim must ""identify"" the work, goods or services to which the payment sought relates. The term ""identify"" should be given a purposive construction: what must be done must be sufficient to draw the attention of the principal to the fact that an entitlement to a payment is asserted, arising under the contract to which both the contractor and the principal are parties. In that sense, the claim, to be valid, must be reasonably comprehensible to the other party. If the entitlement does not arise absent the supply of supporting documentation, then the claim must be accompanied by that documentation, unless it has already been provided.
Here Basten JA proposes another test, which is whether the payment claim is sufficient to draw the attention of the principal to the fact that an entitlement arising under the contract to payment is asserted. That test has the benefit of being flexible and able to take into account the things that the parties themselves require, as part of the context of the contact and the nature of the project, to give rise to an entitlement.
What if the payment claim relates to work over 12 months ago?
Section 13 (4) provides:
(4) A payment claim may be served only within:
(a) the period determined by or in accordance with the terms of the construction contract, or
(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),
whichever is the later.
This has been held to refer to the last work done on the project so that if the work on the site was done within the last 12 months the right to claim for tother work done more than 12 months ago persists - per Einstein J in Leighton Contractors Pty Limited v Campbelltown Catholic Club Limited, Campbelltown Catholic Club Limited v Leighton Contractors Pty Limited [2003] NSWSC 1103:
91 It would seem unlikely that the legislature would have intended that a payment claim in respect of any particular item of construction work [as for example the laying of a particular brick] could only be served within the period of 12 months after completion of the work comprising that particular item.
92 Possibly the same may also be said in relation to it being unlikely that the legislature would have intended that a payment claim in respect of a particular unit of construction work [as for example the laying of a brick course or concourse] could only be served within the period of 12 months after completion of the work comprising that unit of construction work. On the other hand perhaps it is arguable that the legislature may have so intended.
93 The legislature in fact enacted section 13 (4) in the following terms:
"A payment claim may be served only within….
(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related good and services to which the claim relates were last supplied)…"
94 To my mind properly construed the subsection in its reference to "the construction work to which the claim relates" should be regarded as referring in a general way to the construction work or to the related goods and services. Hence as long as any item of construction work to which the claim relates [in that general sense], was carried on during the 12 month period prior to the service of a payment claim, that payment claim could also, unexceptionally, include items of construction work carried on prior to that 12 month period
Also, in terms of the effect on an adjudication, Palmer J said in Brookhollow Pty Ltd v R&R Consultants Pty Ltd & Anor [2006] NSWSC 1
63 In a contested adjudication, the adjudicator need consider only those provisions of the Act and of the contract which are relevant to the issues formulated by the parties in their submissions. In an adjudication in which the respondent does not participate the position of the adjudicator is, in my opinion, analogous to that of the Court when a plaintiff seeks the entry of judgment in default of an appearance by the defendant or where the defendant has failed to file a defence. In such a case, the Court still has a duty to decide the case according to truth and fact and if the plaintiff's case appears on the face of the pleading or on the plaintiff's evidence (or lack of it) to be fatally flawed, then the Court will refuse to enter judgment: Charles v Shepherd [1892] 2 QB 622, at 624, 625; Gramophone Company Ltd v Magazine Holder Company (1911) 28 RPC 221, at 225; Termijtelen v Van Arkel (1974) 1 NSWLR 525, at 529; Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (unrep.) NSWSC Young J, 31 May 1991.
64 In my opinion, where the respondent has not participated in the adjudication process so that the payment claim is undefended, s.22(2) requires the adjudicator to address in good faith such issues arising from the need to conform with the provisions of the Act and of the contract as manifestly appear on the face of the payment claim, the adjudication application and any supporting material. In most cases, the consideration will be confined to:
- whether there is in existence a construction contract between the parties and whether the payment claim is made pursuant to that contract;
- whether the payment claim reasonably purports on its face to comply with the requirements of s.13(2);
- whether there is evidence that the payment claim has been served on the respondent;
- what the contract provides, if anything, about the particular claim made in the payment claim and the time for payment;
- whether the claimant says that it has done the work for which the payment has been claimed but has not received payment.
65 If a fatal flaw in compliance with the Act or the contract is manifestly apparent from a consideration of these matters, the adjudicator will refuse to make a determination in favour of the claimant. If no fatal flaw appears, the adjudicator is entitled to make a determination in favour of the claimant even if a more penetrating analysis of the claim and the provisions of the Act or the contract would have revealed a flaw upon which the respondent could successfully have relied. In this regard, it must always be borne in mind that the adjudicator's determination is not final and binding on the parties; whatever defence to the claim the adjudicator may have overlooked in making the determination in this summary and provisional way may always be taken up by the respondent in civil proceedings to determine liability on a final basis: s.32.
In the Queensland Supreme Court, Lyons J in the case of GW Enterprises Pty Ltd v Xentex Industries Pty Ltd & Ors [2006] QSC 399 said that lateness in the payment claim must be raised in the payment schedule or it cannot be raised at all. This appears to clash with the view of Palmer J in Brookhollow.
What if part of the payment claim is for work which is not strictly construction work?
In Coordinated Construction Co. Pty. Ltd. v. J.M. Hargreaves (NSW) Pty. Ltd. & Ors. [2005] NSWCA 228 two judges of the Court, Hodgson JA and Basten JA disagreed:
Hodgson JA said:
50 Before concluding, I wish to note what I believe may be an important error in the judgment of the primary judge, not bearing on the outcome of the case. In the second half of para.[51] of his judgment, the primary judge said this:
An adjudicator is bound to consider the provisions of the Act, the provisions to the construction contract, the payment claim and payment schedule and submissions made by the claimant and respondent respectively and the results of any inspection: s 22(2). It seems to follow from all this that, if the point that an amount claimed is not "for" construction work is not taken in the payment schedule, it cannot thereafter be relied upon by the respondent in the adjudication process. The adjudicator would be bound to determine the matter on the basis of the material to which she or he could properly have regard; and if the adjudicator decided that all the reasons advanced by the respondent were invalid, the adjudicator would determine the amount of the progress payment in favour of the claimant.
51 That passage could be read as asserting that, if a respondent to a payment claim does not raise any relevant grounds for denying or reducing the progress claim made by the claimant, then the adjudicator automatically determines the progress claim at the amount claimed by the claimant. My tentative view is that such an assertion would be incorrect. 52 The task of the adjudicator is to determine the amount of the progress payment to be paid by the respondent to the claimant; and in my opinion that requires determination, on the material available to the adjudicator and to the best of the adjudicator's ability, of the amount that is properly payable. Section 22(2) says that the adjudicator is to consider only the provisions of the Act and the contract, the payment claim and the claimant's submissions duly made, the payment schedule and the respondent's submissions duly made, and the results of any inspection; but that does not mean that the consideration of the provisions of the Act and the contract and of the merits of the payment claim is limited to issues actually raised by submissions duly made: see The Minister for Commerce v. Contrax Plumbing (NSW) Pty. Ltd. [2005] NSWCA 142 at [33]-[36]. The adjudicator's duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim. The adjudicator may very readily find in favour of the claimant on the merits of the claim if no relevant material is put by the respondent; but the absence of such material does not mean that the adjudicator can simply award the amount of the claim without any addressing of its merits.
53 Indeed, my tentative view is that, if an adjudicator determined the progress payment at the amount claimed simply because he or she rejected the relevance of the respondent's material, this could be such a failure to address the task set by the Act as to render the determination void.
Basten AJ said:
64 At [50]-[53] Hodgson JA takes issue with a passage in the judgment of McDougall J below, part of which is set out at [50]. In substance the issue in dispute, as I understand it, is this: if, on a proper construction of the Act and the contract, the adjudicator comes to the view that a particular item in the payment claim is not justified, he or she will nevertheless be required to allow the item if an appropriate objection was not taken by the respondent in its payment schedule. In the passage from the judgment below, set out at [50] above, reliance for this conclusion would appear to be rooted squarely in s 22(2) of the Act. However, when read in context, the primary judge expressly placed weight upon a number of other provisions of the Act, to which attention should be given. Before turning to those, it is convenient to note the scope and operation of s 22(2). The provision is set out in full at [29] above.
65 According to the well-known principles governing judicial review under the general law, a decision-maker will fail to exercise a statutory power if he or she fails to take into account a mandatory consideration. Similarly, there will be a failure properly to exercise the statutory jurisdiction where the decision-maker takes into account an impermissible consideration. The same principles are found in the Administrative Decisions (Judicial Review) Act 1977 (Cth), discussed by Mason J in Minister for Aboriginal Affairs v Peko Wallsend Ltd (1986) 162 CLR 24 at 39-40. As his Honour noted (at p.40), many statutory discretions are in their terms unconfined and the considerations will therefore be unconfined "except in so far as there may be found in the subject-matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard …". Section 22(2) of the Act is an exception to this rule: indeed, it has a dual function. On the one hand, it prescribes matters to which the adjudicator is required to have regard; on the other hand, it identifies those matters as the "only" matters to which the adjudicator is to have regard. At least on its face, the list is exhaustive.
66 If that were the whole of the story, the conclusion suggested by Hodgson JA, namely that the adjudicator would be entitled to disallow an item on the basis of the contract and the nature of the claim made, would be made good. The fact that the payment schedule prepared by the respondent did not identify the reason for disallowance would not mean that the adjudicator had failed to take account of a mandatory consideration, or had had regard to an impermissible consideration. However, McDougall J based his reasoning to a contrary conclusion in part on other statutory provisions, in addition to s 22(2), including ss 14(3) and 20(2B). Sub-section 14(3) requires that where a payment schedule indicates an amount of a payment which is less than that the amount of the claim, the schedule must indicate why the amount is less and, if a respondent is withholding payment, the reason for that action. Where the payment schedule indicates an amount which is less than the amount claimed, the claimant may apply for adjudication of its payment claim: s 17(1)(a). Where such an application is made, the respondent may lodge a response to the claimant's adjudication application. That response may contain relevant submissions (s 20(2)(c)), but, subs (2B) provides:
"The respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant."
In the light of this express restriction on the response which can be provided to the adjudicator, there is merit in the conclusion that the adjudicator is not entitled to go beyond the terms of the response, in rejecting part or all of the claim. That was the conclusion reached by McDougall J.
67 It is not necessary to resolve this difference of opinion in the present case, nor would I wish to do so. There are factors, not referred to at [50] above and not expressly identified McDougall J, which militate against the conclusion just identified. For example, the claimant may make an adjudication application in circumstances where the respondent has failed to provide a payment schedule at all: see ss 15(1)(a) and (2)(a)(ii) and 17(1)(b). Whether, in the light of s 20(2B) the respondent can give any reasons for withholding payment at all in such a case, is unclear. It is also unclear whether it is intended, in that event, that the adjudicator must allow the claim in full. These issues require consideration. They are dealt with further in a different context in Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229 at [40]-[42].
68 The judgment of this Court in The Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142 was handed down after the decision of McDougall J in the present case. Accordingly the reasoning relied on by Hodgson JA in that case at [33]-[36] and relied on at [50] above, was not considered by the primary judge. However, it follows from what I have said that I am not persuaded that the reasoning in those paragraphs of Contrax is correct, but a similar conclusion may be attainable by a different course.
How fast do you have to move?
Festina Lente. Gzell J in Brodyn Pty Ltd v Davenport & Anor , took the view that, even if there was jurisdictional error, when an adjudicator's determination had been registered as a judgment in a court, in order to have that judgment set aside you had to challenge the adjudicator's determination, albeit by application, not to the court in question, which was the District Court, but to the Supreme Court on a prerogative writ, and that the express words of section 25 forbade you doing so. This was overruled by the Court of Appeal in Brodyn Pty Ltd v Davenport [2004] NSWCA 394 para 42 where it was held that a party may apply to the court in which a judgment has already been entered pursuant to section 25(1) to have the judgment set aside on the ground that the adjudication founding it was not in law an adjudication at all. See the comments of Palmer J in Co-ordinated Constructions Co Pty Ltd v J.M. Hargreaves Pty Ltd [2004] NSWSC 1206 (30 November 2004), para 9. In Maine & Anor v Chelia & Ors [No2} NSWSC 425 (20 April 2005) in para 4 Palmer J rejected an application for an interlocutory application to the Supreme Court to restrain any further step in an allegedly invalid adjudication saying that the party adversely affected could seek to set aside any judgment sought to be entered under section25 (1) of the Act. In Energy Australia v Downer Construction (Australia ) Pty Limited [2005] NSWSC 1042 there was a similar result.
What happens if an adjudicator's award has been set aside?
Where the adjudicator's award has been quashed for error of law going to jurisdiction, that is, a voidable decision has been made void by order of the Court, it has been held that what that means is that, in essence, the adjudicator has failed to carry out the adjudication within the ten business day time limit and section 26 (3) of the NSW Act applies. That section gives the claimant a further five days to make a new adjudication application in such circumstances. See Multiplex Constructions v Luikens [2003] NSWSC 1140 para 103. If the determination is declared void, as opposed to voidable, then the period of five days will already have expired. Cardinal Project Services v Hanave [2010] NSWSC 1367. This could be critically important if the work is completed and the payment claim the subject of the adjudication was the final claim, meaning that the claimant cannot make another one.
How do you enforce an adjudicator's award?
That adjudicator's award may be registered as a judgment in a court of competent jurisdiction. The award must be accompanied by an affidavit by the claimant (or where the claimant is a company, by a member or officer of that company - usually a director - see the Uniform Civil Procedure Rules 2005 Pt 35 R 35.3 (1) (b)) stating whether the debt or any part of it has been paid.
Can you serve a statutory demand based upon an adjudicator's award?
Yes, but only for the portion of the debt not subject to an offsetting claim Brereton J In the matter of Douglas Aerospace Pty Ltd [2015] NSWSC 167 (9 March 2015)
98. In my view, a curial proceeding in which a party to a construction contract seeks, by way of enforcing its contractual rights, a declaration that an adjudicated amount is not truly due and payable is in a position closely analogous to one who applies to set aside a judgment, or to appeal from a judgment – essentially, the contention is that the adjudication, and thus the judgment founded on it, is wrong. Despite the width of the concept of “offsetting claim”, it has never been thought to extend to an appeal from, or application to set aside, a judgment. In the absence of payment of an amount of which restitution might be claimed, there is nothing to be set off against the judgment debt, but only a contention that the adjudication is in error. A contention that a debt does not exist is not a “counterclaim, set-off or cross-demand”. Such a contention denies the debt, whereas a counterclaim, set-off or cross-demand admits it, but asserts that there is a countervailing liability. That the curial proceedings might produce a different result is no different from an appeal. The general principle that an appeal or application to set aside a judgment does not found a genuine dispute, or (at least without more) provide some other reason to set aside a demand, supports the conclusion that a claim that an adjudication does not reflect the true contractual rights of the parties does not amount to an offsetting claim.
99. Moreover, as Pullin JA pointed out, there is no restitutionary claim unless money has been paid over, and if money had been paid over there would be no statutory demand. In Collier Nominees Pty Ltd v Consolidated Constructions Pty Ltd (NSWSC, unreported, 3 July 1998, BC9803056), Santow J, as he then was, pointed out that the definition of “offsetting claim” refers to a claim the company has – not one that it will have – against the respondent. The company will not have a restitutionary claim under s 32 unless and until it has paid money to the claimant.
100. In my opinion, therefore, the existence or pendency of an arguable claim that an adjudication does not reflect the true legal rights of the parties – involving no cross-claim for damages, and where there has been no payment and thus no complete claim for restitution – cannot be an offsetting claim for the purposes of s 459H(1)(b). It follows that, far from being satisfied in this respect that the decision in Diploma is plainly wrong, I respectfully accept its correctness. It also follows that what I said in the last sentence of [23] in Prime City should no longer be regarded as correct..
The usual procedure when you have a judgment against a company is that you commence recovery action by serving a statutory demand. In the case of Max Cooper v Booth, which involved an application to set aside a statutory demand, Master Macready held that the provisions of section 25 (4) do not prevent the pleading of cross claims or set offs or other defences in proceedings (NOT BEING MATTERS ALREADY DEALT WITH IN THE ADJUDICATION) to set aside a statutory demands so long as they are not frivolous or vexatious. Master Macready then varied the statutory demand by deducting from it the amount of an offsetting claim by the plaintiff. Where the respondent's claimed offset exceeds the statutory demand, things get a little more complicated. The respondent can seek to set aside the whole of the statutory demand based on the offsetting claim. See the judgment of Barrett J in Greenaways Australia Pty Ltd v CBC Management Pty Ltd [2004]NSWSC 1186. Naturally the respondent has to be pretty convincing to the court, but if its offsetting claim is clearly more than the adjudicator's award, then the court will, as a matter of convenience, allow the offset. In order to avoid the winding up order however the respondent must be able to show the Court that they are setting about the "Claw back " proceedings under section 32. If not- in Peekhrst P/L v Wallace & Anor [2007] QSC 159 in the Qld Supreme Court, Douglas J found that delay in that regard and in other regards justified the statutory demand not being set aside.
Can you get a Mareva Order or freezing order to assist recovery of an adjudicated amount?
Yes. See McDougall J's judgment in Downer EDI Engineering v Taralga Wind Farm Nominees No.2 [2014] NSWSC 971 (18 July 2014)
Can a claimant demand that the respondent pay the adjudicated amount into Court ?
Yes. In Nazero Group Pty Limited v Top Quality Construction Pty Limited [2015] NSWSC 232 (17 March 2015)
Hammerschlag J said in paras 40 to 44:
40. The starting point in the exercise of the discretion to make the orders sought here is the general policy aims of the Act, and specific aims of particular pertinent sections. A general policy aim of the Act is to give enforceable rights to progress payments. Another is to ensure the speedy and effective determination of disputes about them. Specific provisions of the Act aim to put a claimant who has the benefit of an adjudication in its favour in a strong position, so much so that it is entitled to automatic judgment. Section 23(2) of the Act imposes a statutory obligation to pay an adjudicated amount before the relevant date. Coupled with this is the burden placed by s 25(4)(b) of the Act on a respondent who commences proceedings to have a judgment set aside to pay into Court, with the corresponding benefit of the security such payment gives the claimant. Where the claimant has not yet obtained judgment, the respondent remains under the statutory obligation to pay. McDougall J’s reference in Filadelfia to “analogy with s 25(4)”, is recognition of the fact that from a policy point of view, such a respondent has no less an obligation to pay than one against who judgment has been obtained.
41. The presence in the Act of s 25(4)(b) gives rise to no implication that the discretion of the Court to make the kind of orders sought here is narrowed. If anything, the fact that discretion is removed in only the particular circumstances where the section applies, indicates that there is discretion in all other circumstances.
42. The policy of the Act, as reflected in s 25(4)(b), is that a claimant is to be given protection of payment into Court when a respondent seeks, whether by injunction or otherwise, to inhibit the claimant’s enforcement of an adjudication in its favour. Pendente lite, Top Quality is being held out of payment, with the risk attendant on delay, notwithstanding the statutory obligation on Nazero to pay. It is open to Top Quality to file the adjudication certificate, in which event Nazero would have little option but to seek to have the judgment set aside to protect its position, in which event, s 25(4)(b) of the Act would mandate payment into Court. Here, by happenstance, the section does not apply because the further step has not yet occurred. Top Quality would have to take that step to enforce its statutory right to payment. The only difference is that these proceedings have intervened. The policy of the Act is not served by removing Top Quality’s protection pending determination of Nazero’s challenge even though s 25(4)(b) of the Act does not apply in terms.
43. The present position might also be thought to be a close analogue to injunctive proceedings where, pending final determination, Top Quality is practically being held out of its payment. Were it an actual injunction, the usual undertaking as to damages would have to be given.
44. It is not apt to describe a requirement to pay into Court an amount the subject of a statutory obligation to pay, pending a challenge to that obligation, as a fetter on the right to make the challenge. It may be a practical inhibition, depending on the specific financial circumstances of the challenger. This could be a factor relevant to the exercise of discretion, but in the present case, Nazero leads no evidence of hardship.
How do you stave off enforcement of an adjudicator's award?
Since the adjudicator's award is not a final judgment, in circumstances where there are grounds to believe that the claimant will not be able to repay the award at the end of the "claw back" proceedings, such as when the claimant is insolvent such as under administration or in liquidation , if an attempt is made to enforce the judgment based upon the award, you can do a number of things:
Can you get a stay of a judgment made under the provisions of the NSW Act on the basis of the claimant's inability to repay?
The Short answer - Only if the claimant is absolutely, without doubt, insolvent. The argument for the stay is that after payment of the judgment the right of the respondent to seek final resolution in later legal proceedings by pursuing those cross claims may be illusory if, in the meantime, the claimant becomes insolvent.
The Long Answer - Maybe. See the comments by Parker J in A-Tech Australia Pty Ltd v Top Pacific Construction Aust Pty Ltd (No 2) [2019] NSWSC 624 (27 May 2019) paras 22 to 28
22.In support of the application for a stay counsel for TPC referred to decisions of this Court which have emphasised that a judgment under the Act, although enforceable, is interim in the sense that it does not finally determine the legal entitlements of the parties. Counsel referred in particular to the judgment of Nicholas J in Parist Holdings Pty Ltd v WT Partnership Australia Pty Ltd [2003] NSWSC 365 at [19].
23In my view, earlier authorities must be considered with some caution in view of the subsequent amendments. In Parist Holdings, Nicholas J referred to the original Second Reading Speech from September 1999 and not to the Second Reading Speech for the amendment Act. (It may be that the case was argued before his Honour on the Act in its original form).
24This does not mean that the interim nature of the entitlements created by the Act is irrelevant to a stay application. Where the evidence establishes that if payment is made, it will for practical purposes be final, then the interim nature of the procedure is a significant factor.
25.I think this can be discerned from cases where stays have been granted under the Act. In Grosvenor Constructions (NSW) Pty Limited (in administration) v Musico & Ors [2004] NSWSC 344, a decision referred to specifically by counsel for TPC, the contractor was in administration. In Veolia Water Solutions v Kruger Engineering [No 3] [2007] NSWSC 459 the contractor had been under administration and was operating under a Deed of Company Arrangement. In both of these cases it was clear that, once payment was made, if the claims against the contractor were later to succeed, the applicant's recovery would only be cents in the dollar.
26.In Greenwood Futures v DSD Builders (No 2) [2018] NSWSC 1471 the contractor company was not in administration or liquidation, but the evidence before McDougall J showed that those in control of the company had engaged in the past in a pattern of phoenix trading and there was reason to doubt whether the contractor company would continue to be able to trade profitably.
27In Hakea, Ball J found that, having regard to the contractor company's declining trading business, there was a substantial risk that it would be wound up in the near future and that it would prove to be insolvent, whether or not the moneys owing under the Act were paid. His Honour was satisfied that on the facts there was little prospect that the applicants would be able to recover any amount which they paid to the contractor.
28There is nothing like that in the present case. There is no evidence that ATA is trading other than normally; all there is evidence of is that it is a $1 company. That, without more, does not establish that if the money was paid to ATA it would be unable to repay it. That is the relevant risk, and it depends upon the actual facts concerning the company's financial position and trading prospects. There is simply no evidence on those questions before the Court.
also see the comments of Bell j in paras 4, 5 and 6 of Hakea Holdings Pty Limited v Denham Constructions Pty Ltd; BaptistCare NSW & ACT v Denham Constructions Pty Ltd [2016] NSWSC 1120 (16 August 2016) in which she said:
Relevant legal principles
It is common ground that the court has power to grant a stay of a judgment, or an injunction restraining the registration of a judgment, based on an adjudication certificate. As Hodgson JA explained in Brodyn Pty Ltd t/as Time Cost & Quality v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421 at [85]:
A court in which judgment for recovery of money has been given can stay execution of that judgment. A party against whom there was a substantial judgment could apply for a stay of execution on the grounds that it had a greater claim against the judgment creditor, for which it would shortly obtain judgment, and that, if the judgment money was paid, it would be irrecoverable; and the court could in its discretion grant a stay, on terms if it thought appropriate. I see no reason why a judgment under s.25 of the Act could not be stayed on that kind of basis, although the policy of the Act that progress payments be made would be a discretionary factor weighing against such relief.
See also Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238 at [61].
In determining whether to grant a stay or an injunction, the court must balance two competing policies of the SOP Act. One is that contractors should be paid promptly for the work that they have done. The other is that any payment under the Act is not intended to affect the rights of the parties under the relevant construction contract. To give effect to the second of these policies, the SOP Act specifically provides in s 32 that the court or tribunal hearing a dispute under the relevant construction contract may make such orders as it considers appropriate for the restitution of any amount paid as a result of an adjudication determination. That right may prove to be worthless if the contractor is or becomes insolvent.
The factors that the court will take into account in balancing the competing policies include the following:
(a) the strength of the applicant’s claim: see Veolia Water Solutions v Kruger Engineering Australia Pty Ltd (No 3) [2007] NSWSC 459 at [73]; Romaldi Constructions Pty Ltd v Adelaide Interior Linings Pty Ltd (No 2) [2013] SASCFC 124 at [95] (where Blue J (with whom Sulan and Stanley JJ agreed) described the factor as “an important criterion”); RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397 at [19], [36] per Keane JA (with whom Fraser JA and Fryberg J agreed);
(b) the basis of the applicant’s claim. Obviously, an important factor is whether the applicant challenges the adjudicator’s determination. Another important factor is whether the applicant challenges the debt the subject of the adjudication determination. The absence of a challenge to the debt is a powerful factor against the grant of a stay: Romaldi at [110];
(c) the likelihood that the contractor will be unable to repay the amount the subject of the determination. It is accepted in this context that the policy of the Act is generally to place the risk of insolvency on the applicant: R J Neller at [40]. However, where there are strong reasons for believing that the applicant will be unable to recover any amount paid, that fact favours granting a stay: Veolia at [36]-[39];
(d) the risk that the contractor will become insolvent if a stay is granted: Romaldi at [101].
In RSA v VDM CCE and VDM CCE v RSA [2012] NSWSC 861 (20 July 2012) , McDougall J analysed the nature of the power to grant a stay very carefully. In that case the claimant, although still solvent, had ceased operating as a construction company. That meant that one of the purposes of the Act, to keep contractors going and paying subcontractors etc was no longer relevant. He quoted Einstein J in Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd & Ors:
12. In Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd & Ors [2005] NSWSC 571, Einstein J referred at [54] to the decision in Herscho as justifying the proposition that the risk of prejudice must be "a very high risk", and in any event "more than merely a real risk" if a stay were to be granted. With great respect, I think that this is putting too high a burden on the words of Hodgson JA, which clearly were directed not at laying down some general principle but at the facts of the particular case.
Of more moment is what Einstein J said in Taylor Projects at [59]:
59The principle in Grosvenor is only applicable where the claimant is either actually, or very close to, insolvent. Were it otherwise then the stay itself may drive the claimant into the very insolvency which the interim payment regime of the Act is designed to prevent. Such a result would be unjust in circumstances where:
prima facie there is a debt due from the respondent to the claimant;
the final amounts due between the parties may not be ascertained for weeks, months or years;
the Court is in no position to assess the relative merits of the parties on the final claims;
the financial situation of the respondent may itself deteriorate so that the claimant loses for all time the benefit of the right which is now prima facie enforceable;
there is nothing in the Act which suggests a claimant's entitlement to receive the interim payments depends upon it establishing a capacity to repay those sums if there is a final determination unfavourable to it;
the claimant is deprived of the very funds the Act contemplated would be made available to it to pay its own employees and suppliers.
The features that emerge from that paragraph include:
(1)one of the matters that the Court is required to consider, and that it should be astute to prevent, is driving the claimant (as that term is used in the NSW Act) into insolvency (being the state of affairs that the NSW Act sought to prevent) by granting a stay;
(2)the Court should seek to protect the claimant against a deterioration in the respondent's financial position; and
(3) one of the fundamental purposes of the NSW Act is to ensure that claimants are put in funds to pay their own employees and suppliers.
It is apparent, when one looks at the matters listed by Einstein J in [59], that his Honour was not proceeding on the simplistic analysis of the need to demonstrate "very high risk" but, rather, that he was balancing the possibility of detriment to the respondent on the one hand, with the possibility of detriment to the claimant on the other, and taking into account, as a moderating factor, the policy of the Act.
As to the Queensland Act, Keane JA (who spoke with the concurrence of Fraser JA and Fryberg J) said in RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397; [2009] 1 Qd R 390 at [40] that one of the features of the Queensland Act was that, as a matter of legislative policy, it assigned, the risk of insolvency to respondents rather than claimants. In those circumstances, as his Honour said at [41], the mere existence of the risk of the claimant's insolvency would not of itself justify a stay. There must be something else which, together with that risk, justified keeping a claimant out of its statutory right.
Western Australia - Beech J said, in Hammersley Iron Pty Ltd v James [2015] WASC 10, a case where the insolvent claimant sought leave to enforce the adjudicator's award, that there was a need to ensure that the respondent did not, when granted a stay, avoid payment without ever having to prove its cross claim:
The exercise of discretion under s 43
170 In my view, in the circumstances of this case, as I have outlined them, the application for leave to enforce the adjudication determination should not be granted. In essence, that is because:
(1) Hamersley has established a serious question to be tried that it has a counterclaim exceeding the Adjudicated Sum;
(2) Hamersley's counterclaim constitutes mutual dealings for the purposes of s 553C of the Corporations Act;
(3) s 553C operated as at the date of the administration to mean that the Adjudicated Sum and Hamersley's counterclaim must both be taken account of in determining the net balance payable by one party to the other; and
(4) there is, at least, a serious question to be tried that the balance, assessed as required by s 533C, lies in favour of Hamersley.
171 To my mind, to grant leave to enforce the determination in these circumstances would defeat the purpose and object of s 553C. A grant of leave to enforce would mean that Forge would receive from Hamersley the full amount of the Adjudicated Sum, whereas Hamersley would be left to prove in the liquidation of Forge in respect of its counterclaim. Moreover, in circumstances where Forge as contractor is insolvent, and in liquidation, the object of the Construction Contracts Act - keeping the money flowing in the contracting chain by enforcing timely payment and sidelining protracted and complex disputes - does not demand the grant of leave to enforce the adjudication determination.
172 For these reasons, I consider that s 553C requires that leave to enforce be declined, or, alternatively, the operation of that section in the circumstances of this case provides a good reason to decline to grant leave to enforce the adjudication determination.
173 In my opinion, the application for leave to enforce should be stayed, not dismissed. At this stage, Hamersley has not proved its counterclaim. Rather, it has only demonstrated a serious question to be tried. If this application is dismissed, and if Hamersley did not pursue proceedings to advance its counterclaim, Hamersley would avoid payment of the Adjudicated Sum without ever having proved its counterclaim. In the circumstances I think justice between the parties requires that this application for leave be stayed pending resolution, by legal proceedings or by agreement, of Hamersley's counterclaim.
This problem was adverted to by Palmer J in Multiplex Constructions Pty Ltd v Luikens and Anor wherein he said:
21 Again, a respondent may choose to pay a statutory demand founded on an adjudicator's judgment and may successfully contest liability for the payment in subsequent litigation only to find that the claimant has since become insolvent and that the money paid under the "interim judgment" is now irrecoverable.
The problem also arose in a more direct form in the case of Grosvenor Constructions (NSW) Pty Limited (in administration) v Musico & Ors [2004] NSWSC 344. In that case Einstein J ordered that a judgment based on an adjudicator's award be stayed in a case where the claimant was in administration. The stay was to allow the respondent to seek resolution of the cross claims available to it. The stay was granted because:
35 In the present case, if no stay is granted, an interim arrangement would be in practice converted into a final order. The effect of not granting a stay would be that the defendants' rights to recoup the adjudicated amount in the "appeal" pursuant to section 32 of the Act would be rendered nugatory, and the defendants would thus suffer irreparable prejudice.
The stay was to allow the respondent to seek resolution of the cross claims available to it because if no stay was granted, an interim arrangement would be in practice converted into a final order, and instead of getting the full benefit of its set off the respondent would just be an unsecured creditor for that amount in the administration. Although this will make the recovery of monies for liquidators and administrators a little harder, the NSW Act still provides a claimant liquidator or administrator with a significant advantage in that the respondent will have to secure the debt. In his judgment Einstein J quoted with approval some English cases (they have a similar Act in the UK) in which the respondent was required to pay the adjudicated amount to the Court or to a stakeholder pending the resolution of the cross claims. That is a considerable tactical benefit to the claimant liquidator or administrator in that the respondent is then faced with the question of whether it really has a case. If not, it might as well agree to the immediate release of the money to the claimant and thereby avoid having to also pay an order for costs when it fails on its cross claim. Certainly it leaves the claimant liquidator or administrator in a good bargaining position.
Where the claimant is not in administration or liquidation then there must be shown a more than serious risk that the money will not be repaid to give rise to a stay. This was the attitude of the Court of Appeal in Herscho v Expile Pty Limited [2004] NSWCA 468 where at para 3 Hodgson JA said: "...having regard to the policy of the Act, there is sound reason for making stays less readily available in such cases, and perhaps looking for more than "a real risk of prejudice" if a stay is not granted. Also see "Amirbeaggi and Anor v Matrix Group Co Pty Limited [2020] NSWSC 827 (30 June 2020)
Queensland: The Queensland Court of Appeal took a very similar stand with some very interesting additional observations in R J Neller Building P/L v Ainsworth [2008] QCA 397 per Keane JA
[40] The BCIP Act proceeds on the assumption that the interruption of a builder's cash flow may cause the financial failure of the builder before the rights and wrongs of claim and counterclaim between builder and owner can be finally determined by the courts. On that assumption, the BCIP Act seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash in circumstances where the builder's financial failure, and inability to repay, could be expected to eventuate. Accordingly, the risk that a builder might not be able to refund moneys ultimately found to be due to a non-residential owner after a successful action by the owner must, I think, be regarded as a risk which, as a matter of policy in the commercial context in which the BCIP Act applies, the legislature has, prima facie at least, assigned to the owner.
[41] The mere existence of the very kind of risk on which the provisions of the BCIP Act in favour of the builder are predicated would not ordinarily be sufficient of itself to justify a stay of an execution warrant based on the registration of a certificate of adjudication. There may, of course, be other circumstances, which, together with this risk, justify the staying of a warrant of execution based on the registration of an adjudication certificate. For example, the builder may have engaged in tactics calculated to delay the ultimate determination of the rights and liabilities of the parties so as unfairly to increase the owner's exposure to the risk of the builder's insolvency. Or the builder may have restructured its financial affairs after the making of the building contract so as to increase the risk to the owner of the possible inability of the builder to meet its liabilities to the owner when they are ultimately declared by the courts. In this case there are no such circumstances.
Victoria: Vickery J took a similar approach in Asian Pacific Building Corporation Pty Ltd v Aircon Duct Fabrication Pty Ltd & Ors (No 2) [2010] VSC 340 (6 August 2010)
Can you get security for costs?
Hodgson JA in the Court of Appeal in Procorp Pty Ltd v Napoli Excavations & Contracting Pty Ltd (No 2) [2006] NSWCA 147 held that it was appropriate for a claimant to seek security against a respondent for the costs of an appeal initiated by the respondent in relation to an adjudication award. Quare whether such an order would be granted against a respondent who has brought proceedings under section 32 of the NSW Act. (See para 12)
Can the respondent recover overpayments?
That right is expressly preserved by section 32 of the NSW Act which provides that the contractual and other rights of a respondent are unaffected by the adjudicator's award and provides that in any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal must allow for any amount paid to a party to the contract under the NSW Act and, where appropriate, make orders for the restitution of any amount overpaid. The scheme is one which has always only set out to provide interim relief to claimants who, on a brief review of the matter appear to have been unfairly deprived of monies which they are owed.
Can you invalidate a retention clause as a pay when paid clause?
Retention clauses often make the payment of retention monies dependent on the practical completion and final completion of work under the head contract. This "makes the liability to pay money owing, or the due date for payment of money owing, contingent or dependent on the operation of another contract." and the term is a "pay when paid" provision under section 12 (1) of the NSW Act which provides that it "has no effect in relation to any payment for construction work carried out or undertaken to be carried out ... under the contract."Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5 and Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4).
Where the retention clause makes the payment dependent on practical completion and final completion of work under the subcontract then section 12(1) does not apply as the due date for payment is not "contingent or dependent on the operation of another contract."
Can you get a Mareva Order to assist in the recovery of an adjudicated amount?
SERVICE GENERALLY
How do you effect service under the Act?
Section 31 provides:
31 Service of notices
(1) Any notice that by or under this Act is authorised or required to be served on a person may be served on the person:
(a) by delivering it to the person personally, or
(b) by lodging it during normal office hours at the person’s ordinary place of business, or
(c) by sending it by post addressed to the person’s ordinary place of business, or
(d) by email to an email address specified by the person for the service of notices of that kind, or
(d1) by any other method authorised by the regulations for the service of notices of that kind, or
(e) in such other manner as may be provided under the construction contract concerned.
(2) Service of a notice that is sent to a person’s ordinary place of business, as referred to in subsection (1) (c), is taken to have been effected when the notice is received at that place.
(3) The provisions of this section are in addition to, and do not limit or exclude, the provisions of any other law with respect to the service of notices. (UP TO DATE AS AT 27 APRIL 2017)
Note that under section 31 (3) you are able to serve a payment claim at the registered office of a company in accordance with the Corporations Act. Per Giles AJ in Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78 at paragraph 29:
29Further again, the saving in s 31(3) permits service by leaving at or posting to a company's registered office: Corporations Act 2001 (C'th), s 109X(1)(a). A registered office is often an address maintained for the purpose, not at the company's place of business. The legislature has seen as acceptable service by leaving a notice at or posting it to a registered office where no one may have knowledge of the relevant works, and which may be at a remote location. It is difficult, then, to see necessity to read down s 31(1)(c) in order to avoid that possible situation.
NOTE THAT SERVICE BY FACSIMILE IS NOW NO LONGER GOOD SERVICE UNLESS IT IS PROVIDED FOR IN THE CONSTRUCTION CONTRACT CONCERNED
What happens when you serve multiple copies of a document?
This frequently occurs when, for abundant caution, and to ensure service occurs on time, a party may serve a full set of documents in more than one way, such as both by facsimile and by delivery. With service of any notices under the Act, what must be kept in mind is the critical importance of recording when the document is served. In the case of a payment claim, from the time it is served, the respondent's ten days to provide a payment schedule begins to run. You must be able to prove not only that a document was served, but the date, and indeed sometimes even the actual time, of service.
If you serve multiple copies of a document then the first valid service, either in accordance with section 31 of the Act or in accordance with the Corporations Act 2001, is taken as the service of the document and time beings to run from that service. Rein J in JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737 said:
25 The question then is whether the decision in Falgat means that service on 8 December started a fresh period of 10 days. If the words "has been served with" is substituted for "receives" in s 17(3)(c) so that it reads:
"in the case of an application under subs (1)(a)(i) - must be made within 10 business days after the claimant [has been served with] the payment schedule"
the answer to the question when does time start to run, is "from when the claimant was served with the payment schedule". Castleplex was served with the payment schedule on 7 December and again I do not think that service of another copy on 8 December (accepting that it was service) means that time starts running again.
26 In a sense, the rights of the claimant to an adjudication have commenced to run once the other party to the building contract has provided its response by means of the payment schedule. In the absence of an argument based on estoppel arising out of some confusing conduct on the part of the builder, I do not think that the process initiated by the service of the payment schedule on 7 December has come to an end because a second copy was served the following day. If it is said that service of the same payment schedule on the second occasion commenced its own chain, then there were two sets of process deriving from the one payment claim - a most unsatisfactory state of affairs in respect of a statutory regime designed "to provide a speedy and effective means of ensuring that progress payments are made during the course of administration a construction contract without undue formality or resort to the law": see Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd (2005) 21 BCL 364; [2005] NSWCA 229 at [49] per Basten JA. I do not think the Act could have intended that second valid service of documents within time would activate a second regime for payment.
27 The need for certainty of timing seems to me to be best accommodated by taking the first date of valid service of a payment schedule as the date from which time commences to run.
What happens if you try to effect service on a solicitor?
Service on a solicitor is not an accepted method of service under the Act so service only occurs when the respondent actually receives the document. See Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSWSC 903 at para 55. Also see Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 at para 58.
What are the best ways of serving documents under the Act?
With service of any notices under the Act, what must be kept in mind is the critical importance of recording when the document is served. In the case of a payment claim, from the time it is served, the respondent's ten days to provide a payment schedule begins to run. You must be able to prove not only that a document was served, but the date of service, sometimes even the time of service. Some of the above methods of service do not allow you to do that with any certainty. For example, under section 31 (2), service of a payment claim by post to the respondent's ordinary place of business is only effected when the notice is received. The sender of the notice will therefore be unaware of the date of service and the date on which the respondent's ten days to provide a payment schedule begins to run and, if the respondent does not provide a payment schedule, the claimant will be unaware of the final date for serving a notice under section 17 (2). This illustrates that, for the comfort of knowing what the critical dates are, the ideal method of service of a payment claim, payment schedule or section 17 2) notice is by email or facsimile if that is provided for in the contract, or, if the respondent does not have a facsimile, by personal service, ideally by a commercial agent who can fill out a statutory declaration as to service. The advantages of service by facsimile are that it is quick, easily provable both as to service and the date and time of service and cheap warning service by email is less easily provable and should be supplemented by personal service on a registered office or at the address for service under the contract. The problem with service of an adjudication application or an adjudication response is that the document may comprise one or a number of folders and may be so large it will "bounce" if emailed. Personal service, ideally by a commercial agent who can fill out a statutory declaration as to service, is the best way. If you have time problems in lodging such a document with an adjudication authority, if you are still in ordinary business hours, send a scanned copy via email and immediately telephone the adjudication authority to ask that they confirm receipt. (they usually do anyway but it never hurts to ask). You can then send the hard copy by courier as the lodgement has already occurred.
If it is after business hours send the whole document by email or facsimile before midnight and service will have been effected on that day. You can then send the hard copy by courier as the lodgement has already occurred.
Can a solicitor serve a payment claim?
Yes. In Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129 Brereton J at para 23 described a suggestion that a solicitor could not serve a payment claim on his client's behalf as "nonsense".
Can you serve a document at a registered business office after normal office hours?
Yes, but the service takes effect the next business day.
Section 31 (1) (b) provides that a document may be served : (b) by lodging it during normal office hours at the person's ordinary place of business,
If service is effected after normal office hours then the service is effected at the next recommencement of normal office hours. In Falgat Constructions Pty Limited v Equity Australia Corporation Pty Limited [2006] NSWCA 259 Hodgson J. A. said:
"62 There remains the question of whether the time at which service or provision has taken effect is also the time at which a document is received, for the purposes of s.17(3)(b) (and see also s.17(2)(b) and s.21). I note that the word "receive" is also used in s.31(2), but used in the context of "received at that place". In my opinion, mail delivered to a registered office or place of business is received at that place when it is put into the mail box of that registered office or place of business, without the necessity of anyone actually seeing it.
63 In my opinion, the word "receive" in s.17(3)(c) does not necessarily require that the document come to the notice of a person authorised to deal with the document on behalf of the claimant. In general, in my opinion, it would be satisfied once the document has arrived at the claimant's registered office or place of business and is there during normal office hours. There may be circumstances in which service or provision has been effected within s.109X of the Corporations Act or s.31 of the Act, but the document has not been received, but I find it difficult to identify any such circumstances."
Also see Macready AJ in Diddy Boy v Design [2009] NSWSC 14 para 26.
26 Thus the adjudication application was served within the time limit and on 21 December 2008 given the time of service of 7:50 p.m. on 20 December 2008.
What if the recipient of the documents has requested that documents be served in a certain way?
(e) in such other manner as may be provided under the construction contract concerned.
In Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 Austin J said
15 The circumstances surrounding the making of the subcontract are in dispute. It appears that the plaintiff's project manager, Ray Ward, invited the first defendant to tender for the works in about January 2006, and subsequently the first defendant submitted a tender to Mr Ward at Conjola. Ruairi O'Connor, the sole director and major shareholder of the first defendant, attended a meeting on 10 July 2006 with Frank O'Connell, a director of the plaintiff, to discuss the tender. His evidence, which I accept on this point, was that Mr O'Connell told him the plaintiff wanted the first defendant to start the job straight away.
16 Mr O'Connor attended the plaintiff's site office on 11 July and Mr Ward told him to submit all correspondence and invoices to the site office, and provided him with a facsimile number, 4456 1433. I accept Mr O'Connor's evidence on these matters because it is confirmed by evidence of transmission of progress claims to that facsimile number and their subsequent payment.
36 The plaintiff's address is in Newington in suburban Sydney and has never been at Conjola. Nevertheless, the invoice was received at the project site office and transmitted from the project site to Mr O'Connell, and he received it about 2 days later, according to his evidence. If (contrary to my finding) there had been a formal subcontract as claimed by Mr O'Connell, the contract would have required transmission of documents to the plaintiff at its address in Newington or at a post office box address in Silverwater, or to another facsimile number or another e-mail address. But the evidence establishes that even if the formal subcontract had been in place, its provisions concerning service of documents on the plaintiff would have been overridden by Mr Ward's specific instruction to Mr O'Connor, with which Mr O'Connor subsequently complied by transmitting documents to the fax number supplied by Mr Ward to which the plaintiff subsequently responded. That constituted service of the payment claim authorised by s 31(1)(e), because Mr Ward's instruction formed part of the contract between the parties. My conclusion, therefore, is that, whether or not the formal subcontract was in place, the final progress claim for $243,975 was validly made on the plaintiff on 19 June 2007.
When does service by facsimile take effect?
Taylor Projects Group Pty Limited v Brick Dept Pty Limited & Ors [2005] NSWSC 452 Service of a notice by facsimile takes effect the moment the faxed document appears in the recipient's facsimile machine. It does not have to be sent in business hours.
So long as the fax is received into the memory of the recipients facsimile machine it has been served. It does not need to have been printed out.
Zebicon Pty Ltd v Remo Constructions Pty Ltd [2008] NSWSC 1408
23 I find that payment claim 11 was sent "by facsimile" to Remo's ordinary place of business on 19 July 2008. That is an available - indeed, I think, the only rational - inference from Mr Zerilli's evidence and the transmission report. As I have said, it is fortified by the absence of any other suggested candidate for the role of the six page document shown to have been sent on that day.
24 Was it received? It is not necessary that the document should have come to the attention of anyone at Remo's ordinary place of business. See Hodgson JA in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 at [62], [63]. Although what his Honour there said was obiter, it commanded the support of Handley JA and Hunt AJA. I do not regard myself as at liberty to take a different view. (On this, see Austin J in Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 at [65].) Nor do I see it as a relevant point of distinction that Hodgson JA was talking of receipt in the context of s 17(3)(c) of the Act, rather than that of s 31(1)(c).
25 Thus, I conclude, for the purposes of s 31(1)(c) of the Act, Remo would have received payment claim 11 on 19 July 2008 if that document had been received into the memory of Remo's fax machine on that date. I do not think that it is necessary, in terms of receipt, for the document to have been printed out. If it were, a respondent could avoid facsimile service of a document by keeping its fax machine perpetually empty of paper.
26 In my view, it can be inferred from the "OK" result indicated by Zebicon's transmission report that communication was established between Zebicon's fax machine and Remo's fax machine on 19 July 2008 and that the message - the data into which Zebicon's machine had transformed payment claim 11 - was delivered to Remo's machine. If communication had not been established, or the message had not been delivered, the result would not have been "OK".
Should you serve documents with other documents?
It is not a good idea to serve a payment claim under a covering letter dealing with other issues or in a format or circumstances under which it might be viewed as anything other than a payment claim. See Leighton Contractors Pty Ltd v Campbelltown Catholic Club Pty Ltd [2003] NSWSC 1103 paras 59 to 65 in which a claimant only very narrowly escaped coming to grief for this reason.
If you serve both by facsimile and by hard copy when does service take effect?
In JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737 paras 25 to 27 Rein J ruled that where the same document was served twice, time begins to run from the date and time of the first effective service.
What happens when there are multiple places of business?
Per Hodgson AJ in Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78 at paragraph 39:
39On that approach, "the person's ordinary place of business" in s 31(1)(c) would include a head office in which business is ordinarily carried on in relation to the whole of the person's business, as well as a branch office in which business is carried on in relation to the particular construction contract. Thus in this case, service by facsimile to the appellant's head office was sufficient.
What happens when you serve multiple copies of a document?
This frequently occurs when, for abundant caution, and to ensure service occurs on time, a party may serve a full set of documents in more than one way, such as both by facsimile and by delivery. With service of any notices under the NSW Act, what must be kept in mind is the critical importance of recording when the document is served. In the case of a payment claim, from the time it is served, the respondent's ten days to provide a payment schedule begins to run. You must be able to prove not only that a document was first effectively served, but the date, and indeed sometimes even the actual time, of service.
If you serve multiple copies of a document then the first valid service, either in accordance with section 31 of the NSW Act or in accordance with the Corporations Act 2001, is taken as the service of the document and time beings to run from that service. Rein J in JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737 said:
25 The question then is whether the decision in Falgat means that service on 8 December started a fresh period of 10 days. If the words "has been served with" is substituted for "receives" in s 17(3)(c) so that it reads:
"in the case of an application under subs (1)(a)(i) - must be made within 10 business days after the claimant [has been served with] the payment schedule"
the answer to the question when does time start to run, is "from when the claimant was served with the payment schedule". Castleplex was served with the payment schedule on 7 December and again I do not think that service of another copy on 8 December (accepting that it was service) means that time starts running again.
26 In a sense, the rights of the claimant to an adjudication have commenced to run once the other party to the building contract has provided its response by means of the payment schedule. In the absence of an argument based on estoppel arising out of some confusing conduct on the part of the builder, I do not think that the process initiated by the service of the payment schedule on 7 December has come to an end because a second copy was served the following day. If it is said that service of the same payment schedule on the second occasion commenced its own chain, then there were two sets of process deriving from the one payment claim - a most unsatisfactory state of affairs in respect of a statutory regime designed "to provide a speedy and effective means of ensuring that progress payments are made during the course of administration a construction contract without undue formality or resort to the law": see Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd (2005) 21 BCL 364; [2005] NSWCA 229 at [49] per Basten JA. I do not think the Act could have intended that second valid service of documents within time would activate a second regime for payment.
27 The need for certainty of timing seems to me to be best accommodated by taking the first date of valid service of a payment schedule as the date from which time commences to run.
What happens if you try to effect service on a solicitor?
Service on a solicitor is not an accepted method of service under the NSW Act so service only occurs when the respondent actually receives the document. See Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSWSC 903 at para 55. Also see Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 at para 58.
What are the best methods of service?
With service of any notices under the NSW Act, what must be kept in mind is the critical importance of recording when the document is served. In the case of a payment claim, from the time it is served, the respondent's ten days to provide a payment schedule begins to run. You must be able to prove not only that a document was served, but the date of service. Some of the above methods of service do not allow you to do that with any certainty. For example, under section 31 (2), service of a payment claim by post to the respondent's ordinary place of business is only effected when the notice is received. The sender of the notice will therefore be unaware of the date of service and the date on which the respondent's ten days to provide a payment schedule begins to run and, if the respondent does not provide a payment schedule, the claimant will be unaware of the final date for serving a notice under section 17 (2).
This illustrates that, for the comfort of knowing what the critical dates are, the ideal method of service is by facsimile, or, if the respondent does not have a facsimile, by personal service, ideally by a commercial agent who can fill out an affidavit of service. The advantages of service by email are that it is quick, easily provable both as to service and the date of service and cheap.
Is it good service at a registered office if you do not place document wholly within the recipient's office?
It is not. Someone could steal it. In Sand Excavation Pty Ltd v Nahas Constructions Pty Ltd [2011] NSWSC 184 Associate Justice Macready said
48. It seems clear on the evidence that, because of its size, the payment schedule was not able to fit entirely under the door of the plaintiff's office. Ms Orlievsky says that when she collected the package it was stuck under the door and the door had to be opened to force the package out. The defendant's witnesses accepted that the payment schedule could not (and did not) go all the way inside the plaintiff's office.
49. The defendant referred to a number of cases, most of which referred to the situation that applies when a document is served at a letterbox.
50. In Career Trading Online Pty Ltd v BES Trading Solutions Pty Ltd; Buckland [2010] NSWSC 460, the court had to deal with a statutory demand which had been served by sliding the demand wholly under a glass door of a closed accountancy practice on Christmas Eve. At [27] Barrett J said:
"It follows that the action of Ms Buckland is depositing the envelope containing the two statutory demands under the glass doors at the street frontage so as to be wholly within the premises behind those doors constituted "leaving" each such document "at" the registered office of the plaintiff. Each statutory demand was therefore served on the plaintiff on 23 December 2009."
51. In the instant case, the demand was not wholly within the office and a passing stranger could have taken it from the outside of the office. Therefore, as it was not within the control and possession of the occupants of the office, I would have thought that it was not left at the registered office.
Is it good service at a registered office if you leave the document in a letterbox outside the registered office?
No. In a case involving service of a statutory demand, placing it after hours in the outside letterbox of the recipient's registered office was held not to constitute good service : James v Ash Electrical Services Pty Ltd [2008] NSWSC 1112
What does "normal office hours mean?
Section 31 of the Act provides that a notice may be served "in normal office hours". That expression is undefined but in Sand Excavation Pty Ltd v Nahas Constructions Pty Ltd [2011] NSWSC 184 Associate Justice Macready said:
The evidence suggests that Mr Hiatt was at the plaintiff's office from 7am on 13 May 2010 and that Ms Orlievsky usually arrived at about 10am. On the basis that the payment schedule had been served at 8.15am, this would seem to be within normal office hours on 13 May 2010. However, normal office hours is an expression which refers to the general operation of an office. In this case there is not sufficient evidence to determine this point.
If a document has been delivered but not actually come to the attention of the intended recipient, is that good service?
Yes. In Kittu Randhawa -v- Monica Benavides Serrato [2009] NSWSC 170 a respondent claimed that an adjudicator's determination was invalid because receipt of notice of adjudicator's acceptance had been alleged not to have been received by the respondent. It was established that the notice was posted and accepted that the notice did not come to the attention of the respondent. Hammerschlag J made a distinction between non-delivery and not coming to the attention of the recipient. Under section 31(2) of the NSW Act and section 160 of the Evidence Act 1995 (NSW) the sender of a postal article has the benefit of a presumption of delivery which the respondent cannot rebut by showing non-receipt by recipient, as opposed to non-delivery and so the adjudication was valid.
If an obviously incomplete payment claim is served followed by a complete one, is the first service effective to start time running?
No. Service occurs when the complete one is served. In Chase Oyster Bar v Hamo Industries [2010] NSWSC 332 McDougall J said:
13 For reasons that are not entirely clear, Hamo delivered the payment claim (or part of it) by facsimile transmission on 22 December 2009, and the whole of it, by post, sent on 23 December 2009.
14 In form, the payment claim comprised a one-page tax invoice, number 71, which bore the notation that it was made under the provisions of the Act. The document that was sent by facsimile transmission comprised that one page only and did not include copies of the invoices and time sheets that were said in the text of the document to form part of it. The document that was sent by post the following day included not only the first page (the actual tax invoice) but also the supporting documents.
15 There was no evidence of the date of actual receipt of the document that was posted. There was however confirmation of correct transmission of the page that had been sent by facsimile transmission on 22 December 2009. It was common ground that this document was sent and received that day.
37 I think the better view is that it was the posting of the letter rather than the sending of the facsimile transmission that constituted service. That is because the document that was sent by facsimile transmission was on its face incomplete. It is at least arguable that, without the supporting documentation, it would not have been possible for Chase to understand how it was that the value of the work to date was calculated. That is a matter of particular significance when, at least on the face of the payment claim, the work was charged for on a "cost plus" basis.
Can a solicitor serve a payment claim?
Yes. In Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129 Brereton J at para 23 described a suggestion that a solicitor could not serve a payment claim on his client's behalf as "nonsense".
What is a claimant or respondent's "ordinary place of business"?
Hammerschlag J said in Parsons Brinckerhoff Australia Pty Ltd v Downer EDI Works Pty Ltd [2010] NSWSC 1295:
16 To my mind the word "ordinary" in the phrase "ordinary place of business" connotes"usual"; see Jones (as Trustee of the property of Heather MacNeil-Brown, A Bankrupt) v Southall & Bourke Pty Ltd [2004] FCA 539 at [42]. I think that the ordinary place of a person's business includes any place at or from which the person usually engages in activities which form a not insignificant part of the person's business.
Can you serve a document at a registered business office after normal office hours?
Yes, but the service takes effect the next business day.
Section 31 (1) (b) provides that a document may be served : (b) by lodging it during normal office hours at the person's ordinary place of business,
If service is effected after normal office hours is service effected at the next recommencement of normal office hours? In Falgat Constructions Pty Limited v Equity Australia Corporation Pty Limited [2006] NSWCA 259 Hodgson J. A. said:
"62 There remains the question of whether the time at which service or provision has taken effect is also the time at which a document is received, for the purposes of s.17(3)(b) (and see also s.17(2)(b) and s.21). I note that the word "receive" is also used in s.31(2), but used in the context of "received at that place". In my opinion, mail delivered to a registered office or place of business is received at that place when it is put into the mail box of that registered office or place of business, without the necessity of anyone actually seeing it.
63 In my opinion, the word "receive" in s.17(3)(c) does not necessarily require that the document come to the notice of a person authorised to deal with the document on behalf of the claimant. In general, in my opinion, it would be satisfied once the document has arrived at the claimant's registered office or place of business and is there during normal office hours. There may be circumstances in which service or provision has been effected within s.109X of the Corporations Act or s.31 of the Act, but the document has not been received, but I find it difficult to identify any such circumstances."
Also see Macready AJ in Diddy Boy v Design [2009] NSWSC 14 para 26.
26 Thus the adjudication application was served within the time limit and on 21 December 2008 given the time of service of 7:50 p.m. on 20 December 2008.
What if the recipient of the documents has requested that documents be served in a certain way?
(e) in such other manner as may be provided under the construction contract concerned.
In Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 Austin J said
15 The circumstances surrounding the making of the subcontract are in dispute. It appears that the plaintiff's project manager, Ray Ward, invited the first defendant to tender for the works in about January 2006, and subsequently the first defendant submitted a tender to Mr Ward at Conjola. Ruairi O'Connor, the sole director and major shareholder of the first defendant, attended a meeting on 10 July 2006 with Frank O'Connell, a director of the plaintiff, to discuss the tender. His evidence, which I accept on this point, was that Mr O'Connell told him the plaintiff wanted the first defendant to start the job straight away.
16 Mr O'Connor attended the plaintiff's site office on 11 July and Mr Ward told him to submit all correspondence and invoices to the site office, and provided him with a facsimile number, 4456 1433. I accept Mr O'Connor's evidence on these matters because it is confirmed by evidence of transmission of progress claims to that facsimile number and their subsequent payment.
36 The plaintiff's address is in Newington in suburban Sydney and has never been at Conjola. Nevertheless, the invoice was received at the project site office and transmitted from the project site to Mr O'Connell, and he received it about 2 days later, according to his evidence. If (contrary to my finding) there had been a formal subcontract as claimed by Mr O'Connell, the contract would have required transmission of documents to the plaintiff at its address in Newington or at a post office box address in Silverwater, or to another facsimile number or another e-mail address. But the evidence establishes that even if the formal subcontract had been in place, its provisions concerning service of documents on the plaintiff would have been overridden by Mr Ward's specific instruction to Mr O'Connor, with which Mr O'Connor subsequently complied by transmitting documents to the fax number supplied by Mr Ward to which the plaintiff subsequently responded. That constituted service of the payment claim authorised by s 31(1)(e), because Mr Ward's instruction formed part of the contract between the parties. My conclusion, therefore, is that, whether or not the formal subcontract was in place, the final progress claim for $243,975 was validly made on the plaintiff on 19 June 2007.
When does service by facsimile take effect?
Taylor Projects Group Pty Limited v Brick Dept Pty Limited & Ors [2005] NSWSC 452 Service of a notice by facsimile takes effect the moment the faxed document appears in the recipient's facsimile machine. It does not have to be sent in business hours.
So long as the fax is received into the memory of the recipients facsimile machine it has been served. It does not need to have been printed out.
Zebicon Pty Ltd v Remo Constructions Pty Ltd [2008] NSWSC 1408
23 I find that payment claim 11 was sent "by facsimile" to Remo's ordinary place of business on 19 July 2008. That is an available - indeed, I think, the only rational - inference from Mr Zerilli's evidence and the transmission report. As I have said, it is fortified by the absence of any other suggested candidate for the role of the six page document shown to have been sent on that day.
24 Was it received? It is not necessary that the document should have come to the attention of anyone at Remo's ordinary place of business. See Hodgson JA in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 at [62], [63]. Although what his Honour there said was obiter, it commanded the support of Handley JA and Hunt AJA. I do not regard myself as at liberty to take a different view. (On this, see Austin J in Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 at [65].) Nor do I see it as a relevant point of distinction that Hodgson JA was talking of receipt in the context of s 17(3)(c) of the Act, rather than that of s 31(1)(c).
25 Thus, I conclude, for the purposes of s 31(1)(c) of the Act, Remo would have received payment claim 11 on 19 July 2008 if that document had been received into the memory of Remo's fax machine on that date. I do not think that it is necessary, in terms of receipt, for the document to have been printed out. If it were, a respondent could avoid facsimile service of a document by keeping its fax machine perpetually empty of paper.
26 In my view, it can be inferred from the "OK" result indicated by Zebicon's transmission report that communication was established between Zebicon's fax machine and Remo's fax machine on 19 July 2008 and that the message - the data into which Zebicon's machine had transformed payment claim 11 - was delivered to Remo's machine. If communication had not been established, or the message had not been delivered, the result would not have been "OK".
Should you serve documents with other documents?
It is not a good idea to serve a payment claim under a covering letter dealing with other issues or in a format or circumstances under which it might be viewed as anything other than a payment claim. See Leighton Contractors Pty Ltd v Campbelltown Catholic Club Pty Ltd [2003] NSWSC 1103 paras 59 to 65 in which a claimant only very narrowly escaped coming to grief for this reason.
If you serve both by facsimile and by hard copy when does service take effect?
In JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737 paras 25 to 27 Rein J ruled that where the same document was served twice, time begins to run from the date and time of the first effective service.
When documents are served by email, when does service take effect?
The Electronic Transactions Act 2000 provides that the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee
If an email is sent to an address designated by the addressee it is viewed under the ET Act as being received when it becomes capable of being retrieved. For example if the email is sent to the respondent’s ordinary email address.
If however it is not sent to the resppondent’s ordinary emailaddress but say, to a private email address, then it is not viewed under the ET Act as being received until both:
(i) the electronic communication has become capable of being retrieved by the addressee at that address, and
(ii) the addressee has become aware that the electronic communication has been sent to that address.
SEE SECTION 13A BELOW:
Section 13A of the Electronic Transactions Act.
Section 13A provides:
Time of receipt
(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication:
(a) the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee, or
(b) the time of receipt of the electronic communication at another electronic address of the addressee is the time when both:
(i) the electronic communication has become capable of being retrieved by the addressee at that address, and
(ii) the addressee has become aware that the electronic communication has been sent to that address.
(2) For the purposes of subsection (1), unless otherwise agreed between the originator and the addressee of the electronic communication, it is to be assumed that the electronic communication is capable of being retrieved by the addressee when it reaches the addressee's electronic address.
(3) Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been received under section 13B.
In Bauen Constructions Pty Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123 Sackar J said:
Bauen says this Act applies and I should find that the words "becomes capable of being retrieved by the addressee at an electronic address..." aptly describes the position here. Clearly the email was received, albeit it was caught by the spam filter. The words "capable of being retrieved" are ample in their reach. They certainly do not require an email to be opened, let alone read. Again the Oxford dictionary defines "retrieve" in its primary sense as "to get or bring back from somewhere". In its secondary sense it is said to mean "to find or extract (information stored in a computer)". According to the evidence when an email is caught by the Adjudicate Today spam filter, it is nonetheless archived and accessible by Adjudicate Today via its external IT consultant.
In my opinion this Act enables Bauen to contend that if an email is sent, but not opened or read, but it is capable of being retrieved, it has been received by Adjudicate Today. Once received in my view it has been "lodged" on any view of that word.
It is accepted the response although "lodged" in time was not considered by Adjudicate Today and it follows that Bauen has been denied natural justice, the adjudication having proceeded in the absence of Bauen being heard. For this reason alone both adjudications should be set aside.
Can the parties agree to suspend the time limits imposed by the NSW Act?
Not quite, but in Barclay Mowlem Construction v Tesrol Walsh Bay [2004] NSWSC 716 at paras 16 to 22, it was alleged by one of the parties that there had been an agreement between the parties that they would take no further step in response to the claim pending attempts to resolve the dispute. This was held to give rise to a viable argument that there was a right to an estoppel such as to prevent summary judgment being ordered. Be careful what is said in negotiations.
Can a payment claim be served during the course of litigation?
Yes. Where a claimant has commenced court proceedings in respect of a progress claim it is not precluded from serving a payment claim in respect of the same progress claim and seeking adjudication. Both sets of proceedings can proceed concurrently. There is no express provision in the NSW Act that requires statutory proceedings to be completed before court proceedings are commenced, and the general provisions of the NSW Act do not have this effect. (See the decision of the Court of Appeal in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49.)
Further where the contractor has appealed a declaration that the adjudication determination is void, the contractor may also serve another payment claim including the same work and commence another adjudication. Halkat Electrical Contractors Pty. Ltd. v. Holmwood Holdings Pty. Ltd. [2006] NSWCA 125.
Is strict compliance with the rules as to service necessary?
No. In Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 delivering the judgement of the Court of Appeal, Hodgson AJ said:
56 For those reasons, in my opinion, irrespective of fine questions of construction arising under the Act itself, the payment schedule was provided to Falgat at 4.22pm on 22 October 2004 when it was placed under the door at Falgat's registered office, this being during normal office hours. It also would have been provided no later than 27 October 2005 if the copy posted to Falgat was placed in Falgat's box at Kellyville post office on that day; and Falgat did not discharge its onus of proving it was not placed in the box on that day.
57 Accordingly, it is not strictly necessary to express a view as to fine questions of construction under the Act. However, it is in my opinion appropriate to express views about this, because of the importance of clarity on this matter.
58 In the first place, in my opinion it is clear that if a document has actually been received and come to the attention of a person to be served or provided with the document, or of a person with authority to deal with such a document on behalf of a person or corporation to be served or provided with the document, it does not matter whether or not any facultative regime has been complied with: see Howship Holdings Pty. Limited v. Leslie (1996) 41 NSWLR 542; Mohamed v. Farah [2004] NSWSC 482 at [42]-[44]. In such a case, there has been service, provision and receipt.
Can you serve document by email?
Yes. First because it does not really matter how the document is served, so long as it is actually served. second because the Act now provides for service by email.
In Falgat Constructions Pty. Limited v. Equity Australia Corporation Pty. Limited [2006] NSWCA 259 delivering the judgement of the Court of Appeal, Hodgson AJ said:
56 For those reasons, in my opinion, irrespective of fine questions of construction arising under the Act itself, the payment schedule was provided to Falgat at 4.22pm on 22 October 2004 when it was placed under the door at Falgat's registered office, this being during normal office hours. It also would have been provided no later than 27 October 2005 if the copy posted to Falgat was placed in Falgat's box at Kellyville post office on that day; and Falgat did not discharge its onus of proving it was not placed in the box on that day.
57 Accordingly, it is not strictly necessary to express a view as to fine questions of construction under the Act. However, it is in my opinion appropriate to express views about this, because of the importance of clarity on this matter.
58 In the first place, in my opinion it is clear that if a document has actually been received and come to the attention of a person to be served or provided with the document, or of a person with authority to deal with such a document on behalf of a person or corporation to be served or provided with the document, it does not matter whether or not any facultative regime has been complied with: see Howship Holdings Pty. Limited v. Leslie (1996) 41 NSWLR 542; Mohamed v. Farah [2004] NSWSC 482 at [42]-[44]. In such a case, there has been service, provision and receipt.
Third, because Section 13A of the Electronic Transactions Act says you can.
Section 13A provides:
Time of receipt
(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication:
(a) the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee, or
(b) the time of receipt of the electronic communication at another electronic address of the addressee is the time when both:
(i) the electronic communication has become capable of being retrieved by the addressee at that address, and
(ii) the addressee has become aware that the electronic communication has been sent to that address.
(2) For the purposes of subsection (1), unless otherwise agreed between the originator and the addressee of the electronic communication, it is to be assumed that the electronic communication is capable of being retrieved by the addressee when it reaches the addressee's electronic address.
(3) Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been received under section 13B.
Does an email have to be opened or read or is it enough that it has been received?
It is enough that it has been received: See para 78 of Bauen Constructions Pty Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123 per Sackar J :
78. In my opinion this Act enables Bauen to contend that if an email is sent, but not opened or read, but it is capable of being retrieved, it has been received by Adjudicate Today. Once received in my view it has been "lodged" on any view of that word.
There are problems however as to when a communication is taken to have been received. See:Reed Constructions Pty Limited v Eire Contractors Pty Limited [2009] NSWSC 678 an email is not considered received at the time it was sent, but only when it is received.
Can you effect service by email and drop box?
No. See Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd and Anor [2014] QSC 30. In that case Phillip McMurdo J was considering a case where an email was sent to the adjudication authority with the facility to down load the adjudication application from a drop box and a copy of that email was sent to the respondent. In ruling that this was not proper service under the Queensland Act or the Queensland Electronic Transactions Act, Phillip McMurdo J said:
[37] Actual service does not require the recipient to read the document. But it does require something in the nature of a receipt of the document. A document can be served in this sense although it is in electronic form. But it was insufficient for the document and its whereabouts to be identified absent something in the nature of its receipt. The purported service by the use of the Dropbox facility may have been a practical and convenient way for CGE to be directed to and to use the documents. But at least until 2 September 2013 (when Mr How became aware of the contents of the Dropboxes), it did not result “in the person to be served becoming aware of the contents of the document”.[14]
Phillip McMurdo Js decision is likely to be adopted by the New South Wales Courts
How do the provisions of section 26A work when the respondent goes into liquidation?
They do not work well when the respondent goes into liquidation in that the pursuit of the money then falls foul of the preference provisions of the Corporations Act. See NSW Land and Housing Corporation -v- DJ's Home and Property Maintenance Pty Ltd (in liquidation) [2013] NSWSC 1167 (23 August 2013)
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