Equa Building Services Pty Ltd v KLG Trading Pty Ltd

1. [1]

   On 29 October 2021, an adjudicator made an adjudication determination pursuant to s 22 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the “SOPA”) that the plaintiff, Equa Building Services Pty Ltd, pay the defendant, KLG Trading Pty Ltd $394,148.39.

2. [2]

   Equa had engaged KLG to perform facade works at a development in Miranda known as “Miranda Central”.

3. [3]

   Equa seeks an order in the nature of certiorari quashing the adjudication determination.

4. [4]

   Equa contends that:

Decision

1. [5]

   Equa has not made out any of these challenges to the adjudication determination.

2. [6]

   The summons should be dismissed with costs.

The adjudication application served on Equa

1. [7]

   Section 17(5) of the SOPA provides that:

2. [8]

   On 1 October 2021, KLG’s solicitors uploaded electronic files containing KLG’s adjudication application to the relevant authorised nominating authority’s online “lockbox” system. The adjudication application was thereafter provided electronically to the adjudicator.

3. [9]

   On 8 October 2021, KLG caused a hard copy of the adjudication application, in two lever arch binders, together with a USB drive, to be delivered to Equa’s registered office in Queensland by express post. The two folders contained 833 pages of documentation.

4. [10]

   Equa contends that there were differences between that which was uploaded electronically to the authorised nominating authority and provided to the adjudicator and that which was delivered to its registered office.

5. [11]

   Equa’s solicitor, Ms Shieana Hamid, affirmed an affidavit to which she annexed a table comparing the contents of the electronic file provided to the adjudication authority and adjudicator and the hard copy documents served on Equa. Mr Weinberger’s instructing solicitor, Mr John Nairn, added his comments in a further column to the table.

6. [12]

   For the most part, the differences that Ms Hamid identified were that some documents in the electronic file that have colour elements have been reproduced in the hard copy in black and white.

7. [13]

   Although his written submissions ranged more widely, in oral argument Mr Byrne, who appeared for Equa, made four points about those differences. Mr Byrne did not seek to make anything of the point at [12] above.

8. [14]

   The first related to the USB drive delivered to Equa on 8 October 2021.

9. [15]

   That USB drive contained a video which, to adopt the language of the submissions of Mr Weinberger, who appeared for KLG, “shows the movement of objects over 28 seconds”.

10. [16]

    Ms Leanne Miers, an executive assistant to the director of Equa, Mr Derek Williams, gave this evidence as to what she did in relation to the USB drive on 8 October 2021:

11. [17]

    However, in her table Ms Hamid records, in relation to the “USB data disc”, having been “able to play image on HWLE [1] laptop”.

12. [18]

    Thus, although Ms Miers was not able to access the video content on the USB drive, Ms Hamid was able to do so, presumably because of some software difference in the computers used.

13. [19]

    The point is that all the information stored electronically on the USB drive was available to be accessed.

14. [20]

    Mr Byrne then referred to three documents which were uploaded to the authorised nominating authority’s online lockbox system but which were not included in the hard copy documents served on Equa.

15. [21]

    The first was a part of an “ASIC organisation extract for Miranda Central”. Miranda Central Pty Ltd was the developer of the project in relation to which Equa engaged KLG. This omission was entirely inconsequential. Miranda Central’s organisational structure had no relevance to the adjudication.

16. [22]

    The other two documents not included in the hard copy documents served on Equa were the second sheets of two Excel spreadsheets.

17. [23]

    However, the second sheet contained no more than a paragraph “about the company (Vertex 42) who designed the template for KLG’s invoice”, [2] and was thus of no moment.

18. [24]

    Mr Byrne submitted that 3 of the 833 pages in the 2 lever arch binders served by KLG on Equa on 8 October 2021 were illegible.

19. [25]

    One of those documents was a photograph of an aspect of the development on which there were superimposed four typed annotations. It is true that annotations on the copy of that page that is included in the court book are a little difficult to read. However, annotations on the copy actually served on Equa are legible.

20. [26]

    The other two documents are architectural plans prepared on behalf of the developer by Altis Architecture. Some of the writing and detail on those two drawings is difficult to read. That may be because the documents were originally prepared in A3 format and had been included in the folders served on Equa (and in the court book) in A4 format. Nonetheless, it is clear that they are copies of the documents uploaded electronically to the authorised nominating authority’s online lockbox system.

21. [27]

    Finally, Mr Byrne pointed to 10 examples of documents where the “tab numbering is mislabelled”. [3] For example, the document in the electronic version of the adjudication application that is described as being at Tab V-16.04 is behind Tab V-16.03 in the hard copy served on Equa.

22. [28]

    This “mislabelling” is of no consequence. There is no question that the documents themselves are contained in both the electronic and hard copy versions of the adjudication application.

Was that which was served on Equa a “copy” of the adjudication application uploaded to the authorised nominating authority’s online lockbox system?

1. [29]

   As I have set out, there were some very minor, and entirely inconsequential, differences between what was supplied electronically to the adjudication authority and adjudicator and what was physically served on Equa.

2. [30]

   The differences are trivial and truly de minimus.

3. [31]

   The issues are:

4. [32]

   In Parkview Constructions Pty Ltd v Total Lifestyle Windows Pty Ltd, [4] Hammerschlag J left open:

5. [33]

   I would go further. In my opinion, if what is served has only trivial or inconsequential differences from the original adjudication application, it should been seen as a “copy” of the original. There would of course be questions of degree. But, in this case, the differences are so insignificant that the hard copy adjudication application together with the USB drive delivered to Equa should be seen as a “copy” of the electronic version provided to the adjudicating authority and the adjudicator.

6. [34]

   Mr Byrne drew my attention to authorities concerning the strictness with which it has been held that the requirement in s 459G(3) of the Corporations Act 2001 (Cth) must be complied with.

7. [35]

   Section 459G provides:

8. [36]

   There is authority for the proposition that the “copy” of the application to set aside a statutory demand under s 459G(3) must be “a reproduction” of the original [6] and that “substantial compliance” with the requirement to serve a copy of the supporting affidavit is not sufficient. [7]

9. [37]

   However, the language in s 459G(3) of the Corporations Act is far stronger than that in s 17(5) of the SOPA. Further, the consequences of failure strictly to comply with the requirements of s 459G(3) of the Corporations Act are such that strict compliance with the section, calling for an exact copy of the application and supporting affidavit to be served on the party that served the statutory demand on the company in question, is understandable.

10. [38]

    I see no reason to adopt such a strict view in relation to the requirements of s 17(5) of the SOPA.

11. [39]

    Assuming that the hard copy documents and USB drive delivered to Equa were not a “copy” of the adjudication application, the requirements of s 17(5) of the SOPA have not been complied with.

12. [40]

    The question then arises as to what Parliament intended should be the result of such non-compliance. [8]

13. [41]

    Is the result that there has been no “service” for the purposes of s 17(5)?

14. [42]

    The legislature has provided no guidance in the SOPA itself to the answer to this question.

15. [43]

    In an oft cited passage, it was held in Tasker v Fullwood [9] that:

16. [44]

    In Project Blue Sky Inc v Australian Broadcasting Authority [10] the High Court endorsed the criticism offered in Tasker v Fulwood of what the High Court described as the “elusive distinction between directory and mandatory requirements” [11] and said that the distinctions had “outlived their usefulness because they deflect attention from the real issue which is whether an act done in breach of the legislative provision is invalid”.

17. [45]

    A better test, the High Court said, was “whether it was a purpose of the legislation that an act done in breach of the provision should be invalid”. [12]

18. [46]

    The Interpretation Act 1987 (NSW) provides, relevantly: [13]

19. [47]

    The object of the SOPA is stated in s 3(1) of the SOPA to be:

20. [48]

    Section 3(3) of the SOPA provides that the means by which the Act “ensures that a person is able to recover a progress payment is by establishing a procedure that” includes “the referral of any disputed claim to an adjudicator for determination”.

21. [49]

    It would not be consistent with that legislative object for s 17(5) of the SOPA to be read as having the effect that the slightest difference between the adjudication application as submitted to the adjudicator and the copy served on the respondent rendered invalid the purported service of the copy adjudication application, let alone an adjudication determination based on it.

22. [50]

    Where a statutory requirement is capable of “degrees of non-compliance” and if “some degree of non-compliance can be seen as not necessarily prejudicing the substantial carrying into effect of the general object” of the statute, the statute may be construed as not necessarily invalidating the non-compliant action. It will then be a question of degree and “the extent of non-compliance in the particular case must then be examined to determine whether what has in fact occurred nevertheless gives effect to the general object of the statute.” [14]

23. [51]

    The stipulation in s 17(5) of the SOPA that a copy of the adjudication application be served on the respondent is capable of degrees of non-compliance. Some degree of “non-compliance” could occur “without prejudicing the substantial carrying into effect of the objects” of the SOPA. In each case, it would be a matter of degree.

24. [52]

    In this case, and because of the slight degree to which that which was served by KLG on Equa was less than an exact “reproduction” of that which was provided to the adjudication authority and adjudicator, my conclusion is that, assuming what was served by KLG on Equa was not a “copy” of the adjudication application for the purposes of s 17(5) of the SOPA , it constituted substantial and thus sufficient compliance with the requirements of s 17(5) so as not to render the service ineffective.

Is service of a copy of the adjudication application under s 17(5) of the SOPA a jurisdictional fact?

1. [53]

   There was debate before me whether service of a copy of the adjudication application on Equa was a jurisdictional fact, in the absence of which the adjudicator had no jurisdiction.

2. [54]

   In view of the conclusions to which I have come, it is not necessary that I decide this question.

3. [55]

   However, the weight of authority in this State is that a failure to serve an adjudication application does not go to an adjudicator’s jurisdiction, although, may well bespeak a denial of procedural fairness to the respondent. [15]

4. [56]

   Further, as Mr Weinberger submitted, if s 17(5) should be regarded as jurisdictional, it is difficult to see why s 20(3) (which provides that a copy of the adjudication response must be served on the claimant) should also not be found to be jurisdictional: an unlikely result.

Has Equa been denied procedural fairness?

1. [57]

   Mr Bryne submitted that even if, as I have found, what was served on Equa was a “copy” of the adjudication application or, alternatively, what was served was sufficient compliance with s 17(5), the manner and form in which the material was served on Equa establishes that it was denied procedural fairness.

2. [58]

   Mr Byrne submitted that the denial of procedural fairness concerning the file on the USB drive was “obvious” as Equa was not able to review that file and was not in a position to make any comments on it.

3. [59]

   However, it appears that the only reason Equa was not able to review that file was that Ms Miers’ computer did not have software, or other functionality, sufficient to enable her to view the video. It is clear that the USB drive in fact contained, in electronic form, both the video and audio file as Ms Hamid was, later, able to view both.

4. [60]

   In any event, any such denial of procedural fairness arising from Ms Miers inability to view the video appears to have been of no moment as the adjudicator recorded:

5. [61]

   Mr Byrne also relied upon the fact that KLG “chose to deliver” the adjudication application to Equa’s registered office in Queensland, being the office of its accountants, rather than to Equa’s ordinary place of business in New South Wales and also “chose to wait a week” before serving the adjudication application on 8 October 2021.

6. [62]

   In those circumstances, Mr Byrne submitted:

7. [63]

   I see no basis upon which I could conclude that KLG engaged in conduct “obviously intended to maximise delays” in Equa preparing its adjudication response.

8. [64]

   Nor did Mr Byrne point to any evidence to support the submission that the “differences” between the adjudication application provided to the adjudication authority and adjudicator and that served on Equa had delayed Equa in preparing its adjudication response. Equa’s adjudication response was served within the time specified in the SOPA and appears to be a comprehensive document. It comprises a 33 page, 184 paragraph document together with over 1400 pages of annexures.

9. [65]

   Mr Byrne also pointed to evidence that Equa had requested KLG to provide an electronic copy of the adjudication application and that this was not provided. But there is no evidence that this caused Equa any problem.

10. [66]

    Ultimately, Mr Byrne submitted that procedural fairness dictated that:

11. [67]

    In my opinion, this position overstates matters.

12. [68]

    It has been held that:

13. [69]

    I see no “practical injustice” here. Mr Byrne did not point to any particular difficulties that Equa had preparing its adjudication response by reason of the very slight differences between the copy served on it and the copy made available to the adjudication authority and adjudicator.

14. [70]

    That is not surprising as the insignificant nature of those differences points strongly to the conclusion that they made no difference to Equa’s ability to respond to the adjudication application.

15. [71]

    I am not satisfied that Equa has been denied procedural fairness.

Did the Adjudicator fail to exercise his statutory function?

1. [72]

   Section 22(2)(d) of the SOPA required the adjudicator to consider Equa’s payment schedule and any “duly made” submissions.

2. [73]

   Section 14(3) of the SOPA required Equa to indicate in its payment schedule “why” the scheduled amount was less than the claimed amount and the “reasons” for withholding payment.

3. [74]

   Section 20(2A) of the SOPA prevented Equa from including in its adjudication response any “reasons” for withholding payment unless those “reasons” had already been included in its payment schedule.

4. [75]

   In its payment schedule, Equa alleged that KLG had not rectified unspecified defects.

5. [76]

   In a schedule to the payment schedule Equa listed, amongst other matters, four items in respect of which it alleged:

6. [77]

   Equa then “assessed” the four claims and stated, in relation to each of them, that:

7. [78]

   Equa then “assessed” the four claims as being, variously, 90%, 95% or 99% of the amount claimed.

8. [79]

   Later in the payment schedule, Equa stated that:

9. [80]

   Equa did not include in its payment schedule a statement of what “defects” were notified to KLG in its “notices of 14 May 2021”. Nor did Equa explain by what process of reasoning it had “assessed” the amounts claimed for the four items to which I have referred at 90%, 95% or 99% of the amounts claimed.

10. [81]

    The adjudicator dealt with this matter by referring to Equa’s 14 May 2021 notices and continuing:

11. [82]

    It is clear from the adjudicator’s reference to s 20(2B) of the SOPA that his conclusion that no deduction was “merited” for the alleged defect was based on his conclusion that Equa had not indicated in its payment schedule “why” it had made the deductions on account of alleged defects and had failed to give “reasons” for those deductions.

12. [83]

    In so far as Equa had referred, generally, to the allegedly defective items, and to its 14 May 2021 notification, and had made the 90%, 95% or 99% “assessments”, Equa had given some explanation as to “why” it had made the deductions and what its “reasons” were.

13. [84]

    However, as I have said, Equa did not explain by what process of reasoning it made its calculations, nor did it specify what the defective items were.

14. [85]

    Minds might differ as to whether this was a sufficient indication as to “why” the deductions were made or to the “reasons” for them. But I am unable to conclude that the adjudicator’s conclusion was unreasonable, let alone wrong. If the adjudicator did make an error in this regard, it was within jurisdiction.

15. [86]

    Further, I do not see this as a case where an adjudicator has simply awarded an amount of a claim, without addressing its merits, merely because Equa did not adduce relevant material. [17]

16. [87]

    Equa did not in its payment schedule contest that the contract works were complete. Rather, as I have set out, it made “assessments” as to the “reasonable amount” payable to KLG on account of the allegedly defective work and reduced the amounts claimed by the percentages to which I have referred. The percentage deductions proposed by Equa were not on account of any suggestion that the works were not complete. Indeed, they assumed the works were complete.

17. [88]

    Consistently with that position, the adjudicator found that the works were practically complete and that, on the face of it, and but for Equa’s contentions about defects, KLG was “entitled to be paid the full contract sum”.

18. [89]

    The adjudicator then dealt with Equa’s contentions about defects.

19. [90]

    In those circumstances, there was no call for the adjudicator separately to considered whether the work had been done or its value. I think Mr Weinberger was correct to submit that, in this respect, the circumstances are similar to those considered by the Court of Appeal in Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd [18] where Basten JA said, in similar circumstances:

20. [91]

    I see no basis upon which I could conclude that the adjudicator failed to exercise his statutory function.

Conclusion

1. [92]

   Equa’s challenge to the adjudication determination fails.

2. [93]

   The summons should be dismissed with costs.

3. [94]

   Orders should now be made for the payment out to KLG of the monies paid into Court.

4. [95]

   The parties should bring in short minutes to give effect to these reasons.