BSA Advanced Property Solutions (Fire) Pty Ltd v Ventia Australia Pty Ltd

1. [1]

   THE COURT: This appeal arises from an attempt by the appellant, BSA Advanced Property Solutions (Fire) Pty Ltd (“BSA”), to obtain a progress payment for work done under a construction contract by way of supplying goods and services in relation to construction work. The entitlement to serve a payment claim on the respondent, Ventia Australia Pty Ltd (“Ventia”), arose under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“Security of Payment Act”). The respondent filed a payment schedule declining to pay the amount claimed, in part on the ground that the payment claim was invalid. An adjudicator determined that the claim was not invalid and that the bulk of the amount claimed was payable.

2. [2]

   By a summons filed in the Equity Division, Technology and Construction List, Ventia sought an interim order restraining the appellant from obtaining an adjudication certificate or taking any other step to enforce the determination. By way of final relief, Ventia sought a declaration that the adjudication determination was void and an order that it be quashed or set aside. The summons invoked the supervisory jurisdiction of the Supreme Court, relying upon the alleged invalidity of the payment claim.

3. [3]

   The principal argument relied upon by Ventia in the Court below was that a payment claim could be made only in respect of one construction contract and that the contractual arrangement between the appellant and the respondent required that the respondent issue “work orders” in relation to all work to be done under an overarching agreement and that each work order constituted a separate contract. Because the payment claim related to five separate work orders, it was therefore not a valid payment claim.

4. [4]

   The hearing took place on 24 June 2021. While judgment was reserved, on 19 August 2021, the Queensland Court of Appeal heard a matter raising similar issues. Judgment in that matter was delivered on 15 October 2021: Ausipile Pty Ltd v Bothar Boring and Tunnelling (Australia) Pty Ltd. [1] The parties in this case filed further submissions on 22 and 27 October 2021, addressing the reasoning in Ausipile.

5. [5]

   By a judgment delivered on 30 November 2021, the primary judge, Rees J, accepted Ventia’s contentions and quashed the adjudicator’s determination. [2] The primary judge was satisfied that (i) each work order constituted a separate agreement and (ii) the Security of Payment Act, at least by implication, precluded the service of a payment claim in relation to construction work undertaken under more than one contract. Those findings required that the judge also determine whether the element of non-compliance with the Act rendered the payment claim invalid. In concluding that it did, the judge declined to follow the reasoning in Ausipile. [3]

6. [6]

   On the appeal, BSA contended that –

7. [7]

   The appellant also contended that the primary judge ought not to have declined to follow an intermediate court of appeal. In any event, the appellant contended that the reasoning of the Queensland Court of Appeal was to be preferred. The respondent took a contrary view, which led to this appeal being heard by a five-judge bench.

Salient background

1. [8]

   In April 2016, Ventia entered into an agreement with the NSW Land and Housing Corporation to provide various services, including property maintenance, for some 68,000 social housing properties within the areas of Greater Sydney, the Blue Mountains, Newcastle and the Hunter Valley. As described by the primary judge, part of Ventia’s responsibilities encompassed the maintenance of fire protection at the properties, including the provision of fire extinguishers, emergency exit lighting and fire doors. [4] These were described as “building essential services” or “BES” in various documents. The BES work was subcontracted to the appellant.

2. [9]

   The subcontract comprised 11 documents. The first was a covering letter dated 3 May 2016 signed on behalf of Ventia (then known as Broadspectrum) and stating:

3. [10]

   The letter then specified the 11 documents which constituted the award, including the letter itself. The other documents included a “Subcontract Agreement”, a “Price Schedule”, and material extracted from the head contract with the Housing Corporation involving standards and specifications. The letter set out a number of other matters not presently relevant, and included, at the end, an acceptance clause which was signed on behalf of BSA.

4. [11]

   The “Price Schedule” listed a large number of properties against which was identified “total $ per building per annum”. What appeared to be a summary by region and contract area, also identified a total price per annum of $2,341,782. It noted a “mobilisation fee” of $330,657 said to be “amortised over the first year of contract”. Some, but not all, of the other documents referred to in the letter were included in the evidence. The material extended over more than 500 pages.

5. [12]

   It will be necessary to refer to further aspects of the subcontract in considering the respondent’s argument that each work order constituted a separate construction contract. It is, however, convenient at the outset to identify the basis of that argument, by reference to the provisions relied on by Ventia. Clause 2 in the subcontract was headed “Services and remuneration”. Clause 2.1 was as follows:

6. [13]

   Annexure 4, referred to in cl 2.1(b), provided for “work orders” by which it was said that Ventia would “initiate the Services by issuing specific Service Orders to the Subcontractor to perform discrete tasks”. [5] Importantly for present purposes, cl (b) in Annexure 4 stated:

7. [14]

   It appears that, for some years, invoices provided by BSA to Ventia were paid in due course. At some stage, perhaps in 2018, disagreements arose as to the work undertaken and the amounts claimed, which apparently led the respondent to terminate the subcontract with effect from 1 March 2021. On the date on which Ventia gave notice of termination, namely 8 February 2021, BSA served a payment claim on Ventia for an amount of $2,979,262.34. The payment claim identified the project as “LAHC Asset Maintenance Services” and the contract as:

8. [15]

   The payment claim then identified the amount (noted above) and detailed it as falling within 3 categories of “work type”, namely “SOU” (self-occupied units), variations, and “PM” (preventative maintenance). The first category involved four monthly invoices, each in the same amount of $21,417.64, dated October, November and December 2020 and January 2021. The second category (variations) identified 17 invoices dating from 30 September 2019 to 31 January 2021. Each invoice was in the same amount, namely $121,740.86. The third category (“PM – monthly maintenance contract”) contained 4 invoices again dated in October 2020 to January 2021 and each in the same amount of $205,999.29. Although there were 25 invoices there were not 25 work orders; 23 invoices fell within three work orders, one for each category. (There were two additional early invoices in categories one and two referrable to separate work orders.)

9. [16]

   On 22 February 2021 Ventia served a payment schedule which asserted, amongst many other matters, that no money was owing because BSA had been overpaid with respect to variation works an amount in excess of $2m. Two passages in the payment schedule are directly relevant for present purposes. First, the document stated:

10. [17]

    The second passage read:

11. [18]

    Given the dispute as to the whole amount of the claim, on 8 March 2021 BSA lodged an adjudication application under s 17 of the Security of Payment Act. On 18 March 2021 Ventia lodged an adjudication response under s 20 of the Act. The response maintained the invalidity argument in the following terms:

12. [19]

    On 31 March 2021 the appointed adjudicator delivered his adjudication determination. He devoted some 10 pages to dealing with jurisdictional matters. The adjudicator resolved the issue in favour of BSA on the basis that the statement as to separate agreements in Annexure 4 cl (b) was inconsistent with the structure provided by the general contract provisions, which did not contemplate separate agreements for each work order. [6] It will be convenient to return to that reasoning when considering the jurisdictional issue below.

Grounds 1 and 2: the “one contract” rule

1. [20]

   In a careful consideration of the so-called “one contract” rule, the primary judge commenced with the authorities from which the rule was said to derive. [7] It will be appropriate to return to those authorities, but, as the judge correctly observed, “the cases reviewed have limited precedential value”. [8] That was because the issue either did not arise, the reasoning was obiter, or the rule was relied upon without challenge. Nevertheless, the judge noted that “a series of learned commercial judges have proceeded accordingly, presumably because such a construction of the Act seemed obviously correct.” [9]

2. [21]

   The second, and perhaps the primary, factor upon which the judge relied was the use of the term “construction contract”, in the singular, throughout the operative provisions of the Act, being ss 8 and 13. Acknowledging that s 8(b) of the Interpretation Act 1987 (NSW) provides that in any Act “a reference to a word or expression in the singular form includes a reference to the word or expression in the plural form”, the primary judge nevertheless concluded that the plural form was not intended in these provisions. The reason for that conclusion was that a payment claim could only be made with respect to a particular “reference date”, making it unlikely that the legislature intended to allow a situation where there might be more than one contract, and thus more than one reference date, in respect of which a single payment claim would be served. [10]

3. [22]

   Thirdly, the judge considered that this construction of the Security of Payment Act was consistent with the object of the Act, namely that a scheme for progress payments had been designed to operate quickly and with clarity so that a respondent and an adjudicator could attend to their respective tasks within the short timeframes provided. [11]

4. [23]

   While each step in this reasoning was orthodox and persuasive in its terms, there are other factors which support a different conclusion. To explain why that is so, it is convenient to start with the objects of the Act. The primary objects are stated in the following terms:

5. [24]

   The claim process provided by the Act involves periods measured in days, not weeks or months. For example, where a claimant serves a payment claim, the respondent becomes liable to pay the claimed amount unless it provides a payment schedule within 10 business days after the payment claim is served: s 14(4). An adjudication application must be made by a claimant within 10 business days after receiving a payment schedule indicating that the respondent does not intend to pay the full amount of the claim: s 17(3)(c). Where an adjudication application is made, the adjudicator is to determine the application “as expeditiously as possible, in any case… within 10 business days after the date on which the adjudicator notified the claimant and the respondent as to his or her acceptance of the application”: s 21(3).

6. [25]

   While it is no doubt true that a construction of the legislative scheme which would potentially increase the complexity of a claim might militate against the effectiveness of the regime to deliver fair outcomes, as a practical matter, the possible consequences are somewhat nebulous. On the other hand, the imposition of an additional jurisdictional condition, especially one of indeterminate scope, is likely to lead to increased litigation. One effect of such litigation is to render ineffective the tight timetable imposed on the parties by the statute. To engage the Equity Division in an exercise in the supervisory jurisdiction of the Court, based on jurisdictional error, is likely to delay for months and even years the interim process of obtaining a progress payment. That undermines the object of transferring the risk of insolvency from the subcontractor to the contractor. The fundamental objective of maintaining the money flow and relieving subcontractors from undue financial pressures would be lost.

7. [26]

   It is convenient to address the issue of statutory construction, before dealing with the discussion of the statute in earlier cases. First, there is a temporal factor to take into account: the subcontract commenced on 3 May 2016. On the appellant’s case, that is the relevant contract. It preceded amendments to key provisions in 2019 [12] and is therefore governed by the legislation prior to that time. However, on the respondent’s case each relevant construction contract was created by the service on the appellant of a work order. On that view, the relevant legislation was that in force at the date of the issue of each work order. However, for the purposes of appeal, it is sufficient to have regard to the Act prior to its amendment. On the other hand, the primary judge noted that her construction of ss 8 and 13 (and thus the “one contract” rule) may not apply following the amendments. [13] Ironically, that would result in an unresolved puzzle: if the rule did apply only under the old legislation, but each work order gave rise to a new contract, the payment claim lodged in 2021 should have been valid in so far as it applied to post-amendment work orders. (This possibility was not addressed.) There is no basis for thinking the legislature intended such a result; it would in any event be a surprising outcome. Further reference will be made to the amending legislation in due course.

8. [27]

   As in force in May 2016, ss 8 and 13 relevantly provided:

9. [28]

   Section 8 provides to a person who has undertaken to supply goods and services under a construction contract a right to a progress payment. The entitlement crystallises at the “reference date”. A reference date may be provided by the contract or, if there is no express provision in the contract, it is the last day of the month in which the construction work (or the supply of goods and services) occurred. Section 13 then provides that a person who (relevantly) supplied goods and services and is thus entitled to a payment under s 8(1), may serve a payment claim. The fact that both the entitlement in s 13(1), and the concomitant liability under s 13(2), are expressed as actual or putative entitlements and liabilities demonstrates that their existence is not a condition of the right to make a claim. [14]

10. [29]

    It is now established that the Act imposes few essential preconditions to the engagement of the entitlement under s 8 and the procedure under s 13. In particular, the validity of a claim does not depend on the existence of an entitlement; rather, a person was “able to make a valid payment claim even though it may ultimately be proved that no payment was due under the construction contract.” [15]

11. [30]

    In Brodyn Pty Ltd v Davenport [16] Hodgson JA (with the agreement of Mason P and Giles JA) noted that there were certain “basic and essential requirements” conditioning the existence of an adjudicator’s determination. [17] Relevantly for present purposes, they included the following:

12. [31]

    Two points should be made with respect to the first requirement. First, s 7(1) provides that, subject to a number of exclusions which are not presently relevant, “this Act applies to any construction contract, whether written or oral, or partly written and partly oral, and so applies even if the contract is expressed to be governed by the law of a jurisdiction other than New South Wales”. Secondly, the definition of “construction contract” in s 4 is “a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party”. The phrase “construction work” is itself defined in broad terms in s 5, a definition which is engaged in the present case; so much was not disputed. Of more direct relevance is the definition of the phrase “related goods and services” in s 6, which provides in part as follows:

13. [32]

    It is readily apparent that, while the existence of a construction contract between the claimant and the respondent is an essential element of the legislative scheme, there may be scope for dispute as to whether a particular agreement falls within the statutory description. However, the breadth of the statutory language is apt to limit areas of disputation. In particular, the expansion of the ordinary meaning of “contract” to include some “other arrangement” under which one party undertakes to carry out construction work for another will limit the likelihood of disputes as to the legal character of the relationship between the parties.

14. [33]

    That is not to say that such disputes may not arise. The boundaries of the Industrial Relations Commission’s unfair contract jurisdiction under the Industrial Relations Act 1996 (NSW) in relation to agreements “whereby a person performs work in any industry” gave rise to a series of cases preceding Kirk v Industrial Court of New South Wales, [18] including Fish v Solution 6 Holdings Ltd [19] and Solution 6 Holdings Ltd v Industrial Relations Commission of New South Wales. [20] However, no issue arises in the present case as to whether the appellant supplied “related goods and services” to the respondent: it is common ground that it did. Nor is there any contention that they were not provided under a construction contract: the only question is whether there was one such contract or many.

15. [34]

    Nor is there any dispute that the appellant served on the respondent a document purporting to be a “payment claim” seeking payments claimed to be due under a contract. Indeed, as has been noted, the respondent provided a payment schedule in response to the payment claim, thus submitting the existence of a valid payment claim as a matter to be determined by the adjudicator (whilst reserving its rights).

16. [35]

    There are undoubtedly limits to the characteristics of a valid payment claim. It is commonly accepted that s 13(2) identifies such limits by use of the obligatory “must”. However, conscious of the objects of the legislative scheme, the courts have been cautious in identifying these as “basic requirements”, [21] precise compliance with which is a precondition to the exercise by the adjudicator of his or her function. [22] Spigelman CJ observed in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd: [23] “As Hodgson JA recognised in Brodyn, the purpose of the legislative scheme is best served by restricting the scope of intervention by the courts.”

17. [36]

    Three matters make it inherently implausible that there is any strict and precise “one contract rule”. First, s 8(1) confers an entitlement to a progress payment in respect of construction work carried out under a contract. The object of the Act, as explained in s 3, is to ensure that persons carrying out such work (or supplying related goods and services) obtain regular payments on account, and subject to a final reckoning. The expansive definition of construction contract, to include both a contract and some other arrangement, directs attention to the carrying out of the work, for reward, rather than the legal characteristics of the source of the obligation to carry out the work and the source of the liability of the respondent to make a payment.

18. [37]

    Secondly, the stated requirements for a valid payment claim do not include the identification of the source of the obligation to carry out the work or the source of the entitlement to payment. The Court has preferred not to read the Act as containing implied limitations, such as permitting the conditions of service of a payment claim to be qualified by the contract. In All Seasons Air Pty Ltd v Regal Consulting Services Pty Ltd [24] the Court held that, for the purposes of the Act, a payment claim was served on the date on which it was received by the respondent, although under the contract it was deemed to have been served on the next reference date. That conclusion was supported by the following reasoning:

19. [38]

    Where the Act intends the contract to govern, it says so and provides a default position where the contract does not so provide. That is true with respect to progress payments under s 8. It is also true with respect to reference dates. If there were some doubt as to the reference date with respect to which the claim is made, that would be a matter to be determined by the adjudicator in determining an adjudication application.

20. [39]

    If there is an adjudication, one finds amongst the categories of material which the adjudicator is required to take into account, “the provisions of the construction contract from which the application arose”: s 22(2)(b). The fact that the adjudicator is required to take such material into account, and thus determine whether the claim is made good under the terms of the construction contract, suggests that no specific constraint is imposed on the validity of a payment claim by reference to the terms of any particular construction contract or arrangement in the nature of a contract.

21. [40]

    Thirdly, the phrase “the one contract rule” conveys a degree of precision as to its meaning which quickly dissolves on consideration of its possible application. The fact that it appears to reflect the phrase “under a construction contract”, in ss 8 and 13, gives it a false sense of acceptability. As a practical matter, the scope of commercial arrangements under which goods and services may be supplied for construction work is expansive. The nature of such arrangements will be considered in more detail below in addressing the contention in ground 4 that there was in fact only one construction contract between the appellant and the respondent.

22. [41]

    As the primary judge noted, the purported rule has been attributed to a case in which the issue did not arise because there was only one contract. [25] In fact, the origin was even more curious. Rail Corporation of NSW v Nebax Constructions Australia Pty Ltd [26] bore some likeness to the present matter in that the contractor (Nebax) was required to undertake platform resurfacing work at 25 railway stations under the control of Rail Corp. Nebax served a progress claim (No 18), attaching a number of invoices, and referrable to the month of September 2011. [27] The claim was referred to adjudication. It was the adjudicator who found that there were 25 separate contracts, contrary to the views of the parties. He described the contract as relating to “separable portions” which were subject to a single head contract. [28] The primary argument in the Court was that the adjudicator lacked jurisdiction because there could not be separate adjudication applications (as he assumed there to be) for separate portions of one payment claim: Security of Payment Act, s 17(1). The alternative was that 5 separate payment claims had been lodged under one contract and by reference to a single reference date, in breach of s 13(5). McDougall J, in an ex tempore judgment delivered during vacation, dealt with the operation of s 17(1) in the following passages. First, he stated:

23. [42]

    Having set out the relevant provisions, McDougall J continued:

24. [43]

    The next significant case was a decision of Douglas J in Queensland, dealing with relevantly identical legislation, in Matrix Projects (Qld) Pty Ltd v Luscombe. [30] The arrangement was described by the judge in the following terms:

25. [44]

    The payment claim identified what the judge described as 3 separate bases of claim, namely (i) claims with respect to at least nine properties where work orders were issued pursuant to the period subcontract, (ii) additional properties the subject of a verbal direction and undertaken on a “do and charge” basis, and (iii) a sponsorship of a local soccer team. The adjudicator found that the work carried out pursuant to work orders was undertaken under the period subcontract and the further verbal instructions were in effect a variation of the period subcontract and constituted one arrangement and there was, thus, one construction contract. [31] Douglas J concluded that the reasoning of McDougall J in Nebax was correct and rejected in part the contractual analysis of the adjudicator:

26. [45]

    There remained the question as to the effect of the inclusion of the soccer sponsorship arrangement. It did not involve construction work and was apparently not pressed before the adjudicator.

27. [46]

    Douglas J was “inclined to accept” the submission that the inclusion of the soccer sponsorship claim did not invalidate the payment claim, “on the basis that it should be possible to treat the inclusion of such an obviously erroneous item in a payment claim as not depriving an adjudicator of jurisdiction”. [32] The adjudication was, nevertheless, set aside, on the basis that the payment claim covered more than one contract or arrangement and was invalid.

28. [47]

    The result in Matrix raises a significant issue as to the proper identification of a pre-condition as to the validity of a payment claim. If the inclusion of an obviously invalid claim does not invalidate the payment claim, on what basis does an arguably invalid claim give rise to invalidity? It is well-established that an adjudication cannot be reviewed on the basis that the adjudicator misconstrued the construction contract under which the claim was made. [33] Yet the question whether part of the claim was for work done under the period subcontract, or an arrangement which included the period subcontract, was an issue involving arguable questions of fact and law which the adjudicator addressed on the basis of the objection taken by Matrix in its payment schedule. While it must be accepted that the adjudicator cannot determine the limits of his or her own jurisdiction, the decision raises difficult questions as to why identifying the terms of the construction contract goes to the adjudicator’s jurisdiction to act.

29. [48]

    In Ausipile, the Queensland Court of Appeal adopted a test of facial non-compliance as the indicium of the invalidity of a payment claim. Where there was no reliance on more than one contract on the face of the payment claim, the issue was one which should, in an appropriate case, be raised by way of a payment schedule and addressed by the adjudicator. [34] In broad terms, this approach was consistent with authority in this Court and may be accepted. Thus, in Nepean Engineering [35] this Court dealt with a case in which a payment claim was said not to satisfy the requirement of s 13(2)(a) because it failed to identify the construction work to which the payment related. Hodgson JA accepted that a sufficient identification was necessary in order to allow a respondent to formulate its payment schedule and to allow the adjudicator to determine the claim. However, Hodgson JA stated that if the payment claim were deficient in that respect, the payment schedule should say so and the adjudicator would need to determine whether the work was sufficiently identified. He concluded:

30. [49]

    In TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [36] this Court addressed a contention that a payment claim, which stated that certain amounts were progress payment of parts of the contract sum, and other amounts were for variations, was invalid because it sought to raise quantum meruit claims as to those parts not the subject of the contract sum. The Court rejected that submission as a ground of invalidity stating:

31. [50]

    It is not clear that the reasoning in Matrix was consistent with this approach. As the Queensland Court of Appeal noted in Ausipile, the judgment in Matrix involved “no examination of the proper construction of the then applicable section governing a payment claim”, [37] nor whether, it might be added, the payment claim did in fact identify “three distinct contracts”.

32. [51]

    On one view, the test of facial non-compliance may be inadequate as a test of jurisdictional error because s 13 of the Security of Payment Act does not require that the payment claim identify the construction contract; yet the claim must have such a basis. That there is no such identification required by s 13 demonstrates that the “one contract” rule involves a jurisdictional condition imposed by implication. The implication of such a requirement is inconsistent with the observation of Spigelman CJ in Chase Oyster Bar that “the purpose of the legislative scheme is best served by restricting the scope of intervention by the courts”. [38] That approach, which may be justified by reference to the purpose and objects of the legislative scheme discussed above, works against an implication of the kind proposed.

33. [52]

    It follows that, if it be necessary that a payment claim relate to one construction contract with one reference date, compliance with that statutory requirement is a matter to be addressed by the adjudicator: any such “one contract” rule is not a precondition to the service of a valid payment claim. That conclusion is sufficient to uphold grounds 1 and 2. However, it is strongly arguable that there is no “one contract” rule, as such, and that s 13(1) permits a person to serve a payment claim in relation to an entitlement under more than one contract so long as the claim is referable to one reference date, in compliance with s 8(1) in combination with s 13(5).

Grounds 3 and 4: Was there a single contract?

1. [53]

   As the primary judge stated, “[o]nce it is accepted that whether a payment claim is made in respect of one construction contract is a jurisdictional fact, then it is a matter for the Court to determine on the evidence before it”. [39] Having determined that there was such a jurisdictional fact, it was necessary for the judge to proceed to determine that issue on the evidence, which she did.

2. [54]

   Having briefly noted the factual background, [40] the judge turned to the content of the subcontract, noting the services provided under it, and the method of payment provided by the contract, [41] before turning to the “work orders”. [42] The judge then identified the elements of the payment claim by reference to evidence given by witnesses for both parties. [43] Although there was no oral evidence, Ventia relied on an affidavit of Ms Jasiulec, dated 7 May 2021. In addition to exhibiting various documents, including the subcontract, much of the affidavit was devoted to explaining the commercial context of the relationship between the parties and in particular between Ventia and the head contractor, NSW Land and Housing Corporation. Significant parts of the affidavit described the deponent’s understanding of how the contractual scheme operated, and was admitted on that basis only. Other parts provided detail as to the administrative arrangements with respect to the operation of the subcontract. It seems that no objection was taken to the relevance of such material, presumably because it identified matters to which the payment claim related. However, in some respects it may have been a distraction from the real question which was the basis upon which the appellant became entitled to progress payments, and whether they were properly described as “under” the subcontract.

3. [55]

   BSA relied on an affidavit of 7 June 2021 of Mr Crossing, its mobilisation and contracts manager. The material covered the same broad issues as that of Ms Jasiulec. No doubt because the proceedings constituted a fresh application and not a review of the determination of the adjudicator, there was no clear indication as to how much of the material presented to the court was before the adjudicator. In addition, BSA filed an affidavit of its solicitor addressing the fees payable in respect of an adjudication.

4. [56]

   The judge then set out the submissions for the parties as to whether there was one contract or numerous contracts constituted by each individual work order.

5. [57]

   Ventia submitted that the “PM” (preventative maintenance) payment of $823,997 was for work arising from 1,860 work orders (apparently having an average value of $443). By contrast, BSA asserted that all of the work within the payment claim was “category B works”, which BSA was obliged to undertake because they involved routine maintenance works in accordance with the “services specification” set out in clause 2.1(a) of the subcontract. The specification documents provided for six monthly or annual maintenance of assets.

6. [58]

   Before turning to the judge’s rejection of BSA’s contentions, it is convenient to note that the judge found no need to have regard to the conduct of the parties, their communication or post-contractual conduct in order “to define the parties’ intentions as to the effect of a work order”. That was because Annexure 4 cl (b) provided that a separate agreement would come into existence each time Ventia issued a work order. [44]

7. [59]

   The primary judge rejected the submission that BSA was required to do the work in any event because, “the work order identified the Services” and the “Services Specification set out how the services were to be performed, rather than what services were to be performed”. [45] As a result, she concluded that there was a separate agreement which came into existence each time Ventia issued a work order so that the payment claim consisted of claims made under numerous construction contracts. [46]

8. [60]

   The judge concluded that the payment claim was invalid and the decision of the adjudicator upholding it was void. She then turned to consider an alternative submission by BSA that even if each work order gave rise to a different contract, “that new contract remained part of one overarching of ‘arrangement’ within the meaning of that term as used in the definition of ‘construction contract’ in s 4(1) of the Act”. [47]

9. [61]

   The judge concluded that the term “arrangement” used in the definition of “construction contract” was “intended to capture dealings between parties which fail to achieve that level of precision which the law of contract would not ordinarily recognise.” [48] With respect to the alternative contention, the primary judge concluded:

10. [62]

    Clause 2.1 and the key passage in Annexure 4 relied upon by the primary judge have been set out above. [49] There are, however, numerous other provisions which need to be considered.

11. [63]

    Clause 1 of the subcontract included definitions, by reference to Annexure 1. The term “agreement” was defined:

12. [64]

    The definitions included the terms “Category A works” and “Category B [works]”. Category A works meant “the Responsive Works Program, Vacant Restoration, Modifications (MODS)/Acquisitions/Major Fire Upgrades (MFU)/ Lease Refurbishments/Property Standard Assessments (PSA).” Category B (the word “works” was omitted) meant “Lawns, Grounds & Cleaning (LGC) and Building Essential Services (BES)”.

13. [65]

    There was also a definition of the term “claim”, namely “an entitlement of the Subcontractor under or arising out of or connected with the Agreement, in tort, in equity, under any statute, or otherwise….”

14. [66]

    Two further definitions may be noted:

15. [67]

    Annexure 2 defined “payment term” by reference to cl 6.3 as “30 business days from receipt of payment claim”. Clause 6 is important: the relevant provisions of cl 6 read as follows:

16. [68]

    Many of these provisions are consistent with requirements for a payment claim under the Security of Payment Act. For example, cl 6.2(b), requiring a statement that employees and suppliers have been paid, is a statement required with respect to a payment claim. Also noteworthy is the passage in cl 6.2(a) italicised above, referring to part of the fee claimed “in relation to Work Orders worked on for that payment claim”. It expressly envisaged that a payment claim may relate to more than one work order.

17. [69]

    Annexure 10, referred to in cl 6.6, imposed on BSA an obligation to give notice to Ventia if it received a notice from one of its subcontractors under various provisions of the Security of Payment Act. In particular, it provided that Ventia might make a payment due to a subcontractor of BSA in order to avoid a suspension of work under the Security of Payment Act.

18. [70]

    Clause 6.1 referred to “the Fee”, a term defined in Annexure 3 by reference to rates set out in “Appendix A of this Agreement”. What appears to be Appendix A in the material before this Court, [51] sets out a total price per annum according to regions and contract areas, a mobilisation fee and a table of “total $ per building per annum” with respect to a large range of buildings, perhaps running into the hundreds. Many addresses appear to include multiple occupancies.

19. [71]

    Annexure 1 also contained a definition of “Services”, namely, “the services set out in Annexure 8 or in any Work Order, and any other services which the Subcontractor and Broadspectrum agree from time to time”. The primary judge discounted the significance of the definition of “Services” because she did not read Annexure 8, referred to in that definition, as identifying relevant services. There is some force to the observation: although Annexure 8 is headed “Services”, cl 1 provided:

20. [72]

    Annexure 9, however, was headed “Services Specification” and referred to specification documents in the following terms:

21. [73]

    Clause 4 was also relevant, and read in part:

22. [74]

    In terms of the underlying documentation, it remains to consider the form of the work orders. The examples of orders contained in the evidence are best explained by reference to the document which is attached to this judgment. The document is largely meaningless read in isolation. The top half of the document is entirely formal stating addresses, ABNs and similar details of Ventia and BSA. A “shipping address” is given, but not in terms applicable to the particular work order. There are three items listed, each is described as “AFSS Access Inspection Net Diff”, followed by each of three consecutive months. The order is dated 22 February 2021 but refers to three items, each described as "item completely delivered”, the orders being dated by reference to the months of June, July and August of 2019. (Ventia cancelled the subcontract in February 2021, some 14 days before the date of the work order.)

23. [75]

    The reasoning of the primary judge focused upon the statement in Annexure 4 that a separate agreement would come into existence each time the respondent issued a work order. Each individual agreement would be governed by the terms of the subcontract. That approach was challenged on two bases. First, it involved characterising the arrangement for the purposes of the Security of Payment Act entirely by reference to a term of the agreement. Secondly, it extracted one provision from the agreement, which, reading the document as a whole was inconsistent with the overall effect of the agreement.

24. [76]

    The first criticism is sound in principle. As Mahoney JA explained in Lewis v Bell: [52]

25. [77]

    Mahoney JA relied upon the reasoning of Windeyer J in Radaich v Smith [53] to the effect that the parties cannot “escape the legal consequences of one relationship by professing that it is another”.

26. [78]

    Although those cases concerned the classification of an agreement as a lease or a licence, the principle has been applied in many circumstances where the particular classification is legally significant. Thus, in Fearnley v Australian Fisheries Management Authority, [54] Finn and Sundberg JJ stated:

27. [79]

    As noted by Lewison and Hughes, The Interpretation of Contracts in Australia: [55]

28. [80]

    In the present case, the legal question is whether the payment claim served by the appellant was a claim for a progress payment “under” a construction contract, for the purposes of the Security of Payment Act. That question cannot be finally determined by the parties affixing a label or identifying the nature of the relationship under which construction work was undoubtedly undertaken. Were it otherwise, a contractor would be able to impose terms, the effect of which might be to exclude, modify or nullify the practical benefit of the Act, contrary to the prohibition on contracting out contained in s 34 of the Security of Payment Act. It is not necessary to address the operation of s 34 in the context of the present case: it is sufficient to note that s 34 assumes the need to classify a contract or arrangement for the purposes of the Act and negates any provision which might adversely affect the intended effects of the Act.

29. [81]

    Secondly, it was necessary to address the construction of Annexure 4 cl (b) in the context of the whole subcontract. Reaching a conclusion contrary to the view taken by the primary judge, the adjudicator addressed precisely the same issue based on similar submissions by identifying “a fundamental inconsistency in the contract in respect of the concept of each work order creating a separate contract versus the general contract provisions”. [57] His reasoning focused on the various elements in cl 6.

30. [82]

    The reasoning may be summarised (with some augmentation) in the following manner. First, if Annexure 4 cl (b) was to be given its apparent literal effect, no services were to be undertaken by the appellant except in response to separate work orders, each of which established a separate agreement. Nevertheless, cl 6.2(a) distinguished between work orders for category A and category B works. A payment claim was to be lodged for category A works within 5 business days after the completion of the relevant service, whereas for category B works the claim was to be lodged 5 business days after the last business day prior to the end of each calendar month for services rendered in that month. In each case, the statement was to be in a form showing “the part of the Fee claimed in relation to work orders worked on for that payment claim”. The use of the plural, “work orders”, was manifestly inconsistent with the conclusion that each work order required a single payment claim.

31. [83]

    There are also provisions for set-offs (cl 6.4) and defect rectification (cl 4.4) in which no reference is made to the separate contracts by which the work must be undertaken in relation to each work order.

32. [84]

    The term “Variation” in Annexure 1 to the subcontract is defined to mean “a change to the Services that is deemed to be outside the scope of the Services required to be performed under the agreement at the proposed time of change”. The kinds of variation which might be anticipated might relate to the nature of the services generally, or the location at which they are to be performed, having regard to the list of premises contained in the agreement. It would be a perverse reading of that term to limit it to a variation of services which have already been requested under a work order.

33. [85]

    As the adjudicator specifically pointed out, Annexure 4 cl (c)(ii), inconsistently with Annexure 4 cl (b), required that the subcontractor “must ensure that each work order is invoiced separately, but in accordance with cl 6 of this Agreement”. [58] He continued: [59]

34. [86]

    The adjudicator noted the evidence of Ms Jasiulec (for Ventia) to the following effect: [60]

35. [87]

    The adjudicator was prepared to accept that, for category A works, there might be separate contracts with respect to specific work orders which involved the purchase (and possibly installation) of goods. However, as the payment claim before him related only to category B works, it was not necessary to determine the situation with respect to category A works. At least reading Annexure 4 cl (b) literally, such a distributive operation might not be tenable. However, it is not necessary for this Court to determine that question either.

36. [88]

    In resisting this reasoning, the respondent sought to rely upon the distinction between “the mere quotation of a price and an offer to sell and deliver” goods and services, referring to the judgment of Barwick CJ in Re Webster, [61] a case involving the possible disqualification of a senator on the basis that he had a “direct or indirect pecuniary interest in any agreement with the Public Service of the Commonwealth”, contrary to s 44(v) of the Constitution. The respondent submitted that the arrangement in that case was analogous to that in the present case. Senator Webster’s company having submitted a tender, it was a special condition of the contract that the Department was not bound to order “the whole of the quantities listed herein”, but the successful tenderer was required to supply, in full, all orders placed during the currency of the contract. Barwick CJ held that there was “no standing agreement, each order [creating] a separate and distinct agreement”. [62]

37. [89]

    For a number of reasons, the assistance to be gained from Re Webster is limited. First, whilst a distinction drawn between a standing offer and the circumstances in which a legal contract results may be accepted, each case will turn upon the proper construction of the documentary material and the circumstances of the case.

38. [90]

    Secondly, what constituted an “agreement” for the purposes of s 44(v) of the Constitution, and what may constitute a “construction contract” for the purposes of the Security of Payment Act, may well be quite different.

39. [91]

    Thirdly, at least in so far as Re Webster concerned the proper construction and operation of s 44(v) of the Constitution, it is no longer good law. Each of the separate judgments of the High Court in Re Day [No 2] [63] rejected the approach taken in Re Webster to the operation of s 44(v). The agreement in Re Day [No 2] was a lease taken by the Commonwealth over property owned by an entity associated with Mr Day, as a result of which rent was payable. There was no issue that the lease was a legal contract, rather the case concerned the interposition of a trust between the recipient of the payments and Mr Day. The Court held that he did not have to have a legal interest in the payments by the Commonwealth.

40. [92]

    In those circumstances, there was no necessary consideration of the scope of the term “agreement” in s 44(v). However, the purpose underlying s 44(v) may well affect the understanding of the term “agreement” in that provision. Gageler J said of the section that “[a]t its core lie agreements for the procurement of services or property negotiated and entered into for or on behalf of the Commonwealth...”. [64] As s 44(v) “looks to the personal financial circumstances of a parliamentarian and the possibility of conflict of duty and interest”, [65] it may be that an agreement which is not legally enforceable against the Commonwealth but provides for benefits to a parliamentarian, or an entity associated with that person, would fall squarely within a provision, the purpose of which “is not limited to preventing executive influence upon a parliamentarian, but extends to preventing the influence of a member’s private financial interests upon the discharge of his or her parliamentary functions”. [66] As Keane J further noted, the animating concern may be that “the parliamentarian might seek to exert a corrupting influence on officers of the administration with whom he or she comes into contact”. [67]

41. [93]

    No doubt Re Webster exemplified the important principle that context and purpose may be critical in determining the meaning of statutory terms, although, as Gageler J warned in Re Day [No 2], they properly inform that construction but do not take the place of the statutory language. [68] Further, it may be accepted that a party who is an accepted tenderer with respect to a procurement arrangement may have no legally enforceable right to supply goods or services except in response to a specific request. None of that suggests that the provisions for progress payments in the Security of Payment Act are dependent upon a single contract under which construction services are provided or goods supplied. Rather, these examples support the conclusion that the basis of the entitlement to payment is a matter which will need to be considered by the adjudicator.

42. [94]

    In our view, the proper classification of the contract for the purposes of the Security of Payment Act requires a reading of its substantive provisions as a whole. To the extent that there is inconsistency, that inconsistency cannot be resolved by a statement of intention. What is uncontroversial is that there was a contractual agreement between the parties. The work orders may have been an integral part of some aspects of the contractual relationship, but, like many directions to persons undertaking work for another, they did not give rise to a separate contract each time a work order was issued, at least in respect of the Category B works.

43. [95]

    It follows that, even if the requirement for one contract were a jurisdictional requirement for a valid payment claim, the respondent did not demonstrate that the payment claim in this case was not issued under the subcontract agreement to which it referred by number on its face. Grounds 3 and 4 should be upheld.

Orders

1. [96]

   In the event of success, on the appeal, the appellant sought an order that the moneys which had been paid into court by the respondent, and then paid out again to the respondent upon its success in the Equity Division, should be “repaid to the appellant”. In oral submissions, the appellant suggested that the appropriate order was a judgment in its favour for the amount of the adjudication determination, together with interest. The statutory process, however, provides for the issue of an adjudication certificate, which may be filed as a judgment for a debt in a court of competent jurisdiction and is enforceable accordingly: Security of Payment Act, s 25(1). The judgment creditor (in this case the appellant) then has certain protections against attempts by the respondent to set aside such a judgment.

2. [97]

   In the circumstances, the proper course is to set aside the judgment in the Equity Division so as to allow the appellant to complete the process available under the Security of Payment Act to enforce the adjudication determination. Although the entitlement under s 24(1) to an adjudication certificate turns on the failure of the respondent to pay the adjudicated amount within the 5 business days specified in s 23 of the Security of Payment Act, it is clear that that condition has been satisfied because the respondent did not pay the adjudicated amount “to the claimant” as required by s 23(2).

3. [98]

   The money paid into court having been returned to Ventia, order 3 made in the Equity Division is now spent. The other 3 orders, namely order 1 (declaring the adjudication determination void), order 2 (quashing the adjudication determined) and order 4 (requiring that BSA pay Ventia’s costs of the proceedings) should be set aside.

4. [99]

   The Court makes the following orders:

   1. (1)

      Allow the appeal from the judgment in the Equity Division given on 30 November 2021.

   2. (2)

      Set aside orders 1, 2 and 4 entered on 30 November 2021.

   3. (3)

      In lieu thereof order that:

   4. (4)

      Order that the first respondent (Ventia) pay the appellant’s costs in this Court.