BCFK Holdings Pty Ltd v Rork Projects Pty Ltd

1. [1]

   In this case a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”) was purportedly served on the plaintiff, but not effectively served so as to enliven the provisions of the Act. It subsequently came to the attention of and was read by the sole director of the plaintiff. The question is, should the payment claim be taken to have then been validly served.

2. [2]

   So far as my research, and that of counsel, reveals, the question has not been hitherto considered.

3. [3]

   In Piety Constructions Pty Ltd v Hville FCP Pty Ltd [1] I held that an effectively served payment claim under the Act should be taken to have been served when it actually came to the notice of and was read by the recipient, notwithstanding a “deemed service” provision in the relevant building contract.

4. [4]

   The question here is different, but similar considerations apply. In my opinion, for the reasons that follow, the answer to the question is “yes”.

The facts

1. [5]

   On 10 May 2021, BCFK Holdings Pty Ltd (“the Principal”) and Rork Projects Pty Ltd (“the Builder”) entered into a construction contract (“the Contract”) within the meaning of the Act. The Contract related to a childcare centre in Balmain.

2. [6]

   For the purposes of the Adjudication Application only, and thus for these proceedings, the parties agree that the Contract was lawfully terminated by the Builder on 12 May 2022.

3. [7]

   On 12 July 2022 the Builder delivered a payment claim (which, for reasons that will become apparent, I will call “the First Payment Claim”) under the Act to Spectrum Property and Projects Pty Ltd, the superintendent of the project (“the Superintendent”). The Superintendent was not authorised under the Contract to accept service of documents relevant to the Contract. [2] It is common ground that the delivery of the First Payment Claim to the Superintendent was not itself effective service.

4. [8]

   Shortly after the Builder delivered the First Payment Claim to the Superintendent, the Superintendent notified the sole director of the Principal, Ms Pam Meale, of the delivery.

5. [9]

   On 16 July 2022 Ms Meale requested the Superintendent to “provide me access to the documentation so I can urgently review what has been provided and make comment”.

6. [10]

   On 18 July 2022 the Superintendent forwarded to Ms Meale a link to the First Payment Claim.

7. [11]

   Evidently, Ms Meale opened the link at or about that time and read the First Payment Claim.

8. [12]

   Thus, on 26 July 2022, she caused a payment schedule (which, again for reasons which will become apparent, I will call “the First Payment Schedule”) to be served on the Builder which stated:

9. [13]

   In the First Payment Schedule, the Principal also made detailed submissions concerning the question of whether or not the First Payment Claim was a “final” payment claim for the purposes of the Contract, [3] whether the Contract had been validly terminated, [4] whether the Principal had repudiated the Contract and whether the Principal was thus entitled to suspend payment under the Contract.

10. [14]

    Clause 7 of the Contract provided that notice was deemed to have been received on the date of its “actual receipt”. However, cl 7 was concerned only with documents delivered by mail, email or fax and was not engaged here, as the First Payment Claim was delivered personally to the Superintendent on 12 July 2022.

11. [15]

    In the circumstances I discuss further below, the Builder, on advice from its solicitor, decided not to proceed to adjudication relying on the First Payment Claim.

12. [16]

    Instead, on 20 August 2022, it served a further payment claim (“the Second Payment Claim”) on the Principal. There is no dispute that the Second Payment Claim was validly served. The Principal served a payment schedule in response (“the Second Payment Schedule”).

13. [17]

    The matter then proceeded to adjudication and, on 5 October 2022, the Adjudicator made an Adjudication Determination in favour of the Builder in the sum of $685,915.54.

Was the First Payment Claim validly served so as to enliven the Act?

1. [18]

   Despite making the opposite assertion in the First Payment Schedule, the Principal now contends that, notwithstanding the fact that delivery of the First Payment Claim to the Superintendent was not effective service for the purposes of the Act, service should be taken to have been effected on 18 July 2022 when, it is to be inferred, Ms Meale, as the sole director of the Principal, accessed the link sent to her by the Superintendent and thereby came to be on notice of the contents of the First Payment Claim.

2. [19]

   This does amount to a volte-face by the Principal. But that does not, itself, mean that the position it now propounds is not correct. It may have other consequences to which I will return.

3. [20]

   In Falgat Constructions Pty Limited v Equity Australia Corporation Pty Limited [5] the Court of Appeal considered when a payment schedule was served under the Act. The question was whether service had occurred in accordance with s 109X of the Corporations Act 2001 (Cth).

4. [21]

   The Court held:

5. [22]

   These remarks were made in the context of the dispute in Falgat Constructions as to when the payment schedule had been served. In Piety Constructions I cited the Court of Appeal’s observations in Falgat Constructions in a like context, the question in Piety Constructions being when the payment claim had been served, there being no dispute about the mode of service that was adopted.

6. [23]

   But I read the Court of Appeal’s observations in Falgat Constructions as having wider application.

7. [24]

   They were certainly treated that way by Ball J in QC Communications NSW Pty Ltd v CivComm Pty Ltd [7] where his Honour said, citing the Court of Appeal’s observations in Falgat Constructions:

8. [25]

   As numerous authorities in this Court have made clear, the Act is intended to provide a speedy way to resolve, on an interim basis, disputes concerning construction contracts.

9. [26]

   The Act is also clearly intended to operate in a realistic fashion and, so far as possible, despite the plethora of cases that have arisen under the Act, in a manner that avoids arid technical disputes.

10. [27]

    As I said in Piety Constructions, [9] a recipient of a document required to be served under the Act who actually opens and peruses a copy provided electronically ought not be encouraged to contend, as the Principal initially did here, that although it was factually provided, it was not legally provided.

11. [28]

    A party that actually receives a payment claim should not be entitled to assert that service did not ever happen because of a shortcoming, perhaps technical, in the manner in which the claimant purported to effect service.

12. [29]

    In my opinion, an assertion in a payment schedule that service has not been validly effected should be taken to be an acknowledgement that, notwithstanding the initially ineffective service, the payment claim has, ultimately, come to the attention of the authorised recipient; who would then stand as being validly served.

13. [30]

    It is true that this may mean that a claimant that has ineffectively purported to serve a payment claim may not know when time starts to run for the respondent to serve a payment schedule and thus may not know at what time they may take action under s 15(2) of the Act to recover the unpaid portion of the claimed amount or go to adjudication. However, any such circumstance will be a consequence of the claimant’s own error so far as concerns service and, if they were to move prematurely to adjudication, it would be of no effect.

14. [31]

    In any event, the respondent’s obligations under the Act are engaged once the payment claim has come to the attention of the authorised recipient. Sensible communication between the parties will, and should be encouraged to, resolve any such issues and to ensure that the claimant is made aware of the respondent’s contention as to when service was effective.

15. [32]

    For those reasons, my conclusion is that, notwithstanding the position it took at the time, the Principal was correct to contend before me that the First Payment Claim was served on it on or about [10] 18 July 2022, when Ms Meale accessed it.

Misleading or deceptive conduct?

1. [33]

   In those circumstances, the Builder alleges that by service of the First Payment Schedule, and by its silence in not informing the Builder that the First Payment Claim had been validly served “and that it considered that the First Payment Claim did enliven the operation of the Act”, the Principal represented that “the First Payment Claim had not been validly served and could not enliven the processes of the Act” (described as the “Payment Claim Representation”).

2. [34]

   There are thus two elements of the alleged Payment Claim Representation:

3. [35]

   The Builder alleges that the Payment Claim Representation was made in trade or commerce and was misleading or deceptive because:

4. [36]

   Finally, the Builder alleged that it relied on the Payment Claim Representation and was induced thereby to act to its detriment by refraining to make an adjudication application based on the First Payment Claim.

5. [37]

   In those circumstances, the Builder alleged that the Principal was estopped or precluded from advancing the contention that the First Payment Claim had been validly served or alternatively, that the Builder was entitled to an order under s 237 of the Australian Consumer Law [11] to prevent the Principal from now advancing the contention that the First Payment Claim had been validly served.

6. [38]

   Before me, the Builder did not press the contention that an estoppel had arisen but maintained its contention that the Principal had engaged in misleading or deceptive conduct.

7. [39]

   As to whether the Payment Claim Representation was made, although the First Payment Schedule asserted in paragraph 1 that the First Payment Claim “was not served” on the Principal, the very fact of the service of the First Payment Schedule revealed that it had been received by the Principal and thus had been validly served. Indeed, in paragraph 2 of the Payment Schedule, the Principal referred to the payment claim “served by” the Builder, albeit in the context of an assertion that the operation of the Act had not been enlivened.

8. [40]

   As Mr Damian Ward, the solicitor for the Builder, deposed:

9. [41]

   However, as mentioned, the First Payment Schedule also asserted that the First Payment Claim did “not enliven the operation of the Act”. That was an assertion as to the legal effect of the steps taken by the Builder to deliver the First Payment Claim.

10. [42]

    There is no evidence before me as to whether, at the time that the Principal served the First Payment Schedule, it then “considered” that the First Payment Claim had been “properly served” on 18 July 2022 nor that the Principal then “considered” that the First Payment Claim did “enliven the operation of the Act”. I think it more likely that this is a view to which the Principal has come since publication of my reasons in Piety Constructions.

11. [43]

    However that may be, the critical question is whether the Builder has shown that it has taken any step or suffered any damage “because of” [12] the Payment Claim Representation.

12. [44]

    In this regard, as I have set out, the Builder alleges that it relied on the Payment Claim Representation by refraining from making an adjudication application based on the First Payment Claim. I accept the Builder’s submission that it is not necessary for it to establish that but for the alleged Payment Claim Representation it would have proceeded to adjudication. It would be sufficient for the Builder to show that the alleged Payment Claim Representation made a “non trivial contribution” or “materially contributed” to its decision not to proceed to adjudication on the basis of the First Payment Claim. [13]

13. [45]

    On 8 August 2022 Mr Ward sent an email to Mr Brian O’Rourke, a director of the Builder, and Mr Malcolm Hoye, a construction manager employed by the Builder, as follows:

14. [46]

    The decision made by the Builder not to seek an adjudication arising from the First Payment Claim was made in a conversation between Mr Ward, Mr O’Rourke and Mr Hoye later on 8 August 2022.

15. [47]

    Mr Ward gave evidence that this conversation went as follows:

16. [48]

    Mr Hoye gave this account of the conversation:

17. [49]

    Mr Hoye concluded:

18. [50]

    Mr Hoye confirmed during cross-examination that he was the person responsible for the decision to serve the Second Payment Claim. Although he stated that he would not have sought Mr Ward’s advice but for the issues raised in the First Payment Schedule, he was clear that his decision not to cause the Builder to proceed to adjudication on the basis of the First Payment Claim was “because” of the advice given by Mr Ward that the Builder should serve what became the Second Payment Claim.

19. [51]

    As to the basis on which Mr Ward came to give that advice, Mr Ward said in his affidavit:

20. [52]

    In his oral evidence, Mr Ward gave this evidence in answer to a question from me:

21. [53]

    Mr Ward later gave this evidence:

22. [54]

    A further factor that affected the advice Mr Ward gave the Builder was that the First Payment Claim was described as a “Final Payment Claim” whereas, under the Contract, no “final” payment claim could be served until the expiry of the defects liability period. [14] There was no dispute that the defects liability period had not commenced when the First Payment Claim was served.

23. [55]

    In these circumstances, I am not persuaded that whatever representation was made by the Principal in the First Payment Schedule played any material role in the decision taken by the Builder not to proceed to adjudication on the basis of the First Payment Claim but to, rather, serve what became the Second Payment Claim and to proceed to adjudication on the basis of that document. The Builder relied on Mr Ward’s advice that a “tactical choice” needed to be made, and on Mr Ward’s advice that in turn was based upon his own independent consideration of the question of the effectiveness of the service of the First Payment Claim. It also relied on Mr Ward’s further advice that the fact that the First Payment Claim was described as being a “final” payment claim might provide a “technical reason” for an adjudicator to make a decision adverse to the Builder. The detail of the advice given by Mr Ward to the Builder in his lengthy and comprehensive 8 August 2022 email together with the terms of Mr Ward’s subsequent conversation with Mr O’Rourke and Mr Hoye show that it was on Mr Ward’s advice, and not the assertions in the First Payment Claim, that the Builder relied when deciding on the course to be adopted.

24. [56]

    For those reasons, I am not persuaded that any misleading or deceptive conduct on the part of the Principal caused the Builder to act to its detriment.

Section 13(1C) of the Act

1. [57]

   Section 13(1C) of the Act provides:

2. [58]

   The question that divided the parties was whether, on its proper construction, this subsection means that once a construction contract has been terminated, a party seeking a payment may serve only one payment claim thereafter.

3. [59]

   The relevance of such a conclusion here would be, as I have found that the First Payment Claim was effectively served, that service of the Second Payment Claim was not effective to enliven the operation of the Act.

4. [60]

   Section 13(1C) was introduced into the Act pursuant to the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) (“the 2018 Act”), evidently to overcome the problem created by the absence of a reference date post-termination in the sense discussed by the High Court in Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd. [15]

5. [61]

   The 2018 Act amended s 13(5) of the Act.

6. [62]

   Previously, s 13(5) of the Act provided:

7. [63]

   By the amendment effected by the 2018 Act, s 13(5) now provides:

8. [64]

   As the Builder pointed out, s 13(5) provides that, except as otherwise provided for in the contract, a claimant “may only serve one payment claim” in any particular month, whereas in s 13(1C) it is simply stated that, when a construction contract has been terminated, “a payment claim” may be served on and from the date of termination.

9. [65]

   That is, although the legislature refers in s 13(5) to a claimant being permitted “only” to serve “one payment claim” in the circumstances there posited, s 13(1C) provides that, on termination, “a” payment claim may be served on and from termination.

10. [66]

    There is a presumption that different words used within an Act have different meaning although the strength of such must depend on the context. [16]

11. [67]

    The context here suggests that the Parliament intended the two subsections to operate in the same way, despite the different language used.

12. [68]

    Subsections 13(1C) and (5) are directed to different circumstances. Subsection 13(1C) concerns the case of a contract that has been terminated. Subsection 13(5) concerns a contract that is on foot. The evident and understandable object of s 13(5) is to prevent a claimant from making more than one payment claim in any one month, and thus seeks to achieve a result similar to the former “reference date” provisions.

13. [69]

    The Parliament’s intention in relation to s 13(1C) was made clear in the Second Reading Speech relating to the 2018 Act. The Minister said:

14. [70]

    The Minister’s reference to the proposed s 13(1C) establishing an entitlement to make “a” payment claim and his reference, in the next sentence, to “the” payment claim makes clear that it was the Parliament’s intention that, after a construction contract has been terminated, only one payment claim may be served.

The Second Payment Claim was of no effect

1. [71]

   As I have concluded that the First Payment Claim was served on the Principal on or about 18 July 2022, and as I have concluded that the effect of s 13(1C) of the Act is that only one payment claim may be served after the termination of the construction contract, it follows that it was not open to the Builder to serve the Second Payment Claim, and that service of the document was thus not effective to enliven the provisions of the Act.

2. [72]

   It follows that the Adjudicator had no jurisdiction to adjudicate on the matter and that his decision must for that reason be quashed.

The Adjudicator’s reasons

1. [73]

   In those circumstances, it is not necessary for me to consider the parties’ submissions concerning the reasons given by the Adjudicator. However, in deference to the careful submissions made by the parties about this matter I will do so.

2. [74]

   In the Second Payment Claim, the Builder claimed $822,884.38 for contract works and variations:

3. [75]

   The Second Payment Schedule scheduled the amount payable as “$nil” and stated that:

4. [76]

   The Second Payment Schedule continued:

5. [77]

   The Principal made no further submissions in the Payment Schedule about the Builder’s claim for contract works and variations.

6. [78]

   In the Adjudication Application, the Builder made submissions about the structural steel issue and continued:

7. [79]

   Later in the Adjudication Application, the Builder said:

8. [80]

   In the Adjudication Response, the Principal made further submissions in respect of the structural steel issue, [18] but did not cavil with the submissions set out above.

9. [81]

   In the Adjudication Determination, the Adjudicator made a number of observations concerning the s 13(1C) issue, with which it is not necessary for me to deal.

10. [82]

    The Adjudicator dealt with the structural steel issue on the basis favourable to the Principal and about which the Principal makes no complaint.

11. [83]

    The Adjudicator dealt with the contract works and variation issues as follows.

12. [84]

    As to the Builder’s claim for contract works, the Adjudicator said:

13. [85]

    In relation to the variations, the Adjudicator stated:

14. [86]

    In determining an adjudication application, an adjudicator must consider the matters specified in s 22(2) of the Act, including the provisions of the Act, the provisions of the contract, the payment claim and payment schedule, and all submissions and relevant documentation provided by the parties.

15. [87]

    By s 22(3)(b) of the Act, the adjudicator must “include the reasons for the determination”.

16. [88]

    The authorities establish that the reasons given by an adjudicator must:

17. [89]

    If an adjudicator does not act consistently with these authorities, the adjudicator may reveal that he or she has not exercised his or her statutory function under the Act and thereby committed jurisdictional error.

18. [90]

    Allowance must be made for the constrained time within which an adjudicator must exercise their statutory function, particularly where a large amount of material must be digested. In this case, as the adjudicator noted, the Second Payment Claim comprised some 1,300 pages.

19. [91]

    Thus, it has also been said that, when considering an adjudicator’s reasons, the Court should not adopt an overly fine “toothcomb approach” or view the language of the decision-maker through a “prism of legal concepts”. [24]

20. [92]

    Here, in relation to both contract works and the variations, the Adjudicator recorded that the Builder had provided “various documents to support its entitlement to the amounts claimed”.

21. [93]

    In relation to the contract works claim, as I have said, the Adjudicator noted the volume of material provided.

22. [94]

    The Adjudicator noted the Builder’s correct submission that in both its Payment Schedule and Adjudication Response, the Principal had, relevantly, only disputed the Builder’s structural steel claim.

23. [95]

    That did not mean that the Adjudicator could uncritically accept the balance of the claims made by the Builder. However, this is not a circumstance where the Adjudicator, without reasons, preferred one party’s view to another. I do not see this as a case where the Adjudicator simply allowed the Builder’s claim “in full default of any valid submission against it”. [25] Rather, the Adjudicator, correctly in my view, and as the Builder contended, read the Principal’s Payment Schedule and Adjudication Response as a “concession and admission” that, otherwise than in relation to structural steel, the Builder was entitled to the amounts it claimed. In fact, the bulk of the Principal’s contentions in both the Payment Schedule and Adjudication Response were directed to the circumstances of termination of the Contract (in circumstances where the Principal had accepted in terms that, for the purposes of its Payment Schedule, it accepted that the Contract had been validly terminated), and to the question of whether the First Payment Claim had been validly served and whether s 13(1C) of the Act had the effect that the Second Payment Claim, and thus the Adjudication Application, were of no effect.

24. [96]

    In those circumstances, and accepting the brevity with which the Adjudicator expressed his conclusions, I am not persuaded that he failed to perform his statutory function.

25. [97]

    However, the point is moot because the adjudicator had no jurisdiction to deal with the matter in any event.

Conclusion

1. [98]

   The Principal’s challenge to the Adjudication Determination succeeds.

2. [99]

   The parties should confer and agree on the orders necessary to give effect to these reasons.

3. [100]

   As to costs, although the Principal has been successful, that success is born of its maintenance of an argument before me concerning service of the First Payment Claim which is the opposite of the claim it made when it served the First Payment Schedule. In those circumstances, I will hear submissions as to why, notwithstanding its success, it should not pay the Builder’s costs of the proceedings. The parties should agree on a timetable for written submissions on the topic.