Veer Build Pty Limited v TCA Electrical and Communication Pty Ltd

The plaintiff and the first defendant entered into a contract in August 2014 whereby the first defendant agreed to carry out certain construction work for the plaintiff at the Hoyts Cinema complex at Broadway.

On 7 January 2015 the first defendant served a payment claim upon the plaintiff pursuant to the Building and Construction Industry Security of Payment Act (1999) (NSW) (“the Act”). The payment claim was made in the sum of $135,262.43. On 19 January 2015 the plaintiff provided a payment schedule which indicated that, for various reasons, the plaintiff did not agree to pay any part of the claim.

The first defendant sought adjudication of the payment claim, and the second defendant was appointed as the adjudicator. On 20 February 2015 the second defendant issued a determination in which it was determined that the plaintiff should pay the first defendant the sum of $124,197.53.

By a Summons filed on 18 March 2015, the plaintiff seeks a declaration that the adjudication determination made by the second defendant is void, and an order in the nature of certiorari that the determination be quashed.

The plaintiff’s primary contention is that the payment claim upon which the determination is based was invalid as it was made contrary to the prohibition contained in s 13(5) of the Act, against serving more than one payment claim in respect of each reference date under a construction contract. The plaintiff also raises a complaint that it was denied procedural fairness by the second defendant. Certain other arguments were not pressed.

In brief, it was submitted by the plaintiff that the work the subject of the payment claim was work carried out in October and November 2014, and that such work had previously been the subject of payment claims in respect of reference dates of 31 October 2014 and/or 30 November 2014. The plaintiff contended that it was irrelevant that some further work may have been carried out by the first defendant in December 2014. Such work was not the subject of the payment claim and no further reference date arose. The payment claim was merely a repeat of earlier payment claims.

The first defendant did not concede that the payment claim was not a claim in respect of any work carried out in December 2014. It was submitted that, in any case, such work gave rise to a further reference date (of 31 December 2014) upon which to base the payment claim. The first defendant further submitted that to the extent that there were any earlier payment claims under the Act, they did not use 30 November 2014 as a reference date and that date thus remained available as a reference date for the payment claim.

The second defendant filed a submitting appearance, submitting to any order save as to costs.

There is no dispute that in August 2014 the plaintiff and the first defendant entered into a construction contract whereby the first defendant agreed to carry out construction work for the plaintiff. The contract was made when the first defendant’s quotation in the sum of $171,650 (excluding GST) was accepted by the plaintiff’s purchase order No. 1672.

The contract made no provision with respect to the dates upon which progress payments may be claimed under the contract. Accordingly, s 8(2)(b) of the Act operated to make the last day of the named month in which construction work was first carried out, and the last day of each subsequent named month, to be reference dates in relation to the contract.

By October 2014, a progress claim in the amount of $71,973.16 (excluding GST) had been claimed by the first defendant and paid to it.

On 27 October 2014, Mr Southers of the first defendant sent an email to Mr Ugov of the plaintiff. The subject was stated to be “Hoyts Broadway Claim 2 – Veer Group”. The email attached a certificate of currency from an insurer, a sub-contractor’s statement, a spreadsheet dated 25 October 2014 and headed “Progress Claim” and “Claim No.2”, and invoice No. 616 dated 25 October 2014 in the sum of $114,046.84 (plus GST). The invoice included a statement that it was a payment claim made under the Act. The spreadsheet included contract items and variations totalling $114,046.84. The email itself stated:

On 10 November 2014, Mr Ugov sent an email to Mr Southers in response. The email included the following:

Mr Southers sent an email in response to Mr Ugov shortly thereafter on 10 November 2014. This email included the following:

On 18 November 2014, Mr Southers sent a further email to Mr Ugov. The subject was stated to be “progress calim [sic] 2 Hoyts October 14 revised”. Attached to the email was a revised spreadsheet in relation to Claim No.2 which contained different figures to those contained in the spreadsheet sent on 27 October 2014, but which was otherwise in the same terms. The revised spreadsheet contained contract items and variations totalling $106,786.79. The covering email included the following:

On 25 November 2014, Mr Ugov sent an email response to Mr Southers in the following terms:

Mr Southers sent a further email to Mr Ugov on 27 November 2014. The subject was stated to be “Hoyts Oct claim 2 rev 3 and provisional for claim 3”. This email attached a further revised spreadsheet in relation to Claim No.2 which included contract items and variations totalling $89,121.29. The email also attached a spreadsheet dated 25 October 2014 and headed “Claim No.3”. It contained contract items and variations totalling $32,233.55. The covering email included the following:

A further email was sent by Mr Southers to Mr Ugov on 1 December 2014. The subject was stated to be “Hoyts Broadway Claim 2 – Veer Group”. This email attached a certificate of currency from an insurer, and a sub-contractor’s statement. It also attached the further revised spreadsheet in relation to Claim No. 2 which included contract items and variations totalling $89,121.29, and a revised version of invoice No. 616 dated 25 October 2014. The invoice was now in the sum of $89,121.29 (excluding GST). The invoice still contained the statement that it was a payment claim made under the Act. The covering email included the following:

Mr Ugov sent an email in response on 8 December 2014. The subject was stated to be “Hoyts Broadway October 2014 Claim”. The email included the following:

Mr Ugov also referred in his email to various alleged defects, and to costs incurred as a result of a fire which was stated to be the responsibility of the defendant.

The payment claim that ultimately became the subject of adjudication was made by the first defendant on 7 January 2015. The total amount claimed was $135,262.43 (including GST). That amount was equal to the total of two invoices that formed part of the payment claim. The first invoice (invoice No. 616 dated 25 October 2014) was in the sum of $89,121.29 (excluding GST). The second invoice (invoice No. 634 dated 25 November 2014) was in the sum of $33,844.55 (excluding GST). Invoice No. 616 was in identical terms to the revised invoice No. 616 that accompanied the email sent by Mr Southers to Mr Ugov on 1 December 2014. There is no evidence that invoice No. 634 had been sent previously to the plaintiff. The amount of the invoice does, however, reflect the “Balance to Claim” amount contained in the spreadsheet that accompanied the email sent by Mr Southers to Mr Ugov on 1 December 2014.

The payment claim made on 7 January 2015 was variously described as “Final Payment Claim 4”, “Progress Claim No. 4 (final progress claim)”, and “Claim No. 4”.

The plaintiff provided its payment schedule in response to the payment claim on 19 January 2015. In essence, it indicated that for various reasons it proposed to make no payment to the first defendant.

On 3 February 2015 the first defendant made an application for adjudication in respect of the payment claim. The adjudication application specified 31 December 2014 as the reference date, or “date to which progress value is calculated”. It was further stated that 31 December 2014 was the reference date as it was “the last day of the named month in which works were carried out on site”. The adjudication application also contained statements that the “original contract works” (including variation works) had been completed by the first week of November 2014, and that all defects on a defects list given on about 12 November 2014 had been attended to.

Following the appointment of the second defendant as the adjudicator, the plaintiff provided its adjudication response on 12 February 2015. The adjudication response stated that the adjudication application was incompetent in circumstances where, inter alia, “the Claimant had made multiple repetitious payment claims for the same reference date” and “the Claimant served the Payment Claim after the cessation of work where there was no reference date”. The plaintiff further stated that “the Claimant completed its works that were practically complete on 4 November 2014, which was also the handover date”.

On 13 February 2015, the adjudicator sought further submissions from the parties in relation to various issues, including:

On 16 February 2015 the first defendant, in its response to that request, took issue with the suggestion that no further works were carried out after 4 November 2014. It provided evidence to the effect that, following a written request made by the plaintiff on 4 December 2014, it had returned to the site on 5 December 2014 and carried out additional works.

On 17 February 2015 the plaintiff, in its response to the arbitrator’s request, advanced reasons in support of its contention that the first defendant was making “multiple repetitious payment claims”. It stated that in circumstances where the first defendant completed its work on 4 November 2014, the only available reference date was 30 November 2014, which date was the subject of the claim made on 1 December 2014. The plaintiff further stated that there was no evidence that the payment claim included “different and new work after the reference date of 30 November 2014”. The plaintiff, which had received the first defendant’s response of 16 February 2015, did not explicitly address the first defendant’s submission concerning returning to the site on 5 December 2014 at the request of the plaintiff.

The second defendant issued his adjudication determination on 20 February 2015. He determined that the first defendant should be paid an amount of $124,197.53 (including GST). The second defendant’s reasons included the following:

The plaintiff contends that the payment claimed served on 7 January 2015 offends s 13(5) of the Act as a second payment claim served in respect of one or more reference dates (being 31 October 2014 or 30 November 2014). It is said that one or other of those dates was the reference date in relation to payment claims made previously by the first defendant in respect of the work it carried out in October and November 2014. It is then said that the payment claim served on 7 January 2015 was in respect of one or other of those reference dates because no claim was made for work that was not the subject of one or other of the earlier claims.

In considering the plaintiff’s contention, it is first necessary to determine what, if any, payment claims under the Act were in fact served prior to 7 January 2015.

In my view, the first defendant served a payment claim under the Act (Claim No. 2) on 27 October 2014 for the sum of $114,046.84 (plus GST). However, this claim was withdrawn by the first defendant on 10 November 2014 in accordance with a request by the plaintiff to undertake a revision of the claim. In effect, the payment claim was withdrawn by agreement between the parties (see NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842 at [38]-[39]; Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 at [17]).

I do not think that a further payment claim was made on 18 November 2014 when Mr Southers sent the email that attached the revised spreadsheet for Claim No. 2. The terms of the email made it clear that the spreadsheet was a draft, and that if it was satisfactory, an amended invoice would be sent. It was also contemplated that the list of variations would be updated.

Neither do I think that a further payment claim was made on 27 November 2014 when Mr Southers sent the email that attached the spreadsheets concerning Claim No. 2 and Claim No. 3. As far as Claim No. 2 is concerned, the spreadsheet was evidently the product of a further revision carried out at the plaintiff’s request, and Mr Southers was looking to the plaintiff to indicate whether it was “ok”. It was not accompanied by an invoice, or any statement that it was a payment claim made under the Act. Whilst it is no longer necessary for a payment claim to contain a statement that it is made under the Act, the absence of such a statement is relevant, particularly as invoices issued by the first defendant contain the statement. As far as Claim No. 3 is concerned, the spreadsheet was said to show how such a claim “would look”, and the stated subject of the email indicated that it was provisional only.

However, a payment claim under the Act (Claim No. 2) was in my opinion served on 1 December 2014, in the sum of $89,121.29 (plus GST). This payment claim was made when Mr Southers sent the email that attached various documents, including the revised invoice No. 616. The invoice contained a statement that it was a payment claim made under the Act. It appears from the email that the claim was made even though the first defendant was unsure whether the plaintiff had found the revised Claim No. 2 “ok”.

Claim No. 2 was concerned with work carried out up to 31 October 2014. This is made clear by the terms of the parties’ communications about the claim, in particular Mr Southers’ email of 27 November 2014. Such a claim could have been served at any time in November 2014. This is because 31 October 2014 was, by the operation of s 8(2)(b) of the Act, a reference date in relation to the contract. Nevertheless, the claim was not served until 1 December 2014. By that time, another reference date in relation to the contract had arisen, namely, 30 November 2014. In my view, in the absence of a clear agreement that 31 October 2014 would be treated as the applicable reference date, Claim No. 2 should be regarded as a payment claim served in respect of the reference date 30 November 2014.

It is next necessary to consider whether the payment claim served on 7 January 2015 is itself a payment claim served in respect of the reference date 30 November 2014. If it is, then it was served contrary to the prohibition contained in s 13(5) of the Act, and is invalid (see Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; (2009) 74 NSWLR 190 at [13]-[14]; The Trustees of the Roman Catholic Church for Diocese of Lismore v T F Woollam and Son [2012] NSWSC 1559 at [49]; Kitchen Xchange v Formacon Building Services (supra) at [21]-[22]).

However, for the reasons which follow, I do not consider that the payment claim served on 7 January 2015 offended s 13(5) of the Act.

It may be accepted that at least insofar as the claim concerns the work the subject of invoice No. 616, it concerned work that was the subject of the payment claim served on 1 December 2014. Insofar as the claim concerns the work that was the subject of invoice No. 634, it appears to concern work carried out in November 2014 that could have been, but was not, the subject of the payment claim served on 1 December 2014 (or any other payment claim served prior to 7 January 2015). I therefore do not accept the plaintiff’s submission that the payment claim made on 7 January 2015 only concerned work that was the subject of earlier payment claims.

No contravention of s 13(5) of the Act is established by the mere fact that the payment claim made on 7 January 2015 includes a claim for work that was the subject of the payment claim made on 1 December 2015. Section 13(6) of the Act makes it clear that s 13(5) does not prevent a claimant from including in a payment claim an amount that has been the subject of a previous claim. The previous claim was not the subject of any adjudication, so no question of issue estoppel arises (see Dualcorp Pty Ltd v Remo Constructions Pty Ltd (supra) at [60] and [68]).

This is not a case like Dualcorp where the claimant, after completing the work and leaving the site, made a claim in respect of the work (and indeed pursued adjudication of the claim) and later repeated the very same claim. Here, the defendant made a claim in respect of work done up to 31 October 2014. After completing some further work and leaving the site, the defendant made a claim for work that included the work done up to 31 October 2104.

As mentioned earlier, s 8(2)(b) of the Act operates in this case to make the last day of the named month in which construction work was first carried out, and the last day of each subsequent named month, to be reference dates in relation to the contract. By s 21 of the Interpretation Act 1989 (NSW) “named month” means “January, February, March, April, May, June, July, August, September, October, November or December”. Accordingly, if construction work commenced in August 2014, 31 August 2014 would be a reference date in relation to the contract, as would the last day of each subsequent named month. In my opinion, 31 December 2014 thereby became a reference date in relation to the contract.

In Brodyn Pty Ltd t/as Time Cost and Quality v Davenport and Another [2004] NSWCA 394; (2004) 61 NSWLR 421 Hodgson JA (with whom Mason P and Giles JA agreed) stated at [63]:

The subsequent decisions of the Court of Appeal in Dualcorp Pty Limited v Remo Constructions Pty Ltd (supra) and Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 78 NSWLR 393 do not in my opinion require that a judge at first instance not follow this aspect of the decision in Brodyn Pty Limited t/as Time Cost and Quality v Davenport (supra) (see Allpro Building Services Pty Ltd v C&V Engineering Services [2009] NSWSC 1247 at [8] to [10]; see also Patrick Stevedores Operations No. 2 Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2014] NSWSC 1413 at [29]).

Nevertheless, it has been held that for reference dates to arise on the last day of a month pursuant to s 8(2)(b) of the Act, it is necessary that some construction work be undertaken in that month (see, for example, Grid Projects NSW Pty Ltd v Proyalbi Organic Set Plaster Pty Ltd [2012] NSWSC 1571 at [23]-[39]). Even on that basis, a reference date arose in this case on 31 December 2014. It is clear that some construction work was carried out by the first defendant in December 2014.

Accordingly, on and from 31 December 2014, the first defendant was a person entitled to a progress payment within the meaning of s 8(1) of the Act (see Southern Han Breakfast Point Pty Limited v Lewence Construction Pty Limited [2015] NSWSC 502 at [30]-[40]). 31 December 2014 was a reference date available to the first defendant to support the service of the payment claim it made on 7 January 2015. In my view it was open to the first defendant to make the claim regardless of whether the claim extended to the work done in December 2014. It was entitled to make a claim for the work done in October and November 2014 for which it had not been paid. The plaintiff’s primary contention that the payment claim was invalid is not accepted. The statutory mechanism which depends upon the existence of a valid payment claim was properly engaged. The second defendant did not lack jurisdiction to adjudicate the claim.

The remaining issue to consider is the plaintiff’s complaint that it was denied procedural fairness by the second defendant. The complaint is based upon that part of the adjudication determination in which the second defendant stated that the plaintiff did not address the first defendant’s submission that it was requested to carry out further work on 4 December 2014.

I do not think there is any substance to this complaint. As noted earlier, the plaintiff did not explicitly address the first defendant’s submission concerning returning to the site on 5 December 2014 at the request of the plaintiff. The plaintiff certainly did not contest the fact that it made a request on 4 December 2014 that the first defendant carry out further work. The second defendant’s observation to that effect was soundly based. More importantly, there is nothing to suggest that the second defendant failed to consider any submission made by the plaintiff, or otherwise denied procedural fairness to the plaintiff.

On the contrary, the evidence discloses that the adjudicator made considerable efforts, including by calling for further submissions from the parties, to understand the issues raised by the plaintiff concerning the validity of the payment claim. Further, it appears from the adjudication determination that the adjudicator read and considered those submissions in the course of reaching his conclusions.

The challenges made by the plaintiff to the validity of the payment claim and the process of adjudication have not been made out. No basis has been shown for the adjudication determination to be declared void or ordered to be quashed. The plaintiff’s Summons should be dismissed with costs.