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Why take a chance with the method of service or lodgement of a Payment Claim, Payment Schedule, Adjudication Application, or Adjudication Response under the Building and Construction Industry Security of Payment Act 1999 (NSW)?

05/08/2020

In litigation, it is important to not expose your clients to risks that can be easily avoided and to not fight battles that do not need to be fought.  Litigation is costly and risky enough.

A recent illustration of the above is as follows:

We acted for an Owner of two properties, who had entered into a Contract with a Builder to develop them.

A dispute arose and the Building Contract was terminated.  Thereafter:

  • The Builder served a Payment Claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) on our client on 31 March 2020 claiming the sum of $474,779.87; and
  • Our client served a Payment Schedule on the Builder on 15 April 2020 submitting that no amount was payable to the Builder.

Section 17 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) provides the procedure to make an Adjudication Application.

An Adjudication Application is required to be made to an Authorised Authority under the SOP Act.

An Adjudication Application must be in writing and must be made within a specified time as set out in the SOP Act.  A copy of an Adjudication Application must be served on the respondent concerned.

In the recent case it was accepted between the parties that based on the above, the last day for the Builder to make an Adjudication Application was 29 April 2020.

What took place was as follows:

  • At 11:14pm on 29 April 2020, the solicitor for the Builder sent an email to an Authorised Nominating Authority which contained a link to an externally hosted website from which a copy of the Adjudication Application could be downloaded by the Authorised Nominating Authority.  
  • No one saw the email at the Authorised Nominating Authority on 29 April 2020 and in fact, it was not until the next morning on 30 April 2020 that it was seen by an employee at the Authorised Nominating Authority and then the Adjudication Application was downloaded from the link provided.
  • At 11:17 PM on 29 April 2020, the solicitor for the Builder sent an email to our client purportedly serving a copy of Adjudication Application in the same manner as the Solicitor lodged it with the Authorised Nominating Authority - by sending a link to an externally hosted website from which it could be downloaded by our client.  Our client did not see the email until the morning of 30 April 2020, at which point he downloaded the Adjudication Application.

Section 31 of the SOP Act provides for the manner of service of documents.

Questions then arose as to whether the Adjudication Application had been made within time, and as to whether it had been served within time.

In the Adjudication Response subsequently served in time, our client submitted that lodgement of the Adjudication Application with the Authorised Nominating Authority had been affected within time and consequently, that the Adjudication Application was invalid and should be dismissed on this basis.

The Adjudicator called for submissions from the parties on this issue (and a few other issues) and asked for the agreement of the parties to extend the time for making the Adjudication Determination, to which the parties agreed.

The parties then put in the rival submissions on this issue.

On behalf of the Owner we submitted that:

  • The Application was not attached to the email sent to the Authorised Nominating Authority on 29 April 2020 and therefore the requirements of the Building and Construction Security of Payment Act 1999 (NSW) were not satisfied until the Adjudication Application was actually downloaded from the Google Drive server by the Authorised Nominating Authority on 30 April 2020.
  • The relevant provisions of the Electronic Transactions Act (2000) NSW sought to be relied upon by the Builder did not apply because the Google Drive address was not nominated by the Authorised Nominating Authority and the Google Drive location where the Adjudication Application was stored was not the Authorised Nominating Authority’s address.

On behalf of our client relied upon various cases including:

  • The decision in Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd and Anor, which was followed by the New South Wales Supreme Court decision in Parkview Constructions Pty Ltd v Total Lifestyle Windows Pty Ltd t/a Total Concept Group, made it clear that an Adjudication Application uploaded to a third party server such as Google Drive is not made until the document is downloaded by the Authorised Nominating Authority.

On behalf of our client we submitted that:

  • Bauen Constructions Pty Ltd v Sky General Services Pty Ltd & Anor (“Bauen v Sky General”) is distinguishable because it was dealing with an email that could be accessed and downloaded from the Authorised Nominating Authority’s server.
  • Conveyor v Basetec was also followed in The Trust Company (Australia) Ltd atf the WH Buranda Trust v Icon Co (Qld) Pty Ltd & Anor and Clarke v Australian Computer Society Incorporated.

The Builder sought to rely upon by relating to service by email.

Ultimately, the Adjudicator found that making the Adjudication Application had been affected within time and was heavily reliant by way of analogy on Bauen Constructions Pty Ltd v Sky General Services Pty Ltd & Anor.  This is a matter that could be subject to challenge.

The Adjudicator determined the balance of the Adjudication Application and determined that a sum of only $72,042.06 out of the total Payment Claim amount of $474,779.87 was payable by the Owner. This represented just over 15% of the amount claimed.

The Adjudicator determined that his fees in the sum of $19,338.00 should be borne equally between the Owner and the Builder.

Our client could have challenged the determination as to the date of making the Adjudication Application being by way of an action in the Supreme Court of New South Wales.  However:

  • The costs of a Supreme Court to challenge would be significant in light of the amounts that were in issue; and would do no more than resolve an interim right in relation to the obligation of the Owner to pay the sum of $72,042.06 and the half share of the Adjudicator’s costs; and
  • Adjudications under the Building and Construction Security of Payment Act 1999 (NSW) are only in respect of interim rights to payment, which can be subsequently adjusted by claims by either party.  For example the Builder could have commenced a claim for $474,779.87 claimed in the Payment Claim.

The overall dispute was able to be resolved between the parties on a final basis without the issue as to service being tested in the Supreme Court and without further litigation on a basis which was very satisfactory to the likely outcome for our client if the matter had been further litigated.

The dispute was able to be resolved as a result of the Builder not making the Adjudication Application well within the time allowed, and in light of the Builder only succeeding in 15% of his claim raised doubts as to the utility of the claim which allowed the Owner to settle on a favourable basis.

However, what this does is highlight how this entire dispute as to service could have been avoided if the Owner had taken a cautious step to ensure the application was made in time.  The Owner would have employed a conventional means of lodging and serving the Adjudication Application rather than relying on more modern electronic service to attempt to make the application or had made it the day before the last date for it to be made.

If you are involved in a building dispute great care needs to be taken as to the timing and methodology of service of documents irrespective of the nature of the document to be served, be it an Adjudication Application/Response or Payment Claim/Schedule or Notice under a Contract.  At Watson & Watson Lawyers our experienced Building and Constructions Lawyers are alert to this very important aspect which has the potential to negate a successful claim.  Please contact Richard Watson Accredited Specialist Building and Construction or his Personal Assistant Shereen Da Gloria to discuss your concerns and seek timely advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.

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