(4) The adjudication application lodged on 20 August 2003 complies with all the requirements of section 17(3) in so far as those requirements relate to the form of the application, who it must be made by, and to whom it must be made.
17 The difference between the Builder and Subcontractor concerns whether the adjudication application made on 20 August 2003 was made in time.
18 The Builder contends that the payment schedule which was served on 4 August 2003 was a "payment schedule under Division 1" in which the scheduled amount was less than the claimed amount. Hence, it says that the application for adjudication is one made under section 17(1)(a)(i). Thus, the Builder argues, section 17(3)(c) requires the application to be made within 10 business days after the Subcontractor received the payment schedule. The payment schedule was served on 4 August 2003; 10 business days after 4 August 2003 is 18 August 2003; hence the adjudication claim made on 20 August 2003 is two days too late.
19 The Subcontractor contends that the application for adjudication is one made under section 17(1)(b). Thus, the Subcontractor says, section 17(3)(e) applies. The "end of the 5 day period referred to in sub section (2)(b)" is arrived at by starting from 31 July 2003 (the day when the Subcontractor gave notice, under section 17(2)(a) of intention to apply for adjudication of the payment claim), adding on five business days from 31 July 2003 (which takes one to 7 August 2003), and then adding on a further 10 business days (which takes one to 21 August 2003). Thus, the Subcontractor says, the adjudication application of 20 August 2003 was made within time.
Assistance from a Purposive Construction?
20 Section 3 of the SOP Act says;
"3. Object of Act
(1) The object of this Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.
(2) The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.
(3) The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves:
(a) the making of a payment claim by the person claiming payment, and
(b) the provision of a payment schedule by the person by whom the payment is payable, and
(c) the referral of any disputed claim to an adjudicator for determination, and
(d) the payment of the progress payment so determined.
(4) It is intended that this Act does not limit:
(a) any other entitlement that a claimant may have under a construction contract, or
(b) any other remedy that a claimant may have for recovering any such other entitlement."
21 Part 2 of the SOP Act ensures that, even if a construction contract does not make provision for the making of progress payments, a person who has undertaken to carry out construction work under the contract, or who has undertaken to supply related goods and services under the contract, is entitled to periodical progress payments, to interest on unpaid progress payments, and to some rights of security concerning unpaid progress payments. Further, the right to a progress payment exists even if the person who is obliged to make the progress payment has not itself been paid money by some third party.
22 Part 3 of the SOP Act sets out a procedure for recovering progress payments, whereby payment claims can be made periodically, and the person on whom the payment claim is made has the opportunity to reply to that claim with a payment schedule under section 14. There is no obligation for a person on whom a payment claim is served to reply with a payment schedule. If no payment schedule is served, however, section 15 provides for the person on whom the payment claim was served to be liable to pay the amount of that payment claim. That liability is one which the claimant can enforce as a debt in a court, or through the making of an adjudication application.
23 If a respondent chooses to provide a payment schedule which acknowledges that some money is owed to the claimant, and the respondent does not pay the amount of money it acknowledges is owed, the claimant has the same sort of rights, concerning the amount which was acknowledged but not paid, as it would have had concerning the amount claimed if no payment schedule has been served at all.
24 If a payment schedule is served, which disputes all or part of the claimed amount, the claimant can also apply for adjudication concerning the disputed amount. Adjudication is required, under section 21(3) to be determined as expeditiously as possible, and in any case within 10 business days after the date on which the adjudicator notified the claimant and respondent of his or her acceptance of the application, or such further time as the claimant and the respondent might agree. Once an adjudicator's determination has been served, if the determination is that the respondent is required to pay an adjudicated amount, the respondent must pay that amount within five business days of the determination being served, or such later date as the adjudicator has determined. If payment is not made within that time, the claimant can request an adjudication certificate (section 24(1)) which may then be filed as a judgment for debt in a court (section 25(1)).
25 A fundamental feature of the legislation is that, apart from the fact that parties to a construction contract cannot contract out of the rights given by the legislation (section 34) nothing in Part 3 of the Act (section 13-32 inclusive) affects any of the rights that parties to a construction contract have (section 32(1)). The concern of the Act is with maintaining the cash flow of claimants, by enabling them to recover quickly amounts which the adjudication process says they are entitled to. It is possible for the person who pays the amount of money which an adjudication has found due to seek to reclaim that money, in court proceedings which decide what the ultimate legal rights of the parties are. An evident purpose of the Act is that, if there is to be such litigation, it will start from a position where the claimant has been paid the amount which the adjudication process has decided should be paid.
26 The purposes which can be ascertained from considering the Act as a whole would be equally well advanced by the contention of the Builder as by the contention of the Subcontractor.
Assistance from Extrinsic Aids to Construction? - Second Reading Speech
27 Section 17 of the SOP Act was completely replaced by the amendment which came into effect on 3 March 2003. The second reading speech for the Building and Construction Industry Security of Payment Amendment Bill 2002 was given in the Legislative Assembly on 12 November 2002 (Hansard page 6541). In his speech the Minister said:
"The main purpose of the Act is to ensure that any person who carries out construction work, or provides related goods or services, is able to promptly recover progress payments. The Government wanted to stamp out the practice of developers and contractors delaying payment to subcontractors and suppliers by ignoring progress claims, raising spurious reasons for not paying, or simply delaying payment. …
The Act was designed to ensure prompt payment and, for that purpose, the Act set up a unique form of adjudication of disputes over the amount due for payment. Parliament intended that a progress payment, on account, should be made promptly and that any disputes over the amount finally due should be decided separately. The final determination could be by a court or by an agreed dispute resolution procedure. But meanwhile the claimant's entitlement, if in dispute, would be decided on an interim basis by an adjudicator, and that interim entitlement would be paid …
Cash flow is the lifeblood of the construction industry. Final determination of disputes is often very time consuming and costly. We are determined that, pending final determination of all disputes, contractors and subcontractors should be able to obtain a prompt interim payment on account, as always intended under the Act …
… there will be instances when the progress payment determined by the adjudicator will be more or less than the entitlement finally determined to be due under the contract. However, it is better that progress payments be made promptly on an interim basis, assessed by an independent party, rather than they be delayed indefinitely until all issues are finally determined.
Presently, when a respondent fails to pay the claimant by the due date for payment under the contract, the claimant's only recourse to enforce payment is to commence proceedings in a court. The Bill will give the claimant another option. The claimant will be able to opt to have an adjudicator determine the amount of the progress payment that is due. This is an "optional adjudication" . The claimant will still be able to proceed to adjudication earlier if the respondent provides a payment schedule and the scheduled amount is less than the amount claimed. The benefit to the claimant of proceeding with an optional adjudication rather than commencing proceedings in a court is that the claimant will then be able to use the adjudication certificate to obtain judgment expeditiously and without a court hearing. The claimant will be able to initiate an optional adjudication when the respondent fails to provide a payment schedule within time and fails to pay the amount claimed, or the respondent provides a payment schedule but fails to pay the whole of the scheduled amount."
28 While the Minister's statement in the second reading speech clearly states the general purposes which the Bill was seeking to achieve, those statements of general purpose do not assist in resolving the point of fine detail upon which this case turns.
Assistance from Extrinsic Aids to Construction? - The Departmental Booklet
29 The Builder tendered a booklet entitled "Government Information Kit" published in March 2003 as a guide to the Act. It includes an "adjudication application checklist" which says:
"In accordance with section 17 of the Act, the time for lodging an adjudication application is: …
c. where the claimant did not receive an initial payment schedule within 10 business days and the full amount of the payment claim was not paid on the due date for payment - .
i. the claimant has 20 business days from the due date for payment to notify the respondent of the claimant's intention to apply for adjudication; and
ii. the respondent has 5 business days to provide a payment schedule; and
iii. the claimant has 10 business days after receipt of the payment schedule to make the application. If the respondent does not provide a payment schedule, the application must be made within 10 business days of the expiry of the 5 business days period provided to the respondent."
30 The Builder says that this is something I should take into account as an aid to construction.
31 The Interpretation Act 1987 section 34(1) says:
"34. Use of extrinsic material in the interpretation of Acts and statutory rules
(1) In the interpretation of a provision of an Act or statutory rule, if any material not forming part of the Act or statutory rule is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material:
(a) to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision (taking into account its context in the Act or statutory rule and the purpose or object underlying the Act or statutory rule and, in the case of a statutory rule, the purpose or object underlying the Act under which the rule was made), or
(b) to determine the meaning of the provision:
(i) if the provision is ambiguous or obscure, or
(ii) if the ordinary meaning conveyed by the text of the provision (taking into account its context in the Act or statutory rule and the purpose or object underlying the Act or statutory rule and, in the case of a statutory rule, the purpose or object underlying the Act under which the rule was made) leads to a result that is manifestly absurd or is unreasonable."
32 Section 34(2) goes on to give a list of material that may be considered in interpretation of a provision of an Act. A booklet like the Government Information Kit does not fall within the list in section 34(2). Neither do I regard it as falling within section 34(1). There is no reason to believe that the contents of the Kit have at any time come to the attention of Parliament, let alone been taken into consideration by Parliament in deciding what to include in the SOP Act.
33 The portion I have quoted from the Kit is, in any event, inconsistent with another extract from the Kit (information sheet 2, page 4) which says:
"If you did not receive a payment schedule and decide to make an adjudication application, you must give the respondent an opportunity to provide a payment schedule.
In such circumstances you must, within 20 business days after the due date for payment, give the respondent notice that the respondent has 5 business days to serve you with a payment schedule. You then have another 10 business days to make an adjudication application after the end of the 5 business days period provided to the respondent to serve the payment schedule."
34 It is the extract from the Kit which I have just quoted which gives the correct construction of the legislation, not the extract which I have first quoted.
The Correct Construction
35 The Subcontractor is correct in the construction of the Act for which it contends.
36 The question of construction hinges on what is meant by the expressions "provides a payment schedule under Division 1" in section 17(1)(a), and "fails to provide a payment schedule to the claimant under Division 1" in section 17(1)(b). Each of those expressions contains a syntactic ambiguity. The ambiguity concerns whether "under Division 1" is an adjectival phrase describing "payment schedule", or an adverbial phrase qualifying "provides" or "fails to provide".
37 The definition of "payment schedule" in section 4 requires one to identify what is "a schedule referred to in section 14". The sub sections in section 14 have differing functions. Section 14 (1) is in part a facultative provision - it creates the possibility of an action being taken in the law, namely "providing a payment schedule to the claimant" which will have legal consequences under the new structure for creating legal rights which the Act brings into existence. Section 14(1) also by implication states two characteristics of a "payment schedule", namely that it is something which is provided by a respondent to a claimant, and that it is provided after a payment claim is served. Section 14(2) and (3) set out other characteristics which a payment schedule must have. Section 14(4) states a legal consequence of a respondent failing to provide a payment schedule.
38 It is only section 14(1)(2) and (3), out of all the provisions in the Act, which state characteristics which a payment schedule needs to have. Section 14 is in Division 1 of Part 3 of the Act. If the words "under Division 1" in section 17(1)(a) and section 17(1)(b) were an adjectival phrase describing "payment schedule", the words "under Division 1" would be accurate (in that it is Division 1 which sets out the characteristics of the payment schedule), but redundant - section 17(1)(a) and (b) would mean exactly the same even if the words "under Division 1" did not appear in them.
39 If "under Division 1" is an adverbial phrase qualifying "provides" or "fails to provide" then it looks to whether a payment schedule has been provided in the circumstances in which Division 1 contemplates provision of a payment schedule. Division 1 sets out, in section 14(4) and 15(1) and (2) the consequences of a payment schedule not being provided within 10 business days after the payment claim is served those subsections could not state what counts as the payment schedule being provided under Division 1. I do not regard sections 14(1), 15(1) or 15(2) as stating what is meant if a payment schedule is provided "under Division 1". However section 16 sets out the consequences which flow if a payment schedule is provided within 10 business days after the claim is served. If a payment schedule is provided within 10 business days after the payment claim is served, that payment schedule is one which is provided "under Division 1".
40 There is provision in the Act, outside Division 1, for a payment schedule to be provided in circumstances other than within 10 business days after a payment claim is served. Section 17(2) sets out those other circumstances. Thus, if "under Division 1" is treated as an adverbial phrase which qualifies "provides" or "fails to provide" it is capable of making a real distinction - namely that it is section 17(1)(a) which is attracted if the respondent has provided a payment schedule with 10 business days after the payment claim is served, and section 17(1)(b) which is attracted if the respondent does not provide a payment schedule within those 10 business days. A construction of the Act which gives the words "under Division 1" work to do is to be preferred to a construction which gives them no work to do. And there is no strained or artificial use of language if "under Division 1" is construed as an adverbial phrase.
41 This construction fits with other provisions of the Act. Section 15(2)(a)(ii) contemplates that if no payment schedule has been provided within 10 business days after a payment claim is served, and in consequence the respondent has become liable to pay the claimed amount under section 14(4), and has not paid all of it, the claimant may make an adjudication application under section 17(1)(b). Section 17(2) says that, as a precondition to making an application under section 17(1)(b) the respondent must be specifically notified of the claimant's intention to apply for adjudication of the payment claim, and given an opportunity (which, in the circumstances, must be a further opportunity, beyond the 10 business days after the payment claim was served) to provide a payment schedule within five business days of receiving the claimant's notice. If the contention of the Builder were right, then, if that opportunity were availed of, and a payment schedule was served, the adjudication which resulted would be one under section 17(1)(a). Yet that result is inconsistent with what section 15(2)(a)(ii) expressly provides, namely that the adjudication application will be one under section 17(1)(b).
42 The construction which seems to me to be the correct one is also consistent with section 17(3). Section 17(3)(c), (d) and (e) set out three different circumstances in which an adjudication application may be made, and sets out the time for making of each such type of application. It gives a coherent reading of these provisions if, every time a respondent has not provided a payment schedule within 10 business days after the payment claim is served, but has been given the opportunity, under section 17(2) to provide a payment schedule at a later date, the application for adjudication is made within 10 business days after the end of the five day period.
43 For all these reasons, I conclude that, in the present case, the application was commenced within time.
44 The Subcontractor submitted that, if I was against its construction of the legislation, this was still not an appropriate case in which to make an order in the nature of certiorari. In light of the conclusion I have come to, I need not consider that submission.
Orders