Broadview Windows Pty Ltd v Architectural Project Specialists Pty Ltd

Supreme Court of NSW|2015-07-09|Before: McDougall J

Solicitors: Nil (Plaintiff) Richard Green Construction Lawyers (First Defendant) File Number(s): 2015/115032

Judgment (ex tempore - revised 9 july 2015)

HIS HONOUR: The plaintiff (Broadview Windows) seeks relief aimed at quashing the determination of an adjudicator (who is the third defendant). For the reasons that follow, the plaintiff has not made good its claim to that relief.

Background facts

The relevant facts are not in dispute. Broadview Windows contracted with the first defendant (APS) for APS to install windows and doors on a building site at Bellevue Park. Broadview Windows' case is that the contract was made on 21 April 2014, by acceptance on that date of an earlier quotation. Its evidence on that point is unchallenged.

The payment claims

On 24 November 2014, APS served a payment claim, so-called. It recited, among other things, that it was a "payment claim" under the Security of Payment Act. It attached the invoices of 10 and 12 August 2014, to which I have referred already.
There is no evidence that Broadview Windows provided a payment schedule in response to this payment claim.
APS sought to have its payment claim (which, for convenience, I will call "the first payment claim") adjudicated. It referred the matter to the second defendant, an authorised nominating authority. For reasons that I do not quite follow (bearing in mind the lack of a payment schedule), Broadview Windows provided an adjudication response.
The first adjudicator nominated withdrew. So too did the second adjudicator nominated. Although APS was asked whether it wished to have yet a third adjudicator nominated, it did not do so. Instead, on 23 February 2015, it served what was said to be another payment claim (the second payment claim). Again, the second payment claim attached copies of the invoices of 10 and 12 August 2014.

Adjudication

Broadview Windows provided a payment schedule. The dispute thereby constituted was referred to the second defendant for adjudication. The second defendant nominated the third defendant as the adjudicator.
Broadview Windows provided an adjudication response, which, among other things, challenged the adjudicator's jurisdiction. The challenge was based on s 13(5) of the Act.
The adjudicator decided that he did have jurisdiction. He determined the matter in favour of APS, holding that it was entitled to payment of the whole of the amount claimed together with interest and that Broadview Windows should pay the costs and expenses of the adjudication.

Challenge to the determination

The challenge that Broadview Windows makes to the third defendant's determination is limited. As framed in the Technology and Construction List Statement, the challenge is on the basis that the second payment claim must have been referable to a reference date of 31 August 2014, and that the first payment claim, likewise, must have been referable to the same reference date. In those circumstances, it is said, APS served two payment claims referable to the one reference date, in defiance of the prohibition in s 13(5) of the Security of Payment Act.
In those circumstances, Broadview Windows relies on the decision of Stevenson J in Grid Projects NSW Pty Ltd v Proyalbi Organic Set Plaster Pty Ltd [2012] NSWSC 1571 "and other similar cases". Broadview Windows says that those decisions establish that the second payment claim was invalid and, hence, that the determination based on it is void.

Relevant provisions of the Security of Payment Act

In essence, the parties' submissions traversed the reasoning of Stevenson J in Grid Projects. However, before I look at his Honour's reasons, I should set out relevant provisions of the Security of Payment Act.
The right to progress payments under a construction contract is established by s 8. The key to that right is the concept of "reference date". I set out s 8: 8. Rights to progress payments (1) On and from each reference date under a construction contract, a person: (a) who has undertaken to carry out construction work under the contract, or (b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment. (2) In this section, "reference date", in relation to a construction contract, means: (a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or (b) if the contract makes no express provision with respect to the matter - the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month.
The amount of the progress payment is to be determined in accordance with s 9. There is no need to go to s 9.
Section 13 is the first section in Pt 3 of the Security of Payment Act, which Part deals with "Procedure for recovering progress payments". Section 13 deals with payment claims. I set it out: 13. Payment claims (1) A person referred to in section 8(1) who is or who claims to be entitled to a progress payment (the "claimant") may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (2) A payment claim: (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the "claimed amount"), and (c) if the construction contract is connected with an exempt residential construction contract, must state that it is made under this Act. (3) The claimed amount may include any amount: (a) that the respondent is liable to pay the claimant under section 27 (2A), or (b) that is held under the construction contract by the respondent and that the claimant claims is due for release. (4) A payment claim may be served only within: (a) the period determined by or in accordance with the terms of the construction contract, or (b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied), whichever is the later. (5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. (6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim. (7) A head contractor must not serve a payment claim on the principal unless the claim is accompanied by a supporting statement that indicates that it relates to that payment claim. Maximum penalty: 200 penalty units. (8) A head contractor must not serve a payment claim on the principal accompanied by a supporting statement knowing that the statement is false or misleading in a material particular in the particular circumstances. Maximum penalty: 200 penalty units or 3 months' imprisonment, or both. (9) In this section: "supporting statement" means a statement that is in the form prescribed by the regulations and (without limitation) that includes a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned."
I should make it clear that the Security of Payment Act was amended by the Building and Construction Industry Security of Payment Amendment Act 2013 (NSW). The amendments did not affect either s 8 or, relevantly, (that is to say, sub-s 4 to sub-s 6 of) s 13.
It will be noted that the concept of "reference date" is central to the operation of s 13(5). There is no statutory definition of "reference date" apart from that set out in s 8(2). And that definition in terms applies only to s 8 itself. However, so it seems to me, the definition in s 8(2) must apply throughout the Act. Otherwise, important provisions, such as s 13(5), simply cannot work. I note that this was common ground before, and accepted by, Stevenson J in Grid Projects.

Authorities on s 13(5)

There are cases that hold that where a payment claim is served in defiance of s 13(5), it is a nullity. That view was expressed by Allsop P in Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190 at [8] to [14]. There have been decisions, at first instance, that follow and apply this aspect of his Honour's reasons. I hope I will not be thought to be immodest if I refer to my own decision in The Trustees of the Roman Catholic Church for the Diocese of Lismore v T F Woollam & Son [2012] NSWSC 1559, in particular at [48] to [49], and other cases that I cited in that decision.
The fundamental question, in terms of s 13(5) is whether a claimant has served more than one payment claim in respect of each "reference date" under the construction contract. Allsop P came to the view in Dualcorp, that the claimant in that case, Dualcorp, had done precisely that. This is apparent from what his Honour said at [12]. The full content of that paragraph, I set out in context (in this case, from [8] to [14]): [8] As can be seen from the Act, s 13(5) a claimant is limited to one payment claim in respect of each reference date. Section 13(6) permits, however, inclusion in another payment claim (necessarily by reference to another reference date) of an amount that has been the subject of a previous claim. Amongst other usual and uncontroversial examples, this permits the submission of cumulative payment claims by reference to later reference dates, which include an amount the subject of a previous claim. In such circumstances, if there has been an adjudication, s 22(4) will apply to require the same value to be given to such work, subject to the qualification in that subsection. [9] Here, Dualcorp, after undertaking the works, left the site in November 2007. It claimed to have substantially completed the works under the contract in November 2007. [10] A payment claim was made on 29 January 2008 attaching six invoices, four of which were dated 24 January 2008 and two of which were dated 29 January 2008. The relevant reference date was not identified on the claim or invoices. [11] On 3 March 2008, Dualcorp purported to serve a second payment claim annexing the same invoices and claiming the same amount. Again, no reference date was identified on the documentation. [12] Whether or not this was a final claim or a progress claim does not matter. The claim represented by the six invoices must have been in respect of only one reference date - either 15 December 2007 or 15 January 2008, if pursuant to Annexure A, Item 11 or the reference date pursuant to the operation of cl 8.13, if a final payment claim. In either case, there must have been one reference date under the contract or the last day of the month as provided for by the Act, s 8(2)(b). [13] I see no warrant under either the contract or the Act, s 8 for permitting a party in Dualcorp's position to create fresh reference dates by lodging the same claim for the same completed works in successive payment claims. That is not the intended operation of the last phrase of s 8(2)(b) ("and the last day of each subsequent named month"). [14] Here, the work had been done; Dualcorp, the subcontractor, had left the site; it claimed payment by six invoices; six weeks later it repeated that claim by reference to the same invoices and, in my view, in respect of the same reference date. Dualcorp was prevented from serving the second payment claim. The terms of s 13(5) are a prohibition. The words "cannot serve more than one payment claim" are a sufficiently clear statutory indication that a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment.
Whatever may have been the basis for his Honour's conclusion at [12], what is crystal clear is that in his view, there was only one "reference date", in respect of which each of the payment claims in question had been served. It was that state of affairs that, in his Honour's view, triggered the prohibition contained in s 13(5) of the Security of Payment Act.
I came to the same conclusion in T F Woollam & Son. However, I reached that conclusion specifically by reference to the terms of the contract in that case (see at [32]): Thus, the reference dates fixed by the contract are: (1) while work is being performed - those prescribed by cl 16(a); and (2) the end of the defects liability period - cl 16(d).
That was because, in my view, the contract in that case specified what the "reference dates" were. In those circumstances, the identification of the "reference dates" was to be undertaken (as I did) in accordance with s 8(2)(a) of the Security of Payment Act.
Thus, in a significant respect, there was a factual distinction between my decision in T F Woollam & Son and the facts of this case, where, it is clear, the argument is based on s 8(2)(b).

Authorities on s 8(2)(b)

Grid Projects was also a case involving s 8(2)(b). Stevenson J noted at [18] that the contract made no express provision, within s 8(2)(a), specifying the reference dates.
It is plain, from what his Honour said, at [20], that his Honour was not given any assistance in relation to the expressed "named month" in para (b). Thus, he said at [21] to [24]: [21] In my opinion, in the context in which it appears in s 8 of the Act, the expression "named month" means the month "named" in the claim for a progress payment as being the month in which the work referred to in the claim for progress payment was undertaken. [22] Thus, the "last day of the named month in which the construction work was first carried out" in this case was 30 November 2011; as construction work was first carried out in November 2011. [23] Similarly, "the last day of each subsequent named month" was the last day of each subsequent month in which work was undertaken, as named in a claim for progress payment. [24] The last month "named" in a claim for progress payment as being a month in which work was undertaken was June 2012; hence the last "reference date" to arise under the contract was the last day of that month: 30 June 2012.
In my respectful opinion, his Honour overlooked the operation of s 21 of the Interpretation Act 1987 (NSW). That definitions section provides, relevantly, that a "named month" "means January, February, March, April, May, June, July, August, September, October, November or December" when used in any Act or instrument.
In my view, when the expression "named month" is used in s 8(2)(b), it is to be given its statutorily defined meaning. Darke J considered the matter in Veer Build Pty Ltd v TCA Electrical and Communication Pty Ltd [2015] NSWSC 864. His Honour came to the conclusion at [42], with which, as will be seen, I respectfully agree, that the words "named month" are to be given their statutory meaning, as it appears from the Interpretation Act.
Thus, as it seems to me, the reasons of Stevenson J in Grid Projects are affected by what, in my respectful opinion, was a failure to give that meaning to the expression "named month". It was because his Honour considered that the "named month" must be the month in which the work was undertaken, as named in the claim for a progress payment, that he came to the conclusion that he did. I should make it perfectly clear that, on the basis of this (as I see it) erroneous meaning given to "named month", the conclusion that his Honour came to follows naturally.
The real difficulty with this approach seems to me to follow from two decisions of the Court of Appeal which, in considering s 8(2)(b), indicate that the concept of a "reference date" is not tied to the performance of work in any given month. The starting point is the Court's decision in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421. That case is best known for its holding (which no longer represents the state of the law in New South Wales) that judicial review was not available for jurisdictional error but that this Court could intervene only (by declaratory and injunctive relief) for breach of what Hodgson JA at [53] called "the basic and essential requirements", which were "laid down for the existence of an adjudicator's determination".
The earlier approach, based on the proposition that judicial review under s 69 of the Supreme Court Act 1970 (NSW) is indeed available, was re-established by Chase Oyster Bar v Hamo Industries Pty Ltd (2010) 18 NSWLR 393.
Nonetheless, in my view, nothing in Chase Oyster Bar had any impact on the other aspect for which the decision in Brodyn is relevant, namely, the Court's views on s 8(2)(b). I said as much in Rubana Holdings Pty Ltd v 3D Commercial Interiors Pty Ltd [2008] NSWSC 1405 (which was decided before the decision in Dualcorp) and again in Allpro Building Services v C & V Engineering Services [2009] NSWSC 1247 (which was decided after Dualcorp).
It is sufficient to set out what I said in Rubana at [19] to [21] and in Allpro at [10]: Rubana [19] The next step in Mr Bland's argument, and the key point, is that 3D had no right to serve a further payment claim because 31 July 2007 was the last reference date under the contract. That submission was founded on my decision in Holdmark. In that case, I concluded, where a construction contract had come to an end, the last reference date for the purposes of a payment claim under s 8 and s 13 was the last reference date following the last performance of work under the contract. If that conclusion were correct, then it was not open to 3D to serve further payment claims after August 2007, because there would not have been any more reference dates by reference to which they could be served and, by s 13(5), "[a] claimant cannot serve more than one payment claim in respect of each reference date under the construction contract". However, I do not think that it is open to me to proceed on the basis that what I said in Holdmark was correct. The issue was considered by the Court of Appeal in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at 443-444 [62]-[66]. Hodgson JA (with whom Mason P and Giles JA agreed) there said that Holdmark was wrongly decided. His Honour held, in substance, that it was not correct to say "that reference dates cease on termination of a contract or cessation of work" (see 443[63]). His Honour said, in the same paragraph, that: the only non-contractual limit to the occurrence of reference dates is that which in effect flows from the limits in s 13(4): reference dates cannot support the serving of any payment claims outside these limits. [20] Mr Bland submitted that Hodgson JA had pointed to a possible distinction between the facts in Brodyn and the facts in Holdmark, and left open the possibility that Holdmark might continue to operate in circumstances where the contract was at an end. His Honour referred to that possible distinction at 444[65]. However, having referred to the distinction, his Honour noted that it was unlikely to be one that could be made out on the facts of the case before him and said that "[i]n any event in my opinion, Holdmark was wrongly decided, and it is not necessary to distinguish it". [21] I do not think it is possible to say, based on what Hodgson JA said of Holdmark at 444[65], that there is any room left for the operation of the view that I had expressed in Holdmark. His Honour's statement that it was wrongly decided must be taken at face and full value. … Allpro [10] For the reasons that I gave in Rubana Holdings Pty Ltd v 3D Commercial Interiors Pty Ltd [2008] NSWSC 1405 at [19]-[21], I do not think that it is open to a court of first instance to proceed on the basis that the relevant aspect of the decision in Brodyn was incorrect. Although Rubana was decided before Dualcorp, that does not seem to me to change the position. If there is something in Dualcorp which renders it appropriate for this aspect of the reasoning in Brodyn to be re-examined, that is a matter for the Court of Appeal.
The Court of Appeal returned to the question of s 8(2)(b) after Brodyn, but before Dualcorp, in Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2006) 23 BCLR 292. In that case, Hodgson JA (with whom, on this point, the other members of the Court agreed) dealt with s 13 briefly at [36]. His Honour repeated the view expressed by him in Brodyn.
The decision in Falgat, on this particular point, was considered by Hammerschlag J in Olympia Group Pty Ltd v Tyrenian Group Pty Ltd [2010] NSWSC 319. His Honour said at [32]: So far as abuse of process point is concerned, I propose to follow what was said by the Court of Appeal in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259. In the judgment of Hodgson JA at para 36 his Honour held that the Act permits successive payment claims to be made for the same work. This disposes of the first plaintiff's submission.
I return to the reasons of Hodgson JA in Brodyn at [63] his Honour there said that the only non-contractual limit to the occurrence of "reference dates" is that which is found in s 13(4).
At [64], his Honour set out matters of context that, in his opinion, supported the view that he expressed. I set out those paragraphs: [63] However, s.8(2) of the Act does not provide that reference dates cease on termination of a contract or cessation of work. This may be the case under s.8(2)(a) if the contract so provides but not otherwise; while s.8(2)(b) provides a starting reference date but not a concluding one. In my opinion, the only non-contractual limit to the occurrence of reference dates is that which in effect flows from the limits in s.13(4): reference dates cannot support the serving of any payment claims outside these limits. [64] In my opinion, as submitted by Mr. Fisher for Dasein, this view is supported by s.13(6), which indicates that successive payment claims do not necessarily have to be in respect of additional work; and especially by s.13(3)(a), which provides for inclusion in payment claims of amounts for which the respondent is liable under s.27(2A). Losses and expenses arising from suspension of work could arise progressively for a substantial time after work has ceased on a project, and s.13(3)(a) expressly contemplates that further payment claims for these losses and expenses may be made progressively.
I should note that in Brodyn, Mason P and Giles JA agreed with the views expressed by Hodgson JA.
In the present case, Mr Rodionoff of counsel, for Broadview Windows, submitted that what Hodgson JA had said, as to s 8(2), was obiter. That was so, Mr Rodionoff submitted, because his Honour's conclusion, that judicial review was unavailable, disposed of the matter before the Court. I do not agree.
Hodgson JA made it plain that where the basic and essential requirements for validity did not appear, then the determination was void (see at [55]). His Honour then said that where the determination is void, the court could grant declaratory and injunctive relief to ensure that the determination was void and to prevent it from being acted upon. There remained for decision a question as to whether the determination considered by the Court of Appeal in Brodyn was void. That was what Hodgson JA considered from [62] and following of his reasons. In that context, his Honour's construction of s 8(2), set out at [63], seems to me to be an integral part of the reasoning leading to the conclusion to which his Honour came.
I should add that, even if this were not so, I do not think that it is appropriate for a Judge at first instance to depart, without very good reason indeed, from a carefully considered opinion expressed by a unanimous Court of Appeal.
Returning to Falgat, I note that Hodgson JA's reasons at [36] were essentially the reasons underlying or leading to the conclusion that he came to, as to one of the attacks that was made on the determination in that case. His Honour's reasons on this point were the reasons of the Court. Even if (contrary to my view) what his Honour said was obiter, I would not regard myself as being at liberty to depart from it. Hodgson JA said at [36]: In my opinion the primary judge was in error in relation to s.13 of the Act. I adhere to the view I expressed in Brodyn Pty. Limited v. Davenport [2004] NSWCA 394, (2004) 61 NSWLR 421, at [62]-[66], to the effect that after cessation of work there continue to be reference dates in respect of which successive payment claims can be made, up to the twelve month limit under s.13(4)(b), and that s.13(6) permits successive payment claims to be for the same work. Mr. Rudge SC for Equity did not seek to submit to the contrary, and accepted that there was a reference date at about the end of November 2004 in respect of which a further payment claim, claiming the same amount, could have been served. The decision of Allsop P in Dualcorp may be distinguished. His Honour there proceeded on the express and stated assumption that both payment claims were related to the one "reference date".

Decision

In the present case, it is submitted for APS that, because of the view expressed by Hodgson JA in Brodyn and in Falgat as to the proper operation of s 8(2)(b), there were successive "reference dates" under the contract notwithstanding that work had finished. In my view, that submission must be correct. Hodgson JA expressly contemplated that reference dates did not necessarily cease "on termination of a contract or cessation of work": at least, for the purposes of s 8(2)(b).
It follows, in my view, that even though no work was done under the construction contract in this case from, at the latest, 31 August 2014, reference dates continued to accrue under s 8(2)(b).
In the present case, the first payment claim nominated as its reference date 31 October 2014, and the second payment claim nominated as its reference date 31 January 2015. On the face of the documents, they were not both referable to the one reference date. And as I have said, applying the reasoning of the Court of Appeal in Brodyn and Falgat in relation to s 8(2)(b), it cannot be the case that reference dates "stopped" simply because no further construction work was done.
In those circumstances, the only relevant limitation is that set out in s 13(4)(b). That prohibition does not arise in this case.

Conclusion and orders

For those reasons, I conclude that Broadview Window's challenge to the determination fails. The result is that the amended summons must be dismissed with costs, and I so order. The exhibit is to be handed out.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 July 2015

Building and Construction Industry Security of Payment Amendment Act 2013(NSW)

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