Chase Oyster Bar v Hamo Industries

CATCHWORDS : BUILDING AND ENGINEERING CONTRACTS - challenge to adjudicator's determination - whether open for adjudicator to conclude contract was wholly in writing or relevant terms were written - where notice of intention to apply for adjudication of payment claim not given within time limit - whether jurisdictional error by adjudicator in concluding that notice was served within time limit - preliminary questions for determination - date of service on plaintiff of first defendant's payment claim - date for payment of progress payment - date by which first defendant was required to give notice of intention to seek adjudication - date on which actual notice was given - whether it was open to adjudicator to conclude that first defendant's notice had been served in accordance with statutory time requirements - Building and Construction Industry Security of Payment Act 1999 (NSW) ss 17(2)(a), 31 - Interpretation Act 1987 (NSW) s 76. - PROCEDURE - Supreme Court procedure - New South Wales - removal of proceedings - where plaintiff submitted that reasoning of Court of Appeal in Brodyn could no longer be supported in light of subsequent High Court case - where point is one for Court of Appeal - issue to be referred to Court of Appeal for determination - Supreme Court Act 1970 (NSW) s 51(5).

Building and Construction Industry Security of Payment Act 1999 (NSW) LEGISLATION CITED : Interpretation Act 1987 (NSW) Judiciary Act 1903 (Cth). Supreme Court Act 1970 (NSW)

Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 CASES CITED : Halkat Electrical Constructors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32 JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737 Kirk v Industrial Relations Commission of New South Wales (2010) 239 CLR 531

Chase Oyster Bar Pty Ltd (First Plaintiff) Cheryl Fran (Second Plaintiff) PARTIES : Paul Della Marta (Third Plaintiff) Hamo Industries Pty Ltd (First Defendant) Peter Finnane (Second Defendant)

COUNSEL : B DeBuse (Plaintiff) C A Bolger (Defendants)

Watson & Watson (Plaintiffs) SOLICITORS : Atkinson Vinden (First Defendant) MBA Lawyers (Second Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST

2010/76539 CHASE OYSTER BAR PTY LTD v HAMO INDUSTRIES PTY LIMITED JUDGMENT

1 HIS HONOUR: The plaintiff (Chase) and the first defendant (Hamo) are parties to a construction contract under which Hamo undertook to carry out fitout work at the Chase Oyster Bar, Chatswood Chase. 2 On 22 or 23 December 2009, Hamo either served or initiated the process of serving a payment claim on Chase. The amount claimed was $115,822.73. Chase did not provide a payment schedule. In circumstances to which it will be necessary to return, the payment claim was referred to the second defendant (the adjudicator) for adjudication. The adjudicator, by a determination dated 18 March 2010, concluded that Hamo was entitled to be paid the amount claimed. In these proceedings, Chase challenges the adjudicator's determination. The contract 3 The case that Hamo put to the adjudicator in submissions in support of its adjudication application was that the contract was made on about 16 September 2009. Chase submitted that the contract was partly in writing and partly oral. 4 It said that the written part consisted of a standard form of contract, completed with details of the project and the work to be undertaken, which was signed on behalf of Hamo. It said that the signed form of contract was provided to Chase and that Chase accepted the offer thereby made orally. 5 It would appear that Chase disputed, at least before the adjudicator, that there was a contract that was wholly or partly in writing as alleged by Hamo. However, the evidence for Chase in these proceedings is that the contract was in writing. The adjudicator proceeded on the basis that there was either a contract that was wholly in writing or a contract the relevant terms of which were in writing. In my view, he was correct to do so. 6 The adjudicator disregarded the submissions that Chase sought to put to the effect that there was no written contract, or no contract that was partly in writing. Again, in my view, he was correct to do so. Those submissions were not made in pursuance of, or in supplementation of, a payment schedule that had been duly served. Accordingly, the adjudicator was required to disregard them, and was not entitled or required to consider them (see ss 20(2B), 22(2) of the Building and Construction Industry Security of Payment Act 1999 (the Act). 7 It follows that, on the basis of the material properly before the adjudicator, it was open to him to conclude, as I have said, that the contract was either wholly in writing or, to the extent that the terms were in issue, those terms were written. 8 Further, in circumstances where that is the way that the case was put to the adjudicator (by Hamo, the defendant in these proceedings) and that is the way that the case is put in this court (by Chase, the plaintiff in these proceedings), the Court should not proceed on any different basis. 9 It is unnecessary to resolve whether there were (as Hamo now seeks to suggest) additional oral terms of the contract. That is because, as the case was put to the adjudicator, it was on the written terms that Hamo had submitted to the adjudicator constituted the documentation of the contract that the relevant issues were argued and decided. 10 It is unnecessary to go into detail to most of the terms of the contract. Clause 16 dealt with payment. Subclause (e) provided, in the events that happened, that payments were to be made within five days of the date that a claim for payment was submitted to Chase. By cl 30(b), the word "days" was defined to exclude Saturdays, Sundays, rostered days off or other gazetted or proclaimed public holidays in the locality where the works were to be executed. 11 Clause 28 of the contract dealt with service of notices. It provided, by subcl (b), that service of a document would be taken to occur on the earliest of actual receipt, confirmation of correct facsimile transmission (if, which was the case, that mode of service was allowed by the contract: see subcl (a)) or otherwise, in the case of posted documents, three days after posting. It will be observed that the third alternative calls up the definition of "days" to which I have referred. 12 It was common ground that in this case the form of contract employed permitted service by facsimile transmission.

The payment claim 13 For reasons that are not entirely clear, Hamo delivered the payment claim (or part of it) by facsimile transmission on 22 December 2009, and the whole of it, by post, sent on 23 December 2009. 14 In form, the payment claim comprised a one-page tax invoice, number 71, which bore the notation that it was made under the provisions of the Act. The document that was sent by facsimile transmission comprised that one page only and did not include copies of the invoices and time sheets that were said in the text of the document to form part of it. The document that was sent by post the following day included not only the first page (the actual tax invoice) but also the supporting documents. 15 There was no evidence of the date of actual receipt of the document that was posted. There was however confirmation of correct transmission of the page that had been sent by facsimile transmission on 22 December 2009. It was common ground that this document was sent and received that day. The challenge to the determination 16 The adjudicator concluded that the payment claim comprised the one page that had been sent by facsimile transmission on 22 December 2009. It was that transmission that, he found, amounted to service of the payment claim (see paras 15 and 31 of the determination). Thus, taking into account the definition of "business day" in s 4 of the Act, he concluded that the due date for payment (five days after service of the payment claim) was 6 January 2010 (see, again, para 31). He also found, correctly, that Hamo's notice under s 17(2)(a) of the Act was served, by facsimile transmission, on 11 February 2010. Notwithstanding those findings (which, on the assumption that service of the payment claim was effected by facsimile transmission on 22 December 2009 were correct), the adjudicator said, among other things, that the notice under s 17(2)(a) was served in accordance with the time requirements of the Act (see para 24 of the determination). 17 On the adjudicator's findings, that conclusion could not be correct. The notice under s 17(2)(a) is required to be given within 20 business days immediately following the due date for payment. On the adjudicator's findings, it was given well outside that time limit. That was common ground before me. 18 On that basis, Mr DeBuse of counsel, who appeared for Chase, submitted that the adjudicator had proceeded without having jurisdiction to do so. That followed, Mr DeBuse submitted, because the adjudicator had no jurisdiction to hear an adjudication application which had not been commenced in accordance with the relevant provisions of the Act, contained in s 17. 19 Mr DeBuse recognised that this argument was foreclosed by a number of decisions at first instance which, following the decision of the Court of Appeal in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421, held that relief in the nature of certiorari was not available for jurisdictional error of law. In conformity with the decision in Brodyn, those cases (it is not necessary to refer to them in detail) concluded that a finding as to the jurisdictional fact (if I may use that term) stipulated by s 17(2)(a) was within the power of an adjudicator to make, and that an erroneous finding made in good faith was not a basis for concluding that the determination was void. 20 Mr DeBuse also submitted, although with less than his customary vigour, that in any event there was "Brodyn" error because the adjudicator had not applied himself in good faith to the discharge of his statutory responsibilities. It is convenient to deal with that point immediately. I do not think that it should be accepted. The adjudicator referred to the relevant provisions of the Act. He found the facts carefully. It is plain that, by oversight, he reached the mistaken conclusion that the notice under s 17(2)(a) was served in time. If the decision in Brodyn is correct, and if the first instance cases that apply Brodyn in the manner that I have outlined are therefore correctly decided, a mistake made in deciding a jurisdictional fact does not attract the consequences to which Mr DeBuse refers. He relied on the decision of the Court of Appeal in Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32. It is sufficient to say that the facts of that case were far removed from the facts in this, and that nothing said by the Court of Appeal in that case could warrant the conclusion that the adjudicator in this case had failed to exercise his powers and responsibilities under the Act in good faith. The fact that he made a mistake in his consideration of the relevant principles does not alter that conclusion. 21 The thrust of Mr DeBuse's principal attack was that the reasoning in Brodyn had been effectively undermined by the decision of the High Court of Australia in Kirk v Industrial Relations Commission of New South Wales (2010) 239 CLR 531. That is because the reasoning in Brodyn, which disagreed with the proposition that relief in the nature of certiorari was available for jurisdictional error of law, was based on the proposition that the scheme of the Act displayed an intention to displace the power of this Court to grant relief in the nature of certiorari. 22 The matter was considered in detail by Hodgson JA (with whom Mason P and Giles JA agreed) from 437 [44] to 443 [61] in Brodyn. Mr DeBuse submitted that, in light of the reasoning in Kirk (in particular, at [97] to [100]), the reasoning in Brodyn could no longer be supported. 23 That argument was raised somewhat late in the day. Mr Bolger of counsel, who appeared for Hamo, said that he required time to deal with it. In circumstances where the point is clearly one for the Court of Appeal, I raised with counsel the proposition that, if the point arose, it should be referred to the Court of Appeal for decision under s 51(5) of the Supreme Court Act 1970 (NSW). Counsel agreed with that proposition, on the basis (so far as Mr Bolger was concerned) that the time taken to get the matter before the Court of Appeal would give him sufficient time to come to grips with the point. Subject to the concurrence of the President, I do propose, once I have decided the preliminary questions to which I shall turn in a moment, to refer the matter to the Court of Appeal for determination of what I might call the "Kirk" issue. The preliminary questions

24 In the circumstances that I have recounted, it was agreed that certain questions should be dealt with separately from and before the decision of all other questions in the proceedings. Those questions are as follows:

What was the date of service on the plaintiff of the first defendant's payment claim constituted by tax invoice no. 31 dated 22 December 2009?

What was the due date for payment of the progress payment claimed by that payment claim?

What was the last date on which, pursuant to s 17(2)(a) of the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"), it was open to the first defendant to notify the plaintiff of the first defendant's intention to seek adjudication of that payment claim?

What was the date on which the first defendant actually so notified the plaintiff?

Whether, in the circumstances appearing from the answers to questions 1 to 4, it was open to the second defendant to conclude that the first defendant's notice pursuant to s 17(2)(a) of the Act had been served in accordance with the time requirements of the Act?

25 On the basis on which I propose to answer those questions, for reasons that follow, the Kirk issue will arise. First question: date of service 26 If the sending of the facsimile transmission on 22 December 2009 constituted service of the payment claim then, it is clear, that was the date of service. Mr DeBuse submitted that it was not open to Hamo to re-serve a payment claim, so as to set in operation concurrently the relevant provisions of the Act. He relied on the decision of Rein J in JAR Developments Pty Ltd v Castleplex Pty Ltd [2007] NSWSC 737. 27 Mr Bolger submitted, in essence, that the payment claim constituted the whole of the document, including the supporting documentation that was referred to on the first page. Thus, he submitted, service was effected by means of post, and the date of service falls to be determined by reference to either the provisions of the contract, the provisions of the Interpretation Act 1987 (NSW) or a combination of relevant provisions of the Act and the Interpretation Act. 28 There is a further complication, to which it will be necessary to turn in dealing with the second issue. That is whether the due date for payment of the amount demanded by the payment claim was five days or ten days after service. Leaving that to one side for the moment, Hamo's case could only succeed if the third of the approaches advocated by Mr Bolger (combining the relevant provisions of the Act with those of the Interpretation Act) applies.

29 In essence, and dealing for the moment with the document that was posted on 23 December 2009, it is common ground that if the date of service is calculated in accordance with the terms of the contract then the date of service was 31 December 2009. Equally, it is common ground that if the date of service is calculated in accordance with s 76 of the Interpretation Act then it was 31 December 2009 (see the agreed facts recorded in exhibit PX2). 30 It seems to me that the position must be covered by the terms of the contract. That follows from s 31 of the Act. Section 31, which deals with service of notices, authorises, among other things, service by post or by facsimile transmission. However, the provisions of s 31 do not exclude the relevant provisions of the contract, and are facultative and not exclusive. The section reads as follows: 31 Service of notices

(1) Any notice that by or under this Act is authorised or required to be served on a person may be served on the person: (a) by delivering it to the person personally, or (b) by lodging it during normal office hours at the person's ordinary place of business, or (c) by sending it by post or facsimile addressed to the person's ordinary place of business, or (d) in such other manner as may be prescribed by the regulations for the purposes of this section, or (e) in such other manner as may be provided under the construction contract concerned. (2) Service of a notice that is sent to a person's ordinary place of business, as referred to in subsection (1) (c), is taken to have been effected when the notice is received at that place. (3) The provisions of this section are in addition to, and do not limit or exclude, the provisions of any other law with respect to the service of notices.

31 Still dealing for the moment with the document sent by post on 23 December 2009, there is, as I have said, no evidence of when it was actually received. However, s 31(1)(e) preserves the operation of the contract. In this case, as I have pointed out, the contract provides that where a document is served by post, service takes place, relevantly, three days after posting; and the calculation of days is governed by cl 30(b). 32 It is correct to say, although at a level of some generality, that in general the Act is designed to supplement rather than to supplant what the parties to a construction contract have agreed. That statement requires some reservation (in particular, in relation to provisions of a contract that might be seen to exclude, modify or restrict rights under the Act - see s 34). However, in general, the Act recognises that where the parties have expressly dealt with a particular point, their bargain should be respected. The function of the Act is to supplement the position where the parties' bargain does not extend. See, for example, s 8(2), dealing with reference dates; and s 11(1), dealing with the due date for payment. 33 On that basis, in my view, where Hamo chose to serve the document by a means permitted by the contract, and where the contract governed the time when the document is taken to have been served, that bargain should be respected. On that basis, as I have said, the date of service was 31 December 2009. 34 Alternatively, if for some reason it is thought that a provision deeming the date of service is not something within s 31(1)(e) of the Act (because it does not deal with some "manner" of service "provided under the construction contract") one turns to s 76 of the Interpretation Act. By s 76(1)(a), a document may be served by prepaid post. Where it is sent to an address in Australia or an external territory, then by s 76(1)(b), service is taken to have been effected on the fourth working day after the letter was posted unless there is some reason to doubt that. Section 76(2) defines the expression "working day". In the circumstances of this case, there is no relevant distinction between the operation of the contract and the operation of s 76. 35 The third alternative involves in effect picking and choosing various applicable regimes, in an attempt to construct from them something that is not a feature of any one of them by itself. In circumstances where both the primary source of rights and obligations (the contract) and the secondary source (the Act) provide clear mechanisms for the determination of the date of service, I do not think that it is proper to try and construct some alternative regime for calculating the date of service. 36 For those reasons, if the act of service is constituted through the postage of the complete payment claim, I conclude that service took place on 31 December 2009, and that that was the date of service of the payment claim. 37 I think the better view is that it was the posting of the letter rather than the sending of the facsimile transmission that constituted service. That is because the document that was sent by facsimile transmission was on its face incomplete. It is at least arguable that, without the supporting documentation, it would not have been possible for Chase to understand how it was that the value of the work to date was calculated. That is a matter of particular significance when, at least on the face of the payment claim, the work was charged for on a "cost plus" basis. 38 Since one of the functions of a payment claim is to apprise the respondent not only of the amount of the claim but also of the manner of calculation of that amount (see s 13(2) of the Act), it seems to me that a document that does not contain sufficient detail to fulfil that purpose should not be regarded as a payment claim. 39 To the extent that this approach differs from that of the adjudicator, it does not matter. It is clear that if, contrary to what I think is the better view, it was service by facsimile transmission that initiated the statutory regime, then the date of service was even earlier: 22 December 2009. 40 I do not see any necessary inconsistency between what I have said and what Rein J said in JAR. That is because, on the view that I take of the physical distinction between the two forms of documentation that were sent, it was not until the second form of documentation was sent, by post on 23 December 2009, that a complete payment claim was served (or, to be more accurate, that the process of service was initiated). 41 Thus, I answer question 1 by saying "31 December 2009". Question 2: due date for payment 42 If the due date for payment is calculated by reference to cl 16(e) of the contract, it is common ground that the due date for payment was 13 January 2010 (see exhibit PX2A). 43 The argument that the due date for payment is some other date was based on the proposition that cl 16(e) did not apply, because for some reason (inconsistent with the way Hamo put its case to the adjudicator, the printed terms did not form part of the contract. On that basis, it was submitted that the contract did not specifically provide for the due date for payment, and thus that s 11(1)(b) of the Act did apply. 44 For the reasons that I have given, I think that the adjudicator was correct to decide either that the contract was in writing or that its relevant terms were evidenced in writing, and that the Court should not proceed in any way different to that on which Hamo, the claimant, put its case to the adjudicator. Accordingly, I do not agree with the proposition that the contract makes no provision for the due date for payment. On the contrary, I think, that due date should be calculated in accordance with cl 16(e). 45 For those reasons, I answer question 2 by sayng "13 January 2010".

Third and fourth questions: s 17(2)(a) notice 46 It is unnecessary to deal in detail with the third question (which inquires what was the last date on which it was open to Hamo to serve a s 17(2)(a) notice). That is because it was agreed between the parties in effect that if (as I have concluded) the due date for payment was not to be calculated in accordance with s 11(1)(b), and if (as I have also concluded) the payment claim was served before 6 February 2010, then the notice was not validly served (see exhibit PX3). On any view, and contrary to the conclusion reached by the adjudicator, on my findings of fact the s 17(2)(a) notice that was served on 11 February 2010 was not served in accordance with the time limitations set out in s 17(2)(a). 47 In those circumstances, I answer questions 3 and 4 together by saying "not necessary to answer in detail; on the basis of the answers to questions 1 and 2, the first defendant's notice pursuant to s 17(2)(a) of the Act was served outside the time limited for the service of such a notice". Fifth question: did the adjudicator err? 48 As will be clear from what I have said, the answer to this question is "yes" and I shall so record it. Orders (1) I make an order in accordance with the document initialled by me and dated today's date. (2) I direct that the answers to the separate questions be recorded. (3) I direct the plaintiff to submit to my associate by 5pm on 22 April 2010 draft orders and directions covering, among other things, the terms of the issue to be referred to the Court of Appeal and the giving of notice under s 78B of the Judiciary Act 1903 (Cth). (4) I reserve the costs of the hearing to date. (5) I note that the plaintiff by counsel continues the usual undertaking as to damages and the first defendant accepts that its undertaking given to the Court on 29 March 2010 remains binding on it until the further order of the Court. **********

17/05/2010 - replaced paras 42 and 45 - Paragraph(s) 42 and 45

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.