Emag Constructions Pty Limited v Highrise Concrete Contractors - [2003] NSWSC 903 - NSWSC 2003 case summary — Zoe

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Emag Constructions Pty Limited v Highrise Concrete Contractors

[2003] NSWSC 903

Supreme Court of NSW|2003-09-26|Before: Einstein J, Bergin J

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Source facts

Court

Supreme Court of NSW

Decision date

2003-09-26

Before

Einstein J, Bergin J

Source

Original judgment source is linked above.

Judgment (69 paragraphs)

[1]

CITATION : Emag Constructions Pty Limited v Highrise Concrete Contractors (Aust) Pty Limited [2003] NSWSC 903 HEARING DATE(S) : 26/09/03 JUDGMENT DATE : 26 September 2003 JURISDICTION: Equity Division JUDGMENT OF : Einstein J DECISION : Adjudicators decision vitiated. Short minutes of order to be brought in.

[2]

CATCHWORDS : Contract - construction contract - payment claim - non-payment of amount claimed - Building and Construction Industry Security of Payment Act 1919 (NSW) - progress payment claim - payment schedule of $Nil - adjudication - attempted service of adjudication application - appointment of adjudicator - failure to provide adjudication response - validity of acceptance of appointment by adjudicator - jurisdiction of adjudicator to adjudicate - validity of determination given by adjudicator - sections 13, 14, 17, 19, 20, 21, 31 of the Act - Service - ordinary meaning of "service" - validity of service of documents on legal representatives - principles of actual or ostensible authority in solicitors to receive service of copies of relevant notices - statutory construction - formal and strict requirements to observe time stipulations in the Act Building and Construction Industry Security of Payment Act 1999 Building and Construction Industry Security of Payment Amendment Act 2002 LEGISLATION CITED : Corporations Act 2001 Corporations Law Supreme Court Rules 1970 Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 John Russell & Co Limited v Cayzer [1916] 2 AC 298 CASES CITED : Paynter Dixon Constructions Pty Ltd v JF & CG Tilston Pty Ltd [2003] NSWSC 869 Players Pty Limited v Interior Projects (1996) 20 ACSR 189 Walter Construction Group Pty Ltd v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266 PARTIES : Emag Constructions Pty Limited (Plaintiff) Highrise Concrete Contractors (Aust) Pty Limited (Defendant) FILE NUMBER(S) : SC 3601/03 COUNSEL : Mr GA Sirtes (Plaintiff) Mr M Christie (Defendant) SOLICITORS : Gray & Perkins (Plaintiff) Deacons (Defendant)

[26]

If you believe to the contrary, please advise by close of business 3 June 2003 by fax to Highrise Concrete Contractors (Aust) Pty Ltd". [and the address was given] 15 A question arose on the evidence in relation to whether or not this facsimile was received by Gray & Perkins lawyers. Albeit that some expert evidence in relation to the issue was sought to be relied upon by the defendant, the plaintiff has accepted that what is not disputed is that the facsimile, which apparently has never been able to be located within the offices of Gray & Perkins, was in fact received on 2 June. What is disputed is the suggestion that any solicitor within Gray &Perkins ever sighted that document. 4 June 2003 16 The adjudication application dated 3 June 2003 and accompanying documentation, was delivered to Gray & Perkins on 4 June 2003. The evidence includes a document entitled "Receipt Confirmation Record" where at the end of the document, in handwriting, next to the section for reading "Received" and "Date", there is a signature followed by a handwritten section reading "By Gray and Perkins - Lawyers for Emag Constructions Pty Limited". A letter from Gray & Perkins of 16 June 2003 to Mr Hillman advised that the wording "By Gray Perkins - Lawyers for Emag Constructions Pty Limited" was "not inserted by this office and may have been inserted after the receipt was signed". No challenge to this proposition was put to Mr Hodges in cross-examination. 10 June 2003 17 By letter dated 10 June 2003, Mr Hillman informed Highrise and Emag that he had accepted the nomination by National Electrical and Communications Association ("NECA") as adjudicator under section 19 of the Act, and enclosed a copy of an adjudication response form for use by the respondent if required. There is no evidence that this letter was hand delivered or courier delivered on the same date. It is likely that the correct inference for the Court to draw is that it was posted in the usual course of events and would have been received on 11 June. 11 June 2003 18 Mr Dwyer gave evidence that he had located within his office an adjudication application apparently served on his office without a covering letter during the week ended 6 June 2003. The wording of paragraphs 1 and 2 of Mr Dwyer's affidavit of 2 July 2003 indicates that it was on 11 June that he so located the application. He was not cross-examined to have a possible contrary reading of his affidavit exposed. It follows that Mr Dwyer could not have sent that document to Mr Ghosn, a director and principal of Emag, before that date, namely 11 June 2003. 12 June 2003 19 On 12 June Mr Dwyer had a discussion with Mr Ghosn. Mr Ghosn indicated that he would try to get details of Emag's claim against Highrise to Mr Dwyer by the following day. He also stated that the adjudication application was not served on Emag Constructions Pty Limited "and this is the first time that I have seen it" or words to that effect. [See paragraph 3 of Mr Dwyer's affidavit of 2 July 2003 and paragraph 3 of Mr Ghosn's affidavit of 19 August 2003]. 20 Mr Ghosn's further evidence was that at no time did he provide instructions to the plaintiff's solicitors to accept service of those documents on its behalf and further that those instructions were not requested of him by the plaintiff's solicitors. 13 June 2003 21 On 13 June 2003 Mr Dwyer had a telephone conversation with Mr Ghosn, Mr Ghosn indicated that the application was definitely not served on Emag. In the light of that Mr Dwyer stated that he would write to the adjudicator and to Highrise to inform them that the application had not been served in accordance with the Act. 22 Mr Dwyer's letter of the same date to Mr Hillman read as follows:

[65]

(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." [Section 31 of the Building and Construction Industry Security of Payment Act 1999 No 46] 33 Save for (1) such provision for the purposes of the section as the regulations may prescribe or (2) particular provisions under the relevant construction contract or (3) the application of any other legislation with respect to the service of notices, it appears clear that in essence, service must be personal (s.31(1)(a)) or by being lodged during normal office hours at or sent by post or facsimile addressed to the ordinary place of business of the person to be served. There is no dispensation for service upon a solicitor: cf Part 9 Rule 7, Supreme Court Rules. 34 The words "the person's ordinary place of business" is not defined in section 4. 35 Plainly enough the whole of the rationale underpinning the procedures laid down by the Act is directed at providing a quick and efficient set of procedures permitting recovery of progress payments and the quick resolution of disputes in that regard. Time limits under the Act are strict. The consequences of not complying with the stipulated time limits can be significant. Counsel for the plaintiff has given an example in Walter Construction Group Pty Ltd v CPL (Surry Hills) Pty Ltd [2003] NSWSC 266 , 9 April 2003, where a failure to comply with a time limitation under the Act resulted in successful $13 million summary judgment application. 36 An essential parameter forming part of Part 3, Division 2 "Adjudication of disputes" is the requirement to be found in section 17 (5) that "a copy of an adjudication application "must" be served on the respondent concerned". The following stepped procedure requires: · that the adjudicator accept the application by causing a notice of acceptance to be served on the claimant and the respondent [section 19]; · that the respondent lodge with the adjudicator a response to the adjudication application within a specified time frame set out in section 20; · the adjudicator himself adhere to strict time frames. [Section 21 of the Act prevents the adjudicator from determining the adjudication until after the expiry of the period designated in section 20 for the lodgement by the respondent of its response in answer to the application]; · in the event that the time frame for lodging an adjudication response has expired the adjudicator has no jurisdiction to extend the section 20 time frame. Curial process 37 In relation to situations involving the curial process, under the general law the existence of the jurisdiction of a court is, of course, dependent on service of its process: John Russell & Co Limited v Cayzer (1916) 2 Appeal Cases 298 at 302. In curial process circumstances, service, apart from being fundamental to the jurisdiction of the court, is also an essential requirement of natural justice. The Act 38 Service being effected in accordance with the Act is critical as it governs the commencement of the time limitations following such service. The consequence of non-compliance with the time limitation periods is harsh. As was submitted to the court by counsel for the plaintiff, the Act exhibits "zero tolerance" for delay. To borrow a phrase from the world of contract, and in particular conveyancing, in a real sense time is of the essence. 39 Although the Act does not expressly provide for this, it seems to me that, in the absence of having received an adjudication response from a respondent, in order to determine whether an adjudicator has jurisdiction to determine an adjudication application, the adjudicator must be satisfied as to when and how service of the adjudication application has taken place. This must surely be inherent as part of the obviously highly significant need for any tribunal to be satisfied with the formal requirements laid down by the relevant legislation as necessary to be complied with as a condition precedent to the tribunal being permitted to proceed to exercise a jurisdiction or power conferred upon the tribunal by relevant legislation.

[66]

Dealing with the issue 40 The submissions before the Court covered a number of areas. The first concerned questions going to the compliance with service requirements of the Act. 41 The submission of the plaintiff was that strict compliance in that regard was necessary and that the Court should find that on the evidence, no service had been effected here, either personally or by being lodged during normal office hours, at or sent by post or facsimile addressed to the ordinary place of business. 42 The submission went the distance of asserting that Gray & Perkins had had no instructions to accept service and had expressly made that known to Highrise. So much represents an important factual finding which is made. 43 The submission stressed the need for strict compliance with the time provisions in respect of service laid down by what was put as an obviously important set of codified procedures. 44 The second area concerned Emag's contention that even if it be the case that service took place at the date when the adjudication application came into the possession of Emag, the particular dates and times here in focus show that the Emag was effectively shut out by the adjudicator from exercising its right to lodge an adjudication response (section 21 (1) and 20 (1) (a) and (b)). Howship Holdings Pty Ltd v Leslie (1996) 41 NSWLR 542 45 Untutored by authority it seems to me that there is likely a strong case in support of the proposition that the use in the Act of the word "may" in section 31 should be read as "must". The significance of certainty in terms of the precise point in time when a notice under the Act is served upon a particular person is obvious from the general scheme of what this legislation permits in terms of its mechanics. 46 The Court has, however, been referred to a decision by Young J, in Howship Holdings Pty Limited v Leslie (1996) 41 NSWLR 542, which essentially concerned an issue as to whether service of a summons at a document exchange box was good service. The defendants had sought a declaration under Part 11 (8) (c) of the Supreme Court Rules 1970 that the summons filed had not been duly served on the defendants. The summons sought an order pursuant to section 459 G of the Corporations Law setting aside a statutory demand posted on 4 June 1996 and which would have been deemed to have been served a day or so later. The summons was issued out of the Supreme Court on 21 June 1996. The defendants had filed an application for winding up the plaintiff consequent upon the alleged non-compliance with the statutory demand and did that in the Federal Court by an application filed on 1 July 1996. 47 In the course of the judgment Young J pointed out that section 459 G (3) of the Corporations Law provides that an application to set aside a statutory demand may only be made if the copy of the application and a copy of the supporting affidavit was served on the person making the demand within 21 days. 48 As his Honour also pointed out, section 459 G itself does not deal with what is service. The ordinary meaning of "service" being personal service, this his Honour held, merely means that the document in question must come to the notice of the person for whom it was intended. His Honour referred to authorities supporting the proposition that the means by which the person obtained the document were usually immaterial. 49 His Honour then referred to section 109 X of the Corporations Law. The submission for the defendants was that that section, which deals with service, was a code and that there had been no service within the meaning of section 109 X, nor in accordance with the personal service provisions of the Supreme Court Rules, there had been no service at all. His Honour held as follows:

[67]

"However, section 109 X is facultative, it is not mandatory. It will be noted that the words used in subsection (1) are "may be served". Indeed, the Drinkwater rule [Re Drinkwater (1929) 46 WN (NSW) 202] shows that section 109 X could not constitute a code for service. The document could have been served under section 109 X but the mere fact that it has not been does not disqualify it from service if the document came into possession of the addressee." 50 His Honour did not follow Lander J in Players Pty Limited v Interior Projects (1996) 20 ACSR 189, in so far as Lander J had held that section 109 X had provided a code. The evidence 51 I return to deal with certain parameters of the evidence of significance. Insofar as the evidence threw up an issue, as between the evidence given by Mr Lorimer and Mr Hodges, concerning the telephone call of 2 June 2003, the Court accepts as reliable the version of the conversation given by Mr Hodges in his affidavit of 3 July 2003 at paragraph 7. 52 To a certain extent this finding is supported in the second sentence of the facsimile from Mr Lorimer sent late on the same day. The first sentence had read "This will serve to confirm that you act on behalf of Emag and as such will accept notices served on this matter". The second sentence had read "If you believe to the contrary, please advise by close of business 3 June 2003 [giving the facsimile detail]". Although Gray & Perkins have no record of receiving this facsimile, but the case has proceeded upon the assumption that it was received, and although there is no evidence that any solicitor had read it, it seems to me to give some corroboration in its terms to the version of the conversation given by Mr Hodges. This is particularly so in use of the words "if you believe to the contrary" which are simply inconsistent with there having been an acceptance during the conversation that the solicitors would accept service of the application. Had the second sentence not been included the matter would be clearer in favour of Mr Lorimer's recollection. It is appropriate to comment on the particularly unsatisfactory situation which arises where a facsimile appears to have been lost in the offices of Gray & Perkins. No doubt human error will always results in some difficulties in any busy legal practitioner's offices. The present is an example of just how important it is to concentrate on procedures. But also throws up the high significance in terms of the Act in a claimant that service within the meaning of the Act can be strictly proved to have taken place. The whole of the stepped procedures being dependent upon compliance with rigid timelines, each of the formal requirements stipulated for by the Act must be complied with to the letter. 53 Further, the Court was impressed by the demeanour of Mr Hodges. Albeit that he was away from the office for some period thereafter, he gave clear evidence that he was assisted in his recollection because it had become necessary, while he was away, for him to communicate the content of the conversation to Mr Dwyer. 54 There were a number of aspects of Mr Lorimer's recollection which it seems to me made it difficult to accept his version of what had occurred. He accepted that the second sentence in the facsimile represented his 'view' that Gray & Perkins would accept service because they acted on behalf of Emag. He accepted that in his facsimile sent on the same day he invited Mr Hodges to indicate to the contrary. This, it seems to me, was curious in terms of his recollection of what he stated had been said. 55 I return next to examine the matter of particular dates and the adjudicator's approach and this descends into a matter of some detail. I approach the matter upon the assumption that the proper approach to the question of service of the claimant's adjudication application on the facts is to look to when the document came into the possession of the plaintiff. 56 Ultimately the matter rests in very small compass: · the Adjudicator in his finding of 16 June 2003 determined that the adjudication application had been properly served on 4 June 2003. The same finding was made in the Determination of 19 June 2003 [paragraph 4 (ii)]; · the Court's holding is that this determination was incorrect and that the earliest day when it could be said that notice of the adjudication application was received by Emag was 12 June 2003; · in those terms Emag then had five business days within which to lodge its response. The last such day was 19 June 2003; · the date of service upon Emag of the adjudicator's Notice of Acceptance [11 June 2003] falls away as of no significance because the later of the times to expire as between: (1) 5 business days following a copy of the application being received; and (2) 2 business days following notice of the adjudicator's acceptance of the application being received, was 19 June 2003; · the adjudicator plainly approached the matter upon the basis that by 16 June 2003 Emag was out of time in providing an adjudication response in accordance with section 17 of the Act. He foreshadowed such a finding in his letter of 16 June 2003 when he stated that in the absence of satisfactory evidence being produced to him, there would be a determination based on the documentation received "up to and including 12 June 2003". This analysis could only have been correct if: (1) the adjudication application was served on 4 June 2003; and (2) the adjudicator's acceptance of the application had been received by Emag on 10 June 2003; · this analysis was twice misconceived. In fact the evidence now establishes that the correct focus ought to have been on the date (12 June 2003) when the adjudication application was received by Emag. That was when time would begin to run. Further the evidence now establishes that the Adjudicator's acceptance was received on 11 June and not on 10 June; · Emag was entitled to provide its relevant response on or before 19 June 2003; · notwithstanding that entitlement the effect of the Adjudicator's communication of 16 June 2003 in the finding that Emag had failed by then to provide an adjudication response in accordance with section 20 (1) of the Act, was to effectively mislead and impede Emag in terms of its proper entitlement up to including 19 June 2003 to provide and adjudication response; · in any event Section 21 (1) of the Act expressly prohibited the adjudicator from determining the adjudication application until after the end of the period within which Emag might lodge an adjudication response. But the adjudicator actually determined the adjudication application on the last of the days upon which that adjudication response might have been lodged; and · this vitiates the validity of the adjudicator's determination. 57 At the end of the day the matter is capable of being determined in accordance with the approach taken by Young J in Howship. Of course section 31 (3) makes plain that the service provisions under the Act are in addition to and do not limit or exclude the provisions of any other law with respect of the service of notices: Corporations Act section 109 X is such a provision. 58 None of the other submissions put by the defendant are of substance. There was neither actual authority in the plaintiff's solicitors to receive a copy of the adjudication application nor ostensible authority in that regard. And in relation to the submission that the solicitors for Emag are presumed to have acted in the usual way by passing on the adjudication application to Emag, this is not now a circumstance in which such a presumption is available to be relied upon by the defendant. The presumption/inference for which the defendant contended which may in some circumstances be drawn, has now been resoundingly rebutted having been the subject of strict proof. 59 In my view the character of the subject legislation is such that general principles of actual or ostensible authority in solicitors to receive service of copies of relevant notices must yield to the strictures of the strict requirement to prove service. The service provisions of the Act require to be complied with in terms. Prudence dictates that those responsible for complying with the service provisions take steps to be in a position to strictly prove service in the usual way. One only example of the difficulties which may arise is where a solicitor who may have been instructed to act in relation to an adjudication application has his/her instructions withdrawn. There are no provisions similar to those to be found in the Supreme Court Rules 1970 for notices of ceasing to act and the like. The Act here under consideration simply proceeds by requiring particular steps to be taken by the parties and by the adjudicator and proof of strict compliance with the Act is necessary for the achievement of the quick and efficient recovery of progress payments and resolution of disputes in that regard. 60 The parties are to bring in short minutes of order. I certify that paragraphs 1 - 60 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 26 September 2003 ex tempore and revised on 8 October 2003

Emag Constructions Pty Limited v Highrise Concrete Contractors

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