Hill as Trustee for the Ashmore Superannuation Benefit Fund v Halo Architectural Design Services Pty Ltd

Supreme Court of NSW|2013-06-26|Before: Stevenson J

Introduction 1These proceedings relate to a dispute under the Building and Construction Industry Security of Payment Act 1999 ("the Act"). 2The plaintiffs are the trustees of the Ashmore Superannuation Benefit Fund. That fund is the owner and developer of a property at Toronto. 3On 21 January 2009 the plaintiffs entered into a Project Management Agreement ("the Agreement") appointing the defendant, Halo Architectural Design Services Pty Ltd, as project manager of a project on the Toronto land. 4The second defendant ("the Adjudicator") is an adjudicator appointed under the Act. 5On 6 March 2013 the Adjudicator made a determination ("the Determination") under the Act that the plaintiffs pay Halo $127,017 in respect of four payment claims as follows: - Payment Claim One 26 November 2012 $36,597 Payment Claim Two 28 November 2012 $21,384 Payment Claim Three 30 November 2012 $25,179 Payment Claim Four 3 December 2012 $43,857

6The plaintiffs contend that the Determination is void on a number of bases. They also seek a declaration that, in the events that have happened, no further "reference dates" can arise under the Act or under the Agreement such as would give rise to any entitlement to any further progress payments under the Act.

Decision 7In my opinion, the Determination is void. The plaintiffs are also entitled to the declaration they seek.

Background 8Much of what follows, especially as to uncontroversial background, is taken from the submissions of Mr Goldstein, who appeared for the plaintiffs. 9Under the Agreement, the amount payable for providing the project management services was based on hourly rates, with a minimum retainer of $3,600 per week plus GST. 10In the period between 8 November 2012 and 7 December 2012, the plaintiffs received from Halo the following ten claims for payment, each of which purported to be "payment claims" made under the Act: - (a)a payment claim dated and served on 9 November 2012 for work done in February 2012; (b)a payment claim dated and served on 13 November 2012 for work done March 2012; (c)a payment claim dated and served on 16 November 2012 for work done in April 2012; (d)a payment claim dated and served on 19 November 2012 for work done in May 2012; (e)a payment claim dated and served on 21 November 2012 for work done in June 2012; (f)a payment claim dated and served on 23 November 2012 for work done in July 2012; (g)a payment claim dated and served on 26 November 2012 for work done in August 2012; (h)a payment claim dated and served on 28 November 2012 for work done in September 2012; (i)a payment claim dated and served on 30 November 2012 for work done in October 2012; and (j)a payment claim dated and served on 3 December 2012 for work done in November 2012 . 11All but the first three claims called for payment within 30 days of invoice. 12Of these claims, all were paid or settled, apart from those at (g) to (j) (those in respect of August, September, October and November 2012). The latter four claims (totalling $127,017) ("the Payment Claims") were those considered, and upheld, by the Adjudicator. 13On 4 February 2013, the plaintiffs purportedly served a payment schedule pursuant to s 15 of the Act that valued the Payment Claims at nil. As I will discuss below, there is a dispute as to whether this payment schedule was properly served. 14On 6 February 2013, Halo served a further payment claim ("the February Payment Claim") on the plaintiffs. The February Payment Claim repeated the claims made in the Payment Claims. The Adjudicator was not asked to deal with this claim. Its relevance will emerge below. 15On 18 February 2013, Halo made an adjudication application pursuant to s 17 of the Act in respect of the Payment Claims. 16On 25 February 2013, the plaintiffs lodged their adjudication response pursuant to s 20 of the Act. 17On 6 March 2013, the Adjudicator issued the Determination.

The reference date issue 18Clause 5.1 of the Agreement provided: - " ... [the plaintiffs] shall pay [Halo] a project management fee ("the Fee") calculated in accordance with Item 6 of the Schedule." 19Clause 5.2 of the Agreement provided: - "The Fee shall be payable by [the plaintiffs] to [Halo] as provided for in accordance with Item 7 of the Schedule hereto." 20Item 7 of the Schedule to the Agreement provided: - "Tax invoices issued by [Halo] on or before the 7th day of each month must be paid by [the plaintiffs] by the 21st day of each month (or the next business day should the 21st not be a business day). 21Section 8 of the Act provides that: - (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... 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... under the contract...". (emphasis added) 22It was common ground that, by reason of these matters, the "reference date" for the purposes of the Agreement was the seventh day of each month. 23Between 9 November 2012 and 3 December 2012, Halo issued 10 payment claims on 10 different dates. All of those payment claims purported to have been made under the Act. Each of the payment claims was in respect of work said to have been done in 10 separate months, namely February to November 2012 inclusive. 24Section 8(1) of the Act provides that "on and from" each reference date a person who has undertaken to carry out construction work under a contract is entitled to a progress payment. I read s 8(1) to mean that the progress payment to which the person who has undertaken construction work under the contract is entitled is one in respect of all of the construction work done at that reference date. 25Section 13(1) of the Act provides that a person who is or claims to be entitled to a progress payment may serve "a" payment claim on the person liable to make the payment. 26Section 13(5) of the Act provides that a claimant cannot serve more than one payment claim "in respect of" each reference date. I read the words "in respect of" in s 13(5) to mean "on and from" (consistently with the wording of s 8(1)) so that the effect of the sub-section is that a claimant may only serve one payment claim "on and from" each reference date. 27That reading of s 13(5) is consistent with the stated object of the Act as set out in s 3: - "(1) The object of this Act is to ensure that any person who undertakes to carry out construction work... under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work... (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." (emphasis added) 28Further, each of s 17(1), s 17(3)(f), s 22(2)(c), and s 22(2)(d) of the Act, contemplate that only one payment claim at a time can be submitted to adjudication. Thus, s 17(1) provides that a claimant may apply for adjudication of "a" payment claim. Section 17(3)(f) provides that an adjudication application must identify "the" payment claim to which it relates. Section 22(2)(c) and (d) oblige the adjudicator to consider only (amongst other things) "the" payment claim and payment schedule to which the application relates. 29Mr Goldstein submitted, and I accept, that these provisions make clear it was not possible for a party in Halo's position to "bank" reference dates and serve multiple payment claims following one reference date for work done in previous months. 30In that regard Mr Goldstein referred to the observations of McDougall J in Rail Corporation of NSW v Nebax Constructions [2012] NSWSC 6 at [43] and [44] as follows: - "Nonetheless, it seems to me, when one considers the structure of the Act as a whole, it is reasonably clear that there should be one only application for adjudication of any one payment claim. Section 8(1) gives the right to a progress payment. Section 13 of the Act gives to a person claiming an entitlement to a progress claim the right to serve a payment claim. Section 14 provides for a response, through a payment schedule. Section 17 provides for 'adjudication of a payment claim' where, among other things, a payment schedule is provided under which the scheduled amount is less than the claimed amount. ... It seems to me that, because s 13(5) prevents... the service of more than one payment claim per reference date per construction contract, and because the right to adjudication 'of a payment claim' is clearly referable to a payment claim that complies with the various requirements of s 13, there can only be one adjudication application for any particular payment claim for any particular contract." (emphasis added) 31McDougall J's reference to s 13(5) preventing service of more than one payment claim "per" reference date is, in my opinion, consistent with my conclusion at [26]. 32At one stage in his submissions Mr Bland, who appeared for Halo, accepted that it was not possible for a party in Halo's position to "bank" reference dates. Later in his submissions, Mr Bland resiled from that concession but did not offer any positive submission refuting those made by Mr Goldstein. 33Rather, Mr Bland submitted that the 10 payment claims served by Halo between 9 November 2012 and 3 December 2012 should be seen as one payment claim, made progressively and by 10 instalments, over that period. Mr Bland submitted: - "We can serve all of our invoices together as one continuous facsimile or we can serve them on consecutive days or we can serve them as they are prepared and put." 34Mr Bland submitted that it followed that Halo had not acted inconsistently with s 13(5) of the Act as it had served but one payment claim in respect of the relevant reference date, 7 November 2012. 35I do not accept that submission. 36Although each of the 10 payment claims were comprised by two separate invoices (and thus might each be considered one payment claim, rather than two; see for example Rail Corporation of NSW v Nebax Constructions at [31] per McDougall J and Alan Conolly & Co v Commercial Indemnity [2005] NSWSC 339 at [16], [20] and [23] per Macready M), the 10 payment claims made between 7 November 2012 and 3 December 2012 appear to be separate payment claims. They were made on different dates, each for a different month and called for payment on different dates. They are not expressed to be 10 individual components of one overarching claim. Further, in its adjudication application, Halo described the last four payment claims (being the Payment Claims which it referred to adjudication) as each being separate payment claims. 37My conclusion is that by reason of s 13(5), Halo was only entitled to serve one payment claim "in respect of" (that is, on and from) the reference date of 7 November 2012. That one claim was the first that it served, on 9 November 2012 (in respect of the work done in February 2012). That payment claim was paid. It was not possible for Halo to serve any further payment claims "in respect of" the reference date of 7 November 2012. Therefore, the purported payment claims of 26 November 2012, 28 November 2012, 30 November 2012 and 3 December 2012, being those referred to the Adjudicator, were not "payment claims" within the meaning of the Act. 38Accordingly, the Adjudicator had no jurisdiction to deal with the matter and the Determination is void.

The payment schedule service issue 39The plaintiffs also contended that the Adjudicator erroneously held the plaintiffs' payment schedule was not served on Halo and that the Adjudicator accordingly denied the plaintiffs natural justice by failing to have regard to certain contentions advanced by the plaintiffs in the payment schedule. 40In view of the conclusion to which I have come in regard to the reference date issue, it is not necessary for me to decide this issue. 41However, I will deal with it, albeit briefly. 42Clause 15.3 of the Agreement provided that: - "All notices and other communications... required or permitted to be given or made under this Agreement, shall be in writing and shall be addressed to a party at its address within Australia set forth in Item 10 of the Schedule hereto... and shall be delivered personally, sent by telex, telegram or facsimile transmission... and in the case of service in person, by telex, telegram or facsimile transmission shall be deemed to have been made or given and received on the next business day in the place of address following the day of delivery or transmission...". 43Item 10 of the Schedule to the Agreement identified Halo's address as a post office box in Toronto. 44In my opinion, on the proper construction of cl 5(3) of the Agreement, communications such as the Payment Schedule were required to be addressed to and served at the address set forth in the Schedule (in the case of Halo, at its Toronto post office box). Mr Goldstein did not make a contrary submission. 45However, s 31 of the Act provides: - "(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 normally, 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." 46Section 31(1) of the Act provides that a party "may" serve the other at its "ordinary place of business". 47Had the plaintiffs served the Payment Schedule at Halo's "ordinary place of business" then, by reason of s 34(2) of the Act (which renders void any provision in an agreement inconsistent with the Act), such service would have been sufficient, despite the mandatory terms of cl 5.3 of the Agreement. 48However, although the plaintiffs addressed their Payment Schedule to Halo at the post office box address referred to above, they served it, by post and by fax, at Halo's registered office. Halo's registered office was not its "ordinary place of business". 49Section 31(3) of the Act envisages that there may be other ways in which service may be validly effected. In this regard, s 109X(1) of the Corporations Act 2001 (Cth) provides that a document may be served on a company by leaving it at, or posting it to, the company's registered office. 50But for the mandatory terms of cl 5.3 of the Agreement, service at Halo's registered office would have been effective. 51However, in my opinion, the mandatory terms of cl 5.3 of the Agreement have the effect that this course was not available to the plaintiffs. 52In my opinion, s 31(3) of the Act, which states that the provisions of s 31 are in addition to, and do not limit or exclude any other law with respect to service of notices, takes the matter no further. That sub-section does not have the effect that the parties "may" (no matter what the relevant agreement provides) serve documents in a manner provided "by any other law". It simply says that the enabling provisions in s 31(1) do not limit, and are additional to any such "other" provision. Section 31(3) does not have the effect that the plaintiffs were, despite the terms of cl 5.3 of the Agreement, entitled to serve the Payment Schedule otherwise than in accordance with cl 5.3 of the Agreement (or s 31(1) of the Act.) 53I see nothing in the observations in Giles JA in Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78 as being inconsistent with these propositions. In that case, Giles JA said at [29]: - "Further again, the saving in s 31(3) permits service by leaving at or posting to a company's registered office: Corporations Act 2001 (Cth), s 109X(1)(a). A registered office is often an address maintained for the purpose, not at the company's place of business. The legislature has seen as acceptable service by leaving a notice at or posting it to a registered office where no one may have knowledge of the relevant works, and which may be at a remote location". 54In Downer, there was no suggestion that the construction contract contained a provision, such as cl 5.3 of the Agreement, requiring that service be affected at a nominated address. 55In those circumstances, my opinion is that the Adjudicator was correct to conclude that the Payment Schedule had not been served on Halo and did not deny the plaintiffs natural justice by coming to that conclusion and by failing to take into account the contents of the Payment Schedule.

The no further reference dates issue 56Pursuant to cl 7.2.1 of the Agreement, the project management services to be provided by Halo were deemed complete upon the completion of the defects liability period under the Building Contract. 57Completion of the defects liability period under the Building Contract was due to occur on 17 August 2012. 58On or about 10 October 2012, the parties agreed that no further work would be undertaken by Halo on behalf of the plaintiffs. 59In the period since at least December 2012, Halo has not undertaken any further work for the plaintiffs. 60On 6 February 2013, Halo served on the plaintiffs the February Payment Claim referred to at [14] above. 61On 20 February 2013, the plaintiffs served a payment schedule in response to the February Payment Claim. 62Pursuant to s 17(1)(a)(i) of the Act, Halo was entitled to apply for adjudication of the February Payment Claim. It elected not to do so. 63Where a contract makes no provision for reference dates to continue to accrue after work has ceased, no further reference dates will accrue to a claimant for the purposes of the Act: see The Trustees of the Roman Catholic Church for the Diocese of Lismore v T F Woollam and Son [2012] NSWSC 1559. 64The Agreement provided that payment of Halo's fee was subject to work being performed. The Agreement made no provision for further reference dates to continue to accrue after works had ceased. 65Accordingly, the plaintiffs submitted that there were no further reference dates under the Agreement and for the purposes of s 8 of the Act. 66The only basis on which Mr Bland resisted this submission was his contention that the February Payment Claim was not, in truth, a "payment claim" for the purposes of the Act. Mr Bland pointed to correspondence which took place between the parties in December 2012 in an effort to resolve the matter and submitted that it was clear that Halo never intended the February Payment Claim to be a payment claim for the purposes of the Act. 67I do not accept that submission. 68I see nothing in the correspondence passing between the parties to give rise to any such suggestion. The form of the February Payment Claim suggests, and I find, that it is a payment claim within the meaning of the Act.

The project documents issue 69A dispute between the parties concerning certain project documents was resolved by undertakings given by Halo to the plaintiffs in correspondence. On 26 June 2013, I noted those undertakings.

The result 70In those circumstances, I make the following orders and declarations: - (1)Declare that the purported adjudication determination made by the second defendant pursuant to the Building and Construction Industry Security of Payment Act 1999 described as Adjudication Determination RICS-039 and dated 6 March 2013 ("the Determination") is void. (2)Order in the nature of certiorari pursuant to s 69 of the Supreme Court Act 1970, that the Determination be quashed. (3)Declare that there are no further reference dates under the Project Management Agreement dated 21 January 2009 made between the parties, or under the Act, that would entitle the first defendant to a progress payment from the plaintiffs under s 8 of the Act. (4)Order that the defendant pay the plaintiffs' costs. (5)Grant liberty to apply on short notice as to the form of these orders.

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: 28 June 2013

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