Lamio Masonry Services Pty Ltd v TP Projects Pty Ltd

The Issues

1. Lamio seeks to challenge the Adjudicator's determinations on two bases. First, it submits that in neither case was there a payment claim complying with the requirements of s 13(2) of the Security of Payment Act. Second, it submits that in both cases the Adjudicator denied Lamio natural justice.
2. It is not disputed that the determinations were void if there was no valid payment claim. Nor is it disputed that the Adjudicator was obliged to comply with the rules of natural justice, although the content of those rules must be understood in the context in which the adjudication process is to take place and, in particular, the restrictions contained in the Security of Payment Act on the material that the Adjudicator can consider, the tight timetable imposed by the Act on the parties and the Adjudicator and the general purpose of the Act to provide what has been described as a "rough and ready" means of ensuring that contractors who do building work are paid promptly for the work that they do: see Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 78 NSWLR 393 at [207] - [209]; Clyde Bergemann v Varley Power [2011] NSWSC 1039 at [83] - [84] per McDougall J; Northbuild Constructions P/L v Central Interior Linings P/L [2011] QCA 22; [2012] 1 Qd R 525 at [107] per White JA.

Was there a payment claim?

1. Section 13(2) of the Security of Payment Act provides: 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.
2. In Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [76], Palmer J said: A payment claim and a payment schedule are, in many cases, given and received by parties who are experienced in the building industry and are familiar with the particular building contract, the history of construction of the project and the broad issues which have produced the dispute as to the claimant's payment claim. a payment claim and a payment schedule must be produced quickly; much that is contained therein in an abbreviated form which would be meaningless to the uninformed reader will be understood readily by the parties themselves. A payment claim and a payment schedule should not, therefore, be required to be as precise and as particularised as a pleading in the Supreme Court. Nevertheless, precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in the dispute. That statement was adopted in Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391; (2005) 64 NSWLR 448 by Mason P with whom Giles and Santow JJA agreed.
3. In the present case, Mr Corsaro submitted that a payment claim must contain sufficient information so that a reasonable person who considered the payment claim in the context of the contract and in light of the surrounding circumstances would be left in no doubt as to what the claim was for and would be able to make a proper assessment of it. He pointed out that, unless the respondent to a payment claim understood the claim, the respondent would not be able to prepare a proper payment schedule. That would be unfair to the respondent who is bound by the reasons advanced in the payment schedule in any subsequent adjudication. It would also be inconsistent with the purpose behind the Security of Payment Act, which is to provide a streamlined system for the making of and the assessment of progress claims. That system depends on properly articulated claims.
4. Mr Corsaro submitted that, in the present case, both claims were inadequate. In making that submission, he relied on an affidavit of Mr Anthony Barbalace, the Managing Director of Lamio, who said that he was not able to assess either claim. In order to do so, Mr Barbalace said that he needed to know where the work took place, the extent of the work and the names of the persons who did the work.
5. Mr Corsaro also sought to attach significance to the fact that each of the claims in this case was a claim for services related to construction work, and submitted that s 13(2) was not to be read as requiring the payment claim to identify the related services to which the progress payment relates, but rather was to be read as requiring the identification of the services related to construction work to which the progress payment relates. Although I found the submission difficult to follow, the suggestion appears to be that s 13(2) requires identification of both the construction work and the way the services related to that work.
6. The starting point in relation to the question whether there were valid payment claims is the words of the section. In the case of related services, in my opinion, those words require no more than the identification of the services to which the payment claim relates. Contrary to what I understand to be Mr Corsaro's submission, they do not require identification of the construction work to which the services relate, although the identification of that work may be necessary at least in part to identify the services. Of course, the payment claim must also indicate the amount of the progress payment that the claimant claims to be due. I accept that it is implicit in s 13(2) that the services must be sufficiently identified so that the respondent can properly consider and respond to the claim. However, just what that involves will depend very much on the circumstances of the case, and may depend on what the terms of the contract between the parties require. The services do not have to be identified completely or accurately. Rather, they must be identified sufficiently so that the respondent is able to respond to the claim: see Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (In Liq) [2005] NSWCA 409 at [34]ff per Hodgson JA.
7. In the present case, the contracts were informal. They gave no indication of how progress claims were to be made. The only question is whether the payment claims contained sufficient information so that Lamio was able to respond sensibly to them, and, in particular, was in a position to identify the grounds on which it should object to the claim if that is what it thought it should do. No doubt a well presented payment claim would expedite the adjudication process. But one that is not well presented or documented or particularised does not cease by virtue of those facts alone to be a payment claim.
8. In my opinion, the claims in this case met the requirements of a payment claim. They identified the job. They gave a brief description of the work done, how many men did the work, how long it took to do the work and the amount charged. I cannot see why that was not sufficient to enable Lamio to respond to the claims and for the Adjudicator to make a sensible determination in relation to the disputes. It is noteworthy that in the case of both disputes, the Adjudicator appears to have had no difficulty in setting out a clear statement of the issues between the parties and dealing with those issues.
9. Mr Corsaro in his submissions focussed on the Katoomba determination and, in particular, the fact that the payment claim did not identify who had done the work, with the result that Lamio did not raise the question whether the right rates had been claimed until its adjudication response. However, it was clear from the payment claim that all work had been claimed at the same rate; and if there was an issue about that, it is not clear why it could not have been raised in the payment schedule. Lamio had no difficulty in raising that issue in the payment schedule in response to the Hazelwood payment claim, although the payment claim in that case contained no additional information. It appears that the issue was not raised in response to the Katoomba payment claim due to an oversight.
10. Mr Barbalace gave evidence of the additional information he thought should be included. However, he did not explain how the absence of that information prevented him from serving a payment schedule that raised all the issues that he wanted to raise. For example, one issue that Lamio sought to raise for the first time in the adjudication response was the length of blocks actually cut. However, the length claimed was set out in the payment claim and it is difficult to see why Lamio could not have taken issue with the lengths claimed in the payment schedule. I have already mentioned another example, concerning the rates charged for labour.
11. In my opinion, both payment claims were valid payment claims under s 13(2) of the Security of Payment Act.

Natural justice

1. It is not easy to understand Lamio's claim based on natural justice. Mr Corsaro sought to tie the question of natural justice to the question of what was required by a payment claim: the payment claim had to provide sufficient information so that the respondent was not denied natural justice. At a general level, I accept that proposition. However, for the reasons I have given, the payment claims contained sufficient information to achieve that purpose. Mr Corsaro did not advance any independent argument that there had been a denial of natural justice, although he said he had no instructions to abandon such a claim that appears to be raised by Lamio's Technology and Construction List Response.
2. In the Technology and Commercial List Response, Lamio says that the adjudication application in respect of both the Katoomba and Hazelbrook payment claims contained information that was not included in the payment claim and that in considering that additional information the Adjudicator acted outside s 22 of the Security of Payment Act. In the case of the Katoomba adjudication application, the additional information was site diaries covering the period 20 May 2013 to 2 October 2013 and receipts. In the case of the Hazelbrook adjudication application the additional information was site diaries covering the period 31 July 2013 to 27 September 2013, ANZ Bank statements, Induction cards and receipts. In written submissions, Lamio submitted that by not including the information in the payment claim, TP Projects denied it a fair opportunity to respond to the information.
3. In my opinion, there is no merit in these contentions. Section 22(2)(c) of the Security of Payment Act specifically states that in determining an adjudication application, the adjudicator is to consider: The payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim.
4. The additional documents about which Lamio complains unquestionably fall within the description of "relevant documentation". It is difficult to see how the documents in question raised new claims that Lamio did not have an adequate time to consider. They simply contained information supporting the contentions made in the payment claim. Lamio was able to make submissions on those documents and, in some cases, the Adjudicator accepted those submissions. To the extent that it is said that the site diaries raised an issue concerning the rates that were charged for the men who did that work, I have already dealt with that issue.

Orders

1. The summons should be dismissed with costs.

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