The proceedings were commenced by the first respondent (Southern Han). It sought a declaration that an adjudication determination made by the second respondent (the Adjudicator), in respect of a payment claim made on 4 December 2014 (December Payment Claim) by the appellant (Lewence) was void. The Adjudicator made the determination on 30 March 2015 pursuant to s 22 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (BCI Act). The Adjudicator determined that Southern Han was liable to Lewence in the sum of $1,221,051.08.
Oddly enough, Southern Han did not seek relief in the nature of certiorari quashing the decision of the Adjudicator. It might have sought such relief either on the ground that the determination was made on the basis of an error of law on the face of the record [1] or that it was affected by a jurisdictional error. Southern Han's Amended Technology and Construction List Statement (Statement) appears to assume that if Lewence's payment claim was not made in accordance with the requirements of the BCI Act, the adjudication determination was void. The correctness of this assumption was not debated on the appeal.
[2]
Ground 1 of the Notice of Appeal
Ground 1 of the Notice of Appeal challenges the primary Judge's holding that a person who claims to be entitled to a progress payment (the claimant) does not make a valid claim for the purposes of s 13(1) of the BCI Act, unless the claimant satisfies all the requirements of s 8(1) - that is, unless the claimant is a person who has undertaken to carry out construction work under a construction contract (or supply related goods and services) in respect of which a reference date has in fact arisen. [2] In my view, the outcome of the appellant's challenge is determined by the tolerably clear language of ss 8 and 13 of the BCI Act, when read in the context of the legislation as a whole.
Section 8 of the BCI Act is in Pt 2, which is headed "Right to progress payments". [3] Section 8(1) creates an entitlement to a progress payment on and from each "reference date under a construction contract". The statutory entitlement is created in favour of 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."
The term "reference date", in relation to a construction contract, is defined in s (8)(2) of the BCI Act. The amount of a progress payment to which a claimant is entitled in respect of the construction contract is specified in s 9. That amount is ordinarily to be "calculated in accordance with the terms of the contract". [4] Under s 10 of the BCI Act, the due date for making a progress payment under a construction contract is determined by the terms of the contract, subject to express provisions that apply to certain kinds of construction contracts.
A claimant who satisfies either sub-par (a) or sub-par (b) of s 8(1) of the BCI Act must demonstrate that the reference date has arrived in order to gain the benefit of a determination that a progress payment is payable. Part 2 of the BCI Act is not concerned, however, with the procedure by which a claimant may establish his or her entitlement to a progress payment. That is the province of Pt 3 of the BCI Act.
Section 13 of the BCI Act is in Pt 3, which is headed "Procedure for recovering progress payments". As the heading to Pt 3 implies, s 13 establishes a procedure for a person "who is or who claims to be entitled to a progress payment" to enforce the claimed entitlement. The claimant may serve a payment claim on the "person who under the contract is or may be liable to make the payment".
It is a strained interpretation of the introductory words to s 13(1) of the BCI Act ("[a] person referred to in section 8(1) who is or who claims to be entitled to a progress payment") to read them as referring to a claimant who not only satisfies either sub-par (a) or sub-par (b) of s 8(1), but who is also able to show that the relevant reference date under the construction contract has in fact arrived. The very point of the procedure created by Pt 3 of the BCI Act is to establish a mechanism, in the event of a dispute, for an adjudicator to determine precisely that question.
A claimant can only obtain a determination as to his or her entitlement to a progress payment by invoking the procedure established by s 13. It is true that s 13 imposes limitations on the availability of the procedure. It is also true that if the limitations apply, a claimant will not be able to enforce the entitlement to a progress payment. For example, a claimant must serve a claim within the periods specified in s 13(4) of the BCI Act and a claimant cannot serve more than one payment claim in respect of each reference date (s 13(5)). But the fact that the statutory procedure is subject to these limitations does not detract from the conclusion that Pt 2 of the BCI Act creates a claimant's substantive entitlement to a progress payment, while Pt 3 creates the procedural mechanism for enforcing that entitlement.
This conclusion is consistent with the object of the BCI Act, stated in s 3:
"(1) The object of this Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.
(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.
(3) The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves:
(a) the making of a payment claim by the person claiming payment, and
(b) the provision of a payment schedule by the person by whom the payment is payable, and
(c) the referral of any disputed claim to an adjudicator for determination, and
(d) the payment of the progress payment so determined."
(Emphasis added.)
It can be seen that the language of s 3(2) and (3), respectively, reflects the different work performed by Pt 2 and 3 of the BCI Act. Part 2 "matches" s 3(2), in that it grants the statutory entitlement to a progress payment. Part 3 "matches" s 3(3) in that it establishes the procedure by which a claimant is able to recover a progress payment from the person liable to make the payment.
The conclusion I have expressed is also consistent with the structure and evident purpose of Pt 3 of the BCI Act. If s 13(1) is construed as I think it should be, it permits a claimant to serve a valid payment claim if the following conditions are satisfied:
the claimant has undertaken to carry out construction work under a construction contract (or has undertaken to supply goods and services under the contract);
the claimant is or claims to be entitled to a progress claim under the construction contract; and
the claim is served on the person who, under the construction contract concerned, is or may be liable to make the payment.
Section 14 provides for the person on whom the claim is served (respondent) to reply to the claim by providing a payment schedule. Depending on whether a schedule is provided and the contents of the schedule, the respondent may become indebted to the claimant. For example, s 14(4) states that if a claimant serves a payment claim and the respondent does not provide a payment schedule within a specified time:
"the respondent becomes liable to pay the claimant amount to the claimant on the due date for the progress payment to which the payment claim relates".
In the event of a dispute, s 17(1) of the BCI Act permits the claimant to apply for an adjudication of a payment claim (that is, a claim under s 13(1)), subject to observing certain procedures. Section 22(1) provides that the adjudicator is to determine:
"(a) the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount), and
(b) the date on which any such amount became or becomes payable, and
(c) the rate of interest payable on any such amount."
In making the determination the adjudicator is to consider only the matters specified in s 22(2) as follows:
"(a) the provisions of this Act,
(b) the provisions of the construction contract from which the application arose,
(c) 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,
(d) the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule,
(e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates."
In order to determine whether a respondent must make a progress payment, it may be necessary to decide whether the reference date has arrived. If so, an adjudicator has the authority to make that decision. If in making the determination, the adjudicator commits an error of law on the face of the record, the determination is subject to judicial review pursuant to s 69 of the Supreme Court Act 1970 (NSW). If the adjudicator's determination is affected by a jurisdictional error, judicial review will also be available. [5]
In the absence of a challenge on these grounds, a determination by the adjudicator that a respondent is required to pay an amount obliges the respondent to pay that amount to the claimant within five business days of service of the determination. [6] Should the respondent not comply, the claimant may obtain an adjudication certificate from the authorised authority. [7] Such a certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly. [8] However, the enforcement of a determination through a summary procedure in the BCI Act does not affect the right that any party to the construction contract has under the contract or in respect of anything done or omitted to be done under the contract. [9]
Part 3 of the BCI Act thus establishes a summary procedure for determining whether a claimant satisfies the criteria governing the statutory entitlement to a progress payment. The procedure includes a mechanism to ensure that the claimant can swiftly enforce a favourable determination. The statutory scheme enables a claimant to recover quickly the progress payments to which it is entitled, yet otherwise leaves undisturbed the parties' contractual rights. The construction of ss 8 and 13 of the BCI Act advanced by Southern Han is not only difficult to reconcile with the statutory language, but adds a layer of uncertainty and complexity to a legislation intended to achieve certainty and to operate simply. Accordingly, its construction of the legislation should not be accepted.
[3]
The Notice of Contention
The Notice of Contention filed by Southern Han seeks to uphold the decision of the primary Judge on the ground that:
"The purported payment claim the subject of the proceedings was served in contravention of [s] 13(5) of the [BCI Act] and therefore was not a valid claim."
This ground was not raised in Southern Han's Statement filed in the Equity Division proceedings. On the appeal, both parties accepted that the point had been argued before the primary Judge, but there was disagreement as to whether his Honour resolved or even addressed the point. As I have noted, Southern Han's submissions appear to assume that if the payment claim was served in contravention of s 13(5) of the BCI Act, the adjudicator's determination is void, independently of whether Southern Han succeeds in the opposition to Ground 1 in the Notice of Appeal.
The primary Judge referred briefly to s 13(5) of the BCI Act, but I do not read his judgment as deciding that the payment claim contravened that provision or that the adjudicator's determination was rendered invalid by reason of any such contravention. It is therefore necessary to address the Notice of Contention.
Southern Han's written submissions acknowledge that its argument that the payment claim contravened s 13(5) of the BCI Act depends on establishing that no reference date arose after 8 October 2014. Indeed its argument appears to be that since there was no reference date after the October reference date and Lewence had already made a claim in respect of that date, it follows that the December Payment Claim was "in respect of" the October reference date, within the meaning of s 13(5) of the BCI Act.
As has been seen, Southern Han's first challenge to the validity of the Adjudicator's determination is based on the argument that the payment claim was not valid unless a reference date, after the October reference date, had arrived before the claim was made. That challenge has been rejected, with the consequence that the existence of a reference date after the October reference date was a matter for the Adjudicator to determine (as he did). As I have also noted, Southern Han has not sought judicial review of the Adjudicator's determination.
In the absence of a challenge to the Adjudicator's determination, I do not think that it is open to Southern Han to allege that the payment claim was lodged in contravention of s 13(5) of the BCI Act on the ground that no post-October reference date had arisen. The existence of a reference date was a matter for the adjudicator to determine. If the existence of a post-October reference date was not a precondition to the Adjudicator's exercise of jurisdiction to make a determination and if there is no application for judicial review of that determination, I do not think that Southern Han can impugn the adjudicator's determination by contending that no post-October reference date had arisen. In effect, Southern Han seeks to repeat its unsuccessful jurisdictional fact argument but in a different form.
In any event, in my view the assumption underlying Southern Han's contention is not correct. Section 13(5) of the BCI Act provides that a claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. Section 13(5) does not say that a payment claim is deemed to be in respect of a past reference date if the payment claim is lodged after the last reference date but before another reference date has in fact arisen. The omission of any language to this effect is not surprising, once it is accepted that it is the adjudicator who is entrusted with the task of determining whether the claimant is entitled to a progress payment and, if necessary, whether the relevant reference date has arrived. The inquiry required by s 13(5) is therefore simply whether the payment claim is "in respect of" a reference date for which a payment claim has already been made.
Southern Han's contention that Lewence's December Payment Claim was served in contravention of the prohibition in s 13(5) of the BCI Act has to take account of s 13(6). This provision states that s 13(5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.
There are difficulties in determining the inter-relationship between s 13(5) and (6). Whatever those difficulties, it seems clear enough that a payment claim relating to work done after a particular reference date is not a claim "in respect of" that reference date merely because the payment claim includes some amounts that were the subject of a previous claim. The scanty evidence relied on by Southern Han goes no further than suggesting, at most, that Lewence's December Payment Claim may have incorporated some small amounts that were the subject of a previous payment claim, but were not resolved by that claim. That evidence is insufficient to establish that the December Payment Claim was served on Southern Han in contravention of s 13(5) of the BCI Act.
[4]
Other Grounds
I agree with Ward JA in her analysis of Grounds 2 and 3 of the Notice of Appeal.
[5]
Endnotes
Supreme Court Act 1970 (NSW), s 69.
Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd [2015] NSWSC 502 (Primary Judgment) at [30]-[31] (Ball J).
The heading to Pt 2 is taken to be part of the BCI Act: Interpretation Act 1987 (NSW), s 35(1). The same heading is used for s 8 itself. However, the heading to a particular provision does not form part of the legislation: Interpretation Act 1987 (NSW), s 35(2).
BCI Act, s 9(a).
Kirk v Industrial Court of New South Wales [2010] HCA 1; 239 CLR 531.
BCI Act, s 23(2).
BCI Act, s 24.
BCI Act, s 25.
BCI Act, s 32
[6]
Amendments
29 September 2015 - Typographical error at [51]
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: 29 September 2015
Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd [2015] NSWSC 502
The Solholt [1983] 1 Lloyd's Rep 605
Trives v Hornsby Shire Council [2015] NSWCA 158
Trustees of Roman Catholic Church for Diocese of Lismore v T F Woollam and Son [2012] NSWSC 1559
Texts Cited: Dennys, N et al (eds) Hudson's Building & Engineering Contracts, (12th ed, 2010, Sweet & Maxwell)
Category: Principal judgment
Parties: Lewence Construction Pty Ltd (Appellant)
Southern Han Breakfast Point Pty Ltd (First Respondent)
Ian Hillman (Second Respondent)
Australian Solutions Centre Pty Ltd (Third Respondent)
Representation: Counsel:
S Robertson (Appellant)
M Christie SC with B Michael (First Respondent)
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
HEADNOTE
[This Headnote is not to be read as part of the judgment]
In January 2013, Lewence Construction Pty Ltd ('Lewence'), as contractor, entered into a construction contract with Southern Han Breakfast Point Pty Ltd ('Southern Han'), as principal, for the construction of an apartment block in Breakfast Point ('the contract').
On 4 December 2014, Lewence served Southern Han with a payment claim invoking the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) ('the Act'). By that time, Southern Han had issued Lewence with a notice purporting to take further work under the contract out of Lewence's hands and Lewence had in turn notified Southern Han that it regarded this as a repudiation of the contract, which Lewence accepted as bringing to an end the contract with effect from 28 October 2014. The payment claim was the subject of adjudication. A determination was made in favour of Lewence.
Southern Han brought proceedings in the Technology & Construction List in the Equity Division of the Supreme Court seeking a declaration that the adjudication determination was void. Southern Han contended that the adjudicator had made a jurisdictional error because he wrongly determined that a 'reference date' (being the date on which a claim for a progress payment can be made) within the meaning of s 8 of the Act had arisen in respect of the work that was the subject of the payment claim, whereas in fact no such reference date had arisen.
The primary judge accepted the construction of ss 8 and 13 of the Act advanced by Southern Han, namely that satisfaction of the requirement under s 8(1) of the Act that there be an available reference date to support a progress claim was a matter going to the jurisdiction of the arbitrator and was therefore amenable to judicial review.
Southern Han did not seek to establish that it had validly exercised its' contractual rights to take over the work and suspend payment. The primary judge found that there was no available reference date that could support the impugned payment claim on either of the two relevant hypotheses that arose in those circumstances, ie, that Southern Han had validly taken over the work and suspended payment under the contract or that the termination by Lewence was valid.
On appeal, Lewence challenged the construction of ss 8 and 13 adopted by the primary judge and, in the alternative, the findings made by his Honour that on the proper construction of the contract, there was no available reference date in respect of the impugned payment claim.
Southern Han filed a notice of contention seeking to affirm the primary judgment on the ground that the impugned payment claim was served in contravention of s 13(5) of the Act, because it was a second or subsequent claim in respect of a reference date, and was therefore not a valid payment claim.
Held allowing the appeal:
(1) The existence of a reference date to support a payment claim is not a jurisdictional fact; it is not an essential pre-condition for the making of a valid payment claim (Ward JA at [60], [93]; Emmett JA at [119]; Sackville AJA at [133]).
Kembla Coal & Coke v Select Civil [2004] NSWSC 628 affirmed.
(2) The words "on and from each reference date" in s 8(1) do not purport to identify a person, they identify the time on and from which a person who satisfies the description in either (a) or (b) of that sub-section is entitled to a progress payment (Ward JA at [61], [93]; Emmett JA at [119]).
(3) The words "a person referred to in s 8(1)" in s 13(1) refer, in their ordinary meaning, to a person failing within either s 8(1)(a) or 8(1)(b) (Ward JA at [61], [93]). To read those words as referring to a claimant who not only satisfies either sub-par (a) or sub-par (b) of s 8(1), but who is also able to show that the reference date has arrived would be a strained interpretation (Sackville AJA at [132]). It would be surprising if Parliament had intended in those words to pick up the fact of arrival of a reference date (Emmett JA at [120]).
(4) The words "or who claims to be entitled to a progress payment" in s 13(1) make clear that the existence of a dispute as to the entitlement of a person to a progress claim does not preclude the making of a valid payment claim (Ward JA at [61]).
(5) The construction of ss 8 and 13 advanced by Southern Han is difficult to reconcile with the statutory language and adds uncertainty and complexity to legislation intended to achieve certainty and to operate simply (Sackville AJA at [142]; Emmett JA agreeing at [120]).
(6) There was no reason to conclude that the impugned payment claim was a second or subsequent claim "in respect of" the 8 October reference date when the impugned payment claim covered work under the contract after that date and the earlier claim was not in evidence (per Ward JA at [94]; Emmett JA agreeing at [121]).
(7) (obiter) had it been necessary to determine, termination of the contract would not have precluded Lewence from making a valid payment claim in respect of a reference date arising after termination (Ward JA at [82]; Sackville AJA agreeing at [152]).
(8) (obiter) had it been necessary to determine, on the proper construction of the contract, if Southern Han had validly exercised its right to take the work out of Lewence's hands and suspend payments, this would have precluded Lewence from making a valid payment claim (Ward JA at [92]; Sackville AJA agreeing at [152]).
Primary judgment
Southern Han argued before the primary judge that the adjudicator had committed a jurisdictional error because he wrongly determined that a reference date, within the meaning of s 8 of the Act, had arisen in respect of work that was the subject of the impugned payment claim, whereas in fact no such reference date had arisen. (Southern Han also claimed that it had been denied natural justice by the adjudicator on two bases but as no challenge is made to his Honour's determination of those issues it is not necessary to consider them.)
The jurisdictional error issue turned on the correct construction of ss 8 and 13 of the Act.
Section 8 provides:
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.
Section 13, relevantly, provides:
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.
…
(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.
The scheme of the Act is recognised as providing an entitlement to progress payments and a mechanism to ensure that disputes concerning the amount of such payments be resolved with the minimum of delay, those payments being only on account of a liability that will finally be determined otherwise (as so described by Hodgson JA in Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421 at [51]).
Ground 1 - s 13(1) of the Act
Lewence points to the words "or who claims to be" in s 13(1) to show that the legislature intended that a payment claim could validly be made not only by a person who is entitled to a progress payment under s 8(1) but also by a person who claims to be so entitled. That is hardly a controversial submission. McDougall J observed in Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 801 (at [22]), the words "or who claims to be" were inserted into s 13(1) to overcome the contrary effect of the decision of this Court in Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2003] NSWCA 4; (2003) 56 NSWLR 576.
The proposition that a claimed entitlement is sufficient to trigger the progress payment mechanisms of the Act was recognised by McDougall J in Consolidated Constructions Pty Ltd v Ettamogah Pub [2004] NSWSC 110; (2004) 20 BCL 373 at [61] and in Ampcontrol SWG Pty Ltd v Gujarat NRE Wonga Pty Ltd [2013] NSWSC 707, where Hammerschlag J emphasised (at [19]) that the express words of s 13 make it clear that the assertion of entitlement is sufficient to enliven the operation of the Act. In Ampcontrol, Hammerschlag J, referring with apparent approval to the decision in Consolidated Constructions, stated that it would be out of step with the express wording of s 13 for the Court to become enmeshed in a determination of the contractual efficacy of the plaintiff's claim or the defendant's response to it ([25]).
Lewence contends that it follows from this that the question whether a claimed entitlement exists in fact and law is a matter for an adjudicator appointed under the Act to decide, not for the Court. It is submitted that, were this not so, the words "claims to be" in s 13(1) would be redundant since a person who claims to be entitled to a progress payment would not be able to serve a payment claim unless that person were actually so entitled.
Lewence points to two other features of s 13(1) in support of the construction for which it contends.
First, it submits that the reference to a "progress payment" in s 13(1) must be a reference to a progress payment under s 8; and hence that a person claiming that a reference date has arisen is a person claiming to be entitled "under s 8". In oral argument it was accepted by Counsel for Lewence that to read into s 8 the definition of "progress payment" contained in s 4 of the Act would involve some circularity, as recognised by Ball J in Patrick Stevedores Operations No 2 Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2014] NSWSC 1413 at [30], since that definition makes clear that a payment is still a progress payment for the purposes of s 13 even if it is a claim for a final payment, a single payment or a milestone payment. Nevertheless, he points to this as a feature providing some support for Lewence's construction.
Ground 1 of Notice of Contention - s 13(5)
Linked to the argument on ground 1 of the notice of appeal, and the way in which the issue seems to have been approached when the matter was before the primary judge, is the question whether there was a contravention of s 13(5) of the Act.
In Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; (2009) 74 NSWLR 190 (at [14]), Allsop P, as his Honour then was, having referred to s 13(5) as a prohibition said that:
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 claim under the Act and does not attract the statutory regime of the Act.
Similarly, McDougall J concluded in Trustees of Roman Catholic Church for Diocese of Lismore v T F Woollam and Son [2012] NSWSC 1559 (at [49]) that the statutory prohibition in s 13(5) would be set at naught if a payment claim served in breach of that sub-section nonetheless initiated the statutory enforcement or recovery mechanisms, a view his Honour affirmed in Kitchen Xchange Pty Ltd v Formacon Building Service Pty Ltd [2014] NSWSC 1602 (at [23]). McDougall J there concluded that a payment claim served in breach of s 13(5) had the consequence that it was not open to the adjudicator, as a matter of jurisdiction, to consider the payment claim and make a determination thereon ([30], [31]). (His Honour reached a similar conclusion in relation to the non-compliance by the claimant with the specific and mandatory requirement in s 13(7).)
Lewence did not suggest that compliance with s 13(5) was not a matter going to the jurisdiction of the adjudicator. However, it maintains that, to succeed on its notice of contention, Southern Han must establish that service of the impugned payment claim was in contravention of s 13(5). The primary judge did not so find and it was not submitted that the adjudicator had made an error of law in that regard.
It was agreed between the parties that a reference date arose on 8 October 2014 and, although a copy was not in evidence, that a payment claim was made in respect of that date. However, it is not conceded, and in my opinion has not been established, that the impugned payment claim was a second or subsequent payment claim in respect of that same reference date (or some other reference date in respect of which a claim had already been made).
The impugned payment claim did not on its face assert that it was in respect of the 8 October 2014 (or indeed any particular) reference date. It included work done after 8 October 2014. Lewence argues that the fact that the impugned payment claim was for work done up to 27 October 2014 supports the characterisation of the claim as not being one that was "in respect of" the earlier 8 October date. It maintains that the objective criterion to determine how to characterise the impugned payment claim is by reference to the particular work claimed to have been done.
Ground 2 - assumption that termination was valid
In Brodyn, it was made clear by Hodgson JA that whether reference dates ceased on termination of the contract or cessation of work may depend on construction of the relevant contract. There it had been submitted that the payment claim was not a valid payment claim under the Act because the termination of the contract and cessation of the work under it meant that there was thereafter only one reference date in respect of which only one final payment claim could be made. Hodgson JA pointed out that s 8(2) of the Act does not provide that reference dates cease on termination of a contract or cessation of work and went on to say (at [63]):
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.
Whether or not a contractual term operates after termination, as Ball J noted in Patrick Stevedores at [37], is a question of construction (Photo Production Ltd v Securicor Transport Ltd [1980] AC 827).
In construing the contract in this case, his Honour had regard to cl 39.10. His Honour considered (at [50]) that it made little sense for Lewence to have a continuing right to claim payment progressively under the contract when the contract was terminated and any obligation to perform work under the contract had come to an end. His Honour thus concluded that at the time of termination the only right to a progress payment was the right that had accrued on 8 October 2014 but since that right had already been exercised any further payment claim in respect of that date was precluded by s 13(5).
Lewence argues that cl 39.10 of the contract provides no support for his Honour's reasoning since it applies only where the contract is terminated pursuant to cl39.4(b) or cl 39.9 and, in the present case the contract was terminated at common law by its acceptance of Southern Han's repudiation (Lewence's right to do so being preserved by cl 39.1).
Lewence argues that the contract makes clear that the contractor will progressively earn and be paid the contract sum (cl 37.1) and that it would be a strange result if that entitlement could be defeated by the principal wrongly repudiating the contract and the contractor then electing to exercise the right to terminate which arises on such a repudiation. It is submitted that such a construction would offend the general rule of contractual construction that a contract should not be construed so as to permit a party to take advantage of his or her own wrong (Lewence citing Alghussein Establishment v Eton College [1988] 1 WLR 587).
Having considered both parties' submissions, his Honour ultimately accepted the construction advanced by Southern Han, namely that satisfaction of the requirement under s 8 of the Act that there be an available (unused) reference date to support a progress claim is a matter that goes to the jurisdiction of the adjudicator and hence is susceptible to judicial review.
His Honour found that there was no available reference date that could support the impugned payment claim on either of the two relevant hypotheses (those two alternative hypotheses arising because Southern Han did not seek to establish that it had validly exercised its right under cl 39.4(a) of the contract to take over the work and hence that Lewence's termination of the contract was invalid).
First, on the hypothesis that, as Southern Han contended, it had validly taken over the work and suspended all payments under the contract, his Honour considered that there could be no subsequent date under the contract on which a claim for a progress payment may be made and consequently no reference date ([44]). Second, on the alternative hypothesis, namely that the termination by Lewence was valid, his Honour concluded that this brought an end to the accrual of reference dates ([46]). Accordingly, his Honour made the declaration sought by Southern Han.
Second, Lewence notes that s 13(1) directs attention, relevantly, to a person who claims to be "entitled" to a progress payment (under s 8). Lewence contends that s 8(1) identifies two classes of person: a person who has undertaken to carry out construction work under the contract (s 8(1)(a)) and a person who has undertaken to supply related goods and services under the contract (s 8(1)(b)); and that the person identified in s 13 is someone falling within one or both of those classes and who is or claims to be entitled to a progress payment under s 8(1). Lewence's argument in this context is that where such a person's claimed entitlement depends on whether a reference date has arisen under the contract, that person nevertheless satisfies the description in s 13(1) even if its contention as to an available reference date is ultimately determined (by the adjudicator) to be incorrect.
For its part, Southern Han contends, in effect, that s 13(1) must be construed against the background of s 13(5) and that, because it is clear from s 13(5) that there must be an "unused" reference date to support a claim, the existence of a reference date for the purpose of s 8 is a precondition to the exercise of an adjudicator's power; and the Court thus has jurisdiction to determine whether there is a reference date to support the impugned payment claim.
The primary judge considered that the expression "person referred to in s 8(1)", as used in s 13(1), was ambiguous ([30]) and that it could mean either any person meeting the requirements set out in s 8(1)(a) or s 8(1)(b) (as Lewence contends) or that it could mean a person who satisfies all of the requirements of s 8(1), i.e., a person who has undertaken to carry out construction work, or to supply related goods and services under a construction contract in respect of which a reference date has arisen (Southern Han's contention).
His Honour preferred the latter construction on the basis that s 13 identifies a person who is entitled to serve a payment claim by reference to the whole of s 8(1), not simply by reference to s 8(1)(a) and s 8(1)(b) ([31]). His Honour accepted that the existence of a reference date is not a characteristic of the person identified in s 8(1) but considered that it was an essential characteristic of the rights of such a person that are created by s 8(1) and hence concluded that "[a] person referred to in s 8(1)" is a person having those rights ([31]).
Thus his Honour interpreted s 13 as saying that a person who meets the essential requirements set out in s 8 is entitled to make a progress claim and said (at [37]) that:
[t]he entitlement to make a claim does not depend on the success or otherwise of the claim. But it does depend on satisfying the essential requirements. Section 13(1) uses the words "or claims to be" to address the first of these points. It uses the words "[a] person referred to in s 8(1)" to address the second. It is apparent from the wording of s 8 that the occurrence of a reference date is as essential as the existence of a construction contract and the performance of construction work or the supply of related goods and services under that contract.
His Honour drew support for that construction of s 13(1) from the Second Reading Speech for the Building and Construction Industry Security of Payment Amendment Bill, in which the then Minister for Public Works and Services, Mr Iemma, recognised the potential for claimants to abuse the intent of the legislation and said that "[c]onsequently, the bill restricts claimants to one payment claim under the Act in respect of each reference date" (Second Reading Speech (New South Wales, Parliamentary Debates, Legislative Assembly, 12 November 2002, 6541). In particular, his Honour extracted (at [38]) a passage from the speech from which he considered it apparent that the requirement of a reference date (as was the requirement that only one claim could be made in respect of each reference date) was intended to be an important mechanism by which abuses of the right to make a payment claim were to be prevented.
Pausing there, I do not consider that the Second Reading Speech provides any significant support for Southern Han's construction of s 13(1). The potential for abuse of the statutory right to make payment claims, to which the Minister referred, is in my view a matter addressed by s 13(5).
Lewence argues that if his Honour's approach is adopted, then it would always be open to the principal to challenge any adjudication determination made in the contractor's favour where a milestone payment regime was adopted in the contract on the ground that the payment claim was not supported by a reference date. It is submitted that a construction of the Act which would require an extensive enquiry as a pre-requisite to the adjudicator's jurisdiction is a most unlikely construction having regard to the objects of the Act and that this provides a factor which, in addition to the others, tends against the adoption of the approach preferred by the primary judge.
His Honour accepted that on Southern Han's interpretation the question whether a reference date had arisen might raise difficult factual issues going to the adjudicator's jurisdiction (as might other issues going to the question of jurisdiction) but did not accept that this was a reason for not treating the factual question as a jurisdictional one (see [40]).
Southern Han in response argues that the hypothetical example posed by Lewence is unrealistic and says that the flaw in reading s 13(1) in the manner for which Lewence contends is highlighted by the fact that, on that construction, a contractor could (assuming a construction contract providing for reference dates at two month intervals) be able validly to serve a payment claim, or even several payment claims, before the first reference date had actually arisen under the contract.
In response to Lewence's submission to the effect that the legislature cannot have intended this to be a jurisdictional fact because its determination might embroil the court in lengthy factual disputes, Southern Han contends (as his Honour accepted at [40]) that other jurisdictional matters in relation to the Act can raise similarly difficult factual issues (such as whether there is an arrangement; whether the work comes within the definition of construction work; whether the goods and services come within the definition of related goods and services; and whether the exceptions in s 7 apply).
Pausing there, while inconvenience is not a reason in itself for not treating the requirement for a reference date as a jurisdictional fact, it has been recognised as a factor which may be taken into account in determining on the proper construction of a statutory provision whether a fact is jurisdictional in the sense of being an essential condition to the exercise of a particular power, as was recognised in Trives v Hornsby Shire Council [2015] NSWCA 158 (at [9], [13]).
Counsel for Lewence did not concede that if no available reference date had arisen after 8 October 2014 (for example, if it did not succeed on one of grounds 2 and 3 of the grounds of appeal) then the impugned payment claim must necessarily have been in respect of the earlier date. While it maintained before the adjudicator that the impugned payment claim was a claim in respect of the 8 November 2014 reference date, it submits in this Court that if it succeeds on ground 1 of the appeal (the s 13(1) issue) then the claim was prima facie valid and it was for Southern Han to establish that it was a second or subsequent claim in respect of a particular reference date.
In other words, Lewence maintains that unless Southern Han establishes that the impugned payment claim was served in breach of s 13(5), the determination by the adjudicator that 8 November 2014 was an available reference date is not appellable in this Court on the construction of s 13(1) for which it contends (and which I consider to be correct), the existence of a reference date under the contract being for the adjudicator to determine.
This Court was not taken to the adjudicator's reasons to suggest that there was any error of law on the face of the record in relation to the existence of an available reference date. On its face the impugned payment claim includes a claim for work done after 8 October 2014 and hence logically one would expect it to be in respect of a reference date after that time. Insofar as Southern Han submits that this would not necessarily be the case, referring to s 13(4) which permits the making of a payment claim within a year (notwithstanding the contractual obligation to make the payment claim in accordance with cl 37.1), the difficulty is that there is nothing before this Court on which it could be concluded that the impugned payment claim was the second or subsequent payment claim "in respect of" the 8 October 2014 (or any other) reference date.
Ground 1 of the notice of contention therefore fails irrespective of the outcome of grounds 2 and 3 of Lewence's notice of appeal.
It is further submitted that the Court should apply by analogy the approach which applies in the law of damages to the effect that the consequence of termination at common law for repudiation is generally attributed to the repudiatory conduct of the party in breach rather than to the election of the innocent party to terminate (referring to Castle Constructions Pty Ltd v Fekala Pty Ltd [2006] NSWCA 133; (2006) 65 NSWLR 648 at [28], citing The Solholt [1983] 1 Lloyd's Rep 605 at 607).
Southern Han relies upon the well-known reasoning of Dixon J in McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457 at 476-477 and argues that if Lewence's termination was valid then both parties are discharged from the further performance of the contract and no further reference dates accrue under the contract. It refers to Qline Interiors Pty Ltd v Jezer Construction Group Pty Ltd [2002] QSC 88; [2009] 2 Qd R 566 at [55]-[57], [71] where Muir J did not accept that a claim in respect of a particular progress claim could be categorised as an accrued right which survived termination of the contract.
In both Patrick Stevedores and Omega House, the Court (Ball J and Darke J, respectively) considered whether, on the proper construction of the contract in that case, the contract continued to provide reference dates following its termination. In both cases, the parties' contract made specific provision for what should happen following a termination for convenience and in those circumstances their Honours held that the contract did not continue to provide a reference date.
Had it been necessary to determine, I would have concluded that once the contract was terminated the contractual right to make further progressive payment claims under cl 37.1 came to an end. However, the impugned payment claim is made pursuant to a statutory entitlement to do so "[o]n and from each reference date". Termination of the contract does not alter the fact that under the contract a reference date arises on the 8th of each month for work done under the contract up to the 7th of that month. Therefore, I consider that 8 November 2014 was an available reference date to support the making of the impugned payment claim. There not being a contractual provision to preclude the exercise of the statutory right to make a progress payment claim on that date, I would have held that ground 2 of the appeal is made out on that basis.