Parkview Constructions Pty Limited v Total Lifestyle Windows Pty Ltd t/a Total Concept Group

Supreme Court of NSW|2017-02-22|Before: Hammerschlag J

Solicitors: Salim Rutherford Lawyers - Plaintiff QBM Lawyers - First Defendant File Number(s): 2016/374624

Judgment

HIS HONOUR: These proceedings are to quash or to declare void an adjudication determination purportedly made under the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) on the grounds that it is infected by either jurisdictional error or a denial of procedural fairness, or both.
References below to sections are, unless the context otherwise indicates, references to the Act.
The Plaintiff (Parkview) complains that: 1. the adjudication application made by the Defendant, the respondent under the Act (Total), differed from that referred by the authorised nominating authority to the adjudicator; 2. the adjudication application served on it, the respondent under the Act, was not a copy of that which was referred to the adjudicator; 3. its adjudication response was wrongly disregarded by the adjudicator; and 4. the adjudicator took into account material that was not properly part of the adjudication application.
For the reasons which follow, these complaints have been made out. The adjudication determination cannot stand.

BACKGROUND

The course of events which give rise to this dispute can properly be described as a litany of errors.
On 18 May 2015, Parkview engaged Total to design, supply and install glazed windows and doors at the Woolooware Bay Town Centre.
On 11 October 2016, Total served on Parkview a payment claim as contemplated by s13(1), for $668,177.24 incl. GST.
On 25 October 2016, Parkview responded with a payment schedule as contemplated by s14, identifying as nil the amount of the payment it proposed to make.
8 November 2016 was the deadline for Total to make an adjudication application to an authorised nominating authority under s17.
ABC Dispute Resolution Service (ABC) is an authorised nominating authority. ABC has "space" at www.hightail.com (Hightail).
Hightail is an internet based data storage provider. It provides a "cloud" storage service that enables users to upload, share and download files via a web browser or desktop application. Transfer of files can occur by a user uploading a file to the Hightail cloud and sending a download link via email to the recipient, or a user can create a space which is a repository of files and upload files to it. The user can share the space with other people by sending an access link via email. Recipients of the link can download files in the space unless restricted by access controls set by the creator of the file.
The adjudication application which Total prepared was hefty. In physical form, it ran to four full lever arch folders. It comprised four Sections. Section 1 was an adjudication application on a form published by ABC (11 pages) and filled out by Total. Section 2 was Total's submissions in support of the application (10 pages). Section 3 comprised witness statements with documentary exhibits (1001 pages). Section 4 comprised the contract, the payment claim and supporting documentation and the payment schedule and some additional materials (427 pages).
At 1.29 pm on 8 November 2016, Total's legal and contracts officer Claire Sun uploaded the adjudication application to ABC's space on Hightail, providing to ABC a link to the files uploaded.
However, the version of the submissions uploaded was not the version upon which Total intended to rely. It had revised submissions. These were separately uploaded to Hightail at 2.11 pm that day.
Claire Sun "pasted" a copy of the application to a Universal Serial Bus (or USB) "stick". This is a diminutive device which stores information. It is a solid state, non-volatile storage medium that can be electronically controlled to add, modify and delete electronic data. To enable storage of data it must be formatted with a file system. Files stored on it may be created, copied or deleted, much like a computer hard drive. A USB stick is connected to a computer via a port or jack. Information stored on it can be accessed via the computer.
Claire Sun placed the USB stick, together with a covering letter dated 8 November 2016 and addressed to Parkview, in a prepaid, express post envelope and posted it to Parkview's physical address at level 6, 235 Pyrmont Street, Pyrmont, NSW. The letter read: On 8 November 2016, Total Concept Group submitted an adjudication application with ABC DRS in relation Payment [sic] Claim 22, served on 11 October 2016. By way of service, a copy of this application is contained in full on the enclosed USB drive. A hard copy of the application will also be sent via courier to your office and should arrive later this week.
The first significant error infecting the application was that Section 3 (the witness statements) was not in the material which was uploaded to Hightail.
The USB stick was received by Parkview in its post box in the afternoon of 9 November 2016.
On 10 November 2016, the letter and the USB stick were handed to Jennifer David, Parkview's company secretary. She had the letter scanned. She placed the USB stick into her computer and opened it, but was unable to determine if it contained an index or all documents that would potentially be contained within the application. She then handed it to Karen White, the personal assistant to Parkview's managing director, to review and upload. The adjudication application, as pasted onto the USB stick, did however include Section 3 and the revised submissions.
On 10 November 2016, Total served a version of the adjudication application, in four folders, on ABC.
The second significant error infecting the application was that these folders did not contain the revised submissions, but the original ones. They did, however, contain Section 3.
On 10 November 2016, ABC referred the adjudication application to the Second Defendant (the adjudicator).
On 11 November 2016, ABC delivered four volumes supposedly containing the application to the adjudicator.
The third significant error infecting the adjudication application was that these volumes did not include the revised submissions, but only the original ones. Indeed the revised submissions were never given to the adjudicator, and the original ones were never given to Parkview.
The fourth significant error infecting the adjudication application was that the folders received by the adjudicator contained some documents that were not included on the USB stick and vice versa. For example, the folders contained a page (not on the USB stick) referring to the fact that some documents which were included in the payment claim were included in electronic format only, due to their number. The adjudicator was not given that format.
On 11 November 2016, Parkview received delivery of four volumes containing the application. They contained Section 3 and the revised submissions.
On 14 November 2016, under s19(1) ABC served notice of the adjudicator's acceptance of the adjudication application on the parties.
Under s20(1)(a) of the Act, Parkview could lodge an adjudication response within 5 business days after receiving a copy of the application. If Parkview received copy of the application when the USB stick arrived in the post on 9 November 2016, it had until 16 November 2016 to serve its response. If it first received copy of the application when it opened the USB stick on 11 November 2016, it had until 17 November 2016 to do so.
On 17 November 2016, Parkview served its adjudication response which apparently included written submissions. The adjudication response is not in evidence. Leave was sought by Parkview during its submissions in reply to tender it. In the face of an objection by Total, I rejected the tender.
Total submitted to the adjudicator that Parkview's adjudication response was out of time and had to be disregarded.
On 21 November 2016, the adjudicator requested further written submissions in respect of the service of the adjudication application.
On 12 December 2016, the adjudicator delivered his adjudication determination (dated 9 December 2016). He determined that the adjudication application was served on Parkview on 9 November 2016, upon delivery of the USB stick. Accordingly, he found, the adjudication response was out of time, and he disregarded it. This was the fifth significant error infecting the adjudication application. He determined that the amount to be paid by Parkview to Total was $539,634.24 (incl. GST).

RELEVANT PROVISIONS OF THE ACT

Section 17(1) entitles the claimant to apply for adjudication of a payment claim if the respondent provides a payment schedule and the scheduled amount indicated in it is less than the amount indicated in the payment claim.
Section 17(3) provides: An adjudication application: (a) must be in writing, and (b) must be made to an authorised nominating authority chosen by the claimant, and (c) in the case of an application under subsection (1) (a) (i)-must be made within 10 business days after the claimant receives the payment schedule, and (d) in the case of an application under subsection (1) (a) (ii)-must be made within 20 business days after the due date for payment, and (e) in the case of an application under subsection (1) (b)-must be made within 10 business days after the end of the 5-day period referred to in subsection (2) (b), and (f) must identify the payment claim and the payment schedule (if any) to which it relates, and (g) must be accompanied by such application fee (if any) as may be determined by the authorised nominating authority, and (h) may contain such submissions relevant to the application as the claimant chooses to include.
Section 17(5) provides: A copy of an adjudication application must be served on the respondent concerned.
Section 19 provides: (1) If an authorised nominating authority refers an adjudication application to an adjudicator, the adjudicator may accept the adjudication application by causing notice of the acceptance to be served on the claimant and the respondent. (2) On accepting an adjudication application, the adjudicator is taken to have been appointed to determine the application.
Section 20(1) provides: Subject to subsection (2A), the respondent may lodge with the adjudicator a response to the claimant's adjudication application (the "adjudication response" ) at any time within: (a) 5 business days after receiving a copy of the application, or (b) 2 business days after receiving notice of an adjudicator's acceptance of the application, whichever time expires later.
Section 21(2) provides: An adjudicator is not to consider an adjudication response unless it was made before the end of the period within which the respondent may lodge such a response.
Section 21(4) provides: For the purposes of any proceedings conducted to determine an adjudication application, an adjudicator: (a) may request further written submissions from either party and must give the other party an opportunity to comment on those submissions, and (b) may set deadlines for further submissions and comments by the parties, and (c) may call a conference of the parties, and (d) may carry out an inspection of any matter to which the claim relates.
Sections 22(1) and (2) provide: (1) An 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. (2) In determining an adjudication application, the adjudicator is to consider the following matters only: (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.

THE PROCEEDINGS

On 14 December 2016, Parkview sued out a Summons (with accompanying Technology and Construction List Statement), seeking an order in the nature of certiorari quashing or setting aside the adjudication determination, and in the alternative, a declaration that it is void. It sought injunctive relief restraining Parkview from applying for an adjudication certificate or otherwise seeking to enforce or rely on the adjudication determination.
On 15 December 2016, against the usual undertaking as to damages, the court ordered interim injunctions.
Parkview paid the amount of the adjudication determination into court.
Mr M. Christie SC together with Mr A.R.R. Vincent of counsel appeared for Parkview. Mr D.A. Savage QC and Mr M.R. Bland of counsel appeared for Total.

THE ISSUES

Parkview initially contended that the adjudication application was made out of time because an uploading to Hightail did not constitute the making of an application. It abandoned this when it was established that on 8 November 2016, ABC downloaded what was uploaded.
First, Parkview submits that the adjudicator had no jurisdiction to determine the application which was referred to him, in that it was not the application which Total made (by uploading to Hightail on 8 November 2016 - the last day for making the application) but a different application which included both revised submissions and Section 3, neither of which were included in the application which was uploaded.
Second, it submits that the adjudicator had no jurisdiction because a necessary prerequisite to him having jurisdiction to determine the application referred to him, was that Parkview be served with a copy of that application, which did not occur here. The two applications differed in at least the respect that one had the original submissions and the other the revised ones.
Third, Parkview submits that the adjudicator fell into jurisdictional error by failing to have regard to its adjudication response which it says was served in time. In the alternative, Parkview submits that it was denied procedural fairness.
Finally, Parkview submits that it was denied procedural fairness by not being informed both that Section 3 was not included in the application uploaded to Hightail and that the submissions given to the adjudicator were the original and not the revised ones.

CONSIDERATION

The principles which govern the approach to, and consequences of, non-compliance with provisions of the Act are now well trodden ground.
Punctilious compliance with provisions of the Act upon which the effectiveness of the decision making process under it depends is required: Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393 at [47]-[48], [96] and [213]-[229].
Non-compliance with such a provision will have the consequence that an essential prerequisite to an adjudicator's jurisdiction is not met, and an adjudication determination made in the face of such non-compliance will be vitiated.
Procedural fairness is implied as a condition of the exercise of the statutory power given to adjudicators under the Act. In any given instance, the content of the obligation is determined by the applicable provisions of the Act and its scope must accommodate those provisions which regulate how an adjudicator is to go about doing his task: Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88 at 93.
Judicial review is available where a party has been denied the natural justice which the Act requires to be given: Timwin Constructions Pty Ltd v Façade Innovations Pty Ltd (2005) NSWSC 548 at 44.
It may of course be that non-compliance with a provision of the Act is both jurisdictional error and a denial of procedural fairness. There is no bright line. Each case will turn on its own facts and on the statutory provision in play.
Section 17(5) makes it a mandatory requirement that copy of an adjudication application be served on a respondent. This is an essential preliminary to the decision making process for which the Act provides. Such service triggers the entitlement (and the time limit for it) of a respondent to serve its adjudication response.
The use of the word copy in s17(5) makes it clear that the written words which constitute the adjudication application are to be communicated to the respondent.
By using the words an adjudication and then using the words the adjudication, s19(1) makes it clear that the written words which constitute the adjudication application made to the authorised nominating authority must be referred to the adjudicator.
The Act contemplates that it is the same written words which are to be copied to the respondent and, for that matter, to be referred by the authorised nominating authority to an adjudicator. Compliance with this requirement is an essential preliminary for the decision making process for which the Act provides.
The Act confers jurisdiction on an adjudicator to determine only the application which was made and then referred to her or him, not some other application.
I leave open the question whether an instrument purporting to be a copy of an adjudication application can nevertheless be a copy of it within the meaning of s17(5) if there are trivial differences. That is not this case. I also leave open the question whether there is a valid referral to an adjudicator under s19(1) where what is referred differs in trivial respects from the application made to the authorised nominating authority. That is also not this case. Triviality of differences (even if their presence means that one instrument is not strictly a copy of another) may be a relevant factor in the granting or withholding of discretionary relief. That too is not this case.
The differences between the submissions provided to the adjudicator (as part of the application - see s17(3)(h)) and those provided to Parkview were not trivial. The instrument purporting to be the adjudication application served on Parkview cannot properly be viewed as a copy of the one which was made.
In its payment claim and adjudication application, Total claimed amounts owing in respect of alleged variations. Clause 78 of the contract between Parkview and Total in effect excluded claims for variations without written direction from Parkview.
In para 46 of the original submissions (provided to the adjudicator) Total argued that the parties had agreed to waive the requirements set out in cl 78 because of an oral direction to undertake certain works. In the same paragraph of the revised submissions, express reference to cl 78 was deleted, as was the submission that the parties agreed to waive the requirements set out in the provision. Instead, the submission was made that a determinative factor, not to be overlooked by the adjudicator, was that there was a danger of unjust enrichment if the respondent was permitted to disavow an oral promise to pay. An additional submission was included that closely related to the doctrine of waiver as developed by the High Court in Agricultural and Rural Finance v Gardiner (2008) 238 CLR 570, is the doctrine that parties, by their conduct, may orally rescind the provision that all change orders be in writing.
A submission was made in the revised submissions, not appearing in the original submissions, that the evidence before the adjudicator showed that the respondent consistently, with repeated frequency, ignored the contractual provision requiring all "change orders" be in writing, and that notwithstanding the contractual provision the parties orally rescinded this part of the written contract and proceeded under the new oral agreement.
The adjudicator of course did not deal with the revised submissions. But he did deal with the original ones, including with the alleged waiver which Total was no longer pressing. Albeit that he was not satisfied that there was a waiver (para 101 of the adjudication determination), this course of events demonstrates the significant differences between the two instruments and the potential for mischief as a consequence. This is not a trivial difference.
Another difference is that the original submissions (para 39) stated that a number (11) of statements by named persons made in response to the issues raised by the respondent in the payment schedule accompanied the application. These included statements of Garth Muller, Leo Zhang and Michael De Hossen. The references to the statements of Muller, Zhang and De Hossen were deleted in the revised submissions. Whether the adjudicator called for or had regard to statements of Muller, Zhang and De Hossen (indeed, whether such statements exist), is unknown. The difference meant that it was conveyed to the adjudicator that the applicant was relying on evidence upon which it in fact was not relying. And this was unknown to Parkview. There is clearly potential for mischief. This too is not a trivial difference.
There were other differences with which it is not necessary to deal.
Compliance with s19(1) is required for a valid referral to an adjudicator.
Section 3 was not part of the adjudication application made within the statutory deadline and it was not part of the application that could properly be referred to the adjudicator. Consequently, he had no jurisdiction to deal with an application which included it: Shorten v David Hurst Constructions Pty. Ltd. [2008] NSWSC 546 at [74].
I turn to the issue of the adjudicator's disregard of Parkview's adjudication response. There is no issue that if Parkview was first served with the adjudication application on 10 November 2016 when it opened the USB stick, its adjudication response was served in time. There is no issue that if it was first served on 10 November 2016 the adjudicator's disregard of that response was a denial to Parkview of procedural fairness which warrants the quashing of the adjudication determination.
Section 17(3)(a) requires an adjudication application to be in writing. Section 17(5) requires copy of it to be served on the respondent. It is plain that what is served on the respondent must itself be in writing.
The significant issue is whether delivery alone of a USB stick constitutes service of something in writing for the purpose of s17(5).
Section 21 of the Interpretation Act 1987 (NSW) provides, relevantly: (1) In any Act or instrument: "writing" includes printing, photography, photocopying, lithography, typewriting and any other mode of representing or reproducing words in visible form.
In my opinion, service (that is, delivery) of the USB stick is not to be equated with service of writing stored on it. Additionally, whatever it is that was served by its delivery, it was not in writing within the meaning of s17(5), as affected by s21(1) of the Interpretation Act.
Absent some relevant statutory expansion or limitation of the notion (and there is none here), a document will, in the ordinary meaning of the word, be served if the efforts of the person who is required to serve it have resulted in the person to be served becoming aware of the contents of the document: Capper v Thorpe (1998) 194 CLR 342 at 352. In the case of an email transmission, or where documents are uploaded to a site such as Hightail, it cannot be said that they have been served until they have been accessed: Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2015] 1Qd R 265 at 271 [32]-[34].
A fortiori, delivery of a USB stick will not suffice.
It does not represent or reproduce words in visible form in the way s21 of the Interpretation Act has in mind. Looking at it, one sees only a small piece of plastic, perhaps with some circuitry on it. It is a device which, if actioned, is capable of representing or reproducing what is stored on it in visible form.
In order to access what is stored on it, the recipient must take the step of accessing, opening and viewing the files stored on it. To take delivery of a USB stick as service of an instrument stored on it in writing, is as untenable as it would be to take delivery of a compact disc, cassette or vinyl record as itself constituting aural transmission of what is recorded on it.
To access information on a USB stick, the recipient must have compatible technology. This cannot be regarded as an inevitability, even today.
I conclude that delivery alone of a USB stick is not service of a copy in writing for the purposes of s17(5).
It follows that Parkview's adjudication response was in time, and the adjudicator acted contrary to s22(2)(d) in disregarding it. This is an instance where non-compliance may be both jurisdictional error and a denial of procedural fairness. However, there was in any event a sufficient denial of procedural fairness which the section requires be afforded a respondent to warrant quashing the adjudication application.
Having regard to my conclusions, it is also not necessary to consider whether the failure to inform Parkview of the non-inclusion of Section 3 in the original uploaded version itself constituted a denial of procedural fairness, and if so, whether on its own, that omission would have warranted the grant of relief.

CONCLUSION

The Court will make an order in the nature of certiorari quashing the adjudication determination of Kenneth Spain, dated 9 December 2016 and permanent injunctions restraining Total from acting upon it.
The parties are to bring in short minutes. I will hear them on costs, on why the funds in Court should not be released back to Parkview and on any other issues which remain to be determined, should this be necessary.

Amendments 07 March 2017 - Interpretation Act 1987 (NSW) 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: 07 March 2017

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