Plaintiff v Defendant [2020] VSC 739 | Case summary

Supreme Court of Victoria|2020-11-10|Before: Stynes J

BUILDING CONTRACTS - Trial - Application for judgment after principal failed to provide payment schedule - Whether contract was a construction contract under the Act - Whether payment claim was served in accordance with the Act - Whether payment claim was served in accordance with the contract - Whether payment claim was served in accordance with s 13A of the Electronic Transactions Act 2000 (Vic) - Whether the payment claim was served when it was available to the defendant or when the defendant became aware of it - Whether payment schedule was served within the prescribed time under the Act - Whether payment schedule was valid under s 15 of the Act - Building and Construction Industry Security of Payment Act 2002 (Vic) ss 4, 5, 15, and - , applied - , applied - , applied - (2010) 30 VR 141, applied - ; , applied - , applied - , applied - (2010) 30 VR 141, applied - , applied - , applied - , applied - ; , applied - , applied - , applied - , applied - , applied - , applied - , applied - , applied ‑ - , applied - , applied.

1 This proceeding arises in relation to a contract between the parties for the operation and maintenance of baggage handling equipment and the maintenance of aerobridges and nose guidance systems at various airports around Australia (the Contract).

2 Specifically, it arises in relation to a payment claim issued by the plaintiff under the Contract dated 15 January 2020 (the Payment Claim).

3 The plaintiff says that the defendant failed to pay the amount claimed and failed to provide a payment schedule in response to the Payment Claim as required by the Building and Construction Industry Security of Payment Act 2002 (Vic) (the SOP Act). Consequently, the plaintiff seeks an order that the defendant pay to the plaintiff the sum of $471,449.86 (including GST) as a debt due under s 16(2)(a) of the SOP Act.

4 The defendant disputes the plaintiff's entitlement to seek an order under s 16(2)(a) of the SOP Act as set out in its document entitled 'Grounds of Opposition' dated 7 August 2020.

(a) Is the Contract a construction contract? Specifically, is the plaintiff's scope of work under the Contract 'construction work' within the meaning of s 5 of the SOP Act?

(b) If the Contract is a construction contract, when did service of the Payment Claim occur: 16 January 2020 or 11 February 2020?

(c) If the Payment Claim was served on 11 February 2020 was a payment schedule served within 10 business days? Specifically, does the defendant's letter dated 18 February 2020 satisfy the requirements of s 15 of the SOP Act?

(d) If the Payment Claim was served on 16 January 2020, does the conduct of the plaintiff prevent it from obtaining judgment?

(a) The Contract is a construction contract for the purpose of the SOP Act;

(b) Service of the Payment Claim by uploading it to a cloud based information system was not effective until the Payment Claim was identified and read by the defendant on 11 February 2020;

(c) The defendant's letter dated 18 February 2020 was delivered within 10 business days of the service of the Payment Claim and satisfied the requirements of s 15 of the SOP Act; and

(d) In light of my findings that service occurred on 11 February 2020, it is not necessary for me to determine the availability of other defences to the plaintiff's claim arising under the Australian Consumer Law and in equity.

7 On around 9 October 2010, the plaintiff and Qantas Airways Ltd (Qantas) entered into the Contract.

8 From 9 October 2010 to 30 April 2017, the plaintiff performed works for Qantas under the Contract at airports around Australia.

9 On around 1 May 2017, Qantas novated the Contract to the defendant.

10 The Contract has been varied on around 7 occasions, the most recent variation being identified as NAT-CPP-2010-013590-7,[1] which describes the rates applicable to work performed under the Contract as at the date of novation.[2]

11 Following novation, the plaintiff performed services under the Contract for the defendant at the following airports:

(a) Sydney Airport;

(b) Melbourne Airport;

(c) Perth Airport;

(d) Brisbane Airport;

(e) Adelaide Airport;

(f) Darwin Airport;

(g) Canberra Airport; and

(h) Ayres Rock Airport.

12 The services to be provided by the plaintiff under the Contract include, but are not limited to, maintenance of:[3]

(a) Check-in kiosks;

(b) Baggage conveyor systems;

(c) Motors for baggage conveyor systems;

(d) Replacement of sections of baggage return carousels;

(e) Aerobridges;

(f) Aircraft nose in guidance systems; and

(g) Late baggage conveyors or chutes.

13 Photographs depicting examples of each asset and details of how they are affixed to the airport terminal are included in the affidavit of Mr Cachia, the plaintiff's Commercial Manager, sworn 1 June 2020.[4]

14 In around October or November 2017, the parties commenced negotiating a formal written agreement to replace the Contract and was referred to as the Specialist Services Agreement (the SSA).[5]

15 The following representatives were involved in the negotiations:

(i) Paul Egan, Procurement Manager, who left JLL in or around April 2018;

(ii) Gyan Raniga, National Sourcing Manager for the Qantas account, who took over negotiations in April 2018 from Mr Egan;

(iii) Hounaine Fadli, Executive Director and Head of Supply Chain and Procurement, who took over negotiations from Mr Raniga when he left JLL; and

(iv) Michael Raphael, Chief Procurement Officer Asia Pacific, to whom all of the above reported;

(i) Dean Durban, Executive General Manager of Safety & Operations;

(ii) Jason Cachia, Commercial Manager Australasia; and

(iii) Mark Buggy, Group Contracts Manager.

16 The negotiations between the parties were directed, in part, to rates applicable to the plaintiff's services.

17 A dispute exists between the parties about whether or not an agreement was reached on around 7 December 2017 that the price for the plaintiff's services would be reduced commencing, retrospectively, from 1 October 2017 (the Rate Dispute). It is the position of the defendant that such an agreement was reached and is contained in an email from Mr Durban of the plaintiff to the defendant dated 8 December 2017 (the 2017 Durban Email).[6] The plaintiff disputes that an agreement was reached[7] and says that the rates set out in NAT-CPP-2010-013590-7 apply.

18 Negotiations of the terms of the SSA between the parties continued throughout 2018.

19 In November 2018 a copy of the SSA was signed by the defendant and sent to the plaintiff. However, it was not executed by the plaintiff.

20 Notwithstanding the terms of the 2017 Durban Email, the defendant did not immediately reduce payments made to the plaintiff.

21 On 15 January 2019, the defendant informed the plaintiff that having regard to the 2017 Durban Email, the defendant had overpaid the plaintiff in the sum of $852,443.62 and would withhold payments for services performed in December 2018 and January 2019 and would thereafter adjust payment for future work orders in line with the 2017 Durban Email.[8]

22 The plaintiff disputes the defendant's entitlement to do so.

23 Corrigo is a cloud based facilities management platform that amongst other things facilitates the issuing of work orders and the service of invoices.[9]

24 In June 2017, the defendant requested the plaintiff to connect to Corrigo and informed the plaintiff that invoicing for services rendered would no longer be in the form of a traditional PDF invoice submitted to an email address, but would be entered directly into Corrigo and managed via that portal.[10]

25 Thereafter, the defendant used Corrigo to direct work orders to the plaintiff. The plaintiff used Corrigo to provide invoices in response to those work orders.

26 It was noted that the parties used different versions of Corrigo, which is of no consequence to this decision.[11]

(a) the defendant to raise and track work orders for tasks to be performed by the plaintiff. Each work order is a discrete page on Corrigo, which records the pricing of the work order and logs inputs such as communications between the parties via Corrigo in relation to that work order and documents that may be uploaded in relation to that work order. The defendant created different types of work orders through Corrigo;

(b) the plaintiff to check in to the raised work order and create an electronic invoice for the amount of the work order by entering invoice details directly into Corrigo.[12]

28 In relation to specific items of work, work orders were assigned a code associated with the location of the proposed work - eg 'MEL' or 'SYD'.[13]

29 In relation to regular work carried out over a longer period of time across multiple sites, the defendant created monthly work orders identified by the prefix 'DUMMY'.

30 DUMMY work orders are created for billing purposes only.[14] The performance of the works and their compliance with requirements is the subject of a separate 'activity' work order, which does not deal with pricing and payment.[15] These activity work orders are closed off by the defendant entering a value of 'A' against that work order, meaning it is finalised and it is authorised as 'no charge' because the billing of it is dealt with in the DUMMY work order to which it corresponds.[16]

31 In relation to each work order, the defendant set the price for the work to be done by the plaintiff.[17]

32 In each DUMMY work order the defendant input a sum designated 'NTE' (for 'Not TO Exceed') representing the limit on the amount of the invoice that could be entered in response to that work order. [18]

33 If the plaintiff wanted to enter an invoice more than the NTE, it was required to first ask the defendant to increase the NTE. The plaintiff could and did make such requests in a number of ways:

(a) By email;[19]

(b) By Cruchats, a messaging system within Corrigo facilitating communication between the parties in relation to work orders.[20] Messages between the parties were recorded in Corrigo against the work orders that they related to;

(c) By a note added into Corrigo as part of the invoice details. This was used by the plaintiff if the plaintiff wanted the matter drawn to the defendant's attention.[21]

34 Invoices were created in Corrigo by the plaintiff entering the required information directly into Corrigo in response to the relevant work order. It could enter a price for work done at or below the NTE.[22]

35 In addition to entering invoice details manually into Corrigo, Corrigo permits documents to be uploaded by the supplier as attachments to the work order. Attachments were not required for the purpose of payment. However, it was the plaintiff's practice to always attach a PDF invoice on its own letterhead in addition to manually entering invoice details.[23]

36 It is important to note that the existence of an NTE value associated with a work order did not prevent the plaintiff attaching an invoice in PDF form for a sum greater than the NTE.[24]

37 Up until 2 December 2019, the invoice value of the PDF attachment to a work order or DUMMY work order matched the manually entered invoice data and NTE.[25]

38 Once invoices were uploaded, the defendant could then either review, dispute or authorise the invoice. Authorised invoices were then paid.[26] According to the oral evidence of Mr Aalam, the defendant always responded promptly 'within one minute sometimes, sometimes within one hour'.[27]

39 Mr Timmermans, who was responsible for authorising payment of the plaintiff's invoices, did not review attachments for DUMMY work orders where the invoice details entered matched the NTE.[28] It was his practice to review any non-invoice attachments to the 'activity' work orders (referred to in paragraph 30 above, whether associated with a DUMMY work order or not) because they related to compliance and the status of the works. He also reviewed financial documents such as quotes and reconciliations before creating the NTE. However, he did not review invoices before creating an NTE because an invoice can only be submitted after an NTE is created.[29]

40 During 2018 and 2019, the plaintiff would follow up unpaid invoices with the defendant by email.[30]

41 From December 2018 to March 2019, the defendant continued to issue work orders with NTE amounts matching the amount the plaintiff expected to be paid based on the rates under the Contract.[31] In response, the plaintiff manually entered invoice details and attached PDF invoices at or below the NTE values.[32] However, for this period the defendant paid less than the NTE value to the plaintiff. Instead, the defendant paid an amount representing the rate the defendant says was agreed and recorded in the 2017 Durban Email.

42 From April to December 2019, the defendant issued monthly DUMMY work orders for NTE amounts representing the rate the defendant says was agreed and recorded in the 2017 Durban Email. During this period the plaintiff uploaded invoices to Corrigo in relation to each DUMMY work order. However, as the invoice details it entered exceeded the NTE value, the invoice could not be submitted. The plaintiff knew its invoices were not submitted to the defendant but remained in draft.[33]

43 On 2 December 2019, Mr Aalam, as instructed by Mr Cachia, did the following in relation to each DUMMY work order for the period between April and December 2019:

(a) included a note as a part of the invoice details requesting an increase the NTE to match the attached invoice;

(b) copied the request into a Cruchat message;

(c) marked the DUMMY work orders as completed; and

(d) submitted manually entered invoice details matching the NTE value so that the invoice could be submitted to the defendant.[34]

44 The defendant created Work Order DUMMY10562 on 1 November 2019.

45 It was created automatically by the Corrigo system as part of a series of recurring monthly work orders for the work performed by the plaintiff under the Contract. The initial NTE was set at $98,660.63.[35]

46 On 5 November 2019, the plaintiff requested the NTE be increased and that the amount should be calculated in accordance with the 'Qantas rates' which I understand to mean the rates the plaintiff understood were applicable under the Contract.

47 On 2 December 2019, the plaintiff again requested that the NTE be increased 'to match attached invoice QAN013 as per contract $108,474.12'.[36]

48 On 2 December 2019, at 4:15pm, the plaintiff manually entered in DUMMY10562 invoice details for the sum of $98,660.63. At the same time the plaintiff also uploaded to DUMMY10562, the following PDF documents: [37]

(a) QAN013;

(b) QAN014;

(c) QAN016;

(d) QAN017; and

(e) QAN018.

49 QAN013 is a tax invoice dated 15 November 2019 in the sum of $108,474.12.[38] It responds to DUMMY100562 and is for services performed in Canberra, Ayers Rock, Darwin, Melbourne and Adelaide. The sum claimed is equal to the increased NTE requested by the plaintiff in advance of the invoice being issued.

(a) marked 'tax invoice';

(b) claim unpaid amounts in relation to numerous invoices previously entered into Corrigo; and

(c) unrelated to DUMMY10562.

51 QAN014 relates to works performed at Sydney airport and claims a total sum of $1,113,805.59.[39]

52 QAN016 relates to works performed at Brisbane airport and claims a total of $233,906.59.[40]

53 QAN018 relates to works performed at Darwin airport and claims a total of $9,290.89.[41]

54 QAN017 relates to works performed at Perth airport and claims a total of $278,756.87.[42]

55 The upload of these claim documents was the first time the plaintiff had used the Corrigo system to upload documents of this type, that is, unpaid invoice reconciliations.

56 Mr Aalam didn't see a quick response from the defendant to those documents and reported that to Mr Cachia, who sat next to his desk, in around mid-December 2019.[43]

57 The defendant created work order, DUMMY1000600, on 1 December 2019.

58 It was created automatically by the Corrigo system as part of a series of recurring monthly work orders for the work performed by the plaintiff under the Contract.[44]

59 The initial NTE for DUMMY1000600 was automatically set for the sum of $98,660.63. That NTE value was changed by the defendant on 10 December 2019 to $3,447.13.[45]

60 DUMMY1000600 was for maintenance work under the Contract. By the time DUMMY1000600 was created, the defendant had removed from the scope of its work under the Contract the works at Melbourne and Sydney airports.[46]

61 On 16 January 2020, at 5:19pm, the plaintiff made a request in Corrigo, in relation to DUMMY1000600, for an increase to the NTE from $3,447.13 to $3,790.01 by stating 'please increase NTE to match attached invoice QAN 023 as per contract $3,790.01'.[47]

62 On 16 January 2020, at 5:20pm, the plaintiff manually entered into Corrigo, in relation to DUMMY1000600, invoice details for the sum of $3,447.13. At the same time the plaintiff also uploaded to Corrigo, in relation to DUMMY1000600, the following PDF documents:[48]

(a) QAN020 (the Payment Claim);

(b) QAN022;

(c) QAN021; and

(d) QAN023.

63 QAN023 is a tax invoice dated 15 December 2019 in the sum of $3,790.01.[49] It responds to DUMMY1000600 and is for services performed in Canberra, Ayers Rock, Darwin and Adelaide. The sum claimed is equal to the increased NTE requested by the plaintiff in advance of the invoice being issued. Like QAN013 it was a PDF invoice automatically generated by the plaintiff's accounting system, MYOB.[50]

64 The plaintiff entered the sum of $3,447.13 into Corrigo because, as noted, it is not possible for a sum to be entered that exceeds the NTE.

65 QAN020 is the Payment Claim the subject of this proceeding.[51] It is marked 'Tax Invoice' and is endorsed with: 'This is a payment claim made under the Building and Construction Industry Security Payment Act 2002 (Vic).' It does not respond to DUMMY1000600. It is a claim for a total of $616,517.64 comprising:[52]

(a) amounts outstanding for works performed at Melbourne Airport for the months December 2018 to November 2109 (inclusive); and

(b) unpaid amounts under work orders MELDTB013700, MELDTB013591 and MELDTB013848 for works at Melbourne airport, which have since been paid by the defendant.

66 The balance remaining unpaid under the Payment Claim is $471,449.86 (inclusive of GST).[53] That sum represents the credit applied by the defendant against the plaintiff by reason of the Rate Dispute.[54]

67 The works claimed under the Payment Claim are unrelated to work order DUMMY1000600. The work orders referenced in the invoices referred to in the Payment Claim were:

(a) DUMMY10156 (for invoice QAN002);

(b) DUMMY10196 (for invoice QAN003);

(c) DUMMY10233 (for invoice QAN004);

(d) DUMMY10267 (for invoice QAN005);

(e) DUMMY10310 (for invoice QAN006);

(f) DUMMY10335 (for invoice QAN007);

(g) DUMMY10369 (for invoice QAN008);

(h) DUMMY10407 (for invoice QAN009);

(i) DUMMY10446 (for invoice QAN010);

(j) DUMMY10483 (for invoice QAN011);

(k) DUMMY10524 (for invoice QAN012);

(l) MLEDTB013700 (for invoice QM325);

(m) MELDTB013591 (for invoice QM324); and

(n) MELDTB013848 (for invoice QM327).

68 Other documents attached to DUMMY1000600 with the Payment Claim were:

(a) QAN021 which was marked 'Tax Invoice' and endorsed with 'This is a payment claim made under the Building and Construction Industry Security Payment Act 2009 (ACT).'[55] It does not respond to DUMMY1000600. It is a claim for a total of $5,126.65 comprising amounts outstanding for works performed at Canberra Airport that had been previously invoiced;

(b) QAN022 which was marked 'Tax Invoice' and endorsed with 'This is a payment claim made under the Building and Construction Industry Security Payment Act 2009 (SA).'[56] It does not respond to DUMMY1000600. It is a claim for a total of $6,968.47 comprising amounts outstanding for works performed at Adelaide Airport that had been previously invoiced.

69 The Payment Claim (QAN020), QAN021 and QAN022 were not automatically generated. Unlike the invoice responding to the work order (QAN023), they were prepared by Mr Cachia.[57]

70 QAN020 is the first document uploaded by the plaintiff to a work order in Corrigo that contains the endorsement that it was made under the SOP Act.[58]

71 Mr Cachia was cross examined about his understanding of a payment claim. His evidence was inconsistent. He was initially reluctant to concede his understanding of a payment claim under the SOP Act.[59]

(a) he had prepared the Payment Claim;

(b) had a basic understanding of what a payment claim was;

(c) added the SOP Act endorsement to the bottom of it; and

(d) prior to 16 January 2020 when the Payment Claim was uploaded to Corrigo, he took advice from external lawyers about the importance of that endorsement.[60]

73 Both Mr Aalam and Mr Cachia were cross examined about whether or not it would have been appropriate to request an increase to the NTE for the DUMMY work orders to which invoices QAN 014, 016, 017, 018, the Payment Claim (020), 021 and 022 were attached so that it matched the value of those invoices. Mr Cachia explained that he did not do this because it would operate to duplicate the NTE requests that had previously been made in relation to the invoices the subject of those claims.[61]

74 As soon as the Payment Claim had been uploaded as an attachment to DUMMY1000600, it was available to the defendant to access, download and read.

75 No one at the defendant opened and read the Payment Claim until 11 February 2020.[62]

76 On 10 February 2020, at about 3:54pm, Mr Cachia, the plaintiff's Commercial Manager, emailed Mr Fadli of the defendant a letter of demand.[63] By that letter of demand, Mr Cachia informed Mr Fadli, amongst other things:

(a) on 2 December 2019 and 16 January 2020, the plaintiff had issued payment claims in each of the States and Territories pursuant to the applicable security of payment legislation for the collective sum of $1,976,324.94 (including GST);

(b) as the defendant had failed to issue any payment schedules within the time required under the applicable legislation and failed to pay the entire amount claimed, the defendant had become liable to pay the outstanding amount in the sum of $1,292,364.69; and

(c) if the defendant failed to comply with the plaintiff's demands for payment, the plaintiff would take steps necessary to protect its interests including, applying for summary judgment to recover the debt.

77 On 18 February 2020, the defendant sent a letter to the plaintiff in response to the letter of demand.[64] It is this letter that the defendant relies on as a payment schedule (the Alleged Payment Schedule).

Issue 1: Is the Contract a construction contract?

78 The SOP Act applies to construction contracts.[65]

79 The courts have found that the existence of a construction contract between a claimant and respondent is a 'basic and essential requirement' to be met as a precondition to a valid adjudicator's determination.[66]

80 If the contract is not a construction contract, then a contractor will have no entitlement to make a payment claim under the SOP Act.

81 'Construction contract' is defined to mean 'a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party'.[67]

82 'Construction work' is defined in s 5 of the SOP Act. The specific issue that arises for determination is whether the plaintiff's scope of work under the Contract is 'construction work' within the meaning of that section.

(a) the subject of the plaintiff's maintenance services are not buildings,[68] industrial plant,[69] or structures[70] but rather machines or parts of machines;[71] and

(b) the purpose of the SOP Act is directed to the building and construction industry. The maintenance of the machines the subject of the plaintiff's services has nothing to do with the building and construction industry.[72]

(a) the definition of 'construction work' for the purpose of the SOP Act is broadly defined;[73]

(b) the Contract between the plaintiff and the defendant is for the maintenance of buildings and structures under s 5(1)(a);[74]

(c) that work will fall within the definition of s 5(1)(a) if it is maintenance of a part of a building. If it were otherwise, specialised trades that form part of the construction industry would not fall within the SOP Act unless contracted to maintain the whole of a building;[75]

(d) all of the maintenance work performed by the plaintiff was on things, parts or works affixed to the building and thereby creating 'the rather complex building that is the airport terminal' and so was maintenance of the building;[76]

(e) further and alternatively, services performed by the plaintiff is the maintenance of works under s 5(1)(b) on the basis that:

(i) some of the items maintained by the plaintiff under the contract are industrial plant, specifically:

(A) those parts of the works which are internal to the building and not public facing such as the internal conveyor system, motors and aircraft nose guidance systems being plant necessary for the airline or air transport industry;[77]

(B) check-in kiosks and the late baggage conveyors or chutes;[78] and

(f) to succeed on this ground, the defendant must establish that no part of the work carried out by the plaintiff involved construction work as defined.[79] This is not disputed by the defendant.

85 The plaintiff primarily relies on s 5(1)(a) of the SOP Act to establish that the Contract is a construction contract. That section provides that 'construction work' means 'the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not).'[80]

86 The plaintiff submits that its scope of work includes the maintenance of buildings or structures forming, or to form, part of land and therefore constitutes construction work.

87 'Buildings' and 'structures' are not defined in the SOP Act.

88 The SOP Act should be interpreted so that it is capable of being applied in a practical way by parties to a construction contract or a proposed construction contract.[81]

89 Moreover, the SOP Act 'should not be construed so as to produce haphazard and apparently unintended consequences'.[82]

90 In Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority, Byrne J considered the definition of 'building' stating:

In its ordinary sense, the word refers to structures which are enclosed and which accommodate or are used by people. In the Macquarie Dictionary it is defined as "things which are built or constructed". The definition in the Oxford English Dictionary is in these terms: "that which is built; a structure, edifice: now a structure of the nature of a house built where it is to stand". The statutory enlargement in s. 3 extends the meaning to include a "structure". Nearly 40 years ago in O'Brien v Shire of Rosedale, Gillard J identified three characteristics which are associated with a structure in popular usage. First, it is the product of the assembly of a number of component parts to produce something which is different from those parts and which is of practical value. Second, this thing is commonly attached to the land on which it is erected, but this is not a necessary characteristic. Third, it has a degree of permanence.[83]

91 The case of Australian Gaslight Co v Valuer-General, considered the definition of structure, albeit in the context of the interpretation of the Valuation of Land Act 1916 (NSW).[84] A structure was defined as a 'substantial erection necessarily constructed in situ and forming and intended to form a permanent feature of the land, having substantially the characteristics of a building or of a permanent framework affixed to the land and not being a machine.'[85]

92 Machines alone are unlikely to be deemed structures,[86] and instead should be considered separate units.[87] Having said this, machines may form 'part of' a structure if removal would cause structural damage to the premises.[88]

93 Whether a building or structure forms or is to form part of the land calls for a practical assessment of the physical relationship between the thing and the relevant land and without the importation of common law rules about fixtures. As stated by Applegarth J in J & D Rigging:

It is not immediately apparent why, in the context of a statute which relates to interim payments for the carrying out of construction work, and not real property, rules about the ownership of fixtures are imported.

...

If the ordinary meaning is used, then the relevant inquiry is about the physical relationship between the thing and the land. That inquiry may involve some of the considerations that apply in the context of the law of real property, including the degree of annexation and the functions served by that annexation.

...

... the greater the degree of annexation the stronger the case for concluding that a structure forms part of the land according to the ordinary meaning of the word "form" when used in conjunction with the ordinary meaning of land or the extended definition of "land" in the Acts Interpretation Act.[89]

94 In determining the degree of annexation, it is useful to consider the following factors:

(a) whether the removal would cause damage to the land or buildings to which the item is attached;

(b) the mode and structure of annexation;

(c) whether removal would destroy or damage the attached item of property; and

(d) whether the cost of renewal would exceed the value of the attached property.[90]

95 The scope of work that the plaintiff has undertaken to perform is described in cl 3.1 of the Contract and includes providing:

Comprehensive Labour Maintenance Services as outlined in the Scope of Works (Schedule 2A) for all assets at Australian leased and owned facilities as listed in Annexure 1.[91]

96 'Comprehensive Maintenance Labour Services' is defined to mean 'all maintenance, operating consumables and labour necessary to ensure the equipment, plant and assets, described in this document, operate and function to their optimum level of intended service and performance ... [but] excludes the cost of parts and material and asset replacement. These costs will be borne directly by Qantas.'[92]

97 I share the defendant's concern about the characterisation of work comprising maintenance of machines as construction work. Had the plaintiff's scope been limited to the maintenance of some of the smaller assets (eg the contemporary check-in kiosks[93] or the automatic bag drops[94]) close scrutiny of that scope of work and the relationship between that asset and the land would be required to determine whether the definition of construction work had been satisfied or whether these assets might properly be called appliances which are not part of the building. However, having regard to the sheer size, extent of attachment and function of some of the larger assets, specifically the aerobridges,[95] baggage conveyor systems[96] and baggage return carousels,[97] it is plain to me that the Contract was a contract under which the defendant had undertaken to carry out construction work comprising the maintenance of a building or structure.

98 The plaintiff's case can be made good by reference to the aerobridges alone. This is the asset that connects the terminal building to aircraft allowing passengers to board and disembark aircraft. It is a large piece of kit, integral to the function of the terminal building.

99 Evidence is given of two types of aerobridges, which are the subject of the Contract:

(a) the static aerobridges and extend-retract aerobridges. Both are permanently fixed to the exterior walls of the airport terminal and excavated through into the airport terminal;

(b) both types are, in the ordinary sense of the word, structures. They:

(i) are a product of the assembly of a number of component parts which is different from those parts and which is of practical value;

(ii) have the characteristics of a building being enclosed and used by people; and

(iii) are permanently attached to the terminal building.[98]

100 Similarly the baggage conveyor systems and baggage return carousels are significant structures, permanently attached to the terminal building.

101 I am satisfied that the plaintiff has undertaken to carry out construction work under the Contract and it is therefore a construction contract for the purpose of the SOP Act.

Issue 2: When did service of the Payment Claim occur: 16 January or 11 February 2020?

102 The defendant says that the service of the Payment Claim was not effective until 11 February 2020.[99] The defendant submits, in summary:

(a) for the purpose of the SOP Act, service requires:[100]

(i) delivery into the possession of the intended recipient; and

(ii) receipt, in this case comprising the observation and opening of the Payment Claim by the defendant;

(b) these requirements are subject to any effective statutory or contractual modifications that deem service to be anything other than receipt;[101]

(c) section 50(1)(e) of the SOP Act permits service in the manner specified in the Contract;[102]

(d) sub-clauses 34.4 and 34.5 of the Contract prescribe the manner of service and deem when it is to have occurred.[103] Specifically, sub clause 34.5 operates to deem the Payment Claim received when it came to the attention of the defendant;

(e) clause 13 of the Contract is not relevant to the service of the Payment Claim:[104]

(i) it mandates delivery of invoices to an addressee that was not relevant following novation;

(ii) it was not varied in accordance with the requirements of the Contract concerning variation;

(iii) it is therefore inoperative and invalid and must be severed;

(iv) in any event, the Payment Claim is not an invoice within the meaning of the Contract but a notice[105] or document[106] to which clauses 34.4 and 34.5 apply;

(f) if cl 13 is valid and has been varied (which is denied), cl 34.5 remains applicable to deem when a Payment Claim delivered in accordance with cl 13 has been received;

(g) section 13A of the Electronic Transactions Act 2000 (Vic) (ETA) is not applicable to determine when service has been achieved:

(i) it does not apply where there is agreement as to these matters;[107]

(ii) it only applies where there is an electronic address;[108]

(iii) Corrigo is not an electronic address but a cloud-based application for which there are no prescriptions for the timing of receipt;[109]

(iv) alternatively, the electronic address designated by the defendant was the relevant work order to which the invoice must relate and QAN020 was not uploaded to any work order to which it related;[110] and

(h) service was only effective on 11 February 2020 when the Payment Claim came to the attention of the defendant.[111]

(a) clauses 34.4 and 34.5 of the Contract are not applicable to the service of the Payment Claim.[112] They speak only to the notification process between the parties under the Contract;

(b) billing and invoicing is dealt with under cl 13 of the Contract;[113]

(c) in June 2017, the defendant requested the plaintiff commence invoicing through Corrigo which varied the Contract as to the proposed billing address for the purpose of cl 13.4;[114]

(d) there being no agreement between the parties as to when electronic service of invoices (as opposed to notices) is deemed to be received under the contract, s 13A of the ETA regulates the position;[115]

(e) Corrigo is an electronic address under the ETA having been designated by the defendant by email on 7 June 2017;[116]

(f) the Payment Claim became capable of being retrieved by the defendant on Corrigo at the time it was uploaded;[117] and

(g) accordingly the Payment Claim was served on 16 January 2020.[118]

104 The SOP Act allows for the rapid determination of progress claims under construction contracts.

105 The means by which the SOP Act seeks to ensure that a person entitled to a progress payment receives that progress payment is by granting a statutory entitlement to it in accordance with the procedure provided for.[119] The starting point for that procedure is the service of a payment claim.[120]

106 Service of a payment claim on a respondent has serious consequences. First, it triggers the respondent's obligation to serve a payment schedule within a limited time frame.[121] If the respondent fails to do so, then:

(a) the respondent will be become liable to pay the claimed amount;[122]

(b) the claimant will be entitled to recover the unpaid portion of the claimed amount as a debt due;[123]

(c) the claimant may serve a notice of intention to suspend works under the construction contract.[124]

107 However, a natural inclination to require precise compliance with requirements of the SOP Act must be balanced with the legislative intention of the SOP Act. As stated by Vickery J in Hickory:

The submissions made by Hickory to which I have referred, smack of excessive technicality. The legislature did not intend, in my view, that precise compliance with all of the more detailed requirements of the Act is essential to the existence of a valid determination. To approach the matter in the manner suggested by Hickory would not accord with the legislative intention disclosed in the Act that adjudication determinations should be made and given effect to with minimum delay and therefore should be approached with minimal technicality and court involvement.

True it is that the Act places the claimant in a privileged position in the sense that it acquires rights that go beyond its contractual rights. However, it is artificial to elevate this consideration to the point where it operates to insist on strict compliance with every procedural requirement with the attendant risk of the process being declared a nullity in the event of non-compliance, as the price for the privilege. In my view, it is not of sufficient weight to displace the legislative intention which I have described.[125]

108 Section 50 of the SOP Act describes how notices or documents under the Act may be served.

109 Section 50 is facultative and not mandatory. That is, the methods of service provided for are in addition to and do not limit or exclude the common law or the provisions of any other applicable legislation with respect of the service of notices.[126]

110 Service of a payment claim by uploading it to a cloud based application such as Corrigo is not expressly provided for in s 50.

111 As stated by the Lord Chancellor in Hope v Hope:

The object of all service is of course only to give notice to the party to whom it is made so that he may be made aware of and may be able to resist that which is sought against him; and when that has been substantially done, so that the court may feel perfectly confident that service has reached him, everything has been done as is required.[127]

112 It is therefore unsurprising that authorities considering the requirements of service are more concerned with the timing of receipt of notice rather than the mode of delivery. For example:

Service of a payment claim under s 14(1) of the Act may therefore include delivery into the possession of the intended recipient, by whatever means, which may be taken to be effected upon receipt of the document by that person.

Mr Wood had to take a number of steps before it could be said that he had received the payment claim. Mr Wood would have to observe on his computer the notification of the email sent from his email server; he would then have to gain access to the email on his computer; and then open its attachment which comprised Payment Claim 15. Until at least these steps had been taken by Mr Wood, it could not be said that the email and its attachment had been "received" at the place of business of the Superintendent and the email remained merely accessible to the intended recipient.[128]

(b) Young J stated in Howship Holdings Pty Ltd v Leslie:

The question I am asked is whether service through the document exchange is good service. The short answer to that question is no.

... without special contractual provisions service through a document exchange is not personal service. However, that is not the ultimate question. The ultimate question is whether the document was received by the addressee within the 21 days. If it was, then in my view no matter how it got to the addressee the addressee has been served within 21 days.

The ordinary meaning of "service" is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries, including Hope v Hope [1854] EngR 805; (1854) 4 De GM & G 328 ; [1843-[1854] EngR 805; 60] All ER Rep 441 ; 43 ER 534 , 539-40; R v Heron (1884) 10 VLR 314 , 315 ; Pino v Prosser & Hassan [1967] VicRp 107; [1967] VR 835 , 838 . Some of those cases were complicated by the requirement in the former statutes that a person serving initiating process had to endorse the initiating process, but the principle is clear from them.

If this were not so, one would get the absurd situation referred to by McInerney J in Pino's case at VR 837, that the conclusion would be one which is:

"... remarkable to the point of seeming absurdity, in that the defendant who, on his own affidavit admits that he received the writ ... should be held not to have been served."[129]

(c) Hodgson JA stated in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd:

In the first place, in my opinion it is clear that if a document has actually been received and come to the attention of a person to be served or provided with the document, or of a person with authority to deal with such a document on behalf of a person or corporation to be served or provided with the document, it does not matter whether or not any facultative regime has been complied with: see Howship Holdings Pty Ltd v Leslie [1996] NSWSC 314; (1996) 41 NSWLR 542; Mohamed v Farah [2004] NSWSC 482 at [42]-[44]. In such a case, there has been service, provision and receipt.[130]

113 Having regard to the authorities addressing service identified above and the emphasis placed by them on receipt by the addressee rather than the mode of delivery to the addressee, I find that Corrigo was an available means of electronic delivery of the Payment Claim to the defendant. So much is accepted by the defendant who concedes that service of the Payment Claim was effective albeit some 26 days after it was uploaded to Corrigo.

114 The critical issue in dispute between the parties is not how the Payment Claim was delivered but when it was received by the plaintiff.

115 However, before I determine that issue, it must be said that uploading the Payment Claim to Corrigo was, in this case, a very poor method of delivery, for the following reasons:

(a) Corrigo did not provide for the upload of a document independent of a work order. As the Payment Claim was not associated with any one particular work order, Corrigo was not the obvious choice for delivery of it;

(b) the plaintiff had not employed Corrigo for the delivery of a payment claim under any security of payment legislation until it did so, unannounced, on 2 December 2019 and 16 January 2020;[131]

(c) it could have been emailed. The plaintiff had previously emailed the defendant in relation to unpaid invoices;[132] and

(d) the plaintiff was already seeking to recover payment for work that had been withheld as a result of the Rate Dispute.[133] The parties were in discussions about that dispute and it is likely that the Payment Claim could have been delivered or raised by Mr Cachia, as a participant in those discussions, in that context.

116 The choice to employ Corrigo as a mode of service was made worse by the following acts or omissions of the plaintiff which operated to obscure the delivery of the Payment Claim:

(a) the plaintiff attached the Payment Claim seeking the sum of $616,517.64 to an invoice in the sum of only $3,447.13;

(b) the plaintiff entered that invoice into Corrigo in response to work order DUMMY1000600 and the Payment Claim was unrelated to that work order;

(c) the plaintiff could have drawn attention to the Payment Claim by including a note in the invoice details entered into Corrigo as it had done so on other occasions,[134] but it did not;

(d) the plaintiff could have drawn attention to the payment claim through the Corrigo messaging system, Cruchat, but did not do so; and

(e) the plaintiff could have named the Payment Claim in a manner that was more descriptive of what was contained therein as it was accustomed to doing for other documents, instead it chose to name it simply as QAN020.[135]

117 Mr Cachia directed Mr Aalam to deliver the Payment Claim by Corrigo. He sought to justify this approach by stating, on numerous occasions during the course of evidence, words to the effect that the only way for the plaintiff to get paid was for invoices to be uploaded to Corrigo.[136] That evidence was not persuasive for the following reasons:

(a) the Payment Claim was not of the same character as the invoices required by the defendant to be entered into Corrigo for payment. Each such invoice responded to a particular work order and was required by the defendant to be created in Corrigo. The Payment Claim did not respond to any particular work order but instead claimed the outstanding balance of a number of invoices each of which had already been entered into Corrigo for payment;

(b) Mr Cachia understood the difference between entering invoice details into Corrigo for payment and chasing up unpaid invoices;[137] and

(c) Mr Cachia understood the significance of the Payment Claim at the time he directed Mr Aalam to upload it to Corrigo. Mr Cachia first denied he knew what the term 'payment claim' meant when he prepared the Payment Claim[138] before admitting that he had a basic understanding of what it meant.[139] He then gave evidence that he had received legal advice about the importance of the following words before adding them to the Payment Claim: 'This is a payment claim made under the Building and Construction Industry Security of Payment Act 2002 (Vic).'[140]

118 Having made these findings, I now turn to the critical issue in dispute, that is, the time at which the defendant received the Payment Claim.

119 Having regard to the purpose of service as described in Hope v Hope,[141] I find the requirement that the Payment Claim be served was not satisfied by the Payment Claim being uploaded to Corrigo on 16 January 2020 even though it may have been available for the defendant to retrieve from that date.

120 What is required for there to be service is that the defendant receive the Payment Claim.

121 A number of steps were required before it could be said that the defendant had received the Payment Claim. Specifically the defendant would have had to:

(a) log on to Corrigo;

(b) open a work order unrelated to the Payment Claim; and

(c) open the relevant attachment. The plaintiff urged me to see the failure to open attachments as a failing on the part of the defendant. I reject that submission. Attachments were not required for payment to be attended to. The amount entered into Corrigo by the plaintiff matched the NTE. While there had been a request to increase the NTE to $3,790.01, there was nothing to indicate the attachment of an unrelated claim in the sum of $616,517,64.

122 The attachment was not opened by the defendant until 11 February 2020. This is not unreasonable in the circumstances described in paragraphs 115 and 116 above, but a consequence of the manner in which the plaintiff chose to deliver the Payment Claim.

123 The question which now arises is whether the common law position is displaced by any manner of service specified in the Contract or the provision of any other applicable legislation.

Is timing of service of the Payment Claim governed by the Contract?

124 Clause 34 of the Contract addresses the service of notices between the parties. The defendant submits it applies to the service of the Payment Claim. Relevantly it provides:

34.4 Notices: A party notifying or giving notice under this Agreement must give notice:

(a) in writing;

(b) addressed to the address of the other party specified in this Agreement or other address as notified in writing by the other party from time to time; and

(c) by either:

(i) leaving at or sending by prepaid post or by fax to that address; or

(ii) in the case of notices, other than those notifying of default or termination under this Agreement, sending by electronic form such as email to that address.

34.5 Service of Notice: A notice given in accordance with clause 34.4 is deemed received:

(a) if left at the recipient's address on the date of delivery;

(b) if sent by prepaid post, 5 days after the date of posting;

(c) if sent by fax, when the sender's facsimile system generates a message confirming successful transmission pf the total number of pages of the notice; and

(d) if sent in electronic form, when the electronic communications comes to the attention of the recipient.[142]

125 'Notice' is not defined for the purpose of the Contract. However, it is a word capable of encompassing a payment claim.[143]

126 Clause 34.5 deems when a notice is received. It does not do so in a vacuum. It only operates to deem receipt of a notice given in accordance with cl 34.4, a mandatory provision.

127 The Payment Claim was not given in accordance with cl 34.4 and therefore cl 34.5 does not apply.

128 To be given in electronic form in accordance with cl 34.4 it is necessary that the notice be sent to 'the address of the other party specified in this Agreement or other address as notified in writing by the other party from time to time'.[144] Corrigo was not an address for notices identified in the Contract or notified by either party. This was not in dispute between the parties.[145] If I am wrong about this, which is a matter I consider further below, then cl 34.5 will operate to deem the Payment Claim received when it came to the attention of the defendant, that is, 11 February 2020.

129 The plaintiff says that the delivery of invoices is governed by cl 13.4 of the Contract.

13.4 Invoicing: The Supplier must send the invoices to the billing address specified in Schedule 7. Each invoice must clearly identify:

(a) the Deliverables to which the invoice relates;

(b) the manner of calculating the amount payable by Qantas under the invoice;

(c) this Agreement and relevant Qantas contact person, and is addressed to the billing address specified in Schedule 7; and

(d) any other information that may reasonably be required by Qantas from time to time.[146]

131 As cl 13 refers to Qantas and not the defendant, it was not readily applicable following novation of the Contract from Qantas to the defendant. The plaintiff says cl 13 was varied by the defendant's request that invoicing be managed by Corrigo.

(a) whether cl 13 was varied; and

(b) whether the Payment Claim is an invoice for the purpose of cl 13.

133 However, whether varied or not, cl 13 does not address the timing of receipt of a document delivered via Corrigo. That is not disputed.

Is timing of service of the Payment Claim governed by the ETA?

134 It is the plaintiff's position that in the absence of a contractual provision to the contrary, the ETA puts in place a statutory form of the postal acceptance rule. It further submits that by operation of the ETA, the time of receipt of the Payment Claim is deemed to be when the electronic communication is capable of being retrieved by the addressee, not when a recipient is actually in possession of the information.[147] The plaintiff relies specifically on s 13A(1)(a).

13A Time of receipt

(1) For the purposes of a law of this jurisdiction unless otherwise agreed between the originator and the addressee of an electronic communication -

(a) at the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee; or

(b) the time of receipt of the electronic communication at another electronic address of the addressee is the time when both -

(i) the electronic addressee has become capable of being retrieved by the addressee at that address; and

(ii) the addressee has become aware that the electronic communication has been sent to that address.

(2) For the purposes of subsection (1), unless otherwise agreed between the originator and the addressee of the electronic communication, it is to be assumed that the electronic communication is capable of being retrieved by the addressee when it reaches the addressee's electronic address.

(3) Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been received under section 13B.

136 I reject the plaintiff's submission and find that s 13A(1)(a) has no application to the service of the Payment Claim by Corrigo.

137 Section 13A(1)(a) will only apply to deem receipt where the electronic communication is capable of being retrieved at 'an electronic address designated by the addressee'. The issues to be determined therefore are:

(a) Is Corrigo an electronic address?

(b) If so, was it designated by the defendant?

138 Both parties agree that Corrigo was an information system as defined in the ETA being 'a system for generating, sending, receiving, storing or otherwise processing electronic communications'.[148] Consistent with that definition, there was evidence that Corrigo is capable of generating work orders, generating invoices, receiving documents and storing documents uploaded to it, sending email notifications to users and facilitating communication between users in relation to particular work orders.[149]

139 In relation to the Payment Claim, it was uploaded to Corrigo as an attachment to an invoice. It was stored and available for the defendant to retrieve from Corrigo, from the time it was uploaded. An email was sent by Corrigo to the defendant, notifying of a change to the work order, but the Payment Claim did not leave Corrigo.

140 The ETA draws a distinction between an 'electronic address' and an 'information system'. However, while 'information system' is defined, 'electronic address' is not.

Plaintiff v Defendant

At a glance

Court

Decision date

Before

Source

Judgment (371 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (8)