Saville v Hallmarc Construction Pty Ltd [2015] VSCA 318

Saville v Hallmarc Construction Pty Ltd [2015] VSCA 318 - VSCA 2015 case summary — Zoe

[29]

9 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 under this Act, calculated by reference to that date.

(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 -

(i) a date on which a claim for a progress payment may be made; or

(ii) a date by reference to which the amount of a progress payment is to be calculated -

in relation to a specific item of construction work carried out or to be carried out or a specific item of related goods and services supplied or to be supplied under the contract; or

(b) subject to paragraphs (c) and (d), if the contract makes no express provision with respect to the matter, the date occurring 20 business days after the previous reference date or (in the case of the first reference date) the date occurring 20 business days after -

(i) construction work was first carried out under the contract; or

(ii) related goods and services were first supplied under the contract; or

(c) in the case of a single or one-off payment, if the contract makes no express provision with respect to the matter, the date immediately following the day that -

(i) construction work was last carried out under the contract; or

(ii) related goods and services were last supplied under the contract; or

(d) in the case of a final payment, if the contract makes no express provision with respect to the matter, the date immediately following -

(i) the expiry of any period provided in the contract for the rectification of defects or omissions in the construction work carried out under the contract or in related goods and services supplied under the contract, unless subparagraph (ii) applies; or

(ii) the issue under the contract of a certificate specifying the final amount payable under the contract a final certificate; or

(iii) if neither subparagraph (i) nor subparagraph (ii) applies, the day that -

(A) construction work was last carried out under the contract; or

(B) related goods and services were last supplied under the contract.

[70]

The Claimant [Saville] and the Respondent [Hallmarc] signed a letter of acceptance from the Respondent on or about 28 February 2013 for the Claimant to supply joinery items and unload them on delivery into each apartment and to supply and install robes for an amount of $921,421.80 including GST.

...

The Claimant has carried out but not completed the contract work. The Claimant submitted a payment claim on 21 February 2014. The Respondent submits that this is a final claim as the Claimant supplied and completed its work by 30 September 2013 so that the subject payment claim must be a final claim. I do not accept the Respondent's submission. It is for the Claimant to decide if the claim is a final claim and it has not done so as set out in the Claimant's reply to the request for further submissions. I determine that the subject payment claim is a progress claim and as such section 9(2)(b) of the Act applies in relation to the reference date.

Further submissions were requested in relation to the reference date. The Respondent submits that the reference date is 30 September 2013 being the day that the Claimant completed its work. The Claimant refers to an invoice of 25 November 2013 for repair being made to the wardrobes that form part of the Claimant's scope of work. The Respondent does not contest this submission and as such I determine that contract work was being carried out on 25 November 2013. The claim for this work arises from a reference date after this date.

I determine that the reference date is a date determined under section 9(2)(b) of the Act calculated from the date that work commenced and being after 25 November 2013. The Respondent submits that the payment claim was served outside the period provided in the Act. The Act requires at section 14(4)(b) a payment claim in respect of a progress payment (other than in respect of the progress payment that is a final, single or one-off payment) may be served only within the period of 3 months after the reference date referred to in section 9(2) that relates to that progress payment.

The reference date is after 25 November 2013 and the payment claim was served on 21 February 2014 which is within the 3 month period.[20]

[96]

In Jotham Property Holdings Pty Ltd v Cooperative Builders Pty Ltd & Ors the Court emphasised that, while the Act is intended to provide for the rapid determination of progress claims under construction contracts, without the parties becoming weighed down in lengthy and expensive litigation or arbitration (which would tend to suggest that excessive technicality in the construction of its provisions should be avoided), nevertheless the clear time limits in the Act which are mandatory need to be strictly observed in order to properly balance the relevant competing interests. In this regard, the Court said:

[T]he Act gives very valuable, and commercially important, advantages to builders and subcontractors. It alters the balance of power in favour of those parties in relation to progress payments in a significant way. In recognition of this position, the availability of the rights conferred by the Act are governed by, and depend upon, the observance of clear specifications of time and the other requirements expressed in the Act, either in mandatory terms or as defined prohibitions. These provisions are to be found at each stage of the regime for enforcement of the statutory right to progress payments. Such provisions, in accordance with the legislative purpose expressed in the text of each, call for strict observance.

I have found that the last date on which Mr Saville last undertook construction work, or provided related goods or services, under the Construction Contract was 30 September 2013. The date immediately following was 1 October 2013, when time under s 14(5)(b) of the Act began to run. This meant that [the] payment claim in respect of a final payment could be served only within three months of 1 October 2013, which is 1 January 2014.

Accordingly, the First Payment Claim being served on 21 February 2014 and the Second Payment Claim being served on 16 May 2014 were both hopelessly out of time.

It follows from these findings that both purported First and Second Payment Claims failed to comply with the mandatory requirements under ss 9 and 14 of the Act, and were invalid.

It also follows that the Adjudication Determination made by the Second Defendant Mr Martin, which was founded on the First Payment Claim, is void.

It further follows that Mr Saville is out of time to serve any further Payment Claims or any Final Payment Claim under the Construction Contract, pursuant to the Act. His only remedy is to seek recourse for any payment he claims may be due to him in proceedings in a Court of the appropriate jurisdiction, should he be so advised to pursue such proceedings.[38]

[98]

The judge erred in finding that the adjudication was mistaken in determining as a fact that Saville last performed work under the construction contract on 25 November 2013 was a reviewable error of law in an application for judicial review or on certiorari.
The judge erred in finding that the adjudication was mistaken in determining as a fact repairs being carried out to wardrobes in November 2013 form part of Saville's scope of work under the construction contract was a reviewable error of law in an application for judicial review or on certiorari.
The judge erred in finding that the adjudication was mistaken in determining the respondent was not entitled under the construction contract to take work out of the hands of Saville was a reviewable error of law in an application for judicial review or on certiorari.
The judge erred in finding that the adjudication was mistaken in determining as a fact the due date for payment of the claim sent on 21 February 2014 was 23 March 2014, was a reviewable error of law in an application for judicial review or on certiorari.
The judge erred in finding that the adjudication was mistaken in determining as a fact Saville's scope of work included the supply of joinery items including organising, co-ordinating and checking goods before delivery to Hallmarc, unloading the containers, and supply and installing the wardrobes.
The judge erred in finding that the adjudication was mistaken in determining as a fact, Hallmarc had taken work that was within Saville's scope of work out of his hands and completed the work without his agreement.
The judge failed to deal with the substantial point raised by Saville that the letter dated 7 February 2013 was not the sole repository of the agreement between Saville and Hallmarc or to assign reasons for rejection or exclusion of the point raised.
The judge erred in failing to deal with or explain or assign reasons for excluding or rejecting evidence contained in specified paragraphs of various of Saville's affidavits[[39]] as to installation work performed between 30 September and 25 November 2013, as to the documents and discussions constituting the agreement between the parties, as to the works the subject of invoices rendered by JMP Carpentry, and as to reconciliation sheets referring to those invoices.
The primary judge erred in failing to consider and apply or to explain the exclusion of the principle enunciated in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd,[40] raised and relied upon by Saville, that a reviewable error relating to the validity of the adjudication is limited to straightforward calculations of time or determinations that are arbitrary, capricious and irrational.

[139]

Critically, an adjudicator is given no express power in s 23 of the ... Act, or anywhere else in the Act, to decide facts which may go to his or her jurisdiction.

In Chase Oyster Bar, Basten JA determined that the power to determine compliance with the jurisdictional requirements which work to confer jurisdiction on the adjudicator is not given to the adjudicator. Further, the Court is not bound by any finding that these requirements have been met.

Basten JA said in this regard:

The power to determine compliance with the essential requirements of an Adjudication Application could lie with the authorised nominating authority (to whom the application is made), the adjudicator (to whom the application is referred) or the Court exercising its supervisory jurisdiction.

The structure of the Act might suggest that it would be inappropriate to refer an invalid Adjudication Application to an adjudicator; there would then be an implied obligation on the authorised nominating authority to consider the validity of the application made to it. Arguably the duty to refer an application to an adjudicator (see s 17(6)) is limited to a valid Adjudication Application. However, as no party before this Court argued for that construction, it may be put to one side.

The second possibility is that power to determine the validity of an Adjudication Application lies with the adjudicator. In a practical sense, there is much to recommend the view that the adjudicator is able to determine whether the application complies with provisions such as s 17(2)(a), as the adjudicator sought to do in the present case. However, there are factors which support a contrary view. First, s 22(1), identifying that which the adjudicator is to determine, makes no reference to the validity of the Adjudication Application. Secondly, s 22(2), limits the matters which the adjudicator is entitled to consider to the Act, the provisions of the construction contract, the payment claim, the payment schedule, submissions in support of either and the results of any inspection. In a provision which renders the consideration of any other material impermissible, the absence of any reference to the circumstances in which the Adjudication Application was made is highly significant.

Thirdly, the descriptions of the matters to which payment claims and payment schedules must relate and hence (at least implicitly) the matters to which the submissions in support can properly refer, do not expressly identify any aspect of the circumstances in which the Adjudication Application was made.

For these reasons, the proper construction of the Security of Payment Act is that it does not permit the adjudicator to determine the validity of the Adjudication Application. The challenge in the present case must therefore be determined on the basis of facts found by the Court.[[75]]

These observations of Basten JA were expressly adopted by McDougall J in Chase Oyster Bar.[76]

[141]

In the light of Kirk and Chase Oyster Bar, the statements referred to in paras [115]-[116] of Grocon, call for some clarification and qualification.

In Grocon it was said:

With the exception of the case where the basic and essential requirements of the Act for a valid determination are not satisfied, or where the purported determination is not a bona fide attempt to exercise the power granted under the Act, if the Act does make the jurisdiction of an adjudicator contingent upon the actual existence of a state of facts, as distinguished from the adjudicator's determination that the facts do exist to confer jurisdiction, in my opinion the legislation would not work as it was intended to. Unnecessary challenges to the jurisdiction of an adjudicator appointed under the Act would expose the procedures to delay, cost and expense. The very purpose of the Act would be compromised.

For these reasons, in my opinion, in order to serve the purposes of the Act, the intention of the legislation is to confer upon an adjudicator the capacity to determine facts which go to his or her jurisdiction, subject to exceptions of the type to which I have referred. It follows that, in making those determinations, the Act confers on adjudicators jurisdiction to make an incorrect decision in relation to such jurisdictional facts which will not be overturned by certiorari.

For the purposes of s 18 of the ... Act, it appears to me that the elements of the section which serve to confer jurisdiction on an adjudicator to make a valid determination under s 23, on the proper construction of the Act, do not permit the adjudicator to finally determine the validity of the adjudication application. If there be any challenge to the jurisdiction assumed by the adjudicator it must [be] finally determined on the basis of facts found by the Court on judicial review, in the course of determining whether a jurisdictional error has been exposed which calls for the exercise of the Court's discretion to grant relief in the nature of certiorari and, if necessary, mandamus. The Court may grant relief on such relevant evidence as may be adduced before it, whether or not such evidence was before the adjudicator at first instance. Further, the Court may grant such relief without regard to any determination which may have been made on the issue of jurisdiction by the adjudicator. The Court is obliged to arrive at its own conclusion as to jurisdiction based on the law and on the facts as found by it.

This is not to say that an adjudicator should not make any findings of fact or rulings on law if a question of jurisdiction is raised in the course of determining an adjudication application. Clearly if an adjudicator is presented with material or submissions which bring into question the jurisdiction of the adjudicator, he or she should determine the question and give reasons for the findings of fact or rulings on law. If however the adjudicator's decision on jurisdiction is challenged in Court on judicial review, the Court may deal with the matter afresh and receive additional evidence on the matter if the additional evidence is relevant to the determination of the question.[77]

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