Ventia Australia Pty Ltd v BSA Advanced Property Solutions

Supreme Court of NSW|2021-06-24|Before: Rees J

Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) (2005) 64 NSWLR 462; [2005] NSWCA 409 Okaroo Pty Ltd v Vos Construction and Joinery Pty Ltd [2005] NSWSC 45 Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 Rail Corporation of NSW v Nebax Constructions Pty Ltd [2012] NSWSC 6 Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2018] NSWSC 412 SHA Premier Constructions Pty Ltd v Lanskey Constructions [2019] QSC 81 Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52 TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 93 Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd [2018] NSWSC 239 Vannella Pty Ltd v TFM Epping Land Pty Ltd [2019] NSWSC 1379 Texts Cited: Perry Herzfeld, Thomas Prince, Interpretation (2nd ed, 2020, Lawbook Co) Category: Principal judgment Parties: Ventia Australia Pty Ltd (Plaintiff) BSA Advanced Property Solutions (Fire) Pty Ltd (First Defendant) Edward Smithies (Second Defendant) Australia Solutions Centre Pty Ltd (Third Defendant) Representation: Counsel: Mr L Shipway (Plaintiff) Mr M Christie SC / Mr D Hume (First Defendant) Submitting appearance (Second and Third Defendants)

Solicitors: Pinsent Masons (Plaintiff) Vincent Young Lawyers (First Defendant) File Number(s): 2021/98498

Judgment

HER HONOUR: The plaintiff, Ventia Australia Pty Ltd, seeks to quash an adjudication determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW) on the basis that the payment claim included claims for work under multiple construction contracts. The relief is opposed by the first defendant, BSA Advanced Property Solutions (Fire) Pty Ltd, in whose favour the adjudication determination was made.
The issue is whether a payment claim served under section 13 of the Act can seek a progress payment in respect of more than one construction contract. There is a long-standing prohibition on this course, which had its genesis in McDougall J's ex tempore judgment in Rail Corporation of NSW v Nebax Constructions Pty Ltd [2012] NSWSC 6. The issue was most recently considered in Ausipile Pty Ltd v Bothar Boring and Tunnelling (Australia) Pty Ltd [2021] QCA 223, where Morrison JA (with whom Fraser JA and North J agreed) proceeded on the same basis, but on the proviso that it is sufficient if the payment claim "on its face" relates to one construction contract, with the respondent to raise any issue in the payment schedule and the adjudicator to consider the matter.
BSA contends that the long-standing prohibition is not required by the Act. For the reasons which follow, I have concluded that the Act does require a payment claim to be made in respect of one construction contract, not multiple contracts. Further, I consider that this is a jurisdictional issue and not one which is finally resolved by an adjudicator after the issue has been raised in a payment schedule. As to the latter, I respectfully disagree with Ausipile, the Court's observations there being obiter in any event.

The legislation

Before turning to the facts, it is convenient to consider the question of statutory construction. The object of the Act (section 3) is to ensure that any person who undertakes construction work under a construction contract is entitled to receive, and is able to recover, progress payments. To this end, the Act establishes a procedure for such a person to make a payment claim, the person from whom payment is sought to respond by a payment schedule, with any disputed claim to be determined by an adjudicator. The parties are at liberty to resolve their contractual entitlements on a final basis elsewhere, with the Act operating on a "pay-now-argue-later" basis. As such, the Act is designed to provide an informal scheme to ensure that subcontractors can obtain cash flow: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [39], [43], [47] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ). The legislation was designed to "reform payment behaviour in the construction industry" by "stamp[ing] out the practice of developers and contractors delaying payment to subcontractors and suppliers": Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52 at [3]-[4] (Kiefel, Bell, Gageler, Keane and Gordon JJ).
A central tenet of the Act is a right to progress payments. Part 2 of the Act is entitled "Rights to progress payments". While the Act was amended by the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW), with amendments commencing on 21 October 2019 (see further at [43]), the amendments apply to construction contracts entered into after that date: Schedule 2, Part 6 of the Act. Thus, at the time of Nebax and the case law reviewed in the judgment, and for the purposes of this case, section 8 provided: 8 Rights to progress payments (1) On and from each reference date under a construction contract, a person: (a) who has undertaken to carry out construction work under the contract, or (b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment. (2) In this section, reference date, in relation to a construction contract, means: (a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or (b) if the contract makes no express provision with respect to the matter - the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month. This is the broad equivalent to section 70 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld), considered in Ausipile.
Part 3 of the Act is entitled "Procedure for recovering progress payments". Division 1 is entitled "Payment claims and payment schedules". At the time of Nebax and for the purposes of this case, section 13 was in the following terms: Payment claims (1) A person referred to in section 8(1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (2) A payment claim - (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), … (5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. …
Section 13 was amended in 2002 to this form to make clear that a claimant is entitled to make a payment claim "even though it may ultimately be proved that no payment was due under the construction contract"; the objects of the Act were amended accordingly: Southern Han Breakfast Point at [53]-[54], [57]. Sub-section (5) was introduced to prevent abuse of the system by claimants, restricting claimants to one payment claim under the Act in respect of each reference date: see the second reading speech delivered by Mr Iemma in NSW Legislative Assembly, Parliamentary Debates (Hansard), 12 November 2002 at 6543. Section 13 of the Act is the broad equivalent to section 75 of the Queensland legislation.
Sections 14 to 16 provide for the person on whom a payment claim is served to reply by providing a payment schedule indicating the amount of payment, if any, that the respondent proposes to make and for payment in accordance with, or in the absence of, a payment schedule. The Act turns to resolving disputed claims. Division 2, "Adjudication of disputes" includes section 17, which provides: 17 Adjudication applications (1) A claimant may apply for adjudication of a payment claim (an adjudication application) if - (a) the respondent provides a payment schedule under Division 1 but: (i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or (ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount, or (b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount.
(Section 17 of the Act is the broad equivalent of section 79 of the Queensland legislation.) The respondent may lodge an adjudication response (section 20). The adjudicator is then to determine the adjudication application "as expeditiously as possible" and, in any case, within 10 business days of acceptance of the adjudication application, or within such further time as the parties may agree: section 21(3). The adjudicator is to determine the amount of the progress payment: section 22(1). Section 22(2) sets out the matters to which the adjudicator is to have regard in determining the application, including "the provisions of the construction contract from which the application arose": section 22(2)(b).

'One contract' rule

The 'one contract' rule began life in a case in which there was only one contract and the issue did not arise. In Nebax, Nebax was contracted to resurface railway station platforms at 25 stations. By email, Nebax made "Progress claim No 18" by attaching five invoices, each stating that it was "a payment claim under the [Act]". RailCorp served a payment schedule in respect of each invoice. Nebax made five adjudication applications, being one for each invoice and its corresponding payment schedule. RailCorp contended that the adjudicator lacked jurisdiction to deal with the applications as the Act did not permit multiple adjudication applications to be made for one payment claim: section 17(1). McDougall J concluded, "when one considers the structure of the Act as a whole, it is reasonably clear that there should be one only application for adjudication of any one payment claim": at [43]. His Honour then set out sections 8, 13, 14 and 17 of the Act and continued at [44]-[46]: (emphasis added) 44 It seems to me that, because s 13(5) prevents … the service of more than one payment claim per reference date per construction contract, and because the right to adjudication "of a payment claim" is clearly referable to a payment claim that complies with the various requirements of s 13, there can only be one adjudication application for any particular payment claim for any particular contract. 45 The proposition that there may be multiple adjudication applications in respect of different parts of a payment claim seems to me to be completely inconsistent with the underlying objective of the Act, which is to provide an enforceable right to progress payments and a speedy and relatively cheap and efficient means for enforcement of those rights. … 46 Thus, it seems to me, the better view of s 17(1) is that there can only be one adjudication application for any one payment claim. To put it another way, it seems to me that s 17(1) does not authorise the lodging of multiple adjudication applications in respect of the one payment claim.
McDougall J noted that the adjudicator's consideration as to whether the objection to jurisdiction on this matter was well-founded did not bind the Court: at [47], citing Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190. Nebax was followed by Stevenson J in Hill as Trustee for the Ashmore Superannuation Benefit Fund v Halo Architectural Design Services Pty Ltd [2013] NSWSC 865.
Whilst Nebax was concerned with whether there could be multiple adjudication applications in respect of one payment claim, the case was relied upon by counsel in Matrix Projects (Qld) Pty Ltd v Luscombe [2013] QSC 4 in support of the proposition that a payment claim must relate to only one construction contract. There, the parties had signed a "Period Subcontract" which, given its indeterminacy, was found not to be a construction contract under the Act. The "Period Subcontract" provided that a work order may issue. The works involved assisting victims of the Brisbane floods to rebuild them houses. The subcontractor undertook work at nine properties in accordance with purchase orders and at another five properties in accordance with verbal directions. In addition, the subcontractor made a claim for sponsorship of a local football team, which appears to have entirely unrelated. (As described in Ausipile, "The payment claim comprised three distinct claims based on three distinct contracts" (at [104]) while in Canterbury-Bankstown Council v Payce Communities Pty Ltd [2019] NSWSC 1803, Ball J considered there were 14 contracts, being one for each property: at [30].) Douglas J considered that McDougall J's reasoning (in Nebax at [44]) was "persuasive and the conclusion is one with which I agree": at [18]. Further, at [20]: Accordingly the payment claim made cannot be described as one being made under a single construction contract … Therefore the variety of different types of contract for construction work relied upon in the payment claim is fatal to its validity. Douglas J also considered that including an obviously erroneous item in the payment claim (sponsorship of the local football club) did not deprive the adjudicator of jurisdiction: at [24].
In Agripower Australia Ltd v J & D Rigging Pty Ltd [2013] QSC 164, Wilson J appears to have proceeded on the basis that Matrix was correct but was unable to determine whether the payment claim before her related to more than one contract and thus did not consider this jurisdictional issue further: at [15], [92], [97], [100].
In Class Electrical Services v Go Electrical [2013] NSWSC 363, the application of Nebax in Matrix came before McDougall J. There, Go Electrical had agreed to supply electrical fittings and appliances to Class Electrical on credit. From time to time, Class Electrical issued purchase orders and Go Electrical delivered the items accompanied by invoices. Class Electrical used the items in connection with various contracts and sub-contracts which it undertook, thus the goods were "related goods" under the Act. Go Electrical served a payment claim, which an adjudicator determined in an amount exceeding $1.8 million. McDougall J observed at [6]-[7]: 6 Go Electrical accepted that if there were indeed a multiplicity of contracts, and not just one contract, then the determination could not stand, for the reasons that I gave in Rail Corporation of NSW v Nebax Constructions [2012] NSWSC 6 at [44]. I should say that although I was there dealing with a slightly different situation, what I said was picked up, in a context similar to the present, by Douglas J in Matrix Projects (Qld) Pty Ltd v Luscombe [2013] QSC 4 at [17] and following. 7 Mr Pritchard of Senior Counsel, who appears with Mr Salama of Counsel for Go Electrical, did not seek to persuade me that what Douglas J had said was incorrect.
After considering evidence as to the contractual arrangements between the parties, McDougall J concluded that the parties had agreed to the terms on which Go Electrical would supply electrical fittings and appliances to Class Electrical if requested to do so, resulting in a multiplicity of contracts. As such, the jurisdictional challenge to the adjudicator's determination was well founded: at [36], [39]-[40].
Likewise in Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd [2018] NSWSC 239, counsel relied on Matrix in support of the proposition that the Act did not permit a payment claim to be made for work performed under more than one contract. McDougall J observed at [58]: Mr Bland did not submit that either [Nebax or Matrix] was incorrect. There is thus no need to revisit the reasoning in either case. I add, for completeness, that in Class Electrical Services v Go Electrical, experienced Senior Counsel accepted, as I recorded, "that if there were indeed a multiplicity of contracts, and not just one contract, then the determination could not stand, for the reasons" given in Nebax and Matrix. McDougall J applied the reasoning in Nebax and Matrix to the payment claim: where the payment claim related to work done under two contracts, it was not a valid payment claim and could not be the foundation of a valid adjudication application: at [60]-[61].
The correctness of Nebax and Matrix was assumed in SHA Premier Constructions Pty Ltd v Lanskey Constructions [2019] QSC 81: at [16]-[17], [21]. The case turned on whether the payment claim contained claims for work under different construction contracts or whether subsequent work orders and emails resulted in variations to the original contract. Boddice J concluded that the work orders confirmed variations: at [39]. Thus, there was no need to apply the 'one contract' rule.
In Canterbury-Bankstown Council v Payce Communities Pty Ltd [2019] NSWSC 1803, Ball J concluded that Nebax and Matrix did not apply to the case at hand. At [31]: (emphasis added) In my opinion, the principle stated by McDougall J and applied by Douglas J has no application in this case. In this case, there were a number of documents governing the terms on which Payce was to carry out the fit out work on the library and senior citizens centre. But there was a single price for that work to be determined in accordance with the documents (as varied by any subsequent agreement between the parties) and the same work was governed by those documents. Whether the different documents should properly be characterised as different contracts or one contract does not matter. They were not separate contracts for the performance of different work. Consequently, they were properly characterised as a single contract for the purposes of characterising any payment claim made under them; and the payment claim which was the subject of the Determination was properly characterised as a single payment claim in respect of the relevant work.
That is, Ball J had regard to whether the documents, or perhaps contracts, were in respect of different works, as in Matrix where a separate contract came into existence for each of the 14 properties when the builder accepted the price and terms on which it was perform work on each property: at [30]. His Honour's analysis focussed not on a strict categorisation of documents as contracts or variations but whether, "properly characterised", there was a single contract for particular work.
Factually similar to the case at hand, in Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd [2020] NSWSC 1330, Acciona was the design and construct (D&C) contractor for the Sydney Light Rail Project and Holcim supplied ready mixed concrete. The parties entered into a Goods Supply Agreement, which provided, at [16]: (emphasis that of his Honour) If the D&C Contractor wishes to order Goods it will issue a Purchase Order. Upon the issue of a Purchase Order a separate contract will come into existence between the D&C Contractor and the Supplier on the terms set out in this Agreement.
Acciona issued some 12,500 purchase orders and Holcim issued 36 payment claims: at [17]. Acciona challenged the jurisdiction of the adjudicator on the basis that the payment claim impermissibly claimed for work done under two or more contracts: at [32]. After summarising Nebax, Matrix and Trinco, none of which were suggested to have been wrongly decided (at [37]), Hammerschlag J concluded at [40] to [42]: 40 The Adjudicator had no jurisdiction because the Payment Claim was invalid and ineffective to engage the operation of the Act. By the parties' express agreement in cl 2 of the Agreed Terms, each time a purchase order was issued, a separate contract came into existence between Acciona and Holcim on the terms set out in the GSA. Each such contract was governed by terms contained in the overarching GSA instrument, which terms became incorporate[d] in every subsequent separate contract, but each time Acciona placed a purchase order, a separate contract for discrete work with a separate payment date came into existence. 41 Applying Trinco, the Payment Claim, which straddled numerous purchase orders (and therefore numerous contracts) with separate payment dates, did not constitute a valid payment claim. 42 It follows that the Determination is void and will be quashed.
In Ausipile, Bothar engaged Ausipile under a subcontract. Ausipile made a payment claim, which also included crane hire. Bothar challenged the jurisdiction of the adjudicator on the basis that the payment claim was in respect of two contracts, being the subcontract and a hire agreement. At first instance, Wilson J found there were two contracts and thus the payment claim was void, following Matrix: Ausipile Pty Ltd v Bothar Boring and Tunnelling (Australia) Pty Ltd [2021] QSC 39 at [253], [255], [263]-[264] and [279]. On appeal, Morrison JA observed that the payment claim "on its face, included two distinct components", the first being $596,777.73 contained in the first schedule to the payment claim and the second being $81,500 claimed under two schedules entitled "Variation Worksheet": at [73]. The Court held that there was no separate contract; the crane hire was a variation of the subcontract: at [40]. Morrison JA nonetheless proceeded to examine the Matrix line of authority. As such, his conclusions are obiter. Morrison JA observed at [82]: Implicit in Bothar's contention is the proposition that the parties on either side of a payment claim can litigate the issue of whether part of the payment claim is, as a matter of fact, under a different contract and do so before the matter reaches adjudication.
Morrison JA reviewed the statutory scheme and observed at [98] and [100]: (inserting the equivalent provisions under the Act) [98] The mandatory obligation to respond to a payment claim identifying the basis upon which it is proposed to make a payment less than the amount claimed, tells against the proposition that the Act comprehends the resolution of issues such as Bothar would suggest, at a stage earlier than [adjudication]. … [100] Nothing in [section 13(1)] suggests that the respondent to a payment claim can simply ignore the payment claim or the statutory obligation to respond under [section 14], by contending that issues such as whether the payment claim is truly under one contract should be first litigated to finality. The whole scheme of the Act is designed to enable compulsory and fast payment to subcontractors, with issues to be determined at a adjudication rather than by traditional litigation.
After examining the payment claim in question, Morrison JA concluded at [102]: On its face, payment claim 6 refers to only one contract between Bothar and Ausipile. Thus, it is a document which fits [section 13(1)] of the Act, in that Ausipile claims to be entitled to a progress payment and therefore may give a payment claim to Bothar who may be liable to make the payment. In my view, even if it is the case that at some subsequent point it is determined that the variation was not a true variation and therefore not able to be made the subject of the payment claim, that does not render the payment claim invalid. Such an issue is something caught by [section 14(3)] of the Act, in that when Bothar obeys its statutory obligation to respond with a payment schedule, it might state that the amount proposed to be paid is less than that in the claim, and states why that is so, including the reason to withhold payment. The evident scheme of the Act is that if Bothar wished to raise a contention that a variation is not a true variation, or indeed the subject of a different contract, that is a matter that the statute obliges it to raise in a payment schedule. In that way, the Act makes it plain that when the scheme under the Act operates by the giving of a payment claim, the entitlement to respond is by the statutory process and not otherwise.
His Honour did not consider that earlier authority warranted a different conclusion. Nebax was of no assistance as the question addressed was well removed from the case at hand: at [117]. In Matrix, "there was no examination of the proper construction of the … section governing a payment claim"; further, the payment claim "on its face, made claims under three distinct contracts"; and Douglas J considered the inclusion of an obviously erroneous item did not deprive the adjudicator of jurisdiction: at [106]-[107], citing Matrix at [24]. McDougall's observations in Trinco were obiter and the payment claim "on its face" made claims under separate contracts: at [118]. There was no contention in Acciona that Nebax, Matrix or Trinco were wrongly decided; the payment claim on its face identified more than one contract as the basis for the claim: at [112]. I take the latter to be a reference to Acciona at [24], where Hammerschlag stated: On 28 May 2020, Holcim made Payment Claim [36] comprising: (1) $1,021,330.81 for newly claimed measured works, $323,830.81 which was for works from October 2019 to April 2020, and $697,500 was for plant opening charges from 26 March 2016 to 16 February 2020 which had not previously been charged by Holcim. (2) $1,718,246.80 for works in payment claims 30 to 34.
Morrison JA followed Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) (2005) 64 NSWLR 462; [2005] NSWCA 409 and TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 93, where the Court of Appeal proceeded on the basis that a payment claim made in good faith could not be treated as a nullity for failure to comply with the Act unless the failure was patent on its face; whether the claim complied with the Act was a matter for adjudication. Morrison JA concluded at [120]: (comparable provisions of the Act included) In my respectful view, the reasoning in TFM is correct and should be followed. A payment claim should not be treated as a nullity for failure to comply with [section 13(1)] of the Act, unless that failure is patent on its face. Where a payment claim purports to be made under one contract, it is not rendered invalid simply because at a later time (either during the adjudication or otherwise) it is determined that part of the claim was, in fact, a claim under a different contract. Provided a payment claim is made in good faith and purports to comply with [section 13(1)] of the Act, the merits of that claim, including questions as to whether it complies with [section 13(1)], is a matter for adjudication after having been raised in a payment schedule. A recipient of a payment claim cannot simply sit by and raise that point later, if it is not put in a payment schedule in response. Thus, even if the claim for crane hire "truly fell under a different contract", the payment claim complied with Act as "it made a claim, on its face, for amounts due under the one contract": at [121].

Consideration

As to whether the Act, properly construed, permits a payment claim to be made in respect of more than one construction contract, the cases reviewed have limited precedential value where this was not specifically argued, nor decided, in Nebax, which was applied in a different context in Matrix and where the contrary was not argued in subsequent cases: Chief Commissioner of State Revenue v Benidorm Pty Ltd (2020) 104 NSWLR 232; [2020] NSWCA 285 at [91]-[92], citing Coleman v Power (2004) 220 CLR 1; [2004] HCA 39 at [79] and CSR Ltd v Eddy (2005) 226 CLR 1; [2005] HCA 64 at [13]. That said, a series of learned commercial judges have proceeded accordingly, presumably because such a construction of the Act seemed obviously correct.
Turning to construction, both the language of the Act and its legislative purpose are important. As to the language, the Act is drafted in the singular, referring throughout to "a construction contract", "a payment claim" and the like. While reference to a word in the singular includes a reference to the word in the plural form (section 8(b), Interpretation Act 1987 (NSW)), the Interpretation Act does not preclude the operation of provisions as drafted and also permits a process of selective pluralising or singularising such that not every singular word need be pluralised and vice versa. These are matters to be resolved by the ordinary process of statutory construction including having regard to the purpose of the provision and whether one of the competing constructions leads to unfavourable consequences: Perry Herzfeld, Thomas Prince, Interpretation (2nd ed, 2020, Lawbook Co) at [4.80] and the authorities there cited. The singularity of language of the Act was a matter of significance to Stevenson J when construing the Act in Hill v Halo Architectural Design Services Pty Ltd [2013] NSWSC 865, referring to entitlement to "a" progress payment and "a" payment claim: at [25]-[31].
Part 2 of the Act confers a statutory entitlement to a progress payment, while Part 3 builds on Part 2 by establishing a procedure for recovery of a progress payment to which an entitlement exists; the two parts "are not hermetically sealed": Southern Han Breakfast Point at [58]. When section 8 and section 13 are read together, I consider that the provisions are to operate as drafted, that is, in the singular. Important in this consideration is the "reference date". A person is entitled to a progress payment "[o]n and from each reference date under a construction contract": section 8(1). The reference date will likely differ for each construction contract, either because the terms of the contract will specify a particular date or, failing this, the reference date will be the last day of the month: section 8(2). It is only when a person is entitled to a progress payment - that is, on or after the reference date - that they may serve a payment claim: section 13(1).
An entitlement to serve a payment claim seeking a progress payment under more than one construction contract pre-supposes that the reference dates for the construction contracts are the same, or at least fall "[o]n and from" the reference date of one of the construction contracts. Whilst this is possible or even likely, the simple and singular relationship drawn by the legislation between a construction contract, the reference date under that contract, and a person's entitlement to serve a payment claim indicates that the Act means that a payment claim is to be made in respect of one construction contract. This is, essentially, what McDougall J was saying in Nebax at [43]-[44]. (I note that the Act has since been amended to remove the reference date: see [44]. The Act as amended may bear a different construction.)
Construing the Act in this manner is supported by its legislative purpose. The object of the Act has been described as [4]. Further, as the High Court described the statutory scheme in Probuild, the procedure in Part 3 is designed to operate quickly. This is apparent from the detailed time limits that apply at each stage, which are "carefully calibrated" and impose "brutally fast" deadlines on the claimant, the respondent and the adjudicator to ensure the prompt resolution of payment disputes: at [40]. Further, at [41]: … an adjudicator can have as few as five business days after receiving the respondent's response to the adjudication application to determine the amount of the progress payment to be paid by the respondent and the date on which it becomes payable. In that limited time, the adjudicator must consider the provisions of the Security of Payment Act, the provisions of the construction contract from which the application arose, the payment claim (and any accompanying submissions and documentation), the payment schedule (and any accompanying submissions and documentation) and the results of any inspection carried out by the adjudicator.
The need for speed is consistent with a construction of the Act that a payment claim can seek a progress payment under only one construction contract. This feature of the legislation was an important factor in the construction of the Act in Nebax (at [45]) and Ausipile (at [100]). Whilst the length and complexity of a construction contract may differ widely - and indeed a construction contract may be oral (section 7(1)) or simply an "arrangement" (section 4(1)) - claiming a progress payment under more than one construction contract in a payment claim may be expected in the ordinary course to compromise the respondent's ability, and that of the adjudicator, to attend to their respective tasks within the short timeframes provided by the Act.
Thus I conclude that the Act, property construed, requires a payment claim to be made in respect of "a" construction contract. The next question is whether an adjudication determination in respect of a payment claim referable to more than one construction contract is void, or whether it is a matter which the adjudicator can consider when making the determination, with the ultimate question as to the number of construction contracts to be finally determined in another venue.
The importance of serving a payment claim in accordance with the Act is that, without it, the adjudicator's determination is void. This Court does not have jurisdiction to quash an adjudicator's determination for non-jurisdictional error of law on the face of the record (in other words, the adjudicator is conferred with decision-making authority to err in law): Probuild at [83] per Gageler J. However, for an adjudicator's determination to have the legal effect provided by the Act, it must satisfy the conditions laid down by the Act as essential for there to be such a determination: Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394 at [52] per Hodgson JA. One essential pre-condition for the existence of an adjudicator's determination is service by the claimant of a payment claim under section 13: Brodyn at [53]-[54]. As explained in Southern Han Breakfast Point at [44]: There is no dispute between the parties that service of a payment claim under s 13(1) of the Act is an essential precondition to taking subsequent steps in the procedure set out in Pt 3 of the Act. There is accordingly no dispute that, unless a payment claim answering that description is served, there can be no adjudication application and hence no adjudication within the jurisdiction conferred by s 22 of the Act. That shared understanding of the relationship between ss 13(1) and 22 is undoubtedly correct.
Whilst the High Court was there concerned with the existence of a reference date as a precondition to the making of a valid payment claim under section 13(1), the Court also observed at [62]: … Section 13(1) operates to require that each payment claim be supported by a reference date and s 13(5) operates to require that each reference date support no more than one payment claim. Section 13(5) has been held to produce the result that "a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment claim under the [Act]". Section 13(1) correspondingly produces the result that a document purporting to be a payment claim that is not in respect of a reference date is not a payment claim under the Act. The document is ineffective in either case to trigger the procedure established by Pt 3.
The question is whether a payment claim referable to more than one construction contract deprives the adjudicator of jurisdiction or whether it is sufficient that "on its face, the payment claim relates to one construction contract." This depends on whether the requirement of section 13(1), as I have construed it, is a basic and essential requirement laid down for the existence of the adjudicator's determination: Brodyn at [53].
In Brodyn, Hodgson JA noted that some sections contained "more detailed requirements", for example, section 13(2) contains requirements as to the content of payment claims. When deciding whether any non-compliance with such requirements has the effect that a purported determination is void, "I think it is preferable to ask whether a requirement being considered was intended by the legislature to be an essential pre-condition for the existence of an adjudicator's determination": at [54]. Further, "the legislature did not intend that exact compliance with all the more detailed requirements was essential to the existence of a determination … What was intended to be essential was compliance with the basic requirement": at [55].
Returning to the cases relied upon by Morrison JA, in Nepean Engineering v Total Process Services, the Court there considered whether a payment claim satisfied section 13(2)(a) of the Act, that is, "identif[ied] the construction work … to which the progress payment relates". There, the payment claim attached copies of progress claim 5 in the amount of $221,403.18 and progress claim 6, claiming $38,645.75 in respect of Variation 4 - Variation 6. The head contractor contended that this was insufficient material for it to understand for what work the claim was being made. Hodgson JA concluded, "a document which purports to be a payment claim does not fail to be a payment claim, within the meaning of the Act, merely because it can be seen, after a full investigation of all the facts and circumstances, not to successfully identify all the construction work for which payment is claimed": at [34]. Further, at [36]: That is, I do not think a payment claim can be treated as a nullity for failure to comply with s 13(2)(a) of the Act, unless the failure is patent on its face; and this will not be the case if the claim purports in a reasonable way to identify the particular work in respect of which the claim is made.
As the payment claim and accompanying progress claim 5 and progress claim 6 "did purport in a reasonable way to identify the work in respect of which the claim was made", it was for the respondent to serve a payment claim saying it did not propose to make any payment in respect of the work because it could not identify the work, leaving the matter for the adjudicator to determine: at [39]. Ipp JA agreed, at [76]: Provided that a payment claim is made in good faith and purports to comply with s 13(2) of the Act, the merits of that claim, including the question whether the claim complies with s 13(2), is a matter for adjudication under s 17 …
Similarly, in TFM Epping Land v Decon, the Court was concerned with whether the payment claim was invalid as, although it claimed payments for variations, it may in fact be a quantum meruit claim, to which the Act does not apply: Southern Han Breakfast Point at [66]. A detailed description of the payment claim may be found in the first instance judgment: Vannella Pty Ltd v TFM Epping Land Pty Ltd [2019] NSWSC 1379 at [17]-[22]. The progress claim was for some $6.3 million including Table 1 headed "Works within the Original Contract Sum" comprising 25 items of work and Table 2 headed "Variations" referring to six variations numbered V01 to V06. The first page of the claim stated that it was made pursuant to the Act for works completed in accordance with the Building Contract.
On appeal, Basten JA (with whom Meagher JA and Emmett AJA agreed) noted that the claim was "in its terms" a claim for works completed under the contract and, whilst it was possible that the amounts claimed for variations did not properly arise under the contract, any challenge on this basis was to be raised by way of a payment schedule provided under section 14 of the Act, to be addressed by the adjudicator: at [19]-[20]. Following Nepean Engineering, Basten JA concluded, "On the face of the claim, the payments were sought under the contract. If they were not available under the contract, it might have been open to an adjudicator to reject those elements of the claimed amount": at [23]. Similarly, Emmett AJA considered, "There is nothing in the Progress Claim to suggest that the claim for variations was made otherwise than under the Contract. Indeed, the Progress Claim states specifically that they are made under the Contract": at [92]. His Honour considered that this would have been a matter for an adjudicator to determine if the issue was raised in a payment schedule.
Both Nepean Engineering and TFM Epping Land v Decon were concerned with the "more detailed requirements" of section 13(2) of the Act which, consistently with Brodyn, are not an essential pre-condition for the existence of the adjudicator's determination. Whether a payment claim seeks payment for work done under more than one construction contract goes to whether the payment claim meets the description in section 13(1) of the Act which, according to Southern Han Breakfast Point, is a matter going to the jurisdiction of the adjudicator. Once it is accepted that whether a payment claim is made in respect of one construction contract is a jurisdictional fact, then it is a matter for the Court to determine on the evidence before it. It is not a matter that depends upon what is raised in a payment schedule. The Court's observations in Ausipile in this regard were obiter and, with great respect, I consider this aspect of the reasoning to be plainly wrong and I do not propose to follow it: Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2018] NSWSC 412 at [130]-[131] (Stevenson J); Greenwood Futures Pty Ltd v DSD Builders Pty Ltd [2018] NSWSC 1407 at [43]-[51] (McDougall J).

Amendments to the Act

As previously noted, in 2018, following a review of the legislation by John Murray AM, Review of Security of Payment Laws, (December 2017), sections 8 and 13 were 'overhauled' in response to "significant stakeholder concern and confusion" by the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW): see the second reading speech delivered by Mr MacDonald in NSW Legislative Council, Parliamentary Debates (Hansard), 24 October 2018 at 61. The amendments were consonant with the objects of the Act being, "reforms to provide greater protections to subcontractors, suppliers and workers in the building and construction industry … [to] further promote cash flow and transparency in the contracting chain" and reduce the devastating and far-reaching impacts" of late payments and the effects of insolvency in the industry, particularly on small businesses: ibid.
The Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) commenced on 21 October 2019 and applies to construction contracts entered into after this date: Schedule 2, Part 6 of the Act. Section 8 of the Act now provides: A person who, under a construction contract, has undertaken to carry out construction work or to supply related goods and services is entitled to receive a progress payment. As explained in the second reading speech, as a consequence of the new section 8, a person's entitlement to receive a progress payment is "no longer is triggered by a 'reference date', a term that will be abolished from the Act. Instead, the entitlement is simply triggered by the fact that a person has undertaken to perform work or supply goods and services under a construction contract."
Section 13 was also substantially amended. According to the second reading speech, "The aim is to ensure that a person who has undertaken to carry out construction work or to supply related goods and services is entitled to make a payment claim for every named month, or more frequently if provided for under the construction contract." Section 13 now provides (with sections (1A), (1B), (5) and (6) being added): Payment claims (1) A person referred to in section 8 who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (1A) A payment claim may be served on and from the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and on and from the last day of each subsequent named month. (1B) However, if the construction contract concerned makes provision for an earlier date for the serving of a payment claim in any particular named month, the claim may be served on and from that date instead of on and from the last day of that month. … (5) Except as otherwise provided for in the construction contract, a claimant may only serve one payment claim in any particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in that month. (6) Subsection (5) does not prevent the claimant from - (a) serving a single payment claim in respect of more than one progress payment, or (b) including in a payment claim an amount that has been the subject of a previous claim, or (c) serving a payment claim in a particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in a previous named month.
Sub-section 13(1A) adopts some of the language of the former section 8(2)(b), the purpose of the new provision being to ensure that claimants can make a monthly payment claim. According to the second reading speech, respondents were delaying progress payments under section 8(2)(a) and the new section was intended to remedy that mischief. "Section 8(2)(b) currently provides a default set of rights to enable claimants to claim monthly. The purpose of adopting its language is to provide commercial certainty by preserving the jurisprudence regarding the proper interpretation of the provision." Section 13(1B) allowed the parties to agree for claims to be made for periods shorter than monthly. New sections 13(5) and (6) generally limit a person from making more than one payment claim each month for construction work carried out in that month.

FACTS

Ventia relied on evidence by commercial manager Laura Jasiulec and solicitor Thomas Heading. BSA relied on evidence from contract manager Paul Crossing and solicitor Mark Irwin. There was no cross examination. Some eight volumes of documents were also tendered. The adjudicator filed a submitting appearance.
Ventia is a services company that (among other things) provides maintenance and facilities-management services to government clients. In April 2016, Ventia entered into a head contract with NSW Land and Housing Corporation to perform asset-maintenance services in respect of some 68,000 social-housing properties located throughout the Greater Sydney area, the Blue Mountains, Newcastle and the Hunter Valley.
Ventia performs the head contract with the assistance of some 126 subcontractors. Part of Ventia's scope of work under the head contract is 'Building Essential Services' (BES), consisting of maintenance of fire-related assets such as extinguishers, emergency-exit lighting and fire doors. To this end, in May 2016, Ventia entered into a subcontract with BSA in relation to the BES work. BSA is a specialist fire-services contractor.

Subcontract

An accompanying Letter of Award expressly formed part of the Subcontract and provided: The work is being carried out as part of a Head Contract being the Asset Maintenance Services Contract between NSW Land and Housing Corporation and [Ventia]. … The following documents provided form part of the award: 1 This Letter of Award 2 BSA Contract Clarifications Register, titled "Clarifications Broadspectrum_21-3-2016" - attached 3 The Subcontract Agreement (TMD-2000-SC-0003 - attached 4 Price Schedule - BES-Pricing-All NominatedRegions 210316 BSA CompleteServices - attached 5 G1.1 Maintenance Work Requirements document; 6 G1.4 Property Standard Assessments document; 7 G2.1 Maintenance Specification document; 8 G2.2 Servicing Specification document; 9 G3 Asset Performance Standards document; 10 G4.2 Service Delivery Program, Scope of Work and Quotation Template; 11 Additional Information - Work Orders (TMD-2033-AD-2001) These Conditions of Subcontract cannot be varied or superseded in any way whatsoever other than by [Ventia's] written agreement.
The Price Schedule referred to in the Letter of Award contained a list of public housing sites with an annual price. Mr Crossing said that, subject to variations, this was the list of sites at which BSA was to provide routine maintenance for the agreed annual price. After referring to a range of matters, the Letter of Award concluded: To ensure your systems are operational to receive Work Orders, please review the Work Order Procedure. Please be advised that on site works MUST NOT commence at any time prior to receipt and acceptance of a Work Order issued by [Ventia]. [Ventia] will not approve any claims for costs incurred on works conducted prior to issue of a Work Order.

Services

Clause 2.1 of the Subcontract Agreement provided: Performance of Services (a) The Subcontractor must execute and complete the Services in accordance with the Services Specification during the Term, and in accordance with the terms of this Agreement. (b) In performance of the Services in clause 2.1(a), the terms set out in Annexure 4 will form part of this Agreement.
Annexure 1 to the Subcontract contained Definitions, including: (emphasis added) Agreement means the Subcontract Agreement General Terms and Conditions, any relevant Work Order to which it attaches, and all Annexures … Services means the services set out in Annexure 8 or in any Work Order, and any other services which the Subcontractor and [Ventia] agree from time to time. Services Specification means the details outlined in Annexure 9. Work Order (WO) is "[Ventia's] record of authorisation to carry out a specific Service.
Annexure 8, entitled "Services", simply provided that BSA was obliged to perform the Services on the basis of the rates and prices in its tender (clause 1(a)) and, further (clause 1(b)): [Ventia] makes no representation that the Subcontractor will be required to carry out any particular volume of Services during the Agreement Period (and any Milestone Period) and the Subcontractor will have no Claim against [Ventia] concerning the volume of any Services it is required to carry out, other than an entitlement to payment (in accordance with the terms of the Agreement) for the Services it is required to carry out. As Annexure 8 did not actually identify what Services were to be carried out, other than "any other services which the Subcontractor and [Ventia] agree from time to time", the Services to be performed were those set out in any Work Order.
Annexure 9, entitled "Services Specification" provided: Refer to Specification Documents: [list of specifications and standards, largely referred to in the Letter of Award] Appendix B - Work Order Procedure Both the Specification Documents and the Work Order Procedure were referred to in the Letter of Award.
Turning next to Annexure 4 (to which clause 2.1(b) referred), the annexure was entitled "Repetitive Services (Standing Orders)". Clause (a) provided: Work Orders (i) [Ventia] will initiate the Services by issuing specific Service Orders to [BSA] to perform discrete tasks. Each Work Order shall include a time and date for completion. The Services must be carried out by [BSA] in accordance with Work Orders issued by [Ventia]. [BSA] must complete the Services the subject of each Work Order by the date of completion. … (iii) Services are only to be performed by the Subcontractor during the Term in response to [Ventia] issuing Work Orders. [Ventia] does not warrant, guarantee or make any representations as to the frequency, number or monetary value of the Work Orders to be issued under the Agreement, and [Ventia] does not warrant or guarantee the Subcontractor any particular level of Services or Work Orders. …
There was no definition of "Service Order", which I take to be a reference to a Work Order, where "Service Order" and "Work Order" are used interchangeably in Annexure 4(a)(i). Annexure 4, clause (b) provided: (emphasis added) Formation of Agreement A separate Agreement will come into existence each time [Ventia] issues a Work Order. Each Agreement so created will be governed by the terms of this Agreement. In the event of any conflict between the terms of this Agreement and any express term in a Work Order, the express term of the Work Order will prevail in relation to the performance of Services under that Work Order only. Consistently with this, "Agreement" was defined as the Subcontract Agreement, "any relevant Work Order to which it attaches, and all Annexures …"
Annexure 4 clause (c) provided: Invoicing and payment (i) The Parties acknowledge that the Work Order is the sole device for ordering Services and that no payment will be made by [Ventia] unless it is for Services completed by the Subcontractor in accordance with a Work Order issued under the authority of [Ventia]. (ii) The Subcontractor must ensure that each Work Order is invoiced separately, but in accordance with clause 6 of this Agreement. (iii) The Subcontractor may only invoice on completion unless the Work Order states that progress payments will be made. If progress payments are to be made the Subcontractor may invoice for the agreed value of work completed at the end of each month, or the (pre-agreed) value of the payment milestone(s) completed within the month, as applicable. (iv) It is a pre-condition for payment that the Work Order Reference Number must be quoted on all invoices. Invoices that do not quote a Work Order Reference Number will be returned to the Subcontractor for rectification and resubmission.
Finally, clause (d) provided: IT Systems for Work Order Issue (i) Appendix B of this Agreement include the procedure on using the electronic system required to receive and manage work orders.
Ms Jasiulec gave evidence as to how the IT Systems for Work Orders operated. Ventia used a computer software package called the SAP system to create and issue Work Orders to subcontractors. The subcontractors also had a SAP Mobility App to log into the SAP system to access Work Orders issued by Ventia and claim payment for the Services once completed.

Payment

Clause 2.2 of the Subcontract Agreement provided: Remuneration …[Ventia] agrees to pay [BSA] the Fee in relation to each of the Services the subject of a Service Order in accordance with the terms of this Agreement. … As mentioned, there was no definition of "Service Order"; I read those words as referring to a Work Order.
Ventia agreed to pay BSA the Fee for the Services, with the Fee to be claimed on issue of an approved claim in accordance with clause 6: clause 6.1. Clause 6.2 provides: (emphasis added) Payment claim procedures (a) The Subcontractor [BSA] must provide to [Ventia] a statement in a form and using a method required by [Ventia], within: (i) 5 Business Days after the date of Completion of the relevant Service, unless otherwise specified for Services designated as Category A Works; and (ii) 5 Business Days after the last Business Day prior to the end of each calendar month for Services designated as Category B Works, which is referred to as 'Monthly Payment Claim', with the first Monthly Payment Claim to be made one month after the commencement date; showing the part of the Fee claimed in relation to Work Orders worked on for that Payment Claim. The payment claim shall relate to work satisfactorily completed for the work order …
As to what is meant by Category A Works and Category B Works, Annexure 1 contained the following definitions: Category A Works means the Responsive Works Program, Vacant Restoration, Modifications (MODS)/Acquisitions/Major Fire Upgrades (MFU)/Lease Refurbishments/Property Standard Assessments (PSA). Category B means … Building Essential Services (BES). As Mr Crossing explained it, Category A Works were on-demand works requested by Ventia where there is a specific, unexpected issue with an asset requiring rectification, while Category B Works were routine maintenance.
The Subcontract contained an entire agreement clause: clause 16.6(a). In the event of any ambiguity or inconsistency when interpreting the terms of the Subcontract, the order of priority for interpretation was to be in the order of the Special Conditions Annexure (Annexure 7), then the other Annexures, then the other terms of the Subcontract: clause 16.6(b). No rights created under the Subcontract could be waived except in writing signed by the party granting the waiver: clause 16.7(a). Any variation to the Subcontract was required to be in writing signed by the parties: clause 16.7(d). Clause 16.11 provided that the Subcontract was non-exclusive; Ventia "retains the right to engage any other person to provide the same type of Services without any liability to [BSA]".

Work Orders

Some 8,600 Work Orders were created each year for BSA. To some extent, the Work Orders are automatically generated each month using a "pricing file". When adding a subcontractor to the SAP system, the list of assets for which the subcontractor was responsible (the Tender List) and the agreed subcontract pricing for each property, service type and month were combined to create a pricing file, which was uploaded into the SAP system each month for the purposes of creating Work Orders. Once generated, the subcontractor was notified that a Work Order has been issued and, on completion of the Work Order, claims for payment were made using the SAP Mobility App.
Neither Ms Jasiulec or Mr Crossing were responsible for implementing the Subcontract until some years after it was executed. As Ms Jasiulec understands it, whilst BSA has used the SAP Mobility App for Category A work, BSA arranged for Ventia personnel to log into the App and make the necessary entries to complete the work orders on BSA's behalf for Category B work. This arrangement was put in place shortly after the Subcontract was entered into. Nonetheless, work orders were generated in the SAP Mobility App for all of the Category B work that BSA undertook and was paid for.
According to Mr Crossing, it was not Work Orders but BSA's annual job plan and monthly schedule of completed maintenance and upcoming maintenance requirements which directed the performance of work under the Subcontract. Mr Crossing said that he has administered the Subcontract on the basis that BSA was required to perform Category B works whether or not there was a Work Order and that Work Orders were simply administrative documents created by Ventia to facilitate its use of the SAP accounting software. The total annual fee for Category B Works under the Subcontract was the aggregate of the annual fee for each site in the Price Schedule. BSA claimed the annual fee in 12 equal monthly instalments, to which Ventia did not object.
Each month, Ventia sent BSA over 450 emails attaching Category B Works work orders comprising one work order for each site covered by the Subcontract, together with a list of the Category B Works work orders with 1/12 of the annual fee per site in the Price Schedule. The details of the Category B Works in the work order were generic and, as Mr Crossing understood it, Ventia issued the work orders irrespective of whether work was mandated for that site in BSA's annual job plan and irrespective of whether BSA intended to perform work at that site that month. Each month, BSA billed and was paid for 1/12 of the per annum price for routine, preventative maintenance works whether or not it in fact performed works at that site in that month.
Consistent with the non-exclusive nature of the Subcontract, in 2017, Ventia contracted with another subcontractor to perform Building Essential Services. Thereafter, from time to time, Ventia altered the allocation of work given to BSA and issued work orders to the new subcontractor instead. In addition, from time to time the NSW Land and Housing Corporation notified Ventia of additions to, or removals from, the list or properties in respect of which Ventia was required to undertake the BES work, and Ventia allocated work orders to its subcontractors accordingly.

Payment claim

On 8 February 2021, Ventia terminated the Subcontract with effect from 1 March 2021. On 8 February 2021, BSA served a payment claim on Ventia for $2,979,262.34. The payment claim referred to the Subcontract Agreement. The claimed amount comprised three groups of work, being: 1. "PM" - further described as "Preventative Maintenance Monthly Contract Services as per Asset requirement" - in the amount of $823,997.16. 2. "SOU" - further described as "Testing of Single Occupier Units - Annual Fire Safety Statement billed monthly" - in the amount of $85,670.56. 3. "Variations" - further described as "Asset validation - further variation to the contract as per agreed value" - in the amount of $2,069,594.62. The payment claim referred to seven Work Orders said to support these groups of work, although Ms Jasiulec explained that the Work Orders referred to were, by and large, wrong. In particular, the "PM" group of work arose from 1,860 Work Orders.
As Mr Crossing explained it, the Payment Claim claimed for three kinds of Category B Works. First, the Payment Claim claimed for "PM" or "Preventative Maintenance Works". This was a claim for the monthly price for routine maintenance works in the public areas of the sites covered by the Subcontract for the months of October 2020, November 2020, December 2020 and January 2021. Ms Jasiulec says that the Work Order referred to in the payment claim for the "PM" group of work does not relate to Category B Works at all. Rather, Ventia issued one Work Order per month per property for Category B Works, that is, 465 work orders a month. For the period claimed in the payment claim, Ventia issued 1,860 Work Orders.
Second, Mr Crossing said that BSA also provided routine maintenance works in the tenanted areas where it understood that local government requirements required maintenance checks of fire protection equipment in the tenanted areas, not just the common areas. BSA understood this to be an agreed variation following a meeting in December 2016. BSA billed for the routine maintenance works in the tenanted areas monthly using the description "SOU" or "Single Occupier Units", being an expression used by the NSW Government to describe tenanted areas of public housing complexes. BSA carried out "SOU" works at the sites covered by the Subcontract whether or not it had a work order. Generally, BSA would carry out these works and later request a work order number to allow billing. Sometimes work orders were not provided until the month after works had already been carried out. Often, the work orders that were issued bore no resemblance to the works that had in fact been carried out because they referred to sites which were not the subject of SOU works at all.
Ms Jasiulec understood that the "SOU" group of work concerned checking each entry door into a unit within a building to determine if the door met Australian Standards for fire compliance. Although the payment claim refers to one work order, there were four Work Orders involved. Ms Jasiulec says the usual procedure was not followed in relation to this work as, early in the term of the Subcontract, a dispute arose between Ventia and BSA as to whether inspection of these fire doors formed part of BSA's scope of work. Ms Jasiulec understands that this dispute was resolved on the basis that Ventia would issue a special, stand-alone work order for the SOU Works each month and BSA would be paid against that work order. Under this arrangement, Ventia did not issue a work order for every property; for convenience, a single work order was issued.
Third, according to Mr Crossing, one of BSA's initial tasks under the Subcontract was to work out precisely what assets were at the sites. BSA had inherited an asset list from the previous sub-contractor, which BSA proceeded to update. This resulted in an increase in assets at the sites, which BSA maintained. There was a dispute between the parties as to whether BSA was entitled to charge for these additional assets. Since March 2018, BSA has claimed for the works it contends were agreed at a meeting that month, by describing the works as "Variations".
BSA's entitlement to this variation remains in dispute between the parties. Ms Jasiulec has been involved in seeking to resolve this dispute since 2019. Ms Jasiulec understands that Ventia agreed to pay a certain amount to BSA for the variation from June 2019 to August 2019 while the variation was investigated. From September 2019, Ventia did not raise any work orders for the variation due to a dispute surrounding the variation. The work orders referred to in the payment claim for the "Variation" are, according to Ms Jasiulec, wrong.
On 22 February 2021, Ventia served a payment schedule, valuing BSA's entitlement at $nil including because, "… it is impermissibly made with respect to multiple construction contracts, each Work Order being a separate construction contract …". BSA referred the payment claim to adjudication. On 11 March 2021, Ventia received an adjudication application. On 18 March 2021, Ventia provided an adjudication response raising the same 'multiple-contracts' point. On 31 March 2021, the adjudicator issued an adjudication determination in BSA's favour in the amount of $2,692,326.71.

Contrary to 'one contract' rule?

Ventia submitted that the Subcontract was a standing agreement under which Ventia was entitled (but not required) to issue Work Orders to BSA. Ventia acknowledged that there was some complexity in the procedures that the parties had adopted since the Subcontract began in 2016. The Subcontract covered a wide range of activities at a large number of locations. Differences had arisen from time to time between the parties as to the work BSA was required to do and the payment to which it is entitled. Special procedures were adopted to handle claims for payment in respect of specific aspects of the work. Generally, however, the procedure adopted by the parties were consistent with the contractual provisions. On occasions work orders were issued after the work in question had been performed. That did not alter the position that a separate agreement came into effect each time Ventia issued a work order.
Ventia submitted that the evidence established a clear and consistent practice on Ventia's part of issuing work orders in respect of all work carried out by BSA. Pursuant to that practice, a work order would be issued for a given building in a particular month even though physical work to that building was not required or performed that month. That does not mean that 'work orders were issued without work being done' so as to demonstrate that the parties did not intend to create separate contracts. It was unsurprising that the parties chose as they did to amortise the payments by dividing the putative annual fee into monthly instalments. By reason of their nature (predominantly fire-related servicing at intervals set by regulation), the works were relatively stable from month to month.
Ventia submitted that it also altered the quantity of work that BSA was required to do, from time to time. These alterations were significant as the specific work for which BSA was entitled to payment was not specified in the Subcontract. When coupled with the express provision in the Subcontract to the effect that a particular volume of work was not guaranteed to BSA, they reflect the fact that the Subcontract created a standing arrangement only. It was the work orders that gave rise to individual contracts. Even if the work orders also served an 'administrative' purpose, that did not mean the documents lacked contractual force. Where a work order was issued but BSA failed to perform the work, Ventia did protest. Payment was never claimed for work that was not performed under a work order.
BSA submitted that the payment claim was in respect of a single contract, being the Subcontract Agreement. As regards Category B Works, work orders were essentially billing or accounting documents, which were issued so that Ventia's SAP accounting platform could allow payment to be made. BSA was obliged to carry out the Category B Works whether or not work orders were issued, and that was the way that both parties administered the Subcontract. BSA was obliged to carry out routine maintenance works because it was obliged to carry out the "Services" in accordance with the "Services Specification" (clause 2.1(a)), which included various specification documents (see definition of "Services Specification" and Annexure 9). Those specification documents, in turn, provided for regular (for example, six monthly or annual) maintenance of assets. The "Services" include the "services set out in Annexure 8", which included the services set out in the relevant "Tender Schedules". The Tender Schedules was the list of sites which accompanied the Subcontract. Further, where past consideration is no consideration (Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [96]), any work which BSA undertook to perform pursuant to the Work Orders was work which it was already obliged to undertake under the Subcontract. Work orders did not call for BSA to do anything which it was not already required to do. They did not, and could not, give rise to new contracts.
I do not agree. Clause 2.1(a) obliged BSA to "complete the Services in accordance with the Services Specification". What were the Services? The Services were set out in Annexure 8 (which did not set out anything), "or in any Work Order" or as otherwise agreed: Annexure 1. For relevant purposes, the Work Order identified the Services. The Services Specification set out how the Services were to be performed, rather than what Services were to be performed. The continuing importance of Work Orders is apparent from the reference, in Annexure 9, not only to Services Specifications but "Work Order Procedure". The 'past consideration' argument likewise fails, being dependent upon acceptance of BSA's construction of the contract.
BSA further submitted that whether the issue of a work order created a separate contract turned on whether, having regard to the mutual relations of BSA and Ventia, there was an intention to create new legal relations upon the issue of each work order, which was to be determined in all the circumstances or having regard to "the whole relationship": GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50 at [227]-[229] (Finn J). However, there is no need to resort to these principles where the parties have removed all doubt by the express terms of the Subcontract Agreement. The Court need not have to regard to the parties' conduct, communications, or post-contractual conduct to divine the parties' intentions as to the effect of a Work Order. Annexure 4 specifically provides that Ventia will initiate the Service by issuing a Work Order. Clause (b) of Annexure 4 provides that a separate agreement will come into existence each time Ventia issues a Work Order.
BSA was only entitled to perform and claim payment for "Services" in response to a "Work Order" issued by Ventia, where the "Services" included Category A Works and Category B Works. The Subcontract provided that a separate agreement came into existence each time Ventia issued a Work Order. It was not in dispute that the total amount claimed in the payment claim was made up of amounts referrable to multiple work orders issued under the Subcontract. The Payment Claim therefore consisted of claims made under numerous construction contracts. As such, the payment claim was invalid and any decision by an adjudicator upholding it is void.

An arrangement?

In the alternative, BSA submitted that if each Work Order gave rise to a different contract, then that new contract remained part of one overarching "arrangement" within the meaning of that term as used in the definition of "Construction contract" in s 4(1) of the Act, being: construction contract means 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.
The arrangement was said to comprise the Subcontract and the work orders issued under it. As there was only one arrangement, the payment claim did not fall foul of the 'one contract' rule. Ventia submitted that the Act did not support a construction whereby the legally enforceable agreements created by the work orders were ignored in favour of enforcing payment pursuant to some wider, ill-defined 'arrangement'.
An "arrangement", as that term is used in the Act, is intended to capture dealings between parties which fail to achieve that level of precision which the law of contract would not ordinarily recognise. As Nicholas J described it in Okaroo Pty Ltd v Vos Construction and Joinery Pty Ltd [2005] NSWSC 45, the reference to an arrangement "is apt to describe something less than a binding contract or agreement": at [40]. As McDougall J observed in Levadetes Pty Ltd v Iberian Artisans Pty Ltd [2009] NSWSC 641 at [55]: Whether there was a contract, or whether it falls short of a contract and is nothing but an arrangement, it seems to me that the analysis required is of the objective intention of the parties - by which I mean, the intention of the parties objectively ascertained from matters known to them or common between them at the time the contract or the arrangement was made. …
Here, it is easy to identify the objective intention of the parties as they entered into a comprehensive contractual regime. There is some debate in the authorities as to whether an "arrangement" need give rise to a legally binding obligation: Machkevitch v Andrew Building Constructions Pty Ltd [2012] NSWSC 546 at [26]-[28] per McDougall J cf Lendlease Engineering Pty Ltd v Timecon Pty Ltd [2019] NSWSC 685 at [67]-[87] (Ball J). It is not necessary to consider this question where one has a contractual regime in place. As Ball J observed in Lendlease Engineering v Timecon at [68]: It is plain that the SOP Act is not intended to affect the ultimate rights and liabilities of the parties to whom it applies. Rather, its purpose is to provide a mechanism by which contractors who do work in the construction industry, or provide related goods and services, and are entitled to be paid for that work are able to make progress claims and to have those claims paid promptly. The purpose of the SOP Act is not to create an obligation to pay where one does not otherwise exist. …
Here, the parties executed a Subcontract Agreement which gave rise, in due course, to further contracts; each Work Order, when issued, gave rise to a separate contract. That is, by and large, how the parties to the Subcontract Agreement conducted themselves in the years which followed. What the Court is being asked to do is overlook the contractual regime and identity an "arrangement". I am not minded to ignore the contractual regime to see whether, perchance, there was something answering the description of an "arrangement". In other words, "The obligations of written agreements between parties cannot simply be ignored or brushed aside:" Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [35].

Section 34

Section 34 provides: (1) The provisions of this Act have effect despite any provision to the contrary in any contract. (2) A provision of any agreement (whether in writing or not): (a) under which the operation of this Act is, or is purported to be, excluded, modified or restricted (or that has the effect of excluding, modifying or restricting the operation of this Act), or (b) that may reasonably be construed as an attempt to deter a person from taking action under this Act, is void.
BSA contended that clause 6.2(a) and clause (b) of Annexure 4 of the Subcontract Agreement were void in respect of Category B Works as prescribing requirements as to the form and content of statutory payment claims which differed from the Act. Absent clause (b) of Annexure 4, BSA would on have had an entitlement to serve a single payment claim in respect of the Category B Works: cf BRB Modular Pty Ltd v AWX Constructions Pty Ltd [2015] QSC 218 at [50] (Applegarth J). Clause (b) of Annexure 4 unjustifiably impeached the making of payment claims by preventing the service of a single payment claim covering all of the Category B Works: cf Castle Constructions Pty Ltd v Ghossayn Group Pty Ltd [2017] NSWSC 1317 at [51] (Stevenson J). There was no legitimate justification for such a course, which did not facilitate the statutory entitlement to progress payments: cf Castle Constructions at [51]. The manner in which the payment claims were to be submitted was wholly impracticable given the relatively low amount of each work order and the associated filing fees and adjudicator's fees in respect of each payment claim. The effect of Ventia's approach was said to frustrate the evident purpose of the statutory scheme.
BSA submitted that section 34 was a beneficial provision designed to ensure that contractual provisions did not deny, or have the effect of denying, to subcontractors the benefit of the Act. As a general proposition, "[i]f, absent a contractual provision, a contractor would have a statutory entitlement to make a claim for a progress payment under the Act, then the provision will have the effect of excluding, modifying, restricting or otherwise changing the effect of the Act": BRB Modular at [50]. A contractual provision which "unjustifiably impeaches the making of a payment claim or renders the statutory entitlement practically illusory" or "does not facilitate a statutory entitlement to a progress payment" is invalid: Castle Constructions at [51].
Ventia submitted that section 34 will not assist BSA. The Act's effect was not "excluded, modified or restricted" by giving effect to the parties' intention that each work order gives rise to a separate contract. The Act applied with full force to each of the contracts so created.
Whilst I do not demur from BSA's summary of the authorities, the problem here is that the Subcontract Agreement did not detract from BSA's ability to exercise its rights under the Act. The Subcontract Agreement said nothing on the subject and imposed no conditions on BSA's rights, such as a requirement to submit a draft progress claim before serving it (Lean Field Developments Pty Ltd v E & I Global Solutions (Aust) Pty Ltd [2014] QSC 293); to provide a statutory declaration two days before serving a progress claim, confirming that all sub-contractors and suppliers had been paid (BRB Modular), or to require a supporting statement by an engineer or surveyor confirming that the work had been done (Castle Constructions). BSA was entitled, without restriction, to serve a payment claim under the construction contracts in question. I do not consider that the provisions of the Subcontract can be voided by reason of the fees charged by adjudicators or lawyers or some imperative to make adjudication applications as affordable as possible.

ORDERS

For these reasons, I make the following orders: 1. DECLARE that Adjudication Determination 2021-TASC-016 made by the Second Defendant on 31 March 2021 is void in its entirety. 2. ORDER that the Adjudication Determination be quashed. 3. ORDER that the money paid into Court by the plaintiff and any interest be paid out to it or, on direction, to its solicitors. 4. Order that the first defendant pay the plaintiff's costs of the proceedings.

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: 30 November 2021

Building and Construction Industry Security of Payment Amendment Act 2018(NSW)

(2020) 104 NSWLR 232

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