Falsely sworn statutory declarations, misplaced letters by Australia Post… in 2017, we saw a range of strange and interesting cases before the courts under each jurisdiction’s Building and Construction Security of Payment Act (referred to throughout this e-brief as ‘SOP Act’).
Below is a snapshot of the key cases.
We recommend anyone issuing or receiving payment claims in the construction industry familiarise themselves with these key cases from 2017. Feel free to call the Building and Construction Dispute Resolution team for further information or advice on any of these cases, or any issues you are experiencing in relation to payment.
- The NSW SOP Act excludes the jurisdiction of the NSW Supreme Court to make an order for judicial review in relation to a non-jurisdictional error of law. The High Court declared that the intention of the Act was that judicial review would not be available because the Act creates an ‘interim entitlement’ only: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd  HCA 4. We note that this decision is of limited relevance in the ACT, as the ACT SOP Act expressly permits review of an adjudicator’s decision for error of law.
- In Maxcon Constructions Pty Ltd v Vadasz  HCA 5, the High Court declared that clauses in a subcontract which provide that retention is to be released on the issue of a certificate of occupancy constitute a ‘pay when paid’ provision and is therefore void. The High Court also held that adjudication determinations made under the South Australian SOP Act are not subject to review for non-jurisdictional errors of law on the face of the record.
- Payment claims that include variations will not succeed in summary judgment, if agreement between the parties in relation to those variations cannot be established. The court in SMLXL Projects Pty Limited v RIIS Retail A/S  NSWDC 131 said that there was no concluded state of affairs between the parties regarding the variation and there was no bilateral agreement between the parties in relation to the variation.
- Contractors cannot issue repeat payment claims for the same work, unless new work has been undertaken since the last reference date: St Hilliers Property Pty Ltd v ACT Projects Pty Ltd  ACTSC 177. This case also found that an adjudicator’s appointment is personal, and an adjudicator should not delegate a large portion of their work to a colleague; otherwise the determination may be void.
- A payment schedule which rejects some costs and variations, and is silent as to other components of the payment claim will not be a valid payment schedule. In Fabtech Aust P/L v Exact Contracting P/L  SADC 44, Exact rejected some variations, and did not set out its position in respect to claims made for other variation claims. The court held that the email sent by Exact did not purport, on its face, to operate as a payment schedule.
- A company officer who swears a statutory declaration in support of a payment claim made under the SOP Act can be personally liable under the Australian Consumer Law if the statutory declaration was made without reasonable enquiries or to the best of the person’s knowledge. In 470 St Kilda Road Pty Ltd v Robinson  FCA 597, the court held that no reasonable enquiries were made pursuant to the statutory declaration, and that the statements made were ‘materially untrue’.
- A payment claim will not be validly served in NSW if the head contractor’s supporting statement (verifying it has paid all subcontractors) is not compliant with all of the requirements of the NSW SOP Act: Mt Lewis Estate Pty Ltd v Metricon Homes Pty Ltd  NSWSC 1121.
- A payment claim that is not served in accordance with the contract, but served validly under the Corporations Act is valid service. In the case of Ottaway Engineering v Aalborg CSP (26 May 2017), the court held that the payment claim was served validly as it was served in accordance with the Corporations Act (i.e. on the corporation’s registered office). The court said that there had been a history of serving court-related and other documents at the registered office with no complaint from the respondent.
- An adjudicator’s acceptance of his appointment is validly served even if deposited into the respondent’s letterbox by a neighbour into whose letterbox Australia Post had wrongly deposited the acceptance: In Castle Constructions Pty Ltd v Ghossayn Group Pty Ltd  NSWSC 1317, it was found that the respondent, Castle Constructions, did receive the adjudicator’s acceptance and that service of its subsequent adjudication response was out of time. The adjudicator was thus bound not to take it into account.
- Payment claims submitted early under a ‘deeming provision’ of a contract will not be valid payment claims under the SOP Act. In All Seasons Air Pty Ltd v Regal Consulting Services  NSWCA 289, the Court of Appeal affirmed the Supreme Court’s decision, which held that the deeming provision was solely to assist in the administration of the contract and had no bearing on the operation of the SOP Act. There was no reference date to support the claim lodged, in a SOP sense.
- For final progress claims under construction contracts which refer to the date for Practical Completion, that date is the date of issue of the superintendent’s certificate, not the date that the contractor notified the superintendent that it had reached Practical Completion. The case of Abergeldie Contractors Pty Limited v Fairfield City Council  NSWCA 113 has important ramifications for reference dates and the validity of final progress claims.
- If an adjudicator plays an active part in court proceedings they may be jointly and severally liable for all the costs along with the respondent: St Hilliers Property Pty Ltd (No 2) v ACT Projects Pty Ltd  ACTSC 263. In this case, the court said that the issues that the adjudicator was involved in went ‘far beyond any arguments on his functions’.
- An adjudicator must allow both parties the opportunity to address new issues raised in each other’s submissions. The decision of Minesco Pty Ltd v Anderson Sunvast Hong Kong Ltd  VSC 299 (2 June 2017), reinforces the principle that a breach of the rules of natural justice is adequate to set aside an adjudicator’s determination. The court held that the procedures adopted by the adjudicator were not such as to result in ‘justice being seen to be done’.
- Claimants have no obligation to notify respondents that it intends to enforce an adjudication determination. If a respondent wants to challenge an adjudicator’s decision, they should seek an injunction from the court or an undertaking from the claimant not to enforce the adjudicator’s decision. In Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd  NSWCA 53 (23 March 2017), the court held that a judgment can be enforced without serving it on the party affected. It said that the SOP Act does not put a respondent in any better position than any other unsuccessful respondent against whom a judgment debt has been obtained in civil proceedings.
- Respondents seeking to challenge adjudication determinations and enforcement of same should act quickly, or face the risk that a court may deny relief on the grounds of significant delay. In Samuel Homes Pty Ltd v Derek Raithby  NSWSC 205 (6 March 2017), the respondent commenced court proceedings 8 months after the adjudication determination seeking to challenge the adjudication determination. The court held that relief should be denied on the basis of significant delay, and that the SOP Act provides the machinery for the expeditious recovery of progress payments, and the expeditious resolution (if only on an interim basis) of disputes surrounding such claims.
- The failure of an adjudicator to give details reasons will not constitute a denial of natural justice (and therefore open to challenge), providing the adjudicator can show they ‘turned their mind’ to the particular issues. In Futurepower Developments Pty Ltd v TJ & RF Fordham Pty Ltd  NSWSC 232 (14 March 2017), the issue before the court was whether the adjudicator gave proper reasons for his conclusions, notwithstanding he ‘referred back’ to prior discussions contained in his adjudication determination. The court held that the reasons adequately addressed the issues.
- Summary judgment under the SOP Act is not available if there is a disputed issue of fact that can only be resolved at a full hearing. In Fu Xing Pty Ltd v Sidway Constructions Pty Ltd  NSWDC 17 (16 February 2017), the court held that the principal difficulty is that where the date of termination of a construction contract is a disputed issue of fact and the payment claim relied upon is served after that date, this must be resolved at a full hearing.
- A company in liquidation should be careful before progressing claims under the SOP Act and taking it to summary judgement. Liquidators can be ordered to pay costs on an indemnity basis if the summary judgement fails. In Tantallon Constructions Pty Ltd (in liq) v Santos GLNG & Anor  QDC 324, the court considered that the conduct of the liquidators in refusing to agree to the ‘entirely reasonable offer’ of the defendants to be unreasonable. The court ordered that the liquidators pay the costs of the unsuccessful application for summary judgment on an indemnity basis.
- The SOP Act can apply to a wide range of investors established for the purpose of making profit, and does not depend on the scale of the business, the success of the business, or the number of projects undertaken. In Promax Building Developments Pty Ltd v PCarol & Co Pty Ltd  VCC 495, the court held that the purpose of PCarol was to make investments in the property market and its sole activity was the purchase and subsequent development of two properties. The court said it does not matter that the projects were otherwise unsuccessful.
- A material denial of justice only occurs where the adjudicator resolves a dispute on a basis not raised by the parties, or on a basis not ‘hinted at’ in the documents put before them: Quasar (Constructions) Commercial Pty Limited v Trilla Group Pty Limited  NSWSC 860
- An invoice issued under a factoring agreement constitutes a valid payment claim under the SOP Act: Quickway Constructions Pty Ltd v Electrical Energy Pty Ltd  NSWSC 1140. The Court found that ‘I think that it would be a surprising gap in the legislative scheme if the existence of such a factoring arrangement was to prevent statutory rights under the BCISPA from arising, or from being enforceable’.
- The decision of Arconic Australia Rolled Products Pty Limited v McMahon Services Australia Pty Ltd  NSWSC 1114 clarifies if and when the SOP Act may permit the determination of a re-agitated payment claim. The court found that the facts before it showed a lot more than mere repetition of a claim earlier made (and decided on) by an adjudicator.
- Properly exercising a show cause notice procedure and thereafter taking works out of the hands of the contractor (without terminating the contract) including suspending payment, pursuant to the terms of the contract, does not constitute ‘contracting out’ in breach of the SOP Act: Westbourne Grammar School v Gemcan Constructions Pty Ltd  VSC 645
- Where a claimant withdraws some payment claims, any payment certificate upon which a statutory demand is based ceases to operate or have force or effect: 289 Grange Road Developments Pty Ltd & Anor v Dalle Projects Pty Ltd  VSC 409 (17 July 2017).
For more information contact the Construction Dispute Resolution Team: