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Caution against serving security of payment documents via USB or cloud facilities

posted 19th June 2017
You may want to think twice before serving documents under security of payment legislation via USB sticks, or cloud storage facilities such as Dropbox. In the recent case of Parkview Constructions Pty Limited v Total Lifestyle Windows Pty Ltd[1], an adjudication application saved onto a USB stick and enclosed under a covering letter was found not to comply with the service requirements under the Building and Construction Industry Security of Payment Act 1999 (NSW) (‘SOP Act’). The result was that the adjudication application was quashed. This decision has dangerous implications for all documents served under the SOP Act, not just adjudication applications.

Background
Parkview engaged Total to design, supply and install glazed windows and doors at the Woolooware Bay Town Centre. Total served on Parkview a payment claim for $668,177.24 incl. GST. Parkview responded with a payment schedule identifying as 'Nil' the amount of the payment it proposed to make. Total prepared an extensive adjudication application, consisting of many different documents and attachments.

In delivering the adjudication application to the adjudicator, Total uploaded the application to Hightail (an internet based data storage provider, similar to Dropbox) providing the adjudicator with a link to the files uploaded. There was some confusion as to the versions of the submissions that were uploaded, and different versions were uploaded at another point that same day.

In serving the adjudication application on Parkview, a copy of the adjudication application was pasted onto a USB thumb drive, and the USB was placed into an envelope together with a covering letter addressed to Parkview. This was posted to Parkview.

Should the adjudication application be quashed?
The NSW Supreme Court had to consider whether the adjudicator had jurisdiction to determine the application. Parkview argued that:

  • the adjudication application made (i.e. the one which was delivered to the adjudicator by uploading to Hightail) was different to the application submitted to Parkview (in that, it included both original and revised submissions);
  • it was not validly served with a copy of the adjudication application in time (this is because the two applications - the first uploaded to Hightail, and the other sent via USB stick – were different).

The Court was asked to consider whether the adjudicator made a jurisdictional error by failing to have regard to Parkview’s adjudication response which it argued was served in time, and whether Parkview was denied procedural fairness by not being informed both that that the submissions given to the adjudicator were the original and not the revised ones (which impacted on its adjudication response).

When is valid service affected?
The court examined the differences between the submissions provided to the adjudicator and those provided to Parkview, concluding they were not trivial.

The court considered that service of the USB stick on Parkview should not be equated with service of the writing stored on it. The court declared that:

  • a document will be served if the efforts of the person who is required to serve it have resulted in the person to be served becoming aware of the contents of the document;[2]
  • in the case of an email, or where documents are uploaded to a site such as Hightail or Dropbox, it cannot be said that service has taken place until the documents have been accessed;[3]
  • delivery of a USB stick will not suffice - in order to access what is stored on the USB (or Hightail, Dropbox etc) the recipient must take the step of accessing, opening and viewing the files stored on it.

The court concluded that delivery alone of a USB stick is not service of a copy in writing for the purposes of the SOP Act, and the adjudication determination was quashed. The court’s reasoning extends to service of any other document under the SOP Act, including payment claims and payment schedules.

What are the implications of invalid service?
Valid service under the SOP Act is imperative. Non-compliance will have the consequence that an essential precondition to an adjudicator’s jurisdiction is not met, and the standing of the adjudication determination will be open to challenge.

If a payment claim is not served validly, claimants are prevented from relying on it (eg for the purposes of adjudication, or enforcing as a judgement debt). Similarly, invalid service of a payment schedule may bar respondents to payment claims from submitting a response to an adjudication application.

What should you do?
All contractors and principals should review their internal procedures for serving of documents under the SOP Act, including payment claims, payment schedules and adjudication applications. Do not rely on USB or cloud storage facilities alone as valid service.

If you are relying on facilities such as Redhub or Aconex to serve payment claims, then unless you can be sure that the document has been accessed by the recipient you should not assume it has been validly served.

Until such time the SOP Act expressly recognises electronic service facilities, more traditional means of service (post or courier of printed documents) remain the safest approach to ensuring the strict requirements of the SOP Act are met.

For more information contact the Building and Construction Dispute Resolution Team:
Alisa Taylor Partner Construction Dispute Resolution
(02) 6279 4388 Alisa.Taylor@MVLawyers.com.au

Lauren Gray Senior Lawyer Construction Dispute Resolution
(02) 6279 4332 Lauren.Gray@MVLawyers.com.au


[1] [2017] NSWSC 194
[2] Capper v Thorpe (1998) 194 CLR 342 at 352
[3] Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2015] 1Qd R 265 at 271 [32]-[34].

 



This material has been prepared for the general information of clients of Meyer Vandenberg Lawyers. Its is not intended to take the place of professional advice and readers should not take action on specific issues in reliance upon any matter of information contained in it.

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