Part 6 – Miscellaneous

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[99.1]  RAISING ARGUMENT

In Minister for Commerce v Contrax Plumbing & Ors [2004] NSWSC 823, McDougall J was of the view that the section makes it clear, that the contractual regime cannot diminish rights given by the Act. The relevant contractual provisions in the contract in question did exclude, modify or restrict the operation of the Act. They did so because, if relied upon, they defer the entitlement given by [s12 Qld] of the Act to be paid from a reference date for construction work carried out prior to that reference date.

If s99 is to be relied upon, it must be raised at the stage of making a claim for payment. The primary judge had erred in holding that Contrax was entitled to rely on s99, when the matter had not been raised in its payment claim in The Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd & Ors at [33]. However if s34 was first mentioned in the adjudication claim and not the payment claim it is still possible to be considered under 26(c): The Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd & Ors at [36].

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[99.2] EFFECT ON ADJUDICATOR’S DECISION

If s99 does not invalidate the relevant parts of a clause in a contract between parties, the adjudicator’s determination will not be invalid according to Hodgsen JA in Contrax at [50]. However, note the opposing view expressed in the case by Bryson JA who felt that the avoidance provisions should be applied according to their terms and no more widely at [58] of the judgment.

In Siemens Ltd v Origin Energy Uranquinty Power Pty [2011] NSWSC 195 the plaintiff sought to recover amounts the subject of two payment claims made under the Building and Construction Industry Security of Payments Act 1999 (NSW) on the basis that the defendant failed to submit payment schedules in accordance with section 14(4) of the Act (the New South Wales equivalent to s 18(4)), therefore entitling it to recover the amounts as debts due to it under section 15(2)(a)(i) of the Act (the New South Wales equivalent to s 19(2)(a)(i)). The defendant applied for a stay of the proceedings, arguing, amongst other things, that the parties had agreed to submit the dispute to arbitration under clause 36 of the contract.  It was held by Ball J that while the parties may have agreed under the contract to submit certain disputes to arbitration, a claim under section 15(2)(a)(i) was not arbitrable, for the reason that section 15(2)(a)(i) specifically and only referred to ‘a court of competent jurisdiction’ as the only suitable forum to hear a dispute under section 15(2)(a)(i).  It makes no reference to arbitration. As such, any provision of an arbitration agreement that prevents a right under section 15(2)(a)(i) to bring proceedings in a court of competent jurisdiction is, to that extent, void under section 34 (the New South Wales equivalent to s 99).

 

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[99.3] EXAMPLE OF VOID CLAUSE

An example of a clause which was held to be void because it purported to annul, exclude, modify, restrict or otherwise change the effect of a provision in the Act can be found in the decision of Brewarrina Shire Council v Beckhaus Civil Pty Ltd & Anor [2005] NSWCA 248.  In this case, the court of appeal held that a clause which provided that a payment was conditional on the provision of a bank guarantee was an attempt to defeat the purpose of the Act and as such, was void to this extent.

In Roseville Bridge Marina Pty Ltd v Bellingham Marine Australia Pty Ltd [2009] NSWSC 320 the New South Wales Supreme Court examined section 34 of the New South Wales Act which prohibits any contractual clauses which exclude, modify or restrict the operation of the act. The court determined that the Act does not create a right to remuneration for construction work – that right is created by the construction contract. Thus, a contractual agreement between the parties limiting the whole of the remuneration to which the builder was entitled for work done to date, was not voided by section 34 as it did not limit the right to progress payments under the Act.

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[100.1] Contractual rights preserved

Section 100 preserves any contractual rights the parties may have and still allows for the application of normal civil law remedies in the event of a dispute.  It may be that an adjudicator’s determination will be final for the purposes of payment of a progress claim under the Act, but not in respect of the final determination of the contractual claim. The specific provisions for adjustment in s 100(3)(a) and (b) allow correction of the amounts ordered to be paid by an adjudicator. Such amounts may or may not have involved a consideration of claims for defective work: per Macready M in Max Cooper & Sons (Builders) Pty Ltd v M & E Booth Pty Ltd (supra).

Section 100 makes it clear that an adjudicators decision is not exempt from normal civil law remedies and so is not a conclusive answer to an application to set aside a statutory demand. Even absent a savings provision such as s 100 there would be a real question as to whether a state law could  remove a remedy provided by a law of the Commonwealth (the Constitution, s109): Oxbara Pty Ltd & Stellaverre Pty Ltd v Geotech Pty Ltd [2002] ACTSC 116.

Certainly, the adjudication is not final, in the sense that, if it later be found that the adjudicated amount was excessive, restitution may be ordered and, in any event, the adjudicated amount must be taken into account in any proceedings that finally determine the balance due between the parties to the adjudication: Musico and Ors v Davenport and Ors (supra).

The rights of the plaintiff under s 100 are not affected in terms of civil proceedings later taken to establish the rights of parties under the construction contract. In particular restitution may be ordered.  It is at that stage and in those proceedings that no doubt submissions will be taken from both parties and every parameter of the subject rights will be extremely carefully traversed. The Court will not be tramelled by the stringent time constraints to which adjudicators are subjected by the Act. In truth all that will have occurred will be that the interim regime for payment of progress claims pending final resolution of disputes under construction contracts will have operated according to the terms provided for in the Act: Brodyn Pty Limited T/as Time Cost and Quality v Philip Davenport and ors [2002] NSWSC 1019 @ para 22.

The Act makes it clear that virtually nothing in the Act affects any right that a party to a construction contract may have under the contract or may have, apart from the Act, in respect of anything done or omitted to be done under the contract, nor does the Act affect any civil proceedings arising under the contract. In such proceedings, a court or tribunal must allow for any amount paid to a party to the contract under the Act and make such orders as it considers appropriate for restitution if that be required: Brodyn Pty Ltd v Dasein Constructions Pty Ltd [2004] NSWSC 1230.

The Act specifically preserves the rights of parties under the Contract and in relation to any civil proceedings arising under a Construction Contract.  Accordingly, the Court has held that a claimant who obtained an adjudication decision, entered judgment in accordance with the Adjudication Certificate and sought to enforce it, was not entitled to a stay of arbitration proceedings which had been commenced following service of a Notice of Dispute by the respondent under the Contract.  The Court held that the arbitration was in no way delaying or frustrating the rights of the claimant to pursue the conventional enforcement processes in relation to the judgment and as such, could not be said to be circumventing the Act:  Grant Constructions Pty Ltd v. Claron Constructions Pty Ltd [2006] NSWSC 369.

In John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 140, the NSW Court of Appeal affirmed the Supreme Court’s earlier decision which confirmed the interim nature of an adjudication certificate and as such, upheld the validity of a certificate from the superintendent under the Contract, which effectively reversed part of the adjudication decision.

In so concluding the Court of Appeal noted that it was true that the contractual mechanisms under the Contract may result in a successful claimant at adjudication having to repay part of the adjudicated amounts.  The Court of appeal stated that this was in no way inconsistent with the Act.

Similarly, in John Holland Pty Limited v Roads & Traffic Authority Of NSW [2006] NSWSC 874, McDougall J held:

(a)              The operation of section 34 of the Act is not excluded, modified or restricted by a clause which entitles a Principal to retain security that effectively offsets an adjudicated amount.

1. s32 of the does not create a restitutionary right.  It is intended to give full effect to parties’ legal rights notwithstanding the determinations of an adjudicator.
2. The act recognises that adjudicators may err and that an adjudicator’s determinations are not “finally conclusive of rights and liabilities under the contract”.
3. The interim determination of rights under the Act is distinct from the final determination of rights under the contract.  Therefore, the superintendent is not bound to accept every valuation of work by an adjudicator.
4. The final decision of a superintendent can undo prior determinations of an adjudicator.  There is no commercial utility in preventing the superintendent making a final determination in the same way a court or other tribunal might.

There is a conflict of legislative provisions between the scheme set out in the Act and the scheme set out in s553C of the Corporations Act. However, the two methods of approaching the problem each give the same result, and that is that the scheme set out in s553C of the Corporations Act prevails: Brodyn Pty Ltd v Dasein Constructions Pty Ltd [2004] NSWSC 1230.

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[100.1.1] EFFECT OF PART 3 ON CIVIL PROCEEDINGS

s100(3)(b) makes a judgement entered under s103 on an adjudication certificate provisional only, both in what it grants and in what it refuses.  A builder can pursue a claim in the courts although it was rejected by the adjudicator and the proprietor may challenge the builder’s right to the amount awarded by the adjudicator and obtain restitution of any amount it has overpaid.  Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49 at [21].

Common law does not permit inconsistent judgements but this may be sanctioned by statute. Compare Toubia Schwenke (2002) 54 NSWLR 46 at 50.  The court is to allow for any interim payments and order appropriate restitution and there is nothing in the Act which prevents the proceedings being concurrent: Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49 at [30].

It is clear that the Act confers statutory rights on a builder to receive an interim or progress payment and enables that right to be determined informally, summarily and quickly, and then summarily enforced without prejudice to the common law rights of both parties which can be determined in the normal manner: Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49 at [22].

The issue in Australian Remediation Services Pty Ltd v Earth Tech Engineering Pty Ltd & Anor [2005] NSWSC 362 was whether an adjudicator was able to determine whether payment claims in the adjudication application could be awarded. Interlocutory relief was refused.  It is clear from the provisions of s100 of the Act that the time for final adjustment of rights and remedies is later.

In Paul Michael Pty Ltd (subject to deed of company arrangement) v Urban Traders Pty Limited [2010] NSWSC 1246 the Supreme Court of New South Wales the plaintiff had obtained judgments pursuant to adjudications, however, subsequently became subject to a deed of company arrangement. The defendant then applied for a stay of execution of the judgments arguing that if the judgments were not stayed, and if it was ultimately determined that the defendants were not in fact indebted to the plaintiff, they would (as against an insolvent plaintiff) suffer real prejudice. The Supreme Court effectively agreed with this argument but nonetheless declined to grant the stay as the contractor had given an undertaking to declare a trust over the money, which would safeguard it pending final determination of the party’s rights.

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[100.2] OPERATION OF THE SECTION

This section effectively preserves the right of a party to a construction contract covered by the Act: Formwork Pty Ltd v Yarraman Construction Group Pty Ltd (County Court of Victoria, 2 August 2004).

In Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49 Handley JA noted that s100(2) provides that Part 3 of the Act does not affect the rights of any party under a construction contract.  Subsection 2 is particularly important because it relevantly provides that nothing done under, or for the purpose of Part 3 affects any civil proceedings arising under a construction contract.

The power under s100(3)(b) to make such other orders as it considers appropriate would probably allow the court to set aside or vary any judgement entered under s31: Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49 at [21-22].

The Act contemplates that proceedings in a court of competent jurisdiction will be completed after the statutory proceedings have been completed.  This is because s100(s32) provides that the court is to allow for any interim payments and order appropriate restitution. [30].

The power of a Court comes in, either to enforce the determination or, in the limited circumstances prescribed in Brodyn, to prevent enforcement of the determination. The whole scheme of the Act including, as Palmer J noted in Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140, is one of “pay now, argue later”.  It is clear from the provisions of s100 that the Act provides that the time for making final adjustments of rights and remedies is later: Australian Remediation Services Pty Ltd v Earth Tech Engineering Pty Ltd & Anor [2005] NSWSC 362.

The New South Wales Supreme Court maintained in Rubana Holdings Pty Limited v 3D Commercial Interiors Pty Ltd [2008] NSWSC that it is open to a claimant to pursue concurrently its rights under the statute via adjudication and through proceedings in the District Court. In upholding the findings in Falgat Construction Pty Ltd v Equity Australia Corp Pty Ltd [2005] NSWCA 29, the court held that it was not an abuse of process for 3D to enforce its rights through a defence of set-off and a cross-claim in the District Court, whilst proceeding to adjudication at the same time.

The only potential exception is where the statutory proceedings are commenced shortly before trial with the result that they would interfere with the orderly preparation and presentation of parties’ case in court. As there had been no hearing date obtained in the District Court, no such limitation applied and as such that there was no abuse of process.

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[100.3] EFFECT OF SUPERINTENDENT’S CERTIFICATE

The Queensland Supreme Court in Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd [2009] QSC 328 dismissed an application by Martinek Holdings to restrain Reed Construction from obtaining judgment based on an adjudication determination. The applicant argued that a final payment certificate issued by the superintendent under the contract superseded the adjudication determination in favour of the respondent, so as to permanently stay the enforcement of the determination. The contract provided that ‘the final certificate shall be conclusive evidence of accord and satisfaction, and in discharge of each party’s obligations in connection with the subject matter of the contract…’. The applicant contended that the superintendent’s certificate made under this contractual clause determined on a final basis the amounts owed under the contract thus, superseding the interim adjudication determination.

The court rejected the finality of the superintendent’s certificate as under the terms of the contract, the final certificate could not be conclusive evidence of the amounts owed, as a notice of dispute had been served by the contractor in response to the certificate.  This decision was affirmed by the Court of Appeal and Martinek’s application for special leave to appeal to the High Court was also dismissed.

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[103.1] DOES “MAY” MEAN “MUST”?

Under the NSW Act it appears clear that in essence, service must be personal or by being lodged during normal office hours at or sent by post or facsimile addressed to the ordinary place of business of the person to be served. There is no dispensation for service upon a solicitor.  The whole of the rationale underpinning the procedures laid down by the Act is directed at providing a quick and efficient set of procedures permitting recovery of progress payments and the quick resolution of disputes in that regard. Time limits under the Act are strict. The consequences of not complying with the stipulated time limits can be significant. There is likely a strong case in support of the proposition that the use in the Act of the word “may” should be read as “must”. The significance of certainty in terms of the precise point in time when a notice under the Act is served upon a particular person is obvious from the general scheme of what this legislation permits in terms of its mechanics: Emag Constructions Pty Ltd v Highrise Concrete Contractors (Aust) Pty Ltd [2003] NSWSC 903.

It was contended in Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd & Ors [2005] NSWSC 439 that the meaning of “notice” was to be given limited meaning, however Einstein J felt that “such a limited role for the provision is inconsistent with its apparently intended general role in the Act. Taylor’s submission dilutes the statutory procedure set out in the Act to ensure a person undertaking construction work receive their progress payments.

Taylor also asserted that the meaning of “service” under the provision of s31(1) incorporated “receipt” as an essential element, but this is not expressly stated anywhere in the Act. Further, if the legislature had intended that service under s31(1) was to require “receipt” and to be “noticed” it would have said so.

In Tsoukatos v Mustafa [2007] NSWSC 614, the New south Wales Supreme Court dismissed a challenge to an adjudication decision on the basis that the Respondent had not been served with the payment claim and/or received notice of the adjudication.

The Respondent sought to challenge the validity of the adjudication decision on the basis that the Claimant had not complied with the pre-requisites for a valid adjudication.  The Supreme Court in dismissing the application noted that the onus of demonstrating that he had not received the documents was on the Applicant and that, on the evidence before the Court, it was not satisfied that he had displaced the onus.

Of particular relevance was the evidence of the Respondent which indicated that the Claimant had previously, in a different matter, wrongly disputed receiving documents as evidence indicated that he had signed for the collection of such documents.

In relation to the issue of when service occurs, the New South Wales Supreme Court, in JAR Developments Pty Ltd v Castlepex Developments Pty Ltd [2007] NSWSC 737, held that the need for certainty of timing requires that the first date of valid service of a document is the date from which the time commences to run.

Accordingly, in circumstances where a document is validly served by way of facsimile transmission on one day and by post on the next, the time commences to run from the date of service by way of facsimile transmission.

Further, the Queensland Supreme Court in Peekhrst Pty Ltd v Glenzeil Pty Ltd [2007] QSC 159 has again confirmed that service upon the principal place of business constitutes valid service on the day that it is delivered to the principal place of business, even in circumstances where the document did not come to the relevant persons attention until some later date.

The New South Wales Supreme Court in The Owners Strata Plan 56587 v Consolidated Quality Projects [2009] NSWSC 1476 concluded that service of a payment claim by the contractor to the superintendent was valid service under the Act despite the payment claim not being served on the owners corporation which was the party responsible for payment of the claim. The court noted that the superintendent was not an agent of the principal under the construction contract and that there was no provisions in the contract for service of payment claims under the security of payment legislation to be made to the superintendent. Despite this, the court held that service on the superintendent was valid as the same service was effected on the superintendent in 25 previous payment claims without dispute.

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[107.1] JUDICIAL REVIEW

Section [107] of the Act is not a privative clause. It does not seek to exclude judicial review. It is not of the nature of such provisions as were considered in R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 and does not fall within the principles discussed in Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168. Indeed, the current provision in NSW is less restrictive than it was in the original NSW legislation which provided that no action lay against an adjudicator or any other person with respect to anything done or omitted to be done by the adjudicator in good faith in the exercise of the adjudicator’s functions under the Act: See Abacus Funds Management Ltd v Davenport & Ors [2003] NSWSC 935.

There is nothing in s107 to indicate that the legislature intended to exclude judicial review. On the contrary, the reference in subs (1) to personal liability of an adjudicator is an indication that the legislature was seeking to protect adjudicators from civil liability for (by way of example) erroneous adjudications. It is not an apt use of language to describe an application for relief in the nature of certiorari or prohibition as one that seeks to enforce a personal liability against the person or body to whom the application is directed: Musico and Ors v Davenport and Ors [2003] NSWSC 977.

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