Amflo Constructions Pty Limited v Anthony Jefferies [2003] NSWSC 856

New South Wales Supreme Court

CITATION : Amflo Constructions Pty Limited v Anthony Jefferies [2003] NSWSC 856 HEARING DATE(S) : 11 September 2003 JUDGMENT DATE : 17 September 2003 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Application for adjudication made within time

CATCHWORDS : STATUTES - ACTS OF PARLIAMENT - interpretation - Building and Construction Industry Security of Payment Act 1999 - time within which application for adjudication must be made - CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - remuneration - Building and Construction Industry Security of Payment Act 1999 - time within which application for adjudication must be made Building and Construction Industry Security of Payment Act 1999 LEGISLATION CITED : Building and Construction Industry Security of Payment Amendment Act 2002 Interpretation Act 1987 Statute Law (Miscellaneous Provisions) Act 2003 Amflo Constructions Pty Limited - First Plaintiff PARTIES : George Khouri - Second Plaintiff Anthony Jefferies - First Defendant Westport Plumbing Pty Limited - Second Defendant FILE NUMBER(S) : SC 4774/03 M Sahade - Plaintiffs COUNSEL : No appearance - First Defendant DD Feller - Second Defendant M Sahade, counsel - Plaintiffs SOLICITORS : A Jefferies - First Defendant Mallesons - Second Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

17 September 2003

4774/03 AMFLO CONSTRUCTIONS PTY LIMITED & ANOR v ANTHONY JEFFERIES & ANOR JUDGMENT HIS HONOUR: Nature of the Case 1 This case concerns whether a purported adjudication under the Building and Construction Industry Security of Payment Act 1999 ("SOP Act") is valid. It turns on whether the application for adjudication was made within the time required by that Act. Facts Giving Rise to the Dispute 2 The First Plaintiff ("the Builder") is carrying out construction work at 3 Railway Parade Burwood. On 9 April 2003 it entered into a construction contract as defined in the SOP Act with the Second Defendant ("the Subcontractor"). 3 On 10 July 2003 the Subcontractor served the Builder with a progress claim for $21,960.42. It is common ground that this was a valid progress claim within the meaning of the SOP Act. For the whole of the rest of July, the Builder did nothing in response to that progress claim. 4 On 31 July 2003 the Subcontractor served on the Builder a notice under section 17(2) of the SOP Act, it said: " Notice under s.17(2) of the Building and Construction Industry Security of Payment Act 1999 NSW In response to Westport Plumbing Pty Ltd's "WPPL" Payment Claim (Tax Invoice/Progress Claim No.1) dated the 10th July 2003 for $21,960.42 including gst, Amflo Constructions Pty Ltd "ACPL" has failed to provide a Payment Schedule within the time allowed by the Building and Construction Industry Security of Payment Act 1999 NSW. As a consequence "ACPL" became liable to pay the whole amount of the claim on the due date. The whole amount has not been paid. Notwithstanding the above, "WPPL" has elected to apply for Adjudication of the Payment Claim. Further to this, "ACPL" has 5 business days in which to serve a Payment Schedule or pay the amount in full whereby if, within that time "ACPL" fails to pay the whole amount, "WPPL" will reserve its rights to proceed to Adjudication. If "ACPL" also fails to serve a Payment Schedule, "ACPL" will be barred from lodging an Adjudication Response pursuant to s.20(2A) of the "Act." ." 5 The Builder served a Payment Schedule on 4 August 2003, which said that the Builder proposed to pay $1,683.67 of the claimed progress claim, and gave reasons. 6 On 20 August 2003 the Subcontractor made an adjudication application. This resulted in the appointment of the First Defendant as adjudicator. 7 On 1 September 2003 the First Defendant issued his determination, which was that the Subcontractor was entitled to the whole of the progress payment which it claimed, and the Builder was liable to pay 100% of the fees associated with the adjudication process. 8 The Builder asserts that the adjudication application made by the Subcontractor on 20 August 2003 is invalid, because it was made too late. It submits that in consequence the First Defendant had no jurisdiction to determine that purported application. 9 On 9 September 2003 the Builder commenced proceedings seeking declarations that these contentions were correct, and an order in the nature of certiorari correcting the purported determination of 1 September 2003 and setting aside the award to the Subcontractor. The matter came on for argument before me in the Duty Judge List on 11 September 2003. 10 The First Defendant has filed an appearance in which he submitted to the orders of the Court save as to costs. He did not take part in the oral argument. Relevant Provisions of the SOP Act 11 Significant amendments were made to the SOP Act by the Building and Construction Industry Security of Payment Amendment Act 2002. That 2002 Act commenced on 3 March 2003. The 2002 Act has itself been repealed, on 22 July 2003, by the Statute Law (Miscellaneous Provisions) Act 2003, Section 4 and Schedule 3. An explanatory note to that Schedule states (correctly): "… in relation to the repeal of amending Acts, it should be noted that the Acts are repealed simply to rationalise the legislation in force and that the repeals have no substantive effect on the amendments made by the Acts or any associated provisions … Section 30(2) of the Interpretation Act 1987 ensures that when an Act is amended or repealed, no amendment made by the Act is affected." 12 All the events relevant to this dispute happened after 3 March 2003. Hence it is the SOP Act in its amended form which I shall consider. 13 There is a recurring pattern in provisions of the SOP Act whereby some particular step which the Act makes provision for must be taken within either the time required by the relevant construction contract, or a time laid down by the SOP Act itself. The case was argued on the basis that no relevant times were laid down by the construction contract. Hence in quoting from the Act, I shall omit all reference to times laid down by the contract. 14 It is also a repeated theme of the SOP Act that in certain circumstances a claimant will have a right to suspend work or suspend supplying goods and services. Another repeated theme concerns what is to happen if a claimant chooses to go to court rather than have its claim adjudicated. I also omit both of those matters from the provisions quoted. 15 The following provisions of the Act are relevant: "4 In this case: … adjudication application means an application referred to in section 17 … adjudication response means a response referred to in section 20 … claimant means a person by whom a payment claim is served under section 13 … payment claim means a claim referred to in section 13 payment schedule means a schedule referred to in section 14 … respondent means a person on whom a payment claim is served under section 13 Part 2 Rights to Progress Payments 8(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 … is entitled to a progress payment. 11(1) A progress payment under a construction contract becomes due and payable: … (b) if the contract makes no express provision with respect to the matter, on the date occurring 10 business days after a payment claim is made under Part 3 in relation to the payment. Part 3 Procedure for recovering progress payments Division 1 Payment claims and payment schedules 13(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. … 14 Payment schedules (1) A person on whom a payment claim is served (the respondent ) may reply to the claim by providing a payment schedule to the claimant. (2) A payment schedule: (a) must identify the payment claim to which it relates, and (b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount ). (3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment. (4) If: (a) a claimant serves a payment claim on a respondent, and (b) the respondent does not provide a payment schedule to the claimant: … (ii) within 10 business days after the payment claim is served, … the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates. 15 Consequences of not paying claimant where no payment schedule (1) This section applies if the respondent: (a) becomes liable to pay the claimed amount to the claimant under section 14(4) as a consequence of having failed to provide a payment schedule to the claimant within the time allow by that section, and (b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates. (2) In those circumstances, the claimant: (a) may: (i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii) make an adjudication application under section 17(1)(b) in relation to the payment claim, … 16. Consequences of not paying claimant in accordance with payment schedule (1) This section applies if: (a) a claimant serves a payment claim on a respondent, and (b) the respondent provides a payment schedule to the claimant: … (ii) within 10 business days after the payment claim is served, … (c) the payment schedule indicates a scheduled amount that the respondent proposes to pay to the claimant, and (d) the respondent fails to pay the whole or any part of the scheduled amount to the claimant on or before the due date for the progress payment to which the payment claim relates. (2) In those circumstances, the claimant: (a) may: (i) recover the unpaid portion of the scheduled amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or (ii) make an adjudication application under section 17 (1) (a) (ii) in relation to the payment claim, … Division 2 Adjudication of Disputes 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. (2) An adjudication application to which subsection (1) (b) applies cannot be made unless: (a) the claimant has notified the respondent, within the period of 20 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim, and (b) the respondent has been given an opportunity to provide a payment schedule to the claimant within 5 business days after receiving the claimant's notice. (3) An adjudication application: (a) must be in writing, and (b) must be made to an authorised nominating authority chosen by the claimant, and (c) in the case of an application under subsection (1) (a) (i)---must be made within 10 business days after the claimant receives the payment schedule, and (d) in the case of an application under subsection (1) (a) (ii)---must be made within 20 business days after the due date for payment, and (e) in the case of an application under subsection (1) (b)---must be made within 10 business days after the end of the 5-day period referred to in subsection (2) (b), and … 20. Adjudication responses (1) Subject to subsection (2A), the respondent may lodge with the adjudicator a response to the claimant's adjudication application (the "adjudication response") at any time within: (a) 5 business days after receiving a copy of the application, or (b) 2 business days after receiving notice of an adjudicator's acceptance of the application, whichever time expires later. … (2A) The respondent may lodge an adjudication response only if the respondent has provided a payment schedule to the claimant within the time specified in section 14 (4) or 17 (2) (b). … The Rival Contentions 16 It is common ground between the Builder and the Subcontractor that: