Supreme Court New South Wales Medium Neutral Citation: Reitsma Constructions Pty Ltd v Davies Engineering Pty Ltd t/as In City Steel [2015] NSWSC 343 Hearing dates: 30 March 2015 Decision date: 02 April 2015 Jurisdiction: Common Law Before: Ball J Decision: Summons filed on 24 February 2015 be dismissed with costs. Catchwords: BUILDING AND CONSTRUCTION - Validity of payment claim - Whether two payment claims served in respect of one reference date - Whether parties agreed to service of second payment claim in substitution of the first ADMINISTRATIVE LAW - Judicial review - Adjudication determination - Jurisdictional error - Existence of jurisdictional fact Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Cases Cited: Kitchen Xchange Pty Ltd v Formacon Building Services [2014] NSWSC 1602 NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842 Trustees of Roman Catholic Church for Diocese of Lismore v TF Woollam & Son [2012] NSWSC 1559 Woolworths Ltd v Pallas Newco Pty Ltd [2004] NSWCA 422; (2004) 61 NSWLR 707 Category: Principal judgment Parties: Reitsma Constructions Pty Ltd (ACN 001 185 879) (Plaintiff) Davies Engineering Pty Ltd t/as In City Steel (ACN 153 746 171) (First Defendant) Australian Solutions Centre Pty Ltd (ACN 085 917 219) (Second Defendant) Justin Hampton (Third Defendant) Representation: Counsel: B DeBuse (Plaintiff) M Rudge SC (First Defendant) Solicitors: Coleman Greig Lawyers (Plaintiff) File Number(s): 2015/57828 Publication restriction: Nil Judgment Introduction 1. By a summons filed on 24 February 2015 the plaintiff, Reitsma Constructions, seeks a declaration that the adjudication determination dated 16 January 2015 of the second defendant (the Adjudicator) in favour of the first defendant, Davies Engineering, in the sum of $134,199.29 be quashed. It also seeks a number of ancillary orders restraining Davies Engineering from enforcing the determination. 2. One issue before the Adjudicator was whether the payment claim that was the subject of the adjudication was invalid because it was the second payment claim served in respect of the relevant reference date in contravention of s 13(5) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). The Adjudicator determined that issue against Reitsma Constructions. In these proceedings, Reitsma Constructions contends that that determination involved a jurisdictional error in relation to a jurisdictional fact. 3. The proceedings, therefore, raise two issues. One is whether the issue in question raises a jurisdictional fact. The second is, if it does, whether the Adjudicator erred in answering that question in the way he did. It is not disputed that if both questions are answered in favour of Reitsma Constructions, then it is entitled to relief it claims; otherwise, it is not. Did the question involve a jurisdictional fact? 1. In relation to the first question, it is difficult to see how the question whether the payment claim the subject of the determination was a second payment claim in respect of the same reference date does not raise a jurisdictional fact. Section 13(5) of the Act states: A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. 1. That section must mean that any purported payment claim other than the first in respect of a reference date is not a payment claim for the purposes of the Act. As McDougall J pointed out in Trustees of Roman Catholic Church for Diocese of Lismore v TF Woollam & Son [2012] NSWSC 1559 at [49] "[A]ny other approach would set at naught the statutory prohibition". 2. It is clear that the Adjudicator's jurisdiction depended on a valid payment claim. Section 17(1) of the Act provides: 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. It is the adjudication application that is referred to an adjudicator under s 19 of the Act. Absent a payment claim, there can be no adjudication application that can be referred and be determined, and any purported determination of something that is not a payment claim within the meaning of the Act must be of no effect. Did the Adjudicator make an error in determining the jurisdictional fact? 1. The second question is whether the Adjudicator made an error in concluding that the second payment claim was a valid one. Before addressing that question directly, it is necessary to set out some background in relation to the claim. 2. Reitsma Constructions undertook construction work for the Anglican Church on its church in Oran Park. It subcontracted the supply and installation of fabricated steel required for the construction work to Davies Engineering. 3. It is not disputed in this case that progress payments were to be made monthly under the relevant subcontract and that consequently a new reference date arose under the Act each month. 4. On 27 November 2014, Davies Engineering served by email a payment claim in the sum of $177,109.15, which was described as "invoice 1025". 5. On 28 November 2014, Reitsma Constructions responded to Davies Engineering's payment claim by email disputing the claim and the existence of the amount of work alleged to have been completed and indicating that there would be a formal response by way of a payment schedule. 6. Following that email, Mr Matthew Van Bentum, a project manager with Reitsma, and Mr Paul Halabi, the operations manager of Davies Engineering, spoke by telephone. Mr Van Bentum says that the conversation occurred on 4 December 2014. Mr Halabi says it occurred on 5 December 2014. Nothing turns on the resolution of that issue. 7. Mr Van Bentum says that during the call, they had a conversation to the following effect: Paul: "Matt, we need to sort out the variations claimed in invoice 1020." Matt: "Paul, I sent a payment schedule dealing with that invoice and as to why the variations were not paid." Paul: "Well how are we going to get paid now that the variation work is completed?" Matt: "Paul we still need to sort out the final cost of some of these variations as they remain disputed. Once they are resolved issue an invoice and I will assess it." 1. Mr Halabi gives a quite different account of the conversation. According to him it was in the following terms: Paul: Matt what are we going to do about these outstanding variations that we have been going backwards and forwards on? Matt: Add them to the current payment claim and send me a revised invoice. 1. On 5 December 2014, following the conversation, Mr Halabi sent by email a copy of invoice 1025 to Mr Sadaf Davies, one of the directors of Davies Engineering. The covering email said: Can you please adjust invoice for Oran Park as per attached in [sic] send over to Matt fro [sic] Reitsma for processing I have spoken to him and has requested as per attachment 1. The invoice was amended and, on the same day, Mr Halabi sent Mr Van Bentum a revised invoice for the amount of $216,021.25. The revised invoice bore the same date as the original invoice (that is, 27 November 2014). The covering email said that the email was sent "as requested". It was sent to Mr Van Bentum's home email account, not his work email account, although there is no question he received it. 2. In response to that invoice, on 9 December 2014, Reitsma Constructions served a payment schedule. The payment schedule took issue with the substance of the claim in the invoice. Neither the covering email nor the payment schedule itself suggested that the payment claim was invalid because it was a second claim served in respect of the same reference date as the invoice served on 27 November 2014. 3. On 17 December 2014, Davies Engineering lodged the adjudication application. 4. The Adjudicator, in holding that he did have jurisdiction, said this: 5.3 The value of the adjudication application as indicated by the Claimant makes it clear that the amended invoice served on 5 December 2014 is the payment claim against which this application is bought [sic]. Whilst I agree that the Respondent's submissions do have some prima facie merit I do not accept that the amended Tax Invoice is fatal to the Claimant's application. The Claimant's submissions are that the Respondent's representatives requested amendments to the first version of the Tax Invoice 1025 and this is supported by the email correspondence annexed to the adjudication application. The Respondent has not denied that amendments were requested by it and in these circumstances it would be most disingenuous to now suggest that the Claimant's compliance with such a request must invalidate their right to an adjudication application under the Act. 5.4 Furthermore, I note that the Respondent provided a payment schedule on 9 December 2014 which was some 4 days following receipt of the amended Tax Invoice. The payment schedule has been issued in response to the amended Tax Invoice which in my view further supports the understanding that the amended Tax Invoice replaced the previously issued version and that this was accepted by the parties as the payment claim upon which they were not basing their respective actions. 1. In considering the question whether the Adjudicator made an error, the Court is to make up its own mind having regard to the material before it. It is, however, entitled to give weight to the opinion of the Adjudicator: see Woolworths Ltd v Pallas Newco Pty Ltd [2004] NSWCA 422; (2004) 61 NSWLR 707 at [88], [105] per Spigelman CJ. 2. Reitsma Constructions accepts that the second payment claim is valid if the parties agreed that it should replace the first: see NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842; Kitchen Xchange Pty Ltd v Formacon Building Services [2014] NSWSC 1602 at [17] per McDougall J. Reitsma Constructions also accepts that, if Mr Halabi's account of the conversation that occurred on 4 or 5 December 2014 is correct, then it appears that the parties did agree that the second payment claim should replace the first. 3. Both Mr Van Bentum and Mr Halabi were cross-examined. Both came across as honest witnesses trying to give their best recollection of what occurred. The conflict in their evidence must be resolved by considering which account is objectively more likely having regard to the surrounding circumstances and bearing in mind that Reitsma Constructions bears the onus of proof. 4. In my opinion, the likelihood is that the parties did agree to replace the first claim with the second. Mr Halabi's version of the conversation is supported by the email he sent shortly after the conversation to Mr Davies. The covering email serving the second claim on Reitsma Constructions suggests that it was sent "as requested". Mr Van Bentum says that he paid no attention to the covering email. Taken alone, that may be accepted. However, if Mr Van Bentum's recollection of his conversation with Mr Halabi is correct, it is difficult to understand why Reitsma Constructions did not take issue with the claim in its payment schedule. If it had not agreed to a replacement claim, it is to be expected that it would have said something in response to the service of one. Instead, it treated the second claim as a valid claim and did not raise the question of its validity until after the adjudication application had been lodged. The Adjudicator was right to place considerable emphasis on this point. 5. Reitsma Constructions submits that Mr Halabi's explanation for why it became necessary to serve a replacement claim was not plausible. According to Mr Halabi, he had not included Davies Engineering's variation claims in the original version of the payment claim served on 27 November 2014 because the parties were still in discussion concerning that issue. As soon as that issue was resolved, according to him, he asked Mr Van Bentum what was to happen and Mr Van Bentum suggested that the matter be dealt with by amending the payment claim. However, Reitsma Constructions submits that there was no reason why the variations could not have been included in the original version of the payment claim, that Mr Halabi left them out as a result of an oversight and that by service of the second version of the payment claim he was seeking to correct his mistake. In addition, Reitsma Constructions points to the fact that Mr Halabi sent the email including the revised payment claim to Mr Van Bentum's private email address. That, it was submitted, suggests that Mr Halabi did not intend the annexure to the email to be a replacement payment claim. 6. I do not accept either of those submissions. I accept Mr Halabi's evidence when he says that he did not include the variation claims in the first version of the payment claim because he thought that there were issues still to be resolved in relation to those variations. There is a tension in the position taken by Reitsma Constructions on this issue. On the one hand, it submits that the variations could have been included in the original version of the payment claim. On the other hand, Mr Van Bentum's version of the conversation suggests that even as at 4 or 5 December 2014 there were still issues to be resolved in relation to the variations. Mr Halabi's account of what happened provides a plausible explanation for why he caused a revised claim to be prepared shortly after the conversation. I also accept Mr Halabi's evidence that he sent the email dated 5 December 2014 to Mr Van Bentum's personal email address rather than his work email address as a result of an oversight. 7. Reitsma Constructions also submits that it makes no commercial sense for it to have agreed to permit Davies Engineering to substitute the second version of the payment claim for the first. However, I do not accept that that is so. There were disputes between Reitsma Constructions and Davies Engineering concerning how much, if anything, Davies Engineering was entitled to claim. However, the correspondence between the parties suggests that there were good relations between them. It was reasonable of Reitsma Constructions to want to get to the substance of the dispute and to agree to a substitute payment claim being served to facilitate that happening. 8. Having regard to these various matters, I am satisfied, on balance, that Reitsma Constructions agreed to the service of a substitute payment claim. It follows that the adjudicator's determination did not involve a jurisdictional error on the basis contended for by Reitsma Constructions. Orders 1. The summons filed on 24 February 2015 should be dismissed with costs. ********** 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: 02 April 2015