Professional Documents
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Au Cases NSW NSWSC 2021 1534
Au Cases NSW NSWSC 2021 1534
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Supreme Court
Before: Rees J
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Representation: Counsel:
Mr L Shipway (Plaintiff)
Mr M Christie SC / Mr D Hume (First Defendant)
Submitting appearance (Second and Third Defendants)
Solicitors:
Pinsent Masons (Plaintiff)
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JUDGMENT
1 HER HONOUR: The plaintiff, Ventia Australia Pty Ltd, seeks to quash an
adjudication determination made under the Building and Construction Industry
Security of Payment Act 1999 (NSW) on the basis that the payment claim
included claims for work under multiple construction contracts. The relief is
opposed by the first defendant, BSA Advanced Property Solutions (Fire) Pty
Ltd, in whose favour the adjudication determination was made.
2 The issue is whether a payment claim served under section 13 of the Act can
seek a progress payment in respect of more than one construction contract.
There is a long-standing prohibition on this course, which had its genesis in
McDougall J’s ex tempore judgment in Rail Corporation of NSW v Nebax
Constructions Pty Ltd [2012] NSWSC 6. The issue was most recently
considered in Ausipile Pty Ltd v Bothar Boring and Tunnelling (Australia) Pty
Ltd [2021] QCA 223, where Morrison JA (with whom Fraser JA and North J
agreed) proceeded on the same basis, but on the proviso that it is sufficient if
the payment claim “on its face” relates to one construction contract, with the
respondent to raise any issue in the payment schedule and the adjudicator to
consider the matter.
3 BSA contends that the long-standing prohibition is not required by the Act. For
the reasons which follow, I have concluded that the Act does require a
payment claim to be made in respect of one construction contract, not multiple
contracts. Further, I consider that this is a jurisdictional issue and not one
which is finally resolved by an adjudicator after the issue has been raised in a
payment schedule. As to the latter, I respectfully disagree with Ausipile, the
Court’s observations there being obiter in any event.
The legislation
4 Before turning to the facts, it is convenient to consider the question of statutory
construction. The object of the Act (section 3) is to ensure that any person who
undertakes construction work under a construction contract is entitled to
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receive, and is able to recover, progress payments. To this end, the Act
establishes a procedure for such a person to make a payment claim, the
person from whom payment is sought to respond by a payment schedule, with
any disputed claim to be determined by an adjudicator. The parties are at
liberty to resolve their contractual entitlements on a final basis elsewhere, with
the Act operating on a “pay-now-argue-later” basis. As such, the Act is
designed to provide an informal scheme to ensure that subcontractors can
obtain cash flow: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty
Ltd (2018) 264 CLR 1; [2018] HCA 4 at [39], [43], [47] (Kiefel CJ, Bell, Keane,
Nettle and Gordon JJ). The legislation was designed to “reform payment
behaviour in the construction industry” by “stamp[ing] out the practice of
developers and contractors delaying payment to subcontractors and suppliers”:
Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd (2016)
260 CLR 340; [2016] HCA 52 at [3]-[4] (Kiefel, Bell, Gageler, Keane and
Gordon JJ).
5 A central tenet of the Act is a right to progress payments. Part 2 of the Act is
entitled “Rights to progress payments”. While the Act was amended by the
Building and Construction Industry Security of Payment Amendment Act 2018
(NSW), with amendments commencing on 21 October 2019 (see further at
[43_Ref88821366]), the amendments apply to construction contracts entered
into after that date: Schedule 2, Part 6 of the Act. Thus, at the time of Nebax
and the case law reviewed in the judgment, and for the purposes of this case,
section 8 provided:
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Payment claims
(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.
(2) A payment claim—
(a) must identify the construction work (or related goods and services)
to which the progress payment relates, and
(b) must indicate the amount of the progress payment that the
claimant claims to be due (the claimed amount),
…
(5) A claimant cannot serve more than one payment claim in respect of each
reference date under the construction contract.
…
7 Section 13 was amended in 2002 to this form to make clear that a claimant is
entitled to make a payment claim “even though it may ultimately be proved that
no payment was due under the construction contract”; the objects of the Act
were amended accordingly: Southern Han Breakfast Point at [53]-[54], [57].
Sub-section (5) was introduced to prevent abuse of the system by claimants,
restricting claimants to one payment claim under the Act in respect of each
reference date: see the second reading speech delivered by Mr Iemma in NSW
Legislative Assembly, Parliamentary Debates (Hansard), 12 November 2002 at
6543. Section 13 of the Act is the broad equivalent to section 75 of the
Queensland legislation.
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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.
9 (Section 17 of the Act is the broad equivalent of section 79 of the Queensland
legislation.) The respondent may lodge an adjudication response (section 20).
The adjudicator is then to determine the adjudication application “as
expeditiously as possible” and, in any case, within 10 business days of
acceptance of the adjudication application, or within such further time as the
parties may agree: section 21(3). The adjudicator is to determine the amount of
the progress payment: section 22(1). Section 22(2) sets out the matters to
which the adjudicator is to have regard in determining the application, including
“the provisions of the construction contract from which the application arose”:
section 22(2)(b).
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for each invoice and its corresponding payment schedule. RailCorp contended
that the adjudicator lacked jurisdiction to deal with the applications as the Act
did not permit multiple adjudication applications to be made for one payment
claim: section 17(1). McDougall J concluded, “when one considers the
structure of the Act as a whole, it is reasonably clear that there should be one
only application for adjudication of any one payment claim”: at [43]. His Honour
then set out sections 8, 13, 14 and 17 of the Act and continued at [44]-[46]:
(emphasis added)
12 Whilst Nebax was concerned with whether there could be multiple adjudication
applications in respect of one payment claim, the case was relied upon by
counsel in Matrix Projects (Qld) Pty Ltd v Luscombe [2013] QSC 4 in support of
the proposition that a payment claim must relate to only one construction
contract. There, the parties had signed a “Period Subcontract” which, given its
indeterminacy, was found not to be a construction contract under the Act. The
“Period Subcontract” provided that a work order may issue. The works
involved assisting victims of the Brisbane floods to rebuild them houses. The
subcontractor undertook work at nine properties in accordance with purchase
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Accordingly the payment claim made cannot be described as one being made
under a single construction contract … Therefore the variety of different types
of contract for construction work relied upon in the payment claim is fatal to its
validity.
Douglas J also considered that including an obviously erroneous item in the
payment claim (sponsorship of the local football club) did not deprive the
adjudicator of jurisdiction: at [24].
13 In Agripower Australia Ltd v J & D Rigging Pty Ltd [2013] QSC 164, Wilson J
appears to have proceeded on the basis that Matrix was correct but was
unable to determine whether the payment claim before her related to more
than one contract and thus did not consider this jurisdictional issue further: at
[15], [92], [97], [100].
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present, by Douglas J in Matrix Projects (Qld) Pty Ltd v Luscombe [2013] QSC
4 at [17] and following.
7 Mr Pritchard of Senior Counsel, who appears with Mr Salama of Counsel
for Go Electrical, did not seek to persuade me that what Douglas J had said
was incorrect.
15 After considering evidence as to the contractual arrangements between the
parties, McDougall J concluded that the parties had agreed to the terms on
which Go Electrical would supply electrical fittings and appliances to Class
Electrical if requested to do so, resulting in a multiplicity of contracts. As such,
the jurisdictional challenge to the adjudicator’s determination was well founded:
at [36], [39]-[40].
16 Likewise in Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd [2018] NSWSC 239,
counsel relied on Matrix in support of the proposition that the Act did not permit
a payment claim to be made for work performed under more than one contract.
McDougall J observed at [58]:
Mr Bland did not submit that either [Nebax or Matrix] was incorrect. There is
thus no need to revisit the reasoning in either case. I add, for completeness,
that in Class Electrical Services v Go Electrical, experienced Senior Counsel
accepted, as I recorded, “that if there were indeed a multiplicity of contracts,
and not just one contract, then the determination could not stand, for the
reasons” given in Nebax and Matrix.
McDougall J applied the reasoning in Nebax and Matrix to the payment claim:
where the payment claim related to work done under two contracts, it was not a
valid payment claim and could not be the foundation of a valid adjudication
application: at [60]-[61].
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20 Factually similar to the case at hand, in Acciona Infrastructure Australia Pty Ltd
v Holcim (Australia) Pty Ltd [2020] NSWSC 1330, Acciona was the design and
construct (D&C) contractor for the Sydney Light Rail Project and Holcim
supplied ready mixed concrete. The parties entered into a Goods Supply
Agreement, which provided, at [16]: (emphasis that of his Honour)
If the D&C Contractor wishes to order Goods it will issue a Purchase Order.
Upon the issue of a Purchase Order a separate contract will come into
existence between the D&C Contractor and the Supplier on the terms set out
in this Agreement.
21 Acciona issued some 12,500 purchase orders and Holcim issued 36 payment
claims: at [17]. Acciona challenged the jurisdiction of the adjudicator on the
basis that the payment claim impermissibly claimed for work done under two or
more contracts: at [32]. After summarising Nebax, Matrix and Trinco, none of
which were suggested to have been wrongly decided (at [37]), Hammerschlag
J concluded at [40] to [42]:
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Implicit in Bothar’s contention is the proposition that the parties on either side
of a payment claim can litigate the issue of whether part of the payment claim
is, as a matter of fact, under a different contract and do so before the matter
reaches adjudication.
23 Morrison JA reviewed the statutory scheme and observed at [98] and [100]:
(inserting the equivalent provisions under the Act)
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On its face, payment claim 6 refers to only one contract between Bothar and
Ausipile. Thus, it is a document which fits [section 13(1)] of the Act, in that
Ausipile claims to be entitled to a progress payment and therefore may give a
payment claim to Bothar who may be liable to make the payment. In my view,
even if it is the case that at some subsequent point it is determined that the
variation was not a true variation and therefore not able to be made the subject
of the payment claim, that does not render the payment claim invalid. Such an
issue is something caught by [section 14(3)] of the Act, in that when Bothar
obeys its statutory obligation to respond with a payment schedule, it might
state that the amount proposed to be paid is less than that in the claim, and
states why that is so, including the reason to withhold payment. The evident
scheme of the Act is that if Bothar wished to raise a contention that a variation
is not a true variation, or indeed the subject of a different contract, that is a
matter that the statute obliges it to raise in a payment schedule. In that way,
the Act makes it plain that when the scheme under the Act operates by the
giving of a payment claim, the entitlement to respond is by the statutory
process and not otherwise.
25 His Honour did not consider that earlier authority warranted a different
conclusion. Nebax was of no assistance as the question addressed was well
removed from the case at hand: at [117]. In Matrix, “there was no examination
of the proper construction of the … section governing a payment claim”;
further, the payment claim “on its face, made claims under three distinct
contracts”; and Douglas J considered the inclusion of an obviously erroneous
item did not deprive the adjudicator of jurisdiction: at [106]-[107], citing Matrix
at [24]. McDougall’s observations in Trinco were obiter and the payment claim
“on its face” made claims under separate contracts: at [118]. There was no
contention in Acciona that Nebax, Matrix or Trinco were wrongly decided; the
payment claim on its face identified more than one contract as the basis for the
claim: at [112]. I take the latter to be a reference to Acciona at [24], where
Hammerschlag stated:
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Appeal proceeded on the basis that a payment claim made in good faith could
not be treated as a nullity for failure to comply with the Act unless the failure
was patent on its face; whether the claim complied with the Act was a matter
for adjudication. Morrison JA concluded at [120]: (comparable provisions of the
Act included)
Consideration
27 As to whether the Act, properly construed, permits a payment claim to be made
in respect of more than one construction contract, the cases reviewed have
limited precedential value where this was not specifically argued, nor decided,
in Nebax, which was applied in a different context in Matrix and where the
contrary was not argued in subsequent cases: Chief Commissioner of State
Revenue v Benidorm Pty Ltd (2020) 104 NSWLR 232; [2020] NSWCA 285 at
[91]-[92], citing Coleman v Power (2004) 220 CLR 1; [2004] HCA 39 at [79] and
CSR Ltd v Eddy (2005) 226 CLR 1; [2005] HCA 64 at [13]. That said, a series
of learned commercial judges have proceeded accordingly, presumably
because such a construction of the Act seemed obviously correct.
28 Turning to construction, both the language of the Act and its legislative purpose
are important. As to the language, the Act is drafted in the singular, referring
throughout to “a construction contract”, “a payment claim” and the like. While
reference to a word in the singular includes a reference to the word in the plural
form (section 8(b), Interpretation Act 1987 (NSW)), the Interpretation Act does
not preclude the operation of provisions as drafted and also permits a process
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of selective pluralising or singularising such that not every singular word need
be pluralised and vice versa. These are matters to be resolved by the ordinary
process of statutory construction including having regard to the purpose of the
provision and whether one of the competing constructions leads to
unfavourable consequences: Perry Herzfeld, Thomas Prince, Interpretation
(2nd ed, 2020, Lawbook Co) at [4.80] and the authorities there cited. The
singularity of language of the Act was a matter of significance to Stevenson J
when construing the Act in Hill v Halo Architectural Design Services Pty Ltd
[2013] NSWSC 865, referring to entitlement to “a” progress payment and “a”
payment claim: at [25]-[31].
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that the Act has since been amended to remove the reference date: see
[44_Ref89160383]. The Act as amended may bear a different construction.)
31 Construing the Act in this manner is supported by its legislative purpose. The
object of the Act has been described as [4_Ref88821679]. Further, as the High
Court described the statutory scheme in Probuild, the procedure in Part 3 is
designed to operate quickly. This is apparent from the detailed time limits that
apply at each stage, which are “carefully calibrated” and impose “brutally fast”
deadlines on the claimant, the respondent and the adjudicator to ensure the
prompt resolution of payment disputes: at [40]. Further, at [41]:
… an adjudicator can have as few as five business days after receiving the
respondent’s response to the adjudication application to determine the amount
of the progress payment to be paid by the respondent and the date on which it
becomes payable. In that limited time, the adjudicator must consider the
provisions of the Security of Payment Act, the provisions of the construction
contract from which the application arose, the payment claim (and any
accompanying submissions and documentation), the payment schedule (and
any accompanying submissions and documentation) and the results of any
inspection carried out by the adjudicator.
32 The need for speed is consistent with a construction of the Act that a payment
claim can seek a progress payment under only one construction contract. This
feature of the legislation was an important factor in the construction of the Act
in Nebax (at [45]) and Ausipile (at [100]). Whilst the length and complexity of a
construction contract may differ widely – and indeed a construction contract
may be oral (section 7(1)) or simply an “arrangement” (section 4(1)) – claiming
a progress payment under more than one construction contract in a payment
claim may be expected in the ordinary course to compromise the respondent’s
ability, and that of the adjudicator, to attend to their respective tasks within the
short timeframes provided by the Act.
33 Thus I conclude that the Act, property construed, requires a payment claim to
be made in respect of “a” construction contract. The next question is whether
an adjudication determination in respect of a payment claim referable to more
than one construction contract is void, or whether it is a matter which the
adjudicator can consider when making the determination, with the ultimate
question as to the number of construction contracts to be finally determined in
another venue.
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34 The importance of serving a payment claim in accordance with the Act is that,
without it, the adjudicator’s determination is void. This Court does not have
jurisdiction to quash an adjudicator’s determination for non-jurisdictional error
of law on the face of the record (in other words, the adjudicator is conferred
with decision-making authority to err in law): Probuild at [83] per Gageler J.
However, for an adjudicator’s determination to have the legal effect provided by
the Act, it must satisfy the conditions laid down by the Act as essential for there
to be such a determination: Brodyn Pty Ltd v Davenport (2004) 61 NSWLR
421; [2004] NSWCA 394 at [52] per Hodgson JA. One essential pre-condition
for the existence of an adjudicator’s determination is service by the claimant of
a payment claim under section 13: Brodyn at [53]-[54]. As explained in
Southern Han Breakfast Point at [44]:
There is no dispute between the parties that service of a payment claim under
s 13(1) of the Act is an essential precondition to taking subsequent steps in the
procedure set out in Pt 3 of the Act. There is accordingly no dispute that,
unless a payment claim answering that description is served, there can be no
adjudication application and hence no adjudication within the jurisdiction
conferred by s 22 of the Act. That shared understanding of the relationship
between ss 13(1) and 22 is undoubtedly correct.
35 Whilst the High Court was there concerned with the existence of a reference
date as a precondition to the making of a valid payment claim under section
13(1), the Court also observed at [62]:
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That is, I do not think a payment claim can be treated as a nullity for failure to
comply with s 13(2)(a) of the Act, unless the failure is patent on its face; and
this will not be the case if the claim purports in a reasonable way to identify the
particular work in respect of which the claim is made.
39 As the payment claim and accompanying progress claim 5 and progress claim
6 “did purport in a reasonable way to identify the work in respect of which the
claim was made”, it was for the respondent to serve a payment claim saying it
did not propose to make any payment in respect of the work because it could
not identify the work, leaving the matter for the adjudicator to determine: at
[39]. Ipp JA agreed, at [76]:
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Provided that a payment claim is made in good faith and purports to comply
with s 13(2) of the Act, the merits of that claim, including the question whether
the claim complies with s 13(2), is a matter for adjudication under s 17 …
40 Similarly, in TFM Epping Land v Decon, the Court was concerned with whether
the payment claim was invalid as, although it claimed payments for variations,
it may in fact be a quantum meruit claim, to which the Act does not apply:
Southern Han Breakfast Point at [66]. A detailed description of the payment
claim may be found in the first instance judgment: Vannella Pty Ltd v TFM
Epping Land Pty Ltd [2019] NSWSC 1379 at [17]-[22]. The progress claim was
for some $6.3 million including Table 1 headed “Works within the Original
Contract Sum” comprising 25 items of work and Table 2 headed “Variations”
referring to six variations numbered V01 to V06. The first page of the claim
stated that it was made pursuant to the Act for works completed in accordance
with the Building Contract.
41 On appeal, Basten JA (with whom Meagher JA and Emmett AJA agreed) noted
that the claim was “in its terms” a claim for works completed under the contract
and, whilst it was possible that the amounts claimed for variations did not
properly arise under the contract, any challenge on this basis was to be raised
by way of a payment schedule provided under section 14 of the Act, to be
addressed by the adjudicator: at [19]-[20]. Following Nepean Engineering,
Basten JA concluded, “On the face of the claim, the payments were sought
under the contract. If they were not available under the contract, it might have
been open to an adjudicator to reject those elements of the claimed amount”:
at [23]. Similarly, Emmett AJA considered, “There is nothing in the Progress
Claim to suggest that the claim for variations was made otherwise than under
the Contract. Indeed, the Progress Claim states specifically that they are made
under the Contract”: at [92]. His Honour considered that this would have been
a matter for an adjudicator to determine if the issue was raised in a payment
schedule.
42 Both Nepean Engineering and TFM Epping Land v Decon were concerned with
the “more detailed requirements” of section 13(2) of the Act which, consistently
with Brodyn, are not an essential pre-condition for the existence of the
adjudicator’s determination. Whether a payment claim seeks payment for work
done under more than one construction contract goes to whether the payment
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claim meets the description in section 13(1) of the Act which, according to
Southern Han Breakfast Point, is a matter going to the jurisdiction of the
adjudicator. Once it is accepted that whether a payment claim is made in
respect of one construction contract is a jurisdictional fact, then it is a matter for
the Court to determine on the evidence before it. It is not a matter that depends
upon what is raised in a payment schedule. The Court’s observations in
Ausipile in this regard were obiter and, with great respect, I consider this
aspect of the reasoning to be plainly wrong and I do not propose to follow it:
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) [2018]
NSWSC 412 at [130]-[131] (Stevenson J); Greenwood Futures Pty Ltd v DSD
Builders Pty Ltd [2018] NSWSC 1407 at [43]-[51] (McDougall J).
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triggered by a ‘reference date’, a term that will be abolished from the Act.
Instead, the entitlement is simply triggered by the fact that a person has
undertaken to perform work or supply goods and services under a construction
contract.”
Payment claims
(1) A person referred to in section 8 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.
(1A) A payment claim may be served on and from the last day of the named
month in which the construction work was first carried out (or the related goods
and services were first supplied) under the contract and on and from the last
day of each subsequent named month.
(1B) However, if the construction contract concerned makes provision for an
earlier date for the serving of a payment claim in any particular named month,
the claim may be served on and from that date instead of on and from the last
day of that month.
…
(5) Except as otherwise provided for in the construction contract, a claimant
may only serve one payment claim in any particular named month for
construction work carried out or undertaken to be carried out (or for related
goods and services supplied or undertaken to be supplied) in that month.
(6) Subsection (5) does not prevent the claimant from—
(a) serving a single payment claim in respect of more than one
progress payment, or
(b) including in a payment claim an amount that has been the subject
of a previous claim, or
(c) serving a payment claim in a particular named month for
construction work carried out or undertaken to be carried out (or for
related goods and services supplied or undertaken to be supplied) in a
previous named month.
46 Sub-section 13(1A) adopts some of the language of the former section 8(2)(b),
the purpose of the new provision being to ensure that claimants can make a
monthly payment claim. According to the second reading speech, respondents
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were delaying progress payments under section 8(2)(a) and the new section
was intended to remedy that mischief. “Section 8(2)(b) currently provides a
default set of rights to enable claimants to claim monthly. The purpose of
adopting its language is to provide commercial certainty by preserving the
jurisprudence regarding the proper interpretation of the provision.” Section
13(1B) allowed the parties to agree for claims to be made for periods shorter
than monthly. New sections 13(5) and (6) generally limit a person from making
more than one payment claim each month for construction work carried out in
that month.
FACTS
49 Ventia performs the head contract with the assistance of some 126
subcontractors. Part of Ventia's scope of work under the head contract is
‘Building Essential Services’ (BES), consisting of maintenance of fire-related
assets such as extinguishers, emergency-exit lighting and fire doors. To this
end, in May 2016, Ventia entered into a subcontract with BSA in relation to the
BES work. BSA is a specialist fire-services contractor.
Subcontract
50 An accompanying Letter of Award expressly formed part of the Subcontract
and provided:
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The work is being carried out as part of a Head Contract being the Asset
Maintenance Services Contract between NSW Land and Housing Corporation
and [Ventia].
…
The following documents provided form part of the award:
1 This Letter of Award
2 BSA Contract Clarifications Register, titled "Clarifications
Broadspectrum_21-3-2016” – attached
3 The Subcontract Agreement (TMD-2000-SC-0003 – attached
4 Price Schedule – BES-Pricing-All NominatedRegions 210316 BSA
CompleteServices – attached
5 G1.1 Maintenance Work Requirements document;
6 G1.4 Property Standard Assessments document;
7 G2.1 Maintenance Specification document;
8 G2.2 Servicing Specification document;
9 G3 Asset Performance Standards document;
10 G4.2 Service Delivery Program, Scope of Work and Quotation Template;
11 Additional Information – Work Orders (TMD-2033-AD-2001)
These Conditions of Subcontract cannot be varied or superseded in any way
whatsoever other than by [Ventia’s] written agreement.
51 The Price Schedule referred to in the Letter of Award contained a list of public
housing sites with an annual price. Mr Crossing said that, subject to variations,
this was the list of sites at which BSA was to provide routine maintenance for
the agreed annual price. After referring to a range of matters, the Letter of
Award concluded:
To ensure your systems are operational to receive Work Orders, please review
the Work Order Procedure. Please be advised that on site works MUST NOT
commence at any time prior to receipt and acceptance of a Work Order issued
by [Ventia]. [Ventia] will not approve any claims for costs incurred on works
conducted prior to issue of a Work Order.
Services
52 Clause 2.1 of the Subcontract Agreement provided:
Performance of Services
(a) The Subcontractor must execute and complete the Services in
accordance with the Services Specification during the Term, and in
accordance with the terms of this Agreement.
(b) In performance of the Services in clause 2.1(a), the terms set out in
Annexure 4 will form part of this Agreement.
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56 Turning next to Annexure 4 (to which clause 2.1(b) referred), the annexure was
entitled “Repetitive Services (Standing Orders)”. Clause (a) provided:
Work Orders
(i) [Ventia] will initiate the Services by issuing specific Service Orders to
[BSA] to perform discrete tasks. Each Work Order shall include a time and
date for completion. The Services must be carried out by [BSA] in accordance
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with Work Orders issued by [Ventia]. [BSA] must complete the Services the
subject of each Work Order by the date of completion.
…
(iii) Services are only to be performed by the Subcontractor during the Term
in response to [Ventia] issuing Work Orders. [Ventia] does not warrant,
guarantee or make any representations as to the frequency, number or
monetary value of the Work Orders to be issued under the Agreement, and
[Ventia] does not warrant or guarantee the Subcontractor any particular level
of Services or Work Orders.
…
57 There was no definition of “Service Order”, which I take to be a reference to a
Work Order, where "Service Order" and "Work Order" are used
interchangeably in Annexure 4(a)(i). Annexure 4, clause (b) provided:
(emphasis added)
Formation of Agreement
A separate Agreement will come into existence each time [Ventia] issues a
Work Order. Each Agreement so created will be governed by the terms of this
Agreement. In the event of any conflict between the terms of this Agreement
and any express term in a Work Order, the express term of the Work Order will
prevail in relation to the performance of Services under that Work Order only.
Consistently with this, “Agreement” was defined as the Subcontract
Agreement, “any relevant Work Order to which it attaches, and all Annexures
…”
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Payment
61 Clause 2.2 of the Subcontract Agreement provided:
Remuneration
…[Ventia] agrees to pay [BSA] the Fee in relation to each of the Services the
subject of a Service Order in accordance with the terms of this Agreement. …
As mentioned, there was no definition of “Service Order”; I read those words as
referring to a Work Order.
62 Ventia agreed to pay BSA the Fee for the Services, with the Fee to be claimed
on issue of an approved claim in accordance with clause 6: clause 6.1. Clause
6.2 provides: (emphasis added)
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Work Orders
65 Some 8,600 Work Orders were created each year for BSA. To some extent,
the Work Orders are automatically generated each month using a “pricing file”.
When adding a subcontractor to the SAP system, the list of assets for which
the subcontractor was responsible (the Tender List) and the agreed
subcontract pricing for each property, service type and month were combined
to create a pricing file, which was uploaded into the SAP system each month
for the purposes of creating Work Orders. Once generated, the subcontractor
was notified that a Work Order has been issued and, on completion of the
Work Order, claims for payment were made using the SAP Mobility App.
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67 According to Mr Crossing, it was not Work Orders but BSA’s annual job plan
and monthly schedule of completed maintenance and upcoming maintenance
requirements which directed the performance of work under the Subcontract.
Mr Crossing said that he has administered the Subcontract on the basis that
BSA was required to perform Category B works whether or not there was a
Work Order and that Work Orders were simply administrative documents
created by Ventia to facilitate its use of the SAP accounting software. The total
annual fee for Category B Works under the Subcontract was the aggregate of
the annual fee for each site in the Price Schedule. BSA claimed the annual fee
in 12 equal monthly instalments, to which Ventia did not object.
68 Each month, Ventia sent BSA over 450 emails attaching Category B Works
work orders comprising one work order for each site covered by the
Subcontract, together with a list of the Category B Works work orders with 1/12
of the annual fee per site in the Price Schedule. The details of the Category B
Works in the work order were generic and, as Mr Crossing understood it,
Ventia issued the work orders irrespective of whether work was mandated for
that site in BSA’s annual job plan and irrespective of whether BSA intended to
perform work at that site that month. Each month, BSA billed and was paid for
1/12 of the per annum price for routine, preventative maintenance works
whether or not it in fact performed works at that site in that month.
Payment claim
70 On 8 February 2021, Ventia terminated the Subcontract with effect from 1
March 2021. On 8 February 2021, BSA served a payment claim on Ventia for
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71 As Mr Crossing explained it, the Payment Claim claimed for three kinds of
Category B Works. First, the Payment Claim claimed for “PM” or “Preventative
Maintenance Works”. This was a claim for the monthly price for routine
maintenance works in the public areas of the sites covered by the Subcontract
for the months of October 2020, November 2020, December 2020 and January
2021. Ms Jasiulec says that the Work Order referred to in the payment claim
for the “PM” group of work does not relate to Category B Works at all. Rather,
Ventia issued one Work Order per month per property for Category B Works,
that is, 465 work orders a month. For the period claimed in the payment claim,
Ventia issued 1,860 Work Orders.
72 Second, Mr Crossing said that BSA also provided routine maintenance works
in the tenanted areas where it understood that local government requirements
required maintenance checks of fire protection equipment in the tenanted
areas, not just the common areas. BSA understood this to be an agreed
variation following a meeting in December 2016. BSA billed for the routine
maintenance works in the tenanted areas monthly using the description “SOU”
or “Single Occupier Units”, being an expression used by the NSW Government
to describe tenanted areas of public housing complexes. BSA carried out
“SOU” works at the sites covered by the Subcontract whether or not it had a
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work order. Generally, BSA would carry out these works and later request a
work order number to allow billing. Sometimes work orders were not provided
until the month after works had already been carried out. Often, the work
orders that were issued bore no resemblance to the works that had in fact been
carried out because they referred to sites which were not the subject of SOU
works at all.
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due to a dispute surrounding the variation. The work orders referred to in the
payment claim for the “Variation” are, according to Ms Jasiulec, wrong.
78 Ventia submitted that the evidence established a clear and consistent practice
on Ventia's part of issuing work orders in respect of all work carried out by
BSA. Pursuant to that practice, a work order would be issued for a given
building in a particular month even though physical work to that building was
not required or performed that month. That does not mean that 'work orders
were issued without work being done' so as to demonstrate that the parties did
not intend to create separate contracts. It was unsurprising that the parties
chose as they did to amortise the payments by dividing the putative annual fee
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79 Ventia submitted that it also altered the quantity of work that BSA was required
to do, from time to time. These alterations were significant as the specific work
for which BSA was entitled to payment was not specified in the Subcontract.
When coupled with the express provision in the Subcontract to the effect that a
particular volume of work was not guaranteed to BSA, they reflect the fact that
the Subcontract created a standing arrangement only. It was the work orders
that gave rise to individual contracts. Even if the work orders also served an
'administrative' purpose, that did not mean the documents lacked contractual
force. Where a work order was issued but BSA failed to perform the work,
Ventia did protest. Payment was never claimed for work that was not
performed under a work order.
80 BSA submitted that the payment claim was in respect of a single contract,
being the Subcontract Agreement. As regards Category B Works, work orders
were essentially billing or accounting documents, which were issued so that
Ventia’s SAP accounting platform could allow payment to be made. BSA was
obliged to carry out the Category B Works whether or not work orders were
issued, and that was the way that both parties administered the Subcontract.
BSA was obliged to carry out routine maintenance works because it was
obliged to carry out the “Services” in accordance with the “Services
Specification” (clause 2.1(a)), which included various specification documents
(see definition of “Services Specification” and Annexure 9). Those specification
documents, in turn, provided for regular (for example, six monthly or annual)
maintenance of assets. The “Services” include the “services set out in
Annexure 8”, which included the services set out in the relevant “Tender
Schedules”. The Tender Schedules was the list of sites which accompanied the
Subcontract. Further, where past consideration is no consideration (Agricultural
and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at
[96]), any work which BSA undertook to perform pursuant to the Work Orders
was work which it was already obliged to undertake under the Subcontract.
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Work orders did not call for BSA to do anything which it was not already
required to do. They did not, and could not, give rise to new contracts.
82 BSA further submitted that whether the issue of a work order created a
separate contract turned on whether, having regard to the mutual relations of
BSA and Ventia, there was an intention to create new legal relations upon the
issue of each work order, which was to be determined in all the circumstances
or having regard to “the whole relationship”: GEC Marconi Systems Pty Ltd v
BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50 at
[227]-[229] (Finn J). However, there is no need to resort to these principles
where the parties have removed all doubt by the express terms of the
Subcontract Agreement. The Court need not have to regard to the parties’
conduct, communications, or post-contractual conduct to divine the parties’
intentions as to the effect of a Work Order. Annexure 4 specifically provides
that Ventia will initiate the Service by issuing a Work Order. Clause (b) of
Annexure 4 provides that a separate agreement will come into existence each
time Ventia issues a Work Order.
83 BSA was only entitled to perform and claim payment for “Services” in response
to a “Work Order” issued by Ventia, where the “Services” included Category A
Works and Category B Works. The Subcontract provided that a separate
agreement came into existence each time Ventia issued a Work Order. It was
not in dispute that the total amount claimed in the payment claim was made up
of amounts referrable to multiple work orders issued under the Subcontract.
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An arrangement?
84 In the alternative, BSA submitted that if each Work Order gave rise to a
different contract, then that new contract remained part of one overarching
“arrangement” within the meaning of that term as used in the definition of
“Construction contract” in s 4(1) of the Act, being:
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Timecon Pty Ltd [2019] NSWSC 685 at [67]-[87] (Ball J). It is not necessary to
consider this question where one has a contractual regime in place. As Ball J
observed in Lendlease Engineering v Timecon at [68]:
It is plain that the SOP Act is not intended to affect the ultimate rights and
liabilities of the parties to whom it applies. Rather, its purpose is to provide a
mechanism by which contractors who do work in the construction industry, or
provide related goods and services, and are entitled to be paid for that work
are able to make progress claims and to have those claims paid promptly. The
purpose of the SOP Act is not to create an obligation to pay where one does
not otherwise exist. …
88 Here, the parties executed a Subcontract Agreement which gave rise, in due
course, to further contracts; each Work Order, when issued, gave rise to a
separate contract. That is, by and large, how the parties to the Subcontract
Agreement conducted themselves in the years which followed. What the Court
is being asked to do is overlook the contractual regime and identity an
“arrangement”. I am not minded to ignore the contractual regime to see
whether, perchance, there was something answering the description of an
“arrangement”. In other words, “The obligations of written agreements between
parties cannot simply be ignored or brushed aside:” Equuscorp Pty Ltd v
Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [35].
Section 34
89 Section 34 provides:
(1) The provisions of this Act have effect despite any provision to the
contrary in any contract.
(2) A provision of any agreement (whether in writing or not):
(a) under which the operation of this Act is, or is purported to be,
excluded, modified or restricted (or that has the effect of excluding,
modifying or restricting the operation of this Act), or
(b) that may reasonably be construed as an attempt to deter a
person from taking action under this Act,
is void.
90 BSA contended that clause 6.2(a) and clause (b) of Annexure 4 of the
Subcontract Agreement were void in respect of Category B Works as
prescribing requirements as to the form and content of statutory payment
claims which differed from the Act. Absent clause (b) of Annexure 4, BSA
would on have had an entitlement to serve a single payment claim in respect of
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the Category B Works: cf BRB Modular Pty Ltd v AWX Constructions Pty Ltd
[2015] QSC 218 at [50] (Applegarth J). Clause (b) of Annexure 4 unjustifiably
impeached the making of payment claims by preventing the service of a single
payment claim covering all of the Category B Works: cf Castle Constructions
Pty Ltd v Ghossayn Group Pty Ltd [2017] NSWSC 1317 at [51] (Stevenson J).
There was no legitimate justification for such a course, which did not facilitate
the statutory entitlement to progress payments: cf Castle Constructions at [51].
The manner in which the payment claims were to be submitted was wholly
impracticable given the relatively low amount of each work order and the
associated filing fees and adjudicator’s fees in respect of each payment claim.
The effect of Ventia’s approach was said to frustrate the evident purpose of the
statutory scheme.
92 Ventia submitted that section 34 will not assist BSA. The Act's effect was not
“excluded, modified or restricted” by giving effect to the parties' intention that
each work order gives rise to a separate contract. The Act applied with full
force to each of the contracts so created.
93 Whilst I do not demur from BSA’s summary of the authorities, the problem here
is that the Subcontract Agreement did not detract from BSA’s ability to exercise
its rights under the Act. The Subcontract Agreement said nothing on the
subject and imposed no conditions on BSA’s rights, such as a requirement to
submit a draft progress claim before serving it (Lean Field Developments Pty
Ltd v E & I Global Solutions (Aust) Pty Ltd [2014] QSC 293); to provide a
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statutory declaration two days before serving a progress claim, confirming that
all sub-contractors and suppliers had been paid (BRB Modular), or to require a
supporting statement by an engineer or surveyor confirming that the work had
been done (Castle Constructions). BSA was entitled, without restriction, to
serve a payment claim under the construction contracts in question. I do not
consider that the provisions of the Subcontract can be voided by reason of the
fees charged by adjudicators or lawyers or some imperative to make
adjudication applications as affordable as possible.
ORDERS
94 For these reasons, I make the following orders:
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