WHAT’S NEW IN THE SECURITY OF PAYMENT WORLD?

The NSW Building and Construction Industry Security of Payment Act has spawned a raft of judgments since it commenced in 1999. The legislation has now been adopted in different forms across all States and Territories and some other countries. It is essential that all building practitioners maintain an awareness of the recent judgments and divergence of judicial opinion. Adjudicate Today publishes a comprehensive annotation service of the NSW Act, which also addresses judgments from other jurisdictions. The following is a synopsis of some recent judgments taken from the regular updates issued.

The synopsis is prepared by the author of the annotated service, Scott Pettersson. Scott has been involved with the Act since 1999 and, as the former CEO of LEADR, operated an ANA. He has been engaged by State Governments to advise on the inception of the Act and to train Adjudicators. He is a Senior Adjudicator with Adjudicate Today.

High Court

Harlech Enterprises Pty Ltd as trustee for Harlech Family Trust v Beno Excavations Pty Ltd trading as Benex Pipelines & Anor [2022] HCATrans 228

This was an application for special leave to appeal the decision of the ACT Court of Appeal. Her Honour Gordon J, following detailed submissions, did not allow the application to proceed. The application was pressed on grounds that the NSW and ACT Courts of Appeal had found differently with regard to 'issue estoppel' being applied by Adjudicators. The outcome appears to be:

• In the ACT 'issue estoppel' and potentially all other forms of estoppel are not to be applied by an Adjudicator. Rather an alternate of abuse of process is the appropriate construction.
• In NSW, issue estoppel can be applied to support an Adjudicator's reasoning.

NSW Court of Appeal

Allianz Australia Insurance Ltd v Probuild Constructions (Aust) Pty Ltd [2023] NSWCA 56

The court considered matters regarding the disbursement of funds which followed from a Victorian adjudication. In the various challenges pressed in Victoria was a challenge that Adjudicator's were exercising judicial power. The court observes that Adjudications are enforceable and no judicial power is exercised by Adjudicators (at paragraph 5).

NSW Supreme Court

Ceerose Pty Ltd v A-Civil Aust Pty Ltd [2023] NSWSC 239

This challenge related to two determinations for two different sites (York Street $2,045,453.97 and Elizabeth Bay $349,324.36). Each application was determined by the same Adjudicator. Certificates had been issued and a District Court judgment issued. It was accepted the lower court judgment would not be enforced. The Respondent sought to have the determinations quashed where the claimant supported them or alternatively submitted any errors should be excised reliant on section 32A of the Act.

The determination was found to have jurisdictional flaws (not valuing the work on its merits, failed to consider the reason for withholding payment (pressed in both the Payment Schedule and Response). In relation Elizabeth Bay grounds 1, 2, 4, 5 and 6, challenging the determination, were found by the judge.

Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 2) [2023] NSWSC 345

The Adjudicator denied the Respondent procedural fairness. Richmond J exercised power under section 32A to reduce the sum to remove the amount awarded in breach. The Adjudicator determined that the clause relating to the release of retention was void as it offended the 'paid if paid' provisions as it was based on the operation of another contract or entitlement which arose because of the termination of the contract. These were not arguments raised by the parties and no further submissions were requested.

Further, when exercising section 32A, the court is not empowered to adjust the Adjudicator's fees.

Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd; In the matter of Kennedy Civil Contracting Pty Ltd [2023] NSWSC 99

This is an interesting case seeking to manage the loss of entitlement created by section 32B(1) of the Act (no access to SOP if the Claimant in liquidation). Kennedy entered a Deed of Company Arrangement rather than liquidation, and in the Deed required any revenues won through the SOP were to be held in trust pending the final resolution of the rights. Justice Ball agreed and in a well-reasoned judgment, observed that a DOCA is not liquidation and the funds would be preserved. Therefore, the SOP enforcement option for no payment & no payment schedule must succeed. [2019] NSWCA 11

NOTE:

1. Richard Crookes may appeal.
2. Section 32B(1) rendered Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2019] NSWCA 11 of no force.

Ratcliffe v Horizon Glass & Aluminium Pty Ltd [2023] NSWSC 196

This is a dispute in relation to contract formation, and, subsequently, who were the parties to the contract. It appears a debt recovery entity undertook an online search and identified the incorrect party, and the claim was progressed against the individual rather than the company. This similarly persuaded the Adjudicator, who found the individual to be the correct respondent. Given the existence of a construction contract between the parties to the Adjudication is an essential jurisdictional fact, the determination was quashed. The complexity of the identity is best described by Her Honour Rees J at paragraph 3:

3. The key question in this case is who were the parties to the construction contract. As is sometimes the case, the modest amount owed to Horizon Glass bore no proportion to the complicated factual and legal issues which arose. In short, the case resembled a law school exam on contract law – including when a contract is formed and who are the parties – and on one view may be something of a contractual rarity: a unilateral mistake as to the contracting party in the absence of a fraudulent misrepresentation.

A-Civil Aust Pty Ltd v Meso Solutions Pty Ltd [2023] NSWSC 372

Rodrigues v customOz Services Pty Ltd [2023] NSWSC 379

The reasons published confirm existing case law in that:

• A Payment Claim can be withdrawn without extinguishing the Reference Date (at 29 - 37)
• A without prejudice document will generally not be a Payment Schedule (at 50).

Castle Constructions Pty Ltd v Napoli Excavations and Civil Pty Ltd [2023] NSWSC 348

The Adjudication Determination was quashed on the basis that the Adjudicator's reasons did not disclose consideration of a reason present in the Payment Schedule and the subject of further submissions in the Adjudication Response.

Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd [2023] NSWSC 309

In this matter the Respondent alleged a jurisdictional failure in both the Payment Schedule and Adjudication Response. The Adjudicator stated he was not empowered to determine a jurisdictional issue as he was constrained by section 22(1) of the Act. However, he subsequently found the Payment Claim did comply with section 13 (at paragraphs 14 and 15). The court found the documents were validly issued payment claims and schedules. It also appears the court suggested section 22(2) does require consideration of a document being a payment claim or not (this being a jurisdictional issue) (at paragraph 47). The Determination was upheld.

A further issue related to the insolvency of the Claimant (the Payment Claim was issued by the Administrator). Ultimately, the matter of securing a stay was avoided as it had not been pressed in pleadings and the parties had not prepared submissions.

ACT Supreme Court

Nova Builders Pty Ltd v Civil & Civic Corporation Pty Ltd [2022] ACTSC 209

This case related to the same work as an earlier dispute with Beno Excavations. At issue was could an Adjudicator determine that a debt already paid into court be again adjudicated, albeit with a different party? In this unusual case, Nova was the principal, Civil & Civic (C & C) was the main contractor and Beno excavations was the subcontractor. Both Beno and C & C pursued payment for the same work. The consequence was that Nova had already paid into court the disputed amount following an application by Beno. They now faced (and had decided by the Adjudicator) that they also had to pay C & C.

Nova had commenced an action of Interpleader naming both Beno and C & C and paid the disputed funds into court. Interpleader is an action taken when a party understands it is responsible for a payment but cannot safely determine whom to pay.