CONSTRUCTION Alert: Fraught with danger: Exchanging documents under security of payment regimes electronically 

Apr 10 2017

Publications

The Supreme Court of New South Wales has considered whether an adjudication application delivered by USB constituted valid service under the Building and Construction Security of Payment Act 1999 (NSW) (SOP Act) in the decision in Parkview Constructions Pty Ltd (Parkview) v Total Lifestyle Windows Pty Ltd (Total) [2017] NSWSC 194.

The SOP Act provides that adjudication applications must be in writing, and served on the respondent.  Traditionally, claimants using the security of payment legislation in all jurisdictions have tended to supply documents under the legislation by way of printed hard copy.  A more recent trend has been the exchange of documents under the security of payment regimes by various electronic delivery modes, and it is not without controversy.

The finding of the Court supports the view that service by USB is ineffective, at least until the documents on the USB are accessed (which may be later than the date for service).

Lodgement of the adjudication application with the authorised nominating authority

On 8 November 2016, the legal and contracts officer at Total lodged an adjudication application under the SOP Act with ABC Dispute Resolutions Service (ABC DRS).  It did so by:

  • uploading the adjudication application to a cloud-based file storage and sharing provider;
  • providing ABC DRS with a link to the files stored with the file storage and sharing provider; and
  • subsequently updating its adjudication application submissions by replacing the originally uploaded submissions later the same day (and still within time).

On 10 November 2016, Total delivered a printed hard copy of the adjudication application to ABC DRS.  Notably, the printed copy contained the revised adjudication application submissions and witness statements which inadvertently had not been uploaded by Total to the cloud-based file storage provider.

Service of the adjudication application on Parkview

Total then provided a copy of the adjudication application to Parkview.  It did so by copying the adjudication application onto a USB.  The USB was sent to Parkview’s physical address by express post with a covering letter dated 8 November 2016.  The USB was received by Parkview in its post box in the afternoon of 9 November 2016, but was not placed into a computer and its contents examined until 10 November 2016.

The USB version of the adjudication application provided to Parkview contained the revised submissions as well as the witness statements that had not been uploaded to the cloud-based file storage provider.

Additionally, Total served a further printed hard copy of the adjudication application on Parkview on 11 November 2016.

Effect on time frames under the SOP Act

Under the SOP Act, Parkview’s adjudication response was required to be lodged within 5 business days of receiving a copy of the adjudication application.   Parkview lodged its adjudication response with ABC DRS on 17 November 2016.  The adjudicator determined that the time in which Parkview had to lodge the adjudication response began on 9 November 2016 (when the USB was delivered to Parkview’s post box) and as a result disregarded the adjudication response in the adjudication decision on the basis that it was out of time.

The Court’s decision

Parkview applied to the Court for orders quashing the adjudication decision on the basis that the adjudicator had improperly disregarded the adjudication response and thereby denied Parkview procedural fairness.  The Court was required to determine whether Parkview received the application on 9 November when the post arrived, or if it received the application on 10 November when the USB was opened.

The Court found that service by USB is not ‘in writing’ in accordance with the legislative requirements.  It does not represent or reproduce words in visible form – ‘one only sees a small piece of plastic, perhaps with some circuitry’ which, only if actioned, is capable of representing the appropriate visible form.

The Court likened service by USB to that of an email transmission, where it cannot be said that service is effected until the email has been accessed.  For service to be effective, the person served needs to become aware of the contents of the document.  In the case of a USB, this requires a person to open it and view the files.

The decision of the Court is in line with a recent Queensland decision, Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2015] 1 Qd R 265, in which it was held that documents in a Dropbox file were not served at least until the Dropbox site was accessed, the file was opened, and probably not until its contents had been downloaded to a computer at the respondent’s office.

Separately, the Court determined that Total erred by failing to provide an identical copy of the adjudication application that ultimately was provided to the adjudicator to Parkview.  The Court said [59]:

The Act contemplates that it is the same written words which are to be copied to the respondent and, for that matter, to be referred by the authorised nominating authority to an adjudicator. Compliance with this requirement is an essential preliminary for the decision making process for which the Act provides.

In light of the Court’s finding in relation to the delivery of the adjudication response in time, the Court opted not to make a decision on whether the differences in the adjudication application material would have constituted a denial of natural fairness, however the Court found that the differences were not trivial.

The position in Queensland

In Queensland, the Building and Construction Industry Payments Act 2004 (Qld) does not specifically state, as the NSW SOP Act does, that an adjudication application must be ‘in writing’.  It does, however, state under section 21(3)(a) that an adjudication application must be in the ‘approved form’, which means a Form 6 v3 010816 which is published by the Queensland Building and Construction Commission.   A full copy of the application and submission are to be served on the respondent after lodgement with the adjudication registry in Queensland, and proof of service of the application and all submissions on the respondent should be provided to the adjudicator.

Implications

When serving an adjudication application, best practice suggests that service should be made in hard copy, to the respondents during normal business hours.   Service by USB, email, Dropbox and similar technologies may expose a party to an allegation of late service, and the results can be fatal.  Service using such methods will only be effected once the documents contained therein are viewed and/or downloaded, which does not provide certainty to the applicant as to when service will occur.

It is also critical that documents copied and provided under the security of payment regimes must be identical in every respect to documents provided to other relevant parties.  Discrepancies between documents may very well lead to allegations of procedural unfairness which, if made out, have the potential to undo adjudication decisions.

——————-

Andrew Kelly has been recognised in the 2017 Expert Guide to Construction and Real Estate in Australia, one of only three Queensland based construction lawyers to be recognised.

——————-

For further information please contact:

Andrew Kelly | Partner | +61 7 3338 7550 | akelly@tglaw.com.au
Tom McKillop  | Senior Associate | +61 7 3338 7530| tmckillop@tglaw.com.au
Claire Harding | Lawyer | +61 7 3338 7932 | charding@tglaw.com.au