Construction and Infrastructure case note: Deemed service of payment claims is valid in NSW

May 24, 2021

Earlier this month, Stevenson J of the Supreme Court of New South Wales (Court) held, in MGW Engineering Pty Ltd t/as Forefront Services v CMOC Mining Pty Ltd [2021] NSWSC 514, that a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW SOP Act) was deemed to be served on a date subsequent to the date on which the payment claim was actually handed by the claimant to the respondent.

In this case note, we briefly summarise how the Court arrived at that decision and provide commentary on the potential effect of the decision.

Background

MGW Engineering Pty Ltd, trading as Forefront Services (Forefront) had entered four contracts (the Contracts) with CMOC Mining Services Pty Ltd (CMOC) to provide various services at the Northparkes copper and gold mine (the Mine) at Goonumbla in central New South Wales.

The Contracts were, relevantly, in the same form.

Service of the payment claims

At 5.15 pm on 3 February 2021, an employee of Forefront handed four payment claims made under section 13 of the NSW SOP Act to an employee of CMOC who was then on duty at CMOC’s ‘Access Control Room’ at the Mine. The employee was not a director or secretary of CMOC and the ‘Access Control Room’, and the Mine itself, was not the registered office of CMOC.

The four payment claims were for a total amount of $6,161,020.35.

Service of payment schedules

Section 14 of the NSW SOP Act requires respondents to provide payment schedules within the later of the time required by the relevant contract or within 10 business days after the relevant payment claim was served.

CMOC served its payment schedules on 18 February 2021.

Question to be determined

The question for the Court to determine was whether the payment claims were served on 3 February 2021 or, because the payment claims were not handed to CMOC until 5:15 pm, whether service was deemed to occur on 4 February 2021.

If the payment claims were served on 3 February 2021, then the payment schedules were provided outside the time limited specified in section 14(4)(b)(ii) of the NSW SOP Act, which would entitle Forefront to judgement in the sum of $6,161,020.35 (by reason of section 14(4) of the NSW SOP Act).

However, if the payment claims were not served until 4 February 2021, the payments schedules would be served within the time limited specified in the NSW SOP Act and Forefront would be entitled to no more than $180,912.05.

The date of service of the payment claims was therefore of critical importance.

Service of documents under the NSW SOP Act and the Contracts

Section 31 of the NSW SOP Act provided (among other things):

    (1) Any document that by or under this Act is authorised or required to be served on a person may be served on the person:
      (a) by delivering it to the person personally; or
      (b) by lodging it during normal office hours at the person’s ordinary place of business; or
      (e) in the case of service by a party to a construction contract on another party to the construction contract--in the manner that may be provided under the construction contract.
    (3) The provisions of this section are in addition to, and do not limit or exclude, the provisions of any other law with respect to the service of documents.
    (4) In this section:
      'document' includes written notice or determination.
      'serve' includes give, send or otherwise provide.
      Clause 47.2 of the Contracts provided (among other things):
      ‘47.2 Notices deemed given
      A Notice will be taken to be duly given:
        (a) in the case of delivery by hand, when delivered;
        ...
        but if the result is that a Notice would be taken to be given or made on a day that is not a Business Day or the Notice is sent or is [delivered] later than 4.00pm (local time) it will be taken to have been duly given or made at the commencement of business on the next Business Day.’

Court’s decision

The Court held as follows (summarised):

  1. In considering the requirements of section 109X of the Corporations Act 2001 (Cth) and section 47.2 of the Contracts, the payments claims were not served ‘personally’ on CMOC unless and until they came to the attention of the relevant responsible person within the corporation.
  2. Although the Mine operates continuously 24 hours a day, 7 days a week and every day of the year, section 31(b) of the NSW SOP Act concerns ‘office’ hours (being the hours that the administrative or clerical staff of the corporation normally keep) and not ‘operating hours’. As the normal office hours concluded around 4.00 or 4:30 pm, delivery of Payment Claims occurred outside of those normal office hours.
  3. In circumstances where Forefront contended that it served the payment claims ‘in the manner provided’ by clause 47.2 of the Contracts, for the purposes of section 31(1)(e) of the Act, such delivery occurred after 4:00 pm and service is taken to be effected the next day.
  4. Deemed service, in accordance with the Contracts, does not ‘modify’ the operation of section 31(1) or section 31(1)(e) of the NSW SOP Act. Rather, it gives effect to section 31(1)(e).

Take home message

It is of critical importance that claimants have regard to the provisions of the NSW SOP Act, the relevant construction contracts and, if relevant, the Corporations Act 2001 (Cth) when serving payment claims under the NSW SOP Act.

Had Forefront delivered its payment claims on 3 February 2021 in accordance with section 109X of the Corporations Act 2001 (Cth), or delivered its payment claims 1 hour and 16 minutes earlier, the Court’s decision may have been dramatically different.

Although this decision was made under the NSW SOP Act, it may still have an impact on future Victorian adjudications insofar as they concern service under section 50(1)(e) of the Building and Construction Industry Security of Payment Act 2002 (Vic) and equivalent provisions of a construction contract.

More information

To learn more about the decision, or for advice, please contact Darren Cain, Principal Lawyer and Head of Construction and Infrastructure, on (03) 8600 8835 or dcain@kcllaw.com.au, or Dominic Brown, Associate, on (03) 8600 8851 or djbrown@kcllaw.com.au.

Author

This Construction and Infrastructure case note was authored by Dominic Brown, Associate.

Note: This update is a guide only and is not intended to constitute legal advice.

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