You’ve Been Served… Or Have You?
Posted on August 19, 2021
Sub-contractors and head contractors should be familiar with the Building and Construction Industry Security of Payment Act (Act). For subbies, it is a great way to get paid quickly, and for head contractors, the importance of providing payment schedules on time is paramount, in order to avoid having to pay claimed monies that are not actually due.
The recent decision of MGW Engineering Pty Ltd t/a Forefront Services v CMOC Mining Pty Ltd [2021] NSWSC 514 (MGW Engineering) considered service of payment claims made under s 13 of the NSW Act. As we will touch on below, the service provisions in the NSW Act are pretty similar to the service provisions in the South Australian Act.
MGW Engineering considered the concept of “personal service” on a company (subsection (a)), service by lodgement during normal office hours at the person’s ordinary place of business (subsection (b)), and service in accordance with provisions in a contract (subsection (e)).
Key Takeaways
MGW Engineering is a timely reminder that extra care must be taken in complying with the time limitation and service provisions under the Security of Payment Acts, as technical mistakes can prove very costly and can have significant consequences.
In certain circumstances, documents (like payment claims and payment schedules) served after business hours will be taken to have been served the following day. This includes that subsection (e) in the service section of the Act, can mean that a contract may provide for notice to be effective the next day if served after a certain time of day, and such a provision does not contravene the “no contracting out” provisions of the Act. This is important as we see this kind of clause used frequently in construction contracts.
Facts
The plaintiff (MGW) entered into four contracts with the defendant (CMOC) relating to a copper and gold mine in NSW. On 3 February 2021 at 5.15pm, an employee of MGW handed four payment claims totalling $6,161,020.35 to an employee of CMOC at the mine. On the next day, MGW issued further copies of the payment claims to CMOC via Aconex.
The primary issue for the Court to decide was whether the payment claims were served on 3 or 4 February 2021. This was critical as CMOC had provided their payment schedules on the 11th business day after 3 February 2021 (the NSW Act allows 10 business days for payment schedules to be provided). If CMOC had not served their payment schedules in time, then MGW would have been entitled to judgment for the full amount of $6,161,020.35. If CMOC had provided their payment schedules in time, then MGW would only have been entitled to no more than $180,912.05. Less than 1 day’s difference in time of service - $6 million difference in result!
The Courts have held in the past that the timing of service under the Act is critical.[1]
In MGW Engineering, the Court held that MGW had not properly served the payment claims on 3 February 2021, and so it was not entitled to payment of the $6 million amount since the payment schedules had been provided by CMOC in time. We have considered below what this case means for the different methods of service under the Act.
The Legislation
Section 31 of the NSW Act states:
31 Service of documents
- 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
(c) by sending it by post addressed to the person’s ordinary place of business, or
(d) by email to an email address specified by the person for the service of documents of that kind, or
(d1) by any other method authorised by the regulations for the service of documents of that kind, 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. - Service of a document that is sent to a person’s ordinary place of business, as referred to in subsection (1)(c), is taken to have been effected when the document is received at that place.
- 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.
- In this section—
- document includes written notice or determination.
- serve includes give, send or otherwise provide.
Section 34 of the SA Act is in substantially similar terms, although it does not provide for service via email. The term “serve” is not defined in the SA Act, and the SA Act refers to “notice” instead of “document”.
Service
MGW submitted that the payment claims were served in three different ways on 3 February 2021:
by delivering them personally in accordance with subsection (a);
by lodging them during normal office hours at CMOC’s ordinary place of business in accordance with subsection (b); or
in a manner provided under the contracts in accordance with subsection (e).
Personal delivery (subsection (a))
The concept of “personal” service or delivery on a company is a tad artificial – because a company is not a natural person. The Court observed that for a document to be personally served on a company, more must be done than leaving that document with an employee at any location within the company’s business premises. A step must be taken to bring the document to the attention of a relevantly responsible person within the company.
The payment claims were marked for the attention of two company representatives, but were not given directly to those representatives on 3 February 2021. The Court found that, based on the evidence before it, the payment claims had not been served until 4 February 2021, when they eventually came to the attention of those representatives.
You can serve documents/notices under the Act under other relevant service laws. On that note Stevenson J also made reference to s 109X of the Corporations Act 2001 (Cth), which allows a document to be served on a company by leaving it at the company’s registered office or delivering a copy personally to a director of the company. In MGW Engineering, MGW did not serve the payment claims using either of these methods.
If MGW had complied with s 109X, a document can be “received” even if it did not come to the notice of the person authorised to deal with it. The document need only arrive at the registered office or place of business during normal office hours.[2]
Lodged during normal office hours (subsection (b))
Generally, service at any time of the day is regarded as service on that day.[3] However, subsection(b) specifies that service is to take place “during normal office hours”.
The Court in MGW Engineering held that the document had not been “lodged” within the meaning of s 31(1)(b) until it came to the attention of responsible persons on 4 February 2021.
Although the mine operated continuously, the Court found that “office hours” meant the customary working hours of administrative or clerical staff.[4] The Court considered evidence in relation to the ordinary working hours of staff at the mine and found that normal operating hours were between 7- 7.30am and 4-4.30pm. So, the payment claims were not delivered within “normal office hours”.
Manner provided for under the contracts (subsection (e))
Clause 47.2 of the contract provided that where a notice is sent or is delivered later than 4pm, it is taken to have been given or made at the start of business on the next business day. MGW submitted that this requirement is void because of the “no contracting out” section of the NSW Act (s 34) as clause 47.2 purports to modify s 31 of the NSW Act. The Court rejected this submission and the payment claims were accordingly taken to have been served at the commencement of business on 4 February 2021.
This article is general in nature, is based on the law as at the date of publication, and is not intended to provide legal advice to your specific situation. If you have an issue or particular payment claim issue that you would like to discuss, please give us a call and we can provide legal advice to suit your needs. Lynch Meyer’s Construction, Infrastructure and Engineering Team frequently deal with all enquiries in relation to Security of Payment laws, including payment claims, payment schedules and adjudications. Our Senior Associate, Patrick Kerin, is the author of Thomson Reuters’ legal commentary on the South Australian Security of Payment Act.
[1] Emag Constructions Pty Ltd v Highrise Concrete Contractors (Aust) Pty Ltd [2003] NSWSC 903 at [38].
[2] Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 at [62], [63].
[3] See Mohamed v Farah [2004] NSWSC 482 at [52]-[54]; Taylor Projects v Brick [2005] NSWSC 439 at [20]-[22].
[4] Lane v Arrowcrest Group Pty Ltd (1990) 27 FCR 427.
