BCFK Holdings Pty Ltd v Rork Projects Pty Ltd [2022] NSWSC 1706

Andrew Hales  |  Laura-Rose Lynch  |  Jack McFadden

Key takeout

A payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) which is not effectively served under the SOP Act by being delivered to the superintendent, but which ultimately comes to the attention of and is read by the relevant party, will then be taken to have been validly served under the SOP Act.

Additionally, after a construction contract is terminated, only one payment claim may be served under the SOP Act.

Facts

BCFK Holdings Pty Ltd (principal) and Rork Projects Pty Ltd (builder) entered into a construction contract relating to a childcare centre in Balmain, NSW. The contract was terminated on 12 May 2022.

On 12 July 2022, the builder delivered a payment claim to the superintendent for the project (first payment claim). The superintendent was not authorised to accept service of documents under the contract. Shortly after receipt, the superintendent notified the sole director of the principal of the delivery of the first payment claim.

On 18 July 2022, the superintendent forwarded a link to the principal who opened the link on or about that time. The principal then caused a payment schedule to be served on the builder (first payment schedule). The first payment schedule noted that the payment claim was not a valid claim under the SOP Act as it was not served on the principal, who is the person who is or may be liable to make the payment under section 13(1). The first payment schedule also made detailed submissions on the question of whether or not the first payment claim was a ‘final’ payment claim for the purposes of the contract.

On advice from its solicitor, the builder decided not to proceed to adjudication on the first payment claim as there was doubt as to whether it had been effectively served under the SOP Act. Instead, the builder validly served a further payment claim on the principal (second payment claim). The principal served a payment schedule in response (second payment schedule).

The matter then proceeded to adjudication and an adjudicator’s determination was made in favour of the builder for the sum of $685,915. The principal challenged the adjudicator’s determination on a number of grounds including that the second payment claim was invalid as the first payment claim was validly served when it came to the attention of the director of the principal.

Decision

The principal’s challenge to the adjudicator’s determination was successful as the second payment claim was invalid and therefore the adjudicator’s determination was void.

The court first considered whether the first payment claim was validly served so as to enliven the SOP Act. The court considered various cases including the presiding judge’s own decision in Piety Constructions Pty Ltd v Hville FCP Pty Ltd [2022] NSWSC 1318. You can read our update on this case: It is not always as it is deemed – service under the SOP Act  – Construction Law Made Easy. The court also considered the intention of the SOP Act – to facilitate speedy resolution of disputes concerning construction contracts.

Despite being initially served incorrectly on the superintendent as opposed to the principal, it constituted valid service, as the first payment claim ultimately came to the attention of the principal on 18 July 2022, and therefore triggered the operation of the SOP Act at that time.

The court also considered the proper interpretation of section 13(1C) of the SOP Act, which provides that ‘[i]n the case of a construction contract that has been terminated, a payment claim may be served on and from the date of termination.‘ The court found that it was parliament’s intention that, after a construction contract has been terminated, only one payment claim may be served.

The contract was terminated on 12 May 2022. Therefore, as the court had found that the first payment claim was served on the principal on 18 July 2022 and the effect of section 13(1C) is that only one payment claim may be served after termination of the contract, the builder was not able to serve the second payment claim. As a result, the adjudicator had no jurisdiction to adjudicate on the matter and the determination must be quashed.

The court did not agree with the builder’s allegation that the principal had engaged in misleading and deceptive conduct because it had induced and/or prevented the builder from making an adjudication application for the first payment claim in circumstances where the principal’s position on that point later changed. The court found that this representation did not play a material role in the decision taken by the builder not to proceed to adjudication on the basis of the first payment claim, as it was rather the advice of the builder’s solicitor which guided this decision.