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Recent Supreme Court case brings focus to electronic delivery of documents in security of payment proceedings

Newsflash 21 March 2017

The recent New South Wales Supreme Court Case of Parkview Constructions v Total Lifestyle Windows delivered in March of this year underscored some lessons for delivery of documents particularly in an electronic format when pursuing or responding to a claim in the security of payment area.  Because of the similarity of the legislation, the case is likely to be persuasive in Queensland and is consistent with previous Queensland decisions.

Facts

As the Judge in this case pointed out the course of events giving rise to the dispute could probably be described as a “litany of errors”.  Those errors unfortunately led to questions of validity of the application for adjudication itself and in turn the jurisdiction of the adjudicator to determine the matters before him. 

The subcontractor was engaged to supply and install glass windows at the Woolooware Bay Town Centre.  An amount of over $600,000 was claimed and a payment schedule was delivered at Nil.  The deadline within which the subcontractor was to apply or make an application for adjudication was 8 November 2016.  The Authorised Nominating Authority (ANA) used a system referred to as “Hightail” providing cloud storage that enabled users to upload, share and download files.  The adjudication application was of a significant size and included a significant number of statements and submissions by the subcontractor.  Material was uploaded to the site on 8 November by way of two uploads one containing an initial submission and then a later one containing amended submissions.  

In addition the subcontractor was said to have served the respondent on the same date with a letter enclosing a USB stick and drawing the recipient’s attention to the USB's general contents.  A hard copy was to follow in later days.

The errors in this procedure were identified as follows:

  1. The witness statements were not contained in the material uploaded to Hightail.
  2. The folders delivered to the respondent did not contain the revised submissions but only the original ones.
  3. The volumes of material delivered to the adjudicator did not include the revised submissions but only the original ones and indeed the respondent never received the original submissions.
  4. The material received by the adjudicator contained some documents that were not on the USB and the USB received by the respondent contained some documents that were not included in the folder received by the adjudicator.

The USB delivered to the respondent was only opened on 11 November, while it arrived by post on 9 November.  The response was lodged on 17 November.  It was therefore pivotal as to when exactly it could be said that the time began to run to lodge a response. Was it the 9 November date or 11 November date (5 business days from receipt of the adjudication application)? 

The adjudicator refused to take the response into account,  having decided, the response had been served at a time beyond the 5 days from the USB arriving by post.  The adjudicator found for the applicant in a sum of over $530,000.  The application before the Court sought to have declared void the adjudication on the grounds that it was infected by a lack of jurisdiction or a denial of procedural fairness (the adjudicator not having taken into account any response by the respondent).

Decision

Parkview Constructions submitted in the application before Court that there was no jurisdiction for the adjudicator as the response was made within time and he should have taken that into account in his determination.  It was further submitted there was no jurisdiction as it was a pre-requisite to proper jurisdiction to have service of the same application that the adjudicator received. 

The Court held it was mandatory that service of the application on the respondent occurred and that was an essential element of the working of the Security of Payments Act (NSW).  It was held the differences between the two applications were not trivial and as a result there was no issue of discretion that the Court should exercise.  There were significant differences in the content and the number of statements as well as the submissions made (as between the application received by the adjudicator and the application received by the respondent).

As to whether the service of the USB was sufficient to be “in writing delivered” the question arises as to whether delivery was when the submissions were opened or just physically delivered via USB.  The court held that Parkview Constructions had to have been aware of its contents, and on the evidence, the Court was satisfied that that did not occur until the documents were accessed via USB.  

Consequences and tips and traps

The Acts Interpretation Act (QLD) has similar provisions in respect of the definition of “writing”.  The decision of Conveyor & General Engineering v Basetec 2014 before Justice McMurdo of the Supreme Court reached a similar finding in relation to Dropbox material that had similar catastrophic effects for an applicant.  In that case it was held that the Electronic Transactions (Queensland) Act did not authorise service of an application inclusive of the Dropbox material as there had been no agreement for it to be electronically served.  Importantly the Electronic Transactions (Queensland) Act did not provide for the Dropbox material to be defined as “electronic communication” which would have allowed such material to be delivered via the Dropbox.  The Court instructively indicated that “although the actual service does not require the recipient to have read the document, there must be something in the nature of receipt”.  Having the matter accessed by Dropbox did not amount to something in the nature of receipt and did not result in the party becoming aware of the content of the document.  As a consequence  similarly the Court found the application unserved.

Accordingly parties need to be aware of the provisions of section 103 of the Building and Construction Industry Payments Act that allows parties to contract on matters of service and notice.  If it is intended that certain electronic communications be used, this should be outlined in the contract so that difficulties such as this are avoided.  If a provision in the contract does not allow for delivery in electronic format such as by Dropbox or USB there may be some real difficulties in proving timing of receipt and understanding of what was in the documentation.

Obviously parties during last minute arrangements are apt to make mistakes in relation to content of material and the consistency between what is in the application served as opposed to what goes to the adjudicator.  It goes without saying that that sort of urgency should be avoided in the first instance to avoid mistakes and there needs to be enough time for parties to calmly review the material delivered and its consistency.

Parties cannot assume that because a particular mode of delivery has been used previously during the course of contractual correspondence, that this process will continue to be acceptable when the matter turns to a dispute.


Tony Mylne, Partner
Brisbane

 

Newsflash 21 March 2017
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