Construction Law - BIF ACT Series - Chapter 3 Progress Payments - Back to Basics Adjudication - #2

This is the second in a series of articles discussing the ABC’s of the adjudication process and you’re in luck, this one is our shortest yet (jokes). If you missed our first article, you can catch up here.

As before, the words that appear in italics in these articles have special meaning. In most cases they will be words or phrases that are specifically defined in the Building Industry Fairness (Security of Payment) Act 2017 (“BIF Act”).

Throughout the adjudication process under the BIF Act, there are specific actions that must be taken within strict time frames by the claimant or the respondent, relevant to their respective roles in the process. In the first article we mentioned that a payment schedule must be served within 15 business days. The term ‘business day’ is a defined term in the BIF Act and knowing what constitutes a business day and properly calculating time frames for each of the steps in the adjudication process is critical to ensure the strict time frames are complied with. No less critical is the proper service of the documents required to be served as part of the adjudication process. Serving a document improperly or outside the time frames permitted, be it a payment claim, payment schedule, adjudication application or adjudication response, can lead to an adjudicator finding the adjudication application invalid or worse, to an adjudicator deciding the adjudication application and committing jurisdictional error in doing so. The latter could result in a claimant finding themselves a party to a Supreme Court application to have the adjudicator’s decision declared void. Although it sounds like common sense, determining a business day and the correct method and time of service of a document can be more complex than you would think.

This article will detail the nuances in defining a business day and how to properly serve a document within the required time frames stipulated in the BIF Act. Our next article will discuss what a reference date is, how it arises and why it is so important to the adjudication process under the BIF Act.

Backto basics: What is a business day?

The term  ‘business day’ is defined in Schedule 2 of the BIF Act as follows:

business day does not include –

1. a Saturday or Sunday;
2. public holiday, special holiday or bank holiday in the place in which any relevant act is to be or may be done; or
3. any day occurring within any of the following periods –
   
   
4. 22 to 24 December;
5. 27 to 31 December;
6. 2 to 10 January.

So how does that work? Well let’s usethe following scenarios as examples:

Scenario 1

• Subcontractor serves a payment claim on the Head Contractor on 19 December 2018. Thesubcontract agreement doesn’t state a period within which a payment schedule must be served so unders76 of the BIF Act, the HeadContractor has 15 business days toserve a payment schedule on theSubcontractor.
• To work out the date of the last day on whichthe Head Contractor can serve the paymentschedule one must count the businessdays forward from the date of service, but not counting the date ofservice.
• Therefore the first of the 15 business days will be 20 December 2018and the remaining business days willbe 21 December 2018, 11, 14 to 18, 21 to 25 and 29 to 30 January 2019. Thattakes into account the intervening weekends, public holidays and the daysexcluded by subparagraph (c) of the definition.
• Therefore, the last day on which the HeadContractor can serve the payment scheduleis 30 January 2019.

Scenario 2

• The Head Contractor (who has its office inBrisbane CBD) serves a payment claimon the Principal on 10 August 2019. The head contract doesn’t state a periodwithin which a payment schedule mustbe served so under s76 of the BIF Act,the Principal has 15 business days toserve a payment schedule on the HeadContractor.
• To work out the date of the last day on whichthe Head Contractor can serve the paymentschedule, one must count the businessdays forward from the date of service, but not counting the date ofservice.  However, there is an extracomplexity here. The payment claimwas served on 10 August 2019, which is a Saturday. So that begs the question asto whether service of the payment claimwas effected on the Saturday and the first day of the 15 business day periodfor serving the payment schedule isMonday 12 August 2019, or is service of the paymentclaim deemed to have occurred on 12 August 2019 and the first day of the 15business day period for serving the payment schedule is Tuesday 13 August2019. The correct answer will depend upon the particular construction contract at issue. If the contract does not prohibitservice of a payment claim on aweekend, service will likely be effected on the Saturday. However, if the contractprohibits service of a payment claimon weekends, it may be the case that service will be effective on the followingMonday. Although, even that may not be the case if, for example, 10 August 2019was the last day of the 28 days after the end of the contractual defectsliability period referred to in section 75(3)(a) of the BIF Act. In that case the clause of the contract prohibitingservice on a weekend may be deemed void under s200 of the BIF Act. There is no general answer that can be applied to thisquestion. It will depend upon the particular circumstances of the case.   
• For the purposes of our scenario, we willassume service of the payment claimis effective on Saturday 10 August 2019. The first of the 15 business days willbe 12 August 2018 and the remaining business days will be 13, 15 to 16, 19 to23, 26 to 30 August 2019 and 2 September 2019. Note that location specific public holidays can alsothrow a spanner in the works, especially local show days. That takesinto account the intervening weekends and the exclusions in subparagraph (b) ofthe definition. In this case, that is 14 August 2019 because that date is theBrisbane Ekka show holiday, which is a public holiday or special holiday inBrisbane which is where the paymentschedule must be served.
• Therefore, the last day on which the Principalcan serve the payment schedule is 2September 2019.

It is important you calculate time frames carefully. The BIF Act does not forgive. If you are late to serve a document, even by 1 minute, it is invalid.

Asindicated above, the calculation of the relevant times for service of documentsunder the BIF Act can also beaffected by the terms of the constructioncontract at issue. Contracts often have their own definitions of ‘days,‘working days’ or business days’ and that can have an effect on calculating thedate by which a document must be served. Notably this can be relevant if the contractprovides a shorter period for giving a paymentschedule or determining the due date for a progress payment.

Onefurther point to make about business daysand the doing of an act required by the BIFAct within the periods specified is in respect to the time on each business day by which the act must bedone. Other than the lodgement of an adjudicationapplication with the registrar(QBCC), which must be done by 5pm on a businessday, anything that must be done on a businessday must be done before 12 midnight on the business day.

Backto basics: What is service?

Equallyas critical to serving a document within the correct timeframe is the means ofservice itself. It is all well and good to deliver a document within what youbelieve to be the required time, but if you do not serve that document properlyin accordance with your contract and/or the applicable law, your adjudication application may be invalid.

The lawhas always been a little bit behind the times when it comes to technology. Weof all people understand that serving documents electronically may be practicaland convenient for your business, however, that convenience may come at a costif it is ultimately decided that the method of service was not valid, or thedate of service was determined to be later than you thought it was.

By way ofexample, in the Queensland Supreme Court matter of Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltdand Anor [2014] QSC 30 (“Conveyor v Basetec”), BasetecServices Pty Ltd (“Basetec”) purported to serve an adjudication application on Conveyor & General Engineering PtyLtd (“CGE”) via email, which contained links to access and downloadthe files containing the adjudicationapplication from Dropbox (a file sharing service). It was undisputed that CGE read the email on the day itreceived the email; however, it did not access the Dropbox links until some7-10 days after receiving the email. The Court determined that although the useof the Dropbox facility may have been practical and convenient, service was noteffected until CGE became aware ofthe contents of the document. That is, when the Dropbox links were accessedover a week later. Therefore, the adjudicationapplication was not served on the respondent CGE within time. This determination applies to allservices similar to Dropbox including iCloud storage services, Google Drive andonline file hosting services.

Youshould also be cautious serving documents by email, unless the contract inquestion makes express provision, as the legislation currently does not providefor service in this form.

Section39 of the Acts Interpretation Act 1954provides a document may be served byleaving it at, or sending it by post, telex, facsimile or similar facility.In the past, Queensland Courts have held email is a “similar facility” to telexand facsimile, however, this must be treated with caution. In Conveyor v Basetec, the Supreme Court ofQueensland held email is not a valid method of serving documents unless itis consented to by the party in advance.

Get to know your contract and ways inwhich you are entitled to serve a document. Also, be conscious of your pastconduct. Even though your contract may not explicitly allow service ofdocuments via email, if the parties to the contract have a history of acceptingdocuments from each other by email, there may be a course of conduct thatevidences a prior agreement to accept service by email. Further, the partiesmay be estopped from denying they have been served with the document. Estoppelis a somewhat complex legal principle which we won’t bore you with here.

Take care when you serve thedocuments. An email sent at 11.30 PM from Brisbane in December to a recipientin New South Wales will be effective service at 12.30 AM on the following business day due to daylight saving inNew South Wales. In a matter we were involved in where similar events occurred,the document in question was a paymentclaim and the date it was served was critical to determining whether the payment schedule was served within time.

There are also circumstances whereservice is deemed to have occurred, even if the recipient hasn’t become awareof it. For example, a payment claimcould be served in accordance with s109X of the Corporations Act 2001 (Cth) which permits a document to be sent bypost to the registered office of a company. That provision, in conjunction withs29 of the Acts Interpretation Act 1901(Cth) will deem service to have occurred “in the ordinary course of post” unless the contrary is proved. 

The point is, take care to ensure themethod by which you deliver a document required to be delivered under the BIF Act delivers the document in such away that there can be no argument that it came to the attention of therecipient or otherwise is deemed to have been served within the timeframerequired.

The key to effective service:

• We have said it before and we will say it again,make your calendar your bible. All too often we see documents served late. Itis imperative you set up a reliable reminder system for your business.
• Understand your rights and obligations under thecontracts you enter and ensure you administer those contracts correctly. If youintend to serve a document by email, we recommend you make an express provisionin your contract permitting email as an effective means of service. Similarly, if youintend to serve documents via online services, such as Dropbox, include anexpress provision in your contract permitting this. To avoid argument,you should also consider requesting a delivery receipt, read receipt or areturn email.
• Take care when you serve the documents toensure the recipient receives it on the date that you think they have.
• When serving documents, electronically orotherwise, make sure you are able to prove that you have done so. Simplyemailing a Dropbox link with all relevant attachments will not effect service.Until the law catches up with common business practices, it is imperative youprotect yourself.
• Get legal advicebefore offering or signing a contract. Poorly drafted or unfavourable contractscan greatly affect your chance a successful outcome in adjudication.
• Keep checking yourmailbox, email and facsimile regularly. Remember, a document can be served evenwithout you realising it.

Don’t wait until it’s toolate. Active Law’s construction law division have the experience and expertisein all areas of construction law that you may require.

With more than 37 years’experience in the construction industry and as an adjudicator in Queensland andother States and Territories for more than 13 years, Active Law’s Paul Hick isvery familiar with the practical, financial and legal difficulties contractorsface generally as well as with the adjudication procedures in the BIF Act. Paul regularly assists claimants and respondents with the adjudication process and indeed in many othermatters requiring expertise in construction law.

Formerly employed by theQBCC, Emma Ward has invaluable insight into statutory regulation and canswiftly identify your rights and obligations to ensure you comply with yourstatutory and contractual obligations.

So whether you require assistance with a payment claim and adjudication application or a payment schedule and adjudication response, Active Law are well placed to help to achieve the best position possible to make or defend a claim under the BIF Act or any matter requiring expertise in construction law.

Disclaimer: Reliance on content.
The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.