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Keep Payce With The Power Of The Security of Payment Act

Canterbury-Bankstown Council v Payce Communities Pts Ltd (2019) NSWSC 1419

In Canterbury-Bankstown Council v Payce Communities Pty Ltd [2019] NSWSC 1419 His Honour Justice Henry delivered a decision on 18 October 2019 in respect of the Building and Construction Industry Security of Payment Act 1999 (NSW) (as amended) (SOP Act).

The case considered an application from Canterbury-Bankstown Council (Council) as to whether it was an abuse of process for Payce Communities Pty Ltd (Payce) to commence proceedings under the SOP Act while there were separate proceedings being heard in the Supreme Court of NSW.

 

Facts and Background

The relevant facts and background for this case are as follows:

  • Council entered into an Agreement with Payce in respect of the redevelopment of an existing Senior Citizens Centre located in Riverwood, NSW including the fit out of a library and Senior Citizens Community Centre.
  • On 24 August 2018 practical completion was certified. A 12 month defect liability period commenced on the date of practical completion.
  • On 11 October 2018 Payce served a payment claim on Council seeking the amount of $1.772 million in respect of 41 items of variation works. On 24 October 2018, Council responded with a payment schedule of nil.
  • On 31 October 2018, Payce lodged an Adjudication Application with Adjudicate Today pursuant to the SoP Act 2018, ADJT508 (the 2018 Adjudication Application) in relation to the 11 October payment claim.
  • On 3 December 2018, the Adjudicator delivered its determination concluding that Payce was entitled to an amount of $NIL based on a finding that there was no reference date available in respect of the 11 October payment claim.
  • Payce did not challenge the 2018 Adjudication Determination.
  • On 30 April 2019, Payce commenced Supreme Court proceedings against Council. In the Supreme Court proceedings, Payce claim the amount of $1.748 million in respect of 44 items of variation works and one item for builder’s margin.
  • On 24 August 2019, the 12-month defects liability period under the Agreement ended, which meant the 28 day period in which Payce could make its final payment claim under the agreement commenced.
  • On 19 September 2019, Payce served its final payment claim (Final Payment Claim).
  • On 30 September 2019, the solicitors for Council wrote to the solicitors for Payce asserting that the Final Payment Claim and any subsequent adjudication was an abuse of process.
  • On 3 October 2019, Council served a payment schedule in response to the Final Payment Claim stating that Council proposed to pay “$NIL”.
  • On 8 October 2019, Council commenced the proceedings to restrain Payce from seeking to invoke the adjudication procedures under the SoP Act.
  • Payce needed to lodge any proposed adjudication application by 18 October 2019 and this date cannot be extended by the Court.
  • The decision was delivered by His Honour Henry J on 18 October 2019.

 

Council’s Position

The basis of Council’s application was that it would be an abuse of process for Payce to invoke the SOP Act adjudication regime in the context where Payce is pursuing Supreme Court proceedings for essentially the same claim (Abuse of Process Argument).   Further  Council argued that it would cause significant prejudice if Council has to respond to both processes concurrently.

Payce used the Council defense documents prepared for the Supreme Court proceedings in aid of its SOP Act process. Council argued that this gave Payce a forensic advantage in the adjudication process. Council also claimed that this use was in beach of Payce’s implied undertaking as enshrined in Hearne v Street  (2008) 235 CLR 125 (Implied Undertaking Argument).

 

Decision

Council’s summons was ultimately dismissed.

His Honour Henry J summarised the relevant law in relation

to the Abuse of Process Argument as follows:-

  • The SOP Act creates a statutory adjudication process which enables rights to be enforced informally and summarily without prejudice to the common law rights of both parties which can be determined in court proceedings.
  • The consecutive prosecution of statutory and common law claims by a builder for payment is contemplated by the SOP Act. A claimant is not required to make an election between enforcement by statutory or common law remedies.
  • The concurrent pursuit of a claim by a builder for payment in court proceedings and by adjudication under the SOP Act is not, in itself, an abuse of process.
  • The right to concurrently prosecute claims under the SOP Act and in court is subject, however, to a possible exception where the proceedings “are close to trial” where the statutory procedures “would interfere with the orderly preparation and presentation of the party’s cases in the Court”, or there is “some additional circumstance that could generate an abuse of process”.
  • It is not an abuse of process for a claimant to desire the benefit of the expeditious nature of the SOP Act process in pursuit of a claim concurrently with a claim in Court or in arbitration, even though there will be an inevitable greater burden upon the responding party having to contest both claims.
  • It is for the party seeking to restrain the use of the SOP Act to show that it is an abuse of process. That onus has been described as a “heavy one” and the power to grant a stay or injunction as being exercised in “exceptional circumstances”.
  • Council argued that its position could be distinguished from the previous authorities by arguing that in those cases the pleadings were closed, whereas in this matter the Supreme Court proceedings were at a stage close to taking a trial date.
  • His Honour did not accept that there was any abuse of process or any significant factors relevant to distinguish this matter. Council had been on notice of the variations claimed by Payce in the Supreme Court proceedings since May 2019 and even earlier in the 2018 Adjudication Application when detailed submissions were exchanged in relation to the basis for a valuation of the variations claimed.

In relation to the Implied Undertaking argument His Honour Justice Henry found:

  • The Court did not accept that there was any breach. His Honour found that Council had not demonstrated that its defense documents provided a forensic advantage to Payce in the SOP Act process and that the use of Council’s defense documents was indirect.
  • The parties both agreed that the law on the question of whether the Implied Undertaking applies to pleadings is not settled and there are conflicting authorities. His Honour Henry J preferred the position of Brereton J in Helicopter Aerial Surveys Pty Ltd and referred to the following quote:-

“Where one party to litigation is compelled, either by reason of a rule of court, or by reason of a specific order of the court, or otherwise, to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence. The types of material disclosed to which this principle applies include documents inspected after discovery, answers to interrogatories, documents produced on subpoena, documents produced for the purposes of taxation of costs, documents produced pursuant to a direction from an arbitrator, documents seized pursuant to an Anton Piller order, witness statements served pursuant to a judicial direction and affidavits.”

  • His Honour J concluded that Payce had not breached the Implied Undertaking by serving a defense document from the Supreme Court proceedings as part of the Final Payment Claim, and would not be in breach if it were to rely on it as part of the SOP Act process.
  • His Honour noted that the documents was being used in a private adjudication involving the parties and an adjudicator. There is no risk the documents will be published more broadly and so the use is “indirect”.
  • Further His Honour indicated that if needed he would grant Payce permission to use the documents in the SOP process in any event.

Conclusion

Council’s Summons was dismissed and Council was ordered to pay Payce’s costs.

This case confirms the separate role of the statutory and civil processes for recovering payments in the Building and Construction industry can also operate concurrently.

This decision is a reminder of the futility of attempting to obstruct the use of the SOP Act where there is an entitlement to do so.

 

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For more information, please contact our lawyers David Glinatsis or Catherine Lucas at excellence@kreisson.com.au or on 02 8239 6500.

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