Service by Aconex and the Security of Payment Act

Case Note: Watpac Constructions (NSW) Pty Limited v Charter Hall Funds Management Limited [2017] NSWSC 865

In the recent decision of Watpac Constructions (NSW) Pty Limited v Charter Hall Funds Management Limited [2017] NSWSC 865 (Watpac Case), the Supreme Court of New South Wales considered (amongst other things), the issue of service of a payment claim through “Aconex” and whether that such service could be valid service for the purposes of section 31 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act).

The judgment of the Court provides some useful guidance and commentary as to service of notices by way of Aconex, particularly in light of such method of communication being common in the construction industry.

What the case is about

The Plaintiff (Watpac) sought judgment against the Defendant (Charter Hall) in the sum of $13.55 million on the basis that Charter Hall had not provided a payment schedule in response to a payment claim issued by Watpac.

One of the main arguments raised by Charter Hall in its defence was that an “Aconex convention” had been established, whereby all claims affecting the parties’ legal rights and obligations were submitted via Aconex. Charter Hall submitted that Watpac had departed from this convention by serving the payment claim subject of the dispute by hard copy only, and that it was unconscionable for Watpac to do so in circumstances where the first 32 claims (but not the last 4) were communicated only through Aconex.

The Court ultimately found in favour of Watpac and determined that Watpac was entitled to judgment against Charter Hall for the claimed amount.

What the Court said

In rejecting Charter Hall’s argument as to the “Aconex convention”, the Court determined the following:

1. Regardless of Watpac’s Design Management Plan and Project Quality Plan document indicating that all communications were to be made exclusively through Aconex, clause 14.1 of the actual contract entered into between Watpac and Charter Hall had not been amended to require this;
2. To the contrary, clause 14.1 of the contract expressly permitted notices to be given by Aconex, by post or by hand;
3. While the evidence fully supported the conclusion that the parties decided to use Aconex as their preferred method of communication, it did not go so far as to show that the parties decided to use Aconex only, and to forswear for all purposes (at least, without giving notice) use of the other means of communication authorised by clause 14.1 of the contract; and
4. In any event, there can be no doubt based on the evidence put before the Court that the disputed payment claim did in fact come to the attention of Charter Hall.

The Court also commented on the significant practical benefits and convenience in using Aconex to communicate, particularly with respect to sending or providing access to large documents.

Other recent decisions as to service

As detailed in one of our earlier articles “When a USB will not do” the decision of the Supreme Court on 7 March 2017 in the case of Parkview Constructions Pty Ltd v Total Lifestyle Windows Pty Ltd t/as Total Concept Group [2017] NSWSC 194 (Parkview Case) considered whether delivery of an adjudication application by USB constituted valid service for the purposes of the Act.

In the Parkview Case, the Court said in relation to service by USB:

1. Delivery of a USB does not amount to valid service of the information stored on the device;
2. Section 17(3)(a) of the Act requires for an adjudication application to be in writing;
3. Section 17(5) of the Act requires a copy of the application to be served on the respondent;
4. Whatever it is that was served by its delivery, was not in writing within the meaning of section 17(5) of the Act; and
5. The delivery of a USB will not constitute effective service until its contents have been physically accessed and viewed by the recipient.

This raises some interesting points of discussion, particularly in light of the Court’s more recent comments in the Watpac Case, which appear to suggest that Aconex can be utilised as a valid method of service for the purposes of the Act.

For example, would service of an adjudication application by Aconex amount to service in “writing” for the purposes of the Act?

What to take away

• The Court’s decision in both the Watpac Case and the Parkview Case reiterates the importance of ensuring that notices are served validly in accordance with the Act for the purposes of adjudication;
• If parties to a contract intend to communicate through Aconex, the subject contract ought to expressly allow for communication via Aconex to ensure that arguments in relation to service are limited; and
• If a claimant or respondent party is of the view that a claim will be disputed, that party should, for abundant caution, ensure that any documents relevant to the adjudication (i.e. payment claim, payment schedule, adjudication application and adjudication response) are served through multiple avenues on the same date, including for example in hard copy to the address stipulated in the contract, by email, and any other means provided for in the contract.

This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.