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“When a USB Just Will Not Do!”

Recent Security of Payment Decision

One of the basic requirements under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOPA”) is that notices and claims comply with the prescribed time frames.

In a recent case the Supreme Court found that the service of a USB device containing an Adjudication Application was not service in writing as required by section 17(3) of the Act.

The case provides a timely warning against using digital technology to serve documents under SOPA.

What happened?

In Parkview Constructions Pty Ltd v Total Lifestyle Windows Pty Ltd t/as Total Concept Group [2017] NSWSC 194, the claimant uploaded the Adjudication Application onto a “cloud” storage server that could be accessed by the Authorised Nominating Authority. The claimant also served a letter on Parkview attaching a USB storage device (“USB”) which contained a copy of the Adjudication Application.

Parkview did not view the contents of the USB until 2 days after it was received in the post.

Parkview served its Adjudication Response within 5 business days of opening the content of the USB.

An Adjudicator determined that the Adjudication Application was served on the day that the USB was received and found that the Adjudication Response was served out of time.

The Adjudicator made a determination in favour of the claimant in the sum of $539,632.24 including GST.

Litany of errors

Parkview commenced proceedings to have the Adjudication Determination set aside

According to the Court there was a “litany of errors” in the course of events that gave rise to the dispute, particularly relating to the service of the Adjudication Application and the purported Adjudication Determination, including the following complaints raised by Parkview:

  • The Adjudication Application made by the Claimant, differed from that referred by the Authorised Nominating Authority to the Adjudicator.
  • The Adjudication Application served on Parkview under the SOPA was not a copy of the same material that was referred to the Adjudicator.
  • The Adjudicator wrongly found that the Adjudication Response had been served out of time and wrongly disregarded the Adjudication Response.
  • The Adjudicator took into account material that was not properly part of the Adjudication Application.

What did the Court say?

The Court said that “punctilious compliance” with the Act is required, including that an “adjudication application”must be be “in writing” (section 17(3)) and must be “served” on the Respondent (s17(5)).

After considering the parties’ positions, the Court noted that:

  • the information on the USB, without more, did not communicate written words and therefore did not comply with section 17(5) of SOPA as the USB did not “represent or reproduce words in visible form…”;
  • when presented with a USB device, “…[o]ne only sees a small piece of plastic, perhaps with some circuitry on it…”;
  • a USB is a device that “when actioned” is “capable of representing or reproducing what [was] stored on it in visible form”;
  • in order to access the contents of the USB drive “one must take the step of accessing, opening and viewing the files stored on it”;
  • to access the information on the USB drive, the recipient must have compatible technology which “cannot be regarded as inevitability…”;and
  • for service of an email to be effective, a person needs to have accessed the email and it follows that in the case of a USB, effective service requires the recipient to open the USB and view the files.

The decision

The Court held that

  • Delivery of a USB does not amount to valid service of the information stored on the device.
  • The delivery of a USB will not constitute effective service until its contents have been physically accessed and viewed by the recipient.
  • The Adjudication Response was made in time and the Adjudicator acted contrary to the Act by disregarding the Adjudication Response

 What does the decision mean?

Some of the lessons from the decision that are applicable to SOPA procedures include the following:

  1. Strict compliance with SOPA is always required. There are no short cuts.
  2. Best practice is that service of any documents should be made in hard copy during business hours.
  3. Service by USB, email or drop box and similar cloud-based services may be result in late and potentially invalid service.
  4. All documents served on the Respondent, lodged with the ANA and provided to the Adjudicator must be identical. Any differences may lead to an allegation of procedural unfairness and result in a determination being set aside.
  5. Documents should only be served in accordance with the Act and should not be served by USB.
  6. Unless provided for in the Contract, service of documents by email should be avoided.
  7. Any electronic copy of documents must be identical to any hard copy of the documents.

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