Cornonero v Bright Moon Buddhist Society
[2018] VSC 737
•29 November 2018
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST | Not Restricted |
S ECI 2018 0950
| CORNONERO PTY LTD | Plaintiff |
| v | |
| BRIGHT MOON BUDDHIST SOCIETY & ANOR | Defendants |
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JUDGE: | DIGBY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 November 2018 |
DATE OF JUDGMENT: | 29 November 2018 |
CASE MAY BE CITED AS: | Cornonero v Bright Moon Buddhist Society |
MEDIUM NEUTRAL CITATION: | [2018] VSC 737 |
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ADMINISTRATIVE LAW – Judicial review – Relief in the nature of certiorari – Whether adjudication determination is vitiated by jurisdictional error – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 56.
BUILDING CONTRACTS – Review adjudications – Application for review by respondent – Requirement for respondent to pay adjudicated amount other than alleged excluded amounts to claimant – Where respondent transfers funds before making review application – Where funds clear after making review application – Requirement for respondent to pay alleged excluded amounts into designated trust account – Where respondent pays undisputed amounts to claimant instead of into trust – Building and Construction Industry Security of Payment Act 2002 (Vic) s 28B(5), s 28B(6).
STATUTORY INTERPRETATION – Legislative intention – Statutory precondition to review application – Where respondent took partial steps of compliance – Need for strict compliance – Meaning of ‘paid’ – Electronic funds transfer – Whether ‘paid’ requires clearance of funds in recipient’s bank account.
WORDS AND PHRASES – ‘Clearance’ – ‘Paid’ – ‘Pay’ – ‘Security’ – ‘Trust’ – ‘Undisputed’.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Andrew | Ward & Co. Legal Consultants |
| For the First Defendant | Mr A Laird | Gadens |
| For the Second Defendant | No appearance |
HIS HONOUR:
Application for judicial review
In this proceeding, Cornonero Pty Ltd (the plaintiff) applies for judicial review of a review adjudication determination made by the second defendant in favour of the Bright Moon Buddhist Society (the first defendant) under the Building and Construction Industry Security of Payment Act 2002 (the SOP Act).
The plaintiff claim the following:
(a) relief in the nature of certiorari quashing a review determination made 21 June 2018;
(b) an injunction (both interlocutory and final) restraining the first defendant from taking steps to enforce the review determination;
(c) an injunction (both interlocutory and final) restraining the second defendant from providing an adjudication certificate in respect of the review determination; and
(d) a declaration that the review determination is unlawful and void.[1]
[1]Originating Motion for Judicial Review dated 21 August 2018 (Originating Motion).
Background facts
The Contract
On 18 January 2017, the plaintiff and the first defendant contracted for the first defendant to carry out construction work on the plaintiff’s land at 540 Springvale Road, Springvale South (the Contract).[2] The total Contract price was around $2,088,800 (including GST).[3]
[2]Affidavit of Rachel Brady, 21 August 2018 (Brady Affidavit), Exhibit ‘RB–1’.
[3]Plaintiff’s Submissions, 15 October 2018 (Plaintiff’s Submissions), [4].
The Payment Claim
On 27 April 2018, the plaintiff served a payment claim on the first defendant seeking payment in the sum of $946,651.47 (including GST) (Payment Claim-11).[4] Payment Claim-11 was served pursuant to the SOP Act.
[4]Brady Affidavit, Exhibit ‘RB–2’.
The First Defendant’s Payment Schedule
On 1 May 2018, the first defendant served a payment schedule under the SOP Act in response to Payment Claim-11.[5]
[5]Affidavit of Chen Guo Jing, 2 November 2018 (Chen Guo Jing Affidavit), Exhibit ‘CGT-2’, Annexure ‘JW-15’ (email 1 May 2018 [4.09pm].
The Adjudication Application
On 13 May 2018, the plaintiff made an adjudication application in respect of Payment Claim-11 (the adjudication application).[6] On 14 May 2018, the authorised nominating authority appointed Mr John McMullan (the original Adjudicator).[7]
[6]Brady Affidavit, Exhibit ‘RB–3’.
[7]Ibid ‘RB–4’.
On 21 May 2018, the first defendant served an adjudication response to the plaintiff’s adjudication application (the adjudication response).[8] The original Adjudicator invited the plaintiff to make reply submissions to the adjudication response on or around 23 May 2018.[9] Such submissions were provided on or around 25 May 2018.[10]
[8]Ibid ‘RB–5’.
[9]Ibid ‘RB–6’.
[10]Ibid ‘RB–7’.
The Adjudicator’s Determination
On or about 1 June 2018, the original Adjudicator determined that the plaintiff was entitled to a progress payment in the sum of $677,250.16 (including GST) (the original adjudication determination).[11] The plaintiff asserts that the first defendant received the original adjudication determination on 5 June 2018.[12] On this view, the last date on which an application for review of the original adjudication determination could be made was 13 June 2018, being five business days from receipt, pursuant to s 28D(2) of the SOP Act.[13]
[11]Ibid ‘RB–8’.
[12]Plaintiff’s Submissions, [14].
[13]Ibid [15].
The First Defendant’s Review Application
On 13 June 2018, the first defendant made an application for review of the original adjudication determination under the SOP Act (the review application).[14] The plaintiff asserts that it was served with the review application on or about 14 June 2018.[15]
[14]Brady Affidavit, Exhibit ‘RB–9’.
[15]Plaintiff’s Submissions, [18].
The review application included a document entitled ‘Proof of Payment to Trust Account’.[16] The customer receipt for this deposit of $250,000 was dated 12 June 2018 but did not confirm the account or to whom the deposit had been paid.
[16]Brady Affidavit, [14].
The review application also referred to a payment by the plaintiff on 13 June 2018 in the sum of $433,154.19. The exhibited payment summary identified this transaction’s payment status as ‘Processing’ in relation to an amount of $433,154.19 as at 13 June 2018.[17]
[17]Ibid [14] and Exhibit ‘RB-9’.
The disputed amount claimed by the first defendant in its Review Application was $573,862.03.
On or about 14 June 2018, the authorised nominating authority appointed Mr William Timothy Sullivan (the second defendant) to review and determine the original adjudication determination pursuant to Part 3 Division 21 of the SOP Act (the adjudication review). The second defendant thereafter accepted his appointment. He also requested an extension of time to which the first defendant agreed.[18]
[18]Ibid Exhibit ‘RB–10’.
The director of the plaintiff deposes that, on Friday 15 June 2018, being two business days after the review application was served on the plaintiff, a transaction of $250,000 cleared in the plaintiff’s bank account.[19] She further deposes that, on 19 June 2018, Westpac advised the funds ‘cleared’ on Friday 15 June 2018.[20]
[19]Ibid [16].
[20]Ibid [17].
On or about 19 June 2018, the plaintiff made submissions in response to the review application.[21]
[21]Ibid Exhibit ‘RB–12’; Plaintiff’s Submissions, [21].
The Review Determination
On 21 June 2018, the second defendant made a review determination in which he substituted the original adjudication determination and determined that the plaintiff was entitled to payment in the sum of $103,388.11 (GST inclusive) (the review determination).[22]
[22]Ibid Exhibit ‘RB–13’.
Judicial review of the Review Determination
The plaintiff now seeks judicial review of the review determination on four grounds:
(a) Ground 1
That the second defendant committed jurisdictional error, or erred in law, by determining that the first defendant validly commenced the review application in circumstances where the first defendant did not comply with s 28B(5) of the SOP Act, because the first defendant failed to pay the adjudicated amount (other than alleged excluded amounts) to the plaintiff before making its review application.[23]
[23]Originating Motion, [14].
(b) Ground 2
That the second defendant committed jurisdictional error, or erred in law, by determining that the first defendant validly commenced the review application in circumstances where the first defendant did not comply with s 28B(6) of the SOP Act, because the first defendant failed to pay the alleged excluded amounts into a designated trust account, before making its review application.[24]
[24]Ibid [15].
(c) Ground 3
That the second defendant committed jurisdictional error, or erred in law, by determining that Variations 5, 7, 8 and 9 are excluded amounts pursuant to s 10A(3)(b) and (d) of the SOP Act when Variations 7 and 8 were not works within the Second Class of Variations under the Act.[25]
(d) Ground 4
That the second defendant committed jurisdictional error, or erred in law, by determining that the total sum of second class variations permitted by ss 10A(3) and 10A(4) of the SOP Act exceeds the ten percent cap.[26]
[25]Ibid [16].
[26]Ibid [17].
Ground 1
Plaintiff’s submissions
The plaintiff submits:
(a) that s 28B(5) of the SOP Act is ‘a precondition of making the review application’;[27] and
(b) that payment is ‘deemed to have been made once the funds are credited to the receiving account’.[28]
[27]Plaintiff’s Submissions, [25(b)].
[28]Ibid [25(c)].
The review application, as outlined above, was made on 13 June 2018.[29] The plaintiff asserts that it received ‘cleared funds of $250,000 into its bank account’ on 15 June 2018.[30] It follows, on the plaintiff’s submission, that the Review Adjudicator’s conclusion as to his jurisdiction under the SOP Act was incorrect and vitiated by jurisdictional error because the review adjudication was applied for by the first defendant before the first defendant paid the plaintiff the adjudicated amount (other than the amounts alleged to be excluded amounts).[31]
[29]Brady Affidavit, Exhibit ‘RB–9’.
[30]Plaintiff’s Submissions, [25(d)].
[31]Ibid [25(e)].
In support of this contention, a director of the plaintiff, Ms Rachel Brady (Brady), exhibits to her affidavit an email from Westpac Banking Corporation confirming that the funds, namely the said $250,000 had ‘only cleared on Friday 15 June 2018’, two days after the first defendant’s review application.[32]
[32]Brady Affidavit, [16]–[17] and Exhibit ‘RB–11’.
First defendant’s submissions
The payment contemplated in s 28B(5) of the SOP Act requires the adjudicated amount ‘other than the amounts alleged to be excluded amounts’.[33] The first defendant asserts that the sum $250,000 exceeds the sum the Adjudicator had ordered to be paid leaving aside the alleged excluded variations.[34]
[33]Building and Construction Industry Security of Payment Act 2002 (Vic) s 28B(5).
[34]First Defendant’s Submissions, 7 November 2018 (First Defendant’s Submissions), [5(b)].
The first defendant asserts that it deposited $250,000 into the plaintiff’s bank account on 12 June 2018.[35]
[35]Ibid [5(a)]; Chen Guo Jing Affidavit, [9].
In support of this assertion, the Senior Temple Representative for the first defendant, Mr Chen Guo Jing, exhibits to his affidavit a letter from his solicitors dated 13 June 2018 ‘enclosing proof of payment’.[36]
[36]Chen Guo Jing Affidavit, [9] and Exhibit ‘CGJ–11’.
The first defendant rejects the plaintiff’s submission that the term ‘paid’ in s 28B(5) of the SOP Act means ‘received an amount in cleared funds’[37] for the following reasons:
[37]First Defendant’s Submissions, [7].
(a) there are no express words in the provision to demonstrate that such a meaning should be given;[38]
[38]Ibid [7(a)].
(b) there are, in practical terms, reductions to the five day timeframe for making a review application under the SOP Act;
(c) given these practicalities, the legislature could not have intended that the meaning of ‘paid’ in s 28B(5) of the SOP Act was that required amounts were received as cleared funds, since this could deprive the parties of an opportunity of sufficient time to seek legal advice, and limit the time available to assess whether the non-excluded amount should be paid;
(d) the plaintiff’s position also reflects a less convincing construction of the SOP Act given it is conceivable that bank transactions resulting in the receipt of cleared funds could in some situations take more than five days to clear;[39]
[39]Ibid [7(b)].
(e) the decision R v Preddy,[40] to which the plaintiff referred, does not assist its argument because that decision turned on the interpretation of an entirely different statute in England and the issue of when an account is credited arises only indirectly in that decision;[41]
(f) the dictionary meaning of the word ‘paid’ refers ‘active sense of the word’ such that the focus is on the action undertaken by the payer and not on the timing of the ultimate receipt by the payee;[42]
(g) according to ‘Westpac’s website,’ there was no provision for the first defendant to recall the payment after the funds had been transferred from its account and clearance was pending,[43] and, by way of analogy, in contract law ‘an offer is deemed to have been received by the offeree on the day the offeror posts it’.[44]
[40][1996] AC 815.
[41]First Defendant’s Submissions, [7(c)].
[42]Ibid [8(a)].
[43]Ibid [8(b)], [9].
[44]Ibid [8(c)].
In summary the first defendant submits:
…s 28B(5) of the SOP Act…simply requires that the non-excluded amount figure is paid to the review respondent. The evidence is that payment was made before the review application was made. It is submitted that this is the end of the matter.[45]
[45]First Defendant’s Submissions, [6].
Considerations - ground 1 and related ground 2
Statutory interpretation
In determining the true construction of ss 28B(5) and 28B(6) of the SOP Act, the Court should give effect to the intention of the Parliament as disclosed by the language that has been used, bearing in mind the relevant context and the purpose of the statute.[46] Likewise, questions of validity and jurisdiction fall to be determined according to whether it was intended by Parliament under the SOP Act that the act or conduct in question is, in the circumstances, invalid.
[46]Interpretation of Legislation Act 1984 (Vic), s 35(a); Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355, 390–91 (McHugh, Gummow, Kirby and Hayne JJ).
In Project Blue Sky v Australian Broadcasting Authority,[47] McHugh, Gummow, Kirby and Hayne JJ observed:
…a court, determining the validity of an act done in breach of a statutory provision, may easily focus on the wrong factors if it asks itself whether compliance with the provision is mandatory or directory and, if directory, whether there has been substantial compliance with the provision. A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid…In determining the question of purpose, regard must be had to ‘the language of the relevant provision and the scope and object of the whole statute’.[48]
[47](1998) 194 CLR 355.
[48]Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355, 390–91 (McHugh, Gummow, Kirby and Hayne JJ); in Ian Street Developer Pty Ltd v Arrow International Pty Ltd [2018] VSCA 294, Maxwell P at [65] discussed the application of Project Blue Sky in connection with the interpretation of ss 22, 23 and 28 of the SOP Act.
Section 28B(5) and (6) are jurisdictional requirements
Section 28B(5) of the SOP Act provides:
(5)An application under this section may only be made if the respondent has paid to the claimant the adjudicated amount other than the amounts alleged to be excluded amounts.
Section 28B(6) of the SOP Act, which is the focus of ground 2, provides:
(6)An application under this section may only be made if the respondent has paid the alleged excluded amounts into a designated trust account.
The language of ss 28B(5) and 28B(6) of the SOP Act prescribes two statutory pre-conditions to making a review application. If the s 28B(5) requirement for payment of the subject adjudicated amount (other than the sum of alleged excluded amounts) has not occurred before the respondent made its review adjudication, or if the respondent has not paid the alleged excluded amounts into a designated trust account as required by s 28B(6) of the SOP Act, I consider, for the reasons which follow, a Review Adjudicator lacks jurisdiction to perform his or her task under the SOP Act. If the Review Adjudicator purports to make a determination in such circumstances, I consider that he or she would thereby fall into jurisdictional error and that relief in the nature of certiorari should go to quash any such purported review adjudication determination.
The language of ss 28B(5) and 28B(6) of the SOP Act, and in particular the phrase ‘may only be made if’, makes clear that the requirements for the defined amounts to be paid are, in each case, preconditions to the respondent’s application to review an adjudication determination.
To ascribe a jurisdictional consequence to non-compliance with ss 28B(5) and 28B(6) of the SOP Act is, I consider, consistent with the purpose of those subsections, namely, to provide security to the claimant which is in the incumbent position of being the beneficiary of a favourable adjudication determination. In this way, ss 28B(5) and 28B(6) of the SOP Act also ensure that there will be no ultimate financial disadvantage arising as a result of the respondent seeking a review of the claimant’s accrued interim entitlement.
I note that in this matter the materiality of non-compliance with ss 28B(5) and 28B(6) of the SOP Act does not at all events appear to be a point of difference between the parties. The first defendant has accepted that ground 1 and ground 2, which relate to non-compliance with ss 28B(5) and 28B(6) of the SOP Act respectively, ‘go to the root of the Review Adjudicator’s jurisdiction’.[49] The plaintiff, similarly, asserts that non-compliance with what it submits are the strict requirements of ss 28B(5) and 28B(6) of the SOP Act deprive a Review Adjudicator of jurisdiction.[50]
[49]First Defendant’s Submissions, [2].
[50]The plaintiff’s written submissions rely on Director of Housing of State of Victoria v StructX Pty Ltd t/as Bizbuilders [2011] VSC 410, Republic of Turkey v Mackie Pty Ltd [2012] VSC 309 and May Constructions (Residential) Pty Ltd v GPZ Pty Ltd and 38 Williams Road Pty Ltd [2017] VCC 54. The plaintiff did not however explain how these authorities assist its case, and I add that I consider that these authorities to be of peripheral relevance, at best.
By contrast both the plaintiff and the first defendant have characterised the alleged errors asserted in grounds 3 and 4 as ‘non-jurisdictional’.[51]
[51]First Defendant’s Submissions, [2]; Plaintiff’s Submissions, [1](e).
What does ‘paid’ require?
The central point of difference between the parties is as to the meaning of the term ‘paid’ in ss 28B(5) and 28B(6) of the SOP Act. While the plaintiff asserts that the requirement that amounts are ‘paid’ is only satisfied once such amounts are cleared in the receiving account,[52] the defendant rejects that there is an additional requirement of clearance of such funds to the claimant before the respondent’s review application.[53]
[52]Plaintiff’s Submissions, [25].
[53]First Defendant’s Submissions, [7].
On this issue the plaintiff referred to and sought to rely on R v Preddy.[54] The relevant passage from that decision states:
The crucial question, as I see it, is whether the defendant obtained (or attempted to obtain) property belonging to another. Let it be assumed that the lending institution's bank account is in credit, and that there is therefore no difficulty in identifying a credit balance standing in the account as representing property, i.e. a chose in action, belonging to the lending institution. The question remains however whether the debiting of the lending institution's bank account, and the corresponding crediting of the bank account of the defendant or his solicitor, constitutes obtaining of that property. The difficulty in the way of that conclusion is simply that, when the bank account of the defendant (or his solicitor) is credited, he does not obtain the lending institution's chose in action. On the contrary that chose in action is extinguished or reduced pro tanto, and a chose in action is brought into existence representing a debt in an equivalent sum owed by a different bank to the defendant or his solicitor. In these circumstances, it is difficult to see how the defendant thereby obtained property belonging to another, i.e. to the lending institution.[55]
[54][1996] AC 815.
[55]Ibid 834 (Lord Goff).
In short, the House of Lords made observations as to the process of making an electronic payment from one bank account (debit) to another bank account (credit). Their Lordships found, as a result of this process, that the chose in action represented by the credit balance in the payer’s account was extinguished or reduced pro tanto and a chose in action in the nature of an equivalent credit balance in the payee’s account was created. This had a number of implications for whether the payee had obtained ‘property belonging to another’ within the meaning of s 15(1) of the Theft Act 1968.
In my view these observations do not assist the plaintiff. The plaintiff did not explain how the House of Lords’ characterisation of bank transfers for the purposes of the English Theft Act 1968 elucidates the meaning of the term ‘paid’ in s 28B(5) of the Victorian SOP Act. The first defendant was also correct to point out that the question of when the receipt of funds meets the definition of ‘property belonging to another’ was, ultimately, peripheral to resolution of the central issues in that case.
The question arising on ground 1, and related ground 2, is principally one of statutory interpretation. Put simply, does ‘paid’ in ss 28B(5) and 28B(6) of the SOP Act refer to when the subject transfer of funds from the first defendant’s account is initiated by the payer, or when the funds are cleared and in the hands of, under the control of, and immediately accessible to the claimant plaintiff?
The example of a payment by cheque is particularly illustrative. There is in such cases the possibility a cheque could take some time to clear or could be dishonoured. Will the requirement for payment be satisfied by the mere delivery of the cheque? Or does ‘paid’ require the funds in question to be in the hands of the payee, and within the payee’s control, and thereby readily accessible to the claimant?
‘Paid’ requires clearance of the funds
‘[R]eports of proceedings in any House of Parliament’ may assist the ascertainment of Parliament’s intention.[56] Relevantly the following statements were made in the Second Reading Speech for the Building and Construction Industry Security of Payment (Amendment) Bill:
It is critical that industry participants obtain prompt interim payment, pending a final determination of the matters in dispute. The bill reinforces this principle by providing that after an adjudicator has made a determination, the respondent must pay the adjudicated amount. The existing legislation allows respondents to provide security for payment (such as placement of the amount in a trust fund) rather than money. This has been removed because the NSW experience demonstrated that some parties delayed payment by providing security and failing to take prompt action to resolve the dispute.[57]
In the event that a respondent applies for a review of the Adjudicator’s determination, disputed amounts are to be paid into a trust account. Undisputed amounts must be paid to the claimant. This has a twofold benefit in that neither the claimant nor the respondent is disadvantaged. The money in trust is readily available to either party whatever the outcome of the review adjudication.[58]
[56]Interpretation of Legislation Act 1984 (Vic) s 35(b)(ii).
[57]Victoria, Parliamentary Debates, Legislative Council, 15 June 2006, 2421 (The Hon. MR Thomson, Minister for Consumer Affairs).
[58]Ibid.
Section 35(a) of the Interpretation of Legislation Act 1984 also relevantly provides:
In the interpretation of a provision of an Act or subordinate instrument—
(a)a construction that would promote the purpose or object underlying the Act or subordinate instrument (whether or not that purpose or object is expressly stated in the Act or subordinate instrument) shall be preferred to a construction that would not promote that purpose or object[59]
[59]Interpretation of Legislation Act 1984 (Vic), s 35(a).
Further, as alluded to above, in determining the true construction of s 28B(5) and s 28B(6) of the SOP Act, the Court should give effect to the intention of the Parliament as disclosed by the language that has been used in the statute, bearing in mind the relevant context and the purpose of the statute.[60]
[60]Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355, 390–91 (McHugh, Gummow, Kirby and Hayne JJ).
In my view, the relevant intention of Parliament in including the requirement for funds to be ‘paid’, whether to the claimant under s 28B(5) of the SOP Act or into a designated trust account under s 28B(6), is to ensure that funds are in the hands of and readily accessible to the claimant before a review application is made by the respondent. Parliament’s purpose in this regard is outlined more extensively in paragraphs [31] and [32] above.
In light of the proper interpretative approach to which I have made reference, and the Minister’s outline of the relevant proposed legislation above, my reasons for so construing the subsections of the SOP Act in issue, include that:
(a) The principal function of ss 28B(5) and 28B(6) of the SOP Act is security. The provisions secure the claimant’s accrued position in relation to an extant Adjudication Determination by ensuring that, subject to the provisions of those sections of the SOP Act, the amount of the Adjudication Determination is in the claimant’s hands (save for the alleged amount of excluded amounts) and that the sum of alleged excluded amounts is secured by preservation in a designated trust account. If the claimant does not have effective control over the funds, or if the funds are not readily accessible to the claimant, the provision for security may be rendered nugatory and the claimant (here the plaintiff) may be disadvantaged;
(b) One of the principal objects of s 28B(5) of the SOP Act is to secure the claimant under the SOP Act in respect of the amount found to be the claimant’s entitlement, pro tem, while the statutory review initiated by the respondent is determined. I consider it would be contrary to the scheme of the SOP Act and the clear statutory intent of s 28B(5) if the amount ‘paid’ by the respondent was not effectively transferred to the claimant, in its hands and subject to its control;
(c) Similarly, s 28B(6) of the SOP Act is an essential component to a functional and effective adjudication review scheme. Parliament has also sought to, among other things, preserve and secure readily accessible, disputed excluded amounts on trust pending outcome of the adjudication proceedings. This is to avoid prejudice or disadvantage relevant parties, such as the claimant beneficiary of the adjudication determination. Payment into trust ensures that funds are available irrespective of what outcome follows the review adjudication;[61]
[61]The sum of alleged excluded amounts held in a designated trust account pursuant to s 28B(6) of the SOP Act are, on the outcome of the adjudication review, readily accessible, certain and effectively under the control of the prevailing party to the extent of their success in that process.
(d) In relation to the subject SOP Act, the Parliament has stated that ‘cash flow is the lifeblood of the construction industry’.[62] Indeed there are a number of unique considerations for ‘payment’ in the context of a large construction project. In addition to securing the accrued rights of a claimant under the SOP Act, the requirement for readily accessible funds will preserve the position of sub-contractors and other third parties who depend on consistent cash flow through a relevant suite of construction contracts. It is unsatisfactory and at odds with the overall purpose of the SOP Act for the status of such funds to be anything other than readily accessible, certain and under the control of the claimant;[63]
[62]Victoria, Parliamentary Debates, Legislative Council, 15 June 2006, 2421 (the Hon MR Thomson, Minister for Consumer Affairs).
[63]See above n 61.
(e) The term ‘paid’ is not defined in the SOP Act and is not a legal term of art. The parties have pointed to nothing in the SOP Act or the relevant context to suggest that ‘paid’ should be given a particular meaning departing from ordinary usage. In these circumstances, it is appropriate for the Court to presume that the ordinary meaning of the term should prevail.[64] This point was explained by Hall J in Australian Leisure and Hospitality Group Pty Ltd v Director of Liquor Licensing:[65]
[64]Seay v Eastwood [1976] 1 WLR 1117, 1121; DC Pearce & RS Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 2014, 8th ed) [4.8].
[65][2012] WASC 463.
If it is intended that a word in a statute will be used in a specific way that may not accord with ordinary usage such an intention is generally reflected in a definition in the statute. Absent such a definition, the ordinary meaning should prevail unless there is something in the context to suggest that another meaning is intended.[66]
[66]Ibid [22] (Hall J).
(f) In circumstances where the ordinary meaning should prevail, it is appropriate and often helpful to consider the dictionary definition of the term in order to ascertain the intention of the Parliament.[67] By way of example, for present purposes, the Macquarie Dictionary defines ‘paid’ as the past participle of ‘pay’.[68] In turn, ‘pay’ is defined in the first instance as ‘to discharge (a debt, obligation etc.) as by giving or doing something’.[69] ‘Paid’ is a transitive verb; it requires the payer to pay, and the payee to receive; and
[67]House of Peace Pty Ltd v Bankstown City Council [2000] NSWCA 44 [28] (Mason P); R v Peters (1886) 16 QBD 636, 641 (Lord Coleridge); Chamber of Commerce and Industry v Commonwealth (1987) 163 CLR 329, 348 (Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ).
[68]Concise Macquarie Dictionary (2004, 3rd ed) ‘paid’.
[69]Ibid ‘pay’.
(g) The SOP Act has often been interpreted as requiring strict compliance. This point was made by the Victorian Court of Appeal in Saville v Hallmarc Construction Pty Ltd,[70] in which it observed in relation to the SOP Act:
[70](2015) 47 VR 177.
(1)it operates in a ‘rough and ready’ way to preserve the cash flow to a builder notwithstanding that the builder might ultimately be required to refund the money received and yet have an inability to repay;
(2)it imposes a mandatory regime regardless of the parties’ contract with extremely abbreviated time frames for the exchange of payment claims, payment schedules, adjudication applications and adjudication responses;
(3)at each stage of the regime for enforcement of the statutory right to progress payments, it lays down clear specifications of time and other requirements to be observed, rendering it not difficult to understand ‘that the availability of those rights should depend on strict observance of the statutory requirements that are involved in their creation’;
(4)as adjudication determinations are capable of being filed as a judgment for debt in a court of competent jurisdiction, a respondent to a payment claim should not be at risk of suffering a judgment where a temporal limitation has not been complied with by the claimant;
(5)a claimant has alternative remedies; ‘even if the door to adjudication is closed, the door to judgment remains open’.[71]
[71]Ibid 207–8 (Warren CJ, Tate and Kaye JJA) (citations omitted).
I am attentive to the first defendant’s concerns about the practical effect of insisting on the clearance of funds under ss 28B(5) and 28B(6) of the SOP Act. Ideally, the jurisdiction to make review adjudications would not be subject to extraneous factors such as delays within and between financial institutions in connection with processing funds, including electronic fund transfers, in circumstances where the respondent has otherwise satisfied the requirements for making an application. In my view, however, the first defendant’s concerns in this regard are outweighed by those factors mentioned militating for a strict interpretation of ‘paid’ as outlined above at paragraphs [31], [32] and [45] and elsewhere.
I consider that the SOP Act provides adequate time for a respondent to make required payments in a way which ensures receipt of those payments in the hands and control of the claimant, and into a designated trust account as required, within five business days of the receipt of an Adjudication Determination. This is particularly so with the availability of electronic banking, special expedited bank transfer arrangements and the timing certainty which the SOP Act itself provides.
Finally, in the setting of the strictly-prescribed and well-defined requirements of the SOP Act, the party intending to consider and perhaps review an Adjudication Determination can anticipate and plan such an application, including scheduling receipt of necessary advice and by making financial arrangements to ensure any necessary amounts are paid well-within the expiration of five business days required under ss 28B(5), 28B(6) and 28D(2) of the SOP Act. Much of this can be anticipated and planned prior to publication of the original Adjudication Determination.[72]
[72]Section 15(2)(c) of the SOP Act requires the respondent at the initial payment response stage to identify any amount of the claim which the respondent alleges is an excluded amount.
In relation to the requirements of s 28B(5) of the SOP Act in particular to reject any requirement that funds be readily accessible in the hands and control of the recipient may itself give rise to a number of practical problems. The recipient should not, for example, be in the unenviable position of having to arrange its affairs to account for the possibility of a dishonoured cheque, or interdiction of or the reversal of an electronic funds transfer or other forms of ‘payment’.
Application of the facts to ground 1
I refer to the facts set out above at paragraph [14]. A director of the plaintiff deposes that, on Friday 15 June 2018, being two business days after the review application was served on the plaintiff, a transaction of $250,000 cleared in the plaintiff’s bank account.[73]
[73]Brady Affidavit, [16], [17].
The first defendant made its application for review of the relevant adjudication determination under the SOP Act on 13 June 2018.[74] The plaintiff’s evidence is that it was served with the review application dated 13 June 2018 on or about 14 June 2018.[75]
[74]Ibid Exhibit ‘RB–9’.
[75]Plaintiff’s Submissions, [18]; Brady Affidavit, [12], [16], and Exhibit ‘RB–9’.
Accordingly, in light of the conclusions outlined above in relation to the proper construction of s 28B(5) of the SOP Act, the amount of $250,000 was not ‘paid’ to the plaintiff within the meaning of s 28B(5) of the SOP Act until those funds were cleared into the plaintiff’s hands and control by Westpac on 15 June 2018, a point in time after the first defendant made its s 28B adjudication review application.
The above evidence as to when the funds were ‘cleared’ and were readily accessible to the plaintiff was not contradicted or challenged by the first defendant.
Disposition – ground 1
Section 28B(5) of the SOP Act requires the adjudicated amount be paid to the claimant before a review application is made. This required payment was not made by the first defendant. While the first defendant’s review application was made on 13 June 2018 and served on 14 June 2018, the required funds did not clear in the plaintiff’s account until 15 June 2018. The funds were not in the hands and control of the plaintiff and were not therefore readily accessible to the plaintiff before this point in time.
The statutory preconditions for making a review application in s 28B(5) of the SOP Act were not satisfied. As a consequence the Review Adjudicator did not have jurisdiction under the SOP Act, and his purported review determination must be quashed. Ground 1 of the application for judicial review is made out.
Disposition – Ground 2
The first defendant purported to pay $433,154.19 in satisfaction of the requirement of s 28B(6) of the SOP Act. That provision of the Act requires the amount of the relevant ‘alleged excluded amounts’ be paid into a designated trust account before the respondent makes a review application under s 28B of the SOP Act.
Here, however, the alleged excluded amounts totalled $573,862.06. Accordingly, the statutory required amount was not paid.
Further, when the review application was made on 13 June 2018, the evidence establishes that the amount purportedly paid by the first defendant into the designated trust account was described as ‘Processing’.[76] To the extent that those funds were not effectively transferred to and readily accessible in the trust account, that required amount was not ‘paid’ in accordance with the meaning of that term as explained at paragraphs [31], [32] and [45] above.
[76]Brady Affidavit, [14], Exhibit ‘RB–9’; Chen Guo Jing Affidavit, [12], Exhibit ‘GJG–11’.
I also observe that the requirements of ss 28B(5) and 28B(6) of the SOP Act are cumulative. Non-compliance with the requirement for the defined amounts to be paid under either subsection, when required, will in my view result in any purported Review Determination being vitiated.
Ground 2
For the above reasons Ground 2 is also made out.
Grounds 3 and 4
Given my decision above in relation to grounds 1 and 2, I do not consider it necessary to deal with grounds 3 and 4.
Conclusion and orders
Grounds 1 and 2 of the plaintiff’s Originating Motion of 21 August 2018 are upheld. The Review Adjudication dated 21 June 2018 shall be quashed. The first defendant shall be restrained from seeking an Adjudication Certificate in relation thereto, or otherwise seeking to enforce the said Review Determination.
I shall await the parties’ proposed final form of orders, including as to costs.
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