Rodrigues v customOz Services Pty Ltd

[2023] NSWSC 379

Supreme Court

New South Wales

Medium Neutral Citation:

Rodrigues v customOz Services Pty Ltd [2023] NSWSC 379

Hearing dates:

11 April 2023

Date of orders:

17 April 2023

Decision date:

17 April 2023

Jurisdiction:

Equity - Technology and Construction List

Before:

Rees J

Decision:

Summons dismissed

Catchwords:

BUILDING AND CONSTRUCTION — dispute resolution clause – works completed – invoices rendered – clients complain – invoices reviewed and replaced by new invoices – mediator appointed –invoices reviewed again and replaced by final invoice – without prejudice correspondence – adjudication.

PAYMENT CLAIM — whether valid payment claim given earlier invoices – s13(6)(b), SOPA – where earlier invoices withdrawn, final invoice complied with s 13.

PAYMENT SCHEDULE — whether without prejudice offer is a payment schedule — without prejudice offer did not indicate why scheduled amount was less — without prejudice correspondence unlikely to be a payment schedule – confidential communication – inadmissible – respondent cannot pay amount in offer absent acceptance of offer by claimant –provision of without prejudice communication to adjudicator may result in manifest error of law.

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW) ss 13(6)(b), 14, 16, 17, 22

Evidence Act 1995 (NSW) s 131(2)

Cases Cited:

Ardnas (No 1) Pty Ltd v J Group (Aust) Pty Ltd [2012] NSWSC 805

Brodyn Pty Ltd v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421

Crown Green Square Pty Ltd v Transport for NSW [2021] NSWSC 1557

Galafassi v Kelly (2014) 87 NSWLR 119; [2014] NSWCA 190

GPI Leisure Corporation Ltd (in Liq) v Yuill (1997) 42 NSWLR 225

Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602

Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333

Multiplex Constructions v Luikens [2003] NSWSC 1140

NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842

Nouvelle Homes t/as Wilson & Hart v Hatch [2009] WASC 63

Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd [2023] NSWSC 309

Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR; [2018] HCA 4

Southern Han Breakfast Point Pty Ltd (In liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52

Style Timber Floor Pty Ltd v Krivosudsky (2019) 100 NSWLR 133; [2019] NSWCA 171

Tenstat Pty Ltd v Permanent Trustee Australia Ltd (1992) 28 NSWLR 625

Vannella Pty Ltd v TFM Epping Land Pty Ltd [2019] NSWSC 1379

Category:

Principal judgment

Parties:

Frank Rodrigues (First Plaintiff)
Janina Rodrigues (Second Plaintiff)
customOz Services Pty Ltd (First Defendant)

Representation:

Counsel:
Mr T Bland (Plaintiffs)
Ms BK Nolan (First Defendant)

Solicitors:
O’Brien Lawyers (Plaintiffs)
Beyond Property Legal Solutions (First Defendant)

File Number(s):

2023/31165

Judgment

1. HER HONOUR: The plaintiffs, Frank and Janina Rodrigues, seek a declaration that an adjudication determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) is void. The adjudicator found that the first defendant, customOz Services Pty Ltd (the builder), was entitled to the whole of its payment claim, being some $60,000 for renovations on the plaintiffs’ Bowral home.

2. The plaintiffs relied on the evidence of their solicitor, Andrew O’Brien. The builder relied on the evidence of its director, Ric Mejias. The parties also tendered correspondence on a voir dire concerning whether a without prejudice email sent by the plaintiffs on 17 October 2022 – said to be a payment schedule – was, in fact, privileged.

Building contracts

3. On 14 February 2022, Mr Mejias attended at the plaintiffs’ home in Bowral to discuss some renovations which the couple wished to undertake. On 25 February 2022, two contracts were signed for different aspects of the work, but in the same terms.

4. Clause 12 dealt with progress payments, obliging the plaintiffs to pay the contract price by progress payments within five business days of the completion of each stage of the works. Clause 14 concerned the time for payment. The plaintiffs were obliged to pay within five business days of receipt of a claim for a progress payment, however: (emphasis added)

If the owner disagrees that the contractor is entitled to be paid a progress claim or other amount due under the contract, the owner must notify the contractor in writing within 5 business days of receiving the claim setting out the reasons for that disagreement. To avoid any risk the owner is unable to pay, the contractor may require the owner pays the amount claimed into the trust account of a solicitor with instructions the moneys be held in favour of the contractor for payment on instruction from the mediator/arbitrator. In the alternative a bank guarantee may be created in favour of the contractor under the aforementioned terms. The funds into a trust account or bank guarantee must be made within 5 days of the payment claim. If there is any dispute between the parties relating to a payment under the contract it must be resolved according to the dispute resolution procedure set out in Clause 27.

5. Clause 27 required the parties to give a written notice of dispute and, if the dispute was not resolved informally following notification:

… the parties must confer to the nominated ADR Arbitrator whose role will be to assist in the resolution of the dispute by mediation or expert appraisal of the work and provide directions/orders.

The nominated Arbitrator/Mediator is Bill Guthrie … or other Arbitrator/Mediator appointed or nominated by him.”

If the dispute was not resolved within 60 days following the directions or orders of the Arbitrator/Mediator, the owner could seek the assistance of NSW Fair Trading to resolve the dispute.

6. On 1 March 2022, work began. On 2 March 2022, Mr Mejias was asked to inspect and report on a flooding issue under the home and report to the strata manager. This was outside the scope of works under the contract.

Invoices

7. On 20 July 2022, the builder attended the site for the last time and rendered four invoices (numbered 721 to 724) for different aspects of the works. Each invoice was stated to be a claim under SOPA. The plaintiffs raised various queries with the invoices, which the builder agreed to review.

8. On 5 September 2022, the builder rendered three invoices (numbered 739, 742 and 745), each of which were said to be a claim under SOPA. In his cover email, Mr Mejias explained that the invoices consolidated amounts owed in respect of different parts of the work, being electrical works, variations and water inundation issues; other invoices could now be disregarded.

9. On 15 September 2022, the builder emailed the plaintiffs, requesting payment of the September invoices “less any line items for review tomorrow.” That is, the builder sought immediate payment of non-contentious items. Further:

If we have anything unresolved after tomorrow then let’s engage Phil Boyce (who we both know) or another Mediator/Adjudicator Bill Guthrie … to allocate 1hr for each of us next week to allow an independent review of any line items outstanding and avoid any conflict between us.

That is, the builder sought to engage the dispute resolution process.

Dispute resolution

10. On 19 September 2022, the builder engaged Mr Guthrie to assist with negotiating a dispute between the parties. More specifically, the builder sent Mr Guthrie an email, not copied to the plaintiffs, seeking an indication of Mr Guthrie’s fees and providing some general background in respect of the matter.

11. Presumably, Mr Guthrie agreed to assist and made contact with the plaintiffs as, on 26 September 2022, the plaintiffs sent an email to Mr Guthrie, not copied to the builder, entitled “without prejudice Payment Claim …”, requesting information about the builder’s invoices and offering to pay an amount “as full and final settlement,” with such offer to remain open until close of business on 11 October 2022. On 28 September 2022, Mr Guthrie replied, advising that he had conferred with the builder, who agreed to withhold action for seven days to enable payment to be made, following which “it is hoped the remaining issues be resol[v]ed by mediation.” As I read these communications, Mr Guthrie was facilitating commercial negotiations between the parties, generally via email.

12. On 7 October 2022, the plaintiffs replied to Mr Guthrie, “WITHOUT PREJUDICE,” advising that their settlement offer might be withdrawn unless their request for further information about the invoices was met. Mr Guthrie sought instructions in this regard from the builder.

Payment claim

13. Mr Mejias agreed with the plaintiffs that the builder would consolidate all items, payments and outstanding monies into a single invoice.

14. On 12 October 2022, the builder provided the plaintiffs and Mr Guthrie with a credit note and invoice 0726. The credit note stated: (emphasis added)

The client had asked for a review of all charges and that has been completed … so that all previous invoices have been withdrawn and all fees/costs for the original scope/s and all extra items are consolidated into invoice 0726. The review has updated any over or under charges and any discounts/credits are consolidated into this credit note 0726. Only invoice 0726 and only credit note CN0726 are applicable for all work performed between January/July 2022 at … Bowral.

15. Invoice 0726 bore a reference “FINAL PAYMENT CLAIM” and appears to be a consolidation of all previous invoices and, over nine pages, a review of those invoices in light of the plaintiffs’ complaints. This became the payment claim relied upon by the builder in the adjudication application.

16. On 17 October 2022, the plaintiffs sent an email to Mr Guthrie, copied to the builder, with the subject “Without prejudice.” (The plaintiffs contend that this was a payment schedule). The plaintiffs set out their position in respect of the invoices which had been rendered by the builder from time to time. The plaintiffs advised that they were happy to pay one of the September 2022 invoices. The plaintiffs advised that they had offered to pay a reduced amount for the remaining two September 2022 invoices, which offer “has been rejected” but “We are keen to settle this matter … Our offer … remains on the table.”

17. Later that day, Mr Guthrie replied to the plaintiffs and the builder, less than receptive to the plaintiffs’ suggestion. However, on 18 October 2022, Mr Mejias replied to Mr Guthrie regarding the “without prejudice” offer, setting out details of his review of the invoices and offering to accept an amount as full and final payment if paid by close of business on 19 October 2022 “and in the alternative having a mediator/arbitrator proceed with the final payment claim.” Mr Guthrie forwarded this offer to the plaintiffs. No response is in evidence. Again, as I read these communications, Mr Guthrie was facilitating commercial negotiations between the parties, generally via email.

18. On 24 October 2022, the builder issued a notice under section 17(2) of the SOPA, which provides that an adjudication application cannot be made unless the claimant has served written notice of the claimant’s intention to apply for adjudication of the payment claim. The notice stated:

you … failed to provide a payment schedule within the time allowed by [SOPA] … You have 5 business days in which to serve a payment schedule or pay the payment claim in full. … If you fail to serve a payment schedule, you will be barred from lodging an adjudication response …

19. On 25 October 2022, the plaintiffs sent an open email to the builder and Mr Guthrie, complaining about a “lack of any conventional mediation processes” such that the matter was said to have “progressed to the point where an alternative dispute resolution mechanism needs to be employed.” The plaintiffs advised that they had filed a complaint with NSW Fair Trading and had been informed that an officer of the Department would make contact in six to ten weeks “to commence mediation proceedings.” On 27 October 2022, Mr Guthrie replied that he was a qualified mediator and suggested that the parties engage in a mediation/conciliation session that weekend. The builder agreed. There is no evidence of a response from the plaintiffs.

20. On 1 November 2022, the builder sent an email to the plaintiffs, advising that the builder would soon be filing an adjudication application and providing a draft. The builder set out the various timeframes applicable under SOPA and offered to accept $42,778 if paid by the following day, failing which the application would be lodged. The plaintiffs replied the following day, “nice try Ric,” and suggested that they were “astounded by the lack of formal efforts towards meeting our request for a mediation."

Adjudication application

21. On 2 November 2022, the adjudication application was filed and served.

22. On 3 November 2022, a director of ABC Dispute Resolution Service, Russell Welsh, acknowledged receipt of the adjudication application. The plaintiffs emailed Mr Welsh, advising that they had lodged a complaint with NSW Fair Trading. Mr Welsh replied that a complaint to NSW Fair Trading was an entirely separate matter to an adjudication under SOPA and recommended that they seek legal or other advice. Further, Mr Welsh advised: (emphasis added)

According to the claimant’s adjudication application form, you did not respond the claimant’s payment claim, or its notice of intent to apply for adjudication, with a payment schedule within the prescribed timeframe. If that is correct unfortunately you are not entitled to respond to the adjudication application with an adjudication response and the adjudicator will make a determination based upon the adjudication application submissions. The adjudicator may however request further submissions from either or both parties.

23. The plaintiffs did not respond. Later that day, the second defendant, Stewart Campbell, was appointed to adjudicate the application.

24. On 8 November 2022, the plaintiffs emailed Mr Welsh again, seeking assistance with the process, “This claim from our builder presumes that there has been no dialogue between us and only his version of events is on record. Can you please advise further.” On 16 November 2022, Mr Welsh replied, “Unfortunately, since you did not respond to the claimant’s payment claim with a payment schedule, you were not entitled to respond to the adjudication application with an adjudication response. The adjudicator will make a determination based upon the claimant’s submissions only …”.

Adjudication determination

25. On 17 November 2022, the adjudication determination was issued. The adjudicator noted that no adjudication response was permitted on account of the respondents having failed to provide a payment schedule in response to the payment claim or the claimants’ notice of intent to apply for adjudication. As to jurisdiction, the adjudicator noted:

As the Respondent was not entitled to nor provided an adjudication response, there are no specific matters of jurisdictions for my consideration.

26. The adjudicator noted that the payment claim was served on 12 October 2020 and was satisfied that the payment claim complied with the requirements of section 13 of SOPA. The respondent did not serve a payment schedule within the time periods allowed by section 14(4)(b) or section 17(2)(b) of SOPA. The application was made on 2 November 2022 and within the time allowed by section 17(3)(e) of SOPA.

27. The adjudicator set out each of the items of work in issue and, for each item, assessed whether the cost was reasonable. The valuation of the construction work comprised some six pages of the determination. The adjudicator found in favour of the builder and valued the work at $60,396.06 including GST. The adjudicator also determined that the plaintiffs should bear his fees in full.

28. These proceedings were commenced on 30 January 2023.

Valid payment claim

29. This Court can only quash an adjudicator’s determination for jurisdictional error: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [35] (per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ). The first basis on which the plaintiffs contend that such an error occurred was, as pleaded, that the September 2022 invoices were final payment claims which exhausted the builder’s rights under section 13(4A)(b) (sic) of SOPA. By reason of section 13(5) of SOPA, the builder was prohibited from issuing a further payment claim such that the payment claim issued on 12 October 2022 was not a valid payment claim for the purposes of SOPA.

30. As developed in submissions, the plaintiffs contended that the payment claim of 12 October 2022 had no reference date such that the adjudication determination was void, relying on Southern Han Breakfast Point Pty Ltd (In liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52 at [60]-[62] (per Kiefel, Bell, Gageler, Keane and Gordon JJ). The four invoices rendered on 20 July 2022 were said to have “used” the builder’s entitlement to a final reference date under the contract. The three invoices rendered on 5 September 2022 were said to have “used” the reference date created by section 13(4)(b) such that no further reference dates arose. As such, the payment claim issued on 12 October 2022 was said to have no valid reference date and was not justiciable.

31. The plaintiffs’ submission was based on legislation considered by the High Court in Southern Han but which has since been amended. Section 13(5) of SOPA was then in the following terms:

Payment claims

…

(5)   A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.

…

32. In 2018, following a review of the legislation by John Murray AM, Review of Security of Payment Laws, (December 2017), sections 8 and 13 were ‘overhauled’: see the Second Reading Speech delivered by Scott MacDonald in NSW Legislative Council, Parliamentary Debates (Hansard), 24 October 2018 at 61. The Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) commenced on 21 October 2019 and applies to construction contracts entered into after this date: Schedule 2, Part 6 of the Act.

33. As explained in the Second Reading Speech, a person’s entitlement to receive a progress payment is “no longer is triggered by a ‘reference date’, a term that was abolished from the Act. Section 13 was substantially amended. Section 13 now provides (with sections (1A), (1B), (5) and (6) being added):

Payment claims

(1)   A person referred to in section 8 who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.

(1A)   A payment claim may be served on and from the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and on and from the last day of each subsequent named month.

(1B)   However, if the construction contract concerned makes provision for an earlier date for the serving of a payment claim in any particular named month, the claim may be served on and from that date instead of on and from the last day of that month.

…

(4)   A payment claim may be served only within—

(a)   the period determined by or in accordance with the terms of the construction contract, or

(b)   the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),

whichever is the later.

(5)   Except as otherwise provided for in the construction contract, a claimant may only serve one payment claim in any particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in that month.

(6)   Subsection (5) does not prevent the claimant from—

(a)   serving a single payment claim in respect of more than one progress payment, or

(b)   including in a payment claim an amount that has been the subject of a previous claim, or

(c)   serving a payment claim in a particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in a previous named month.

…

34. Section 13(6)(b) provides an exception to allow a person to make more than one payment claim each month, where the payment claim includes an amount that has been the subject of a previous claim. Applying this provision, service of a revised invoice in almost identical terms to that originally served was held to amount to a payment claim under section 13(6)(b) in Crown Green Square Pty Ltd v Transport for NSW [2021] NSWSC 1557 at [249] (per Henry J), as was service of various unpaid invoices by an administrator appointed to the builder company, in a letter of demand, in Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd [2023] NSWSC 309 at [43] (per Richmond J).

35. Although the plaintiffs may have referred to a redundant provision, it is nonetheless the case that an essential requirement for the existence of a valid adjudication determination is service of a payment claim which complies with section 13: Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394 at [53] (per Hodgson JA); Southern Han at [44].

36. Here, the payment claim made on 12 October 2022 included amounts which had been the subject of previous payment claims, being invoices rendered on 20 July 2022, which the builder later withdrew and replaced by the invoices rendered on 5 September 2022, which the builder then also withdrew and replaced with the payment claim of 12 October 2022. It was perfectly clear from the credit note that earlier invoices were withdrawn. Section 13(6)(b) applies, such that the payment claim of 12 October 2022 conforms with section 13, notwithstanding that the charges had been the subject of previous, withdrawn invoices.

37. As a matter of history, I note that even before the amendment of section 13, withdrawing an invoice and issuing another invoice in its place did not contravene section 13(5) as it then stood: NC Refractories Pty Ltd v Consultant Bricklaying Pty Ltd [2013] NSWSC 842 at [39] (per Hammerschlag J); followed in Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 at [17] (per McDougall J). The first challenge fails.

Payment schedule?

38. Second, the plaintiffs sought to rely on their without prejudice email of 17 October 2022 as a payment schedule, such that the adjudication application was out of time. The plaintiffs submitted that, by their email, they placed a value on the payment claim. Although this amount was never paid and the builder was entitled to go to adjudication, the time limits in SOPA must be adhered to, being ten business days after the claimant receives the payment schedule: section 17(3)(c), SOPA. As such, the adjudication application had to be made by 30 October 2022 but was made on 2 November 2022. The consequence was said to be that the adjudicator lacked jurisdiction: Brodyn at [57] (per Hodgson JA).

39. It is convenient to assume that the without prejudice email was a payment schedule, as I consider that the adjudication application was still within time. A payment schedule must indicate inter alia the amount of the payment claim, if any, that the respondent proposes to make: section 14(2)(b), SOPA. As mentioned at [16], in their without prejudice email of 17 October 2022, the plaintiffs advised that they were happy to pay one of the September 2022 invoices and repeated their offer to pay a reduced amount for the remaining two September 2022 invoices.

40. Having indicated the amount the respondent is prepared to pay, the respondent is obliged to pay this amount on or before the due date for the progress payment to which the payment claim relates, being in accordance with the terms of the contract: sections 11(1) and 16(1)(d), SOPA. Here, the plaintiffs were obliged to pay within five business days of receipt of a claim for a progress payment: clause 14. By my calculations, payment of the amount referred to in the ‘payment schedule’ was to be made on or before 24 October 2022.

41. In the event that payment is not made, the builder is entitled to apply for adjudication of the payment claim within 20 business days after the due date for payment: sections 17(1)(a)(ii) and 17(3)(d), SOPA. By my calculations, the builder was entitled to lodge an adjudication application on or before 21 November 2022. As such, even if the without prejudice email amounted to a payment schedule, the plaintiffs’ offer to pay part only of the payment claim had the effect of extending the time in which the builder could file an adjudication application, effectively allowing the plaintiffs an opportunity to pay. Where the adjudication application was filed on 2 November 2022, the application was well within time. The second challenge fails.

42. If I am wrong about this, then I will briefly address the plaintiffs’ further contentions. First, the plaintiffs contend that their without prejudice email was not, in fact, privileged, where the connection between a communication and an attempt to negotiate a settlement must be direct: GPI Leisure Corporation Ltd (in Liq) v Yuill (1997) 42 NSWLR 225 at 226-7 (per Young J); Galafassi v Kelly (2014) 87 NSWLR 119; [2014] NSWCA 190 at [117]. The email was said to be a restatement of the plaintiffs’ position, which did not suggest a compromise or that they are willing to engage in further dispute resolution. The dispute resolution process under clause 27 had not been followed. It was said that Mr Guthrie had not been engaged to mediate or at all.

43. I am not sure why it is said that the dispute resolution process was not followed. True it is that the builder had not required the plaintiffs to pay the disputed amounts into a trust account or to provide a bank guarantee whilst their dispute was resolved. While the builder “may” require the plaintiffs to attend to such matters, the builder was not obliged to do so: clause 14. Whilst the parties did not participate in a ‘traditional’ mediation by attending a venue, nor did the building contracts specify precisely how the Arbitrator/Mediator should undertake their task.

44. Rather, it appears that a dispute arose following the issue of the July 2022 invoices, which the parties endeavoured to resolve informally, including by the builder reviewing the invoices and re-issuing new invoices in September 2022. When the plaintiffs declined to pay these invoices, the builder sought to engage the dispute resolution process by his email of 15 September 2022: see [9]. Mr Guthrie was the Mediator/Adjudicator named in the building contracts and is the person who the builder engaged. It is tolerably clear that Mr Guthrie sought to broker a compromise by email. Clearly, the plaintiffs thought Mr Guthrie was acting in a mediator role, as they chose to entitled their emails “without prejudice.” Offers and counteroffers were exchanged. I am comfortably satisfied that the plaintiffs’ without prejudice email of 17 October 2022 was “a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute”: section 131(1)(a), Evidence Act 1995 (NSW).

45. Second, the plaintiffs contend that section 131(2)(i) of the Evidence Act 1995 (NSW) applied; evidence of the communication could be adduced as it affected their rights, where the email was a payment schedule under SOPA: Tenstat Pty Ltd v Permanent Trustee Australia Ltd (1992) 28 NSWLR 625 at 633 (per McLelland J). Further, to exclude the communication may have the effect of misleading the court: section 131(2)(g), Evidence Act 1995 (NSW).

46. As to whether the without prejudice email was a payment schedule, section 14 of SOPA provides:

Payment schedules

…

(2)   A payment schedule—

(a)   must identify the payment claim to which it relates, and

(b)   must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).

(3)   If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less …

47. The requirements for a payment schedule have been described as “relatively undemanding” and are satisfied where the document identifies the claim to which it is responding, what the respondent proposes to pay instead and what parts of the claim are objected to and why: Piety Constructions at [39] (per Richmond J) citing Vannella Pty Ltd v TFM Epping Land Pty Ltd [2019] NSWSC 1379 at [135] (per Henry J). In Piety Constructions, Richmond J also observed that the Court should approach the matter having regard to substance rather than form, and without taking an unduly critical approach: Ardnas (No 1) Pty Ltd v J Group (Aust) Pty Ltd [2012] NSWSC 805 at [11] (per Hammerschlag J); Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333 at [20] (per Chesterman J). However, a payment schedule “must sufficiently describe the dispute so as to enable the claimant to determine whether to proceed in the knowledge of the nature of the case it will have to meet”: Style Timber Floor Pty Ltd v Krivosudsky (2019) 100 NSWLR 133; [2019] NSWCA 171 at [47] (per Leeming JA), following Multiplex Constructions v Luikens [2003] NSWSC 1140 at [70], [76]-[78] (per Palmer J).

48. The without prejudice email did identify the payment claim. The plaintiffs did not indicate the amount of the payment claim which they proposed to make, beyond repeating an offer to pay the September 2022 invoices in a reduced amount. More importantly, the plaintiffs did not indicate why the amount which they offered to pay was less than the payment claim, beyond stating that they were confused with the series of invoices. The builder would have been ‘none the wiser’ to understand the nature of the case it would have to meet if it decided to proceed further.

49. I note that the plaintiffs did not regard their without prejudice email as a payment schedule at the time. On receipt of the builder’s section 17(2) notice on 24 October 2022, the proposed adjudication application on 1 November 2022, the email advice from Mr Welsh of 3 November 2022 and 16 November 2022 – each of which asserted that the plaintiffs had failed to provide a payment schedule – the plaintiffs did not suggest that their without prejudice email was such a document.

50. Finally, the fact that a communication is marked without prejudice tells strongly against it being construed as a payment schedule for the purposes of section 14 of SOPA. The very fact that the communication is marked without prejudice indicates that the purpose of the document is to attempt to negotiate a settlement of a dispute on a confidential basis and without admission. The respondent’s ability to pay the amount indicated in the offer is predicated on the claimant accepting that offer. A respondent’s ability to rely on such a document, before an adjudicator or in subsequent proceedings, is severely undermined by the prima facie inadmissibility of the document. Indeed, taking such a communication into account, absent waiver of privilege by the parties to the negotiation, may result in a manifest error of law: Nouvelle Homes t/as Wilson & Hart v Hatch [2009] WASC 63 at [17], [21] per McKechnie J.

51. As such, the without prejudice email does not satisfy the requirements of section 14 of SOPA, nor affect the rights of the plaintiffs, such that the exceptions in sections 131(2)(g) and (i) of the Evidence Act do not apply.

Lack of procedural fairness

52. The plaintiffs also advanced a third challenge, being that the adjudicator failed to discharge his obligations under section 22 of SOPA “in that he failed to properly consider the Plaintiffs’ email of 17 October 2022 email which was present in the documents submitted with the adjudication application”. When it became clear that the without prejudice email was not amongst the documents submitted with the adjudication application, the plaintiffs sought to embark on a wholesale attack on the adjudication determination, suggesting that the adjudicator did not critically examine the adjudication application but merely ‘rubber-stamped’ the builder’s claim. Being unpleaded, I will not entertain this broader challenge.

53. Further, the adjudicator was said to have acted recklessly or capriciously “by failing to identify if a valid payment claim was made such that jurisdiction could be conferred,” which I take to be a reference to the plaintiffs’ first challenge. The adjudicator did turn his mind to whether the payment claim complied with section 13 of SOPA: see [26]. The third challenge fails.

Orders

54. For these reasons, I make the following orders:

1. Dismiss the summons filed on 30 January 2023.

2. Order the plaintiffs to pay the defendant’s costs of the proceedings.

**********

Decision last updated: 20 April 2023