Security of Payments: Timing is Everything!
The recent decision of the Supreme Court of NSW in MGW Engineering Pty Ltd t/a Forefront Services v CMOC Mining Pty Ltd  NSWSC 514 provide practical guidance on the method of service of payment claims and consequences of miscalculating dates under the Building and Construction Industry Security of Payment Act 1999 NSW (SOPA)
At 5.15pm on 3 February 2021, an employee of MGW Engineering Pty Ltd, trading as Forefront Services (Forefront), personally delivered four (4) claims (totalled > $6M) under SOPA to an employee of CMOC Mining Services Pty Ltd (CMOC) at Northparkes Copper and Gold Mine (the Mine) at Goonumbla in Central New South Wales.
On 18 February 2021, CMOC served its payment schedules in response to the payment claims pursuant to s14 of SOPA (which was 11 days after 3 February 2021 and 10 days after 4 February 2021).
Forefront contended that it served the payment claims on 3 February 2021 and was entitled to full payment because CMOC served its payment schedules outside statutory time limit (10-business days) imposed by SOPA.
CMOC contended that the payment claims were properly served on 4 February 2021. Therefore, its payment schedule was served within the statutory time limit.
The Court had to consider the following questions to determine when the payment claims were deemed to be served:
- Whether the payment claims were delivered 'personally' on 3 February 2021;
- Whether the payment claims were ‘lodged’ during ‘normal office hours’ at ‘ordinary place of business’;
- Whether the payment claims served ‘in a manner provided by’ the Contracts.
The Court held that the payment claims were served on 4 February 2021 and separately that Forefront was not entitled to suspend works under s15(2)(b) of SOPA.
A summary of the Court's finding leading to the determination is as follows:
- Payment claims were not 'personally' delivered until 4 February 2021;
Forefront pleaded that it 'personally' served the payment claims on CMOC on 3 February 2021.
However, the Court was not satisfied and considered that a payment claim could not be served 'personally'. It was not delivered to the person it was addressed to, and it could not have come to the addressee's attention until 4 February 2021.
- Payment claims were not 'lodged' with CMOC during 'normal office hours' at CMOC's 'ordinary place of business on 3 February 2021;
The Court acknowledged the Mines' ‘operating' hours were 24 hours, 7 days a week. However, it confirmed it was different from its standard 'normal office hours' where administrative / clerical staff performed their duties.
CMOC argued that the Access Control Room where the payment claims were left was not within CMOC's 'ordinary place' and put forward evidence that the hours where CMOC’s administrative / clerical works occurred were between 7.00am - 7.30am to 4.00pm - 4.30pm.
The Court concluded that:
(i) any service outside of CMOC's 'normal office hours' (being 4.00pm or 4.30pm) were deemed to be outside of the normal office hours; and
(ii) the Court did not accept that the service was not made at the CMOCs ordinary place of business.
- Payment claims served were not served "in a manner provided by" the Contracts;
The Contract provided that if Forefront delivered a payment claim after 4.00pm on a business day, the service is taken to be effected the next business day.
The Court confirmed that the provision of the Contract does not modify any part of s31 of the SOPA and where a payment claim had satisfied the requirements of section 31(a), (b), (c) or (d) such service of the payment claim would have been effective despite the Contract.
Section 31 of SOPA provides the manner in which a payment claim may be validly served.
This decision is a reminder that when serving a payment claim or schedule, it is important to:
- Ensure that Payment Claims are served on the right person or is brought to the attention of the person the claim is addressed to and not just any employee;
- Note that 'normal office hours' is not the same as 'operating hours' and normal hours are considered to be hours where administrative / clerical staff perform their duties, and any service outside of these hours may be considered to be effected the following day;
- Note that service under SOPA is not usually varied because of contractual requirements of service (i.e. service to take place the next day) where a payment claim is valid and has been served in accordance with the Act. However, where you intend to rely on the contract (per s 31 (1) (e)) it is important to serve such payment claim / notices within the time stipulated in the Contract, and it is generally best practice to comply with the contractual requirements.
- Ensure the date of service is calculated with diligence as there are severe consequences to prematurely suspending works (e.g. you cannot rely on section 27(2A) of SOPA and may be liable for damages or have the works taken out of your hands).
If you require any assistance or if you have any questions relating to the above, please do not hesitate to contact a member of Coleman Greig's Building & Construction team, who would be more than happy to assist you.