Thinking | 7 July 2022

Email payment claims: security of payment update

By Ben Cotter and Emma Bechaz

The recent case of Equa Building Services Pty Ltd v A&H Floors 2 Doors Australia Pty Ltd [2022] NSWSC 152 is a useful reminder to the building industry that proper service of payment claims is crucial to protecting entitlements under security of payment legislation.

This decision considered the Building and Construction Industry Security of Payment Act 1999 (NSW) (the NSW Act) and provides a helpful refresher on how contractors can ensure that their service by email is valid. If a payment claim is not validly served, the claimant may not be entitled to payment.

The Act

Under section 31(1) of the NSW Act, service of documents, including payment claims, may be affected, relevantly, by sending it by post addressed to the recipient’s ordinary place of business or by email to an address specified for the service of documents.

Dispute

A&H Floors 2 Doors Australia Pty Ltd (AH) was performing flooring work for a multi-unit building being developed by Equa Building Services Pty Ltd (Equa).

During the course of the works, AH sent an email containing a payment claim to a representative of a group of companies called the Arden Group, of which Equa was part. The representative had never been an employee of Equa or a related entity. The relevant email address ended with ‘@ardengroup.com.au’.

AH also sent the payment claim by post; however, the envelope was addressed to ‘54 Crosby Road’ even though Equa’s principal place of business was located at ‘56 Crosby Road’.

AH did not receive a response to its email and the posted version of the payment claim was never received by Equa.

Adjudication

The Adjudicator found that although service by post had been ineffective due to the address error, AH was entitled to believe that the email recipient of the payment claim was a representative of Equa for the purpose of service under the NSW Act and, accordingly, the payment claim had been validly served by email.

This was based on the fact that email addresses with ‘@ardengroup.com.au’ were used by all people representing Equa, including those who had previously participated in processing payment claims.

Supreme Court of NSW

Equa argued that AH had not validly served a payment claim and, as a result, the Adjudicator lacked jurisdiction to make the adjudication determination. The Supreme Court of NSW agreed, finding that no payment claim had been served and the Adjudicator had acted without jurisdiction in making the determination. Accordingly, the adjudication determination was quashed.

Central was the fact that Equa had not specified that the email address used by AH was appropriate for service of a payment claim and the mere fact that others involved in the project had email addresses ending with ‘@ardengroup.com.au’ did not mean anything in relation to the status of the particular addressee of the payment claim, who had never been employed by Equa or any related entity.

Conclusion and take away points

The security of payment acts of Victoria, South Australia and Tasmania contain the same service provisions as in the NSW Act. However, it should be noted that Victorian courts taken a more generous approach to service by email and have found that the service requirements in security of payment legislation are facilitative, rather than exclusive (see Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd (No 2) [2015] VSC 500).

Regardless of which jurisdiction parties to construction contracts are in, we recommend that any email address that is to be used for service is set out clearly, agreed to and confirmed by all parties at the outset of a project.

Further, parties should be careful to ensure that service of payment claims or any other document complies with the relevant construction contract as well as legislative requirements in that State or Territory. Failure to comply with the relevant security of payment legislation in the applicable jurisdiction may prevent a party from being able to obtain the benefits conferred under such legislation.

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