Why USB service is not good service for the purpose of Security of Payment - Court Procedure

In the pressured context of the Building and Construction Industry Security of Payment Act 1999 (SOPA), every hour counts. The temptation is to meet SOPA's time limits by providing documents on a Universal Serial Bus, that is, a USB - the ubiquitous 'memory stick'. But is this good service for the purpose of SOPA?

In Parkview Constructions Pty Ltd v Total Lifestyle Windows Pty Ltd t/as Total Concept Group¹ (Parkview v Total Lifestyle) the NSW Supreme Court (the Court) held at first instance that provision of an adjudication application to the respondent by means of a USB, without more, was not proper service.

THE FACTS OF THE CASE

Parkview engaged Total Lifestyle to design, supply and install glazed windows and doors. Total made an adjudication application. The adjudicator determined that Parkview had to pay Total.

The following events took place giving rise to Parkview's proceedings seeking to have the determination quashed:

Upon receipt of a payment schedule identifying as $nil the scheduled amount, Total uploaded its adjudication application to the authorised nominating authority's cloud based platform on 8 November 2016, being the last day for making a valid application.
Later that same day, Total uploaded a revised version of its adjudication application.
The revised version was then transferred to a USB drive and the drive was couriered to Parkview with a covering letter that foreshadowed delivery of a hard copy which consisted of four full lever arch folders.
Parkview received the USB drive containing the application on 9 November 2016.
When the hard copy folders were delivered to Parkview, they contained the original submissions but not the revised adjudication application.
The revised adjudication application was not given to Parkview.
Some documents on the USB drive were not in the hard copy folders and vice versa.

The adjudicator determined that the adjudication application was served on Parkview on 9 November 2016 upon delivery of the USB drive. As the adjudication response was served on 17 November 2016, the adjudicator determined that this was out of time and so disregarded it.

Amongst that 'litany of errors', was the adjudicator's decision to disregard the adjudication response a reviewable error?

The Court's Consideration

"It is plain that what is served on the respondent must itself be in writing."²

The Court reasoned that with section 17(3)(a) requiring the application to be in writing, and with section 17(5) requiring a copy of it to be served on the respondent, that requirement for provision of a copy meant that what the Act contemplated was that the written words of the adjudication application needed to be communicated to the respondent.

In the Court's opinion, provision of information on a USB without more did not so communicate those written words. Therefore it did not comply with the requirement of section 17(5) as the USB drive did not "represent or reproduce words in visible form"³ – it was a device which when actioned, was "capable of representing or reproducing what [was] stored on it in visible form".⁴ 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".⁵ To access the information on the USB drive, the recipient must have compatible technology which "cannot be regarded as an inevitability".⁶

Justice Hammerschlag held that because service was not made on the date the USB drive was delivered, the adjudication response was in time and the adjudicator should not have disregarded it. It was said that this was "an essential preliminary to the decision making process for which the Act provides."⁷ In that regard, the Court decided that there had been a sufficient denial of procedural fairness to warrant quashing the adjudication application.

The key implications

At the time of publication of this article, the time for appeal has not expired. Even so, provision of a USB drive alone cannot safely be regarded as sufficient service of a copy of an adjudication response under the Act.

The Court's decision in Parkview v Total Lifestyle highlights the practical risk of those caught within the Act's reach:

Practical considerations such as communications should be considered before entry into the transaction and, where appropriate, addressed in the contract.
Whenever a security of payment dispute arises, strict compliance with the Act should not be treated lightly.
While the time savings that are often associated with electronic means of communication may be a tempting way of managing tight statutory deadlines, they can also be fatal to success.
If in doubt, hard copy communication of the written word remains the safest option.

Footnotes

¹ [2017] NSWSC 194.

² At paragraph 72.

³ At paragraph 78.

⁴ At paragraph 78.

⁵ At paragraph 79.

⁶ At paragraph 80.

⁷ At paragraph 56.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.