Did you really serve that payment claim? Invalid service cost claimant $6 million

The judgment of Stevenson J in the Supreme Court of New South Wales (‘Court’) in MGW Engineering Pty Ltd t/a Forefront Services v CMOC Mining Pty Ltd [2021] NSWSC 514 (‘MGW’) provides guidance on what constitutes valid service of a payment claim on an organisation.

Claimants must strictly adhere to the statutory provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) (‘SOPA’) and Corporations Act 2001 (‘CA’) in order to validly serve a payment claim on a respondent. A failure to serve payment claims in the prescribed manner under statute can have significant monetary implications for a claimant.

Case Summary

Between 4 February 2020 and 9 August 2020, MGW Engineering Pty Ltd, trading as Forefront Services (‘the plaintiff’) entered into four contracts (‘the contracts’) with CMOC Mining Services Pty Ltd (‘the defendant’) for the provision of services at a mine in central New South Wales.

On 3 February 2021 at 5.15pm, an employee of the plaintiff physically handed an employee on duty in the access control room four payment claims relating to the contracts for a total amount of $6,161,020.35. On 4 February 2021, the plaintiff delivered the four payment claims to the defendant using a cloud-based document sharing software.

In establishing whether the payment claims served on 3 or 4 February 2021, the plaintiff contended that the payment claims were served on 3 February 2021 on the grounds of serving the payment claims (i) “personally” (s 31(1)(a) SOPA), (ii) “lodging..during normal office hours” (s 31(1)(b) SOPA) and (iii) in a “manner…provided under” the contracts (s 31(1(e) SOPA).

The defendant maintained the payment claims were served on 4 February 2021.

Section 31 of SOPA provides:

“Any document that by or under this Act is authorised or required to be served on a person may be served on the person:
(a) by delivering it to the person personally; or
(b) by lodging it during normal office hours at the person’s ordinary place of business; or

…
(e) in the case of service by a party to a construction contract on another party to the construction contract – in the manner that may be provided under the construction contract.
…

The provisions of his section are in addition to, and do not limit or exclude, the provisions of any other law with respect to the service of documents.

In this section:
‘document’ includes written notice or determination
‘serve’ includes give, send or otherwise provide.”

Clause 47.1 of the contracts provides:

“[25] …Any notice served on CMOC or the other defendants “must” be marked with the attention of ‘the Company Secretary’”

Clause 47.2 of the contracts provides:

47.2 Notices deemed given

A Notice will be taken to be duly given:

in the case of delivery by hand, when delivered;

…

but if the result is that a Notice would be taken to be given or made on a day that is not a Business Day or the Notice is sent or is [delivered] later than 4.00pm (local time) it will be taken to have been duly given or made at the commencement of business on the next Business Day.”  

Section 109X of the CA provides:

“For the purposes of any law, a document may be served on a company by:

• leaving it at, or posting it to, the company’s registered office; or
• delivering a copy of the document personally to a director of the company who resides in Australia or in an external Territory…”

As per s 14 of SOPA, the payment schedule must be served within 10-business days after receipt of the payment claim.

On 18 February 2021, the defendant served its payment schedule in response to the payment claims. This represented 10-business days after 4 February 2021, and 11-business days after 3 February 2021. As the defendant maintained that the payment claims were served on 4 February 2021 and their payment schedule was served within time, the plaintiff was entitled to no more than $180,912.05.

The plaintiff contended that service of the payment claims was effected on 3 February 2021. Thus, the defendant’s service of its payment schedule on 18 February 2021 fell outside of the 10-business day statutory time limit prescribed by SOPA. A failure of the defendant to adhere to the time limit would not have entitled them to raise a defence or cross-claim. As such, the plaintiff argued this entitled them to a judgment of the full payment in the sum of $6,161,020.35.

When deciding whether the payment claims were served personally on 3 February 2021, His Honour noted that s 31(3) of SOPA operated in conjunction with other statutory provisions with respect to document service. His Honour looked to s 109X of the CA and clause 47.1 of the contract in coming to a decision. His Honour dismissed the plaintiff’s claim that the payment claims were delivered on 3 February, and contended that the defendant did:

“[37] …not see the Payment Claims until he attended the Mine on 4 February 2021”

His Honour held that the payment claims were not lodged until 4 February 2021, in particular:

“[43]…in order that a Payment Claim be ‘lodged’ with a corporation, more is required than simply leaving the document with an employee, no matter what the employee’s functions were nor how junior the employee was, at any location within the corporation’s business premise. Some further step, the effect to which would likely be bringing the Payment Claim to the attention of the relevantly responsible person, is necessary..”

His Honour maintained that although:

“[49] The Mine operates continuously 24 hours a day, 7 days a week and every day of the year…”

this does not extend the interpretation of “normal office hours” in s 31(1)(b) of SOPA to hours outside the typical working hours of administrative staff.

His Honour based his determination on evidence given by the defendant’s office administration staff to conclude:

“[68] …that CMOC’s ‘normal operating hours’ at the mine commenced between 7 and 7:30am and concluded around 4 to 4:30pm.”

His Honour did not accept the defendant’s access control room satisfied the interpretation of s 31(1)(b) of SOPA as an ordinary place of business. His Honour held that as the payment claims were served after 4pm, they were effectively delivered on 4 February 2021.

However, His Honour noted that if the plaintiff met the other requirements for service of the payment claim on the defendant, a breach of clause 47.2 of the contract would not prevent service from being effected. Accordingly, payment claims were served by the plaintiff to the defendant on 4 February 2021.