Executive summary
The Supreme Court of Victoria’s decision in Endeavour Constructions Pty Ltd v Down Under Piling Australia Pty Ltd [2023] VSC 424 (the Case) outlines the criteria required to satisfy s 18(2) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (the SOP Act).
If a respondent fails to provide a payment schedule, then Section 18(2) requires the claimant to give notice of its intention to make an adjudication application, and give the respondent a “second chance” to serve a payment schedule within 2 business days of that notice.
The Case highlights that a notice under section 18(2) of the SOP Act (Section 18(2) Notice) does not require clear identification when served. Rather, it just needs to be received by the respondent and outline the claimant’s intention to proceed to an adjudication.
What happened?
Down Under Piling Australia Pty Ltd (the Claimant) was engaged by Endeavour Constructions Pty Ltd (the Respondent) to complete excavation and piling works for a basement carpark at an apartment building in Yarraville. The contract was silent as to a ‘final payment claim’ or final reference date.
The Claimant issued a final payment claim on 6 July 2022, under the SOP Act, identifying that the last day of works performed was 7 April 2022.
As no payment schedule was provided in the time required under the SOP Act, the Claimant issued a new version of the payment claim on 25 July 2022 which included a text box at the end of the payment claim noting that the document was a Section 18(2) Notice under the SOP Act.
A Section 18(2) Notice is required under the SOP Act before making an adjudication application, and gives the respondent an opportunity to provide a payment schedule to the claimant within two business days of receiving the Section 18(2) Notice.
In this case, the Claimant did not specifically refer to the Section 18(2) Notice in the covering email sent to the Respondent. The only reference was in the text box on the payment claim itself.
The Claimant proceeded to adjudication (Adjudication), in which the adjudicator ultimately determined in favour of the Claimant.
The Respondent sought to challenge the Adjudication determination on two grounds, being:
- the existence of a valid reference date; and
- whether the Section 18(2) Notice a valid notice under the SOP Act.
The Decision
Valid reference date
The decision of Stynes J dealt with the existence of a valid reference date as an issue of fact, considering, simply, when the last work under the construction contract was undertaken. Stynes J held there was work under the construction contract giving rise to a valid reference date, dismissing this ground of appeal.
Valid Section 18(2) Notice
In determining the question of the Section 18(2) Notice, Stynes J noted that contravention of section 18(2)(a) is enough to invalidate an adjudication. This is founded upon the object of this section, which is to enable the Respondent to provide a payment schedule.
Stynes J held the Section 18(2) Notice was valid for the following reasons:
- there was no dispute as to whether the Section 18(2) Notice was received by the Respondent;
- the Section 18(2) Notice was noticeably different from previous payment claims issued by the Claimant and conveyed an intention to apply for an adjudication; and
- the Respondent had regard to the Section 18(2) Notice, having deposed to noticing the text box.
Regardless of the fact that the Section 18(2) Notice could have been identified in a clearer manner, its intention as detailed in the text box was sufficient to categorise the document as a Section 18 Notice. Accordingly, the Respondent’s appeal was dismissed.
Formal and Procedural Requirements
The determination of Stynes J held that in circumstances where a Section 18 Notice makes it clear a claimant intends to apply for an adjudication application, there is no other formal or procedural requirement under the SOP Act prescribing how a respondent is to be notified a notice is a Section 18 Notice.
Provided that it is uncontroversial that a respondent receives the document (which should be distinct from other attachments if in the form of an email) and the document is noticeably different from previous documents or payment claims, then a Section 18(2) Notice will be valid.
Key takeaways
The decision highlights the importance of identifying a claimant’s intention to apply for an adjudication when issuing a Section 18 Notice. A failure to do this correctly will invalidate a Section 18 Notice, which will be grounds to invalidate an adjudication.
The decision further reinforces that respondent’s will not be able to rely on a claim that a Section 18 Notice was not identified clearly, provided that the notice clearly states the claimant’s intention to apply for an adjudication.
This article was written by Leighton Moon, Partner, Chris Kipouridis, Associate, and Nick Jarrett, Solicitor.
