On a Proper Construction Issue 6: Covid-19 and the Strict Service Requirements Under the Construction Contracts Act 2004 (WA)

The COVID-19 pandemic and increasingly intense government actions being taken globally in response will likely have a significant impact on the construction industry. Payment disputes are inevitable as supply chains become impacted by restrictions on the movement of people and materials.

In Australia, each State and Territory has their own Security of Payment legislation, which provides a rapid adjudication process to resolve payment disputes arising under a construction contract.¹ In Western Australia, the Construction Contracts Act 2004 (WA) (CCA) applies.

At the time of writing there is no indication that the operation of the CCA will be suspended or curtailed by the Western Australian government, and it is yet to be seen whether the current crisis will result in a spike in Adjudication Applications as contractors and subcontractors seek to “keep the money flowing” through the contractual chain using the rapid adjudication mechanism in the CCA. Similar observations can be made about the other Australian jurisdictions.

It is well known that the CCA (and its interstate equivalents) imposes strict time and service requirements. A failure to comply with those requirements will:

1. In the case of the Applicant, result in the Adjudicator dismissing the Adjudication Application without making a determination of its merits;² and
2. In the case of the Respondent, result in the Adjudicator making a finding on the basis of the Application alone.³

However, with increased government action to combat COVID-19, particularly if a future lockdown is directed,⁴ those strict service requirements may not be so easily met.

Moreover, section 5 of the CCA extends to goods and services related to construction work, that is, materials or components,⁵ fittings,⁶ plant or materials,⁷ prescribed goods,⁸ professional services,⁹ or on-site services¹⁰ used to carry out construction works. As such, businesses providing goods and services relating to construction work that may be impacted by government protective measures will also fall under the CCA.

In such circumstances, traditional methods of service (for instance leaving an Adjudication Application at the Respondent’s registered office or usual place of business) may lead to unfair outcomes (for example, if days go by without the documents being noticed because the office is unattended).

Service of Documents under the CCA

To begin an Adjudication Application under the CCA, within 90 business days after the payment dispute arises, the Applicant must prepare and “serve” a written application¹¹ on the other party to the construction contract (the Respondent),¹² and the nominated Adjudicator (where there is one) or a prescribed Appointing Authority.¹³

Within 10 business days after service of the application, the Respondent must then prepare a response and “serve” it on the Applicant and the Adjudicator.¹⁴

No guidance is provided in the CCA as to how the Application and Response are to be served.

The Interpretation Act 1984 (WA) provides that where a written law requires a document to be “served“, it must be:

1. Posted, including by regular or certified mail to the last known address of the person to be served;
2. Delivered personally; or
3. Posted or left for the person at their usual or last known place, business or home.¹⁵

For companies, the Corporations Act 2001 (Cth) states a document may be served by:

1. Leaving it at, or posting it to, the company’s registered office; or
2. Delivering it personally to the company’s director.¹⁶

The serving of documents by post is said to have been effected at the time when the document would be delivered in the ordinary course of post.¹⁷ What constitutes as ‘the ordinary course of post’ will vary depending upon the type of post used, that is, regular, priority or express, as well as the journey of the mail.¹⁸ However, if a contract contains a provision dealing with when the service of document by post is said to have been effected, the parties to that contract will be bound to such provision.

The Department of Mines, Industry Regulation and Safety recommends that where possible, documents should be served in a way that can be tracked or provides proof of receipt.¹⁹ We concur.

In practice, to avoid questions around service, most parties still print and serve hard copies of Applications and Responses by hand, and obtain signed delivery receipts.

As at the date of this article, we are advised that these appointing authorities are adopting the following practices in respect of the service of Applications:

1. Australian Institute of Building: The WA office is open but unattended. Matters are being dealt with electronically or by appointment;
2. Master Builders Association of Western Australia (MBA): The WA office is open and attended (but only by two employees). The MBA is still accepting physical service of applications; and
3. Resolution Institute (RI): The WA virtual office is in operation to accept physical service of applications while the Sydney office is closed. However, the RI encourages Applicants to apply using the online application form on its website.

Issues

The unprecedented restrictions being implemented by the federal and state governments including restricting movement between states and territories (and, particularly if a lockdown is directed, even beyond the home) will obviously impact on a party’s ability to serve documents in the manner contemplated above.

The Electronic Transactions Act

The Electronic Transactions Act 2011 (WA) (ETA) encourages the government, businesses and community to use electronic transactions and communications in their dealings.

With more people working from home, the ETA could play a vital role in resolving the previously mentioned issues regarding service of applications and responses under the CCA.

Section 9 of the ETA states that a person who is required or permitted to give information in writing has done so if they have:

1. Given the information electronically by a means that was reasonable to expect that the information would be readily accessible; and
2. The recipient of the information consented to be given the information through electronic communication.

‘Consent’ is defined under section 5 of the ETA to include inferred consent. Whether or not consent can be reasonably inferred will generally depend on the circumstances of the case and on the parties’ relationship. However, in practice, such consent would usually be expressed, for example, through providing a company or person with an email address in the notice provisions of a construction contract (although it may also be inferred from past practices).

Of course, service by email, social media and cloud storage creates a separate set of issues, for example:

1. In Re David Scott Ellis; Ex parte Triple M Mechanical Services Pty Ltd [No 2] [2013] WASC 161, the Applicant served its response and its attachments to the Adjudicator and Second Respondent as a compressed file.²⁰ However, because the Adjudicator did not have the necessary decompression software or available means to access the attachments,²¹ he disregarded the attachments in his Adjudication Determination;²²
2. In Citigroup Party Ltd v Weerakoon [2008] QDC 174 (16 April 2008), the Queensland District Court was required to consider whether an application was properly served through Facebook. The Court was dissatisfied that the Facebook profile being considered was in fact the defendant’s, stating that ‘anyone can create an identity that could mimic the true person’s identity’;²³ and
3. In Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd & Anor [2014] QSC 30, the Court held that sending an email which provides a Dropbox link to the Adjudication Application and other relevant documents did not constitute service of those documents on the Applicant.²⁴ This was because the files within the Dropbox were not part of the emails and thus did not result ‘…in the person to be served becoming aware of the contents of the document…’.²⁵

It is clear that like all things COVID-19 related there are no easy answers here and that context and practicalities are likely to be relevant. It is pertinent to recall that the ancient cases regarding service spoke to bringing the document to be served to the attention of the person on whom it was being served in practice.²⁶ It seems that in that context, mere compliance with the rules may not be sufficient during the pandemic.

Our Top Tips

Some of our top tips for service of Adjudication Applications and Responses in this difficult time:

1. Check the notice provisions of your construction contract (for example, to see if email service is expressly permitted);
2. Where possible, obtain express consent to serve documents required to be served under any Act (including under the CCA) by electronic means in accordance with the ETA;
3. Take action early to prepare your Application / Response and allow plenty of time to effect its service. Consider the following issues (early):
   1. how will the documents be served within the strict timeframes?
   2. how will you guarantee that the document has been received (or deemed received) by the intended recipient on time?
   3. consider communicating with the other parties about these issues in advance.
4. If your business offices are closed as a consequence of COVID-19:
   1. notify contract counterparties and provide them with the appropriate address for service (i.e. consent to email service and provide multiple email addresses to ensure documents are not missed); and
   2. if you perceive it reasonably likely that you will be served with an adjudication application) consider whether regular checks of your registered office/usual place of business are essential or what technology you could utilise to monitor your offices. For example, install a camera to monitor from home.
5. To prevent the service of documents through electronic transactions being found to be void, ensure that parties have receipt acknowledgment practices in place, such as setting up a delivery/read receipt, calling the other party, or sending another copy of the documents to the other party by fax or hand delivery;
6. Do not use Dropbox or compression software, attach PDFs. Send multiple emails if required, be sure to understand the capacity constraints of your outgoing server and the receiving server; and
7. Take care when serving the documents such that you are aware of the dates of business days and different time zones, including daylight saving, current restrictions, and postal and courier delays arising in that state or territory as a result of COVID-19.

If you are considering lodging an Adjudication Application or expect to receive one, we would be happy to discuss with you how best to prepare.

This article was written by David Ulbrick, Partner, Kate Morrow, Special Counsel, Michael Harris, Associate and Laura Watson, Law Graduate.

¹Building and Construction Industry Security of Payment Act 1999 (NSW), Building and Construction Industry Security of Payment Act 2002 (Vic), Building and Construction Industry Payments Act 2004 (Qld), Construction Contracts (Security of Payments) Act 2004 (NT), Construction Contracts Act 2004 (WA), Building and Construction Industry Security of Payment Act 2009 (SA), Building and Construction Industry Security of Payment Act 2009 (Tas) and Building and Construction Industry (Security of Payment) Act 2009 (Act).
²Construction Contracts Act 2004 (WA), s 31(2)(a)(ii).
³See eg, Re Graham Anstee-Brook; Ex Parte Karara Mining Ltd [No 2] [2013] WASC 59 [20].
⁴Although at the time of writing that is looking less likely in Australia.
⁵Construction Contracts Act 2004 (WA), s 5(1)(a).
⁶Ibid s 5(1)(b).
⁷Ibid s 5(1)(c).
⁸Ibid s 5(1)(d).
⁹Ibid s 6(2). However, note that professional services does not include accounting, financial, or legal services as per s 5(2)(ii).
¹⁰Ibid s 6(3).
¹¹Ibid s 26(1).
¹²Ibid s 26(1)(b)
¹³Ibid s 26(1)(c).
¹⁴Ibid s 27.
¹⁵Interpretation Act 1984 (WA), ss 75-76.
¹⁶Corporations Act 2001 (Cth), s 109X.
¹⁷Interpretation Act 1984 (WA), s 75(1); Interpretation Act 1901 (Cth), s 29(1).
¹⁸In Healy v Deputy Commissioner Of Taxation (2015) 320 ALR 371, Stephen J at [52] referred with approval to Lord Esher MR in Kimp v Wanklyn [1984] 1 QB 583 [585] who said, ‘The Post Office is the authority which, under its statutory powers, determines the ordinary course of the post — that is to say, how the letters shall be carried, and at what time they shall, as a general rule, be delivered within any particular district to the persons taken as a body who reside in that district’.
¹⁹Department of Mines, Industry Regulation and Safety, Topic 3: Applying for Adjudication (19 April 2018) Government of Western Australia Department of Mines, Industry Regulation and Safety <Ihttps://www.commerce.wa.gov.au/sites/default/files/atoms/files/topic_3_cca_applying_for_adjudication_factsheet.pdf>.
²⁰Re David Scott Ellis; Ex parte Triple M Mechanical Services Pty Ltd [No 2] [2013] WASC 161 [3].
²¹Ibid [54].
²²Ibid [7].
²³Citigroup Party Ltd v Weerakoon [2008] QDC 174 (16 April 2008).
²⁴Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd & Anor [2014] QSC 30, [37].
²⁵Ibid [34].
²⁶See eg In re Kerly, Son & Verden [1901] 1 Ch 467, 477 (Rigby LJ) 479 (Stirlin LJ).