Payment claims are an important tool available under the Building and Construction Industry Security of Payment Act 1999 (NSW) (‘SOPA’) to enable people who carry out construction work or supply related goods and services to recover money owed to them under a contract However, these rights only flow if a valid payment claim is properly served on the other party.
The proper service of a payment claim is critical, as this action triggers a strict timetable for the service of a payment schedule in response, suspension of works and the date by which an adjudication application may be made. If you are entitled to serve a payment claim, a simple difference of a day could put your entire claim at risk. It is essential to serve your payment claim correctly.
The Supreme Court’s recent decision in MGW Engineering Pty Ltd t/a Forefront Services v CMOC Mining Pty Ltd  NSWSC 514 (‘MGW v CMOC’) illustrates the importance of properly serving payment claims.
Was the Payment Claim served?
Forefront provided construction services to CMOC under a contract (Contract). CMOC operated a mine at Goonumbla NSW (Mine). At 5.15 pm on 3 February 2021, Mr Wallder, an employee of Forefront, handed four payment claims under SOPA to Mr Sargent, an employee of CMOC, who was working in the Access Control Room at the Mine. The next day, Forefront sent the payment claims to CMOC via a software platform.
The question for the Court was whether the payment claims had been validly served on 3 February 2021. If they had been, then Forefront would have been entitled to over $6.1 million in payment. If they were not, then Forefront would only be entitled to just over $180,000, and would face a cross-claim from CMOC for having ceased work under the contract.
The Court’s decision
Section 31 of the SOPA sets out how a payment claim can be properly served. In this case, the Court considered the operation of the methods of service as set out in that section:
Service by ‘delivering it to the person personally’ – SOPA s 31(1)(a)
One option for service of a payment claim is to “deliver it to the person personally”.
If the person who is liable for payment under the contract is a company, section 109X of the Corporations Act 2001 (Cth) explains how personal service occurs. Service is effected on the company if, for example, the payment claim is personally delivered to a director of the company who resides in Australia, or alternatively by leaving it or posting it to the company’s registered office (which may be different to their place of business).
It is not enough to simply leave the documents with any particular employee at any location within the company’s business premises (including a construction site). This payment claim will likely not be considered to have been served ‘personally’.
In MGW v CMOC, Stevenson J at  explained that in order to be served in accordance with s 31(1)(a) of the SOPA, the payment claim must have come “to the attention of a relevantly responsible person within the corporation”. Only once the documents have come to the attention of the addressee, is the payment claim deemed to have been served. Mr Sargent was not a relevantly responsible person.
Service by ‘lodging it during normal office hours at the person’s ordinary place of business’ – SOPA s 31(1)(b)
Another method of service of a payment claim is by lodging the payment claim at the party’s ordinary place of business during ‘normal office hours in accordance with section 31(1)(b) of the SOPA. This involves three different elements.
Lodging a payment claim
First, the document is required to be brought to the attention of a ‘relevantly responsible person’ (MGW v CMCO ). Who is a ‘relevantly responsible person’ depends on the facts. For example, the contract might state who notices are to be served on. Unless the contract stipulates otherwise, it is not enough for the payment claim to be served on any particular employee of the other party.
Normal Office Hours
Office hours are considered to mean the hours during which administrative staff of the person or company usually perform their duties. This might be different to the hours during which a business generally operates (MGW v CMCO ). his criterion could only be satisfied by serving the payment claim during the party’s ‘office hours’ which in MGW v CMCO was deemed to be between 7 and 7:30am until around 4 to 4:30pm (at ). The payment notice was not delivered until 5.15 pm, which was after hours, meaning that Forefront could not rely on this clause.
Ordinary Place of Business
The third aspect of this provision requires the payment claim to be served at the party’s ‘ordinary place of business’. While MGW v CMCO does not go into detail to define an ‘ordinary place of business’, this is understood to be where business operations generally and ordinarily occur. The access control room was found to be part of CMCO’s ordinary place of business, however, Forefront did not meet the other two aspects of s 31(1)(b) of the SOPA.
Service ‘in a manner provided by the Construction Contract’ – SOPA s 31(1)(e)
In circumstances where the construction contract between the parties specifies a method of service for a document or payment claim, s 31(1)(e) of the SOPA stipulates that service in accordance with the contract is valid service.
The Contract provided that any Notice delivered past 4pm on a business day, or a day that is not a business day, is deemed to have been served on the party at ‘the commencement of business on the next Business Day’. Because the notice was not delivered until 5.15 pm, Forefront could not rely on this section of the SOPA to establish that service occurred on 3 February 2021.
However, this provision supplements the other means of service in s 31 of the SOPA. If a party satisfied the requirements of section 31(a), (b), (c) or (d) of SOPA, then service is considered to have been effected: MGW v CMCO .
Calculating the date of service of a payment claim is entirely contingent on the proper service of the document. It is essential that the payment claim is correctly served so that the timeline of subsequent events can be calculated accurately. Failing to meet the strict time frames under the SOPA could have serious consequences for parties seeking payment, including the risk of dramatically reducing your claim, losing the opportunity for an adjudication application or potentially breach of contract due to a wrongful suspension of works.
If you are unsure about your payment claim, or any of the above, it is vital that you get legal advice at the earliest possible stage. Please get in touch with Mark Yum or Rohini Singh of our Construction + Projects team by phone (02 9324 5300), email (firstname.lastname@example.org) or online below.