Informality and emails – the limits of generality in payment schedules under the Security of Payment legislation

Style Timber Floor Pty Ltd v Krivosudsky [2019] NSWCA 171
Background

Style Timber Floor Pty Ltd (STF) engaged Mr Krisvosudsky to perform floor grinding works at a number of sites in Sydney. In the course of those works, a dispute arose between the parties regarding defective workmanship, delay and wasted materials.

Mr Krisvosudsky issued a payment claim under s 13 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA), following which STF had 10 business days to serve a payment schedule under the SOPA.

Section 14(3) of the SOPA (which mirrors the equivalent Victorian provision) provides that a valid payment schedule “must indicate why the scheduled amount is less [than the claimed amount] and […] the respondent’s reasons for withholding payment.”

The appeal concerned an email from Mr Wang of STF to Mr Krisvosudsky, and whether or not it was a payment schedule for the purposes of the SOPA.  The email relevantly read:

“If you want, make a appointment with me, come to my office.  I will show you the working agreement between [STF] and Rk grinding, many emails, photos, videos, back charges from builders and other trades, complains from my clients.  You will understand why I can’t pay you. The damages you done is more than what you claimed.”

Decision

Justice Leeming delivered the leading judgment, with Bell P and Simpson AJA agreeing.

When responding to a payment claim by way of a payment schedule, it is clear that absolute precision is not required, and cannot be expected given the reasonably short period within which a respondent is required to prepare a payment schedule (at [55], quoting Warren CJ, Tate and McLeish JJA in Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247 at [256]).

Justice Leeming observed that the provisions of Part 3 of the SOPA are characterised by strict, fast-paced time constraints, and a deal of informality.  However, in the context of construing the requirements of s 14 of the SOPA, His Honour held that it is to be borne steadily in mind that enforceable (albeit not conclusive) determinations for hundreds of thousands or millions of dollars result from the fast-paced regime for non-curial adjudication: [26].

Mr Wang’s email identified the invoices in question and conveyed that he proposed to pay none of them and thefore satisfied s 14(2). However, if the email was to amount to a payment schedule, it was required also to indicate Mr Wang’s reasons for withholding payment: [68].  Although an abbreviated description falling short of a pleading would suffice, s 14 required the payment schedule to sufficiently describe the dispute so as to enable the claimant to determine whether to proceed in the knowledge of the nature of the case it will have to meet at adjudication: [47].

While a payment schedule may meet these requirements by reference to other documents, it will only do so if those documents are identified with sufficient particularity so as to enable the recipient to know what is being incorporated.  This requires identification not just of the documents themselves, but which parts of those documents are said to set out the reasons for withholding payment: Bell P, [3], [6]; Leeming JA, [76].

In considering the email, Leeming JA tested it by reference to its purpose – to define the dispute for the purpose of an adjudication: [74].

Ultimately, the Court of Appeal concluded that the generality of the matters raised in Mr Wang’s email (including the failure to give any information about the actual costs said to have been incurred by reason of the defective work or the properties which they referred to) rendered it impossible to determine the scope of the dispute, and therefore it was not a payment schedule within the meaning of s 14 of the SOPA: Bell P, [1], [4]-[5]; Leeming JA, [73]-[75]; Simpson AJA, [82].

Conclusion

Practically speaking, when preparing payment schedules, parties should bear in mind the purpose of the statutory regime – in particular, the fact that a payment schedule will define the dispute to be adjudicated under Division 2 of Part 3 of the SOPA.  To the extent that a party wishes to rely on other documents as part of their payment schedule, these should be provided together with a clear identification of the aspects of those documents which are said to set out the reasons relied upon.