The increasing integration of technology into the construction industry has brought on a range of new methods of delivery of information which have substantially replaced traditional post. The legal process of 'service' is no exception and has been the subject of dramatic change to account for technologies such as email and cloud systems. The application of service under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) is critical.1
Parties to construction contracts should be cognisant of the legal principles that have developed to adequately safeguard themselves. The increasing use and over reliance on Construction Management Softwares (CMS) is a pressing issue that poses costly consequences.
To put it simply, parties must ensure they are in clear prior agreement regarding mediums for service under the SOP Act. Otherwise, service will only be taken from the point the recipient becomes aware of the communication, which is inherently difficult to prove.
Email Service
A good starting point for an understanding on the legal position on electronic service under the SOP Act is the regulation of service by email. In June 2017 the Electronic Transactions Legislation Amendment (Government Transactions) Act 2017 (NSW) (ETLA Act) passed into law.2 The ETLA Act amended a number of legislative Acts, including s 31(1) of the SOP Act, which now states:
"Any document that by or under this Act is authorised or required to be served on a person may be served on the person – ....
(d) by email to an email address specified by the person for the service of documents of that kind, or..."
The Act in effect legitimised email as a valid mode of service, however, subject to the stringent condition that the email address used has been specified by the recipient as the email address for the service of documents that have been sent.
Equa Building Services Pty Ltd v A&H Floors 2 Doors Australia Pty Ltd ('Equa')
The recent case of Equa demonstrates how Courts have interpreted s 31(d) of the SOP Act.3
At [40] – [47] of Equa, Hammerschlag J stressed the necessity of the relevant email address being specified by the recipient for the service of documents of that kind. Hammerschlag J's judgment takes a very narrow approach to interpretation of the SOP Act. This judgment is reflective of a much wider principle – that the law recognises that electronic modes of service are inherently less reliable than physical service and as such fastidious specification must be adopted to safeguard against this issue.
The points emphasised by Hammerschlag J include:
- service by email is only valid where the email address used is specified by the respondent as an email address for the service of documents of the kind in question;4
- if service is issued to an email that has not been appropriately specified, the party looking to prove service occurred will need to show that the contents of the email came to the attention of the recipient by the email address used or by another route. This is difficult to prove;5
- even if the sender believes that the owner of the email address used is a representative of the intended recipient and an appropriate party for the service of documents in question, this does not make such service valid in the absence of the email address used being appropriately specified;6
- even if representatives of the intended recipient have emails with the same domain name as the respondent's email (i.e. business domain names), service is not validated where the full email address used has not been appropriately specified;7 and
- it is for the court to determine whether or not a jurisdictional fact (service) exists on the evidence before the court, and not on the evidence before the primary decision maker (the adjudicator). In the context of adjudications under the SOP Act, where service has not been validly issued, the adjudicator does not have jurisdiction to adjudicate the dispute.8
Construction Management Softwares
CMS are programs that have become commonplace which have many functions including tracking site progress, creating work orders and invoices and facilitating communication. Examples include 'Payapps' and 'Procore'. Although these programs enhance efficiency, parties should not over rely on them in the event of a dispute as they often do not contemplate the legal parameters for effective service. Parties may rely on CMS for service of SOP Act documents, however only if specified under the Contract.9
Two common issues that have arisen with CMS are as follows:
- parties often rely on the in-built communication facilities in CMS without recognising that this method is not valid without prior contractual agreement between the parties;10 and
- CMS often merely issue automated emails that contain links which lead parties to websites where documents can be viewed or retrieved. This system is one step removed from directly sending documents.
Case law has shown the risks that arise from over reliance on CMS.
BCS Infrastructure Support Pty Ltd v Jones Lang Lasalle (NSW) Pty Ltd11
The BCS decision regarded service of a payment claim under the Victorian equivalent of the SOP Act. This decision is prime example of how the time of receipt of electronic documents becomes uncertain when the electronic communication method used has not been appropriately specified. Further, this case highlights the insufficiency of serving documents under the SOP Act via a link that leads parties to a website where documents can be retrieved, rather than serving them directly.
In BCS service was affected using a CMS known as 'Corrigo'. The payment claim was made available to be retrieved from the Corrigo cloud system on 16 January 2020, however, the Recipient did not open the document until 11 February 2020. In BCS, Stynes J found that the service of the payment claim was not effective until it was "identified and read" by the recipient. On this basis, service was only taken to have been affected on 11 February 2020.12
In arriving at this conclusion, the court relied on s 13 of the Electronic Transactions Act, which effectively sets out that unless an electronic communication is sent to an electronic address designated by the addressee, receipt will have occurred when the electronic communication has become capable of being retrieved by the addressee and the addressee has become aware that the electronic communication has been sent to that address.13
It should be noted that in making this decision Her Honour rejected the plaintiff's assertion that the designation of the Corrigo system for the purpose of raising and delivering invoices amounted to designation of Corrigo for the deliverance of Payment Claims.14 This directly highlights the high degree of specificity required for the 'designation' test to be satisfied.
In reaching this decision Stynes J also highlighted pressing concerns with the issuance of Payment Claims by way of provision of access to a cloud data base where the claim could be retrieved. Her Honour noted as follows.
"What is required for there to be service is that the defendant receive the Payment Claim.
A number of steps were required before it could be said that the defendant had received the Payment Claim. Specifically, the defendant would have had to:
- log on to Corrigo;
- open a work order unrelated to the Payment Claim; and
- open the relevant attachment..."15
Her Honour indicated that this tedious process was a contributing factor making the manner of service unreasonable.16
To reiterate, this case highlights two key principles. Firstly, that unless electronic service addresses are pre-agreed between the parties, service will only be taken as achieved when the recipient becomes aware of the electronic communication.17 Secondly, that service via provision of a link to an online database where documents can be retrieved is simply insufficient.
Conclusion
Advancements in technology have brought on a range on advantages to modern workplaces, especially in the construction industry. However, parties must be cognisant of the legal issues that arise from these technologies to ensure they are adequately safeguarded. If not, parties may fall victim to misconceptions of whether or when service under the SOP Act occurred. The consequence of this is that parties may miss deadlines for service under the SOP Act, which may result in substantial sums being awarded against them.18 Proper contract drafting and making a consistent effort to stay educated on relevant legal principles are both as critical now as they have ever been.
Footnotes
1. Building and Construction Industry Security of Payment Act 1999 (NSW) ('SOP Act').
2. Electronic Transactions Legislation Amendment (Government Transactions) Act 2017 ('ETLA Act').
3. Equa Building Services Pty Ltd v A&H Floors 2 Doors Australia Pty Ltd [2022] NSWSC 152 ('Equa').
4. Ibid 40.
5. Ibid 41.
6. Ibid 42.
7. Ibid 43.
8. Ibid 47.
9. SOP Act (n1) s31(1)(e).
10. Ibid.
11. BCS Infrastructure Support Pty Ltd v Jones Lang Lasalle (NSW) Pty Ltd [2020] VSC 739 ('BCS').
12. BCS (n 11) 75.
13. Electronic Transactions Act (No. 162) 1999 (Cth) s 13A ('ETA'); Ibid, 146.
14. BCS (n 11) 144.
15. BCS (n 11) 121.
16. BCS (n 11) 122.
17. ETA (n 12) s 13 B (ii).
18. SOP Act (n 1).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
