Taking the Universal Serial Bus (USB) may result in a delayed service under the Security of Payment Act

In 2000, IBM began selling the first USB flash drives commercially.  Other methods and mediums to quickly and conveniently communicate significant amounts of information have come and gone since 1999.

It is therefore unsurprising that the Act does not specifically address service of documents by different technological methods and mediums.  Whether communication by a method or medium of technology is effective service under the Act has been left to the courts to determine.  This can often be a critical issue because of the strict timeframes under the Act for the service of payment schedules, adjudication applications and adjudication responses.

In the Supreme Court of NSW case of Parkview Constructions Pty Ltd (Parkview) v Total Lifestyle Windows Pty Ltd t/as Total Concept Group (Total) [2017] NSWSC 194, the Court considered whether the mere delivery of a Universal Serial Bus (USB) drive, which contained adjudication application documents, was valid service of an adjudication application under the Act.

Relevant issues

On 12 December 2016, the adjudicator made an adjudication determination in favour of Total in the amount of $539,634.24 (including GST).  On 14 December 2016, Parkview commenced proceedings to have the adjudication determination quashed or set aside.

The lodgement and service of the adjudication application that led to the determination was, as the Court said, a “litany of errors”.  In short, Parkview made the following complaints about the adjudication, which were upheld by the Court and had the effect of invalidating the determination.

1. The version of the adjudication application referred by the adjudication nominating authority to the adjudicator differed from the version lodged under the Act by Total.
2. The adjudication application served on Parkview was not a copy of the adjudication application referred to the adjudicator.
3. Parkview’s adjudication response was wrongly disregarded by the adjudicator (because the adjudicator accepted that delivery of a USB stick amounted to valid service of an adjudication application under the Act and therefore determined that the adjudication response was out of time).
4. The adjudicator took into account material that was not properly part of the adjudication application.

Is the delivery of a USB effective service under the Act?

Section 17(3)(a) of the Act provides that an adjudication application must be in writing.  Section 17(5) of the Act provides that a copy of an adjudication application must be served on the respondent.

Section 21(1) of the Interpretations Act 1987 (NSW) defines “writing” as:

“includes printing, photography, photocopying, lithography, typewriting and any other mode of representing or reproducing words in visible form.”

In construing sections 17(3)(a) and 17(5) of the Act with section 21 of the Interpretation Act 1987 (NSW), the Court held that service of the USB stick could not be equated with service of writing stored on it, and that the USB stick was not “writing” within the meaning of section 17(3)(a) of the Act.

Ultimately, the Court determined that mere delivery of an adjudication application on a USB drive does not amount to service of an adjudication application in accordance with the Act.

Accordingly, the Court found that Parkview was served with the adjudication application on 10 November 2016 when an employee of Parkview first opened the documents on the USB stick.  The effect of this decision was that Parkview’s adjudication response was within time and incorrectly disregarded by the adjudicator (a denial of procedural fairness and jurisdictional error).

Lodgement and service of the adjudication application

Section 17(5) of the Act provides that a “copy” of an adjudication application must be served on the respondent.  Section 19(1) of the Act provides that the adjudication application must be referred to the adjudicator by the nominating authority.  There were substantial and material (not trivial) differences in the versions of the adjudication application that were:

• lodged with the nominating authority;
• provided to the adjudicator by the adjudication nominating authority; and
• served on Parkview.

The effect of the above was that there was a failure to comply with the essential prerequisites for a valid adjudication determination because:

1. a copy of the adjudication application was not provided to Parkview in accordance with section 17(5) of the Act; and
2. the adjudication was not properly referred to the adjudicator in accordance with section 19(1) of the Act.

The Court did not conclusively find that an identical copy of the adjudication application must be served on the respondent.  The Court expressly acknowledged that there may be scope to allow for “trivial” differences in certain circumstances.  In this case, the differences could not be labelled “trivial”.

What does this mean for me?

The issues that infected this adjudication arose from a failure to properly and carefully lodge and serve the adjudication application and a failure to ensure that a hard copy of the adjudication application was identical to the electronic version.  The timeframes under the Act are short and there are time pressures to lodge and serve documents, which can lead to irretrievable errors.

Some practical tips for avoiding the pitfalls evidenced in the Parkview case are set out below.

1. The Act expressly allows service by: (1) delivering it to the person personally; (2) lodging it during normal business hours at the person’s ordinary place of business; (3) sending it by post or facsimile addressed to the person’s ordinary place of business; or (4) as prescribed by the construction contract.

If possible, service of documents under the Act should be by courier to the person’s ordinary place of business during normal business hours to avoid any uncertainty or argument about whether the documents have been served.  A report from the courier confirming delivery should be obtained for evidentiary purposes.

2. Parties should note that service by USB stick is not effective service under the Act – the documents provided on the USB stick will only be served when opened and that would be difficult to evidence if contested by a respondent.  In short, documents should not be served by USB stick.

3. Service by email will only be effected once the documents have been accessed by the recipient.  This is difficult to evidence if contested.  For this reason, absent a contractual entitlement to serve documents by sending an email, service by email should be avoided.  Despite this, if email is used, ‘read receipts’ should be requested for evidentiary purposes.

4. If providing a hard copy of documents that have already been served electronically, ensure the hard copy is identical to the electronic version to avoid confusion and ambiguity, which could invalidate an adjudicator’s determination.