In Fredon Infrastructure Pty Ltd (Fredon) v Hitachi Rail GTS Australia Pty Ltd (Hitachi) [2024] NSWSC 1244, oral representations were made on who can receive a payment claim. Those representations were held to constitute a conferring of apparent authority under a contract.
Background
Contract
Fredon, an electrical subcontractor, initially entered into two construction contracts with a technology contractor, Thales Australia Pty Ltd (Thales), to undertake works on the Victoria Cross and Crows Nest Metro Stations (Contracts).
Representations at the kick-off meetings
During the Contracts’ kick-off meetings with Thales, there were multiple representations made that all commercial correspondences, notices and claims made by Fredon must be directed to the Manager and Contract Administrator of Thales.
Novation
The Contracts were subsequently novated to Hitachi. This meant Hitachi replaced Thales in the Contracts. Under the Contracts, the representative appointed to receive payment claim was Mr Euan Noble of Thales (Mr Noble).
Payment Claim
On 21 February 2024, Fredon sent payment claims to two Hitachi employees, who were the Manager and Contract Administrator for the Contracts, but not to Mr Noble who was the person appointed to receive payment claims under the Contracts with Thales.
Payment Schedule
Under section 14 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA), a respondent who receives a payment claim has 10 business days to serve a payment schedule on the claimant. Although the payment claim was issued to the Hitachi employees on 21 February 2024, the Hitachi employees only confirmed their receipt of the payment claims on 22 February 2024. Hitachi served the payment schedules to Fredon on 7 March 2024, which was 11 business days after the payment claims were sent.
Issue
The two issues that arose were first, whether the payment claims were ‘duly’ served on Hitachi as the payment claims were not sent to Mr Noble but to two other Hitachi employees. If they were, the second issue was whether they were served on 21 February 2024 or 22 February 2024 as the relevant date of service would determine if the payment schedules were served within time.
Decision
The Court held that the payment claims were served on 21 February 2024 as the two Hitachi employees upon novation had the authority to receive Fredon’s payment claims due to the representations made at the kick-off meetings. Therefore, Hitachi’s payment schedules served on 7 March 2024 on Fredon was not within 10 business days pursuant to section 14 of the SOPA.
Further, the Court found that the assessment of payment claims was in the job description of both the Manager and the Contract Administrator of the two Hitachi employees which created actual authority to receive the payment claims.
Key takeaway
Two key takeaways from this case are:
- a party should be careful with any oral representations that might inadvertently grant certain individuals apparent authority to receive payment claims under a contract; and
- all parties should take a conservative position and assume that the service of a payment claim is made on the day it is sent and provide a payment schedule within 10 business days of that date (or an earlier period if the contract provides).
If you would like to discuss this article with us, please contact Vick Tan, Partner, or Sarah Kanjanakorn, Graduate Lawyer on (02) 9261 5900.