09 Jun 2011

A tale of two cities: where is the "ordinary place of business"?

by Dean Gerakiteys

A payment claim will generally be validly served if it is received at any office.

The NSW Court of Appeal has recently confirmed that the "ordinary place of business" for the purpose of serving a payment claim need not be an organisation's site office: Downer EDI Works Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2011] NSWCA 78.

It is likely that, given the similarities between the legislation considered and existing legislation in Queensland, Tasmania, Victoria and South Australia, this decision will have a wider impact in these states also.

Large organisations with multiple offices should be particularly wary of any payment claims received as this decision ensures that in most circumstances claims will likely be taken to have been validly served if received at any one of their offices.

What happened here?

Downer EDI Works Pty Ltd and Parsons Brinckerhoff Australia Pty Ltd were parties to a construction contract. Parsons faxed Downer a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW). One fax was sent to Downer's Melbourne office, the other to its office in Broadmeadow, NSW. The Melbourne office is Downer's registered head office and the one in Broadmeadow is a regional office. There was also a site office at Glendale.

Downer argued that Parsons had failed to serve the claim properly because neither the Broadmeadow nor the Melbourne office was its "ordinary place of business". Rather, Downer argued that the claim should have been served at the Glendale site office. This it was argued, would ensure there was some connection between the transaction which was the subject of the payment claim and the relevant works site office. Downer argued that, where there were multiple offices, "ordinary place of business" referred to that location having the closest connection to the works the subject of the relevant construction contract.

On appeal, the only issue was whether the Melbourne or Broadmeadow Office was Downer's ordinary place of business.

What did the Court decide?

The Court of Appeal held that Downer could have more than one ordinary place of business for the purpose of the service of payment claims. Further, the ordinary place of business for the receipt of such claims need not be that office with the closest connection with the works the subject of the claim.

The Melbourne office was considered Downer's ordinary place of business for the purposes of serving a payment claim. Parsons had therefore properly done all that was necessary in serving a payment claim on the Melbourne office. It was not necessary that the claim be served on the site office with the closest connection to the relevant works the subject of the claim.

Does that mean every office may be an "ordinary place of business"?

No. This decision does not extend the definition of "ordinary place of business" to every place where the an organisation carries on any kind of business. The Court did suggest that where a business' operations include construction and non-construction related activities, it may well be that the ordinary place of business is the office with some relevant operational connection with the construction work in question.

What steps should be taken?

  • To avoid doubt, contracting parties should ensure that contracts clearly identify the relevant address and contact details for the service of payment claims and other formal notices; and
  • where an organisation has multiple offices, appropriate procedures should be put in place to ensure that appropriate persons actively keep an eye out for payment claims and, when received, ensure that claims are promptly given to the relevant persons.

 

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.