Brefni Pty Ltd v Specific Industries Pty Ltd

[2018] NSWSC 578

Supreme Court

New South Wales

Medium Neutral Citation:	Brefni Pty Ltd v Specific Industries Pty Ltd [2018] NSWSC 578
Hearing dates:	27/04/2018
Date of orders:	27 April 2018
Decision date:	27 April 2018
Jurisdiction:	Equity - Technology and Construction List
Before:	McDougall J
Decision:	Summons dismissed with costs. Money in court to be paid out forthwith to first defendant.
Catchwords:	BUILDING AND CONSTRUCTION – Building and Construction Security of Payment Act 1999 (NSW) – whether adjudication determination valid – whether adjudicator erred in considering revised payment schedule – whether adjudicator erred in not having regard to adjudication response – no error disclosed in adjudicator’s approach – summons dismissed.   COSTS – Calderbank letters – compromise offered as to costs only – where no evidentiary support for plaintiff’s case – indemnity costs ordered – where first defendant represented by senior and junior counsel – such costs limited to costs of competent junior counsel.
Legislation Cited:	Building and Construction Industry Security of Payment Act 1999 (NSW)
Category:	Principal judgment
Parties:	Brefni Pty Ltd (Plaintiff) Specific Industries Pty Ltd (First Defendant) Scott Pettersson (Second Defendant)
Representation:	Counsel: D C Eardley (Plaintiff) M Condon SC / J P Nathan (First Defendant)   Solicitors: Stewart & Associates (Plaintiff) John Dela Cruz (First Defendant)
File Number(s):	2018/111342

Judgment   (ex tempore – revised 27 april 2018)

1. HIS HONOUR:    On 19 June 2017 the plaintiff (Brefni) and the first defendant (Specific Industries) made a sub-contract under which Specific Industries agreed to supply and install material for a construction project undertaken by Brefni at Chippendale. There is no doubt that the sub-contract was a construction contract for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act).

2. On 24 January 2018, Specific Industries served on Brefni payment claim No 6, dated 21 January 2018. The claimed amount was, in round figures, $125,000 together with GST.

3. On 7 February 2018, Brefni served a payment schedule. That payment schedule was rather confusing. It misstated the date of, and the date of, service of the payment claim (making the readily understandable beginning of the year error of referring to 2017 rather than 2018). It also misstated the amount of the payment claim, as being in round figures $128,000 inclusive of GST. I am not entirely sure how that happened. Finally, it stated a scheduled amount of (in round figures) $57,800.

4. A little later on the same day, 7 February 2018, Brefni served a revised payment schedule. That revised payment schedule disputed only $2,430 of the claimed amount.

5. Brefni did not pay the claimed amount, the first scheduled amount, or the inferred second scheduled amount, within 10 business days after service of the payment claim (see s 16(1)(b)(ii) of the Act; it does not matter what the contractual date for payment was, because on any view, if it were later than 10 business days after service, the statutory time would apply). Accordingly, Specific Industries sought adjudication of its payment claim. Although the documents do not say so expressly, it must have done so pursuant to s17(1)(a)(ii) of the Act. The adjudication application was made to an authorised nominating authority, who referred it to the second defendant (the adjudicator). The adjudicator accepted the nomination and advised the parties of that.

6. Brefni was notified of the making of the adjudication application on 14 March 2018 (the date it was forwarded to the authorised nominating authority). That occurred because Specific Industries' solicitor sent an email to Brefni and its solicitor advising it and him of the making of the application and providing what appears to have been the cover sheet. Upon request being made, Specific Industries' solicitor sent to Brefni's solicitor a link through which the whole of the application could be accessed.

7. Further, on 14 March 2018 Specific Industries' solicitor placed the whole of the adjudication application into an Express Post envelope addressed to Brefni at 106 Bridge Street, Picton in this State. That is the address stated in the sub-contract as the address to which documents for Brefni should be sent. The Australia Post tracking records demonstrate that the envelope, with the right tracking number, was delivered to 106 Bridge Street, Picton on 16 March 2018. It follows, assuming that earlier attempts to notify Brefni and its solicitor by email did not amount to service, that service was effected on 16 March 2018 and that the time for lodging an adjudication response (five business days thereafter - see s 20(1)(a) of the Act) began to run.

8. Brefni did not provide an adjudication response within that five business day period. It purported to do so outside that time, on 27 March 2018. It suggests that in some way it was misled by correspondence from Specific Industries or its solicitor into thinking that the date of the service was 20 March 2018 not 16 March 2018. The evidence discloses no communication that could possibly be read as having that effect. There was some confusion, on the part of the authorised nominating authority, as to the correct name of Brefni. That confusion was cleared up on 20 March 2018 and Brefni's solicitor was notified of that. However, none of that can undo the fact, which the evidence proves to my satisfaction, that an adjudication application correctly naming Brefni as Respondent was served by Express Post on Brefni at its address specified for service in the sub-contract on 16 March 2018.

9. That position having emerged clearly in the evidence, the adjudicator was not entitled to give any consideration to submissions set out in the adjudication response. Section 22(2) of the Act sets out the "only" matters that "the adjudicator is to consider" for the purpose of "determining an adjudication application". They include, of present relevance, the payment claim together with submissions duly made in support, and the payment schedule together with submissions duly made in support. It is commonly the case that adjudication applications and adjudication responses include submissions in support of the relevant party's position. Where those documents are provided in time and do not go beyond the issues raised by the payment claim and payment schedule, the submissions may be said to "have been duly made". Where the documents are provided out of time, the submissions cannot be regarded as having "been duly made".

10. The adjudicator was correct to consider that he could not take into account the submissions made in the adjudication response. Nonetheless, he was required to consider the reasons for non-payment raised in the payment schedule. He did so.

11. In the course of submissions, Mr Eardley of counsel, who appeared for Brefni, submitted that the adjudicator had erred in some way because he had considered the second, and not the first, payment schedule served on 7 February 2018. I do not understand that submission, which was not foreshadowed in Brefni’s list statement. To the untutored eye, the second payment schedule may not state a scheduled amount. However, the tutored eye of the adjudicator was able to discern this. He said at [25] of the reasons for his determination:

[25]   The revised Payment Schedule issued is clearly intended to replace the earlier document and I accept that is permitted as the parties are in agreement. A single issue is the absence of a clear total at the bottom of the revised document, however the sum said to be the revised value of the contract work allows the calculation that has been made by the parties and is not disputed. Indeed, as I have noted above, the Claimant has pressed an amount less than the actual difference from the sum claimed. However, I am not persuaded that I can award a sum greater than that requested, nor is it my role to seek to perfect the position of either party.    

12. Brefni's evidence is that it is submitted a revised payment schedule which was intended to supersede the earlier payment schedule. I simply do not understand how it can be said that the adjudicator erred in considering the more recent version of the statement of Brefni's position. As he said, the later document was "clearly intended to replace the earlier document". He noted that the parties had agreed to this being done. There is no evidence that they did not do so.

13. In the result, the adjudicator determined that Specific Industries was entitled to be paid the amount claimed in its adjudication application, even though that amount was less than both the amount of the payment claim and the scheduled amount that can be derived from the later of the two payment schedules. He said, in effect, that if the claimant was prepared to reduce its claim, it was not for him to assert a different view.

14. There is nothing in the material to show that the adjudicator erred, let alone erred in a way that would enliven this Court's supervisory jurisdiction, in dealing with the matter in the way that he did. On the contrary, in my view, the approach that the adjudicator took was open to him on the material, and I would go so far as to say, the proper course to take on that material.

15. It follows that the summons must be dismissed with costs and I so order.

16. Brefni has paid into Court the adjudicated amount. That amount, together with any accrued interest, must be paid out forthwith to Specific Industries, and I so order.

17. That leaves the question of costs. On the face of things, Brefni should be ordered to pay Specific Industries’ costs. The adjudicator submitted. Given that there was no error in his approach, Brefni should pay his costs on the basis of a submitting appearance.

18. The only question that I have as to costs relates to the fact that Specific Industries was represented by senior and junior counsel. This does not seem to me to have been a case where it was appropriate for two counsel to be retained, or for senior counsel to be retained. As I see matters at present, I would suggest that the costs of senior and junior counsel ought not to be allowed on assessment. Before expressing a concluded view, I will however hear from senior counsel, Mr Condon, on that point.

[Counsel addressed.]

19. I return to the question of costs. There have been tendered two Calderbank letters, one dated 12, and one dated 17, April 2018. Each offered to settle on the basis that the adjudicated amount be paid in full within seven days, and that the proceedings thereafter be dismissed with no order as to costs. In other words, each offered to compromise as to costs only. The first offer was effectively open only in the course of the day it was sent and overnight. The second was open for three days. Neither letter put any reasons as to why the offer was one that was worthy of consideration. That of itself is a consideration frequently looked at, but not always regarded as determinative.

20. More fundamentally, the whole basis of the pleaded case for Brefni was that it had somehow been misled, by a representation attributable to Specific Industries, into thinking that the adjudication application had not been served until 20 March 2018. However, the evidence that it put on demonstrated to the contrary. Further, there is simply no explanation of how it could possibly be the case that Brefni, having received the Express Post letter on 16 March 2018 (as I have found was the date on which it was delivered) could have been misled thereafter as to the date of service. The evidence does not offer any illumination of that conundrum.

21. Considering the two matters together, I am of the view in principle that some order for costs on the indemnity basis ought be made.

22. In my view, the two letters should have caused Brefni to reconsider its position. They should have caused Brefni to appreciate the fundamental problem in its pleaded case, which was that there was no evidence to support it. On that basis, in principle and in the ordinary way, I would think that costs should be payable on the indemnity basis from the date when the second Calderbank offer expired, namely 20 April 2018.

23. However, that leaves the problem to which I referred earlier, namely that this is not, and never was, a case for senior counsel, or for two counsel. It was a case that could and should have been conducted by competent junior counsel. Accordingly, I am faced with the difficulty of fashioning an order for indemnity costs that does not extend to all counsel's fees incurred by Specific Industries, but limits them to what competent junior counsel would have charged. That is a difficulty which, I confess, appears at present to be insolvable. Accordingly, notwithstanding my view that in principle Specific Industries should have some of its costs on the indemnity basis, I do not think that there is any way that an order can be fashioned to accommodate the problem to which I have referred.

[Counsel addressed further]

24. In the circumstances, the orders as to costs that I make are:

1. order the plaintiff to pay the first defendant's costs of the proceedings.

2. Subject to any view to the contrary taken by a costs assessor, direct that those costs are not to include the costs of senior counsel nor the costs of two counsel; what is to be allowed are the reasonable costs of briefing competent junior counsel, to be assessed so far as possible on the indemnity basis.

3. Order the plaintiff to pay the second defendant's costs on a submitting basis.

4. Direct that the exhibits on the costs application be handed out.

5. To the extent necessary, order that the order made on 10 April 2018 in terms of prayer 6 of the notice of motion filed that date be discharged.

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Decision last updated: 02 May 2018