Primelime (NSW) Pty Ltd v BAEC Contracting Pty Ltd

[2018] NSWSC 372

Supreme Court

New South Wales

Medium Neutral Citation:	Primelime (NSW) Pty Ltd v B.A.E.C. Contracting Pty Ltd [2018] NSWSC 372
Hearing dates:	22/03/2018
Date of orders:	22 March 2018
Decision date:	22 March 2018
Jurisdiction:	Equity - Technology and Construction List
Before:	McDougall J
Decision:	Plaintiff to have relief sought in summons. Plaintiff and first defendant to bring in draft orders.
Catchwords:	BUILDING AND CONSTRUCTION – Building and Construction Security of Payment Act 1999 (NSW) – whether adjudication determination valid – whether construction contract existed between the parties to the adjudication application – whether payment claim made on or from a reference date – where contract was terminated – where contract did not provide for reference dates after termination – whether work performed under a subsequent, fresh contract – adjudication determination quashed
Legislation Cited:	Building and Construction Industry Security of Payment Act 1999 (NSW) Supreme Court Act 1970 (NSW)
Cases Cited:	Associated Midland Corporation Limited v Bank of New South Wales (1984) 51 ALR 641 Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52; (2016) 91 ALJR 233
Category:	Principal judgment
Parties:	Primelime (NSW) Pty Ltd B.A.E.C. Contracting Pty Ltd (First Defendant) Ted Smithies (Second Defendant)
Representation:	Counsel: F P Hicks SC (Plaintiff) D Parish (Defendants)    Solicitors: Carroll & O’Dea (Plaintiff) Celtic Legal (Defendants)
File Number(s):	2017/320560

Judgment – (ex temp – revised 23 march 2018)

1. HIS HONOUR: The first defendant (B.A.E.C. Contracting) has the benefit of a determination made by the second defendant (the adjudicator) under the Building and Construction Industry Security of Payment Act1999 (NSW) (the Act). The plaintiff (Primelime), which was the respondent in the adjudication application, says that the adjudicator lacked jurisdiction to hear and determine the adjudication application. It says, further, that on one of the key jurisdictional issues, the adjudicator failed to discharge his statutory duty to give reasons.

2. The argument as to want of jurisdiction is based on two matters. The first is that, according to Primelime, there was no contract between Primelime and B.A.E.C. Contracting. Rather, Primelime says, the contract was one between it and a related company of B.A.E.C. Contracting known as B.A.E.C. Electrical. The second jurisdictional point taken is that, again according to Primelime, there was no available reference date on and from which the payment claim, the subject of the adjudication application and determination, could be made.

Background

3. The background facts are simple. Primelime owned a quarry at Cudal. The electrical works at that quarry needed recommissioning. It sought the assistance of B.A.E.C. (to use for the moment a neutral term) in that regard.

4. On 9 May 2016, Mr Campbell of B.A.E.C. sent a schedule of rates to Mr Bunting of Primelime. The email did not indicate the precise B.A.E.C. company that was the originator of the email. However, the schedule of rates identified B.A.E.C. Electrical as its author.

5. On 12 July 2016 Mr Campbell sent another email to Primelime revising (apparently downwards) some of the rates. Again, the email itself did not indicate on behalf of which B.A.E.C. company it was sent.

6. It is apparently common ground that work commenced on about 14 July 2016. It is also apparently common ground that the parties agreed that payment claims could be made every 14 days during the performance of work, with payment to follow 14 days thereafter. The obvious inference is that the first date on which a payment claim could be submitted would be either 28 or 29 July 2016, and that subsequent payment claims could be sent on the 14th day thereafter (whilst work was performed). Certainly, that was the way in which the matter was put before the adjudicator.

7. Electrical drawings that are in evidence show that B.A.E.C. Electrical prepared a site layout and elevation for the works at the quarry. Those drawings are dated 22 August 2016. It is not apparent that they were before the adjudicator.

8. It is common ground that the contract between Primelime and whichever it was of the B.A.E.C. companies came to an end on about 20 January 2017. The parties do not agree as to how that happened. Primelime says that B.A.E.C. repudiated the contract and it (Primelime) accepted that repudiation as discharging the contract. B.A.E.C. says that the contract was terminated by agreement. Its case in that regard is set out in a letter dated 23 January 2017 that I think was before the adjudicator.

First issue

9. The first question is: who were the parties to the contract?

10. Mr Hicks of Senior Counsel, for Primelime, submitted on the evidence that the only offer had been made by B.A.E.C. Electrical, and that this was the offer that had been accepted. Thus, he submitted, the contract that came into existence was one made between Primelime and B.A.E.C. Electrical.

11. Mr Parish of Counsel, for B.A.E.C. Contracting, referred to the adjudicator's reasons where the adjudicator noted a statutory declaration made by Mr Bunting, a director of Primelime, which said, among other things:

In or about March 2016 I entered into a verbal agreement with an electrician, Alan Ryan Campbell [the principal of B.A.E.C.]...for Mr Campbell's company, B.A.E.C. Contracting Pty Ltd, to perform electrical works at the Cudal Quarry.

12. Not surprisingly, the adjudicator took the view that the statutory declaration confirmed that the parties to the construction contract were Primelime on the one hand and B.A.E.C. Contracting on the other.

13. Mr Parish pointed also to the fact that numerous invoices - I think 16 in all - had been sent by B.A.E.C. Contracting to Primelime, and about six of those had been paid, with the amounts paid totalling in round figures $193,000. Mr Parish submitted that the invoices could be taken into account as evidence of subsequent dealings from which both the existence of a contract and the parties to it could be inferred. He relied (although the facts are quite distinct) on the decision of the High Court in Associated Midland Corporation Limited v Bank of New South Wales [1] at 643-644 (Gibbs CJ, with whom Mason, Wilson, Deane and Dawson JJ agreed).

    1. (1984) 51 ALR 641.

14. Mr Hicks submitted in reply that the statutory declaration referred to a date some months earlier than the date on which the contract that the adjudicator was asked to consider was made. Mr Hicks noted that the adjudication application had been put before the adjudicator explicitly on the basis that the contract was formed by the two emails to which I have referred (the first including B.A.E.C. Electrical’s schedule of rates) and acceptance to be inferred from the commencement of work on 14 July 2016.

15. Mr Hicks submitted that the evidence of invoicing, being evidence as to matters that occurred after the contract had been formed, could not displace the significance of those earlier matters. Indeed, Mr Hicks submitted that it had not been settled that subsequent conduct could be taken into account to determine who were the parties to the contract. He relied on the decision of the Court of Appeal in Pethybridge v Stedikas Holdings Pty Ltd [2] at [2] (Basten JA) and [59] (Campbell JA, with whom Beazley and Basten JJA agreed).

    2. [2007] NSWCA 154.

16. It is common ground, and rightly so, that the existence of a construction contract between the parties, who were respectively the claimant and the respondent, and the applicant and the respondent, in the payment claim and the adjudication application, is a matter that goes to jurisdiction. It was common ground also, and again rightly so, that the findings of the adjudicator could not conclude the existence of jurisdiction where, on a correct view of the parties’ dealings, there was no jurisdiction.

17. There was no suggestion before the adjudicator that the contract which was made on or shortly before 14 July 2016 had been novated from one contracting party to another. The matter was put before him on the basis that the parties to that contract were always and only Primelime and B.A.E.C. Contracting.

18. The material is open to different interpretations. I think the better view is that the contract was, as Mr Hicks submitted, one made between Primelime and B.A.E.C. Electrical. I say that because the offer made on 9 May 2016, reading together the email of that date which is neutral as to the particular B.A.E.C. company and the accompanying schedule of rates which clearly identifies B.A.E.C. Electrical, is the offer that, as varied, was accepted. The subsequent email of 12 July 2016 did not include any schedule of rates, but it was, as much as its predecessor, neutral as to the particular B.A.E.C. company on behalf of which it was sent.

19. Again, the evidence of the drawings to which I have referred could be read to suggest that it was B.A.E.C. Electrical that performed the work.

20. If it be correct to say that the contract was made no later than 14 July, then the fact that a different company, B.A.E.C. Contracting, provided tax invoices (and payment claims) for the work could not alter the matter unless there was a novation. As I have pointed out, no-one suggested that the contract, if it were one made between B.A.E.C. Electrical and Primelime, had been novated resulting in a fresh contract arising between B.A.E.C. Contracting and Primelime.

21. Thus, as I have said, I think the better view of the evidence overall is that for which Mr Hicks contended. However, because I have come to the view that the plaintiff, Primelime, is entitled to succeed in any event on the second issue, it is unnecessary to take the matter further and express a concluded view.

Second Issue

22. The reference date issue seems to me to be quite clear. The contract was made on or shortly before 14 July 2016. It provided for payment claims every 14 days. Thus, work having commenced on 14 July 2016, payment claims could be made every 14 days thereafter whilst work was performed. On any view, that contract came to an end on about 20 or 23 January 2017.

23. There is nothing in the material to suggest that the contractually determined reference dates would survive termination. Thus, it seems to me, there was no statutory right to make a payment claim after 20 or 23 January 2017 or perhaps, more accurately, based on a reference date that but for termination would have occurred after 20 or 23 January 2017. In this respect, the contract, although informal in the extreme, seems to me to be a contract of the kind to which the High Court referred in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [3] .

    3. [2016] HCA 52; (2016) 91 ALJR 233.

24. In that case, the High Court held [4] , as it seems to me clearly, that if a contract did not provide for the survival of contractual reference dates after termination, then any right to make a progress claim following termination came to an end, except insofar as there was a pre-termination reference date that had not been utilised for the purposes of a payment claim.

    4. At [79] (Kiefel, Bell, Gageler, Keane and Gordon JJ).

25. Mr Parish submitted that the letter of 23 January 2017 to which I have referred evidenced a fresh contract, which he characterised as a construction contract, under which B.A.E.C. Contracting retained the right to payment. Thus, he submitted, the matter was one dealt with by s 8(2)(b) of the Act (because the suggested fresh contract did not specify any reference date) rather than s 8(2)(a) (applicable to the contract made on about 14 July 2016 for the reasons I have indicated).

26. That is not the way that the matter was put before the adjudicator. It was put on the basis that there was a contract made on about 14 July 2016 under which there was a contractual right to make payment claims every two weeks. It was put before the adjudicator that the payment claim in question was one made pursuant to that contractual right. It was not put to the adjudicator that there was some fresh contract, meeting the requirements for a construction contract, under which there was no specification of reference dates and in respect of which, therefore, s 8(2)(b) applied.

27. Of course, if the proper analysis of the situation supported the position for which Mr Parish argued, the fact that it had not been put to the adjudicator might not matter. However, I do not think that the letter on which Mr Parish relied goes so far. It may be assumed that the letter puts the matter at its highest from B.A.E.C. Contracting's perspective. The letter says no more than that there was a consensual termination and, as part of that consensual arrangement, B.A.E.C. Contracting would be entitled to be paid for works carried out up until the date of demobilisation (which was said to be 20 January 2017). The letter noted that no further work had been or would be conducted from that date.

28. The letter seems to me to do no more than record a consensual termination, and the position (which, subject to any deductions and counter-claims, would apply in any event) that B.A.E.C. Contracting had a right to be paid for work done under the (original) contract. It does not suggest that work done up until 20 January 2017 was done not under the contract made on about 14 July 2016, but, rather, under some other and later contract.

29. It is quite clear that ss 8(2)(a) and 8(2)(b) are alternatives. It is unnecessary to do anything more than to refer to Southern Han at [73].

30. It must follow that the termination of the contract having within it the contractually stipulated provision for reference dates had the effect of terminating the right to make a progress claim, or payment claim under the Act, for any reference date that, but for termination, would have accrued after the date of termination. That point follows inexorably from what the High Court said in Southern Han at [79].

31. The adjudicator's reasons on this point are not easy to follow. He appears to have acknowledged that the contract under which the payment claim was made was one stipulating reference dates, but to have thought that some other contract was made to which s 8(2)(b) applied. For the reasons I have given, if that were his reasoning process, it was not correct.

Conclusion; other issues

32. It follows that the jurisdictional requirement of a reference date has not been made good. Primelime is entitled for that reason to the relief that it seeks.

33. It is not necessary to consider the argument as to the adequacy of the adjudicator's reasons on the reference date point, nor is it necessary to consider a subsidiary argument advanced by Mr Hicks, to the effect that the adjudicator had denied his client natural justice because the point on which the adjudicator apparently decided (the applicability of s 8(2)(b)) had not been raised in any way and it had not been given the opportunity to put submissions.

34. The consequence of these reasons is that Primelime is entitled to a declaration in accordance with prayer 1 of the summons filed 24 October 2017, and to relief under s 69 of the Supreme Court Act1970 (NSW) as sought in prayer 2. The parties are to bring in short minutes of order to give effect to my reasons.

35. There is also the question of costs. So far as I can see there is no reason why costs should not follow the event. I note that the summons, rather optimistically, seeks interest on costs. Given the short time that has elapsed between filing and hearing, I do not think that interest is justified.

36. Primelime paid an agreed sum into court as security for B.A.E.C. Contracting's costs. Since Primelime has succeeded, that money should be paid out to it, and the agreed orders should reflect that.

37. The agreed orders should also reflect the usual order that the exhibits are to be returned to the parties.

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Endnotes

Decision last updated: 23 March 2018