Vinson v Neerim Properties Developments Pty Ltd
[2016] VSC 321
•9 JUNE 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST
S ECI 2016 000080
| THERESA ANNE VERONICA VINSON | Plaintiff |
| v | |
| NEERIM PROPERTIES DEVELOPMENTS PTY LTD (ACN 087 570 045) | Defendant |
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JUDGE: | VICKERY J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | IN CHAMBERS |
DATE OF JUDGMENT: | 9 JUNE 2016 |
CASE MAY BE CITED AS: | VINSON v NEERIM PROPERTIES DEVELOPMENTS PTY LTD |
MEDIUM NEUTRAL CITATION: | [2016] VSC 321 |
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BUILDING CONTRACT – Payment claim purportedly made under the Building and Construction Industry Security of Payment Act 2002 (Vic) (the ‘Act’) – Whether the Act applies to reason of s 7(2)(b) of the Act – Court not able to determine this issue on the papers given the issues of fact in controversy – Whether adjudication application under the Act is valid – Purported notice under s 18(2)(a) of the Act not valid – Injunction granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Andrew of Counsel | Russo Pelicano Carlei |
| For the Defendant | Mr Alex Sezenias, Director of the Defendant |
HIS HONOUR:
This proceeding arises under the Building and Construction Industry Security of Payment Act 2002 (Vic) (the ‘Act’).
By Originating Process dated 28 April 2016, the Plaintiff, Theresa Anne Veronica Vinson (‘Ms Vinson’), seeks the following orders:
(a) a declaration that the Defendant company’s, Neerim Properties Developments Pty Ltd (‘Neerim’), claim for payment served on 22 January 2016 (the ‘Payment Claim’) is not a valid payment claim under the Act;
(b) an injunction, both interlocutory and final, restraining Neerim from applying for an adjudication of its Payment Claim.
On 28 April 2016, the Court granted Ms Vinson an interlocutory injunction retaining Neerim from pursuing the Payment Claim at adjudication.
This proceeding was decided ‘on the papers’ in Chambers following receipt of written submissions and material from the parties.
Background facts
The relevant background facts may be summarised as follows.
Ms Vinson is the registered proprietor of a property located at 71 Karnak Road in Ashburton, in the State of Victoria (the ‘Property’).
On or about 29 November 2014, Ms Vinson entered into three separate contracts (the ‘Contracts’) with Neerim as the builder, for the erection of three town-houses on the Property.
The Contracts were in the style of HIA – Victorian New Homes Contract.
On or about 22 January 2016, Neerim sent Ms Vinson the Payment Claim, being an invoice for variations in the amount of $111,050.00 dated 21 January 2016.
On or about 4 February 2016, Ms Vinson caused her solicitors to send to Neerim a communication stating, inter alia, that
(a) the Contracts required the building works to be completed by 13 August 2015;
(b) since 13 August 2015 Neerim had been in breach of the Contracts;
(c) on 19 January 2016 Neerim suspended the building works; and
(d) the Payment Claim is rejected.
On 9 February 2016, Neerim sent an email purporting to be a notice under s 18(2) of the Act (the ‘s 18(2) Notice’) to Ms Vinson.
On 16 February 2016, Neerim served Ms Vinson with an application for adjudication under the Act (the ‘First Adjudication Application’).
On 17 February 2016, Ms Vinson caused her solicitors to send three default notices pursuant to cl 43 of each Contract. Clause 43 is reproduced below:
Owner’s right to end this Contract
43.0If the Builder breaches (including repudiates) this Contract, nothing in this Clause prejudices the right of the Owner to recover damages or exercise any other right or remedy.
43.1 The Builder is in substantial breach of this Contract if the Builder:
· suspends the carrying out of the Building Works, otherwise than in accordance with Clause 35;
· has the Builder’s licence cancelled or suspended; or
· is otherwise in substantial breach of this Contact.
43.2 If the Builder is in substantial breach of this Contract the owner may give the Builder a written notice to remedy the breach:
· specifying the substantial breach;
· requiring the substantial breach to be remedied within 10 Days after the notice is received by the Builder; and
· stating that if the substantial breach is not remedied as required, the Owner intends to end this Contract.
43.3If the Builder does not remedy the substantial breach stated in the notice to remedy the breach within 10 days of receiving that notice, the owner may end this Contract by giving a further written notice to that effect.
43.4The Owner is not entitled to end this Contract under this Clause when the Owner is in substantial breach of this Contract.
By email dated 22 February 2016, Mr Tonkin of Adjudicate Today (the ‘First Adjudicator’) accepted the First Adjudication Application.
On 22 February 2016, Ms Vinson responded by letter dated 19 February 2016 objecting to the jurisdiction of the First Adjudicator.
By email dated 1 March 2016, Adjudicate Today advised the parties that the First Adjudicator withdrew his acceptance to determine the First Adjudication Application.
By email dated 2 March 2016, Neerim requested Adjudicate Today to appoint another adjudicator.
By email dated 4 March 2016, Adjudicate Today informed the parties that Mr Sean O’Sullivan had been appointed as adjudicator (the ‘Second Adjudicator’).
On 24 March 2016, Adjudicate Today advised the parties that the Second Adjudicator declined to determine the matter. The Second Adjudicator commented:
Having reviewed the adjudication application and adjudication response lodged by the Claimant and Respondent respectively, I am not satisfied that I have jurisdiction to determine this matter for at least the two following reasons:
(a) the purported section 18(2) notice does not comply with the legislation;
(b)the work the subject of the payment claim appears to be work to which the exclusion in section 7(2)(b) of the Act applies.
I therefore will not be delivering a determination on this matter.
On 1 April 2016, Neerim referred the Payment Claim to Able Adjudicators (the ‘Second Adjudication Application’).
By email dated 5 April 2016, Ms Vinson caused her solicitors to write to Able Adjudication and stated, inter alia, that -
(a) Neerim’s attempt at a further adjudication was an abuse of process; and
(b) Neerim’s Second Adjudication Application amounts to ‘adjudicator shopping’.
On 7 April 2016, Able Adjudication notified the parties that Mr Robert Sundercombe had accepted the nomination as adjudicator (the ‘Third Adjudicator’).
On 18 April 2016, the Third Adjudicator made the following submissions to the parties:
I have reviewed all of the parties’ submissions and confirm that I have formed a view that the notice provided pursuant to s 18(2) of the Building and Construction Industry Security of Payment Act (the Act) does not meet the requirements of the Act.
Therefore I will not be providing a determination with the period provided by s 22(4) of the Act.
I confirm that this submission is not a determination made pursuant to s 23 of the Act.
On 22 April 2016, Neerim referred the Payment Claim to ASC Adjudications (the ‘Third Adjudication Application’).
ASC Adjudications has yet to appoint an adjudicator.
The first issue – does the Act apply to the Contracts?
Ms Vinson submitted that, pursuant to s 7(2)(b) of the Act, the Act does not apply to the Contracts for the following reasons:
(a) the Contracts are major domestic building contracts within the meaning of the Domestic Building Contracts Act 1995 (Vic) and include the requirements of the Domestic Building Contracts Act 1995 (Vic).
(b) Neerim procured domestic builders warranty insurance from QBE Insurance as required by law; and
(c) Ms Vinson has never been in the business of building residences.
Against this contention, it was submitted on behalf of Neerim that the Contracts are not excluded under s 7(2)(b) of the Act for the following reasons:
(a) Ms Vinson was introduced to Neerim as an experienced property developer and she represented herself as such throughout the course of the construction works;
(b) Ms Vinson advised Neerim of her involvement in large-scale construction projects, which amounted to some $200 million;
(c) Ms Vinson is involved in a property development company and has an email address and website associated with this company; and
(d) Neerim was led to believe that Ms Vinson is an expert in the area of building and construction and that it was dealing with a person experienced in building and construction.
Application of the Act
Section 7(2)(b) of the Act provides:
Application of Act
…
(2) This Act does not apply to—
…
(b)a construction contract which is a domestic building contract within the meaning of the Domestic Building Contracts Act 1995 between a builder and a building owner (within the meaning of that Act), for the carrying out of domestic building work (within the meaning of that Act), other than a contract where the building owner is in the business of building residences and the contract is entered into in the course of, or in connection with, that business;
I accept that the Contracts are domestic building contracts within the meaning of the Domestic Building Contracts Act 1995 (Vic) between a builder (Neerim) and a building owner (Ms Vinson) for the carrying out of domestic building work within the meaning of the Domestic Building Act 1995 (Vic).
Therefore, the Contracts are prima facie excluded from the application of the Act.
The real issue for determination then becomes whether or not the Act is excluded by application of the second limb of s 7(2)(b) of the Act – that is, whether:
(a) the building owner is in the business of building residences; and
(b) the contract is entered into in the course of, or in connection with, that business.
Applicable principles
In Director of Housing of State of Victoria v StructX Pty Lt T/As Bizibuilders & Anor (‘Director of Housing’),[1] this Court had occasion to consider the meaning of the expression ‘in the business of building residences’ in s 7(2)(b) of the Act. There I observed:[2]
“[B]usiness” is not defined in the Act. A glance at the Oxford Dictionary shows that the word has a number of meanings. It is necessary to engage in a process of construction in order to arrive at the meaning of the word as it is used in s 7(2)(b) of the Act. The ordinary and natural meaning in the context of the section must be adopted, having regard to the statutory purpose to be served.
The expression “in the business of building residences …” connotes the construction of dwelling houses as a commercial enterprise on the basis of a going concern, that is, an enterprise engaged in for the purpose of profit on a continuous and repetitive basis.
[1][2011] VSC 410 (citations omitted).
[2]Ibid, [27]–[28].
It was held in Director of Housing that ‘business’ had a similar meaning to the one attributed to the same term as it appeared in s 118(1) of the Local Government Act 1919 (NSW) by Mason J (as his Honour then was) in Hope v Bathurst City Council,[3] where his Honour, with whom the other members of the Court agreed,[4] said:[5]
I accept, then, that “business” in the sub-section has the ordinary or popular meaning which it would be given in the expression “carrying on the business of grazing”. It denotes grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis.
[3](1980) 144 CLR 1.
[4]Gibbs, Stephen, Murphy and Aickin JJ.
[5]Hope v Bathurst City Council (1980) 144 CLR 1, 8–9.
Is the plaintiff ‘in the business of building residences’?
Ms Vinson is a successful businesswoman and formulator of cosmetic products. The cosmeceuticals company of which she is the founder and Managing Director, Synergie Skin Pty Ltd, sells skin care products to a large number of retail outlets in Australia and overseas, including Singapore and Hong Kong. Ms Vinson holds a Bachelor of Science degree (Immunology and Microbiology) from Monash University and a post-graduate Diploma of Formulating Chemistry and a Diploma of Education in Biology and Senior Science.
In a statutory declaration dated 19 February 2016, Ms Vinson states:
I am not and I have never been in the business of building residences:
(i) I have never entered into any building contracts for the construction of any residences (or any other buildings for that matter) prior to these 3 contracts. I am not in business myself and I do not have an ABN;
(ii) my business occupation is Managing Director of Synergie Skin Pty Ltd, a wholesaler and formulator of cosmetic products. Synergie Skin Pty Ltd has absolutely no involvement in any business to [do] with the construction of residences;
(iii) the property at 71 Karnak Road, Ashburton was a property which my late mother owned and which I inherited upon her decease;
(iv) I entered into these 3 contracts with the intention that I would live in one and either rent or sell the remaining two, depending on the market.
Neerim submitted that ‘[a]t all times during the course of construction the respondent continually represented themselves to be an experienced property developer and investor’.
It points to extracts from the website of Launch Corporation Pty Ltd (‘Launch Corporation’), a company whose homepage describes it as ‘a dedicated property development company that collaborates with creative and dynamic entrepreneurs to deliver innovative and profitable projects for its investors and stakeholders’. Ms Vinson has a profile page on this website. There she is described as, inter alia, ‘a serious property investor, a property developer and a major stakeholder in Launch Corporation projects’.
Neerim also cites the fact that that Ms Vinson has an email address allocated to her by the Launch Corporation server in support of the contention that she was ‘deeply personally involved’ in the activities of Launch Corporation.
I note, however, that, on the written evidence before me, the email exchanges between Ms Vinson and Neerim which took place throughout the tenure of the works appears to have been sent and received by the plaintiff on two email accounts, both associated with Synergie Skin Pty Ltd.
In refuting the suggestion that Ms Vinson’s association with Launch Corporation might be used to demonstrate that she was, as a matter of fact, ‘in the business of building residences’, Ms Vinson relies in part upon the statutory declaration of Mr Greg Alvadous, a director of Launch Corporation, dated 29 February 2016. Relevantly, this provides:
…
3 Ms Terri Vinson is on the Advisory Board of Launch Corporation. Terri’s involvement commenced in or about June 2014, and was based on her experience in marketing. Terri’s business background is in cosmetics, not property development.
4I have been informed that Terri is undertaking a development at 71 Karnak Road, Ashburton. That development is not connected in any way with Launch Corporation, it is a private development being undertaken by Terri, for her own benefit.
5I refer to the extracts of the Launch Corporation website referred to by Mr Sezenias in his further submissions dated 25 February 2016. That material describes Terri as “Director – Advisory Board”. That is incorrect, Terri is not and never has been a director of launch corporation, nor is she a shareholder. Terri is merely on the Advisory Board, for marketing management.
6Terri has been an investor in Launch Corporation developments via her Self-Managed Super Fund. That is a passive investment and Terri has not had any role in the management of those projects.
On the written evidence provided, it cannot be authoritatively determined whether or not Ms Vinson was, as a matter of fact, in the business of building residences.
The Court has not been given the opportunity to evaluate the truth of either the statements recorded in the statutory declarations referred to or the alleged representations made to the director of the defendant by the plaintiff as to the extent of her involvement in construction projects and property development by way of oral testimony and cross-examination. Accordingly, the Court is not in a position to decide ‘on the papers’, whether or not the Act is excluded by operation of the second limb of s 7(2)(b) in this instance.
The second issue – the validity of the s 18(2) Notice
It is agreed between the parties that the Payment Claim was served on 22 January 2016 and that no payment schedule was issued by Ms Vinson.
Ms Vinson submitted that the purported s 18(2) Notice is not a valid notice under the Act because it does not give any indication of Neerim’s intention to apply for adjudication.
Neerim submitted that the s 18(2) Notice was a correct notice under the Act.
The purported s 18(2) Notice is contained in an email sent by Mr Alex Sezenias, the director of Neerim, to Ms Vinson at 7:05 am on the morning of 9 February 2016. The email is addressed to Ms Vinson’s email account managed by Synergie Skin Pty Ltd. It reads:
RE: TERRI VINSON vs NEERIM PROPERTY DEVELOPMENTS PTY LTD
I refer to the above matter and the claim for payment of Invoice no 76 dated January 21st 2016, under Section 18 of the Building and Construction Industry Security of Payment Act 2002 (Vic).
I reserve the right to exercise my rights under the Act.
Regards
Alex Sezenias.
Section 18 of the Act provides by sub-sections (1) and (2) that:
Adjudication applications
(1)A claimant may apply for adjudication of a payment claim (an "adjudication application") if—
(a)the respondent provides a payment schedule under Division 1 but—
(i)the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim; or
(ii)the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount; or
(b)the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount.
(2)An adjudication application to which subsection (1)(b) applies cannot be made unless—
(a)the claimant has notified the respondent, within the period of 10 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim; and
(b)the respondent has been given an opportunity to provide a payment schedule to the claimant within 2 business days after receiving the claimant's notice.
The Payment Claim is constituted by Invoice 00000076 in an email which read:
Hi Terri
Please find attached claim.
Regards
Alex.
The invoice did not specify a date for payment.
Schedule 4 ‘Special Conditions’ of the Contracts provided by clause 3 that:
Any variations that require an additional payment to the Builder shall be invoiced at the next stage claim and paid together with that stage payment or earlier if requested by the Builder.
Neerim made its purported Adjudication Application under s 18(1)(b) of the Act. However, s 18(2) of the Act provides a bar to the making of an adjudication application to which sub-section 1(b) applies unless both of the mandatory requirements of paragraphs 18(2)(a) have been satisfied.
As to the requirements under s 18(2)(a) of the Act, Neerim’s email of 9 February 2016, whether or not it was provided to Ms Vinson within the time prescribed, manifestly failed to notify her of Neerim’s intention to apply for adjudication of the Payment Claim, as is required. The notice, such that it was, merely reserved the exercise of the company’s rights under the Act. This is insufficient, for the purposes of the Act, to amount to a notice that Neerim intended to apply for adjudication of its Payment Claim.
The object and purpose of a s 18(2)(a) notice is to enable the respondent to the payment claim to be given an opportunity under s 18(2)(b) to provide a payment schedule to the claimant within 2 business days after receiving the claimant’s notice provided under s 18(2)(a). This opportunity was denied to Ms Vinson by Neerim simply stating that it ‘reserved’ its rights.
For these reasons, Neerim failed to comply with an essential and obligatory requirement of s 18(2) of the Act,[6] and the purported notice was invalid for this purpose.
[6]See Hallmarc Construction v Saville [2014] VSC 491, [24].
Accordingly, there is no valid adjudication application on foot which is capable of being made to any authorised nominating authority under the Act, nor is there any adjudication application on foot which is capable of a valid reference to an adjudicator under the Act.[7]
[7]See s 18(7) of the Act.
It follows that no adjudicator has jurisdiction under the Act to proceed to an adjudication determination of the Defendant’s payment claim served on 22 January 2016 founded upon the purported s 18(2) notice dated 9 February 2016.
This is another case where a standard form of notice, in this case a s 18(2) notice, would be of assistance in the administration of the Act to avert the problem which has arisen.
The Defendant has made numbers of attempts to have an adjudicator appointed under the Act based upon the purported s 18(2) notice, which has been found to be invalid. This conduct is giving rise to unnecessary time and cost in administering the system of adjudication under the Act. A permanent injunction restraining this conduct is therefore justified.
Relief
The Defendant shall be permanently restrained from applying for an adjudication of its payment claim served on 22 January 2016 founded upon its purported s 18(2)(a) notice dated 9 February 2016.
The proceeding should be otherwise dismissed.
Unless there is any reason for ordering otherwise, costs should follow the event, and the Defendant should be ordered to pay the costs of the proceeding.
It is declared that the Defendant’s email of 9 February 2016 is invalid for the purposes of a notice pursuant to s 18(2)(a) of the Act.
It is ordered that:
1. The Defendant and its servants and agents are permanently restrained from applying for an adjudication under the Act of the payment claim served on 22 January 2016 founded upon the purported s 18(2)(a) notice dated 9 February 2016.
2. There be liberty to apply on the question of costs in the event that the parties fail to reach agreement on this.
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