[2006] NSWCA 238
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393
[2010] NSWCA 190
Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 1143
Source
Original judgment source is linked above.
Catchwords
[1990] HCA 17
Bank of New South Wales v The Commonwealth (1948) 76 CLR 1 at 381[1948] HCA 7
Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9[2006] NSWCA 238
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393[2010] NSWCA 190
Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 1143226 ALR 362
Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385
[2005] NSWCA 49
Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No 2) (2009) 26 VR 172
[2009] VSC 426
[2014] FCAFC 155
Pertzel v QLD Paulownia Forests Ltd [2008] 2 Qd R 526
[2008] QCA 287
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
[2018] HCA 4
Village Building Company Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330
Judgment (14 paragraphs)
[1]
Background to the appeal
In the following summary of the background, I have referred to material that was not before the primary judge, on which Mr Bhatt sought to rely in support of the second issue on the appeal. The material comprised orders that the Supreme Court made on various dates, together with a complete version of the Second Further Amended Technology & Construction List Statement (Second Further Amended List Statement) that was filed in the Supreme Court proceedings, and an application that YTO filed in those proceedings further to amend the Second Further Amended List Statement. Although YTO formally objected to the tender of this material on the basis that Mr Bhatt should not be permitted to raise the grounds to which it related, Senior Counsel for YTO indicated at the hearing that YTO had no objection to the Court considering the material with a view to determining the application in the course of the judgment rather than dealing with it separately. Having regard to the nature of the material, and the assistance it provides in terms of understanding the chronology of the proceedings in the Supreme Court and the District Court, I would grant the leave sought in the notice of motion dated 22 May 2023 to rely on it.
YTO and Innovative entered into the subcontract in July 2017. The Scope of Works included that Innovative would undertake "Bulk & Detailed Excavation", including removing and disposing all excess material from the site once excavated. The contract price for the bulk and detailed excavation work, excluding GST, was $790,000, with the further stipulation "No variation applies".
Elkordi Earthworx Pty Ltd, trading as Elkordi Haulage (Elkordi), was subcontracted by Innovative to undertake the haulage and disposal work. The primary judge noted that there were two types of materials removed from the site: GSW, for which Elkordi charged Innovative $1,250 per load, and virgin excavated natural material (VENM), for which Elkordi charged $500 per load: at [7].
On 11 January 2018, Innovative issued a payment claim to YTO pursuant to s 13 of the SOP Act. The payment claim comprised a spreadsheet in which Innovative claimed an outstanding total of $1,649,832.51 (inclusive of GST), for work alleged to have been completed up to 25 December 2017. As part of the payment claim, under the heading "GSW Material Cart Away", Innovative included an amount of $490,000 (plus GST) for the removal of 70 loads of excavated material at a rate of $7,000 per load. In describing this aspect of the payment claim, Innovative referred to finding GSW on the site that needed to be carted away, and which was not contemplated as part of the works in the subcontract. Innovative sought the "additional cost for removing materials other than VENM".
On 23 January 2018, YTO served a payment schedule on Innovative pursuant to s 14 of the SOP Act, stating that it proposed to pay Innovative "$NIL". YTO stated that it was not liable for variations, directing attention to the exclusion of variations in the subcontract.
On 7 February 2018, Innovative lodged an adjudication application under the SOP Act. As the primary judge noted at [35], the adjudication application included a number of different items but the relevant claim was known as Variation 5. Innovative included in Variation 5 a claim for load, cart and tip fees for GSW material, being 66 loads at $7,000 per load, totalling $462,000; it noted in the application that a review had identified that only 66 loads were carted out (and not 70 loads as it had included in the payment claim).
The primary judge identified the following documents that Innovative had provided to the adjudicator as part of the adjudication application and which were relevant to the ACL claim (at [41]):
1. a spreadsheet which provided the dates, number of loads, unit price and total costs of the 66 loads for which it made a claim;
2. a number of haulage dockets from Elkordi;
3. a redacted copy of invoice no 243 from Elkordi; and
4. a schedule prepared by Innovative which was titled "VENM MATRIAL (sic)" and detailed the dates, number of loads and volume of VENM carted from the site.
In its adjudication response dated 15 February 2018, YTO reiterated its position in relation to variations. The primary judge noted that YTO did not refer to the documents that Innovative had submitted as part of its adjudication application, and did not discuss the quantum of the claim for the removal of GSW from the Ashfield site: at [42].
[2]
The adjudicator's determination
On 22 February 2018, the adjudicator made a determination under s 22 of the SOP Act. The adjudicator decided that YTO was to pay Innovative a total of $1,535,377.51 (inclusive of GST), which included the sum of $466,800 (plus GST) for the removal of 66 loads of GSW from the Ashfield site. After referring to the claim and the supporting evidence, and the parties' respective positions, the adjudicator stated (footnotes omitted):
"153. In paras. 225 to 231 of the Adjudication Application, the Claimant sets out the factual background of the claim. Pertinently, the Claimant contends amongst other things:
a. Final Quote dated 13 July 2017 Rev 6 (the Final Quote) details
'Removal of GSW material (approx. 1550 cu. M) and removal of existing footing by client. Client will have to give us report once GSW material removed from site';
b. It was the Respondent's responsibility to provide a clean site, however on commencement the Claimant discovered unsuitable material;
c. The Respondent instructed it to make a stockpile in the middle of the site so that GSW material could be measured prior to export offsite;
d. The Respondent utilized some of that material in lower layers of backfill in northern side of site and instructed the Claimant to separate brick and concrete from stockpile;
e. Claimant moved material through bogies to northern side;
f. Respondent instructed the Claimant to export the remaining material offsite;
g. The Claimant removed 66 loads offsite using its subcontractor, Elkordi;
h. There is no dispute between the parties that the material was unsuitable.
154. I find the Claimant has taken on the task of setting out a detailed explanation as to why it was required to carry out the variation work, and has explained in some detail its interpretation of the Scope of Works under the Subcontract, and the revised Scope of Work actually constructed. The Claimant says it was instructed to perform the works by the Respondent.
155. In particular, I have reviewed the Final Quote, the Scope of Work regarding the Bulk and Detailed Excavation and the Geotechnical Report made available to the Claimant for the purpose of tendering.
156. I acknowledge the Claimant's Final Quote does not constitute a Subcontract document, so have given this document little weight in coming to my determination. I note that in the Final Quote 'Contamination and Asbestos' are expressly excluded.
157. The Respondent has failed to direct me to any particular provisions of the Subcontract Scope of Works, if any, in regard to the removal of GSW. On a reading down of the Scope of Work, I am satisfied that the Claimant's contention that it anticipated the bulk removal of VENM is reasonable.
158. On the basis of the Claimant's factual analysis, and in the absence of any contest, I am persuaded that the Respondent engaged in conduct that did amount to a clear representation that it agreed to the Variation 5 works, and the Claimant acted on that representation.
159. The Respondent has not persuaded me that the absence of a written and signed agreement is sufficient to disentitle the Claimant to claim for work carried out under Variation 5 under the Act. Furthermore, the Respondent has provided me with nothing that persuades me the Claimant cannot claim for work carried out under Variation 5 under the Act in circumstances where verbal instructions were given to it and in the circumstances where the Subcontract conditions were unworkable.
160. I find the Claimant is entitled to claim for work carried out under Variation 5 in its progress claim under the Act.
161. Valuation
162. As contended by the Claimant, I find there are no express provisions that govern the valuation of variations to the Scope of Work.
163. The Claimant provided a summary of cost breakdown and detailed cost breakup and supporting information in the Payment Claim. This included the details of quantification and rates applied for each line item comprising the claim. The Claimant also provided to the Respondent detailed substantiation in the Payment Claim, including photographic evidence of the works in progress.
164. The Respondent did not provide any alternative assessment for the variation in the Payment Schedule or Adjudication Response.
165. In the Adjudication Application the Claimant explained in some detail each item claimed for with photographic evidence. On the balance of the information provided, I accept the Claimant's quantification, proposed rates and valuation.
166. I value Variation 5 as follows:
a. [GSW] Material Cart Away $466,800.00
b. Boggie Supply $13,650.00
c. Excavator Supply $7,500.00
d. Contaminated/Rubbish Material removed from site $3,000.00
e. Preparation of ramp $3,000.00
Total $493,950.00"
[3]
The Supreme Court proceedings
According to the primary judge, on 28 March 2018, YTO commenced proceedings against Innovative in the Supreme Court, seeking, among other things, to set aside the adjudicator's determination on the basis that it was procured by fraud: at [46]. YTO claimed that Innovative's representations, to the effect that it had removed 66 loads of GSW, at a cost of $7,000 per load, were false to its knowledge. YTO also sought an order that Innovative be restrained from enforcing the judgment debt. On 5 April 2018, YTO paid into Court the amount that was the subject of the adjudication certificate: at [47].
In the reasons of the primary judge in the present case, his Honour referred to a number of aspects of the evidence in the Supreme Court proceedings that were relevant to YTO's claim in the District Court:
1. The evidence of Mr Bhatt, who said in cross-examination in the Supreme Court that he accepted responsibility for preparing the adjudication application: at [48]-[49].
2. The evidence of Hemangbhai Patel, who assisted Mr Bhatt to compile the documents for the adjudication application. Mr Patel's evidence was that he had identified the one page schedule, Elkordi dockets and an Elkordi tax invoice as supporting the claim for the off-site disposal of 66 loads of GSW: at [50]‑[52].
3. The evidence of Luz De Guzman, who was the assistant accountant for Innovative. Her affidavit from the Supreme Court proceedings was exhibited to an affidavit of YTO's sole director, Jian Guo Yuan, in the District Court proceedings. Ms De Guzman gave evidence that her process was to review written invoices from subcontractors against the supporting documents they provided; if supporting documents were not provided, she would request that the subcontractor provide them before payment was made: at [54].
In her evidence, Ms De Guzman addressed two invoices issued by Elkordi, the first of which was invoice 242, dated 15 September 2017. Invoice 242 covered deliveries from 28 August 2017 to 12 September 2017, including loads which were the subject of Innovative's adjudication application. Relevantly for present purposes, the first entry on that invoice was for four loads hauled on 28 August 2017, for a unit price of $500. The eighth entry on invoice 242 was for haulage on 30 August 2017; the quantity given was "5" and the unit price was $145, for a total of $725.
[4]
Amendment application in the Supreme Court proceedings
On 19 September 2018, YTO filed a notice of motion for leave to file a Second Further Amended Summons and Third Further Amended Technology & Construction List Statement. Relevantly for present purposes, the proposed Second Further Amended Summons substituted Mr Bhatt as the second defendant and included an alternative claim for damages under s 236 of the ACL. The Third Further Amended Technology & Construction List Statement alleged that Innovative had made representations in the adjudication application that were misleading or deceptive or likely to mislead or deceive and which were relied upon by the adjudicator. YTO alleged that Mr Bhatt, as the proposed second defendant, was involved in Innovative's contraventions of s 18 of the ACL within the meaning of s 236(1) of the ACL, such that YTO could recover from him the amount of loss or damage it suffered.
The evidence on the application for leave to amend included a letter dated 29 August 2018 from Innovative's then solicitor, Mr Sam Wilson of CCS Legal, to YTO's solicitors. In that letter, Mr Wilson indicated that Innovative did not consent to the filling of the proposed amended pleadings and originating process. One of the bases advanced for Innovative not consenting was that the misleading and deceptive conduct claim raised a res judicata, an Anshun estoppel and an issue estoppel. Additionally, Mr Wilson stated that to maintain this claim was an abuse of process.
On 18 October 2018, YTO filed an appeal from the decision of Rein J. The amendment application was adjourned on multiple occasions, presumably pending the outcome of the appeal.
[5]
The decision of the Court of Appeal
On 15 May 2019, the Court of Appeal allowed YTO's appeal in part: YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2019] NSWCA 110. White JA (McFarlan JA and Emmett AJA agreeing) concluded that the primary judge had not addressed the claim that YTO advanced in [21(a)] of the Second Further Amended List Statement, which dealt with Innovative's representation regarding the number of loads of GSW for which it made a claim and alleged that Innovative knew that its representation was false. The Court set aside Rein J's orders in so far as his Honour had dismissed that allegation, and ordered that the proceedings be remitted to the Equity Division for further hearing (Orders 2 and 3).
The Court also ordered that Innovative "pay into Court $399,000 plus GST and interest that had accrued on that sum that formed part of the moneys paid into Court by [YTO] pursuant to the adjudicator's determination and the judgment entered thereon", to await final determination of YTO's claim (Order 5). The Court also made the following notation:
(4) Note that whether, and if so to what extent, either party may be permitted to amend its pleadings or particulars, or adduce further evidence, or make further submissions, will be in the discretion of the primary judge or any other judge of the Equity Division to whom the proceeding is referred.
The primary judge in the present case observed that Innovative never paid into Court any of the money it was ordered to pay: at [62]. On 14 October 2019, Innovative was placed into external administration: at [3].
[6]
The remitted Supreme Court proceedings
On 14 February 2020, Rein J made the following orders:
1. Note the matter was called inside and outside Court and there was no appearance by the Defendant.
2. Proceedings dismissed with no order as to costs.
3. Note that the Plaintiff contends that, despite the current proceedings being dismissed today, the Plaintiff is still at liberty in future to sue Mr Ashish Bhatt and Mr Hemangbhai Patel.
[7]
YTO's claim in the District Court
On 24 May 2020, YTO commenced the proceedings in the District Court against Mr Bhatt. On 1 November 2021, YTO filed an Amended Statement of Claim (ASOC). Mr Bhatt, in turn, filed a Further Amended Defence. Although Mr Bhatt ultimately represented himself at the hearing, the primary judge noted that the Further Amended Defence was prepared and filed by solicitors on his behalf: at [138].
YTO alleged (and the primary judge found, at [91]) that Mr Bhatt made the following statements in the adjudication application (ASOC [7(a) to (e)]):
1. Although Innovative had claimed, in Variation 5, for 70 loads of GSW, on a review it had identified that there were only 66 loads carted out.
2. Innovative had removed 66 loads of GSW off the site using its subcontractor, Elkordi.
3. The supporting documents, including dockets from Elkordi for 66 loads of GSW, had already been provided to YTO along with Variation Claim 5.
4. Innovative was entitled to be paid $462,000 (excluding GST) under the Contract for "GSW Material cart away" in respect of the 66 loads of GSW.
YTO also alleged, and the primary judge found, that Mr Bhatt provided the adjudicator with the redacted copy of invoice 243, which was relied on in the adjudication application as evidence of the carting of 28 of the 66 loads of GSW: at [100].
YTO next alleged that based on the above statements and provision of the redacted copy of invoice 243 to the adjudicator, Innovative made four representations to YTO and the adjudicator, three of which it pressed (ASOC [7(f)-(h)]). His Honour upheld YTO's claim that these representations were made or conveyed (at [104]-[105]):
1. each of the 66 loads referred to in Variation Claim 5 contained GSW (defined as the General Solid Waste Representation);
2. Innovative had incurred additional costs in respect of all of the 66 loads of GSW for which it claimed a variation (defined as the Additional Costs Representation); and
3. Innovative was entitled to be paid $462,000 (excluding GST) as a variation under the Contract for removing the GSW from the site (defined as the Variation Representation).
YTO alleged, and Mr Bhatt denied, that each of the three representations was made in trade or commerce. The primary judge's reasons in finding in favour of YTO on this issue were brief, at [106]:
"I find that they were [in trade or commerce]. Nothing could be more central to the conduct of any business or profession than being paid. Sending an invoice and requesting payment is an ordinary incident of trade or commerce. In the case of a civil engineering business, delivering a payment claim, seeking an adjudication under the SOP Act and making submissions to an adjudicator are everyday events."
[8]
Ground 1: "in trade or commerce"
The conduct of Innovative that YTO alleged was "in trade or commerce" was the making of particular statements in the adjudication application which, together with provision of the redacted invoice, were found to amount to the General Solid Waste Representation, the Additional Costs Representation, and the Variation Representation. Mr Bhatt contended that the primary judge erred in concluding that he engaged in that conduct "in trade or commerce" for the purposes of s 18 of the ACL.
Mr Bhatt submitted that the primary judge had proceeded on a construction of s 18 of the ACL that the High Court had rejected in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; [1990] HCA 17 ("Concrete Constructions") in relation to s 52 of the Trade Practices Act 1974 (Cth) (the statutory predecessor of s 18 of the ACL). Contrary to the reasoning of the primary judge, it did not follow from the fact that delivering payment claims, seeking adjudication on such claims and making submissions to an adjudicator were "everyday events" and "ordinary incident[s] of trade or commerce", that they were also properly characterised as conduct "in trade or commerce".
Mr Bhatt's central contention was that activities that occurred within the regime for the resolution of disputes created by the SOP Act did not have the character of conduct in trade or commerce. In addition to Concrete Constructions, Mr Bhatt relied on the decision of the Full Court of the Supreme Court of Victoria in Little v Law Institute of Victoria (No 3) [1990] VR 257 ("Little"), and the decision of the Queensland Court of Appeal in Pertzel v QLD Paulownia Forests Ltd [2008] 2 Qd R 526; [2008] QCA 287 ("Pertzel"). He also relied upon the reasoning of Campbell J in Concrete Constructions in Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 1143; 226 ALR 362 ("Energetech").
Mr Bhatt emphasised what he submitted would be the broader ramifications of this Court upholding the conclusion of the primary judge on this issue. He referred in this context to s 25(1) of the SOP Act, pursuant to which an adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly. He submitted that like court proceedings, the procedure is enshrined in and a creature of statute; and, like arbitrations, an award is recognised pursuant to statute and is to be enforced by a court. If the conduct in question was found to be conduct in trade or commerce then the reasoning in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 ("Probuild"), would effectively be nullified. He submitted that confirming the primary judge's conclusion in this case would entail also accepting that a submission made to a judge, adjudicator or arbitrator was conduct in trade or commerce.
[9]
Consideration
The first step in answering the question raised by Ground 1 is to understand how courts have construed the phrase "in trade or commerce", before considering whether the conduct that was alleged was in trade or commerce.
Part XI of the Competition and Consumer Act 2010 (Cth) deals with the application of the ACL, which is contained in Schedule 2 to that Act. The provisions of the ACL are picked up and applied as New South Wales law by Part 3 of the Fair Trading Act 1987 (NSW). Section 32 of the Fair Trading Act provides that the ACL applies to and in relation to persons ordinarily resident in New South Wales, including Mr Bhatt.
Section 18(1) of the ACL, which is contained in Chapter 2, provides:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
The phrase "trade or commerce" is defined in s 2 of the ACL to mean:
(a) trade or commerce within Australia; or
(b) trade or commerce between Australia and places outside Australia;
and includes any business or professional activity (whether or not carried on for profit).
The High Court considered the construction of "in trade or commerce" in Concrete Constructions. The appellant in Concrete Constructions was a corporation that was constructing a building in Sydney, and the respondent was one of its employees who was working on that site. As summarised in the reasons of the joint judgment (Mason CJ, Deane, Dawson and Gaudron JJ), the respondent sustained injuries when he fell to the bottom of an air conditioning shaft while attempting to remove a grate positioned at the entry point of the shaft: at 599. He alleged that his injuries were caused by the conduct of the company's foreman, who told him that the grates at the entry points of the shafts were fixed by three bolts on each side, when that was not the case: at 599. In seeking damages against the company, the respondent attributed the conduct of the foreman to the company and contended that his injuries were occasioned by reason of conduct of the company that was misleading or deceptive or liable to mislead or deceive, within the meaning of s 52 of the Trade Practices Act: at 600.
The appeal to the High Court was from the affirmative answer that the Federal Court gave on a preliminary question, namely, whether the facts pleaded and particularised gave rise to a cause of action under the Trade Practices Act: at 600. As the joint judgment stated, the issue was "whether, accepting all of the worker's allegations about the cause of his injuries and that the misleading or deceptive conduct of its foreman is to be attributed to the company, the conduct constituted a contravention of the provisions of s. 52 of the Trade Practices Act": at 600. Although there had been numerous cases which had considered the scope of s 52, the joint judgment noted that none of them was decisive of the question raised in that case, which was "whether s. 52's prohibition of misleading or deceptive conduct by a corporation in trade or commerce extends to the internal affairs of the corporation or to purely internal communications between employees of a corporation in the course of their employment": at 600-601.
[10]
Issue 2: Anshun estoppel, abuse of process and issue estoppel
By Grounds 2, 3 and 4, Mr Bhatt took issue with YTO's bringing the proceedings in the District Court, contending that the circumstances of the claim under s 18 of the ACL were intimately connected with the subject matter of the proceedings in the Supreme Court (and the Court of Appeal).
Mr Bhatt contended that the circumstances raised an Anshun estoppel, on the basis that it was unreasonable for the present ACL claim not to have been raised in the earlier proceedings, given that the representations relied upon were substantially the same as those relied upon in the Supreme Court proceedings and arose out of precisely the same conduct, being Innovative's submission of the adjudication applications. Alternatively, Mr Bhatt contended that YTO's conduct in bringing the present proceedings constituted an abuse of process, particularly in light of the principles in s 56 of the Civil Procedure Act 2005 (NSW). Finally, Mr Bhatt alleged that the Supreme Court proceedings raised an issue estoppel against YTO, having regard to the identity of issues between the proceedings and, he submitted, the sufficient identity of parties notwithstanding that Mr Bhatt was not a defendant in the Supreme Court.
YTO's primary responsive argument, which applied equally to Grounds 2, 3 and 4, was that none of these arguments were pleaded or addressed in the District Court as they were required to have been, despite Mr Bhatt's initial Defence having been prepared by the same solicitors who acted for him in the Supreme Court proceedings (that solicitor having written to YTO's solicitors to oppose the foreshadowed amendments to the Supreme Court proceedings, on the grounds that Mr Bhatt sought to advance in this Court). YTO contended that Mr Bhatt should not now be permitted to advance those grounds, in circumstances where, if they had been raised before the primary judge, it would have had an opportunity to answer them and in all possibility could have prevented the points from succeeding. Mr Bhatt acknowledged that these matters were not raised before the primary judge, although he noted that he did refer to the Supreme Court proceedings before the primary judge in his evidence and oral submissions.
In circumstances where I have concluded in favour of Mr Bhatt on Ground 1, it is unnecessary to determine whether Mr Bhatt should be permitted to raise, on appeal, that YTO was precluded from bringing the claim at all. However, there was force in the submissions advanced by Senior Counsel for YTO that the raising of such grounds on appeal meant that the circumstances in which the District Court proceedings were commenced, against the background of the Supreme Court proceedings, were not sufficiently explored or explained.
[11]
Denial of procedural fairness (Ground 7)
Mr Bhatt submitted that the primary judge denied him procedural fairness, in so far as he determined the case, in part, on his assessment of the contents of the spreadsheet that Innovative submitted to the adjudicator. He contended that this involved a departure from YTO's pleaded case, as YTO never contended that the spreadsheet constituted a misrepresentation, or that it led to other misrepresentations. Rather, its case depended on the making of the three pleaded representations. In the hearing, Junior Counsel for Mr Bhatt submitted that the pleaded representations were not simply referable to specific loads in the spreadsheet and should not have been determined on that basis.
It is unnecessary to determine this ground of appeal in view of my conclusion on Ground 1. However, it is apparent that the primary judge did not, in using the Innovative spreadsheet in the manner he did, determine YTO's case in a manner that was not pleaded. As Senior Counsel for YTO submitted during the hearing of the appeal, the spreadsheet was useful because it recorded the actual loads that formed the basis of the three representations that YTO pleaded were misleading or deceptive or likely to mislead or deceive. Ultimately, his Honour decided that of the four categories into which his Honour broke up the entries in the spreadsheet, two established the falsity of the pleaded representations. There was no denial of procedural fairness in the manner alleged in Ground 7.
[12]
Assessment of YTO's loss or damage (Ground 8)
Mr Bhatt finally submitted that in the event he did not succeed on any of the other grounds of appeal, the primary judge nonetheless erred in the assessment of damages under the ACL. As I have concluded that Mr Bhatt should succeed on Ground 1, it is unnecessary to consider Ground 8.
[13]
Conclusion
I propose the following orders:
1. Grant leave to the appellant to rely on the further evidence identified in the affidavit of James Pope sworn on 19 May 2023.
2. Appeal allowed.
3. The orders of the District Court made on 18 August 2022 be set aside, and in lieu thereof, order that the Amended Statement of Claim be dismissed.
4. The respondent pay the appellant's costs at first instance and on appeal.
KIRK JA: I agree with Mitchelmore JA.
ADAMSON JA: I agree with Mitchelmore JA.
[14]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 15 December 2023
Solicitors:
Pope & Spinks Solicitors (Appellant)
Phillip J Pollack (Respondent)
File Number(s): 2022/284565
Publication restriction: Nil
Decision under appeal Court or tribunal: District Court of NSW
Jurisdiction: Civil
Citation: [2022] NSWDC 348
Date of Decision: 18 August 2022
Before: Russell SC DCJ
File Number(s): 2020/154231
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
HEADNOTE
[This headnote is not to be read as part of the judgment]
The respondent (YTO) was the principal contractor for a commercial and residential development in Ashfield, Sydney. In July 2017, YTO entered into a subcontract with Innovative Civil Pty Ltd (Innovative), of which the appellant was the sole director. Pursuant to the subcontract, Innovative agreed to carry out certain civil works on the Ashfield site, including the excavation and removal of organic material.
On 11 January 2018, Innovative issued a payment claim to YTO pursuant to s 13 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act), which relevantly included a variation amount of $490,000 (plus GST) for the removal of 70 loads (later reviewed to be 66 loads) of excavated general solid waste (GSW) material at a rate of $7,000 per load. On 7 February 2018, after YTO served a payment schedule disputing Innovative's payment claim, Innovative lodged an adjudication application pursuant to s 17 of the SOP Act. On 22 February 2018, an adjudicator determined that YTO was to pay Innovative a total of $1,535,377.51 (inclusive of GST), which included an amount of $462,000 (plus GST) for the removal of 66 loads of GSW.
On 28 March 2018, YTO commenced proceedings against Innovative in the Supreme Court to set aside the adjudicator's determination on the basis of fraud. On 10 August 2018, Rein J held that YTO's claim for fraud could not be established and found that YTO was precluded from relying on assertions made in closing submissions where they departed from the claim as articulated in the Second Further Amended Technology & Construction List Statement. On 15 May 2019, the Court of Appeal allowed YTO's appeal in part, concluding that Rein J had not addressed YTO's claim dealing with Innovative's representation on the number of loads of GSW, nor did his Honour address the respondent's allegation that Innovative knew the representation was false. The Court ordered Innovative pay into the Court an amount of $399,000 (plus GST and interest). Innovative did not pay this amount and on 14 October 2019, Innovative was placed into external administration.
On 24 May 2020, YTO commenced proceedings in the District Court against the appellant. Russell SC DCJ held that representations made by the appellant were made in trade or commerce and were misleading or deceptive. His Honour further found that the adjudicator relied on the misleading and deceptive conduct in coming to the view that Innovative was entitled to its entire claim in relation to the carting and tipping of GSW. His Honour held that YTO suffered loss and damage and awarded damages of $306,763.10 (including interest).
The appeal involved two main issues. The first issue was whether the primary judge erred by finding that representations made by the appellant to the adjudicator constituted conduct "in trade or commerce" for the purposes of s 18 of the Australian Consumer Law (ACL) (Ground 1). The second issue was whether the primary judge should have found that the respondent was precluded from bringing its claim in the District Court on the application of one or more of the principle in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45, abuse of process and issue estoppel (Grounds 2-4). The appellant also raised a denial of procedural fairness (Ground 7) and an alternative argument contending that the primary judge erred in the assessment of damages under the ACL (Ground 8).
The Court (Mitchelmore JA, Kirk JA and Adamson JA agreeing) held:
(1) The making of the representations to the adjudicator was not conduct in trade or commerce. Although an adjudication application is the means by which a claimant may seek to enforce their entitlement to a progress payment under the SOP Act in the event of a dispute, and the process may be prevalent in the construction industry, it does not follow that all conduct associated with the process is conduct in trade or commerce. The relationship between the adjudicator and the parties is not a trading or commercial relationship; and the adjudicator has the statutory function of determining the dispute. Although the dispute may arise from a commercial transaction, the making of the representations to the adjudicator was not conduct which in itself was an aspect or element of activities or transactions which, of its nature, bore a trading or commercial character: [84]-[85].
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; [1990] HCA 17 applied; Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; [2006] NSWCA 238; Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 1143; 226 ALR 362; Little v Law Institute of Victoria (No 3) [1990] VR 257; Pertzel v QLD Paulownia Forests Ltd [2008] 2 Qd R 526; [2008] QCA 287; Probuild Constructions (Aust) Pty Limited v Shade Systems Limited [2018] NSWSC 540 considered.
(2) In light of the determination on Ground 1, it was not necessary to reach a concluded view on the second main issue, regarding Anshun estoppel, abuse of process and issue estoppel. However, the raising of these issues gave rise to a number of difficulties in the oral submissions that would have led to declining to entertain these grounds on the appeal, in circumstances where they were not raised below: [98]. It was also unnecessary to determine Grounds 7 and 8: [101]-[102].
On 6 March 2018, the adjudication certificate was issued in the amount of $1,564,200.22, which was the adjudicated amount decided by the adjudicator with the addition of interest and YTO's share of fees and expenses.
Ms De Guzman also dealt in her evidence with invoice 243, which Innovative submitted in support of the adjudication application in a redacted form and which Ms De Guzman annexed to her affidavit in an unredacted form. The primary judge summarised Ms De Guzman's evidence on invoice 243 and its relevance to the adjudication as follows:
"[59] Ms De Guzman also annexed to her affidavit invoice 243 (PX 5, p 19). In its original form this claimed $5,566. Ms De Guzman wrote notes on the invoice to record that she rejected the items claimed in the second, third and fifth lines. She allowed the items claimed in the first and fourth lines, but reduced the first item from $1,015 to $870 and the fourth item from $1,015 to $725. When GST was added, Ms De Guzman accepted that there was a liability for payment of $1,764.50 in relation to the total claimed of $5,566.
[60] It is to be noted that part of the claim by Innovative for the removal of 66 loads of GSW by Elkordi includes a claim for the work recorded on the first, second, fourth and fifth lines of invoice 243. This is in spite of the fact that Ms De Guzman rejected entirely the claims recorded on the second and fifth lines of invoice 243 and allowed the claims made on the first and fourth lines, but only in part. It is further noted that while the Elkordi invoice asked for payment of $5,566 (which Ms De Guzman marked down to $1,764.50), Innovative put the redacted invoice forward to the Adjudicator and asserted that it was entitled to $196,000 (28 x $7,000) plus GST for GSW cartage on that invoice."
On 10 August 2018, Rein J dismissed YTO's claim of fraud against Innovative: YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2018] NSWSC 1354. His Honour concluded that YTO's allegation that Innovative "falsely represented" the 66 loads as GSW, as articulated in the Second Further Amended List Statement, could not be established, because YTO had not established that the representation that each of the loads hauled was GSW was false: at [21]-[22]. His Honour also concluded that YTO was precluded from relying on the assertion made in closing submissions that it was unnecessary to conduct an assessment of the physical qualities of the material removed in any given truckload, on the basis that this had not been articulated in its pleading.
Rein J also dismissed the aspect of YTO's fraud allegation that claimed Innovative had falsely represented that the cost of removing a load of GSW was $7,000. His Honour held that YTO had again departed from the Second Further Amended List Statement. On the claim that was articulated in the Second Further Amended List Statement, his Honour concluded that the relevant representation was that Innovative charged $7,000 for the removal of a load of GSW, not that the cost to it was $7,000: at [27]-[28]. His Honour also held that the claim relating to the redaction of invoice 243, which was made during closing submissions, was not within the Second Further Amended List Statement and could not be maintained: at [29]-[30].
The orders of Rein J on 16 August 2018, which were made in accordance with Short Minutes of Order, included the following:
(1) The Plaintiff's claim for the relief specified in paragraphs 1 to 6 of the Further Amended Summons under the heading 'Final Relief' are dismissed.
(2) An amount of $1,557,809.08 of the moneys paid into Court is to be paid out to the [Innovative] forthwith.
…
(5) Without admissions by the [Innovative] as to the Court's jurisdiction, the balance of the Further Amended Summons be listed for directions in the Technology & Construction List at noon on 17 August 2018.
…
At the time of his Honour's orders, the Further Amended Summons relevantly included, at Order 7, a claim for damages.
YTO paid to Innovative the funds that it had paid into Court.
His Honour accepted that the representations were made to the adjudicator and were also made to YTO, as part of the material that accompanied the original payment claim that Innovative served on YTO: at [108]. His Honour also accepted that Mr Bhatt made the representations himself and was also otherwise involved in them being made: at [109]-[111].
On the question of whether the representations were misleading or deceptive or likely to mislead or deceive, his Honour had earlier considered the spreadsheet that Innovative provided to the adjudicator titled "GSW Material". His Honour broke the spreadsheet up into categories, only two of which remain relevant:
1. Category 1 concerned two entries in the spreadsheet, relating to the four loads hauled on 28 August 2017 and one load hauled on 30 August 2017 which were included in Elkordi's invoice 242 (a copy of which was not provided to the adjudicator). Comparing the invoice and the spreadsheet, the primary judge found that the spreadsheet entries were "inaccurate", with the entries claiming for haulage of GSW "whereas the supporting invoice clearly indicates that the first loads were VENM and not GSW, and the second load could not have been GSW because of the price charged": at [78].
2. Category 4 concerned two entries in the spreadsheet for 4 October 2017, each for seven loads of GSW at $7,000 per load, and one entry for 7 October 2017 for two vehicles, each hauling seven loads of GSW at $7,000 per load: at [84]. Those entries related to Elkordi's invoice 243, a redacted copy of which was provided to the adjudicator. Comparing the unredacted copy of the invoice with the entries in the spreadsheet, his Honour concluded that the latter was inaccurate: the invoice indicated that the figure recorded in the Quantity column ("7") was the number of hours, rather than the number of loads, and the unit price ($145) resulted in a total claim of $1,015: at [86]-[89].
YTO alleged that the three representations were, and each of them was, not true and on that basis were misleading or deceptive or likely to mislead or deceive (ASOC [12]). His Honour found that the claims in Category 1 were representations that were misleading or deceptive or likely to mislead or deceive, stating at [113]-[114]:
"…Innovative had in its possession an invoice from Elkordi which showed that the four loads for which a claim was made for 28 August 2017, and the one load for which a claim was made on 30 August 2017, were loads of VENM and not GSW. Innovative did not put this Elkordi invoice before the Adjudicator as part of the material in support of its payment claim. Instead, there was an assertion on the Innovative Spreadsheet that these five loads were all GSW loads. That was false to the knowledge of Innovative and Mr Bhatt.
To put forward a claim for five loads of GSW, when the Elkordi invoice clearly indicated that the loads were of VENM, was conduct that was misleading or deceptive or likely to mislead or deceive."
As to Category 4, his Honour found that Mr Patel's whiting out of parts of invoice 243 was a deliberate act designed to provide false evidence in support of the claim for those items: at [117]-[118]. His Honour rejected Mr Bhatt's submission that the redaction of the invoice was "just business" and that this was how such claims are made, stating at [119]:
"It would not necessarily be misleading or deceptive conduct to make a claim for more than is due. However, it is misleading or deceptive conduct to provide what is essentially a forged invoice, in support of a claim which the claimant knows is not justified by the facts."
Finally, YTO alleged that pursuant to the adjudication determination, and acting on the representations, YTO had paid an amount that included $508,200 and interest in respect of the claim for 66 loads of GSW and thereby suffered loss and damage (ASOC [13]-[14]). His Honour found that the adjudicator relied upon the misleading and deceptive conduct of Innovative and Mr Bhatt in coming to the view that Innovative was entitled to its entire claim in relation to the carting and tipping of GSW: at [127]. However, his Honour did not accept that YTO relied on the misleading or deceptive conduct, having regard to its wholesale denial of the claim: at [128].
The primary judge calculated the amount of the GSW claim that concerned Categories 1 and 4 in the spreadsheet as $254,100, including GST. If there had been no misleading or deceptive conduct, the $508,200 that YTO had paid in respect of the Variation 5 claim would have been reduced by that amount: at [135]-[136]. His Honour thus found that YTO had suffered loss and damage in the amount of $254,100: at [137]. With interest, the total of the damages awarded was $306,763.10: at [139]-[143].
In answering that question, the joint judgment noted that the difficulty involved in the construction of s 52 did not spring from the use of the words "trade" and "commerce", but from the requirement that the conduct to which the section refers be "in" trade or commerce: at 602. Their Honours described the phrase "in trade or commerce" as having "a restrictive operation" which "qualifies the prohibition against engaging in conduct of the specified kind". Their Honours observed that, as a matter of language, the prohibition as so qualified could be construed in two ways (at 602-603):
1. The prohibition could be construed as "encompassing conduct in the course of the myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business". On that construction of the section, their Honours recognised that its operation would extend to "a case where the misleading or deceptive conduct was a failure by a driver to give the correct handsignal when driving a truck in the course of a corporation's haulage business". It would also extend to the case with which the Court was dealing.
2. Alternatively, the prohibition could be construed as "referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character". Borrowing and adapting the words of Dixon J in a different context, in Bank of New South Wales v The Commonwealth (1948) 76 CLR 1 at 381; [1948] HCA 7, on that construction "the words 'in trade or commerce' refer to 'the central conception' of trade or commerce and not to the 'immense field of activities' in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business".
Their Honours noted that as a matter of mere language, the arguments favouring and militating against those alternative constructions were fairly evenly balanced. However, when the section was read in the context provided by other features of the Trade Practices Act, "the narrower (i.e. the second) of the alternative constructions of the requirement 'in trade or commerce' is the preferable one": at 603. Their Honours went on to state at 604:
"What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character."
The joint judgment in Concrete Constructions acknowledged that in some areas, the dividing line between what conduct is and is not "in trade or commerce" may be less clear, and may require the identification of what imports a trading or commercial character to an activity which is not, without more, of that character: at 604. In that context, their Honours returned to the examples they had already given, stating:
"The driving of a truck for the delivery of goods to a consumer and the construction of a building for another pursuant to a building contract are, no doubt, trade or commerce in so far as the relationship between supplier and actual or potential customer or between builder and building owner is concerned. That being so, to drive a truck with a competitor's name upon it in order to mislead the customer or to conceal a defect in a building for the purpose of deceiving the building owner may well constitute misleading or deceptive conduct 'in trade or commerce' for the purposes of s. 52. On the other hand, the mere driving of a truck or construction of a building is not, without more, trade or commerce and to engage in conduct in the course of those activities which is divorced from any relevant actual or potential trading or commercial relationship or dealing will not, of itself, constitute conduct 'in trade or commerce' for the purposes of that section. That being so, the giving of a misleading handsignal by the driver of one of its trucks is not, in the relevant sense, conduct by a corporation 'in trade or commerce'."
On the application of this reasoning, the alleged misleading or deceptive conduct at issue in Concrete Constructions, being an internal communication between employees in the course of their ordinary activities in and about the construction of a building, was not conduct "in trade or commerce", and on that basis the joint judgment allowed the appeal: at 605. Brennan J and McHugh J separately took the view that the section was not engaged because the respondent was not misled or likely to be misled in his capacity as a consumer: at 605, 624. That was also the first reason that Toohey J gave for allowing the appeal: at 614. However, his Honour also agreed with the joint judgment that the preposition "in" operated by way of limitation, stating at 614:
"The question is not whether conduct engaged in was in connexion with trade or commerce or in relation to trade or commerce. It must have been in trade or commerce. While there are dangers in seeking the meaning of an expression through the substitution of another, the phrase 'as part of trade or commerce' does, I think, come close to what is intended. Thus, when the appellant's foreman described the grates as being secured on either side with bolts, that statement must have been made as part of trade or commerce before an action could lie under s. 52(1)."
(Original emphasis.)
In concluding that the appellant's conduct was not "in trade or commerce", Toohey J stated at 614:
"If it is the trade or commerce of the appellant with which we are concerned, it may be said that the assurance given by its foreman was in relation to or in respect of that business. But so to conclude does not answer the question whether that assurance was in the trade and commerce of the appellant. In my view it was not, for the conduct was not part of the appellant's trade or commerce, which was that of constructing buildings for others for reward. It was, at most, incidental to that business."
In Village Building Company Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330; [2004] FCAFC 240 ("Village Building"), the Full Court of the Federal Court (French, Sackville and Conti JJ) described the difficulty with Concrete Constructions as "not so much in stating the principles but in applying them to the circumstances of particular cases": at [41]. Their Honours later observed that although the joint judgment acknowledged that identifying where the "dividing line" was between conduct that is or is not in trade or commerce, on the narrower construction of s 52 may be difficult, once that narrower construction was adopted the facts in Concrete Constructions clearly fell outside s 52. Other fact situations, however, "will be much closer to the line": at [48]. As Black J observed in In the matter of Orix Australia Corporation Limited [2020] NSWSC 1770, "first, the determination as to whether conduct is in trade or commerce is sensitive to the particular facts and, second, that determination may involve questions of some subtlety": at [32].
The approach of the joint judgment in Concrete Constructions focuses on the conduct which is said to be misleading or deceptive and the circumstances in which it occurred. The decision in Village Building provides an instructive example. The respondent in that case was the lessee and operator of Canberra Airport and was responsible for the conduct of the Airport's business: at [9]. In 1999, it published a forecast of aircraft noise levels in the vicinity of the Airport up to 2050: at [1], [15]. The forecast was published on the respondent's website, provided to the Minister for Transport and Regional Services as a part of a master plan for the airport as required under the Airports Act 1996 (Cth), and was used in public debate in the context of land use planning for land to the south of the airport. The appellant, a developer of land in that area, brought proceedings alleging that the respondent had engaged in misleading or deceptive conduct by inflating its estimates of future noise with a view to affecting the deliberations of planning authorities: at [1].
In dismissing the appellant's ground of appeal challenging the conclusion at first instance that the respondent's conduct was not in trade or commerce, the Full Court first considered the representations that the respondent made to the Minister. The Court noted that the relationship between the respondent and the Minister was not of a trading and commercial character, nor were the respondent's representations made as part of the process designed to secure approval to a commercial transaction or dealing: at [51]. The Court accepted that the variation to the master plan for 2020, by replacing the noise forecasts up to 2020 with the noise forecasts up to 2050, might, if approved, have contributed to the respondent being able to prolong and perhaps expand its operations at the airport. That was not enough, however, to justify concluding that the representations were made in the course of a commercial transaction or dealing: at [52]. The Court continued:
"It is plainly essential to maintaining the operations of a construction company that a foreman give instructions to a worker to carry out building activities. But, as Concrete Constructions decides, the fact that the foreman's instructions are in the interests of a corporation, or even essential to its operations, does not necessarily mean that the transaction or dealing is in trade or commerce. The conduct must have occurred in the course of a trading or commercial relationship or otherwise to bear a trading or commercial character."
In the present case, the conduct involved representations to an adjudicator, Innovative having decided, upon receipt of YTO's payment schedule, to apply for adjudication of its payment claim under s 17(1)(a)(i) of the SOP Act. Mr Bhatt sought to draw an analogy between adjudication and cases which involved conduct occurring in the context of litigious processes that was alleged to be in trade or commerce. The first in time was Little, which pre-dated Concrete Constructions although Senior Counsel for Mr Bhatt submitted that it was ultimately consistent. What was relied on from Little was the statement of Kaye and Beach JJ, that "statements made during the course of litigation cannot be categorised as statements made in trade and commerce nor can they be categorised as representations": at 273. That their Honours so concluded in Little can be readily understood having regard to what Mr Little alleged to constitute the representation (a statement on behalf of the second respondent that without professional indemnity insurance the appellant was not entitled to practise) and the circumstances in which it was made (during the course of a hearing before Southwell J to enjoin the appellant from practising as a solicitor).
Mr Bhatt next relied on the decision of the Queensland Court of Appeal in Pertzel, which concerned an action for damages for personal injury suffered when the truck that the plaintiff was driving collided with a tree. One of the arguments on the appeal involved whether the primary judge, who had determined separate questions, erred in concluding that the appellant insurer's dealings with the respondent in relation to his claim constituted conduct in trade or commerce. Relying on Concrete Constructions, the appellant contended that the primary judge focused on antecedent activities of the appellant which were said to have created the stage for the activity in question: at [48].
In accepting that contention, Keane JA (Mackenzie AJA and Lyons J agreeing) stated that the conduct of the appellant on which the respondent's case depended was the making of a response to a claim in accordance with obligations imposed by statute as conditions precedent to litigation: at [49]. His Honour continued at [49]-[50]:
"This conduct occurred within statutorily ordained processes intimately associated with the administration of justice. These processes were themselves concerned to facilitate the determination of the rights and obligations of the parties where those matters were in dispute. One would not recognise these dispute resolution processes as part of trade or commerce for the same reason that one would recoil from the suggestion that the courts are engaged in trade or commerce. In each case, one is concerned with activities which take their character from the function of the State in providing for the peaceful resolution of disputes. That these particular dispute resolution processes stem, in part, from the appellant's activities in the business of providing insurance does not mean that the conduct of the process in conformity with the requirements of the statutory regime is an activity that 'of its nature bears a trading or commercial activity'.
Within the four walls of the compulsory dispute resolution mechanisms established by the Act, the nature of the appellant's activity bears no more a trading or commercial character than does the conduct of the respondent. If the scope of the phrase 'in trade or commerce' used in s.52 of the Trade Practices Act were as broad as the learned primary judge's view of it, then a corporation which honestly brought a suit in which factually incorrect assertions were made upon a policy of insurance effected by both plaintiff and defendant in the course of their respective businesses could be guilty of a contravention of s.52 of the Trade Practices Act. It is, with respect, inconceivable that the legislature intended such a result…."
Keane JA further observed that the connection between the activities in question and the trading or commercial activities of the parties was historical only, with the history having no greater relevance than explaining how the assertions made in the litigation came to be made: at [50]. That historical connection could not be said, in his Honour's opinion, "to overwhelm the character of the activity as the conduct of litigation": at [50]. His Honour concluded this part of the reasons by stating at [51]:
"To say this is not to say that the mere circumstance that the activities occurred in obedience to a statutory command means that the activity is not of the character of trade or commerce. Rather, the point is that the activities occur within a statutory regime for the resolution of disputes which is an adjunct to the judicial system of the State. It is this context which denies the activities in question the character of trade or commerce."
Mr Bhatt sought to rely on Pertzel by way of analogy with the present case, which involves activities occurring within the regime for the resolution of disputes created by the SOP Act. The making of an insurance claim for personal injury, pursuant to a statutory scheme for motor accidents insurance, is, again, of a different character to the making of an application for adjudication under the SOP Act. That said, his Honour's comments regarding the characterisation of the dispute resolution processes in issue in Pertzel are instructive in considering the statutory context that attends the conduct in the present case, concerned as it is with the resolution of disputes.
YTO submitted that decisions such as Little and Pertzel do not stand for any absolute prohibition against finding that a person participating in litigation or in a statutory process cannot also be engaging in conduct in "trade or commerce". So much may be accepted. Not only did Keane JA state that expressly in Pertzel, but there are numerous authorities in which the exercise of a statutory function has not proved fatal to the characterisation of that exercise having a trading or commercial character or as constituting conduct in trade or commerce. The decision of the Full Court of the Federal Court in Obeid Australian Competition and Consumer Commission (2014) 226 FCR 471; [2014] FCAFC 155 at [35]-[39], and the decision of the Court of Appeal in Aardwolf Industries LLC v Tayeh [2020] NSWCA 301 at [74]-[76], are two pertinent examples.
In response to Mr Bhatt's reliance on cases such as Little and Pertzel, and the decision of Campbell J in Energetech to which I will come below, YTO emphasised the decision of McDougall J in Probuild Constructions (Aust) Pty Limited v Shade Systems Limited [2018] NSWSC 540 ("Probuild SC"). His Honour was there concerned with an amendment application on the part of the defendant, in the plaintiff's proceedings against it for liquidated damages, to allege that the commencement of those proceedings, at the same time as an adjudication determination was being challenged in the Supreme Court and appellate courts, was unconscionable and in breach of ss 20 and 21 of the ACL. In response to the plaintiff's contention that the conduct alleged was in litigation and not in trade or commerce (as was also integral to a claim for unconscionable conduct) McDougall J saw no reason why, as a matter of principle, the defendant's contention that the plaintiff's conduct was trading or commercial activity continued by another means was not arguable, stating at [22]:
"… Just as a liquidator or receiver may act in trade or commerce by going to court to seek to recover the fruits of, or to compromise, a chose in action of the company of which he or she is in control, so too, it seems to me, it is at least arguable that a company in the building and construction industry may use litigation as an instrument in its pursuit of commercial gain. I wish to make it perfectly clear that I am not suggesting that there is anything wrong or inappropriate in someone's so acting. I say no more than that my years on this Court have demonstrated, as a truism beyond argument, the proposition that those in the building and construction industries routinely use litigation as a means of carrying on their commercial aims."
As this was an amendment application, McDougall J needed to do no more than consider whether the point raised by the amendment was arguable. What YTO sought to draw from the decision was that if litigation can be used by participants in the construction industry for a commercial gain which may be "in trade of commerce" (as McDougall J postulated), it was not easy to understand why the same could not be said for those engaging in an adjudication process. That point is answered by an examination of the provisions of the SOP Act that relate to adjudication, remembering that as construed by the High Court in Concrete Constructions, the phrase "in trade or commerce" refers only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character.
The object of the SOP Act is "to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services": s 3(1). The SOP Act secures this object "by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments" (s 3(2)), and establishing a procedure that involves (s 3(3)):
(a) the making of a payment claim by the person claiming payment, and
(b) the provision of a payment schedule by the person by whom the payment is payable, and
(c) the referral of any disputed claim to an adjudicator for determination, and
(d) the payment of the progress payment so determined.
As Basten JA observed in Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; [2006] NSWCA 238 ("Bitannia"), the SOP Act "operates in relation to trade and commerce, but in a particular area": at [112]. Its central concern is to secure for persons who, under a construction contract, have undertaken to carry out construction work or supply related goods and services, a statutory entitlement to receive progress payments. At a general level, the trading or commercial character of the performance of such work or the supply of related goods and services, and the receipt of progress payments for such work or supplies, is readily apparent. As the primary judge observed in this case at [106], "[n]othing could be more central to the conduct of any business or profession than being paid".
The present case, however, is concerned with particular conduct, namely representations that made to the adjudicator in the adjudication application commenced under s 17(1)(a)(i) of the SOP Act, following YTO's service of a payment schedule. Section 17(3) provides that an adjudication application is to be made to an authorised nominating authority within 10 business days after receiving a payment schedule, and must identify the payment claim and schedule to which it relates and be accompanied by the application fee. It may also contain such submissions relevant to the application as the claimant chooses to include.
Section 18 of the SOP Act sets out the eligibility requirements for an adjudicator. A person must be a natural person and have such qualifications, expertise and experience as the regulations prescribe: s 18(1) and see cl 19(1) of the Building and Construction Industry Security of Payment Regulation 2020 (NSW) (SOP Regulation). A person is not eligible if the person is a party to the contract or in such circumstances as may be prescribed: s 18(2) and see cl 19(2) of the SOP Regulation. Pursuant to s 19(1) of the SOP Act, an authorised nominating authority may refer an adjudication application to an adjudicator, and the adjudicator may accept the application by causing notice of the acceptance to be served on the claimant and the respondent. On accepting an adjudication application, "the adjudicator is taken to have been appointed to determine the application": s 19(2).
Section 20(1) of the SOP Act makes provision for the respondent to lodge a response to the adjudication application (the adjudication response) within the later of five business days of receiving a copy of the application or within two business days after receiving notice of the adjudicator's acceptance of the application under s 19. As with the application, the adjudication response may contain such submissions relevant to the response as the respondent chooses to include: s 20(2).
The adjudicator is then to determine the adjudication application as expeditiously as possible, and in any case, within 10 business days after the date on which the respondent lodges an adjudication response (or the period for lodgement of the response expires), or in any other case after the date on which notice of the adjudicator's acceptance of the application is served, or within such further time as the claimant and respondent may agree: s 21(3). Section 22(1) sets out what the adjudicator is to determine, namely:
(a) the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount), and
(b) the date on which any such amount became or becomes payable, and
(c) the rate of interest on any such amount.
(Original emphasis.)
Section 22(2) lists the only matters that the adjudicator is to consider in making the determination in s 22(1), namely:
(a) the provisions of this Act,
(b) the provisions of the construction contract from which the application arose,
(c) the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim,
(d) the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule,
(e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates.
If the adjudicator determines that a respondent is required to pay an adjudicated amount, the respondent must pay that amount to the claimant on or before the "relevant date", which is defined in s 23(1) to mean the date occurring five business days after the date on which the adjudicator serves the determination on the respondent or such later date as the adjudicator may determine: s 23(2). If the respondent fails to pay in accordance with s 23, s 24(1) of the SOP Act relevantly permits the claimant to request the authorised nominating authority to whom the adjudication application was made to provide an adjudication certificate. Pursuant to s 25(1) of the SOP Act, an adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly. If the respondent commences proceedings to have the judgment set aside, s 25(4) provides that the respondent:
(a) is not, in those proceedings, entitled -
(i) to bring any cross-claim against the claimant, or
(ii) to raise any defence in relation to matters arising under the construction contract, or
(iii) to challenge the adjudicator's determination, and
(b) is required to pay into the court as security the unpaid portion of the adjudicated amount pending the final determination of those proceedings.
Section 32 is also relevant for present purposes. It provides:
32 Effect of Part on civil proceedings
(1) Subject to section 34, nothing in this Part affects any right that a party to a construction contract -
(a) may have under the contract, or
(b) may have under Part 2 in respect of the contract, or
(c) may have apart from this Act in respect of anything done or omitted to be done under the contract.
(2) Nothing done under or for the purposes of this Part affects any civil proceedings arising under a construction contract, whether under this Part or otherwise, except as provided by subsection (3).
(3) In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal -
(a) must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order or award it makes in those proceedings, and
(b) may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings.
In Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190, the Court of Appeal concluded that decisions of adjudicators under the SOP Act could be judicially reviewed. Basten JA (Spigelman CJ agreeing) emphasised the following aspects of the role of the adjudicator under the SOP Act at [70]:
"He or she is not entitled to pursue any personal interests and, at least in relation to the administration of the construction contract, is not permitted to have an interest in the outcome: s 18(2)(a). Rather, the adjudicator is required to determine an application having regard only to the matters specified in s 22(2). ... The right which is to be determined by the adjudicator is not a right which necessarily arises under contract; although the amount may depend upon the contract, the right to payment is a creation of statute."
His Honour referred in this context to the decision of Vickery J in Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No 2) (2009) 26 VR 172; [2009] VSC 426. Vickery J observed that an adjudication determination cannot finally resolve all of the rights of the parties under the applicable construction contract, this being left to later proceedings in the event of a continuing dispute (see s 32 above). Nonetheless, an adjudication determination "does have the effect of finally determining the right of a claimant to immediate payment of its progress claim": at [50]. It does so as part of a statutory process that has been described as enabling the statutory right to an interim or progress payment "to be determined informally, summarily and quickly, and then summarily enforced without prejudice to the common law rights of both parties which can be determined in the normal manner": Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385; [2005] NSWCA 49 at [22] (Handley JA, Santow JA and Pearlman AJA agreeing), quoted with approval in Probuild at [44] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).
As the High Court acknowledged in Concrete Constructions, and as subsequent cases have demonstrated, the line between what is in trade or commerce and what is not in trade or commerce is difficult to draw. The present case is one in which the difficulty is manifest. It may be accepted that an adjudication application under the SOP Act arises in the context of a dispute about a claimant's entitlement to a progress payment and in what amount. The application is the means by which a claimant seeks to enforce that entitlement, the payment being for work performed pursuant to a construction contract. The process, according to the evidence of YTO's director, Mr Yuan (which the primary judge appeared to accept at [63]) is prevalent in the construction industry in which he has worked for over 30 years. As the primary judge stated, for a civil engineering business, delivering a payment claim, seeking an adjudication under the SOP Act and making submissions to an adjudicator are everyday events: in [106].
It does not follow, however, from the prevalence with which the procedure in Part 3 of the SOP Act is invoked, that all conduct associated with it is conduct in trade or commerce. The conduct, the subject of the pleading, was the making of representations by Innovative and Mr Bhatt in an adjudication application. The relationship between the adjudicator and the parties is not a trading or commercial relationship. The adjudicator has the statutory function of determining the dispute between the claimant and the respondent as to the claimant's entitlement (if any) to a progress payment, and in what amount, upon consideration of the material prescribed in s 22. The dispute that sends the parties to adjudication might arise out of a commercial transaction. However, on the application of the reasoning in Concrete Constructions, the conduct of Innovative and Mr Bhatt in making an adjudication application that contained the representations of which YTO complained, was not conduct which, of its nature, bore a trading or commercial character.
I note that Campbell J reached the same conclusion in Energetech, although the question arose in the context of a foreshadowed likely adjudication, which had not yet occurred. The defendant in Energetech served a payment claim on the plaintiff pursuant to s 13 of the SOP Act, following adjudication of an earlier payment claim. The plaintiff sought declaratory relief to the effect that service of the subsequent payment claim (referred to in the reasons as the "second payment claim") did not entitle the defendant to apply for adjudication of that claim pursuant to s 17 of the SOP Act: at [32]. The matter came before Campbell J on the following preliminary question (at [45]):
"Whether, if the defendant were to submit the second payment claim to an adjudicator for adjudication under the Act, so doing would constitute, in trade or commerce, conduct which was misleading or deceptive or likely to mislead or deceive, contrary to the Trade Practices Act."
One of the arguments that the defendant advanced in response to this question was that its payment claim was not one which would be submitted to an adjudicator in trade or commerce, within the meaning of s 52. After setting out extracts from the joint judgment in Concrete Constructions at 603-4, Campbell J stated, without more (at [56]):
"Applying that test, the submitting to an adjudicator - a person appointed under statutory authority and given statutory powers - of a payment claim which has been disputed, for the purpose of the adjudicator making an adjudication upon the correctness of that payment claim, is not conduct 'in trade or commerce' within the meaning of s 52 of the Trade Practices Act."
YTO contended that Bitannia supported the following submissions that it advanced: (1) that the fact that conduct may also be characterised in terms of the SOP Act was not determinative of whether it constituted conduct "in trade or commerce"; and (2) the point that YTO sought to draw from the decision of McDougall J in Probuild SC to which I have referred above (at [72]). However, Bitannia was not concerned with the characterisation of conduct constituted by statements made in an adjudication application. The appellants in Bitannia sought to raise a claim for misleading or deceptive conduct constituted by the service of a payment claim under s 13 of the SOP Act. The respondent (Parkline) sought judgment under s 15 of the SOP Act on the basis that it had served a payment claim and the appellants had not served a payment schedule. Section 15(4) provides in that circumstance:
(4) If the claimant commences proceedings under subsection (2)(a)(i) to recover the unpaid portion of the claimed amount from the respondent as a debt -
(a) …
(b) the respondent is not, in those proceedings, entitled -
(i) to bring any cross-claim against the claimant, or
(ii) to raise any defence in relation to matters arising under the construction contract.
The appellants in Bitannia challenged the validity of Parkline's payment claim on the basis that it was not made in good faith. They otherwise sought to resist judgment on the ground that the non-service of a payment schedule, which was an element of the cause of action under s 15, was brought about as a result of Parkline contravening s 52 of the Trade Practices Act; and if a remedy was not provided under that Act they would suffer damage in the form of a judgment against them: at [8] (Hodgson JA). Parkline did not dispute that the appellants had an arguable case in respect of both grounds, without conceding the merits of either (see [25]) and thus no issue was raised as to whether the service of a payment claim was conduct in trade or commerce.
The Court dismissed the ground regarding good faith, but allowed the appeal from the primary judge's conclusion that the appellants could not plead a defence to an action under s 15 relying on s 52 of the Trade Practices Act. Hodgson JA and Basten JA (Tobias JA agreeing with their Honours' respective reasoning) considered that as a matter of construction, s 15(4)(b)(ii) of the SOP Act did not preclude raising such a defence: at [124]. It was thus unnecessary to decide whether the prohibition on bringing a cross-claim in s 15(4)(b)(i) was inconsistent with the Trade Practices Act in so far as it purported to preclude a cause of action under that Act. Basten JA proceeded nonetheless to determine that issue, concluding that there was an inconsistency within the meaning of s 109 of the Constitution and s 15(4)(b)(i) was invalid to that extent: at [119]. Hodgson JA agreed with Basten JA that to place significant obstacles in the way of obtaining Trade Practices Act relief would make s 15(4)(b) inconsistent with that Act, but on his analysis there were no such obstacles relevant to the case: at [13].
I note that in the reasons of Hodgson JA, his Honour also stressed that the case was one in which the alleged misleading conduct was relevant to the claimant's entitlement to a judgment under s 15 of the SOP Act. His Honour stated that "[i]n a case where the alleged misleading conduct is not relevant to that entitlement, but only to the final entitlements of the parties, s 15(4)(b) would not in my opinion place obstacles in the way of obtaining Trade Practices Act (Cth) relief, and there would be no constitutional reason why it could not operate in accordance with its terms": at [14]. That paragraph does not express any view on the issue presently before this Court, particularly noting Parkline's concession in Bitannia that the appellants' Trade Practices Act claim was arguable.
YTO also relied on the Court's dismissal, in Bitannia, of the appellants' ground alleging that making a payment claim in good faith was a precondition to the validity of a payment claim. However, the reasoning of the Court on that ground assists Mr Bhatt's case on the appeal. The appellants in Bitannia had submitted that s 13 of the SOP Act was not intended to provide a mechanism for claims which were known to be hopeless and accordingly required that the person have a bona fide belief in the substance of the claim: at [57]. In rejecting that submission, Basten JA emphasised the role performed by the adjudicator in the statutory process, stating at [58]:
"Such an approach has an undeniable attraction. However, s 13 should not be read in isolation: rather, consideration must be given to the whole of the procedure envisaged under Pt 3 of the [SOP Act]. Thus, a proprietor who seeks to resist a payment claim is entitled (and required) to provide a payment schedule in reply. A claimant who makes a patently unsustainable or untrue claim is thus likely to be met by a payment schedule. If the claimant wishes to pursue the claim in that event, it must be referred to and determined by an adjudicator, who is very likely to disallow so much of the claim as is patently false or unsupportable. Accordingly, as the respondent argued, the 'bona fides' of the claimant should not be treated as a separate criterion of a valid claim: rather, as with any other issue going to the merit of the claim, the scheme of the legislation was to require that an assessment be made by an adjudicator."
YTO emphasised the doctored nature of the invoice that was submitted to the adjudicator, submitting that an incorrect submission to a Court is completely different to invoking the adjudication process on the basis of a forged document, where that document is produced in trade or commerce. However, the conduct in the present case was the submission of the material to the adjudicator. As Senior Counsel for Mr Bhatt submitted in reply, that conduct was incidental to Innovative's conduct of its business, but it did not have a trading or commercial element itself.
I note that in determining this ground of appeal, I did not view the submission put by Mr Bhatt as to the consequences of finding that the conduct in issue was "in trade or commerce" as persuasive, let alone determinative. As noted above, and both parties emphasised, the characterisation of conduct for the purposes of the "trade or commerce" requirement of s 18 is one that depends upon the particular conduct viewed in the context of the surrounding circumstances.
I have set out the chronology of the various proceedings above, by reference to evidence that included the evidence that Mr Bhatt tendered on the appeal. As I have noted, by his orders of 16 August 2018, Rein J determined YTO's claim for relief in [1] to [6] of the Further Amended Summons. That left, among others, [7] of the Further Amended Summons, which was a claim for damages. In the course of the hearing before Rein J, the Senior Counsel then appearing for YTO stated that the relevant paragraphs of the pleading for the purposes of what his Honour was dealing with was paragraphs 1, 2 and 3 (paragraphs 4, 5 and 6 related to another determination). Senior Counsel for YTO then stated that the balance of the relief sought related to the contractual issue which was to be determined at another time. Senior Counsel for Mr Bhatt on the appeal, who appeared for Innovative before Rein J but did not appear in the District Court, sought to explain this transcript from the bar table. Without in any way doubting his recollection of what occurred or his integrity, the material invited an enquiry of a nature that, as Senior Counsel for YTO submitted, should have occurred before the primary judge at first instance, with the benefit of evidence.