First issue: was there a construction contract?
The T&D agreement
10It is clear, on the evidence, that by mid 2011 at the latest, the relationship between Cranbrook and St Hilliers had broken down. One of the actors involved in the matter described it as "toxic". It was for that reason Cranbrook and St Hilliers made the T&D agreement.
11As I have said, the T&D agreement, among other things, divided the works into two separable portions. It provided for termination of the contract between Cranbrook and St Hilliers in relation to the incomplete separable portion of the works, with exceptions that do not need to be elaborated.
12Clause 6 of the T&D agreement dealt with "transitional assistance". It covered novation and assignment of subcontracts and supply contracts. It provided for St Hilliers to appoint Cranbrook its attorney under power. And it dealt with "disengagement and assistance with handover." There were other subjects dealt with, but it is not necessary to elaborate them.
13Clauses 6.1, 6.3, 6.7 and 6.12 were stressed in the parties' submissions. Accordingly, I set out those clauses:
6.1 On and from the Effective Date the Contractor will, to the extent directed by the Principal, use its best endeavours to novate all subcontracts, supply agreements and professional services agreements (including deeds poll or contracts with all consultants and secondary subcontractors of subcontractors) in relation to the Incomplete Portion and assign all rights (including all warranties, securities and intellectual property rights) which it has under or in connection with subcontracts, supply agreements and professional services agreements (including deeds poll or contracts with all consultants and secondary subcontractors of subcontractors).
...
6.3 If the Contractor is unable to assign or novate any contract, agreement, deed poll, warranty, security or right as required by this Agreement:
(a) the Contractor will, to the extent directed by the Principal or its nominee, administer the contract or right in accordance with the Principal's or its nominee's directions;
(b) the Contractor hereby appoints the Principal or its nominee to act as its agent to do any act, matter or thing in connection with the contract, agreement, deed poll, warranty, security or right in the Contractors name; and
(c) the Contractor will hold on trust for the Principal and immediately provide to the Principal any benefit (including money) received by the Contractor under or in connection with the contract, agreement, deed poll, warranty, security or right.
...
6.7 The Contractor irrevocably appoints the Principal and each director of the Principal from time to time, or any duly appointed attorney of the Principal, jointly and severally as the Contractor's attorney to, in the Contractor's name or in those attorney's own names and as the Contractor's act, do any of the following acts or things:
(a) any act or thing which the Contractor is required to do under clauses 6.1 to 6.5 of this Agreement;
(b) any act or thing necessary to novate to the Principal or its nominee (on terms acceptable to the attorney in its absolute discretion) any contract with any subcontractor, supplier or consultant in connection with the Project and any deed poll between any subcontractor and any other party in connection with the Dangar Project;
(c) assign to the Principal or its nominee any rights of the Contractor under or in connection with any contract with any subcontractor, supplier or consultant in connection with the Project, any deed poll between any subcontractor and any other party in connection with the Project and any security (including unconditional bank undertaking) provided by any subcontractor, supplier or consultant in connection with the Dangar Project;
(d) exercising any rights of the Contractor under or in connection with any contract with any subcontractor, supplier or consultant in connection with the Project, any deed poll between any subcontractor and any other party in connection with the Project and any security (including unconditional bank undertaking) provided by any subcontractor, supplier or consultant in connection with the Dangar Project;
and the Contractor agrees to ratify and confirm all and whatever the attorney does or causes to be done pursuant to the power of attorney.
...
6.12 The Contractor will provide all assistance reasonably necessary to facilitate handover to the Principal or the Principal's nominee of the Executed Works in relation to the Incomplete Portion, including for the period of 2 months from the Effective Date (except to the extent the Principal notifies the Contractor earlier that such assistance is no longer required):
(a) subject to clause 11, and in accordance with the Principal's reasonable directions, notify all subcontractors, suppliers and consultants that it will remain as Contractor only in relation to the WUC in relation to the Kindergarten Portion;
(b) supervising and managing the works to be carried out by or on behalf of the Principal to complete the Incomplete Portion as the Principal's agent (with the cost of the works to be met directly by the Principal) in accordance with good building industry practice, in compliance with laws and relevant approvals, and in accordance with the Principal's or its nominee's directions and remaining as principal contractor under the OH&S Act and the Occupational Health and Safety Regulation 2001 for a fee calculated in accordance with the Contractor's hourly rates as per the attached Schedule 3 plus reimbursement for its out of pocket costs, up to a total monthly fee of $244,000.00 (excluding GST);
(c) making available on a full-time basis all existing key staff as may be required by the Principal as set out in the attached Schedule 3;
(d) providing copies of all relevant information including workshop drawings, the Contractor's project records and work-as-executed drawings and documents in such form as they are held by the Contractor, including electronic forms;
(e) providing all reasonable assistance required by the Principal in the administration of payment claims from subcontractors, suppliers and consultants;
(f) provide all reasonable assistance to the Principal or its nominee in prosecuting any claims against the Contractor's subcontractors, suppliers and consultants in relation to the Incomplete Portion; and
(g) facilitating any discussions with unions that are necessary or desirable to enable the smooth transfer of responsibility from the Contractor to the Principal or its nominee of the works to be carried out in respect of the Incomplete Portion.
Efforts to procure novation
14After the T&D agreement was made, St Hilliers communicated with its subcontractors in connection with the question of novation of their subcontracts to Cranbrook. An email of 14 July 2011 from Mr Baroni of St Hilliers to various subcontractors, including Bradshaw, dealt with this topic. It noted that Cranbrook and St Hilliers had arrived at an agreement described in somewhat obscure terms that need not be repeated. It stated that as part of the process (I interpose, of disengagement):
"St Hilliers intends to novate all sub-contracts to Cranbrook.
St Hilliers will discuss and agree the terms of the novation..."
15A draft novation agreement was forwarded.
16The email stated, further, that once there had been novation, "the school will continue to stand behind the contractual arrangements for the project going forward and will be responsible for future payments under your subcontract."
17The email also stated that Cranbrook had appointed a company known as EPM Projects Pty Limited (EPM) to help it to manage the project up to completion. It said, however, that:
"St Hilliers remains the principal contractor supervising the site, and as such we continue to be your point of contact for both operational as well as administrative issues."
18On 15 July 2011, Bradshaw wrote to St Hilliers referring to the email and in particular to the draft novation agreement. It noted that Bradshaw had a claim for additional costs, effectively for disruption and delay, "in the order of $400,000". The letter stated that since the novation agreement did not deal with that claim, it was not acceptable to Bradshaw.
19On 13 August 2011, Bradshaw submitted a payment claim, number 18, to St Hilliers. That claim included an amount for disruption and delay (referred to as V26) of almost $314,000. Presumably, that was a quantification of the claim referred to in the letter of 15 July 2011.
20On 18 August 2011, Cranbrook sent a circular letter to all subcontractors. It noted that Cranbrook and St Hilliers had agreed that St Hilliers would hand over its role as managing contractor, and that that role would be fulfilled up to the completion of the project, by ADCO Constructions Pty Limited (ADCO).
21The letter then stated the following:
...
"All parties are working together to achieve a smooth handover. ADCO will establish on site at 7am Monday 22 August 2011. St Hilliers will maintain a presence on site until 31 August 2011 to assist in achieving a smooth transition including assisting ADCO with the assessment of all payments due for work completed up to close of business on 31 August 2011.
Please treat this matter as confidential to Cranbrook, St Hilliers and ADCO.
As you may already know Cranbrook has appointed epm Projects Pty Ltd to oversee the completion of the project and to advise it in respect of project matters. We expect you will not need to deal with epm directly after ADCO commences, but please feel free to do so at any time. epm's senior representative is Andrew Graham, telephone ### ### ###.
St Hilliers will issue the Payments Schedule in respect of your contract in the normal way, and arrange payment according to the Schedule. ADO will manage work conducted from 7am Monday 22 August 2011, and will administer your contract for St Hilliers until it is novated to Cranbrook. We encourage you, however, to complete the novation to Cranbrook as soon as possible.
...
The meetings of 24 August 2011
22On 24 August 2011, two meetings were held involving ADCO, EPM and subcontractors. One was held in the morning. The other was held in the afternoon. Mr Kevin Couter of Bradshaw attended both meetings. He has deposed, in an affidavit sworn 5 April 2013, to what was said at them, and has identified notes that he made. I accept Mr Couter's evidence as accurate and reliable. I do so in part because of the contemporaneous notes that he made, and in part because, although there were witnesses available to Cranbrook who could have contested what he said, many of them were not called. In particular, Mr Dean Israel of ADCO had sworn an affidavit. It was not read. Further, Mr Wolf of ADCO and Mr Welsh of EPM attended one or other (or perhaps both) of the meetings. Neither of them was called. There was no suggestion that they were unavailable. The only witness who was called for Cranbrook on this topic was Mr Andrew Graham of EPM. He attended only the second meeting.
23It is I think clear, in context, that at the meetings Mr Israel of ADCO and Mr Graham of EPM spoke representing Cranbrook and setting out its position. That did not appear to be disputed by Mr Dempsey.
24At the first meeting, Mr Israel said, among other things, that:
The job will go ahead administered by ADCO;
The subcontractors would continue to perform their work "and all subcontracts will be honoured by Cranbrook";
"Cranbrook would issue instructions through EPM together with ADCO who would then provide relevant direction to the subbie";
All future progress claims would be submitted to ADCO who would assess those claims in conjunction with EPM and the quantity surveyor;
The intention is to novate the subcontracts from St Hilliers to Cranbrook; and
"I can't see why that would be a concern".
25In the course of cross-examination, it was suggested to Mr Couter that the reference to "honouring the subcontracts" was made in context of novation. Mr Couter did not concede that it was. I do not find that it was.
26As to the second meeting, Mr Graham has given evidence. That evidence is not supported by reference to any contemporaneous notes. To the extent that the evidence of Messrs Couter and Graham is in conflict, I prefer and accept the evidence of Mr Couter.
27Thus, I find that in the course of that meeting, Mr Graham said, among other things, that he:
"...would continue to honour the subcontract and there would be a new QS. ADCO would be the new managing contractor."
28It is clear that, in this passage, Mr Graham was speaking on behalf of Cranbrook, and was, as Mr Couter understood, stating that Cranbrook would honour the subcontract. I say that because, among other things, it is entirely consistent with what I have found Mr Israel said at the earlier meeting on 24 August.
29There was discussion of Bradshaw's claim, and discussion of the draft novation agreement. According to Mr Couter, Mr Graham expressed a preference to deal with the delay and disruption claim as a separate issue. Mr Couter was not prepared to do that. According to Mr Couter, Mr Graham said (and I find, despite Mr Graham's denial, that he did):
"In that case, don't novate it. The school will honour it."
30I might add that this is directly corroborated by Mr Couter's notes of the second meeting, although those notes suggest also, as Mr Couter acknowledged in cross-examination, that it was said that Bradshaw would also continue to honour the subcontract.
Further payment claims and correspondence
31Thereafter, Bradshaw continued to perform work under the subcontract. It submitted payment claim 19 to St Hilliers on 12 October 2011 and payment claim 20 on 14 November 2011.
32There was correspondence between Mr Couter and Mr Graham relating to the proposed deed of novation. On 23 November 2011, Mr Couter sent an email to Mr Graham which said among other things:
"If in fact Cranbrook has already taken over responsibility for the subcontracts which St Hilliers had entered into for the project, it is unclear why acceptance by Bradshaw is in fact required. Should however Bradshaw's agreement be sought, then we require a clear and positive obligation whereby Cranbrook accepts liability for those claims set out in schedule 2 (prior claims), acknowledging that the events upon which they are based arose prior to the effective date."
33The reference to "schedule 2" was to a schedule to the novation agreement, redrafted by or for Bradshaw, which set out the claims that apparently had not been pressed.
34After the news of St Hilliers' insolvency became known, Mr Couter sent an email to ADCO and EPM. It said:
"I'm just looking for a bit of clarification...we have a contract for works at Cranbrook with St Hilliers; now they probably don't want to know about it any more...but we are happy to come to site to complete the job (and indeed to carry out any variation work requested) but we'd like some assurances that ADCO/Cranbrook will step into the vacated St Hilliers' role (and pay for the work that we carry out)."
35The reply to the email of 16 May 2012 came later the same day. It said:
"Your subcontract will be honoured by Cranbrook as we expect Bradshaws to do so also. There should no need for clarification as the news today re STH will not impact how ADCO, Cranbrook and Bradshaws have been operating for the past 8 months and will continue to operate until the project's completion."
The factual issue
36The question in those circumstances is whether there is, or was from about 24 August 2011, a "construction contract" between Cranbrook and Bradshaw; or alternatively, as was put by Mr Condon of Senior Counsel (who appeared for Bradshaw), a construction contract between Cranbrook, Bradshaw and St Hilliers.
The applicable principles
37The expression "construction contract" is defined in s 4 of the Act to mean:
"a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party."
38It was common ground, I think, that the words "or other arrangement" denote something falling short of a contract as that term is known to the law. To the extent that it might not have been common ground, that proposition is in my view clearly established by the decision of Nicholas J in Okaroo Pty Limited v Vos Construction and Joinery Pty Ltd [2005] NSWSC 45. I refer, in addition, to the decision of Rein J in Olbourne v Excell Building Corp Pty Ltd [2009] NSWSC 349 at [25] to [28], and at [44] to [57], where his Honour considered the factual situation. I refer, further, to my own decision in Machkevitch v Andrew Building Constructions [2012] NSWSC 546 at [14] to [30].
39For the reasons that I gave in Machkevitch at [28], for there to be an arrangement for the purposes of the definition of construction contract, one party to whatever the arrangement is must undertake to perform construction work for another party to that arrangement. That view is I think consistent with what Rein J had said in Olbourne.
40Mr Condon submitted that, to the extent that this proposition was established by Olbourne and Machkevitch, they were decided either per incuriam or incorrectly. I see no reason to reconsider what I said in Machkevitch. That seems to me to follow inevitably from the language of the definition, which refers relevantly to an arrangement under which one party undertakes to carry out construction work for another party. It would be quite unusual for the word "party" where first used to indicate a party to the arrangement but, where secondly used, to refer to a party who need not be a party to that arrangement.
Factual findings
41Because I accept the evidence given by Mr Couter, I accept that there were statements made, at both the meetings of 24 August 2011, to the effect that Cranbrook would honour the subcontracts. I find, in context, that those statements were intended to convey, and did convey, not only that Cranbrook would honour the subcontracts to the extent that they had been performed by the subcontractors, but that it would continue to do so unless and until the subcontracts were novated to Cranbrook.
42Thus, I find, Cranbrook effectively conveyed to subcontractors, through its representatives at the meetings of 24 August 2011, that Cranbrook would stand behind the obligations of St Hilliers under those subcontracts. I should say that this seems to me to be entirely consistent with the provisions of the T&D agreement: in particular, cl 6.12(b). It is not to the point that the terms of that agreement may not have been known in detail to subcontractors (including Bradshaw). The point is whether, in considering what was said at the meeting, it was consistent or inconsistent with the agreement. What I find to be its consistency with the agreement confirms my acceptance of the likelihood that it was said.
43I should say, in relation to the question of whether or not the terms of the T&D agreement were known to Bradshaw, that Mr Couter accepted that, at least by 24 August 2011, he was aware that St Hilliers had given a power of attorney to Cranbrook.
Decision: no arrangement
44The key question is whether, arising out of what was said on 24 August 2011 and what happened thereafter, there can be spelled out an arrangement under which one party to it, Bradshaw, undertook to carry out construction work for another party to it.
45The primary case put by Mr Condon was that the arrangement was bilateral: between Cranbrook and Bradshaw. On that basis, and adhering as I do to the proposition that the "other party" must be another party to the arrangement, one must be able to see, on the facts, an undertaking by Bradshaw to carry out construction work for Cranbrook.
46Mr Condon relied on what Mr Israel had said at the first meeting of 24 August 2011, to the effect that Cranbrook would issue instructions through EPM and ADCO to the subcontractors. He relied, further, on the practical reality: namely, that St Hilliers was withdrawing from the project and Cranbrook was taking over. In that context, he submitted, cl 6.12(b) of the T & D agreement made it clear that in reality it was Cranbrook, and not St Hilliers that would be paying for work done in the future.
47All of that may be accepted. But if any undertaking is to be spelled out, it is to be spelled out from a combination of what happened, and was said, on 24 August 2011, and what happened, and was said, thereafter. As to the latter point, the evidence is in my view all one way. Bradshaw did not want to enter into any novation of its subcontract until the question of disruption and delay claims, for matters occurring before the date of novation, was resolved one way or the other. That matter could be resolved by being covered in the novation agreement. Or it could be resolved (for example) by payment. But absent resolution of one form or another, Bradshaw was not prepared to novate.
48In my view, Bradshaw's actions make this crystal clear. It continued to insist that it was performing construction work for St Hilliers under the subcontract. It submitted its payment claims to St Hilliers, notwithstanding advice that they should be directed otherwise.
49In those circumstances, I do not see how one can spell out of what happened, after 24 August 2011, any undertaking by Bradshaw to carry out construction work for Cranbrook. Its position was that it was carrying out (and would only carry out) construction work for St Hilliers, pursuant to the subcontract between them.
50I accept, as Mr Condon submitted (and, in effect, as Rein J had found in Olbourne) that an arrangement may exist alongside a formal contract, and that under the arrangement, different liabilities may attach to those existing under the formal contract.
51That, indeed is what Hungerford ADCJ found was the case in Stallion Civil Group Pty Ltd v Tresedar Pty Ltd [2009] NSWDC 125 at [32]. However, the key to his Honour's finding is that although the formal subcontract was between the plaintiff and the head contractor, there was an arrangement between the plaintiff and the developer under which the plaintiff carried out work for the developer (and, as his Honour added, "to the extent necessary also for the builder"). It is this link which I cannot find in the present case. I say that, at the risk of repetition, because any proposition that Bradshaw was undertaking to carry out work, after 24 August 2011, for Cranbrook is inconsistent with the position that it expressed and maintained at all times thereafter.
52The adjudicator found that there was an arrangement of the kind on which Bradshaw relied. As I understand it, he found that there was a bilateral arrangement. For the reasons that I have given, I do not agree.
53Was there, in the alternative, a trilateral agreement? I do not think so. The dealings were between Cranbrook and Bradshaw. No doubt, Cranbrook was empowered to act on behalf of St Hilliers by virtue of the power of attorney given to it (and by virtue of clause 6.3(b) of the T&D agreement, which is directly in point). No doubt, further, to the extent that work was continuing under the subcontract, St Hilliers' role was as agent for Cranbrook pursuant to cl 6.12(b).
54If the arrangement of the kind for which Bradshaw contends were indeed made trilaterally, then there would have been a de facto novation of the subcontract. That is indeed one way in which Bradshaw put its case. But there was no de facto novation. Bradshaw continued to insist on the legal structure that had been put in place, unless and until its requirements for novation were satisfied. Bradshaw continued to perform construction work for St Hilliers on the terms of the subcontract between them. To my mind, even if Cranbrook were to be regarded as having entered into some trilateral agreement both on its behalf and on behalf of St Hilliers, with Bradshaw, nonetheless the agreement to carry out construction work, or the undertaking to do so, is one which subsisted under the existing subcontract between Bradshaw and St Hilliers.
55Thus, whichever way one analyses the facts, I conclude that there was no construction contract as defined by the Act.
Estoppel
56I should note that Bradshaw relied also on a defence of estoppel. The pleaded estoppel was to the effect that there was a common understanding between Cranbrook and Bradshaw at all times from 24 August 2011, that Cranbrook would pay Bradshaw for construction work undertaken by it. Mr Condon accepted, in my view correctly, that if Bradshaw did not succeed in the primary way that it put its case then the estoppel case added nothing.
Second issue: payment for work done before making of "arrangement."
57On the conclusion to which I have come, this issue does not arise. Accordingly, I would do no more than say that, if it required to be decided, I would decide it in favour of Bradshaw.
58If the adjudicator made an error in determining that the amount of the progress payment to which Bradshaw was entitled included an amount for work done before the arrangement was made, that was to my mind a mistake within jurisdiction. I rely on the analysis that I gave in Clyde Bergemann Senior Thermal Pty Ltd v Varley Power Services Pty Ltd [2011] NSWSC 1039 at [35] to [53]. Of the many cases referred to in those paragraphs, I will mention only the analysis of Spigelman CJ in Chase Oyster Bar Pty Limited Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393 at, in particular, [43] where his Honour drew attention to the distinction between facts to be adjudicated upon in the course of enquiry and facts that are an essential preliminary to the commencement of the enquiry.