Equa Building Services Pty Ltd v A&H Floors 2 Doors Australia Pty Ltd

The facts

1. Equa is part of a group of companies known as the Arden Group. Equa and a related company, Arden Group Services Pty Ltd, together developed a multi-unit development in Baulkham Hills, New South Wales known as Elora the Hills.
2. Rockinghorse Construction Pty Ltd (Rockinghorse) is a company associated with one Alex Scionti. Under a written engagement letter dated 13 February 2018, Equa engaged Rockinghorse to provide construction management services including engaging contractors to design and build the development.
3. Rockinghorse in turn engaged AH to do flooring work sometime in 2019.
4. Rockinghorse and Equa fell into dispute and Equa terminated its retainer on 26 February 2020.
5. After Rockinghorse's departure from the scene, AH did some work on the project directly for Equa.
6. Hakan Aydin is associated with AH.
7. AH says that on 30 June 2021 it sent an email to one Lindsay Gregory at email address lindsay@ardengroup.com.au enclosing for his attention, a payment claim (the payment claim) dated 30 June 2021 claiming $103,632.53 from Equa. The payment claim gave as its "reference date" 28/05/2021 and was marked for the attention of Lindsay Gregory and Alex Scionti. The email said that the payment claim had also been sent by express post to 56 Crosby Road, Albion, Queensland, which is Equa's principal place of business. Equa did not accept that AH had proved that it sent the email because the actual email address does not appear on the face of the email. I am prepared to accept that the email was sent, although there is no metadata in evidence to prove this.
8. The trouble with the posted payment claim was that it was sent to 54 Crosby Road (rather than 56) and therefore not received by Equa. The trouble with the email version was that Lindsay Gregory was never an employee of Equa or of any entity related to it, and he was neither a director of nor a shareholder in Equa.
9. Unsurprisingly, Equa did not respond to the payment claim.
10. On 11 August 2021, AH sent another email to Lindsay Gregory, but this time copied it to Sean Pasterfield, a senior development manager with the Arden Group, enclosing a notice under s 17(2) of the Act. To this notice Pasterfield, on behalf of Equa, responded on 17 August 2021 by serving on AH a payment schedule under s 14 of the Act, denying any liability.
11. Pasterfield gave evidence. He said that he prepared the payment schedule without having the payment claim. He was able to do so because he knew the detail of what the payment claim comprised. He said that there had earlier been meetings between the parties. It was put to him (with scant foundation) that he had in fact received the payment claim, which he denied. No particular source from which he was said to have got it was identified during cross examination. However, AH submitted that he had received it from Lindsay Gregory. This was not put to Pasterfield. I found him a convincing witness and I believe him that he did not receive the payment claim.
12. Para 37 of the Annexure to the contract identifies times for progress claims, one of which is the 28th day of each month for the work done to that day until the date of practical completion. The relevant reference date in this case is thus the 28th of the month. It has been earlier observed that the payment claim identifies the reference date as 28/05/2021. The significance of this is dealt with later.
13. On 30 August 2021, AH made an adjudication application. It asserted the existence of a written construction contract between it and Equa, in the standard form AS 4903-2000, said by it to have been entered into in August 2019. A copy of this instrument was annexed to the application. It is signed by Hakan Aydin on behalf of AH but it is not signed by Equa. It is undated.
14. Equa served an adjudication response on 9 September 2021.
15. Equa argued, amongst others, that it had never seen the construction contract relied on, had not executed it, and it was not the basis on which the works were performed. It suggested that the document had been created and the term "fraudulent" was used. It said the works (after Rockinghorse left) were carried out in accordance with a series of oral arrangements between Equa and AH and that Equa had paid for those works in full.
16. Equa also denied that it was ever served with the payment claim.
17. On 9 September 2021, the Adjudicator called for further submissions from AH and Equa on, relevantly, Equa's contention that the payment claim had not been served, that the construction contract advanced was not one that had ever been seen by Equa, and the Adjudicator would be entitled to draw the conclusion that it was something that had been created by AH.
18. AH provided further submissions on 10 September 2021.
19. On the question of service of the payment claim, AH maintained that it had been served by email because there was clearly a relationship between Equa and the Arden Group and that it seemed likely that Equa was under the control of Arden, related to it and operating from the same address and under the same controlling minds. It submitted that only staff from Arden Group had dealt with the claim and that email service was valid under clause 7 of the written construction contract (on which it continued to rely). That clause deems a notice to have been given and received on confirmation of transmission of an email.
20. On the question of the construction contract, AH submitted that it had quoted to Rockinghorse but that the contract (meaning the formal written one) was ultimately made with Equa and that Rockinghorse staff were assisting "that transition". It relied on emails in July 2019 passing between Rockinghorse and AH and in particular an email dated 10 July 2019 in which Steve Anderson from Rockinghorse wrote to Hakan Aydin stating that he had been advised "that your quote for Elora Apartments has been accepted" and one dated 18 July 2019 in which Steve Anderson from Rockinghorse wrote to Alex Scionti: "Hakan would like a formal contract agreement with Equa for RHC for the flooring contract at Elora Apartments B/Hills and also a deposit paid for the purchase of materials". Notably, no one from the Arden Group or Equa is recipient of these emails.
21. Equa made further submissions to the Adjudicator on 13 September 2021. Amongst others, it submitted that AH had failed to show how Lindsay Gregory was the person liable to make the payment and it repeated that Lindsay Gregory was never an employee of Equa. It drew attention to the fact that there was no evidence that the written contract relied on by AH was in fact entered into between the parties.
22. The Adjudicator issued the determination on 15 September 2021.

Non-service

1. The Adjudicator accepted that the envelope containing the payment claim had been incorrectly addressed and that there was no evidence that it was actually received by Equa (paras 53 to 55).
2. The Adjudicator dealt with email service in paras 56 to 60 as follows: 56. On the matter of the Claimant's service of the Payment Claim, via email, on "Lindsay Gregory", I have noted this person's name on the documentation copied in the Adjudication Application and the Adjudication Response, including being the Respondent's representative identified by the Claimant as "Lindsay", to receive the Claimant's Tax Invoices IN1261, IN1267, IN1269, IN1272, and IN1297, in the period May 2020 to September 2020. Furthermore, various email correspondence emanating from Greenley to the Respondent's employees, for example, from Shubham Gupta, Design Manager, and from John Hanley, are copied to the email address of "Lindsay Gregory ". 57. The email address of "@ardengroup.com.au", is the address used by all of the persons named in the parties' submissions as representing the Respondent including Sean Pasterfield, Lydia Feng and Grace Mai, all of whom participated in the processing of the Claimant's payment claims [refer to Annexures D, E1 and E2 of the Adjudication Application]. In its further written submission, the Claimant has provided an outline of its understanding of the relationship between the Respondent and the Arden Property Group, concluding that the staff from Arden Property Group are the appropriate contacts for the Payment Claim. 58. In view of the above, it seems to me that the Claimant was entitled to believe that Lindsay Gregory was a representative of the Respondent for the above mentioned purposes. 59. I have noted the Respondent's apparent assertion that the Claimant had no entitlement under the Act to serve the Payment Claim via email. That assertion is not consistent with the parties' use of email, over a period of at least eighteen months, to exchange all manner of correspondence under or in connection with the construction contract and the goods and services supplied, noting also that the Respondent's Payment Schedule was served on the Claimant, via email. 60. For the above reasons, I find that I prefer the Claimant's submissions on this matter and determine that the Payment Claim was validly served on the Respondent, via email, on 30 June 2021.
3. The Adjudicator's conclusion is manifestly unsupportable.
4. First, the service he found was not within any of the (facultative) methods provided for in s 31.
5. S 31(d) permits service at an email address specified by the person to be served (in this case Equa) for the service of documents of that kind. The determination does not identify (and nor did AH) any specification by Equa of Lindsay Gregory's email address for the service of the kind of document which a payment claim is.
6. Additionally, there was no evidence and it was not suggested that the email (if it were sent) came to Lindsay Gregory's actual attention, or to that of Equa via some other route: Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259 at [58].
7. Second, an entitlement on the part of the sender "to believe that Lindsay Gregory was a representative of the respondent for the abovementioned purposes" does not make him such a representative in the absence of him being specified by Equa.
8. In para 56, the Adjudicator refers to the claimant (that is AH, not Equa) identifying Lindsay Gregory as the respondent's representative.
9. Third, that other persons involved in the project had email addresses ending "@ardengroup.com.au" says nothing of the particular status or position of Lindsay Gregory. If this reasoning were adopted, service on the janitor who had an email address with the same ending would be valid service on her or his employer.
10. Fourth, on the material before him and on the uncontested evidence before the Court, Lindsay Gregory was never employed by Equa or any other related entity, and he was not a director. Equa's sole director, Dereck McCartney, gave unchallenged evidence that he did not designate Lindsay Gregory's email address as the address for service of payment claims.
11. It is for the court to determine whether or not a jurisdictional fact (here, the service of a payment claim) exists on the evidence before the court, and not on the evidence before the primary decision maker, the Adjudicator: Woolworths Ltd v Pallas Newco Pty Ltd (2004) 61 NSWLR 707 at [105]; IWD No 2 Pty Ltd v Level Orange Pty Ltd [2012] NSWSC 1439 at [9].
12. In my opinion, the Adjudicator wrongly determined that the jurisdictional fact of the service of the payment claim was present when it was not. He had no jurisdiction to adjudicate the dispute.

Procedural fairness

1. The Adjudicator dealt with the issue of the construction contract in paragraphs 35 to 52 of the determination. Although it will add to the prolixity of this judgment, it is appropriate to set them out in full: 35. In the Adjudication Application, the Claimant submits that its quotations dated 7 July 2019 [QT1086 and QT1087], mentioned above, were initially accepted by Rocking Horse. The Claimant claims that the Respondent had then taken over the construction project from Rocking Horse, before the Claimant started the floor coverings work. The Claimant claims that the Respondent drafted a contract for the work, for the Claimant to supply and install carpet and timber floor coverings to the internal areas of the apartments, as set out in the drawings and the accepted quotes. The Claimant submits that the contract between the Claimant and the Respondent for this work is based on the document copied at Annexure A of the Adjudication Application [the Subcontract]. 36. In the Adjudication Response, the Respondent rejects the Claimant's submission on this matter. The Respondent claims that the Adjudication Application is the first time that it has seen the document claimed to be the contract between the parties. This is supported within the Morgan and Hanley Declarations. Mr Morgan, who submits that he was the Respondent's Project Manager for this construction project from February 2019 to March 2020, claims not to have seen or been aware of the alleged contract [the Subcontract] prior to the Adjudication Application. Mr Hanley, who submits that, as the Managing Director of Greenley engaged by the Respondent from March 2020 to provide project management services, he also had not, prior to the Adjudication Application, seen the document claimed by the Claimant to be the contract [the Subcontract]. Mr Hanley submits that he proposed that the Respondent engage its subcontractors using a "Short Form Works Contract". 37. The Respondent submits that the floor coverings works were carried out in accordance with a series of oral arrangements between the Respondent and the Claimant, in respect of which the Respondent has fully paid the Claimant for the work completed. The Respondent submits that this arrangement amounts to an "other arrangement", with reference to the definition of "construction contract" in the Act. 38. On 3 September 2021, the Respondent's solicitor wrote to the Claimant in an attempt to have the Claimant withdraw the Adjudication Application. In that letter [copied at Tab 4 of the Adjudication Response], amongst other things, it was noted with respect to the alleged Subcontract document, "this document has only been executed by you and curiously has handwritten notes in your favour which [Equa] understands to have been made by you". 39. The Respondent further submits: "The proper identification of the construction contract is a fundamental element of a payment claim. Having failed to identify the relevant construction contract, A&H Floors' Payment Claim does not satisfy all limbs of section 13(1) of the Act and is therefore invalid. In these circumstances, the Adjudicator should find that he has no jurisdiction to make a determination with respect to this Application." 40. In response, in its further written submission, the Claimant submits that at the time of entering into the Subcontract, the transition from Rocking Horse to the Respondent was taking place. Rocking Horse staff advised the Claimant via email on 10 July 2019, that the quote was "accepted", presumably by the Respondent. It is then noted in an email exchange on 18 July 2019, between representatives of Rocking Horse, copied to the Claimant, that the Claimant, "would like a formal contract agreement with Equa for RHC for the flooring contract at Elora Apartments B/Hills …". In response on 18 July 2019, Alex Scionti, a representative of Rocking Horse, forwarded a "standard contract" via email to the Claimant [these email messages are copied in the attachments to the Claimant's further written submission]. 41 In its further written submissions on this matter, the Respondent reaffirms its earlier Adjudication Response submissions, claiming that the transition from Rocking Horse to the Respondent was no earlier than February 2020, and that the Payment Claim is fraudulently made as it is made in respect of the alleged Subcontract. 42. Under section 4(1) of the Act, "construction contract" means: "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." 43. In consideration of the above, and the documents submitted by the Claimant, while the Claimant clearly believes that it entered into a contract with the Respondent for the floor coverings work, I am unable to accept that the document copied at Annexure A of the Adjudication Application, that is based on the Australian Standard AS 4903-2000 Subcontract Conditions for Design and Construct [NSW], is the basis of the construction contract entered into between the Claimant and the Respondent. 44. As is submitted by the Respondent, the evidence confirms that the alleged Subcontract document was not executed for or on behalf of the Respondent and I have been provided with no other evidence that it was accepted, as amended by the Claimant, or otherwise agreed by the Respondent. In the Adjudication Application, the Claimant also admits that the relevant provisions of the Subcontract were not applied to the management of such matters as variations and payment claims, leading me to conclude that the Subcontract AS 4903-2000 conditions have in general, not been applied by the Respondent and the Claimant to their commercial relationship. 45. I do not accept that there were any formal contracts between the parties, established by way of the "Short Form Works Contract", as proposed by John Hanley to the Respondent. I have been provided with no evidence of any such contract for the carrying out of the floor coverings work located at the Elora The Hills Apartments project. 46. For the reasons set out below, I am however satisfied that there was at least an arrangement in terms of the provisions of section 4 of the Act, between the parties for the Claimant to carry out and complete the floor coverings work, as is inferred in the Respondent's submissions. That arrangement [referred to as the construction contract hereafter] is based on the Claimant's quotes for the work given to Rocking Horse on 7 July 2019 [copied at Annexure J of the Adjudication Application], the drawings [copied at Annexure A1 of the Adjudication Application], and the acceptance given by Rocking Horse, taken over by the Respondent. 47. Further evidence of this arrangement [the construction contract] is provided by the Respondent, in the Payment Schedule considered herein. In that document, the Respondent's representative, Sean Pasterfield, confirmed that there had been a series of meetings held over some 6 months with the Claimant regarding its unresolved variation claims. This would not have occurred in the absence of some commercial arrangement between the parties for the flooring coverings work. Furthermore, and significantly, Mr Pasterfield confirmed [at paragraph 5 of the Payment Schedule]: "Your company was engaged by Equa Building Services to supply & install timber and carpet to 45 residential apartments …" 48. I am also satisfied that the Respondent gave the Claimant various oral instructions for the carrying out of the floor coverings work, as is submitted by the Respondent. 49. The above conclusions are further supported by the Claimant's Tax Invoices referenced and included in the Payment Claim, the Respondent's progress payments [refer to Tabs D, E1 and E2 of the Adjudication Application] made to the Claimant in response to these Tax Invoices, along with the submissions of the parties that the Respondent has paid the Claimant the total sum of $269,246.36 [excluding GST] in progress payments for this floor coverings work. 50. In view of the above, the Claimant's entitlement to a progress payment for the floor coverings work carried out by the Claimant for the Respondent, does not arise from the alleged Subcontract, but arises as a statutory entitlement under the provisions of the Act. 51. Under the construction contract, the Claimant undertook to carry out and then carried out and completed the supply and installation of floor coverings work that is for the supply of related goods and services, in relation to construction work consistent with the provisions of section 6(1)(a)(i) and 6(1)(b) of the Act, for the Respondent. 52. For the above reasons, I accept that the arrangement described above between the Claimant and the Respondent for the Claimant to carry out the supply and installation of floor coverings work is, by the definition given in section 4(1) of the Act, a construction contract to which the Act applies.
2. The Adjudicator rejected AH's contention of the existence of the written construction contract contended for by AH.
3. But he went on to find that there was at least an arrangement, in terms of the provisions of s 4, for AH to carry out and complete the floor coverings work "as is inferred in the respondent's submissions". He found the arrangement to be based on AH's quotes to Rockinghorse, drawings, and the acceptance given by Rockinghorse "taken over by the respondent" (para 46). The Adjudicator also relied on Pasterfield's statement in the payment schedule that there had been a series of meetings (para 47).
4. The Adjudicator appears to have determined that an agreement between AH and Rockinghorse in 2019 had been taken over by Equa. He does not identify the means by which this takeover happened. On one view, this may be a finding of a novation (for which it is to be observed neither party contended).
5. Counsel for AH accepted, correctly, that neither party contended for the arrangement, which the Adjudicator found. It is also clear that the Adjudicator did not give Equa an opportunity to make submissions with respect to what he ultimately determined.
6. AH submitted that there was evidence before the Adjudicator from which such an arrangement could be conferred or derived with the consequence that even if his determination was incorrect it is unreviewable. I reject this submission. It does not come to grips with the substance of Equa's complaint that the Adjudicator did not give it an opportunity to be heard on a proposed finding which did not accord with the submissions of either party and that he acted inconsistently with s 22(c) and (d) by going beyond the submissions that had been duly made by the contestants.
7. The denial of natural justice and the administrator's failure to adhere to s 22 were material, at least because 1. Equa did not have the opportunity to deal with the notion that an earlier agreement with Rockinghorse had been taken over by it; and 2. the reference date provisions of the Act still applied. The only reference date under the construction contract contended for by AH was the 28th of the month. The arrangement which the Adjudicator found did not have such a reference date, and that reference date did not support the payment claim.
8. I find that there was a realistic prospect of a different outcome had Equa been given the opportunity to deal with the earlier agreement, and a strong prospect of a different outcome if it had been given that opportunity on the reference date question and the Adjudicator had decided that correctly: Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 at [66]; MZAPC v Minister for Immigration and Border Protection [2021] 95 ALJR 441.

conclusion

1. I make the following orders: 1. Declare that Adjudication Determination 2021ADJT374 made by the second defendant on 15 September 2021 is void. 2. Order that the said Adjudication Determination be quashed. 3. Order that the money paid into Court by the plaintiff and any interest be paid out to it or, on direction, to its solicitors. 4. Provisionally order that the first defendant is to pay the plaintiff's costs of the proceedings. This order will solidify 7 business days after delivery of this judgment unless a party notifies the other party and my Associate in writing that some other order is sought, briefly stating the grounds, in which event the order will be vacated and arrangements will be made to determine costs. 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: 22 February 2022