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

Procedural fairness

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.
The Adjudicator rejected AH's contention of the existence of the written construction contract contended for by AH.
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).
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).
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.
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.
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.
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.

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (5)

Cited By (2)