Levadetes v Iberian Artisans

CITATION : Levadetes v Iberian Artisans [2009] NSWSC 641

HEARING DATE(S) : 15 June 2009 JURISDICTION : Equity Division Commercial and Technology List

DECISION : See paragraphs [65] to [68] of the judgment.

CATCHWORDS : BUILDING AND ENGINEERING CONTRACTS - Building and Construction Industry Security of Payment Act - progress claim - whether adjudicator erred - whether a contract or arrangement - whether "construction contract" was "for the carrying out of residential building work."

LEGISLATION CITED : Building and Construction Industry Security of Payment Act 1999 Home Building Act 1989

Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 CASES CITED : Okaroo Pty Ltd v Vos Constructions and Joinery Pty Ltd [2005] NSWSC 45 Olbourne v Excell Building Corp Pty Ltd [2009] NSWSC 349 Reynolds v Atherton (1922) 127 LT 189 TW Hedley (Investments) Pty Ltd v Richardson Plant Hire Pty Ltd [2005] QSC 099

PARTIES : Levadetes Pty Limited (Plaintiff) Iberian Artesans Pty Limited (Defendant)

COUNSEL : M A Ashhurst SC / P Folino-Gallo (Plaintiff) F R Clark (Defendant)

SOLICITORS : Reimer Winter Williamson (Plaintiff) Wilkinson Building & Construction Lawyers (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

55021/09 LEVADETES PTY LIMITED v IBERIAN ARTISANS PTY LIMITED JUDGMENT 1 HIS HONOUR: The question for decision is whether two determinations made by the second defendant (the adjudicator) are void. 2 The issues underlying that question are:

(1) Was there was a construction contract between the plaintiff (the company) and the first defendant (Iberian)?

(2) If there were such a contract, is it excluded from the operation of the Building and Construction Industry Security of Payment Act 1999 (the Act) by s 7(2)(b)? Facts 3 The directors of the company are Mr Dimitrious (also known as Jim) Levadetes, his wife, Mrs Levadetes, and his son, Mr John Levadetes. 4 In 1992, the parents (as I shall call Mr and Mrs Levadetes collectively) decided to buy a property at Vincentia. They decided also to put it in the name of their son. It was he who made the contract and he who became the registered proprietor following settlement. All funds were provided by the parents. Mr John Levadetes acknowledged this by executing a mortgage in their favour. 5 In about 2002, the parents decided to demolish the existing house on the Vincentia land and to build a new one. It was their intention to live there on completion. 6 Mr Jim Levadetes contacted Iberian to obtain quotations for the supply and installation of marble. On about 13 February 2008, Iberian furnished three quotations. One related to the bathrooms in the property; another to other internal work; and the third to external work. 7 Each quotation identified the "firm" for whom, presumably, the work was to be carried out as "Mr and Mrs Levadetes". The site address was said to be "Levadetes residence - Vincentia". The quotations then variously specified "bathrooms", "internal area" or external area" according to their subject matter. 8 Each quotation specified a total price inclusive of GST, and a deposit once again inclusive of GST. The deposits were respectively, $17,600.78 (for the bathrooms), $74.060.53 (for the internal area) and $18,026 (for the external area). 9 Each quotation contained common "Terms and Conditions of Sale, Quote or Contract". One of those was numbered 3. Relevantly, it reads: "3. Payment for goods and services detailed, shall be Payment of deposit, mandatory with order from Builder or Owner ..."

10 The quotations were sent under cover of a letter addressed to Mr Jim Levadetes. That letter reads as follows: "Mr Jim Levedetes: This is the last quote version of: Bathrooms in Levedetes Residence Vicentia with the terms and conditions as a contract and the required deposit. The quote includes Bathroom 01, 02, Shower 02, 03, 04, 05 and Master Ensuite (Pick up, Cut, Measure, Delivery, Fix, Supply Adhesive and Grout). Internal Area External Area Please sign and date this quote the "Quote accepted-Signed/Dated" section on the first page of every single quotation form before returning it to Iberian Artisans Pty Ltd. Regards" 11 Unfortunately (for the parties, the adjudicator and the Court) none of the quotations were signed or dated. 12 Mr Jim Levadetes decided to request Iberian to proceed with the work. He instructed Mr John Levadetes to pay the deposits. 13 On 7 March 2008, Mr John Levadetes caused two payments to be made to Iberian. One was made from a bank account of the company, apparently in its capacity as trustee of a "family trust". The amount paid was $29,248.44. The other payment was made from another account of the company, apparently in its own right. The amount paid was $30,000. On the same date, Mr John Levadetes sent a fax to Iberian. That fax was sent on the letterhead of the "Levadetes Property Group". The letterhead specified, beneath that heading, "Levadetes Pty Ltd" and gave the ABN and address (including postal address) of the company. 14 So far as it is relevant, the fax reads as follows: "Dear Teddy, Payment as requested part deposit for the above mentioned address. Would you please kindly fax to me a tax invoice for the above amount for my records. Regards John" 15 As requested, Iberian sent a tax invoice. Perhaps not surprisingly, it was addressed to "Levadetes Property Group". The description of the subject matter of the tax invoice had three lines. One was "Lim Levadetes" (presumably, a reference to Mr Jim Levadetes). The next line referred to a deposit on the Vincentia property, as did the third line. It is a little unclear, and the setting out of the tax invoice could have been improved, but it would appear that one of the deposits was the sum of $30,000 and the other was the sum of $29,248.44. 16 Iberian supplied and fixed marble to the Vincentia property. Disagreements appear to have arisen as to the rate of progress (and perhaps other things). There was an exchange of e-mails on 3 November 2008. Mr Antonio Alonso of Iberian sent an e-mail to Mr John Levadetes seeking to organise a meeting at Iberian's properties and asking for confirmation that, "as Jim Levedetes [sic] has several times said, that Levadetes Property Group will pay in full all the bathrooms as soon as they have finished". 17 For reasons that are not quite clear, that e-mail, although apparently emanating as I have said from Mr Alonso, appears to have been signed by Mr Jose Mendoza. 18 Mr John Levadetes' reply confirmed a meeting for 10 November, added a proviso as to the continuation of work, and conspicuously avoided addressing the topic of payment in full. 19 There was presumably a meeting on 10 November. In any event, on that date, Mr John Levadetes caused a further payment to be made of $20,000. That was made from a bank account of the company, and although the detail of the account was not specified, the account number corresponds to the number of the account of the company in its capacity as trustee of the family trust. 20 Also on 10 November, Mr John Levadetes sent a further fax to Iberian. It again was on the letterhead of the Levadetes Property Group, and under that referred to the company by name with its business and postal addresses. It reads as follows: "Dear Teddy, I have Eft the amount of Twenty thousand dollars as a good will payment towards the bathrooms to be completed. I trust that Antonio will send the boys to finish off. Kind regards John" 21 In response to the payment, a further tax invoice was sent. Once again, it was addressed to "Levadetes Property Group". However, in the column providing for description, it referred not to Mr Jim (or Lim) Levadetes but to the "Levadetes Property Group". 22 There is evidence that the proprietors of the business name Levadetes Property Group were Mr John Levadetes and the company. There is, however, no evidence that this was known to Iberian or its directors or officers at the relevant time. As I have indicated, the letterhead of the Group (in so far as the two faxes are representative) did not refer to Mr John Levadetes' involvement as a person carrying on business under that name. The adjudication 23 On 14 January 2009 Iberian served two payment claims on the company. One related to the bathroom work and one related to other internal work. The company provided payment schedules in response to each payment claim, on 29 January 2009. The payment schedules raised two issues. The first was that there was no construction contract between the parties. The second (obviously seeking to invoke s 7(2)(b)) was that the subject work was residential building work. 24 The disputes thereby constituted were referred to the adjudicator for determination. She gave her determinations on 4 March 2009. Since there is no relevant difference between them (for the purposes of this hearing) it is necessary to look at one only. In substance, the adjudicator rejected each of the suggested reasons for non-payment and found that the company was liable to pay the claimed amount together with interest and the costs of the adjudication. 25 On the first issue (the existence of a construction contract between the parties) the adjudicator reasoned as follows. First, she noted that the initial contact was made by Mr Jim Levadetes requesting a quotation for the work. She noted that Iberian sent the quotes to Mr Jim Levadetes. She referred to the fax of 7 March 2008 and the payments made on that date and to Iberian's allocation of them. 26 The adjudicator then noted that company had three directors (as I have set out above). She referred also to the business names search and drew from that that "Levadetes Pty Ltd t/as Levadetes Property Group is a commercial business". 27 The adjudicator then referred to the first of the tax invoices provided by Iberian in response to Mr John Levadetes' request. She noted the detail of that tax invoice, and said (correctly, so far as the evidence before me reveals) that it was "accepted ... without question and no change or amendment was requested". 28 The adjudicator then said: "Based on the above sequence of events, I am satisfied that the contract between the parties was formed on 7 March 2008 when the respondent's representative John Levadetes accepted the Claimant's quotation and paid the Respondent's deposit consistent with the Claimant's term of trade."

29 Thus, the adjudicator concluded, she was "satisfied that a contract exists between the Claimant ... and the Respondent ... for the provision of the construction work and related goods and services ...". She was also "satisfied that both Dimitrious [sic] Levadetes and John Levadetes have both acted as representatives of the Respondent". 30 As to the second issue, the adjudicator reasoned as follows. She noted that Mr John Levadetes was the owner of the property, and the evidence that the parents intended to live in the property on completion. She referred to her conclusion that Mr Jim Levadetes was not the contracting party. She said that the relevant issue "is whether John Levadetes as the owner resides or proposes to reside at" the property. Since he did not, she said that s 7(2)(b) would not apply, at least so far as he was concerned. Further, she said, since the contracting party was the company, and it could not be a "residential occupier of a building", s 7(2)(b) would not apply. The parties' submissions 31 Mr Ashhurst of Senior Counsel, who appeared with Mr Folino-Gallo of counsel for the company, submitted that the key error in the adjudicator's reasoning lay in the paragraph that I have quoted above, when she said that the contract was formed on 7 March 2008 by acceptance of the quotation. He submitted that the contract could only be formed by acceptance of a quotation where the acceptance was given by the persons to whom the quotation was addressed. Further, he submitted, there was no acceptance in any event because the term of each quotation - that the specified deposit be paid - was not met. 32 Based on his first submission, Mr Ashhurst put that it was clear that the acceptance had been effected by the company or by Mr John Levadetes (or perhaps for both) as an agent for Mr Jim Levadetes (or perhaps for him and his wife together). Alternatively, he submitted, if there had been no disclosure of the agency, it was nonetheless a contract made by that agent for an undisclosed principal. 33 On either view, Mr Ashhurst submitted, what followed was referable to a contract in which either Mr Jim Levadetes or he and his wife together were parties. 34 If the first view were correct - that the contract was made as an agent for a disclosed principal - then there was simply no contract between the parties to the adjudication. Thus, the first of the "basic and essential requirements" set out in the Act "for the existence of an adjudicator's determination" - the existence of a construction contract between the parties to which the Act applies - had not been demonstrated. This of course is a reference to the well-known passage in the reasons of Hodgson JA (with whom Mason P and Giles JA agreed) in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at 441 [53]. 35 On the second analysis - agent for undisclosed principal - Mr Ashhurst submitted that both the agent and the principal (whoever the principal might be) were parties to the contract. Thus, since it appears to be common ground (as the adjudicator accepted) that Mr and Mrs Levadetes did intend to reside in the property on completion, and since they were parties to and liable under the contract, s 7(2)(b) of the Act applied. 36 Ms Clark of counsel, for Iberian, submitted that the adjudicator's reasoning was correct. Alternatively, she submitted, even if the adjudicator erred in holding that a contract had been formed by acceptance of the quotation, nonetheless the evidence overall suggested that a contract had been made between the company and Iberian, under which Iberian agreed to carry out work for the company. 37 Ms Clark submitted that there was no evidence to support the proposition that Mr John Levadetes or the company (as the case may be) contracted as agent for a principal (disclosed or undisclosed). 38 Alternatively again, Ms Clark submitted, there was an arrangement to which all relevant actors were parties. She noted, correctly, that in s 4 of the Act, the expression "construction contract" is defined 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". She referred to the decision of Rein J in Olbourne v Excell Building Corp Pty Ltd [2009] NSWSC 349 to support the proposition that there could be an arrangement whereby someone not a party to a construction contract (strictly so-called) nonetheless entered into an arrangement with the builder that he or she would make payment to the builder, so that the arrangement between that person and builder became one caught by the Act. 39 Ms Clark relied in particular on the form of the invoices and the fact that in each case the payment was made by the company. She submitted that it did not matter that two of the payments were made by the company in its capacity as trustee of some family trust. Decision First issue: contract or arrangement? 40 In my view, it is clear that the relevant paragraph in the adjudicator's reasons cannot be supported in its terms. I repeat that the adjudicator found that the contract was formed on 7 March 2008 when Mr John Levadetes accepted Iberian's quotation and paid the deposit "consistent with [Iberian's] terms of trade." 41 There are two difficulties with that reasoning. The first is that the better view of the law appears to be that a contract cannot be formed when someone who is not the addressee of a quotation or offer purports to accept it. The authority usually cited in support of that proposition is the decision of the House of Lords in Reynolds v Atherton (1922) 127 LT 189. Jones J, in the Supreme Court of Queensland, referred to that position as settling the proposition "that an offer can only be accepted by the person to whom it is addressed": TW Hedley (Investments) Pty Ltd v Richardson Plant Hire Pty Ltd [2005] QSC 099 at [13]. 42 On that analysis - which, as I have indicated, I think is correct - whatever it was that Mr John Levadetes did or purported or attempted to do on 7 March 2008, it was not the acceptance of an offer by the person to whom the offer was directed. There can be no doubt that each of the three quotations was addressed either to Mr Jim Levadetes or to him and his wife. There is no mention of the company, or for that matter Levadetes Property Group, in either of them. 43 The second reason why this aspect of the adjudicator's reasoning cannot be accepted is that, when one looks at what happened on 7 March 2008, even putting aside the point that I have just discussed, it cannot be regarded as the acceptance of an offer. I have set out above the deposits stipulated in each of the quotations. I have also set out the term of each quotation that payment should include "payment of deposit, mandatory with order ...". The deposits stipulated were not paid and it is impossible to reconcile what was paid to the required deposits in any meaningful way. There is no evidence of any discussion between Iberian and anyone representing the Levadetes' interest to suggest that the offer comprised in the quotations was varied to provide only for deposits in the two amounts that were paid. 44 On the first analysis (the "Reynolds" approach), two possibilities follow. One is that there was no acceptance at all, but rather a separate offer, or an invitation to enter into contractual relations, from the company. The other analysis is that for which Mr Ashhurst contended - that what was done should be understood as having been done on behalf of the person or persons to whom the quotation was addressed. 45 On the second analysis (non-correspondence of offer and acceptance) then the fresh offer or invitation to enter is in terms different to the initial offer. Alternatively, should it be viewed as something done by an agent on behalf of a principal, then of course it is not an acceptance but a counter-offer. 46 The complicating factor in all this is the form of the tax invoice. It suggests very strongly that Iberian regarded the party chargeable as the "Levadetes Property Group". Although we know that the persons who carried on that business included not only the company but also Mr John Levadetes, there is no evidence that this was known to Iberian. On the contrary, the form of the fax of 7 March 2008 was such as to suggest very strongly that "Levadetes Property Group" was the business name used by the company. 47 However, the invoice of 7 March 2008 does not lose sight of the fact that the work was to be carried out for Mr Jim Levadetes. In my view, the reference to "Lim Levadetes" is clearly intended to link the tax invoice back to the quotations. Thus, I think, when one views the matter objectively, what Iberian should be regarded as doing was entering into what was at least an arrangement whereby the work was to be done for Mr Jim Levadetes (either the sole addressee or one of the addressees of the quotation) in circumstances where the entity chargeable with payment was the company, under the name "Levadetes Property Group". 48 If that analysis is correct then it is unnecessary to decide whether what resulted from this mess was a contract or merely an arrangement. 49 As I have already noted, the definition of "construction contract" includes an arrangement whereby work is performed. Nicholas J pointed out in Okaroo Pty Ltd v Vos Constructions and Joinery Pty Ltd [2005] NSWSC 45 at [40] that, in the context of the definition of "construction contract", the reference to an arrangement "is apt to describe something less than a binding contract or agreement". His Honour said at [41] that an "arrangement" would include "transactions or relationships which are not legally enforceable". 50 In my view, at the very least, there was between all the parties involved in this situation an arrangement, for the purposes of the definition of "construction contract", under which Iberian agreed to carry out construction work for Mr and Mrs Levadetes on terms that the company would be liable to make payment. 51 On that analysis, then subject to the second issue, the adjudicator's decision could be sustained although not for the reasons she gave. But of course, that analysis makes it necessary to consider the second issue. Second issue: s7(2)(b) 52 Section 7(2)(b) of the Act provides that the Act does not apply to "a construction contract for the carrying out of residential building work (within the meaning of the Home Building Act 1989) on such part of any premises as the party for whom the work is carried out resides in or proposes to reside in".

53 It was common ground, before the adjudicator and before me, that the work in question was residential building work within the meaning of the Home Building Act. The adjudicator accepted (I think) that Mr and Mrs Levadetes proposed to reside in the Vincentia property once the residential building work was complete. There was certainly evidence before her to support that conclusion and there was no reason why she should not accept it. 54 On that basis, it seems to me, the question is whether "the party for whom the work is carried out" is to be regarded as any party to the contract or arrangement, or only as the party by whom payment is to be made. 55 Whether there was a contract, or whether it falls short of a contract and is nothing but an arrangement, it seems to me that the analysis required is of the objective intention of the parties - by which I mean, the intention of the parties objectively ascertained from matters known to them or common between them at the time the contract or the arrangement was made. It is impossible to divorce any one fact or document from the context and focus on it alone. The context is supplied by the whole of the relevant series of transactions and dealings. That context includes that Mr Jim Levadetes contacted Iberian and asked it to provide a quotation for the performance of work on the property at Vincentia, the way in which the quotations were addressed and their terms, the circumstances of the purported acceptance and the form of the tax invoice that was issued to "confirm" the arrangements made. 56 As I have said, it seems to me that when one looks at those things as a whole, the inevitable conclusion is that there was at the very least an arrangement including Mr and Mrs Levadetes, the company and Iberian. When one asks what that arrangement was concerned with, the response is obvious. It was concerned with the supply and installation of marble at the proposed residence of Mr and Mrs Levadetes. Clearly, Iberian knew that. It identified the client "firm" as Mr and Mrs Levadetes and identified the project through the "site address" as the "Levadetes residence-Vincentia". 57 Further, as I have observed, I think it likely that the form of the tax invoice of 7 March 2008 was intended to pick up, or to refer back to, those quotations. 58 Thus, I think, the inevitable inference is that objectively viewed the parties intended their arrangement to be that Iberian would perform work and supply goods and services for the residence of Mr and Mrs Levadetes, on terms that it would be paid by the company. 59 In this context, I note that the definition of "construction contract", when it refers to one party undertaking to carry out construction work or to supply related goods and services to another party, is clearly apt to include not merely bilateral but also multilateral contracts or arrangements. 60 Again, when the Act talks in s 7(2)(b) of a construction contract for the carrying out of residential building work, it does not do so in terms that specify that there may be no more than two parties to such a contract: the builder and the resident. 61 Finally, in this context, it is to be noted that when s 13(1) of the Act authorises the service of a payment claim, it refers to that being served "on the person who, under the construction contract concerned, is or may be liable to make the payment" . 62 Thus, I think, it is entirely consistent with the scheme of the Act that there could be a contract or arrangement of the tripartite character identified in this case. Further, it seems to me, it is sufficient for the purposes of s 7(2)(b) of the Act that the construction work under the contract be carried out for at least one of those parties. 63 Thus, I think, the adjudicator erred in holding that s 7(2)(b) had no application. 64 I have to say that this does not seem to me to involve any substantial injustice. Had the quotations been accepted according to their terms, the result would have been a contract between either Mr Levadetes or him and his wife on the one hand and Iberian on the other. On any view, that contract would have been caught by s 7(2)(b). Iberian was prepared to enter into such a contract. This is not a case where, on its own documentation, it was prepared to enter into a contract only on the basis that it had available to it the benefit of the Act's provisions for speedy progress payments. Conclusion and orders 65 It follows that the company's challenge to the adjudicator's determinations succeeds, although not on all the grounds that were argued. The company is entitled to the relief sought by prayers 1 to 6 of the amended summons and I make orders in terms of those prayers for relief. I will hear the parties on costs. 66 I order that the monies paid into court by the plaintiff on 15 March 2009 be paid out to the plaintiff. 67 I order the first defendant to pay the plaintiff's costs of the proceedings. 68 I order that the exhibits remain with the papers for 28 days and that thereafter they be dealt with in accordance with the rules.

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