Mick Fabar Constructions Pty Limited as Trustee for the M Fabar Family Trust No 2 v Lingrp Pty Ltd t/as Lindfield Group

Mick Fabar Constructions Pty Limited as Trustee for the M Fabar Family Trust No 2 v Lingrp Pty Ltd t/as Lindfield Group - [2019] NSWSC 158 - NSWSC 2019 case summary — Zoe

[4]

The subcontract and the works

MFC, a builder, had been engaged to carry out remedial work at the Orange Homemaker Centre. Lindfield Group provided plumbing and building services. In late 2015, Mr Mick Fabar, director of MFC, and Mr Matthew Lindfield, director of Lindfield Group, had discussions concerning the scope of works that Lindfield Group might carry out as a subcontractor for MFC in relation to some of the remedial work at the Homemaker Centre.
During the period between a site meeting in December 2015 and mid-February 2016, the parties were negotiating the subcontract.
On 19 February 2016, MFC sent an unsigned standard short form subcontract agreement to Lindfield Group. Mr Lindfield signed the agreement on behalf of Lindfield Group on 20 February 2016 and, on about 23 February 2016, returned it to MFC.
Mr Fabar signed the subcontract agreement on behalf of MFC. A copy signed by MFC was emailed to Lindfield Group on 11 March 2016. The covering email was as follows: "Morning Matt, My apologies I forgot to send through the agreement. Please see attached. Can you give me an update please on the work. Thank you."
Prior to this email, MFC had not given written consent for Lindfield Group to commence the work on site.
Her Honour found that the subcontract agreement was not entered into until Lindfield Group received the copy of the agreement signed by Mr Fabar back from MFC on 11 March 2016. That finding was not challenged in this appeal.
The documentation that formed part, at least, of the subcontract agreement was the 12 page Short Form Subcontract Agreement signed by the parties. This was made up of: 1. A front page, page 1, that contained the statement that the agreement was made on 19 February 2016, identified the parties as MFC and Lindfield Group, was signed by the parties, and included a Schedule, which relevantly stated: "This agreement comprises this schedule, the special conditions, general conditions, scope of works, specifications, drawings, other reference/attached schedules and the provisions of the head contract between MFC and the principal relevant to the subcontract works. The sub-contractor is deemed to have accepted all the terms and conditions of this agreement upon signing this agreement or commencing the works whichever is earlier. This schedule sets out the defined terms in the agreement… • Principal: Sentinel Orange Homemakers Trust • Project: Orange Homemakers Centre • Works: Roof repairs • Scope of works as listed in Schedule B • Special conditions as listed in Schedule A • Site: [an address in Orange] • Specification reference: as listed in Schedule D • Drawing reference: as listed in Schedule D • Subcontract sum: $94,360.00 excluding GST as per Schedule C • Payment terms: 30 days from end of Month • Claim made on 25th day of each month • Payment statement within 10 days of claim • Commencement date: 1st March 2016 • Completion date: 30th March 2016 • Liquidated damages: $1500.00 per day • Defects liability period: 52 weeks…." 1. The General Conditions (GC), which included the following clauses, among others: "2. Time (a) The Subcontractor [Lindfield Group] shall commence the Works on the Commencement Date and complete the Works by the Completion Date as adjusted in accordance with this Clause. (b) MFC may, by notice in writing at any time, suspend the Works, adjust the Completion Date or the order of completion of the Works. (c) If the Works are delayed by any cause beyond the control of the Subcontractor, the Subcontractor must notify MFC in writing within seven (7) days of the cause of the delay and provide all relevant details. MFC will only grant the Subcontractor an extension of time to the Completion Date if in MFC's sole opinion the delay will cause a delay to the Project and where relevant, only to the extent that MFC is granted an extension of time for the same delay by the Principal (d) No extension of time shall be granted in respect of inclement weather or industrial delays. (e) The Subcontractor must cooperate with MFC and other subcontractor on the Project to ensure the Project is completed as soon as possible. 3. Payment (a) MFC shall pay to the Subcontractor the Subcontract sum as adjusted in accordance with this Agreement. (b) MFC will pay the Subcontractor in instalments as the Subcontractor progressively completes the Works. Each payment will be based on the value of the Works completed by the Subcontractor and will only be made if: (i) the Subcontractor submits the claim on the date set out in the Schedule (Payment Terms) (ii) the Subcontractor is not in breach of any term of this Agreement including the requirement to have all insurances in place as set out in the Schedule (iii) separate claims are made for any variations carried out by the Subcontractor and these variations are approved by MFC (iv) the part of the Works for which the claim is made complies with this Agreement … (vi) the Subcontractor's claim is submitted to the Project Manager in the format prescribed by MFC (if any) under paragraph 3(d). … 8. Documents (a) The Subcontractor is deemed to have examined all the documents comprising the Agreement, obtained all other information necessary to complete the Works, determined the nature and extent of the Works and assessed the amount of temporary work, materials, labour and plant necessary to complete the Works. … (c) If the Subcontractor finds an error or inconsistency in or between the documents comprising the Agreement, the Subcontractor shall notify MFC in writing as soon as possible and MFC will direct the Subcontractor as to the resolution of the inconsistency. … 9. Site … (c) The Subcontractor shall not commence work on site without the written consent of MFC. … 12. Delay Damages (a) If the Subcontractor fails to complete the Works by the Completion Date (as adjusted under this Agreement), the Subcontractor shall pay Liquidated Damages to MFC, and if no rate is stated in the Schedule, any losses, costs, expenses or damages incurred by MFC as a result of the delay. (b) MFC will not be liable to pay the Subcontractor in respect of any prolongation, acceleration, delay or disruption claim other than as set out in this Agreement unless MFC has agreed in writing to do so. … 21. Set Off MFC may set off any of the following amounts against any amount MFC owes the Subcontractor or against the Subcontractor's security: (i) any amount the Subcontractor is required to pay under this Agreement. (ii) any costs MFC incurs by doing something the Subcontractor is required to do but fails to do under the Agreement. …" 1. Schedule A - Special Conditions; 2. Schedule B - Scope of Works; 3. Schedule C - Pricing Schedule, which included, among other things: ITEM Cost ($) excl. GST … … Supply and install approximately 400 metres of parapet flashing and the removal of fancy foam trim from the front of the building and making good including the provision of a boom lift hired for approximately 4 weeks. 65,000.00 Supply and install C section purlins to walls to support the flashings. 23,500.00 …

[5]

Schedule D - Drawings and Documentation, which referred, among other things, to a "[f]ree hand sketch of a parapet flashing" but the sketch was not attached to this schedule.
The Local Court held that the commencement and completion dates written in the Schedule on page 1 of the documentation were varied so that, under the subcontract as entered into between the parties, the commencement date was 11 March 2016. It was not in dispute that Lindfield Group was to complete the work in 30 days or one month.
There was a dispute as to whether "back-flashing", which was also described as "the installation of sheeting to the back of the parapet wall", was included in the scope of works. This back-flashing was the subject of the sketch referred to in Schedule D. In this regard, her Honour held: 1. that sketch did not form part of the subcontract documentation; 2. the back-flashing was not included in the Pricing Schedule, Schedule C; 3. Mr Fabar only emailed that sketch to Mr Lindfield on 29 March 2016; 4. the scope of works under the subcontract only included the work described in the subcontract documentation and it did not include the back-flashing.
This conclusion that the back-flashing was not included in the scope of works was not challenged in this appeal.
On 14 March 2016, the next business day after Lindfield Group received the email and the signed copy of the agreement from MFC, Lindfield Group commenced the works.
There were a number of email and other exchanges between MFC and Lindfield Group concerning the progress of the works during the second half of March and the first half of April 2016. Lindfield Group completed the works on about 11 March 2016, subject to rectification of defects.
On 14 April 2016, MFC issued a notice of failure to complete the subcontract works to Lindfield Group. That notice stated: "[MFC] (the builder) in pursuant to the provisions of paragraphs 2(a) & 2(e) of the Subcontract Agreement with [Lindfield Group] (the Subcontractor) gives notice of its intention to deduct liquidated damages at $1500.00 per day as set out in the Agreement in accordance with paragraph 12 Delay Damages for failing to complete the works by 30th March 2016 completion date, calculated to the date of Practical Completion in accordance with paragraph 13 of the agreement. Secondly, the Subcontractor refusing to carry out the installation of sheeting to the back of the parapet wall, on the grounds that it was not included in the price as quoted, no such claim can be made pursuant to paragraphs 8(a) and 9(a) of the Agreement. The Builder pursuant to paragraph 21(ii) of the Subcontract Agreement will employ others to carry out this work and will set off the cost being $19,000.00 including GST in accordance with the attached quotation. Thirdly, any work found not to be satisfactorily completed, then the cost of employing others to make good and complete the works will be set off pursuant to paragraph 21 of the Agreement."
On 21 April 2016, MFC emailed Lindfield Group a list of defects and required them to be completed within two weeks of 26 April 2016.
On 22 April 2016, Lindfield Group emailed Mr Fabar in the following terms: "Dear Mick, Please see attached invoice for works completed as per the contract at the Orange Homemakers Centre. You will note that we have allowed for liquidated damages in the invoice, again as per the contract. Should there be any reasons that the invoice will not be paid in its entirety on the due date please contact me immediately."
The invoice attached to that email and also dated 22 April 2016 claimed a balance due of $92,400.00 explained as follows: "DESCRIPTION: Amount: Carry out installation of parapet flashing and removal of fancy foam trim to Orange Homemakers Centre as per contract $65,000.00 Supply and install C section purlins to walls to support the flashings $23,500.00 Less 3 days liquidated damages -$4,500.00 GST: $8,400.00 Total Inc GST: $92,400.00 Amount Applied: $0.00 Balance Due: $92,400.00"
The defects previously identified by MFC were rectified by Lindfield Group by about 11 May 2016.
On 11 May 2016, MFC emailed another notice of failure to complete the subcontract works to Lindfield Group. That notice was in the following terms: "(a) [MFC] (the Builder) in pursuant to the provisions of Clause 2 paragraphs 2(a), (d) & 2(e) and Clause 12 Delay Damages paragraph (a) of the Subcontract Agreement with [Lindfield Group] (the Subcontractor) is to pay liquidated damages to the Builder at the rate of $1,500.00 per day for 41 days calculated from the day after the date for Practical Completion 31st March 2016 to 10th May 2016 a total of 41 days amounting to $61,000.00. Pursuant to Clauses, 11 Indemnity, 13 Defects and Liability Period, 21 Set Off of the agreement between the Builder and the Subcontractor, the Builder has incurred costs due to the Subcontractor failing to rectify def ts and complete the Subcontract Works. The cost to complete the works is: (b) Flashing to parapet walls not done - $3,340.00 excl. GST (c) Back flashing to parapet walls as per diagram - $18,030.00 excl. GST The total amount owing: $82,870.00"
MFC did not pay Lindfield Group's invoice of 22 April 2016.

[7]

The Local Court judgment

After an oral hearing before Lucas LCM in June and August 2017, his Honour became unwell and was unable to proceed to give judgement in the proceedings. In accordance with ss 88 and 89 of the Civil Procedure Act 2005 (NSW) and with the agreement of the parties, the proceedings were determined by Atkinson LCM on the basis of the relevant pleadings and evidence before Lucas LCM, and the written submissions of the parties. On 22 June 2018, her Honour gave judgement for Lindfield Group in the amount of $92,399, with costs to be the subject of further submissions.
As to Lindfield Group's contract claim, the learned Magistrate concluded as follows, based upon the findings concerning the subcontract which have been summarised above: "122 [Lindfield Group] says that it carried out the work that was described in the contract and it rectified the defects that were identified by [MFC]. 123 [MFC] has not disputed that [Lindfield Group] carried out work pursuant to the contract. The only dispute is about whether [Lindfield Group] was required to carry out the extra work that [MFC] says was included in the contract. 124 I reject [MFC's) submissions that the extra work did fall within the scope of the contract. (My reasons for doing so are set out in the discussion about the sketch and the rectification of defects.) 125 [MFC] has not paid [Lindfield Group] the money that it agreed to pay. 126 I am satisfied on the balance of probabilities that [Lindfield Group] performed its obligations under the contract but [MFC] breached its obligations when it failed to pay the agreed money to [Lindfield Group]. 127 [Lindfield Group] has adduced evidence to show that it carried out the work, invoiced [MFC] for it in accordance with the contract and it suffered a loss when [MFC] failed to pay the invoice. 128 Accordingly, I am satisfied that [Lindfield Group] has proved on the balance of probabilities that it is entitled to damages of $93,400 for [MFC's] breach of the contract."
The figure of $93,400 appears to be a typographical error. In the summary at [172] of Atkinson LCM's reasons, the damages for breach of contract to which Lindfield Group was found to be entitled were $92,400. This corresponds with the amount claimed in Lindfield Group's invoice of 22 April 2016.
Atkinson LCM then considered MFC's claim that it was entitled, under GC cl 21(i) and (ii), to set off amounts it said Lindfield Group was required to pay under the subcontract and costs MFC had incurred in having the back-flashing done, which it said Lindfield Group should have done under the subcontract. These were the amounts referred to in MFC's 11 May 2016 notice of failure to complete, referred to above. Her Honour rejected all of the amounts claimed, including the liquidated damages claim. She did, however, award MFC nominal damages of $1 because she found that Lindfield Group had completed the works one day late. The finding that the liquidated damages of $1,500 per day were a penalty and irrecoverable was the subject of the ground of appeal in par 11 of the amended summons.
Finally, the learned Magistrate considered Lindfield Group's claim, based upon the 22 April 2016 invoice being a payment claim issued in accordance with s 13 of the Security of Payment Act, and held that Lindfield Group was entitled to recover payment of the amount claimed in the invoice under ss 14(4) and 15 of the Security of Payment Act. This finding was also challenged in this appeal.
Her Honour gave judgment for Lindfield Group in the sum of $92,399, being the $92,400 in damages claimed by Lindfield Group, less the $1 nominal damages awarded to MFC because Lindfield Group was one day late in completing the works.

[10]

Relevant statutory provisions and principles

As noted above, whether MFC requires leave to appeal or may appeal as of right depends upon whether the appeal is brought under s 39 or s 40 of the Local Court Act. Those sections relevantly provide: "39 Appeals as of right (1) A party to proceedings before the [Local] Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. … 40 Appeals requiring leave (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court. …"
Generally, if leave to appeal is required, it is granted only where there is an issue of principle, a question of general importance, or an injustice which is reasonably clear, in the sense of going beyond what is merely arguable: Lee v New South Wales Crime Commission [2012] NSWCA 262 at [12]; Jaycar Pty Limited v Lombardo [2011] NSWCA 284 at [46]. In the specific context of appeals under s 40(1) of the Local Court Act, Beech-Jones J observed in Café Du Liban Pty Ltd v Bespoke Garage Pty Ltd [2017] NSWSC 779 at [4]: "[t]he considerations affecting a decision to grant leave to appeal under s 40(1) include whether any reason has been shown to doubt the correctness of the impugned part of the Local Court decision and the desirability of avoiding the parties incurring further costs and expense in litigating the matter if it is remitted to the Local Court. ..."
The principles dealing with whether a ground raises a question of law will be dealt with when considering each relevant ground.
At the hearing, the Security of Payment Act ground, the ground in par 13, was dealt with first and, for convenience, was referred to as ground 1. Next, the three grounds relating to the commencement date of the subcontract, found in pars 5, 6 and 7, were dealt with together and were referred to as ground 2. Lastly, the ground concerning whether the liquidated damages were a penalty, par 11, was considered. It was referred to as ground 3. Notwithstanding this order of dealing with the grounds at the hearing, in these reasons it is more convenient to address the commencement date grounds first, as this clarifies the position in relation to the penalty and Security of Payment Act grounds.

[13]

Should leave to appeal be granted in respect of par 6?

My consideration of the question of leave in relation to par 6 is informed by my conclusions reached concerning the related ground in par 5, which are set out below.
In my view, par 6 does not raise an issue of principle or a question of general importance sufficient to justify a grant of leave. Further, given that, in my view, pars 5 and 6 are based upon a misunderstanding of what her Honour decided, I do not think that reason has been shown to doubt the correctness of the Local Court decision concerning the commencement date. In the light of her Honour's findings that Lindfield Group did the work required under the subcontract and was not paid for it, it is also desirable that the parties should not incur further costs and expense in litigating the matter as those costs may well exceed the amount in dispute. Finally, in my view, MFC has not suffered any injustice which is reasonably clear.
In particular, as to whether MFC has suffered any injustice, arising out of the finding that the commencement date specified in the Schedule on page 1 was varied from 1 March to 11 March 2016, the following can be noted here: 1. MFC's defence contains two significant allegations or concessions concerning the commencement date under the subcontract: 1. At par 5 of its defence, after admitting the allegation, made in par 11 of the amended statement of claim, that the duration of the subcontract was only a period of a month, it went on "and [MFC] says the work was to commence on 14 March 2016 and be completed by 14 April 2016". This is inconsistent with a contention that the commencement date under the subcontract was always 1 March 2016; 2. At par 6 of its defence, after pleading to an allegation concerning the back-flashing, it continues "[MFC] denies there was any valid variation to the contract (save for the date the work was to commence and finish)." Once again, this appears to be inconsistent with a contention that the commencement date was not varied; 1. Mr Fabar's emails, referred to in the Local Court's reasons at [29] and [39], contain comments which indicate that, as at 12 and 14 April 2016, he considered that liquidated damages applied "as of Monday 11th [April 2016]" not as of 31 March 2016, which would have been the case if the commencement date had been as MFC contended on this appeal.
For all of these reasons, leave to appeal in respect of par 6 is refused.

[14]

Paragraph 5 - Parties' submissions

In support of the contention that the court below erred in finding that the commencement date of 1 March 2016 had been varied, MFC submitted that "[v]ariation of a provision of an existing contract requires the contracting parties to enter into a further contract in which they agree to vary the original contract." Thus, it was said that there needed to be: 1. an offer, which was accepted, that the completion and commencement dates would be rescinded and substituted with new dates that were sufficiently certain; 2. consideration in support of the variation; and 3. an intention to create legal relations.
MFC's submission identified the Magistrate's reasoning as being that the absence of written consent to commence work on site, in accordance with cl 9(c), and the sending of the email of 11 March 2016 constituted an offer to vary the commencement and completion dates under the subcontract, and this was accepted by Lindfield Group commencing work on the next business day after it received the email. Attention was drawn to the fact that the email in question attached a signed version of the subcontract agreement and apologised for not sending it through previously as well as asking for an update on how work was progressing. It was then submitted that "[o]n no rational analysis could this email be said to constitute an offer to vary the commencement and completion dates under the [subcontract]" and "[the Magistrate] drew an inference not capable of being drawn from the email communication."
It was also submitted that, as there was nothing at all in that email that provided that the works were to commence on 11 March 2016 and finish on 11 April 2016, it was not reasonably open for the Magistrate to find that the essential terms of the agreement were sufficiently certain to ground a contract to vary the subcontract.
As to lack of consideration, MFC contended that the agreement as found by the learned Magistrate was not supported by consideration because Lindfield Group was, at best, promising to do what it had already contracted to do under the subcontract, albeit in a delayed fashion.
Finally, it was said on MFC's behalf that the exchange of emails that occurred on 11 March 2016 did not disclose any intention to enter legal relations.
Mr Bambagiotti of counsel, who appeared with Ms Arulrajah, on behalf of Lindfield Group, submitted that the Magistrate's conclusion that the commencement date was 11 March 2016 was supported by the following findings and considerations: 1. there was no contract until MFC provided the signed document to Lindfield Group; 2. the subcontract included a provision preventing work from commencing before written consent had been given by MFC; 3. MFC did not give any writing that could fit the description of provision of written consent within GC cl 9(c) until it sent the signed subcontract; 4. it was the common understanding of the parties that the work would take 30 days; 5. work under the subcontract would not commence until receipt of the signed documents.
It was submitted that, if the subcontract were to be as MFC contended, there would be a fundamental inconsistency between GC cl 2(a) and GC cl 9(c).
Lindfield Group also submitted that the documentation, including the provision in the Schedule that the commencement date would be 1 March 2016, was prepared on the assumption that the subcontract would be made on or about 19 February 2016 and hence well before 1 March 2016. The subcontract was not, however, formed until 11 March 2016 and that subcontract would not have permitted Lindfield Group to commence work until that date. Thus a commencement date of 1 March 2016 was nonsensical.
It was also contended that the learned Magistrate did not find that the covering email of 11 March 2016 was an offer; rather it was the provision of the signed subcontract document under cover of that email that was the offer.
As to the consideration point, Lindfield Group submitted that there was no performance of a pre-existing contractual obligation because the offer was in effect the thing that gave rise to the formation of the subcontract itself. There was no pre-existing obligation at that stage.
Finally, Lindfield Group argued that MFC's submission that there was no intention to create legal relations was entirely inconsistent with MFC's conduct in forming the subcontract and its conduct thereafter.

[15]

Paragraph 5 - consideration

MFC's submissions and formulation of its questions of law were premised on there being a pre-existing contract whose terms were the written terms of the document signed by Mr Lindfield on 19 February 2016. This is what underlay the submissions that the email of 11 March 2016, together with the copy of the subcontract documentation signed by Mr Fabar, could not possibly amount to an offer to vary that pre-existing contract, that there was no consideration to support such a variation and that no intention to enter legal relations was evident from the 11 March 2016 email. This premise, that there was a pre-existing contract, is not established, however, on the unchallenged findings and conclusions of the learned Magistrate.
Her Honour found, at [62] and [63], that a contract between MFC and Lindfield Group was not formed until both the email of 11 March 2016 and the copy of the subcontract documentation signed by Mr Fabar were received by Mr Lindfield. As noted above, this conclusion was not challenged in this appeal.
As to the terms of that contract, it was implicitly found that most of the terms of the written documentation supplied by MFC and signed by the parties were the terms that governed the contractual relationship between them. Some of the terms in the documentation, however, gave rise to difficulties, in light of what had and had not occurred after the documentation had been prepared but before the contract was entered into.
Under GC cl 2(a), the commencement date was the date when Lindfield Group was to commence the works, subject to any adjustments in accordance with the subcontract. It was common ground that the duration of the contract was to be one month (as admitted by MFC in par 5 of its defence). Thus, the completion date was to be one month after the commencement date.
If the commencement date was as specified in the Schedule on page 1 of the documentation, Lindfield Group would have been required to commence the work on 1 March 2016 and complete it by 30 March 2016. There were two problems with this.
First, 1 March 2016 was almost two weeks before the contract was entered into on 11 March 2016. Further, if the work was required to be completed by the completion date of 30 March 2016, such would be inconsistent with the duration of the contract being one month. It should not be accepted that a reasonable person in the position of MFC and a reasonable person in the position of Lindfield Group would have thought that Lindfield Group was required to commence work under the subcontract before it was entered into, or to complete the work in less time than was the admitted duration of the subcontract.
Secondly, GC cl 9(c) required Lindfield Group not to commence work on site without the written consent of MFC. No such written consent had been given before MFC sent the signed agreement documentation back to Lindfield Group on 11 March 2016 under cover of the email quoted above. Consequently, Lindfield Group could not have commenced work on site, in accordance with the subcontract, before 11 March 2016 at the earliest.
The learned Magistrate resolved the issue of the commencement and completion dates in her reasons for judgment as follows: "71 By failing to give written consent [under GC cl 9(c)] in a timely manner, [MFC] effectively offered to vary the agreement by pushing back the time frames for completion of the work. [Lindfield Group] accepted that offer when it started work on the next business day after it got the written consent. 72 I reject [MFC's] submission that [Lindfield Group] should have given notice of an unforeseen delay [under GC cl 2(c)], given that the work would not be completed until after 30 March 2016. [Lindfield Group] commenced work on the next working day after it received written authority to commence work on site. The variation to the contract meant that [Lindfield Group] had 30 days after the revised commencement date to complete the work. 73 For the above reasons, I find on the balance of probabilities that the commencement date was 11 March 2016 and that [Lindfield Group] had 30 days within which to complete the work."
In my view, when her Honour refers to "vary[ing] the agreement by pushing back the time frames for completion of the work" and "variation to the contract", she was referring to varying the dates specified in the contract documentation supplied by MFC, to take into account what had and had not happened in the period between 19 February 2016 and 11 March 2016. She was not referring to a variation to a pre-existing contract between MFC and Lindfield Group, because there was no such contract. The only contract found to have been entered into was the subcontract entered into on 11 March 2016. Thus, her Honour found that the commencement date, under the subcontract that MFC and Lindfield Group actually entered into, was 11 March 2016 and the completion date was one month later: see [73] and also [140].
This understanding of the reasoning of the court below is consistent with the approach referred to in Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153 (Brambles Holdings) at [71] to [82]; [2001] NSWCA 61. It involves no error of law. In Brambles Holdings, Heydon JA (as he then was) held at [74], [77] and [81]: 74 Thus offer and acceptance analysis is a useful tool in most circumstances, and indeed is "normal" and "conventional" (Gibson v Manchester City Council [1979] 1 All ER 972 at 974 per Lord Diplock). But limited recognition has been given to the possibility of finding that contracts exist even though it is not easy to locate an offer or acceptance. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR [97326] at 11,117-11,118 McHugh JA (Hope and Mahoney JJA concurring) said: "It is often difficult to fit a commercial arrangement into the common lawyers' analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of 'offer', 'acceptance', 'consideration' and 'intention to create a legal relationship' which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship … Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed." … 77 One further observation of McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd is relevant: "it is an error 'to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed'. Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words. The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract." See also, to the same effect, Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 at 611 (affirmed on appeal at 615). … 81 In the light of the above cases, it is relevant to ask: in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the Council and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?"
The learned Magistrate's findings were in effect that the conduct of, and communications between, the parties on and around 11 March 2016 established that a contract had been entered into between them at that time and that the parties had mutually agreed to be bound generally by the terms set out in the contract documentation, which had been sent earlier. The commencement and completion dates specified in the written documentation could not, however, be given any sensible or logical operation in the light of the passage of time and the absence of necessary steps being taken. Nonetheless, MFC indicated its willingness to go ahead with the subcontract and in effect gave consent in writing to Lindfield Group commencing work on site, by its email of 11 March 2016. Lindfield Group's willingness to be bound by that contract was demonstrated by its commencing work as soon as possible after 11 March 2016. The commencement date and the completion date, as set out in the subcontract documentation, were implicitly varied so as to conform to the mutual expectations of the parties at the time they entered the contract on 11 March 2016.
In substance, her Honour addressed the questions posed by Heydon JA in Brambles Holdings at [81], taking into account the circumstances before her. Her reasons covered in effect each of the following: In all the circumstances could an agreement be inferred? Had mutual assent been manifested? What would a reasonable person in the position of MFC and a reasonable person in the position of Lindfield Group have thought as to whether there was a concluded bargain, and what was the "commencement date" for the purposes of that bargain?
Accordingly, in my view, the questions of law said by MFC to arise in respect of par 5 were misconceived. There was no finding that the email of 11 March 2016 varied a pre-existing subcontract by changing the commencement date. Nor was there a finding that MFC offered to vary the commencement date of the works to be performed under a pre-existing subcontract agreement. It follows that her Honour's reasoning or conclusions were not erroneous on the basis that there was a lack of consideration, the terms were too uncertain or there was no intention to enter legal relations.
Her Honour's finding that the subcontract was entered into on 11 March 2016 was not challenged, and the finding that the "commencement date" was 11 March 2016 was open on the evidence before her and on her other unchallenged findings. The learned Magistrate did not make any error in applying relevant principles concerning the formation and terms of the subcontract.
On these bases, I reject the ground raised in par 5.
Having refused leave to appeal in respect of par 6 of the amended summons, I turn to consider the ground raised in par 7.

[17]

Liquidated damages ground - par 11

MFC's ground in par 11 was to the effect that the learned Magistrate erred in law in finding that GC cl 12(a) of the Subcontract Agreement and the amount of liquidated damages specified in the Schedule on page 1 was a penalty.
The questions of law said to underpin this ground were whether the learned Magistrate had applied the correct test in determining whether the clause was a penalty and whether her Honour had erroneously imposed an evidentiary onus on MFC to prove that the amount of liquidated damages was a genuine pre-estimate of damages.
Clause 12(a) of the General Conditions was as follows: "If the subcontractor [Lindfield Group] fails to complete the Works by the Completion Date (as adjusted under this Agreement), the Subcontractor shall pay Liquidated Damages to MFC, and if no rate is stated in the Schedule, any losses, costs, expenses or damages incurred by MFC as a result of the delay."
The Schedule on page 1 of the subcontract documentation specified: "Liquidated damages: $1,500.00 per day".
It was not in dispute that these were the relevant terms of the subcontract.
The lack of practical utility of the ground in par 11, if MFC was unsuccessful on the commencement and completion date grounds, was acknowledged by Mr Boncardo during oral submissions. The transcript records as follows at p 22 (ll 31-38): "BONCARDO: If the magistrate's right about the completion date, ground 3 of the appeal becomes academic [the ground in par 11 of the amended summons was described at the hearing as 'ground 3']. It gets me nowhere. But if we are right in relation to the completion date being 30 March then clause 12 is in play. HIS HONOUR: So if you're successful on ground 2 [at the hearing the grounds of appeal in pars 5, 6 and 7 of the amended summons were described as 'ground 2'], ground 3 arises. If you're not successful on ground 2 then ground 3 doesn't arise? BONCARDO: Yes. …".
For the reasons set out above, MFC has not been successful on "ground 2", that is the grounds in pars 5, 6 and 7 of the amended summons. Consequently, "ground 3", that is the ground in par 11, does not arise. Since the ground in par 11 is effectively not pressed, it is not necessary to deal with it.
It can be observed here that Mr Boncardo's not seeking to press par 11 in the circumstances was entirely appropriate. This is because, if MFC were successful on par 11, it would not have assisted his client.
The learned Magistrate found that the work was finished one day late. If successful on the ground in par 11, MFC would have been entitled to recover liquidated damages of $1,500 instead of $1, as awarded, for the one day delay in completion of the work. This may well not have benefitted MFC.
If the Local Court's judgment were set aside as a result of MFC's success in respect of par 11, the Court would have to consider what amount should be awarded to Lindfield Group, in light of the Magistrate's uncontested findings and the fact that the challenge to Lindfield Group's contractual claim for work done under the subcontract was rejected (for the reasons explained above in relation to the grounds concerning the commencement date under the subcontract).
Atkinson LCM held Lindfield Group was entitled to $92,400 on its contractual claim, but that figure already included a deduction of $4,500, being 3 days' liquidated damages. This is explicitly stated in the invoice of 22 April 2016 and the covering email, quoted above. In that invoice and email, Lindfield Group conceded that 3 days' liquidated damages were due under the subcontract. To deduct a further $1 for damages for delay, as was done in the Local Court, appears to involve double counting of such damages, but there was no appeal in that regard. Similarly, even if MFC was entitled to $1,500 in liquidated damages for delay instead of $1, to deduct that larger amount from the $92,400 awarded in respect of the contract claim would also involve double counting.
If MFC was successful on an appeal based on par 11 and the judgment of the Local Court was set aside, the amount of the judgment against MFC might be increased because the Magistrate mistakenly included a deduction of $4,500 from the amount awarded for the work done under the contract.

[19]

Should MFC be permitted to raise a new point under this ground?

Lindfield Group opposed this ground of appeal on the basis that the point now sought to be argued had not been raised before the court below. On this basis, it was submitted that MFC should not be allowed to raise the point in this appeal, relying on the principles in cases such as Coulton v Holcombe (1986) 162 CLR 1 at 7-8; [1986] HCA 33 and Metwally v University of Wollongong [1985] HCA 28; (1985) 59 ALJR 481 at 483.
It is clear from MFC's defence, MFC's written submissions in the Local Court, and her Honour's reasons concerning the Security of Payment Act claim at [150] to [171], that MFC did not argue in that court that Lindfield Group's invoice of 22 April 2016 was not a payment claim for the purposes of that Act because it was not served on and from the reference date under the subcontract, being the 25th of the month as specified in the subcontract or, if no date was specified in the subcontract, the last day of the month, in accordance with s 8(2)(b) of the Security of Payment Act. The point taken before the Local Court appears only to have been that the invoice of 22 April 2016 failed to state that it was made under the Security of Payment Act and thus did not comply with s 13(1)(c) of that Act (see her Honour's reasons at [151] and [155] to [163]).
MFC submitted in substance that it was raising a question of law that could not be met by further evidence or different conduct in the proceedings below.
Lindfield Group contended that, if the new point had been raised in the Local Court, it would have sought to meet the point by calling evidence of another, later invoice of 10 May 2016 and it would have conducted its case differently including by relying on that invoice and other evidence concerning the work done under the subcontract. These contentions were supported by two affidavits of Lindfield Group's solicitor, which were read without objection and on which there was no cross examination. I accept that evidence. While there must be some doubt as to whether the other invoice (which identified the correct Act) could overcome the new point raised by MFC, I do not think that I am in a position to conclude definitively that the other evidence or the different way in which the case might have been conducted could not have overcome MFC's new point, had it been raised in the Local Court so as to allow Lindfield Group to address it at that stage.
MFC contended, however, that it was important for this Court to determine whether there was a valid payment claim to found proceedings under s 15 of the Security of Payment Act in this case because of the terms of s 15(4), which prevent MFC from bringing any cross-claim or raising any defence in these proceedings. Section 15 relevantly provides: "(1) This section applies if the respondent: (a) becomes liable to pay the claimed amount to the claimant under section 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and … (2) In those circumstances, the claimant: (a) may: (i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or … … (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) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and (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."
It was not in dispute on this appeal that, if there was a valid payment claim made by Lindfield Group, MFC had failed to provide a payment schedule to the claimant within the time allowed by s 14 and, in those circumstances, Lindfield Group could recover the amount of the unpaid claim in the Local Court in proceedings commenced under subs 15(2)(a)(i). MFC's concern was that s 15(4) operated to prevent it from raising a defence, by way of set off or a cross-claim, in the present proceedings to set off the amounts it claimed it was owed under the subcontract against the amount which the Local Court found Lindfield Group was entitled to recover on its contractual claim.
This concern does not justify allowing MFC to raise its new point on appeal for at least three reasons.
First, as was conceded at the hearing of this appeal, "[t]he proceedings were conducted before the Magistrate below without either the plaintiff or the defendant below taking any issue in respect of section 15 of the Security of Payments Act".
Secondly, the Local Court did award MFC an amount by way of set off and the amount of the judgment was reduced accordingly. The amount was, however, only $1. The challenge to this aspect of the Local Court's judgment has not been successful or was not pressed in this appeal. In addition, the amount of the judgment already included a reduction for 3 days' liquidated damages, which Lindfield Group expressly conceded MFC was entitled to recover, as explained above. Accordingly, any injustice or prejudice to MFC arising out of a failure to consider the effect of s 15(4) of the Security of Payment Act would be de minimis at most.
Thirdly, and perhaps more importantly, MFC's concern appears to be unfounded on the proper construction of s 15 in the context of the Security of Payment Act as a whole. Section 15(4) relates to proceedings under s 15(2)(a)(i). Those proceedings are proceedings limited to recovering the unpaid portion of an amount claimed by way of a payment claim served in accordance with the Security of Payment Act. Section 32 deals with the effect of the provisions in Pt 3, including s 15(4), on civil proceedings more generally.
Section 32 of the Security of Payment Act provides: "(1) Subject to section 34 [which is not presently relevant], 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."
When these two provisions are read together with the objects of the Act set out in s 3 as explained in Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd (2016) 260 CLR 340 at [3] to [15]; [2016] HCA 52, it can be seen that s 15(4) should not be construed as preventing MFC from raising a cross-claim or a defence by way of set off in respect of Lindfield Group's proceedings based on its contractual claim in the Local Court. This is so, even though that set of proceedings somewhat unusually included, in the alternative, a claim under the Security of Payment Act. The statutory liability created by s 14(4) and enforced under s 15(2)(a)(i) is separate and distinct from the underlying contractual liability following the performance of work under the construction contract: Quickway Constructions Pty Ltd v Electrical Energy Pty Ltd [2017] NSWCA 337 at [46].
Put another way, the words "those proceedings" in s 15(4)(b) refer only to "proceedings under subsection (2) (a) (i) to recover the unpaid portion of the claimed amount" in the chapeau to s 15(4). They do not refer to the whole set of proceedings, which includes proceedings based on a contractual claim but also happens to include, as an alternative to the contractual claim, proceedings based on a claim under s 15(2)(a)(i) to recover the unpaid portion of the amount claimed by way of a payment claim under the Security of Payment Act. Moreover, any amount recovered, or recoverable, in s 15(2)(a)(i) proceedings would, in any event, have to be taken into account when the amount of judgment on the contractual claim was being considered: s 32(3)(a) and (b) of the Security of Payment Act.
This approach is consistent with the reasoning of Basten JA and the passages from the relevant Second Reading Speech referred to by his Honour in Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9, particularly at [78] to [82]; [2006] NSWCA 238, when it is understood that different proceedings based on different claims or causes of action can be included in what can be described as one set of proceedings in the Local Court.
It can be accepted that a question of law may be raised for the first time on appeal and it will often be expedient in the interests of justice that this is permitted to be done, but this will not apply where the new ground could possibly have been met by calling evidence at the hearing or, if the ground had been raised below, the other party might have conducted its case differently: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; [1950] HCA 35 citing Lord Watson in Connecticut Fire Insurance Co v Kavanagh [1892] AC 473; Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 at 645; [1997] NSWCA 214.
Applying that principle in the present case and since I cannot rule out that Lindfield Group may have been able to meet the new point by calling evidence or conducting its case differently, MFC should not be permitted to raise the new point involved in the ground in par 13 in this appeal.
In case I am wrong in that conclusion and only a point of law is now raised, and it could not have been met by calling evidence in the Local Court or different conduct in those proceedings, I would still not have permitted MFC to raise this point for the first time on this appeal.
An appellant does not have a right to insist that a point raised for the first time on appeal be decided simply because it raises a question of law only or depends on facts established beyond controversy. The question is always whether the appellate court considers it expedient and in the interests of justice to entertain the point: RinRim Pty Ltd v Deutsche Bank AG [2017] NSWCA 169 at [76] citing TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439 at [166]; [2016] NSWCA 68 and Water Board v Moustakas (1988) 180 CLR 491 at 497; [1988] HCA 12.
In the present case, MFC has not been successful on the grounds in pars 5, 6 and 7 of its amended summons and the ground in par 11 is not pressed. As a result, the judgment of the Local Court in Lindfield Group's favour, for $92,399, stands. That judgment is based on Lindfield Group's contractual claim and does not depend upon whether the alternative Security of Payment Act claim stands or falls. The judgment also includes a reduction for the amount the Local Court held that MFC was entitled to set off for delay damages. In these and all the circumstances referred to above, it would not work any substantial injustice to MFC to refuse to allow it to raise the new point concerning the Security of Payment Act claim on appeal. Nor, in these circumstances, does expediency support allowing MFC to raise the new point now.
For these reasons, MFC should not be permitted to raise in this appeal the new point arising under the ground in par 13 of the amended summons.
Consequently, the appeal based on par 13 of the amended summons should be rejected.

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