Nefiko Pty Ltd v Statewide Form Pty Ltd

Introduction 1In these proceedings, the plaintiff, Nefiko Pty Ltd, challenges the validity of an adjudication determination of the second defendant, Mr Robert Sundercombe (the Adjudicator), made on 17 March 2014 in relation to a payment claim made by the first defendant, Statewide Form Pty Ltd, against Nefiko. The Adjudicator has filed a submitting appearance.

Background facts 2Nefiko carries on the business of producing and selling finished marble and other fancy stone, mostly for bench tops and similar applications. The directors of Nefiko are Suk Chun Janette Cheong (Ms Cheong) and her sister, Suk Fan Angela Wong (Ms A Wong), who each own half the shares in Nefiko. 3Ms Cheong owns a waterfront house in Woolwich where she lives with Ms A Wong, another sister, Veronica Wong (Ms V Wong), who also works for Nefiko, their mother and children. 4In late 2013, Ms Cheong decided to arrange to have some building and landscape work done on the Woolwich property, including demolition of a swimming pool. She spoke to Mr Matthew Bell, a construction project manager with whom she had done some work, who suggested that she contact Mr John Elcham, who worked as a project manager for Statewide Form. 5Mr Bell also spoke to Mr Elcham about the work Ms Cheong wanted done and Mr Elcham arranged for Mr Billy Farah, a director of Statewide Form, to meet with Ms Cheong. The first meeting was on 2 December 2013 at the Woolwich property. It was attended by Mr Farah and Mr Roberto Carera, a formworker employed by Statewide, and Ms Cheong and Ms A Wong. 6Ms Cheong and Ms A Wong, on the one hand, and Mr Farah and Mr Carera, on the other, gave very different accounts of what happened and what was said during the course of the meeting, although there was clearly a discussion concerning the nature of the work that Ms Cheong wanted done. It is agreed that, during the course of that discussion, Ms Cheong gave Mr Farah a sketch that Ms A Wong had prepared showing what Ms Cheong wanted done. It is also likely that Ms Cheong told Mr Farah and Mr Carera that she owned the property, although Mr Farah (but not Mr Carera) denied that she did so. 7According to Ms Cheong and Ms V Wong, there were further meetings on 3 and 4 December 2013, which they both attended, during which Mr Farah showed Ms Cheong samples of timber that could be used for the decking to cover the swimming pool area; and it seems likely that there were other meetings before work commenced, although in their affidavit evidence neither Mr Farah nor Mr Carera refer to them. Ms Cheong also says that, during the subsequent meetings, there was further discussion concerning the nature of the work that she wanted done. 8Ms Cheong and Mr Farah agreed a price for the work of $50,000. According to Mr Farah, that agreement was reached at the first meeting and Ms Cheong agreed to a deposit of $9,000. Of critical importance is Mr Farah's evidence of the following conversation with Ms Cheong at that meeting: I said: How do you want to pay for this work? Who do you want me to make the invoices out to? She said: Make the invoices out to my company name Nefiko. Here is my business card with the details. 9Mr Farah says that the conversation occurred in the presence of Ms A Wong and Mr Carera. Mr Carera gave evidence supporting Mr Farah's version of the conversation. Both Ms Cheong and Ms A Wong deny it; and both deny that Ms Cheong ever gave Mr Farah a copy of her Nefiko business card, although it is plain that Mr Farah obtained Ms Cheong's business card at some stage, since he annexes a copy to his affidavit. 10According to Ms Cheong, the price of $50,000 was agreed at the meeting on 4 December 2013. She makes no reference to the payment of a deposit, although Nefiko's Amended Technology and Construction List Statement pleads that the parties agreed to a deposit of $9,000. Also according to Ms Cheong, there was a conversation between her and Mr Farah in the following terms: Billy: ... How will you pay me? Me: This is my own house, so I can pay cash and/or cheque as the job progresses. ... Ms V Wong gives evidence of the same conversation in almost identical terms. 11It is uncontentious that, during one of the conversations, Ms Cheong made it clear that Mr Farah was to take instructions from Ms A Wong. 12Mr Farah carries on business through the defendant and there is a dispute whether the defendant's name was ever mentioned during the conversations. Ms Cheong places some emphasis in her affidavit evidence on the fact that she asked Mr Farah for his business card on a number of occasions but was not given one. 13Work started on 10 December 2013 and, on 14 December 2013, Ms A Wong handed Mr Farah the deposit of $9,000 in cash. Mr Farah signed a handwritten receipt for that amount which said: Received $9000 cash from Janette to Billy It appears that the receipt was written out by Ms A Wong. 14Shortly after work commenced, Ms Cheong asked Mr Farah to do some additional work. A dispute arose concerning the price for that additional work. The details of the additional work are not important. Ms Cheong contacted Mr Bell about the dispute and in response, on 17 December 2013, Mr Bell emailed Ms Cheong a revised scope of works that had been prepared by Mr Elcham, which described the work to be done and the price for various components of that work. The scope of works was headed "statewide form" and was partially typed and partially handwritten. It was signed by Mr Elcham on behalf of "statewideform P/L" and made provision for "Janet Cheung" to sign as "owner". 15Ms A Wong replied to that email on the same day. The reply relevantly said: Thank you for your revised scope of work unfortunately there is a significant variance from our original agreement between Janette and Billy and Robert. At this stage, we do not agree the proposed scope of work and it's [sic] detail as we'll [sic] as the quotation. As there are proposed exclusions which should have been included in your price as per original agreement. Therefore in order to treat this matter as fairly as possible with minimal impact to the project in every aspects, it is imperative to resolve this matter tomorrow and will consider the continuation of work by Stateform based on the outcomes of that discussion. As such, we do not suggest any work on site. Kindly make necessary arrangements accordingly. 16It appears that, the following day, two persons from Statewide Form attended the property to collect their tools. Later that day, Ms A Wong sent Mr Elcham an email, which said in part: While we understand John will send a detail list of costs incurred up to date for comment and approval. We will try to resolve this as soon as we could. Meanwhile, it seems the chance of having Statewide Form to continue the job is remote as he has provided 2 personnel to pack and remove the gears from site. The site is currently left incomplete and dirty. It is causing a great inconvenience and possibly with structural and water penetration issues, etc. We will immediately engage another contractor, at least to make good and bring the site in a [sic] orderly and safe condition without further notice. 17Mr Elcham responded to that email on 19 December saying the following: I refer to our recent telephone communication and your emails. We hereby accept your repudiation of our agreement. Kindly find enclosed attachment of our claim for the abovementioned project. Attached to the email was an invoice from Statewide Form claiming the sum of $53,232.50. The invoice was addressed to "Nefiko Pty Ltd". Mr Elcham says that, when he was preparing the invoice, he asked Mr Farah to whom to address it and Mr Farah told him to address it to Nefiko and gave him the business card that Ms Cheong had given him. Mr Elcham was not cross-examined on this evidence. The invoice is stated to be a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). 18For reasons which are unclear, Mr Elcham sent further emails to Ms Cheong at Nefiko on 31 December 2013 (one at 9.00 am and another at 9.05 am) stating "We hereby accept your repudiation of our agreement". The emails also attached an invoice dated 31 December 2013 in the same terms as the invoice dated 19 December 2013. Again, the invoice was expressed to be a payment claim in accordance with the Act. 19Nefiko did not serve a payment schedule in response to the payment claim within the time limit specified in s 14(4) of the Act. 20On 6 February 2014, Avondale Lawyers, acting for Statewide Form, sent an email to Nefiko demanding payment of the $53,232.50, failing which the email said "we will be commencing an adjudication application for this matter". 21After receiving that email, Ms V Wong rang the solicitor acting for Statewide Form. There is a dispute concerning what was said. However, it is apparent that Ms V Wong denied that Nefiko was the contracting party and said that the email needed to be sent to Ms Cheong. On the same day, Avondale Lawyers sent a letter to the same effect as the previous email addressed to "Janette Cheung [sic] Nefiko Pty Ltd". 22On 11 February 2014, Statewide Form served a notice under s 17(2) of the Act notifying Nefiko of its intention to apply for adjudication of its payment claim. Again, Nefiko did not serve a payment schedule within 5 business days after receiving that notice. 23On 19 February 2014, Statewide Form lodged an adjudication application with Adjudicate Today. That application was supported by an affidavit sworn by Mr Farah. Since Nefiko had not served a payment schedule, it was prevented by s 20(2A) of the Act from lodging an adjudication response. 24On 6 March 2014, the solicitors acting for Nefiko and Ms Cheong wrote to the Adjudicator. After pointing out that they acted for Nefiko, the letter said: We also act for Janette Cheung [sic], who admits to having a contract with Statewide Form Pty Limited ("Statewide Form"), but not in the terms claimed by the Applicant. The letter went on to submit that the contract was between Statewide Form and Ms Cheong, not between Statewide Form and Nefiko. It made other submissions which are not relevant to the current dispute. 25The Adjudicator made his determination on 17 March 2014. He held that $25,732.50 including GST was payable by Nefiko, together with the Adjudicator's fees. He referred to the submission made by the solicitors for Nefiko and Ms Cheong concerning who the correct contracting party was. However, he observed that Nefiko had not provided a payment schedule pursuant to s 20(2A) of the Act and was not therefore entitled to provide an adjudication response. Nonetheless, he went on to consider the question whether the contract was with Nefiko or Ms Cheong and concluded on the evidence before him that it was with Nefiko. 26Nefiko commenced these proceedings on 28 March 2014. Initially, it sought an interlocutory injunction restraining Statewide Form from acting on or seeking to enforce the Adjudicator's determination on the ground that the Adjudicator had failed to comply with the rules of natural justice. That application was dismissed: see Nefiko Pty Ltd v Statewide Form Pty Ltd [2014] NSWSC 442.