Ratcliffe v Horizon Glass & Aluminium Pty Ltd

Supreme Court of NSW|2023-03-02|Before: Rees J, Mr JJ, Mr P

Solicitors: Gavel and Page Lawyers (Plaintiff) File Number(s): 2022/314117

Judgment

HER HONOUR: The plaintiff, Brendan Ratcliffe, seeks a declaration that an adjudication determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) is void. The adjudicator found that the first defendant, Horizon Glass & Aluminium Pty Ltd, was entitled to the whole of its payment claim, being $72,720.38.
Mr Ratcliffe contends that an essential prerequisite to the exercise of the adjudicator's jurisdiction was not present, being a construction contract between himself and Horizon Glass. Rather, the construction contract was said to be with his company, Starfire Windows Pty Ltd (in liquidation) (the Company). Horizon Glass hotly disputes this.

Jurisdictional error

This Court can only quash an adjudicator's determination for jurisdictional error: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1 at 15; [2018] HCA 4 at [35] (per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ). An essential prerequisite to the exercise of an adjudicator's powers, and thus jurisdiction, is the existence of a construction contract between the claimant and the respondent, to which the Act applies (sections 7 and 8): Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at 441; [2004] NSWCA 394 at [53] (per Hodgson JA).
Section 7(1) of SOPA provides: (emphasis added) Subject to this section, this Act applies to any construction contract, whether written or oral, or partly written and partly oral … where "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: section 4(1).
Section 8 of SOPA provides: (emphasis added) Right to progress payments A person who, under a construction contract, has undertaken to carry out construction work or to supply related goods and services is entitled to receive a progress payment.
As Brereton J explained in Fifty Property Investments Pty Ltd v Barry O'Mara & Anor (2007) 23 BCL 35; [2006] NSWSC 428 at [18]-[23], whether or not there was a construction contract is a "jurisdictional fact". The adjudicator's finding that there was such a contract is open to review in this Court. Where the existence of an essential precondition to jurisdiction is a question of objective fact, it is for the reviewing court to determine, on the evidence before it, whether or not the fact exists. The Court may give weight to the view of the decision maker where their expertise especially equips them for task. Here, "Although the qualifications and experience in the construction industry of the adjudicators appointed under the Act would give them specialist skills in determining technical construction issues, I do not think they have any claim to superior expertise, nor any position of advantage, in determining whether or not a construction contract was made": at [23]; see likewise IWD No 2 Pty Ltd v Level Orange Pty Ltd [2012] NSWSC 1439 at [9]-[11] (per Stevenson J).

Witnesses

Mr Ratcliffe gave evidence and was cross-examined. He was an impressive witness. He made reasonable concessions. Mr Ratcliffe accepted that his first affidavit contained some inaccuracies which were revealed once further contemporaneous records were compiled, in particular, mobile phone records. This was unsurprising and not suggestive of dishonesty. Mr Ratcliffe readily accepted that his recollection of events was imperfect.
Farren Doyle, a director of Horizon Glass, gave evidence and was also cross-examined. He was a straightforward, younger fellow who was understandably bothered that the company, of which he and his wife are directors, had not been paid a substantial sum. Mr Doyle was emphatic that his recollection of critical conversations with Mr Ratcliffe in October 2020 was completely accurate, notwithstanding that his recollection of when he first met Mr Ratcliffe and when the conversation occurred was initially inaccurate: see [21], [58]. He did become a little argumentative and, on one occasion, did not accept that it was important to state with clarity on an invoice the party with whom Horizon Glass had contracted.
Both gave clear and emphatic evidence as to their conversations and strongly denied the other's version. They cannot both be right. I do not think that either Mr Ratcliffe or Mr Doyle are entirely right. Rather, I consider that the conversations and communications between them at the time had a degree of informality which reflected the fact that they had worked together in the past. The precise words used in a critical conversations in October 2020 did not become relevant to recall until February 2022 and was likely not of great moment to either at the time. Both gentlemen likely embellished their account somewhat.
Whilst the period of time between the critical conversation in October 2020 and the apprehension of the significance of that conversation is not particularly lengthy in the scheme of litigation, the observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 remain apposite. At 319: … human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
In determining what happened, I have initially put to one side the witnesses' recollection of their conversations and focused on more reliable business records before returning to consider the evidence as to their conversations again.

Mr Ratcliffe and the Company

Mr Ratcliffe is a shop fitter and glazier. In 2005, Mr Ratcliffe obtained an Australian Business Number (ABN) ending 183 and registered for goods and services tax (GST). He traded as a sole trader for ten years.
In 2016, Mr Ratcliffe registered the business name "Starfire Windows" and became trading in that name, using the same ABN ending 183. Mr Ratcliffe also registered the domain name starfirewindows.com.au using that ABN.
In August 2017, Mr Ratcliffe incorporated the Company; he was the sole officeholder and shareholder. The Company was in the business of window installations. The Company became registered for GST with a different ABN ending 578. The Company opened a bank account with the Commonwealth Bank.
In September 2017, the Company rendered its first invoice, being to "Evolution Windows". The invoice clearly stated the name of the Company, its ABN ending 578 and an email address, brendan@starfirewindows.com.au. Mr Ratcliffe continued to use the email address which he had created when a sole trader, but which was known to others and was still operational. The lower portion of the Company's invoice directed the customer to transfer funds to the Company's Commonwealth Bank account.
Some of the Company's bank statements are in evidence, from which it may be seen that expenses related to the Company's activities were paid from the account, including salary, insurance, accounting software, tolls, fuel, hardware supplies, storage, mobile phone, parking and the like. Payments from customers such as Evolution Windows were deposited to the Company's bank account.
In October 2017, Mr Ratcliffe cancelled his personal registration for GST. It is readily apparent that Mr Ratcliffe moved from a sole trader operating under the business name "Starfire Windows" to operating through the Company.

Mr Ratcliffe and Mr Doyle meet

Mr Doyle is a qualified carpenter and glazier. In May 2017, Mr Doyle and his wife incorporated Horizon Glass.
In 2018, whilst doing a job for Evolution Windows in Potts Point, Mr Ratcliffe met Mr Doyle. Mr Ratcliffe was working as site manager for Evolution Windows. Horizon Glass was providing labour to Evolution Windows. It would appear that, in this industry, a company or person who obtained a contract to install windows on a large project would then source additional labour to complete the work by subcontracts with other companies or sole traders. The Evolution Windows' job is illustrative. Evolution Windows had seven or eight people on the site, managed by Mr Ratcliffe. Some of the labour came from other companies, such as Horizon Glass.
In evidence are a series of text messages between Mr Ratcliffe and Mr Doyle from 24 July 2018 until January 2020, which indicate that they were working with one another over this period. At odds with the contemporaneous records, Mr Doyle said he first met Mr Ratcliffe in early January 2020.
According to Mr Ratcliffe, he and Mr Doyle had many discussions. Certainly, their telephone records indicate that they spoke from time to time at some length. On one occasion, Mr Ratcliffe recalls a discussion about why he was working in a management role rather than 'on the tools'. Mr Ratcliffe said he had a back injury. Mr Doyle asked whether Mr Ratcliffe worked directly for Evolution Windows and Mr Ratcliffe said, "No I operate under a company, Starfire Windows Pty Ltd, [as I] need to have my own workers comp. I contract to Evolution on day labour." They discussed the subject on another occasion. Mr Ratcliffe explained that, because of his back injury, he needed his own insurance and so he started the Company. Working under a company also had tax advantages.
Mr Doyle denied discussions about Mr Ratcliffe's company and thinks he would have remembered if this had been mentioned. Rather, Mr Doyle understood that Mr Ratcliffe was contracting with Evolution Windows in his capacity as a sole trader. Further, Mr Doyle said he did not then understand the differences between working as a sole trader as opposed to using a company, and did not know enough to make the comments attributed to him by Mr Ratcliffe. In this regard, Mr Doyle proved to be a poor historian as Horizon Glass had been incorporated for a year or so by the time these discussions are said to have taken place. Presumably, Mr Doyle did have some knowledge about the difference between working as a sole trader as opposed to using a company, as he had chosen the latter. That said, Mr Doyle was "not exactly" sure what was meant by Pty Ltd, "I know they mean proprietary limited, I am not sure of all the rules that follow them …"
It is not unlikely that these gentlemen, who worked together over some 18 months and had lengthy discussion from time to time, would have talked about how they were operating their respective businesses, that is, whether they were employees, sole traders or using a company. I expect that any discussion as to whether Mr Ratcliffe was employed by Evolution Windows or providing his services through a company was not of great importance at the time and Mr Doyle may not have been recalled it five years' later. Whether this conversation occurred in the terms described by Mr Ratcliffe or not is of relatively little significance when compared with evidence more contemporaneous to when the contract was entered into, to which I now turn.

The Liverpool job

In October 2020, the Company was engaged by Greater Sydney Facades and Glazing Pty Ltd (Sydney Facades) to install windows on a 17-storey apartment building at Liverpool. Invoices rendered by the Company to Sydney Façades bore the same details as those earlier described: see [16]. Payment of the Company's invoices were deposited to the Company's bank account. There is no doubt that the Company was engaged by Sydney Facades to do the Liverpool job.
The Company then had only one labourer and apprentice. It became apparent to Mr Ratcliffe that more labour was needed. The Company proceeded to source labour from other companies or sole traders sufficient to complete the work. In evidence are invoices rendered by three subcontractors supplying labour for the Liverpool job: "Outta No Where Glazing", Fogos Construction Pty Ltd and "MMM Interiors". Eight invoices were rendered by these entities, dating from November 2020 to March 2021. Each invoice is specifically addressed to the Company. The Company's bank statements record payments from the Company to these subcontractors. Presumably, these subcontractors rendered their invoices to the Company because Mr Ratcliffe told them that the Company was the contracting party.
Mr Ratcliffe understood that Horizon Glass routinely hired out its personnel to other companies if needed. On Monday, 12 October 2020, Mr Ratcliffe left a message on Mr Doyle's phone, "Hi Farren, it's Brendan. … Need a few boys for next … week". Mr Doyle returned his call. Mr Doyle described their conversation as follows: Me: Hi Brendan. What's been happening? Haven't heard from you in a while. Brendan: I don't work for Evolution now. I'm doing an install job at Liverpool. Can you send me some boys? They discussed Horizon Glass' rates. Mr Doyle said his "boys" could start straight away.
According to Mr Doyle, no mention was made of the Company. Mr Doyle said he understood that the contract was with Mr Ratcliffe personally. The conversation as recalled by Mr Doyle is certainly consistent with that, but does rather leave the matter open. If Mr Doyle had previously understood that Mr Ratcliffe was the project manager for Evolution Windows, then Mr Doyle may also have understood that Mr Ratcliffe was now working in a similar capacity for whoever had the contract for the Liverpool job, that is, the equivalent of Evolution Windows on the Liverpool site. That is, the entity responsible for paying Horizon Glass might be Mr Ratcliffe or it might be the company for whom he was working.
Mr Ratcliffe accepted Mr Doyle's description of their conversation, save that it was incomplete. First, Mr Ratcliffe said "when I answer a phone call, I always answer with the company I'm working for at the time". I consider it inherently likely that Mr Ratcliffe, when answering his phone, would have said "Starfire Windows", although perhaps not "Starfire Windows Pty Ltd".
Second, Mr Ratcliffe said he told Mr Doyle that he did not work for Evolution as a contractor now, "I'm doing my own work, still under my own company, Starfire Windows Pty Ltd if you recall?" Where Mr Ratcliffe struck me as a competent and efficient person, it is likely that he would have made plain who Horizon Glass would be contracting with for the Liverpool job. Mr Ratcliffe appears to have made this clear to the other three subcontractors who provided labour for the Liverpool job and it is likely that he would have done the same when speaking to Mr Doyle.
On Tuesday, 13 October 2020, Mr Ratcliffe texted Mr Doyle the "Thursday address", being the Liverpool site, adding "You can drop the boxes off between 7-10am tomorrow if that helps you." On Thursday, 15 October 2020, Horizon Glass' workers began work. On Saturday, 17 October 2020, Mr Doyle and Mr Ratcliffe exchanged text messages about getting further workers and ladders on site. Mr Doyle advised that he would go to the site on Tuesday, 20 October 2020, "and by the end of the week we will have a full time crew out there that shouldn't change."
At the end of the month, Mr Doyle and Mr Ratcliffe exchanged text messages on 29 and 30 October 2020: Doyle: Hey mate can you send through your info so I can invoice tomorrow please Ratcliffe: My email Brendan@starfirewindows.com.au Company name Starfire Windows Pty Ltd
Mr Doyle agreed that he sent the text message at a time when he just wanted to clarify who Horizon Glass was contracting with. He reluctantly accepted that he knew, from Mr Ratcliffe's text message, that Mr Ratcliffe was saying that the contracting party was the Company, "that's what he was implying to me, yes." There was nothing implied about it; Mr Ratcliffe made it perfectly clear that the contracting party was the Company.
Mr Doyle's text message corroborates Mr Ratcliffe's version of their initial conversation. Mr Doyle asked Mr Ratcliffe to provide "your info" to enable an invoice to be prepared. Whilst Mr Doyle insisted that the only information he was seeking was Mr Ratcliffe's email address, I do not read his text message as being so confined. Rather, Mr Doyle was asking for the precise details of the entity to whom the invoice should be addressed "so I can invoice tomorrow". He was not only asking for details to enable him to send the invoice but for the information required to prepare the invoice. Where Mr Doyle already knew Mr Ratcliffe's name, the fact that Mr Doyle was asking for further information is consistent with an understanding that the invoice was to be rendered to someone other than Mr Ratcliffe. Mr Ratcliffe's text message in reply provided the necessary "info" in clear and plain terms.
Mr Doyle said the text message was the first time the name Starfire Windows Pty Ltd had been mentioned. Mr Doyle was concerned as he understood that his agreement had been with Mr Ratcliffe. As he had not heard of the company before, he looked up 'ABN Lookup' and saw the business name "Starfire Windows" attached to Mr Ratcliffe. Mr Doyle said he searched 'ABN Lookup' using the name of Mr Ratcliffe. Mr Doyle did not print out the 'ABN Lookup' search; the first such search in evidence was made on 12 February 2022, apparently by Horizon Glass' debt recovery agent: see [56]. Mr Doyle said that, on the basis of his 'ABN Lookup' search, he was prepared to address invoices to "Starfire Windows" instead of addressing them to Mr Ratcliffe as Mr Ratcliffe was listed as the owner of the business name. Mr Doyle did not discuss his concern, or his enquiries, with Mr Ratcliffe at the time.
I have difficulty with Mr Doyle's evidence in this regard. First, there was no reason why Mr Doyle should have been concerned to deal with the Company, rather than with Mr Ratcliffe personally, where Horizon Glass had never previously provided services to either the Company or Mr Ratcliffe.
Second, if, on receipt of Mr Ratcliffe's text message, Mr Doyle was concerned as to who "Starfire Windows Pty Ltd" was then, logically, he would have done an 'ABN Lookup' search of the Company. Against this, I note that an accountant later provided with the Company's name and Mr Ratcliffe's email address "had a quick look online" and understood that Mr Ratcliffe operated the business as a sole trader: see [60]. Whether the "quick look online" was an 'ABN Lookup' search is unknown but it may be that the similarity between the business name and the Company's name gave rise to confusion unless one paid attention.
Third, an 'ABN Lookup' search of Mr Ratcliffe may also have revealed that Mr Ratcliffe was "Not currently registered for GST". Mr Doyle's evidence was unclear as to what details were provided on an 'ABN Lookup' search in October 2020 "before you actually have to pay the money to extract it".
Finally, I consider it wholly unlikely that Mr Doyle would have proceeded to render invoices to the business name registered to Mr Ratcliffe to ensure that Mr Ratcliffe was personally liable, in the face of clear instructions from Mr Ratcliffe that the invoices were to be rendered to the Company, without discussing the matter with Mr Ratcliffe. What could be more productive of a dispute as to payment than rendering an invoice contrary to the customer's specific instructions?
On 5 November 2020, Mr Doyle texted Mr Ratcliffe, "Just sending the invoice now for October …". Horizon Glass' invoice was addressed to "Star Fire Windows" in the amount of $24,970; the invoice did not state the customer's ABN. That is, the invoice was not addressed to the Company, nor the precise business name "Starfire Windows", nor to Mr Ratcliffe. This suggests a lack of attention to detail on Mr Doyle's part at the time.
Mr Ratcliffe did not then notice the entity to whom the invoice was addressed. On 18 November 2020, the Company part-paid Horizon Glass' first invoice by transferring $20,000 from the Company's bank account. (The balance was paid on 5 February 2021). The payments were described differently on the Company's bank statements and those of Horizon Glass as follows: 1. In the Company's bank statement, the transaction was described as "Transfer To Horizon Glass … Invoice 0179". 2. In Horizon Glass' bank statement, the transaction was described as "Payment from Brendan Ratcliffe invoice 0179 Horizon Glass".
The description of the transaction as it appeared on Horizon Glass' bank statements may be post-contractual conduct in the form of an admission against interest as to the terms of the contract: JR Consulting & Drafting Pty Ltd v Cummings (2016) 239 ALR 625 at 637; [2016] FCAFC 20 at [54] (per Bennett, Greenwood and Besanko JJ). However, there is no evidence that the description was authored by Mr Ratcliffe. Mr Ratcliffe made the payments using his mobile phone. He did not enter his name when doing so. Mr Doyle was unable to shed any further light on the matter. The description on Horizon Glass' bank statement was "just as is from ANZ".
On being provided with Horizon Glass' bank statements in the course of these proceedings, Mr Ratcliffe did a test, transferring $2 from a Commonwealth Bank account which he operates for his current business to his wife's St George Bank account. His wife's bank account recorded the deposit as "Brendan Ratcliffe". The test is not particularly helpful where Mr Ratcliffe was unable to divine from his mobile phone whether the bank account from which he transferred the funds was in his name or the trading name of his current business. The most likely explanation for the description appearing in Horizon Glass' bank statement is that the description was automatically generated by, presumably, the Commonwealth Bank, where Mr Ratcliffe's name appears on the Company's bank statements as its director. The point, however, is that there is no evidence that Mr Ratcliffe authored the description that the payment to Horizon Glass was from him.
On 17 November 2020, Horizon Glass rendered its second invoice, addressed again to "Star Fire Windows", for $18,667. Mr Ratcliffe noticed that the invoice was addressed to "Star Fire Windows" and not to the Company. On 20 November 2020, Mr Ratcliffe called Mr Doyle and, according to Mr Ratcliffe's mobile phone bill, they spoke for six minutes. According to Mr Ratcliffe, he said that the invoice which had been sent "is not addressed to the correct entity, it should be Starfire Windows Pty Ltd, as per my original text to you." Mr Doyle apologised and said that he would sort it out. The invoice was nonetheless paid on 20 December 2020.
On 29 November 2020, Horizon Glass rendered its third invoice, addressed again to "Star Fire Windows", for $16,997.75. On 1 December 2020, Mr Ratcliffe called Mr Doyle again and they spoke for about one minute. According to Mr Ratcliffe, he said that the invoice was "still not addressed to the company as we discussed". Mr Doyle said that he had completely forgotten about this and would "get it sorted".
On 15 December 2020, Horizon Glass issued its fourth invoice, addressed again to "Star Fire Windows", for $17,789.75. On 16 December 2020, Mr Ratcliffe and Mr Doyle spoke at length for some 13 minutes. According to Mr Ratcliffe, he asked what was going on where the invoices were still not addressed to Starfire Windows Pty Ltd, "they're addressed to the wrong entity". Mr Doyle said he had actually fixed it on his system but, for some reason, when he produced the invoice the amendment did not show "but definitely updated on my end". Horizon Glass used "Xero" accounting software. Mr Ratcliffe said he did not really have cause to think about it too much more at that time.
Mr Doyle denied that Mr Ratcliffe ever complained to him about the invoices being addressed to "Star Fire Windows". Mr Ratcliffe's evidence that he contacted Mr Doyle three times to correct the invoices is corroborated by his mobile phone records, which confirm that he spoke to Mr Doyle shortly after these three invoices were issued. Of course, they may have been discussing other matters altogether, but I am inclined to accept Mr Ratcliffe's evidence that he raised the matter with Mr Doyle, notwithstanding Mr Doyle's strong denials. Again, it may have been something which, at the time, was not of great significance to Mr Doyle and is now inconvenient to recall.
Horizon Glass continued to render invoices to "Star Fire Windows" in January, February and March 2021. The Company continued to make payments to Horizon Glass. Text messages exchanged between Mr Doyle and Mr Ratcliffe indicate that the Liverpool job was nearing completion at the end of March 2021. In mid April 2021, Mr Doyle arranged to collect his drop saw from the site. Mr Doyle said Horizon Glass continued to work at the Liverpool site until 24 April 2021. It may have been earlier.
A dispute arose between the Company and Sydney Façades. The Company's invoices stopped being paid. The Company engaged a debt recovery firm, and then solicitors, who demanded payment of $311,762 owed to the Company. Mr Ratcliffe said that, after incurring $12,000 on legal fees, he was told it would cost upwards of $50,000 to continue the matter. The Company did not have that much money to spend.
Horizon Glass continued to render invoices to "Star Fire Windows" in April and May 2022 for labour provided in April 2021. Mr Ratcliffe kept in touch with Mr Doyle, trying to work out ways to pay Horizon Glass. Mr Ratcliffe agreed that he did not always take Mr Doyle's phone calls at the time.
In October 2021, Mr Ratcliffe sought a business loan so that he could pay Horizon Glass, but the loan was refused. Mr Ratcliffe reported to Mr Doyle, "I am so sorry but I cannot get a loan for my company to pay you what you are owed and the company has no other funds at this stage." Mr Doyle was understandably most unhappy. Mr Ratcliffe said that, after the application for a loan was refused, "there was nothing that I could do. Financially I was stuck regardless. … I was trying everything I could to pay him."

Payment claim

On 30 November 2021, Horizon Glass rendered a statement to "Star Fire Windows" for outstanding invoices totalling $72,720.38.
Mr Doyle contacted a debt recovery agent, Glenn Bower, to make a payment claim under SOPA. On 13 December 2021, a 'Whois' search was undertaken for starfirewindows.com.au, which revealed that the domain name was registered to Mr Ratcliffe and his ABN ending 183. It will be recalled that Mr Ratcliffe had used this ABN when he was a sole trader. On 14 December 2021, Horizon Glass served a payment claim addressed to Mr Ratcliffe. The ABN noted on the payment claim was Mr Ratcliffe's ABN.
I infer that the 'Whois' search was obtained by the debt recovery agent, given that the payment claim was served the next day. Horizon Glass' invoices rendered to "Star Fire Windows" and the accompanying time sheets do not contain sufficient information to enable a debt recovery agent - or anyone - to identify the customer with precision. Presumably, Mr Doyle provided the debt recovery agent with Mr Ratcliffe's email address, which prompted the 'Whois' search. The search results may have led to an error on which the adjudication application and termination then proceeded.
On receipt of the payment claim, Mr Ratcliffe did not notice or pay too much attention to the ABN at the time; he had not used his personal ABN or the business name to which it attached for five years. Presumably, Mr Ratcliffe also did not pay close attention where, it would appear, the Company was in no position to pay the claim in any event. On 24 January 2022, Horizon Glass sent a notice under section 17(2) of the SOPA to Mr Ratcliffe, again citing his personal ABN.

Adjudication application

On 11 February 2022, Horizon Glass completed an adjudication application, naming Mr Ratcliffe as the respondent. The adjudication application attached an 'ABN Lookup' printout for Mr Ratcliffe, a business name search for "Starfire Windows" and the domain search for starfirewindows.com.au. These searches had been conducted on 11 or 12 February 2022. Also attached was the payment claim, invoices, statement of account and timesheets, together with submissions and a statutory declaration by Mr Doyle.
The submissions in support of the adjudication application did not delve into whether the "construction contract" was with Mr Ratcliffe or the Company. The submissions simply stated that the parties had entered into a construction contract within the meaning of SOPA.
Presumably, Mr Doyle had yet to check his text messages and phone records to the extent now done in these proceedings. Mr Doyle made a statutory declaration stating that his first conversation with Mr Ratcliffe in respect of the Liverpool job occurred in January 2021, not October 2020. What is apparent from this error is that, unsurprisingly, in the absence of collating the contemporaneous records, Mr Doyle's recollection was inaccurate. Perhaps also for this reason, Mr Doyle's text message exchange with Mr Ratcliffe in October 2020 (see [31]) was not provided to the adjudicator.

Company in liquidation

On receipt of the adjudication application, Mr Ratcliffe contacted accountants, SV Partners, for advice. Mr Ratcliffe completed an online inquiry form on behalf of the Company, providing the Company's name and his email address. It is evident that, although the adjudication application had been filed against him personally, Mr Ratcliffe perceived that the issue concerned the Company.
On 14 February 2022, Jason Porter of SV Partners responded to Mr Ratcliffe's online enquiry, "I had a quick look online and it looks like you operate the business as a sole trader. Is that correct?" Mr Ratcliffe replied: Due to my company not being [paid] I have not been able to pay sub-contractors and they have now taken action against me. The entity that you found has not been trading in about 3yrs which is who the contractors are taking action against. The company that is trading is Starfire Windows Pty Ltd … I'm not sure how to proceed at the moment which is why I have contacted you
On 16 February 2022, Mr Ratcliffe met with SV Partners. He was advised that the best option was for the Company to go into external administration and close down. By then, Mr Ratcliffe had been informed of the appointment of the second defendant as adjudicator. On 17 February 2022, Mr Ratcliffe emailed the adjudicator, advising: In regards to this matter the sole trading entity in this matter with ABN [ending] 183 has not been trading. The entity in relation to the matter is Starfire Windows Pty Ltd.
On 1 March 2022, a liquidator was appointed to the Company in a creditors' voluntary liquidation. On 8 March 2022, the liquidator wrote to Horizon Glass, advising of his appointment, "I understand that you are currently involved in [mediation] with the Company regarding an outstanding debt." As the Company had been placed in liquidation, any proceedings against the Company could not be commenced except by the leave of the Court. A proof of debt form was provided for completion. The liquidator also wrote to the adjudicator in similar terms. Obviously enough, the liquidator understood that the amounts being pursued by Horizon Glass in the adjudication concerned the Company and not Mr Ratcliffe personally.

Adjudication determination

On 24 February 2022, the adjudicator reached his determination. The adjudicator accepted Mr Doyle's statutory declaration "in the absence of any evidence to the contrary". The adjudicator took Mr Ratcliffe's reference in his email of 17 February 2022 to "this matter" as further evidence of the existence of an oral contract, although does not appear to have taken the balance of Mr Ratcliffe's email into account insofar as Mr Ratcliffe proceeded to state, "The entity in relation to the matter is Starfire Windows Pty Ltd". The adjudicator concluded that there was construction contract between Horizon Glass and Mr Ratcliffe.
The adjudication determination was not published until 1 April 2022. On receipt, Mr Ratcliffe promptly forwarded the determination to SV Partners and asked advice on what to do next. SV Partners replied on 4 April 2022: We wrote to both Horizon Glass and the mediator at the beginning of March advising that they are unable to take further legal action. You do not need to [do] anything just send through any correspondence you receive to me.
Mr Ratcliffe was told by Matthew Aldred of SV Partners that the firm would take care of it. SV Partners provided Mr Ratcliffe with the same advice when he later received a letter of demand from the solicitors for MMM Interiors, "You do not need to do anything, I will contact them. If any creditors contact you, forward them on to me and I will deal with them."

Enforcement action

On 19 April 2022, judgment was entered in the Local Court of New South Wales in favour of Horizon Glass in the amount of $77,071.10, based on the adjudication determination. A garnishee order was issued. On 1 June 2022, $3,418.12 was debited from Mr Ratcliffe's account with the Commonwealth Bank.
These proceedings were commenced on 20 October 2022. In his affidavit in support of the Summons, Mr Ratcliffe deposed that, due to the liquidation of the Company and these proceedings, his funds were extremely limited. If the adjudication determination could not be overturned, he requested a payment plan of no more than $1,500 per month.
On 15 December 2022, the Local Court ordered Mr Ratcliffe to pay the judgment debt by instalments of $4,750 a month. The first and second instalments have been paid such that Mr Ratcliffe has paid a total of $12,918.12 to Horizon Glass.

Submissions

Horizon Glass submitted that the contract was entered into as a result of the conversations on 12 and 13 October 2020. The later text message from Mr Ratcliffe providing the Company's details did not form part of the contract. The contract was between Horizon Glass and Mr Ratcliffe, either in his personal capacity or in his capacity as an agent for an undisclosed principal, being the Company. As the agent for an undisclosed principal, "the contract is made with the agent, and the agent is personally liable and entitled on it": Bowstead and Reynolds on Agency at [9-012]; Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 149-150 (per Hope JA); Mooney v Williams (1905) 3 CLR 1; [1905] HCA 34 at 8-9 (per Griffith CJ).

Parties to the construction contract

As to how this Court ought determine the parties to the construction contract, one need go no further than Brereton JA's summary in Mills v Walsh [2022] NSWCA 255 at [73]: (citations omitted) The parties to a contract are identified according to the objective theory of contract, which involves ascertaining the intention of the parties from their communications and the circumstances in their mutual knowledge, including their evident commercial aims and expectations; their subjective beliefs and intentions are irrelevant, save insofar as they are manifest and shared. However, the post-contractual conduct of the parties may more readily be resorted to for this purpose than for the purpose of construing contractual terms.
That is, what would a reasonable observer of the communications that led to entry into the contract, together with the background facts known to the parties, conclude that the parties intended that the contract would be with: Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [54] (Campbell JA; Beazley and Basten JJA agreeing).
The legal onus is on the party asserting that a particular party is in fact and law a party to the contract: Pethybridge at [54]. As Judge Rein (as his Honour then was) observed in Blackmore Design Group Pty Ltd v Mudge (2006) 4 DCLR(NSW) 30 at 36; [2006] NSWDC 160, the question of who in fact were parties to the contract is a mixed question of fact and law and "is often a very difficult question": at [23], citing pertinent examples of Southdown Publications Pty Ltd v ACP Magazines Pty Ltd (2003) 60 IPR 367; [2003] NSWCA 347; MacMilllan v Mumby [2006] NSWCA 74.
As to when a contract was formed, the conventional approach is to analyse when an offer has been accepted, although this analysis does not work well in a range of circumstances: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 176. In that event, the better question may be what a reasonable person would have thought in all the circumstances as to whether there was a concluded bargain: Brambles at 179. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110, McHugh JA (Hope and Mahoney JJA concurring) observed at 11,118: 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 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. Followed in Brambles at 117.
There is no prospect that Mr Ratcliffe intended to contract with Horizon Glass in his personal capacity. The Company had then been trading for three years. Mr Ratcliffe was no longer registered for GST. The 'head contract' for the Liverpool job was between Sydney Facades and the Company. The invoices from the other three suppliers of labour for the Liverpool job were each with the Company. It is perfectly clear from Mr Ratcliffe's text message of 30 October 2020 that he wanted invoices from Horizon Glass to be rendered to the Company. Mr Ratcliffe's actions from October 2020 to date are entirely consistent with an understanding on his part that the construction contract was between the Company and Horizon Glass.
More importantly, Mr Ratcliffe communicated his intention to Mr Doyle in their initial conversation, as described at [29]-[30]. I am satisfied on the balance of probabilities that Mr Ratcliffe made plain who Horizon Glass would be contracting with for the Liverpool job, being the Company. The fact that he did so is corroborated by Mr Doyle's text message at the end of the month requesting "your info so that I can invoice tomorrow", where it would have been unnecessary for Mr Doyle to request such "info" if he understood that the contract was with Mr Ratcliffe personally: see [33]-[34]. Nor do I accept that Horizon Glass proceeded to render invoices to "Star Fire Windows", rather than the Company, in an attempt to ensure that Mr Ratcliffe remained personally responsible for payment notwithstanding his clear instruction that invoices should be rendered to the Company. Such a course of action makes no commercial sense: see [39]. Horizon Glass' invoices simply suggest a lack of attention to detail by Mr Doyle at the time.
It is not necessary to decide whether the contract was formed on the initial conversation between Mr Ratcliffe and Mr Doyle or on the exchange of text messages at the end of the month, where I have concluded that Mr Ratcliffe identified the Company as the contracting party in the initial conversation. Even if Mr Ratcliffe did not then give the precise details of the Company's name, Mr Doyle was aware that such an entity was involved and sought the precise details at the end of the month. Looking at the whole relationship and not only at what was said and done when the relationship was first formed, the contract may well have been formed on 30 October 2020 once the precise details of the Company were provided.
There is post-contractual conduct which may suggest that Mr Doyle genuinely believed that Horizon Glass was contracting with Mr Ratcliffe. Specifically, Horizon Glass served a payment claim on Mr Ratcliffe on 14 December 2021. This was before the Company went into liquidation and thus before the identity of the contracting party gained the critical significance imparted by the winding up. However, I consider that this post-contractual conduct is likely referable to the actions of the debt recovery agent undertaking a 'Whois' search on starfirewindows.com.au, which pointed to Mr Ratcliffe, rather than evidence of Mr Doyle's understanding when the contract was formed: see [53]-[54]. The resulting error was the by-product of addressing Horizon Glass' invoices carelessly in the first place, and other than in accordance with the contract.
In the result, I am satisfied on the balance of probabilities that the construction contract was between Horizon Glass and the Company. It follows that the adjudicator's determination may be quashed for jurisdictional error where an essential prerequisite to the exercise of the adjudicator's powers did not then exist, being a construction contract between Horizon Glass and Mr Ratcliffe.

Unilateral mistake as to identity

If I am wrong about this, then this may be a case of unilateral mistake as to the identity of the parties to a contract. However, even if Mr Doyle genuinely believed that Horizon Glass was contracting with Mr Ratcliffe, it does not necessarily follow that there was no contract with the Company or, more importantly, that there was a contract with Mr Ratcliffe.
Most commonly, a unilateral mistake will arise as a result of a fraudulent misrepresentation, for example, where a rogue posed as a well-known film actor when purchasing a car: Lewis v Averay [1972] 1 QB 198. Here, of course, there is no suggestion of a fraudulent misrepresentation.
As Doyle CJ observed in Papas v Bianca Investments Pty Ltd [2002] SASC 190, the cases bearing on the effect of a unilateral mistake as to the identity of the contracting parties are few in number, difficult to reconcile and do not yield a clear principle: at [14]. The cases tend to be categorised by how the parties dealt with each other, being communications between the parties face to face, at a distance or in writing: Cartwright, Misrepresentation, Mistake and Non-Disclosure, 6th Edition (2022) at 14-18; Carter, Contract Law in Australia, 7th edition (2018) at 20-40 to 20-48.
In Papas, where the parties met face to face, Doyle CJ preferred the approach of Lord Denning in Lewis v Averay, who did not accept the theory that a mistake as to identity renders a contract void. Rather, Lord Denning considered at 207: When two parties have come to a contract - or rather what appears, on the face of it, to be a contract - the fact that one party is mistaken as to the identity of the other does not mean that there is no contract, or that the contract is a nullity and void from the beginning. It only means that the contract is voidable, that is, liable to be set aside at the instance of the mistaken person, so long as he does so before third parties have in good faith acquired rights under it.
Papas was cited with apparent approval in Southdown Publications at [95] per Hodgson JA, (with whom Spigelman CJ and Sheller JA agreed) and followed in Vassallo v Haddad Import & Export Pty Ltd (2004) 2 DCLR (NSW) 123 (Judge Rein, as his Honour then was). The learned authors of Carter, Contract law in Australia, 7th edition (2018) at [20-48] concur that, in the absence of a decision of the High Court in this area, Lord Denning's analysis may be accepted as correct, subject to two qualifications. First, the principle enunciated by Lord Denning does not apply if, in fact, there was no contract at all. Second, the position may be different where the contract is written rather than oral, in which case the parol evidence rule may preclude evidence contradicting the document: Shogun Finance Ltd v Hudson [2004] 1 AC 919.
Where the contract is formed through communications between the parties at a distance, rather than face to face, a mistake as to identity may be capable of rendering the contract void. More specifically, if A believes they are making an offer to B, which is in fact accepted by C, there is no consensus of minds between the parties that could lead to the contract being formed: Cundy v Lindsay (1878) 3 App Cas 459; Boulton v Jones (1857) 27 LJ Ex 117. In such cases, it is generally incumbent on the mistaken party to demonstrate that the other party knew or ought to have known of their mistake: Misrepresentation, Mistake and Non-Disclosure at [14-33].
There is no suggestion that Mr Ratcliffe knew or ought to have known that Mr Doyle was labouring under any mistake of identity, or that Mr Ratcliffe contributed to any such mistake. Nor did the parties suggest that the contract was void. Rather, the contract had been fully performed, save for payment. But even if the contract between Horizon Glass and the Company were set aside for unilateral mistake or found to be void ab initio, this would not give rise to a construction contract between Horizon Glass and Mr Ratcliffe. There would still be no construction contract between Horizon Glass and Mr Ratcliffe to found the jurisdiction of the adjudicator.

Relief

Horizon Glass submitted that the Court should refuse to grant relief, where Mr Ratcliffe had deliberately refrained from seeking to set aside the judgment in the Local Court based on the adjudication. A plaintiff should not obtain 'by the back door' orders that he has deliberately refrained from seeking: section 25(4), SOPA; Nazero Group Pty Ltd v Top Quality Construction Pty Ltd [2015] NSWSC 232 at [42] (per Hammerschlag J).
The Court has a discretion to refuse to grant the relief sought. In Probuild, Edelman J explained at [101]: The policy of the Security of Payment Act would be a powerful consideration in favour of the discretionary refusal of certiorari in many cases, including where the error is trivial or where the same result would occur without the error. These discretionary grounds for refusal of certiorari have "been in existence for centuries". To those well-known grounds could be added the circumstance where there is no real injustice likely to arise from an error of law due to an imminent determination of final rights with no substantial prejudice to the payer in the interim, and no likelihood of insolvency of the recipient of the payment.
I consider that the determination ought be set aside as, otherwise, Mr Radcliffe will remain liable for the debts of another, being the Company. Mr Radcliffe's failure to raise the jurisdictional issue earlier arose was by reason of SV Partners' advice that the firm would deal with it. Mr Ratcliffe's failure to set aside the judgment in the Local Court appears referable to his limited financial capacity.
Horizon Glass conceded that, if the construction contract was between Horizon Glass and the Company such that the adjudication determination was invalid for want of jurisdiction, then Mr Ratcliffe would be entitled to set aside the judgment and orders made in the Local Court and Horizon Glass would be obliged to repay the monies garnisheed from Mr Ratcliffe's bank account and instalments paid by Mr Ratcliffe. The procedural manner in which this result would be attained was not entirely clear. I consider the way forward is to make orders in respect of the application to quash the adjudicator's determination and request the parties to bring in short minutes of order to effect the repayment of Mr Ratcliffe, either by orders in this Court or by consent orders filed in the Local Court.

Orders

For these reasons, I make the following orders: 1. Declare that the adjudication determination of the second defendant dated 24 February 2022 is void. 2. Order that the first defendant be permanently restrained from taking any step to enforce the judgment in its favour in proceedings 2022/107952 in the Local Court of New South Wales in Sydney. 3. Order that the first defendant pay the plaintiff's costs of the proceedings. 4. Direct the parties to bring in short minutes within 14 days to effect repayment to the plaintiff of funds paid under the judgment and orders of the Local Court, with liberty to apply in the event that orders cannot be agreed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 March 2023

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