Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd

Supreme Court of NSW|2018-03-06|Before: McDougall J

Solicitors: Colin Biggers & Paisley Pty Ltd (Plaintiff) Solon Lawyers (First Defendant) File Number(s): 2017/351836

Judgment

HIS HONOUR: The plaintiff (Trinco) and the first defendant (Alpha) are in dispute as to a determination made by the second defendant (the adjudicator) pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Security of Payment Act). The central issue is whether the underlying payment claim was made on or from a reference date under a construction contract (see ss 8(1), 13(1) of that Act.) The answer to that question requires identification of the construction contract in question.

Mr Alizada's evidence

Mr Alizada agreed that Alpha had served two earlier progress claims. The first claim was dated 25 May 2017. It claimed $12,350 exclusive of GST for tiling and associated works to level 1 of the project. It is apparent from the claim that not all level 1 tiling works were complete as at 25 May 2017.
The second progress claim was made on 26 June 2017. It was not in evidence, and the amount claimed is unknown.
Mr Alizada was taken to progress claim 3. He agreed that it "was the third claim that was made under the written contract that [Alpha] had with Trinco" [1] . He was then taken to a document that appears to have been annexed to progress claim 3 when it was served, and agreed that the document identified the amounts claimed and the amounts not yet claimed; the latter, he agreed, was "$0" [2] . It followed, Mr Alizada agreed, that "the claim that [Alpha was] making in this tax invoice is for all the amounts that [Alpha says] is payable under the written subcontract" [3] .
After identifying the components of the claim, Mr Alizada was taken back to the detail of progress claim 3. He accepted that the sum of $65,875 was "the total amount [Alpha was] claiming and [Alpha wanted] paid by Trinco… for work under the written subcontract" [4] .
Mr Alizada was then asked to consider the two further amounts claimed by progress claim 3: the sum of $27,511 for extra work, and the sum of $120,697.50 for lost profit. He agreed that the claim for $27,511 was for "work that… was performed by Alpha A after 7 June 2017" [5] .

The adjudication

Alpha's case is that progress claim 3 was its payment claim for the purposes of s 13 of the Security of Payment Act. Trinco did not suggest otherwise.
Trinco provided a payment schedule denying that anything was due to Alpha. On the contrary, Trinco said, it was entitled to be paid in excess of $177,000. The reasons why that was said to be so were apparently set in an annexure which, perhaps fortunately, was not in evidence.
So far as the evidence does go, the payment schedule did not take the point that progress claim 3 had not been made on or from a reference date, and was thus incapable of constituting a valid payment claim for the purposes of the Security of Payment Act.
Alpha made an adjudication application. It identified the claim as having been made under the written subcontract [6] , and the relevant reference date as being 31 August 2017. The adjudication application claimed the entire amount - that is to say, it included the claims for extra work and for lost profit.
Trinco served an adjudication response. It included submissions. Those submissions took as their primary point that the adjudicator did not have jurisdiction because there was no reference date "to support the making of the purported payment claim dated 7 September 2017".
The adjudicator called for submissions. The submissions put by Alpha included the matters referred to at [10] above. Trinco's submissions in response put in issue the proposition that the work the subject of the progress claim had been performed pursuant to some oral agreement.
The adjudicator considered that the subcontract (that is, the written subcontract) did not specify a date for the making of the progress claims and thus, that there was no contractually identified reference date for the purposes of s 8(2)(a) of the Security of Payment Act. He was in error, because the written subcontract did provide for claims to be made on the 25th day of each month. That having been said, his mistake is entirely understandable, because the document also included a blank version of the annexure, in which the relevant item was left incomplete.
The adjudicator appears to have reasoned that, notwithstanding the purported termination on 7 June 2017, the work the subject of progress claim 3 was done pursuant to the written subcontract. In those circumstances, he said, s 8(2)(b) of the Security of Payment Act applied, and the relevant reference date was the end of each month in which work was performed.
In the result, the adjudicator upheld the claim for work done (as he saw it) under the subcontract, but allowing for admitted backcharges and for retention. He found that the claim for extra work was not made out. The claim for loss of profit had been withdrawn, and thus he did not need to deal with it.

First issue: identification of the "construction contract"

The parties' submissions

Mr Robertson of Counsel, who appeared for Trinco, relied on Alpha's admission that the written subcontract had terminated on 7 June 2017. He submitted, correctly, that the terms of that subcontract made no provision for reference dates to accrue after termination. Thus, he submitted, the last reference date under the subcontract (prior to its termination) was 25 May 2017: a reference date that had been utilised for the purposes of the first progress (and payment) claim. Mr Robertson referred to the decision of the High Court in Southern Han Breakfast Point Pty Ltd (In Liq) v Lewence Construction Pty Ltd [7] at [79] to [81].
Mr Bland of Counsel, who appeared for Alpha, accepted that the written subcontract had come to an end on 7 June 2017, and that the reference date of 25 May 2017 had been utilised for the purposes of the first progress claim. However, he submitted, when Alpha returned to the site after 7 June and performed further work, it did so pursuant to some other contract. Although he submitted that this was a contract for the rectification of defects caused by the work of others, there is no evidence to support this point. On the contrary, such evidence as there is suggests that the work was done pursuant to some "contract or other arrangement" [8] for the completion of the subcontract works insofar as they related to the specified items of work on the specified levels of the project. In oral submissions, Mr Bland submitted that the contract or arrangement arose out of Trinco's letter of 8 June 2017 and Alpha's performance thereafter of the work specified in that letter. Since that letter did not make any provision as to reference dates, Mr Bland submitted, s 8(2)(b) of the Security of Payment Act applied.

Decision

I start by setting out ss 8 and 13 of the Security of Payment Act: 8 Rights to progress payments (1) On and from each reference date under a construction contract, a person: (a) who has undertaken to carry out construction work under the contract, or (b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment. (2) In this section, reference date, in relation to a construction contract, means: (a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or (b) if the contract makes no express provision with respect to the matter - the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month. … 13 Payment claims (1) A person referred to in section 8 (1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (2) A payment claim: (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and (c) if the construction contract is connected with an exempt residential construction contract, must state that it is made under this Act. (3) The claimed amount may include any amount: (a) that the respondent is liable to pay the claimant under section 27 (2A), or (b) that is held under the construction contract by the respondent and that the claimant claims is due for release. (4) A payment claim may be served only within: (a) the period determined by or in accordance with the terms of the construction contract, or (b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied), whichever is the later. (5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. (6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim. (7) A head contractor must not serve a payment claim on the principal unless the claim is accompanied by a supporting statement that indicates that it relates to that payment claim. Maximum penalty: 200 penalty units. (8) A head contractor must not serve a payment claim on the principal accompanied by a supporting statement knowing that the statement is false or misleading in a material particular in the particular circumstances. Maximum penalty: 200 penalty units or 3 months imprisonment, or both. (9) In this section: supporting statement means a statement that is in the form prescribed by the regulations and (without limitation) that includes a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned.
As I have noted, the written subcontract made no provision for reference dates to accrue after its termination. It follows that the termination of that subcontract on 7 June 2017 had the effects: 1. of discharging both parties from further performance thereafter; and 2. of limiting (relevantly) Alpha's rights under it to those accrued at the date of termination.
Those points follow directly from the decision of the High Court in Southern Han at [79]. The form of contract that their Honours considered does not appear to be materially distinguishable from the form of the subcontract that Trinco and Alpha made on 6 March 2017.
It is unnecessary to consider whether the admitted position on the quasi-pleadings, that the written subcontract was terminated on 7 June 2017, is correct in law. The matter came on for hearing on the basis of those quasi-pleadings. Mr Bland did not seek leave to withdraw the admission. On the contrary, his submissions accepted it. His client's case was, rather, that the work in question was not done pursuant to that terminated subcontract.
It is not entirely easy to reconcile the facts, to the extent that they appear from the evidence, with the common position of the parties. Trinco's letter of 8 June 2017 appears to assert that the subcontract remained on foot, but with the scope of works varied (downward). It is not clear to me how that asserted position can sit easily (or at all) with the emails exchanged on 6 and 7 June 2017. If (as the emails appear to suggest, and the parties by their quasi-pleadings agree) the subcontract had been terminated on 7 June 2017, the assertion that it remained on foot and was to be performed (to the extent of the reduced scope) could not change the position.
Again taking into account the common position of the parties, the better view of the legal effect of the letter of 8 June 2017 seems to be that it is an offer by Trinco's part to engage Alpha to perform the work specified in it (including its annexure) upon the stated terms. Those terms include "the Contract agreement terms and conditions... except for the original contract sum and the scope of works". Thus, those terms included the nomination of the 25th day of each month during which work was performed as a reference date.
If the letter of 8 June 2017 is to be so regarded, Alpha's conduct in returning to the site and performing the works specified in the letter would amount to an acceptance of the offer. Thus, a fresh contract (more accurately, subcontract) would have come into existence for the performance of those works, in circumstances where Alpha's existing obligation to perform them had been discharged by termination of the written subcontract. The evidence suggests that Alpha returned to the site on 8 June 2017. If that be so, the fresh subcontract came into existence on that date.
It would follow, on that analysis, that work done prior to 7 June 2017 was performed under the written subcontract. Work done on and from 8 June 2017 was performed under the fresh subcontract that came into existence on that day. I return to this point at [42] below.
Analysis (both legal and factual) has been made difficult by at least two matters. One is the confusion that is evident from the parties' correspondence. Another is that Alpha's list response conspicuously fails to "plead" that any relevant contract was made other than that the written subcontract. The list response cannot be read as suggesting that Alpha relied on some further or fresh subcontract, and thus Trinco has been denied the opportunity to put on evidence on this point.

Was there a reference date?

If what I have said so far is correct, then the fresh subcontract made on 8 June 2017 did make provision for reference dates. If (as Alpha put in its submissions to the adjudicator) Alpha attended the site and performed work in June, July and August 2017 on various dates between the 8th of June and the 11th of August, then reference dates would have arisen on 25 June, 25 July and 25 August 2017.
The first of those possible reference dates could have been used to support the second progress claim, made on 26 June 2017. The second and the third would have been available to support further payment claims. Of present relevance, the third would have been an available reference date for the payment claim that in fact was made on 7 September 2017.
There are two further points to be made. The first is that if, contrary to what I have just said, the fresh subcontract did not make provision for reference dates, then reference dates would have arisen on the last day of each month in which construction work was carried out [9] . The second is that deciding (one way or the other) what the reference dates were does not really answer, but rather focuses attention on, the critical question: what was the contract under which the work, the subject of progress claim 3, was performed? That question is the subject of the next issue with which I deal.

Under what contract was the third progress claim made?

The parties' submissions

Mr Robertson submitted that, leaving aside the claims for extra work and loss of profit, the work that was the subject of the determination in Alpha's favour was all done under the written subcontract made on 6 March 2017. He referred to the way in which the work was described and itemised, and to concessions made in evidence by Mr Alizada.
Mr Bland submitted that the work in question had been done under the fresh subcontract that came into existence on 8 June 2017.

Decision

Unfortunately, it is necessary to refer again to the quasi-pleadings.
Paragraph 6 of Trinco's contentions referred to the service of a "Payment Claim" on 7 September 2017: that is, the disputed payment claim. Paragraph 7 asserted that this payment claim "concerned Subcontract 600" (that is, the written subcontract).
Alpha's list response agreed that the payment claim was served on 7 September 2017. However, Alpha said, it "does not accept that the claim was exclusively under" the written subcontract. One available inference from Alpha's response is that some of the work comprised in progress claim 3 was performed under the written subcontract, and some was performed under the fresh subcontract that came into existence on 8 June 2017.
Alpha did not plead that the work the subject of the payment claim in question was done exclusively under the later subcontract, although Mr Bland's submissions appear to suggest that this was so. Such evidence as there is does not support the submission. The paucity of evidence bearing directly on this topic may very well flow from the fact that the issue was not squarely flagged in Alpha's list response.
In progress claim 3, the amount of $65,875 was divided, relevantly for present purposes, into work that was the subject of a "Previous Claim" and work that was the subject of a "New Claim". The total value of the former was said to be $60,355 and, of the latter, $5,525. The inference available to be drawn is that the work that was the subject of the "Previous Claim" had been claimed in one of the two preceding progress claims.
It might be thought that the "New Claim" related to work carried out since whichever was the relevant previous progress claim. Whether that proposition is correct requires analysis of the whole of the evidence, including the oral evidence of Mr Alizada to which I have referred earlier in these reasons [10] and the documents to which he was taken.
It is not entirely easy to reconcile Mr Alizada's evidence with the first and third progress claims (nor those progress claims with each other), particularly in the absence of: 1. the second progress claim; and 2. some coherent explanation, given in chief, by Alpha.
The conclusion that I reach on the whole of the evidence is that the work that was the subject of progress claim 3 comprised, relevantly (I leave aside the claim for loss of profit), two elements. The first element was work done under the written subcontract prior to 7 June 2017. That comprises work, the value of which was claimed at $65,875 [11] , and that was the claim allowed by the adjudicator (after undisputed setoffs for backcharges and retention). The second element was work done under the fresh subcontract after 7 June 2017. That comprises the so called "extra work", valued at $25,711 [12] . That claim was not allowed by the adjudicator.
In reaching that conclusion, I take into account that: 1. Alpha did not flag this issue in its list response; 2. Mr Alizada's evidence on the point in cross-examination was clear, and obtained by reference to the relevant documents which he was given every opportunity to consider; and 3. Alpha, the party in the better position to give explicit evidence on the topic, did not do so.
Putting the matter more compendiously, one part of the claim (the claim allowed by the Adjudicator) was for work performed under the written subcontract. The other part of the claim (the claim not allowed by the Adjudicator) was for work performed (or said to have been performed) under the fresh subcontract.
Brodyn Pty Ltd v Davenport [13] is authority for the proposition that the service of a payment claim (which must mean a valid payment claim) is one of the "basic and essential requirements" for the existence of an adjudicator's determination [14] . Putting the matter in the language now employed, if there were no valid payment claim, the adjudicator lacked jurisdiction to entertain and determine the adjudication application. It is clear that the basic and essential requirements identified in Brodyn at [53] are jurisdictional: see Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd [15] and Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [16] . It matters not that, since the decision in Brodyn was given, other jurisdictional requirements have been identified beyond those five matters identified in Brodyn.
To the extent that progress claim 3 was made under the written subcontract, there was no available reference date to support it, because, for the reasons identified at [28], [29] above, the contractual provision for reference dates did not survive termination. Any pre-termination reference dates must have been utilised for the purposes of either the first or the second progress claim.
Alternatively, to the extent that progress claim 3 was made under the fresh subcontract, there may well have been an available reference date, but the work in question - the work that, according to Mr Alizada, was performed on or prior to 7 June 2017 - was not performed under that fresh subcontract.
That, it seems to me, is sufficient to dispose of the matter. The absence of a reference date under the relevant subcontract is fatal to the validity of progress claim 3 considered as a payment claim, and the Adjudicator lacked jurisdiction to deal with the adjudication application that was founded upon progress claim 3. However, in case that conclusion should be incorrect, I will turn to an alternative argument propounded for Trinco.

One claim, two contracts

Mr Robertson submitted that the Security of Payment Act did not authorise a payment claim to be made for work performed under more than one construction contract; to put it positively, that a payment claim comprising work under two or more construction contracts was invalid. He relied on the decision of Douglas J in Matrix Projects (Qld) Pty Ltd v Luscombe [17] .
In that case, Douglas J concluded that the work the subject of the payment claim in issue had been done under at least two different contracts [18] . In those circumstances, his Honour said, the payment claim was invalid [19] . His Honour referred to my observation, in Rail Corporation of NSW v Nebax Constructions [20] , that "there can only be one adjudication application for any particular payment claim for any particular contract" [21] . Douglas J expressed his agreement with that proposition [22] .
The facts in Nebax were somewhat different to those considered by Douglas J, and to those with which I am now concerned. However, in relevant respects, the facts considered by Douglas J in Matrix were essentially the same as those in this case.
Mr Bland did not submit that either decision was incorrect. There is thus no need to revisit the reasoning in either case. I add, for completeness, that in Class Electrical Services v Go Electrical [23] , experienced Senior Counsel accepted, as I recorded [24] , "that if there were indeed a multiplicity of contracts, and not just one contract, then the determination could not stand, for the reasons" given in Nebax and Matrix.
It is scarcely necessary to note that there is no distinction of present relevance between the Queensland legislation (the Building and Construction Industry Payments Act 2004 (Qld)) and the Security of Payment Act.
The application of the reasoning in Nebax and Matrix to the facts of this case is clear. Progress claim 3 related to work done under two contracts (the written subcontract made on 6 March 2017, and the fresh subcontract made on 8 June 2017). It must follow that the progress claim could not constitute a valid payment claim.
It must follow, in turn that progress claim 3 could not be the foundation of a valid adjudication application.

Discretion

At one point, I was attracted to the proposition that, if Trinco had made out a case for relief (as the foregoing reasons show it has), relief in the nature of certiorari should be denied on discretionary grounds. It was after all Trinco that had created a large part of the problem by the apparently inconsistent attitudes evinced in its communications of 6 and 8 June 2017, the latter read in the context of Alpha's communication of 7 June 2017. However, on reflection, I have concluded that it would be inappropriate to withhold relief on discretionary grounds. That is because the point was not raised either in Alpha's list response or in its pre-hearing outline submissions. In my view, it would be unjust to pursue the point in circumstances where it had not been flagged and where (for example) Trinco, the party that on my view has made good a prima facie case for relief, was not given the opportunity to adduce evidence that might bear on the exercise of any discretion.
Having come to that conclusion, I see no point in discussing the discretion or the kinds of considerations that might bear on its exercise.

Conclusion and orders

Trinco has made good its case that the adjudicator lacked jurisdiction to entertain and determine the application made by Alpha. It is entitled to relief to give effect to that conclusion.
Trinco paid money into court as the price of obtaining interlocutory injunctive relief in its favour. It follows from what I have said that the money should be paid out to it.
On the face of things Trinco, having succeeded, should have its costs. The relevant "event", for the purposes of UCPR r 42.1, is its success in gaining the relief that it sought. To the extent that it did so on a basis alternative to its primary case, that reflects no more than its response to arguments put by Alpha at the hearing, but not flagged in its list response.
Trinco's written outline sought, among others, an order that its costs be paid. Alpha's written outline did not put any reason why, if Trinco succeeded, it should nonetheless not have its costs. Alpha's submissions as to costs were based on the proposition that it succeeded in defeating Trinco's claim to relief.
I make the following orders: 1. declare that the adjudication determination made by the second defendant on 6 November 2017, on application 2017ADJT501, is void. 2. Order that the said determination be quashed. 3. Order that the money paid into court by the plaintiff and any interest thereon be paid out to it or, at its direction, to its solicitors. 4. Order the first defendant to pay the plaintiff's costs. 5. Otherwise, make no order as to costs. 6. Direct that the exhibits be handed out.

Endnotes

T5.32-.34; emphasis added.
T8.30-.32.
T8.34-.36; emphasis added.
T9.21-.23; emphasis added.
T10.21-.24; emphasis added.
Identified as "Subcontract 600".
(2016) 91 ALJR 233.
To quote from the definition of "construction contract" in s 4(1) of the Security of Payment Act.
See s 8(2)(b) of the Security of Payment Act.
At [11] to [15] above.
See at [13], [14] above.
See at [15] above.
(2004) 61 NSWLR 421.
See Hodgson JA, with whom Mason P and Giles JA agreed, at [53].
(2005) 63 NSWLR 385 at [71] (Basten JA).
(2010) 78 NSWLR 393 at [148] (McDougall J).
[2013] QSC 4.
See his Honour's reasons at [19].
See at [20], [30].
[2012] NSWSC 6.
At [44] of Nebax.
See his Honour's reasons in Matrix at [18].
[2013] NSWSC 363.
See Class Electrical at [6], [7]. 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: 06 March 2018

Building and Construction Security of Payment Act 1999(NSW)

Building and Construction Industry Payments Act 2004(Qld)

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