GCB Constructions Pty Ltd v SEQ Formwork Pty Ltd
[2023] QSC 71
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- Unreported Judgment
- Appeal Discontinued (QCA)
- GCB Constructions Pty Ltd v SEQ Formwork Pty Ltd[2023] QSC 71
- Add to List
GCB Constructions Pty Ltd v SEQ Formwork Pty Ltd[2023] QSC 71
Reported at (2023) 15 QR 1
GCB Constructions Pty Ltd v SEQ Formwork Pty Ltd[2023] QSC 71
Reported at (2023) 15 QR 1
SUPREME COURT OF QUEENSLAND
CITATION: | GCB Constructions Pty Ltd v SEQ Formwork Pty Ltd & Ors [2023] QSC 71 |
PARTIES: | GCB CONSTRUCTIONS PTY LTD ABN 26 151 244 254 (applicant) v SEQ FORMWORK PTY LTD ABN 28 168 628 591 (first respondent) and CHRISTOPHER GROVES (second respondent) and THE ADJUDICATION REGISTRAR (QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION) (third respondent) |
FILE NO/S: | BS 6329 of 2022 |
DIVISION: | Trial Division |
PROCEEDING: | Originating Application filed on 31 May 2022 |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 11 April 2023 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 29 July 2022 |
JUDGE: | Burns J |
ORDER: |
|
CATCHWORDS: | CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where theapplicant challenged an adjudicator’s decision under the Building Industry Fairness (Security of Payment) Act 2017 – where the applicant contended that an agreement of the kind found by the adjudicator could not amount to a “construction contract” within the meaning of the Act – where the applicant also contended that the claim for payment made by the first respondent could not amount to a “payment claim” within the meaning of the Act – where the applicant also contended that the adjudicator failed to value the work and materials claimed by the first respondent in accordance with the requirements of the Act – whether an agreement of the kind found by the adjudicator was a “construction contract” within the meaning of the Act – whether the claim for payment made by the first respondent was a “payment claim” within the meaning of the Act – whether the adjudicator valued the work and materials claimed by the first respondent in accordance with the requirements of the Act – whether the decision of the adjudicator ought be declared void and of no effect – whether additional relief in aid of such a declaration should be granted Building Industry Fairness (Security of Payment) Act 2017 (Qld), s 64, s 65, s 66, s 68, s 72, s 75, s 88, s 93 Corporations Act 2001 (Cth), s 459E Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (2020) 4 QR 410, cited Crown Green Square Pty Ltd v Transport for NSW [2021] NSWSC 1557, followed Hervey Bay (JV) Pty Ltd v Civil Mining and Construction Pty Ltd & Ors [2008] QSC 58, cited Kirk v Industrial Court (NSW) (2010) 239 CLR 531, cited Laing O'Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491, cited Machkevitch v Andrew Building Constructions [2012] NSWSC 546, followed Northbuild Constructions Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525, cited Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 , cited Seabreeze Manly v Toposu [2014] NSWSC 1097 , cited T & M Buckley Pty Ltd v 57 Moss Road Pty Ltd [2010] QCA 381 , cited |
COUNSEL: | M Trim for the applicant M D Ambrose KC, with C D Coulsen for the first respondent |
SOLICITORS: | Thomson Geer for the applicant Hall Lawyers for the first respondent |
- [1]This application concerns the validity of an adjudication decision purportedly made under the Building Industry Fairness (Security of Payment) Act 2017 (Qld).
Background
- [2]The applicant, GCB Constructions Pty Ltd, was the head contractor for the construction of two residential towers at Southport. The first respondent, SEQ Formwork Pty Ltd, is a formwork contractor. At GCB’s request, SEQ performed work on the site and supplied materials in connection with that work during 2021. How that came about is at the heart of this dispute.
- [3]By way of background, in September 2020, SEQ provided a tender quotation to GCB for formwork for the project. A letter of award was issued to SEQ by GCB many months later, on 9 June 2021, but the award was expressed to be subject to agreement about “the terms and conditions of the A S 4903-2000 Subcontract Agreement” between SEQ and GCB. Over the ensuing months, negotiations about the terms and conditions took place between the parties but they failed to result in the execution of a contract of the type contemplated by the award.
- [4]However, with both parties no doubt acting on the assumption that agreement on the terms and conditions could be reached, earlier in 2021 GCB asked SEQ to start work on the site and SEQ agreed to do so. In a sworn statement provided to the adjudicator for the purposes of the adjudication, a director of SEQ, Mr Caelli, recalled the circumstances:
- “11.While [SEQ] and [GCB] were negotiating the terms of the proposed Subcontract, [GCB] requested that [SEQ] remain on the site and perform works, including capping beam works.
- 12.The capping beam works were not included in the Scope of Works in the tender of the proposed Subcontract. [SEQ] agreed to perform these preliminary works on an hourly charge/day rate basis. [GCB] requested the preliminary works on 14 March 2021, before issuing the letter of award to [SEQ]. That request was made by Marco of [GCB] to Tim Salumae of [SEQ]. These works were included in the items claimed by [SEQ] in its payment claims issued to [GCB]. [SEQ] would charge [GCB] the daily rate of [SEQ] together with costs of the supply of any material required.
- 13.The preliminary works continued (while the parties continued to negotiate a satisfactory contract to both parties) until [SEQ] withdrew from the site on Friday, 19 November 2021, following [SEQ’s] response to [GCB’s] Notice to Show cause dated 15 November 2021. …
- 14.[SEQ] was still performing [work] until 19 November 2022 [sic]. As a result, [SEQ] performed some of the works contemplated under the proposed Subcontract as preliminary works (due to the length of theongoing discussions). I understood that [GCB] wished [SEQ] to remain on site until [GCB] took on the formwork or found someone else to perform it.
- 15.When [SEQ] left the site on 19 November 2021, [GCB] did not permit [SEQ] to remove from the site formwork it had created during the preliminary works and other items taken to the site by [SEQ] necessary to perform the formwork. Those items are set [out] in detail in the payment claim. The amounts claimed by [SEQ] are the usual amounts included by [SEQ] in its job estimate.”
- [5]In April and August 2021, SEQ advanced invoices for payment to GCB and these were duly paid.
The payment claim
- [6]The payment claim in question was dated precisely one year after the request deposed to by Mr Caelli was made and took the form of a tax invoice from SEQ bearing that date, that is to say, 14 March 2022. It was in the total sum of $391,907.61 (inclusive of GST), and it is comprised of the following elements: “Materials on site – taken by GCB Constructions” ($270,477.90); “Day labour for work on site up to 19/11/21 including capping beam work, and works preliminary to entry of the proposed A S 4903-2000 (amended) contract” ($112,651.00); “Materials used on site = 20% of labour cost (our standard practice)” ($22,530.20); “Retention improperly held previously” ($1,718.94); and “less paid invoices” (-$15,470.43). Appended to the tax invoice were two schedules, one relating to the claim for material and the other relating to the claim for labour.
- [7]On 25 March 2022, GCB gave SEQ a document entitled, “Payment Schedule under the Building Industry Fairness (Security of Payment) Act 2017”, in which, amongst other things, it was asserted that SEQ had “not performed work and supplied goods and services to the value being claimed”, had claimed “for the cost of items which are not construction work or for the supply of related goods and services under” the Act and had “no entitlement to any payment at this time …”.
- [8]On 14 April 2022, SEQ lodged an adjudication application with the third respondent, and on 4 May 2022 GCB lodged a response. The adjudication application included the sworn statement of Mr Caelli together with written submissions on behalf of SEQ and a copy of various documents referred to in those submissions. Likewise, attached to the response were GCB’s written submissions, a copy of the documents referred to in those submissions and a statutory declaration from a contract administrator employed by GCB, Mr Hutchinson. Mr Hutchinson did not dispute any of the parts of Mr Caelli’s statement that are extracted above (at [4]).
The adjudication decision
- [9]After the second respondent as adjudicator called for, and received, further written submissions from the parties, he delivered an adjudication decision on 17 May 2022 in which he found an adjudicated amount of $367,124.39 (GST inclusive) and awarded that sum to SEQ. The adjudicator also decided that GCB should pay 100% of his fees.
- [10]In the course of his decision, the adjudicator found that the work and material claimed by SEQ were respectively performed and supplied under a “construction contract” within the meaning of the Act. The adjudicator’s reasoning in that regard was as follows:
- “44.While [GCB] is critical of [SEQ’s] submissions about what constitutes the relevant ‘construction contract’, [GCB] does not squarely dispute that it requested [SEQ] to carry out capping beam works on 14 March 2021. Given that work commenced and was paid for, I am satisfied that it did.
- 45.[SEQ’s] Mr Caelli says in his statutory declaration, which forms part of the adjudication application, that the preliminary works were requested by ‘Marco’ of [GCB] in a conversation with [SEQ’s] Mr Salumae on 14 March 2021. [GCB] does not dispute that such a request was made, nor that (as is my reading of paragraph [12] of Mr Caelli’s statutory declaration) [SEQ] agreed to do so on the basis that it would be paid on an hourly charge/day rate basis.
- 46.That there was an initial agreement (as then affirmed to continue after 16 September 2021) in my view explicates the earlier payment claims, is the most likely explanation for [SEQ] carrying out work (including after the 9 June 2021 email attaching the draft contract document) for some eight months, and is also consistent with [SEQ’s] 15 September 2021 email and the circumstances of that email – including the history which led to it – in which [SEQ] stated its preparedness to perform preliminary works until transitioned out of the project.
- 47.I am satisfied that an agreement for [SEQ] to carry out preliminary works on hourly charge/day rates, with its scope then principally constituting capping beam works – but expanded over time to incorporate matters intended to ultimately be encompassed by a fixed price contract which was never struck – was reached on 14 March 2021, as demonstrated by the matters I refer to above.
- 48.While somewhat loose in its formulation and explanation in this matter, in my view what was agreed contains all the necessary features of a contract. It is unnecessary to explore whether what was reached constitutes an ‘other arrangement’ within the definition of ‘construction contract’ contained in s. 64 of the Act, however given a request for work was made, pricing and payment was contemplated, and the work was performed, even the most confined interpretation of what constitutes an ‘other arrangement’ within the Act, is in my view met.
- 49.I do not agree with [GCB] that [SEQ] has failed to establish a shift from capping beam works to other preliminary works. That assumes the initial work was confined to capping beam work, which I am not satisfied is accurate. Rather, and as Mr Caelli attests in para. [11] of his statutory declaration, ‘[GCB] requested that [SEQ] remain on the site and perform works, including capping beam works’.”[1]
- 50.As evidenced by [SEQ’s] prior payment claims, the capping beam works then advanced into other preliminary works forming initial stages of the substantive work for which [SEQ] had quoted (and for which the parties were attempting to negotiate their contract), all under the umbrella of the initial contract by which hourly/daily rates are to be charged.
- 51.I am also satisfied that as [SEQ] came to order materials for its work, which fell outside the initial agreement that it charge for its labour time, it has passed on the cost of those materials as part of the cost of its works. The obvious implication upon which [SEQ’s] submissions are apparently premised, if not expressly discussed, is that materials would be charged at (reasonable) cost – as recorded in the first payment claim (albeit in that document no materials were on-charged).”
Enforcement
- [11]Section 93(1) of the Act provides that an adjudication certificate may be filed as a judgment for a debt, and may be enforced, in a court of competent jurisdiction. Acting pursuant to that provision, on 27 May 2022 SEQ filed the adjudication certificate as a judgment for the sum certified in the District Court at Southport and then issued a statutory demand for payment of that debt pursuant to s 459E of the Corporations Act 2001 (Cth).
- [12]Four days later, the originating application was filed and served. On the first return of that application on 6 June 2022, the court ordered that the adjudication sum be paid into court as security pursuant to s 93(4)(b) of the Act, and this duly occurred. At the same time, the court restrained SEQ from attempting to enforce or rely on the adjudication decision until three business days after the day when the court hands down its final decision in this proceeding. On 28 July 2022, the adjudicator advised that he would abide the decision of the court and take no active part in the hearing.
The challenge to the decision
- [13]By the originating application, GCB seeks to invoke the supervisory jurisdiction of this court[2] to have the decision of the adjudicator declared void and of no effect as well as orders setting aside the judgment entered in reliance on it as well as the statutory demand that was subsequently served. To do so, GCB contends that the decision was and is void for want of two separate jurisdictional facts as well as for jurisdictional error and, in doing so, reprises many of the same arguments that were unsuccessfully advanced to the adjudicator.
- [14]So far as an absence of jurisdictional facts is concerned, GCB maintains that an agreement of the kind found by the adjudicator could not amount to a “construction contract” within the meaning of the Act and that nor could the tax invoice and associated schedules forwarded by SEQ to GCB on 14 March 2022 amount to a “payment claim” within the meaning of the Act. The jurisdictional error contended by GCB was an alleged failure to value the work and materials claimed in accordance with the dictates of the Act.
Was there a “construction contract”?
- [15]One of the essential jurisdictional requirements for a valid adjudication is the existence of a “construction contract” within the meaning of the Act.[3] That expression is defined by s 64 in the following way:
“construction contract means a contract, agreement or other arrangement under which 1 party undertakes to carry out construction work for, or to supply related goods and services to, another party”. [Emphasis in original].
- [16]For the purposes of this application, GCB submitted that there was no construction contract of the kind found by the adjudicator.[4] It was submitted that the adjudicator’s findings as to the relevant contract were “formed by an unclear, incomplete and brief discussion on site in March 2021 not deposed to by either participant” and were otherwise in error. As to that, it is to be observed that the construction contract found by the adjudicator was constituted by an agreement arising out of the March 2021 conversation which was then “expanded over time to incorporate matters intended to ultimately be encompassed by a fixed price contract which was never struck”. The adjudicator found that, prior to any expansion, the initial agreement was for SEQ to “carry out preliminary works on hourly charge/day rates, with its scope then principally constituting capping beam works” and that, overall, “what was agreed [contained] all the necessary features of a contract”. Furthermore, the adjudicator made plain that had he not found in favour of the existence of a contract, he would have found that an “other arrangement” came into being because “a request for work was made, pricing and payment contemplated, and the work was performed”.
- [17]At first glance it might be thought that there was, if not a contract, then at least an “other arrangement” within the meaning of s 64 of the Act. According to the uncontradicted evidence of Mr Caelli, GCB requested that SEQ remain on site to undertake work and supply materials. That plainly occurred and, on the faith of that request, work was done and materials supplied. Furthermore, that work and those materials would otherwise respectively qualify as “construction work” under s 65 of the Act and “related goods” under s 66 of the Act.
- [18]But that is as far as it goes. It is important to appreciate that to qualify as an “other arrangement” for the purposes of the legislation, there must at least be a “concluded state of affairs, which is bilateral”.[5] There must also be a sufficient degree of mutuality to serve the purposes for which the arrangement is required under the Act including, of particular resonance in this case, enough settled detail to enable the work and/or materials to be claimed with precision and then valued to the same standard.[6]
- [19]To my mind, the material before the adjudicator could not justify the conclusion that there was an “other arrangement” within the meaning of the Act, any more than it could justify the conclusion that was in fact reached to the effect that a “contract” or“agreement” of the kind found amounted to a “construction contract” as defined.
- [20]In the first place, the bulk of the payment claim was concerned with the supply of material, but nothing was agreed about the supply of, or payment for, that material in the March 2021 conversation and there was no evidence that any subsequent agreement (or arrangement) was reached concerning that significant part of the claim. To the contrary, all that could be pointed to was part of Mr Caelli’s statement to the effect that the “costs of the supply of any material required” were later charged by SEQ and, while that would be obvious from the claim actually made, Mr Caelli did not say that there was any agreement with GCB to that effect, whether in the conversation to which he was of course not a party, or otherwise. There was no agreement (or arrangement) whereby, for example, GCB was to pay the “reasonable cost” of the supply of material. Rather, the charging and later claim for material were, on the limited evidence before the adjudicator, entirely unilateral.
- [21]Secondly, the March 2021 conversation was confined to a discussion about the capping beam works; it did not extend to other works that were later performed by SEQ and then incorporated in its payment claim. On this point, SEQ argued (as the adjudicator found) that, when paragraphs 11 and 12 of Mr Caelli’s statement are read together, the “works” referred to in paragraph 11 should be seen to include both capping beam works and other work to be performed at GCB’s request. The problem though with this argument is that paragraph 12 deposes to what work was in fact the subject of that conversation – capping beam works. It was “these preliminary works” that SEQ “agreed” to perform. Put another way, on the evidence, the scope of what was apparently requested by GCB at that time did not extend beyond capping beam works.
- [22]Thirdly, although Mr Caelli went on to depose that SEQ performed other works in addition to capping beam works – that is to say, “some of the works contemplated under the proposed Subcontract as preliminary works” – he did not depose that those additional works were performed pursuant to any agreement (or arrangement) with GCB and certainly not pursuant to an agreement of the kind found by the adjudicator.
- [23]Fourthly, there was no specification of the rates to be charged for labour. To the extent that the adjudicator felt able to draw on the content of the two previous claims that were made by SEQ and paid by GCB in April and August 2021, different rates and approaches were taken across those claims. Nor was there any proper basis to conclude that GCB had undertaken to pay SEQ by reference to what the latter usually charged or what might be considered “reasonable” rates of charge. There was simply no evidence of any agreement (or arrangement) at all on that important topic.
- [24]Lastly, nothing was agreed (or arranged) in the March 2021 conversation about such things as the time for performance of any of the work, the making of claims, the time for payment, retention money or the transfer of ownership of the formwork. That last omission is meaningful because Mr Caelli deposed that it was never intended that ownership of the materials that remained on site would be transferred to GCB.[7] If that is accepted, as it must, because there is no contrary evidence on the point, strong support is supplied for the conclusion that the March 2021 conversation was limited to a discussion about the supply of labour. In the end, the evidence before the adjudicator did not rise any higher than establishing that GCB requested SEQ toprovide labour for capping beam works and that SEQ agreed to do that without, at the same time, agreeing the hourly or daily rates that would be charged for that work.
- [25]It follows that an agreement of the kind found by the adjudicator could not in my opinion amount to a “construction contract” within the meaning of the Act and so, without more, it cannot be said that the adjudicator’s jurisdiction was enlivened. SEQ may very well have a strong claim based on a quantum meruit,[8] but an agreement of the kind found by the adjudicator does not represent a contract, agreement or other arrangement sufficient to supply one of the essential jurisdictional facts that is necessary to engage the security processes under the Act.
Was there a “payment claim”?
- [26]Because of the conclusion I have just reached, it is unnecessary to examine in great detail whether there was a valid “payment claim” within the meaning of the Act. However, in brief, GCB argued, first, that the payment claim was not made under a relevant contract and, second, that it did not sufficiently identify the work and material claimed. The first argument must be accepted because it follows from what I have found about the absence of a “construction contract” as defined and the features that s 75 of the Act provides that a payment claim will only be valid where it is made under the relevant “construction contract” and s 88 of the Act requires that the adjudicator only consider the provisions of the relevant “construction contract”. The second argument turns on the question whether there was a sufficient description of the work and material claimed[9] but it is unnecessary to decide whether that was so given my acceptance of the first argument.
Were the work and materials valued?
- [27]For similar reasoning, it is also unnecessary to determine the substratum beneath GCB’s contention that the adjudicator’s decision was affected by jurisdictional error. In this regard, GCB argued that there had not been an independent and proper evaluation of SEQ’s claim as required by the Act (or sufficient reasons for the valuation arrived at) and that, therefore, the adjudicator failed to perform the statutory task required of him.[10] However, whatever may be said about the quality of the adjudicator’s evaluation in this case, the statutory task required the valuation of work carried out and/or material supplied under a construction contract,[11] and that could never be validly undertaken given the absence of such a contract. The decision was affected by jurisdictional error to at least this extent.
What relief should be granted?
- [28]For these reasons, the adjudicator’s decision cannot stand. It will be declared void and of no effect.
- [29]The additional relief sought by GCB was intended to return the parties to a pre- decision state of affairs, that is to say, an order setting aside the judgment as well asthe statutory demand. However, the setting aside of the judgment will be a matter for the District Court at Southport and, while the statutory demand may be set aside in the exercise of this court’s jurisdiction, it is founded on that judgment. The fate of the security paid into court will also need to be determined but, as to that, much will depend on whether SEQ commences a proceeding against GCB for recovery of the value of the work done and materials supplied. Given this mix of issues, the better course is to allow the parties to come to an agreed position regarding each, failing which there shall be liberty to apply. In the meantime, it is appropriate that the first respondent be permanently restrained from attempting to enforce, in any manner, the adjudication decision.
- [30]That leaves the question of costs. GCB is plainly entitled to an order for costs in its favour but argued SEQ should be ordered to pay its costs of the hearing on 6 June 2022 on an indemnity basis. In this regard, it relied on a series of letters forwarded to the legal representatives for SEQ both before and after the originating application and supporting material were served in which it proposed several consent directions, most of which were made at that hearing. GCB contended that SEQ’s failure to consent to the directions proposed by it was “unreasonable” and resulted in costs being thrown away by having to appear at a hearing that could have been avoided. I cannot agree. Quite apart from the differences between what was proposed by GCB and what was in fact ordered, it was not unreasonable for SEQ to withhold its consent given that nothing had been agreed to secure the adjudication amount in advance of the hearing. An order for the costs of that hearing, like the costs overall, shall be made in GCB’s favour but all such costs will be assessed on the standard basis.
Footnotes
[1]Emphasis in original.
[2]See Kirk v Industrial Court (NSW) (2010) 239 CLR 531 , [98]-[100]; Northbuild Constructions Pty Ltdv Central Interior Linings Pty Ltd [2012] 1 Qd R 525 , [35], [75]-[80].
[3]Northbuild Constructions Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525 , [32], [37],[80]; Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (2020) 4 QR 410 , [34].
[4]As to which, see Transcript 1-16, 17.
[5]See Machkevitch v Andrew Building Constructions [2012] NSWSC 546, [28]; Seabreeze Manly v Toposu [2014] NSWSC 1097, [26].
[6]As to the requirement for mutuality, see Crown Green Square Pty Ltd v Transport for NSW [2021] NSWSC 1557, [165]-[170].
[7]Statement of Tom Caelli dated 14 April 2022, paragraph 19(g).
[8]See Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 , 227-228, 262-264.
[9]See Hervey Bay (JV) Pty Ltd v Civil Mining and Construction Pty Ltd & Ors [2008] QSC 58 , [52]; T & M Buckley Pty Ltd v 57 Moss Road Pty Ltd [2010] QCA 381, [38].
[10]See Laing O'Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491, [1]-[5].
[11]Building Industry Fairness (Security of Payment) Act 2017 (Qld), s 72.