Rogers Construction Group Pty Ltd v Mirage Interiors & Construction Pty Ltd

1. [1]

   The plaintiff, Rogers Construction Group Pty Ltd (the “Builder”), challenges an adjudication determination in the sum of $108,451.13, [1] under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the “Act”) in favour of the first defendant, Mirage Interiors & Construction Pty Ltd (“Mirage”), on the basis that the Adjudicator decided the Adjudication Determination on a basis not advocated by either party and which neither party, particularly the Builder, could reasonably have contemplated.

2. [2]

   An adjudicator under the Act must accord the parties procedural fairness when exercising his or her powers of adjudication. [2]

3. [3]

   However, by reason of the structure and scheme of the Act, the “content of the requisite procedural fairness is reduced” and will only result in invalidity of an adjudication determination if there is a “significant departure from what would ordinarily be the requirements of procedural fairness for a person exercising a statutory power, and where the departure could be characterised as leading to substantial practical injustice in all the circumstances”. [3]

4. [4]

   There will rarely be a basis for quashing an adjudication determination for want of procedural fairness. [4]

5. [5]

   My conclusion is that this is not one of those rare cases.

The Original Contract

1. [6]

   The underlying contract was originally made in or about December 2023. The Builder engaged Mirage to effect services involving the supply and installation of walls, ceilings and partitions at the Busby Fire Station. I will call this the “Original Contract”.

2. [7]

   There is a dispute between the parties as to the precise basis of the Original Contract. It is common ground, however, that it was a lump sum contract. [5]

Mirage’s case as set out in its Adjudication Application

1. [8]

   Mirage contended that there were two agreements between it and the Builder.

2. [9]

   The first was the Original Contract Mirage contended that the Original Contract was constituted by a quotation given by Mirage to the Builder on or about 21 November 2023 to do the work for $248,715.34 (the “Quotation”).

3. [10]

   The second was an oral contract that Mirage contended was entered into on 16 February 2019 as a result of a conversation between Mr Aaron Franklin on behalf of Mirage and Mr Mitchell Rogers on behalf of the Builder (the “Oral Contract”).

4. [11]

   In its Adjudication Application, Mirage contended the Oral Contract “is the agreement on which the dispute in the adjudication arises”.

5. [12]

   Mirage’s Adjudication Application included a witness statement from Mr Franklin in which he said:

6. [13]

   The passage I have emphasised makes clear that Mr Franklin’s and thus Mirage’s contention was that all “works for the project moving forward” would thenceforth be done on an “open book” or “cost plus” basis; whether or not that work was within the scope of the Original Contract.

7. [14]

   Thus, in the Adjudication Application, Mirage contended that “from 19 February 2024, [it] proceeded with the building works on the Open Book Basis” and that:

8. [15]

   It is true, as Mr Pearson, who appeared for the Builder, submitted, that Mirage did not contend that the Oral Contract was a variation of the Original Contract.

9. [16]

   However, and contrary to Mr Pearson’s further submissions, Mirage did contend that the work done under the Oral Contract was work that may have been within the scope of work under the Original Contract. Hence its contention that it “proceeded with the building works on the Open Book Basis”, this being based on Mr Franklin’s contention that “we agreed that all works for the Project moving forward would be on an Open Book Basis”.

The Builder’s case as set out in its Adjudication Response

1. [17]

   The Builder disputed that the Original Contract was comprised by the Quotation. Rather, it contended that the Original Contract was comprised in a “Formal Instrument of Agreement” (the “Instrument”) which was not signed by the parties but which, the Builder contended, had been agreed to as the basis for the Original Contract by an exchange of emails and text messages. The instrument provided for lump sum of $219,104.85.

2. [18]

   The Builder denied the existence of an Oral Contract. Mr Mitchell contended that the conversation deposed to by Mr Franklin did not occur.

3. [19]

   It is clear from the Builder’s contentions in the Adjudication Response that it understood that Mirage’s position was that the Oral Contract was for work including work within the scope of the Original Contract.

4. [20]

   Thus, the Builder recited its understanding of Mirage’s position as follows:

5. [21]

   The words I have emphasised show that the Builder understood that Mirage was seeking, under the Oral Contract, to recover payment for work for which it had already been paid for and which was thus within the scope of the Original Contract.

The Determination

1. [22]

   The Adjudicator correctly summarised Mirage’s position as being that there had been an Original Contract comprised by the Quotation but that:

2. [23]

   The Adjudicator then set out the works that were the subject of Mirage’s Payment Claim and recorded Mirage’s contention to be:

3. [24]

   The Adjudicator then correctly recorded the Builder’s position as being that the relevant agreement was to be found in the terms of the Instrument and “that no second agreement was ever formed or discussed. Indeed, under no circumstances was the concept of a cost plus arrangement agreed to, or even discussed”.

4. [25]

   The Adjudicator did not make a finding as to whether the Original Contract was comprised by the Quotation, or by the Instrument.

5. [26]

   He did not need to do so because he accepted Mirage’s position that the parties had made the Oral Contract.

6. [27]

   Thus, the Adjudicator found that:

7. [28]

   This constituted an acceptance by the Adjudicator of Mr Franklin’s evidence that, arising from his conversation with Mr Rogers, the parties agreed “that all works for the Project moving forward would be on an Open Book Basis”. The obvious corollary was that all such work was to be on that basis, whether or not that work had originally been within the scope of the Original Contract.

8. [29]

   The Adjudicator recognised that Mirage was making a claim for payment “under an agreement or arrangement that is distinct and separate to the ‘construction contract’ identified in the Adjudication Application”.

9. [30]

   However, the Adjudicator continued:

10. [31]

    The Adjudicator was here rejecting the Builder’s case that the work for which Mirage was claiming was work which fell only within the scope of the Original Contract.

11. [32]

    As Mr Gandar, who appeared for Mirage submitted:

12. [33]

    I agree.

Was the Builder denied procedural fairness?

1. [34]

   The Builder’s argument is that the Adjudicator made no finding about the scope of works under the Original Contract and proceeded on the basis that the scope of works under the Oral Contract was, relevantly, the same as under the Original Contract.

2. [35]

   This is what Mirage contended and what the Adjudicator found, namely, as I have said, that the agreement was that all work done from 19 February 2024 was to be on a cost plus basis and under the Oral Contract.

3. [36]

   Mr Pearson submitted that, had the Builder understood that this was Mirage’s position, and that it would be the basis upon which the Adjudicator proposed to make the Determination, it would have adduced evidence of amounts paid under the Original Contract that it contended ought to be credited against claims made under the Oral Contract.

4. [37]

   But the Builder’s Adjudication Response shows that it was alive to the “scope overlap” point.

5. [38]

   Thus, on a number of occasions, it responded to Mirage’s claim by stating:

6. [39]

   Thus, in effect, the Builder was contending that as Mirage had been paid the lump sum under the Original Contract, it had been paid for the work the subject of its Payment Claim. Implicit in that contention is the Builder’s understanding that Mirage was contending the scope of work under the Oral Contract was, relevantly, the same as that under the Original Contract.

7. [40]

   The Builder was thus alive to the contention and made a submission about it.

8. [41]

   There has been no denial of procedural fairness.

9. [42]

   A further finding made by the Adjudicator was as follows:

10. [43]

    The Adjudicator thus appears to have included, perhaps as an alternative finding, that the Oral Contract constituted a variation of the Original Contract.

11. [44]

    Neither party contended that the Oral Contract was a variation of the Original Contract. Mirage’s position was, in effect. that the Oral Contract superseded the Original Contract. The Builder denied that there had been an Oral Contract.

12. [45]

    However, the Builder was not denied procedural fairness by reason of this.

13. [46]

    Indeed, in its Adjudication Response, it had anticipated such an argument.

14. [47]

    In the Adjudication Response, the Builder noted that, in its Payment Claim, Mirage had referred to “Variations”. The Builder continued:

15. [48]

    Thus, as Mr Gandar submitted, the Builder cannot complain of being deprived of an opportunity to make submissions concerning the question of whether there had been a variation of the Original Contract because it did, in fact, make submissions on that issue.

16. [49]

    In any event, as Mr Gandar further submitted, and as I have set out, the Adjudicator also found in favour of Mirage on the alternative basis that the relevant works were performed under the Oral Contract as a separate contract.

17. [50]

    Thus, the question of whether there were “overlapping” scopes of work between the Oral Contract and the Original Contract, however constituted, did not arise. The Adjudicator must have, expressly or implicitly, considered any obligation under the Original Contract to have been superseded by the subsequent Oral Contract pursuant to which the works were performed.

18. [51]

    There was an arithmetical error in the Payment Claim because all figures in the Payment Claim were exclusive of GST except for a credit for a partial progress payment of $2,000 which was expressed to be inclusive of GST.

19. [52]

    The result was that the amount of the Payment Claim was $2,000 short of the GST-inclusive figure.

20. [53]

    The Builder recognised this error in its Payment Schedule, as did Mirage in its Adjudication Application, and the Adjudicator when he gave the Determination.

21. [54]

    In my opinion, Mr Gandar was correct to submit that:

Conclusion

1. [55]

   The challenge to the Adjudication Determination fails.

2. [56]

   The parties should bring in short minutes to give effect to these reasons.