GCB Constructions Pty Ltd v SEQ Formwork Pty Ltd & Ors [2023] QSC 71

Michael Creedon  |  James Knell  |  Spencer Hayward

Key takeout

• A party that is willing to perform construction work should ensure it has a ‘construction contract’ – as defined by the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) – in place before commencing work. 
• Where the contract does not meet the BIF Act definition, the security of payment provisions do not apply and cannot be utilised.

Facts

GCB Constructions Pty Ltd (head contractor) engaged SEQ Formwork Pty Ltd (subcontractor) to work on a site and supply materials for the construction of two residential towers at Southport in Queensland.

In September 2020, the subcontractor provided a tender quotation to the head contractor to provide the formwork for the project.  On 9 June 2021, the head contractor issued a letter of award to the subcontractor but noted that it was subject to agreement on ‘the terms and conditions of the AS4903-2000 Subcontract Agreement’.  Over the following months, the parties negotiated the terms and conditions, but no contract was agreed.  They failed to execute a contract consistent with the award.  Nonetheless, the subcontractor was asked to begin work and agreed to do so, with both parties likely acting on the assumption that agreement on the required terms and conditions would be reached.  The subcontractor advanced invoices for this work, which were duly paid by GCB.

In response to a claim made by the subcontractor in March 2022, GCB issued a document entitled, ‘Payment Schedule under the Building Industry Fairness (Security of Payment) Act 2017′, stating that, among other things, that  the subcontractor 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 BIF Act and had ‘no entitlement to any payment at this time’. On 14 April 2022, the subcontractor made an adjudication application pursuant to the BIF Act.

Decision

At first instance, the adjudicator ordered $367,124.39 be paid to the subcontractor and that the head contractor should pay 100% of his adjudication fees.

The head contractor challenged the adjudicator’s decision on the basis that a jurisdictional error had been made.  This was on the ground that there was no ‘construction contract’ or ‘payment claim’ within the meaning of the BIF Act and therefore the adjudicator had no jurisdiction to value the work and materials in accordance with the BIF Act.

The Supreme Court of Queensland agreed.

It found that an essential jurisdictional requirement for a valid adjudication was the existence of a ‘construction contract’ within the meaning of the BIF Act.  Section 64 of the BIF Act defines ‘construction contract’ as:

‘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’.

The adjudicator had concluded that the relevant contract was constituted by a conversation in March 2021 and then ‘expanded over time to incorporate matters intended to ultimately be encompassed by a fixed price contract which was never struck’.  The adjudicator reasoned that the initial agreement included the preliminary works, to be carried out on hourly charge/day rate basis, principally constituting capping beam works.

However, Burns J held that there was insufficient evidence to find either an ‘other arrangement’ or ‘construction contract’.  An ‘other arrangement’ requires there to be a ‘concluded state of affairs, which is bilateral’.  There must be sufficient mutuality and enough ‘settled detail’ to enable the work and materials to be claimed accurately and to the same standard.

In a similar vein, there was little to ground a finding that what was ‘agreed’ amounted to a ‘construction contract’.  The payment claim was concerned with the supply of material, but in the March 2021 conversation, nothing was agreed about supply of and payment for materials.  The March 2021 conversation was limited to the capping beam works, it did not extend to the works later performed by the subcontractor.  Further, the subcontractor did not depose that they performed these further works pursuant to any agreement (or arrangement).  Nor did it did not specify its rates to be charged for labour.  Nothing was agreed (or arranged) regarding time for completion, the making of claims, time for payment, retention money or the transfer of ownership of the formwork.  Without a ‘construction contract’ or ‘other arrangement’, Burns J held that the adjudicator’s jurisdiction had not been enlivened.

In light of the finding that no ‘construction contract’ had been entered into, it was not necessary to consider whether the claim for payment was a valid ‘payment claim’ within the meaning of the BIF Act.

Similarly, it was unnecessary to consider whether the adjudicator had properly valued the work and materials as required by the BIF Act, in the absence of a valid ‘construction contract’.

Having made these findings, the decision of the adjudicator was declared void and of no effect.  Costs, assessed on a standard basis, were awarded in the head contractor’s favour.