Equa Building Services Pty Ltd v A&H Floors 2 Doors Australia Pty Ltd [2022] NSWSC 152

Andrew Hales  | Karen Hanigan  |  Lauren Topper

Key takeouts

 This case demonstrates the importance of:

• validly serving a payment claim; and
  
• adjudicators having jurisdiction under the relevant security of payment legislation and using procedural fairness when making a determination.

Facts

Equa Building Services Pty Ltd (developer) engaged Rockinghorse Construction Pty Ltd (construction manager) to design and build a development.  The construction manager engaged A&H Floors 2 Doors Australia Pty Ltd (subcontractor) to perform flooring work. The developer terminated the construction manager’s contract after a dispute arose, at which point the subcontractor carried out work directly for the developer. There was no formal contract between the construction manager and the subcontractor.

Despite the lack of formal contract, the adjudicator found that there was an arrangement between the construction manager and the subcontractor to carry out the work based on correspondence, quotes and drawings exchanged between the construction manager and the subcontractor. The adjudicator found that this arrangement had then been assumed by the developer.

The developer is part of a group of companies called the Arden Group. The subcontractor served the payment claim to the email address of a Mr Gregory, who was an employee of the Arden Group. The adjudicator determined that this constituted valid service of the payment claim because Mr Gregory had been identified by the subcontractor as a representative of the developer.

The developer challenged the adjudicator’s determination on two grounds:

• the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) was not relevant as the subcontractor had failed to serve a payment claim, meaning that the adjudicator lacked jurisdiction to make the determination; and

• the developer had not been given the opportunity to respond to the adjudicator’s finding that it had been assumed that there was a contract. The developer submitted this was a denial of procedural fairness and that the adjudicator had considered matters external to section 22(2) of the Act which exhaustively lists the matters an adjudicator is able to consider in making a determination.

Decision

The court held that both grounds of the challenge were made out and the adjudicator’s decision was quashed.

Was the payment claim validly served?

The court disagreed with the adjudicator’s conclusion that the payment claim had been validly served because:

• service was not to a person specified by the developer for service of payment claims (section 31(d) of the Act);

• having a ‘belief’ that an employee was a representative of the developer is not enough; and

• Mr Gregory was never an employee of the developer.

The subcontractor also sent the payment claim in hard copy to the wrong address, using 54 Crosby Road, instead of 56 Crosby Road. The adjudicator and the court agreed that this did not constitute valid service of the payment claim.

Procedural fairness and consideration of matters outside section 22(2)

The court found that even if a valid payment claim had been served, the adjudicator’s determination would still have been quashed due to lack of procedural fairness and for acting inconsistently with section 22(2) , by going beyond the submissions made by the parties.

The adjudicator’s finding that the developer had assumed the contractual arrangements in place between the construction manager and the subcontractor did not accord with the submissions of either party. There was no opportunity for the developer to address this at a hearing and as a result, the developer had been denied procedural fairness.