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District Court
New South Wales
Medium Neutral Citation: YTO Construction Pty Ltd v Bhatt [2022] NSWDC 348
Hearing dates: 10, 11 August 2022
Date of orders: 18 August 2022
Decision date: 18 August 2022
Jurisdiction: Civil
Before: Russell SC DCJ
Decision: (1) Judgment for the plaintiff against the defendant for $306,763.10.
(2) Order the defendant to pay the plaintiff's costs.
Catchwords: CONSUMER LAW – misleading or deceptive conduct – whether representations were misleading or deceptive – whether representations made to an adjudicator were also made to the plaintiff - whether the representations were made in trade or commerce – whether defendant made the representations – whether defendant was involved in making the representations – whether plaintiff suffered loss or damage because of the representations
Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW), ss 3, 23, 32
Competition and Consumer Act 2010 (Cth) Part XI; Sch 2 - Australian Consumer Law, ss 2, 18, 236
Fair Trading Act 1987 (NSW), Part 3, s 32
Cases Cited: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
CC Builders (Aust) Pty Ltd v Milestone Civil Pty Ltd [2019] NSWSC 1251
Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd [2017] NSWCA 53; (2017) 94 NSWLR 606
Iskra v MMIR Pty Ltd [2019] NSWCA 126
March v Stramare E & MH Pty Ltd [1991] HCA 12; (1991) 171 CLR 506
Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151; (2017) 95 NSWLR 82
Southern Cross Electrical Engineering Ltd v Steve Magill Earthmoving Pty Ltd [2018] NSWSC 1027
Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661
Texts Cited: Miller, Australian Competition and Consumer Law Annotated (43rd ed, Thompson Reuters 2021)
Category: Principal judgment
Parties: YTO Construction Pty Ltd (Plaintiff)
Ashish Bhatt (Defendant)
Representation: Counsel:
A Vincent (Plaintiff)
A Bhatt (Self-represented)
Solicitors:
Philip J Pollack, Lawyer (Plaintiff)
File Number(s): 2020/154231
Judgment
Introduction
1. These proceedings concern an allegation by YTO Construction Pty Ltd (YTO) that it has suffered damage because of certain representations made in relation to an adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act).
2. YTO sues the defendant Mr Bhatt upon an Amended Statement of Claim filed on 1 November 2021. The defence of Mr Bhatt to the Amended Statement of Claim appears in his Amended Defence filed on 19 November 2021. Certain matters are admitted.
3. YTO is a corporation which carried on business as a builder. Mr Bhatt is an individual who is ordinarily resident in New South Wales and who was a director of Innovative Civil Pty Ltd (Innovative). Innovative was placed into external administration on 14 October 2019.
4. In July 2017 YTO and Innovative entered into a written construction contract pursuant to which Innovative undertook to carry out the piling, anchoring, shotcreting, capping beam and excavation works at a development site at 5 Markham Place and 7-9 Cavill Avenue at Ashfield (the site) for a contract sum of $1,281,000.
5. During the course of the works YTO received from Innovative a progress claim dated 25 December 2017 in the amount of $1,649,832.51 for work alleged to have been completed up to 25 December 2017.
6. As part of that progress claim, Innovative claimed a variation amount of $490,000 (plus GST) for removing 70 loads of excavated material, at a rate of $7,000 per load.
7. There were two types of excavated material which had to be removed from the site. Uncontaminated soil is known as Virgin Excavated Natural Material (VENM). General Solid Waste (GSW) is excavated material which contains contaminants such as concrete, rock and stones. It is more costly to tip and dispose of GSW. Innovative's subcontractor Elkordi Earthworx Pty Ltd (Elkordi) charged $500 per load to cart and tip VENM and $1,250 per load to cart and tip GSW.
8. On 7 February 2018 an Adjudication Application was lodged by Innovative under the SOP Act with the Australian Building and Construction Dispute Resolution Service.
9. On 7 February 2018 Mr Bhatt caused a copy of the Adjudication Application to be served on YTO.
10. YTO alleged in par 6 of the Amended Statement of Claim that Mr Bhatt prepared and lodged the Adjudication Application. Mr Bhatt, in par 15 of his Defence, pleaded that the Adjudication Application, and the materials contained within it, were prepared by multiple persons including:
1. Himself.
2. Mr Patel, the Estimating Manager at Innovative.
3. Mr Thompson and Mr Ahuja of Guardian Property & Construction Pty Ltd (Guardian), which was a project management and consultancy firm.
1. Paragraph 7 of the Amended Statement of Claim pleaded five aspects of the conduct of Mr Bhatt which were said to convey four particular representations. I will return to par 7 in more detail below.
2. On 15 February 2018 YTO prepared, and filed with the Adjudicator, an Adjudication Response to the Adjudication Application.
3. Paragraph 8 of the Amended Statement of Claim pleads that on 22 February 2018, acting upon the four pleaded representations, the Adjudicator determined to allow Innovative the variation sum of $462,000 (plus GST) for the removal of 66 loads of GSW material from the Ashfield site.
4. On 6 March 2018, at the request of Innovative, an Adjudication Certificate was issued in respect of the Adjudication Determination, for a total amount of $1,564,200.22. This included $462,000 plus GST (a total of $508,200) in respect of the removal of 66 loads of GSW material from the Ashfield site.
5. Paragraph 10 of the Amended Statement of Claim pleads that the making of the four representations was conduct in trade and commerce for the purposes of the Australian Consumer Law (ACL) and the Fair Trading Act 1987 (NSW) (FTA). Paragraph 10 also pleads that the making of the representations was conduct of Mr Bhatt himself, and conduct on behalf of Innovative.
6. Paragraph 11 of the Amended Statement of Claim pleads the ways in which it was alleged that the representations were misleading or deceptive, or likely to mislead or deceive.
7. Paragraph 15 of the Amended Statement of Claim pleads that in the alternative, to the extent that Mr Bhatt did not directly engage in misleading or deceptive conduct, Innovative engaged in such conduct and Mr Bhatt participated in the making of the representations with actual knowledge that they were false.
8. In par 16 of his Defence Mr Bhatt pleaded that any representations contained in the Adjudication Application were made to the Adjudicator and not to YTO.
9. In par 17 of his Defence Mr Bhatt pleaded that a submission made by Innovative to the Adjudicator under the SOP Act was not conduct in trade or commerce for the purposes of the ACL.
The Australian Consumer Law
1. Part XI of the Competition and Consumer Act 2010 (Cth) deals with the application of the ACL. The ACL is contained in Schedule 2 to that Act.
2. Section 18(1) of the ACL (which is in Chapter 2 of the ACL) says:
"A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."
1. The phrase "trade or commerce" is defined in s 2 of the ACL to mean:
"(a) trade or commerce within Australia; or
(b) trade or commerce between Australia and places outside Australia;
and includes any business or professional activity (whether or not carried on for profit)."
1. Section 236(1) of the ACL provides:
"If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention."
1. Section 2 of the ACL defines "involved" as follows:
"A person is involved, in a contravention of a provision of this Schedule or in conduct that constitutes such a contravention, if the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced, whether by threats or promises or otherwise, the contravention; or
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention."
1. Counsel for YTO put the involvement of Mr Bhatt on the basis of par (a) or par (c) of the definition of "involved".
The Fair Trading Act 1987 (NSW)
1. Part 3 of the FTA picks up and applies the ACL as a law of New South Wales. By s 32 of the FTA the ACL applies to and in relation to persons ordinarily resident in New South Wales or persons otherwise connected with New South Wales. Mr Bhatt is ordinarily resident in New South Wales, a matter admitted in his Defence.
Evidence for YTO
Evidence of Mr J G Yuan
1. Mr Yuan is the sole director of YTO. His evidence-in-chief was contained in the following:
1. Affidavit affirmed 25 May 2021 (PX 2).
2. Exhibit "JY-1" (PX 3) being the documents exhibited to PX 2.
3. Affidavit affirmed on 30 April 2022 (PX 4).
4. Exhibit "JY-2" (PX 5) being the documents exhibited to PX 4.
1. Mr Yuan was cross-examined by Mr Bhatt. Mr Yuan was quite an unsatisfactory witness. He seemed unwilling to answer most questions, and regarded questions as an opportunity to give a speech on a topic which he chose. Nevertheless, his affidavits largely annexed documents which tell the story of the YTO claim. Those documents are not in issue.
2. In 2017 YTO entered into a building contract with a developer for the design and construction of 91 residential units and 7 retail units at the site.
3. YTO and Innovative entered into a subcontract with effect from 7 July 2017. The subcontract works included general excavation and removal of excavated material, piling, anchoring and shotcreting at the site (PX 3, pp 20-34).
Innovative Progress Claim
1. On 11 January 2017 YTO received from Innovative a progress claim in the amount of $1,649,832.51, including GST, for work alleged to have been completed up to 27 December 2017 (PX 3, pp 35-45).
2. Item 9.1 was for "GSW Material – load, cart, tip fees". The claim was for 70 loads at $7,000 per load, a total of $490,000 plus GST (PX 3, p 40).
YTO Payment Schedule
1. YTO submitted a Payment Schedule dated 23 January 2017 in response to the progress claim (PX 3, pp 46-49). It set out the following reasons for withholding all payment:
1. The payment claim is invalid.
2. Payment is not yet due.
3. No variation is permitted by the subcontract.
4. Back charges.
5. Liquidated damages.
Innovative Adjudication Application
1. On 7 February 2018 Innovative lodged an Adjudication Application (PX 3, pp 53-125).
2. While a number of different items were claimed in the Adjudication Application, the claim in relation to excavation, known as Variation 5, was dealt with at pp 57-70 of the Application.
3. While the initial claim of Innovative was for 70 loads of GSW, that was reduced to 66 loads. Innovative said (PX 3, p 57, fn 5):
"Innovative has claimed 70 loads under Item 9.1 in its Progress Claim No. 5 – December 2017; however, on review it was identified, there were only 66 loads were [sic] carted out. The supporting documents already provided to YTO along with the Progress Claim No. 5 included the dockets from secondary subcontractor Elkordi for 66 loads."
1. This part of its claim was quantified by Innovative as 66 loads at $7,000 per load, being a total of $462,000 (PX 3, p 111, Item 9.1). Innovative provided photographs of the GSW material (PX 3, pp 113-114).
Documents Supplied by Innovative to the Adjudicator
1. Mr Yuan did not exhibit to his affidavit copies of the documents supplied by Innovative to the Adjudicator. However, they were annexed to an affidavit of Mr Bhatt affirmed on 7 March 2022 (DX 1). To maintain the chronology of the documents, I will divert from consideration of the documents exhibited to Mr Yuan's affidavit, and deal with the documents which Mr Bhatt said were part of his Adjudication Application. They are at DX 1, pp 87-125. Not all of those documents relate to the claim for 66 loads of GSW.
2. The invoices at DX 1, pp 87-88 are for work done on site by Aldainy Earthworx. This work was not related to cartage and tipping of GSW.
3. Innovative provided a number of photographs of the excavation at the site (DX 1, pp 89-105). Innovative also provided a Bulk Excavation Plan (DX 1, p 106).
4. Innovative also provided the following documents to the Adjudicator, which will be considered in greater detail later in this judgment:
1. A spreadsheet setting out the 66 loads for which a claim was made (DX 1, p 107) (the Innovative Spreadsheet).
2. Dockets from Elkordi (DX 1, pp 108-118).
3. A redacted version of invoice no. 243 from Elkordi (DX 1, p 119).
4. A schedule prepared by Innovative dealing with "VENM Material" (DX 1, pp 120-125).
YTO Adjudication Response
1. YTO prepared an Adjudication Response (PX 3, pp 127-137). This raised the same five matters upon which YTO relied in its Payment Schedule summarised above. There was no consideration of the documents submitted with the Adjudication Application and in particular, there was nothing said concerning the quantum of the claim for removal of GSW.
Adjudication Determination
1. The Adjudicator issued a Determination on 22 February 2018 (PX 3, pp 138-167). The Determination dealt with the claim for Variation 5 – Excavation Work, in pars 150-166. The Adjudicator said:
"Variation 5 - Excavation Work
Liability
150. The Claimant claims a total amount of $521,950.00 for Variation 5 in the Payment Claim, but reduces the claim to $493,950 in the Adjudication Application. More particularly, the claim is said to be made because:
'GSW material (sic) has been found as per agreement between YTO and innovative - YTO supposed to supplied the clean site with site clearance certificate which didn't happened and during an excavation work Innovative piling has found the more possible GSW/ ENM/ other then [sic] VENM materials which needs to be removed from site during lnnovative excavation work. Which costed (sic) additional money to Innovative and never made an allowance (sic) by Innovative to in any part of an agreement. Innovative seeking additional cost for removing materials other then VENM'
151. The Payment Claim is supported by by Aldainy Earthworx and Elkordi dockets and a collection schedule, photographic evidence, and a marked up bulk excavation sketch.
152. The reason for rejecting the variation claim in the Payment Schedule was restricted to' 'No Variation permitted by Sub-Contract' and the general reliance on Clause 3, 5 and 17 of the Subcontract. No other assessment or contractual analysis of the Bulk Excavation Scope of Work was indicated in the Payment Schedule. In the Adjudication Response, the Respondent merely reiterated its general contractual argument based on Clauses 3, 5 and 17, and added nothing further, or any substantive evidence to bolster its position.
153. In paras. 225 to 231 of the Adjudication Application, the Claimant sets out the factual background of the claim. Pertinently, the Claimant contends amongst other things:
a. Final Quote dated 13 July 2017 Rev 6 (the Final Quote) details
'Removal of GSW material (approx. 1550 cu. M) and removal of existing footing by client. Client will have to give us report once GSW material removed from site';
b. It was the Respondent's responsibility to provide a clean site, however on commencement the Claimant discovered unsuitable material;
c. The Respondent instructed it to make a stockpile in the middle of the site so that GSW material could be measured prior to export offsite;
d. The Respondent utilized some of that material in lower layers of backfill in northern side of site and instructed the Claimant to separate brick and concrete from stockpile;
e. Claimant moved material through bogies to northern side;
f. Respondent instructed the Claimant to export the remaining material offsite;
g. The Claimant removed 66 loads offsite using its subcontractor, Elkordi;
h. There is no dispute between the parties that the material was unsuitable.
154. I find the Claimant has taken on the task of setting out a detailed explanation as to why it was required to carry out the variation work, and has explained in some detail its interpretation of the Scope of Works under the Subcontract, and the revised Scope of Work actually constructed. The Claimant says it was instructed to perform the works by the Respondent.
155. In particular, I have reviewed the Final Quote, the Scope of Work regarding the Bulk and Detailed Excavation and the Geotechnical Report made available to the Claimant for the purpose of tendering.
156. I acknowledge the Claimant's Final Quote does not constitute a Subcontract document, so have given this document little weight in coming to my determination. I note that in the Final Quote 'Contamination and Asbestos' are expressly excluded.
157. The Respondent has failed to direct me to any particular provisions of the Subcontract Scope of Works, if any, in regard to the removal of GSW. On a reading down of the Scope of Work, I am satisfied that the Claimant's contention that it anticipated the bulk removal of VENM is reasonable.
158. On the basis of the Claimant's factual analysis, and in the absence of any contest, I am persuaded that the Respondent engaged in conduct that did amount to a clear representation that it agreed to the Variation 5 works, and the Claimant acted on that representation.
159. The Respondent has not persuaded me that the absence of a written and signed agreement is sufficient to disentitle the Claimant to claim for work carried out under Variation 5 under the Act. Furthermore, the Respondent has provided me with nothing that persuades me the Claimant cannot claim for work carried out under Variation 5 under the Act in circumstances where verbal instructions were given to it and in the circumstances where the Subcontract conditions were unworkable.
160. I find the Claimant is entitled to claim for work carried out under Variation 5 in its progress claim under the Act.
161. Valuation
162. As contended by the Claimant, I find there are no express provisions that govern the valuation of variations to the Scope of Work.
163. The Claimant provided a summary of cost breakdown and detailed cost breakup and supporting information in the Payment Claim. This included the details of quantification and rates applied for each line item comprising the claim. The Claimant also provided to the Respondent detailed substantiation in the Payment Claim, including photographic evidence of the works in progress.
164. The Respondent did not provide any alternative assessment for the variation in the Payment Schedule or Adjudication Response.
165. In the Adjudication Application the Claimant explained in some detail each item claimed for with photographic evidence. On the balance of the information provided, I accept the Claimant's quantification, proposed rates and valuation.
166. I value Variation 5 as follows:
a. CSW Material Cart Away $466,800.00
b. Boggie Supply $13,650.00
c. Excavator Supply $7,500.00
d. Contaminated/Rubbish Material removed from site $3,000.00
e. Preparation of ramp $3,000.00
Total $493,950.00"
1. For the work said to have been done by Elkordi in carting away 66 loads of GSW, the Adjudicator allowed 66 x $7,000 = $466,800 plus GST (PX 3, p 158, par 166a).
Adjudication Certificate
1. The Adjudicator issued an Adjudication Certificate on 6 March 2018 in the amount of $1,564,200.22 (PX 3, pp 168-169).
Supreme Court Proceedings 2018/97840
1. In March 2018 YTO commenced proceedings against Innovative in the Supreme Court seeking to set aside the Adjudication Determination, inter alia, on the basis that it was procured by fraud.
2. On 5 April 2018 YTO paid $1,564,220.34 into the Supreme Court, in respect of the Adjudication and associated matters.
3. Mr Bhatt gave evidence in those Supreme Court proceedings to the effect that he accepted responsibility for preparation of the Adjudication Application. Part of the transcript in the Supreme Court reads as follows (PX 3, p 264):
"Q. Because you say in your affidavit that you were responsible for the preparation of the Adjudication Application. Isn't that the case? As the director of the company.
A. Yeah, I had to take ownership. I had to help them out, yes.
Q. So you would have been careful to ensure that the claim accurately recorded the things that you intended to convey. Correct?
A. Yes."
1. The transcript in the Supreme Court also contained the following (PX 3, p 265):
"Q. You agree with that proposition, don't you? That as the director of the company you took responsibility for the preparation of the payment claim?
A. Yes."
1. In the Supreme Court proceedings Innovative relied upon an affidavit by Mr H Patel affirmed on 23 April 2018 (PX 3, pp 431-437).
2. Mr Patel said that he assisted Mr Bhatt in the compilation of the documents for the Adjudication Application. To support the claim for the offsite disposal of the GSW Material, he enclosed a one-page schedule, 11 Elkordi haulage dockets and an Elkordi tax invoice dated 7 October 2017. These were the documents which Mr Bhatt identified in DX 1 as those supplied in support of the Variation 5 part of the Adjudication Application.
3. In relation to the Elkordi tax invoice dated 7 October 2017 Mr Patel said as follows (PX 3, p 436):
"32. One of the matters the Adjudication Application addressed was the haulage and the disposal of GSW Material (that was not VENM) on 4 and 7 October 2017. I could not locate copies of the Elkordi haulage dockets for the disposal of that material on those days. As evidence of the number of truck movements, I therefore included the 7 October 2017 invoice in the Adjudication Application.
33. The 7 October 2017 Invoice identified the date, the registration number of the haulage trucks and the hours worked on those days. I incorporated this information into the document 'Summary Sheet & Dockets – GSW Material'.
34. Before I included the 7 October 2017 invoice, I redacted (whited out) the rates on the Elkordi tax invoice. I redacted the rates shown on the Elkordi invoice dated 7 October 2017 because it is not relevant to the calculation of the truckloads and that was not relevant to that purpose and that I considered that the rate could be commercial in confidence. I have exhibited a copy of the original invoice and the redacted invoice at HP-1 Tab 4 at pp 29-31."
1. In his second affidavit (PX 4) Mr Yuan referred to and exhibited an affidavit filed by Innovative in the Supreme Court proceedings. This was an affidavit by Ms Luz De Guzman dated 6 July 2018 (PX 5, pp 2-20).
2. Ms De Guzman deposed that she was the assistant accountant of Innovative. When she received a written invoice requesting payment, she checked it against supporting documents received from Innovative's subcontractor. If there were supporting documents then the invoice, or part of it, was paid. If there were no supporting documents, Ms De Guzman would request a subcontractor to provide the necessary supporting documents before payment could be made.
3. In her affidavit Ms De Guzman dealt with two invoices received from Elkordi for work done in relation to the site. These were invoices 242 and 243.
4. In relation to invoice 242, several of the entries related to the date of 30 August 2017. Ms De Guzman rejected these claims, as they were not supported by documents from Elkordi.
5. Ms De Guzman gave no evidence that she had subsequently received any supporting documents or that she ever approved the entries for 30 August 2017 for payment.
6. Invoice 242 is at PX 5, pp 16-17, as an annexure to the affidavit of Ms De Guzman filed in the Supreme Court. That version of invoice 242 contains the handwriting of Ms De Guzman. Against the five entries for 30 August 2017 Ms De Guzman has written the word "REJECTED".
7. Ms De Guzman also annexed to her affidavit invoice 243 (PX 5, p 19). In its original form this claimed $5,566. Ms De Guzman wrote notes on the invoice to record that she rejected the items claimed in the second, third and fifth lines. She allowed the items claimed in the first and fourth lines, but reduced the first item from $1,015 to $870 and the fourth item from $1,015 to $725. When GST was added, Ms De Guzman accepted that there was a liability for payment of $1,764.50 in relation to the total claimed of $5,566.
8. It is to be noted that part of the claim by Innovative for the removal of 66 loads of GSW by Elkordi includes a claim for the work recorded on the first, second, fourth and fifth lines of invoice 243. This is in spite of the fact that Ms De Guzman rejected entirely the claims recorded on the second and fifth lines of invoice 243 and allowed the claims made on the first and fourth lines, but only in part. It is further noted that while the Elkordi invoice asked for payment of $5,566 (which Ms De Guzman marked down to $1,764.50), Innovative put the redacted invoice forward to the Adjudicator and asserted that it was entitled to $196,000 (28 x $7,000) plus GST for GSW cartage on that invoice.
9. In the Supreme Court, Justice Rein dismissed YTO's claims and ordered that the amount of $1,564,220.34 that had previously been paid into court by YTO, and accumulated interest, be paid to Innovative.
Court of Appeal Proceedings
1. YTO successfully appealed against part of the decision of Justice Rein. Innovative was ordered to pay $399,000 plus GST and interest back into Court. However, Innovative did not pay that money back into Court and has since entered into voluntary liquidation.
The Business of Construction
1. In his affidavit (PX 2, par 28) Mr Yuan said:
"I have been involved in the construction industry for over 30 years and in my experience the submission of progress claims and subsequent making of adjudication applications and responses forms part of the regular day to day activities of business involved in the construction industry."
Evidence of Mr El Kordi
1. Mr Ahmad El Kordi swore an affidavit on 4 June 2021 (PX 1). He annexed copies of his invoices numbered 242, 243 and 267, which related to cartage from the Ashfield site. He also annexed a copy of invoice 243 which has blanks on it. This is the redacted version of the invoice supplied by Innovative to the Adjudicator and explained by Mr Patel in his evidence to the Supreme Court. Mr El Kordi said that the redacted version was not prepared by him or by any other person at Elkordi. I accept that evidence. Mr Patel confessed to altering the invoice.
Evidence for Mr Bhatt
1. Mr Bhatt affirmed an affidavit on 7 March 2022 (DX 1). He gave the following evidence concerning the distinction between VENM and GSW:
"8. I am aware from my experience in the civil engineering and excavation industries that VENM is natural material (such as clay, gravel, sand, soil, or rock fines):
a) that has been excavated and that is not contaminated with manufactured chemicals, or with process residues, because of industrial, commercial, mining, or agricultural activities;
b) that does not contain any sulfidic ores or soils or any other waste; and
c) that does not contain any wastes such as brick, concrete, and timber.
9. In my observation, the material on the Site was largely VENM with a proportion of material other than VENM (Non-VENM). The Non-VENM material was largely comprised of building and demolition waste and GSW (non-putrescible) (of the nonVENM kind) including tree roots, and some topsoil containing Hazardous Waste comprising of asbestos.
10. It is an industry practice to generally refer to the various classes of Non-VENM material that are pre-classified as GSW (non-putrescible) as 'GSW'. The classes of that material include, for example, building and demolition waste, topsoils, and garden wastes. In this affidavit, I will refer to Non-VENM/GSW (non-putrescible) material as 'GSW' because that terminology is consistent with common industry usage. However, I note that, technically, VENM is a subset of GSW (non-putrescible)."
1. Mr Bhatt said that Innovative engaged Elkordi to dispose of waste material from the site. Innovative and Elkordi agreed on a price of $500 plus GST per truckload for VENM and $1,250 plus GST for non-VENM material.
2. On 11 January 2018 Innovative submitted its payment claim for the work completed up to 25 December 2017, including a claim for the loading, carting and payment of tip fees for 70 truckloads of GSW Material. YTO denied that the work was a variation.
3. Innovative engaged a quantity surveying firm to prepare an Adjudication Application on behalf of Innovative. A large number of supporting documents were attached to the Adjudication Application. Mr Patel compiled the supporting documents with the assistance of the quantity surveying firm. Mr Bhatt annexed a copy of the supporting documents for Variation 5 (relating to carting of GSW) at DX 1, pp 87-125.
4. Mr Bhatt said that in the Adjudication Application, Innovative claimed to have loaded, carted and disposed of 66 loads of GSW. He pointed out that Innovative did not make any representations about the cost incurred by Innovative in removing the GSW.
5. The material supplied by Innovative to the Adjudicator has been summarised above. It is necessary to consider some of those documents in more detail.
The Innovative Spreadsheet for GSW Material
1. One of the documents put before the Adjudicator was the Innovative Spreadsheet headed "GSW Material" (DX 1, p 107). This set out the 66 loads of GSW for which Innovative made a variation claim to the Adjudicator. The Innovative Spreadsheet contained columns which set out: a date; the registration number of the truck and trailer; the number of loads, whether the load was VENM or GSW; a unit price; a total amount; and GST.
2. It is convenient to break the entries on the Innovative Spreadsheet up into four categories.
Category 1: 28 and 30 August 2017
1. The first line on the Innovative Spreadsheet claims for four loads of GSW hauled by vehicle CK91JV on 28 August 2017. The second line of the Innovative Spreadsheet claims for one load of GSW hauled by vehicle registration no. CK91JV on 30 August 2017.
2. These two entries relate to amounts claimed in Elkordi invoice 242 (DX 1, p 126).
3. The first entry on that tax invoice is for four loads hauled by vehicle CK91JV on 28 August 2017. The unit price for each load is $500. According to the evidence of Mr Bhatt concerning prices, this must have been a load of VENM and not GSW.
4. Similarly, the eighth entry on the tax invoice claims for haulage by vehicle CK91JV on 30 August 2017. The "Quantity" is said to be "5" and the "Unit Price" is $145, a total of $725.
5. It is obvious that the "5" relates to five hours rather than five loads. Five times $145 is $725. This could not have been haulage of one load of GSW, even if the trip took five hours. The clear evidence of Mr Bhatt was that the agreed price for haulage of GSW was $1,250 per load. It is unlikely in the extreme that Elkordi would have charged on an hourly rate, and charged much less than the agreed rate per load of GSW, for five hours of work.
6. My finding in relation to the first two entries on the Innovative Spreadsheet is that the first two entries relating to 28 August 2017 and 30 August 2017 are, to use a neutral term for present purposes, "inaccurate". Those two lines on the Innovative Spreadsheet claim for haulage of GSW, whereas the supporting invoice clearly indicates that the first loads were VENM and not GSW, and the second load could not have been GSW because of the price charged.
Category 2: 6, 7, 8, 11 and 12 September 2017
1. There are two entries for 6 September 2017, two entries for 7 September 2017, three entries for 8 September 2017, one entry for 11 September 2017 and two entries for 12 September 2017. When claims were made by Elkordi upon Innovative, Ms De Guzman satisfied herself that there were supporting documents for these claims which showed that the work had been done and that the load hauled was GSW. In closing submissions, counsel for YTO accepted that these claims for a variation were properly made to the Adjudicator, and that there was no misleading or deceptive conduct in making those particular claims. The claims relate to a total of 29 loads at $7,000 per load. In effect, this part of the claim made by YTO in these proceedings was abandoned.
Category 3: 28 September 2017
1. There was one entry for 28 September 2017 for a vehicle registered no. CJ66NS for four loads of GSW at $7,000 per load.
2. There was no supporting documentation given to the Adjudicator in relation to this entry. Nor was it dealt with in the affidavit of Ms De Guzman.
3. However, Ms De Guzman did say in her affidavit (PX 5, p 4, par 5) that sometimes Mr Bhatt authorised payment for a claimed load, because he was aware that the load had been carried out, even though there was no supporting documentation.
4. In those circumstances, I cannot presently classify the claim relating to four loads on 28 September 2017 as "inaccurate".
Category 4: 4 and 7 October 2017
1. There were two claims in the Innovative Spreadsheet for 4 October 2017. They related to two vehicles with the registration numbers CI03WF and CI72ZQ. For each there was a claim for seven loads at $7,000 per load. For 7 October 2017 there were claims for two vehicles with the registration numbers STRSSD and C997GN. For each there was a claim for seven loads at $7,000 per load. Thus the Innovative Spreadsheet claimed for 28 loads at $7,000 per load.
2. The copy of invoice 243 presented by Innovative to the Adjudicator is at DX 1, p 119. This is the version "redacted" by Mr Patel with white out. It shows the two entries for 4 October 2017 and the two entries for 7 October 2017. Under the column "Quantity" appears the number "7" for each entry. The unit price, the GST and the total amount was whited-out and they simply appear as blank columns.
3. The unredacted version of invoice 243 is at DX 1, p 131. This was not supplied to YTO by Innovative when it lodged its payment claim and it was not supplied to the Adjudicator. The unredacted version of the invoice shows that for each truck, the Quantity of "7" and the Unit Price of $145 results in a total claim of $1,015.
4. Thus the unredacted invoice discloses that the figure recorded in the Quantity column is a number of hours rather than a number of loads. Mr Patel said in his affidavit in the Supreme Court (referred to above) that the figure of "7" in the Quantity column was the number of hours not the number of loads.
5. Further, a reading of the invoice shows that each load could not have been GSW, even if seven hours were spent. One load of GSW alone was to be carted for an agreed price of $1,250.
6. Again, to use a neutral term at this stage, the claim in the Innovative Spreadsheet for the 28 loads of GSW said to have been carted on 4 October 2017 and 7 October 2017 is "inaccurate".
Findings of Fact
1. In par 7 of the Amended Statement of Claim YTO pleads that Mr Bhatt made four statements in the Adjudication Application and provided a particular document to the Adjudicator.
2. I find that Mr Bhatt did make the four statements pleaded in par 7 of the Amended Statement of Claim and did provide the document pleaded in par 7. I will deal with those matters one by one.
Paragraph 7a of the Amended Statement of Claim
1. The Amended Statement of Claim pleads that Mr Bhatt stated that although Innovative Civil had claimed in Variation Claim 5 for 70 loads of GSW, on a review it was identified that there were only 66 loads carted out.
2. I find that this statement was made in the Adjudication Application (PX 3, p 109, fn 5).
Paragraph 7b of the Amended Statement of Claim
1. The Amended Statement of Claim pleads that Mr Bhatt stated that Innovative Civil removed 66 loads of GSW off the site using its subcontractor Elkordi.
2. I find that this statement was made in the Adjudication Application (PX 3, p 111, par 231).
Paragraph 7c of the Amended Statement of Claim
1. The Amended Statement of Claim pleads that Mr Bhatt stated that "the supporting documents", including dockets from Elkordi for 66 loads of GSW had already been provided to YTO along with Variation Claim 5.
2. I find that this statement was made in the Adjudication Application (PX 3, p 111, fn 9; p 111, par 235; and p 114, par 239).
Paragraph 7d of the Amended Statement of Claim
1. The Amended Statement of Claim pleads that Mr Bhatt stated that Innovative Civil was entitled to be paid $462,000 (excluding GST) under the Contract for "GSW Material Cart Away" in respect of the 66 loads of GSW.
2. I find that this statement was made in the Adjudication Application (PX 3, p 111, par 233, Item 9.1).
Paragraph 7e of the Amended Statement of Claim
1. The Amended Statement of Claim pleads that Mr Bhatt provided the Adjudicator with a redacted copy of invoice 243 issued by Elkordi, which was relied on in the Adjudication Application as evidence of the haulage of 28 loads of GSW.
2. I find that this document was provided to the Adjudicator (PX 3, p 126; PX 2, par 17; PX 3, p 436, par 34).
The Pleaded Representations
1. The Amended Statement of Claim pleads that, based upon the four statements which I have found that Mr Bhatt made, and the redacted invoice which he provided, there were four representations made to YTO and to the Adjudicator. These are pleaded in pars 7f, g, h and i of the Amended Statement of Claim.
2. In final submissions counsel for YTO abandoned that part of the claim based upon the "Reasonable Relationship to the Additional Cost Representation" pleaded in par 7i of the Amended Statement of Claim. Counsel continued to rely upon the other three pleaded representations.
3. Those representations, as pleaded, are:
"f. Each of the 66 loads referred to in Payment Claim 5 contained General Solid Waste material (the General Solid Waste Representation);
g. Innovative Civil had incurred additional costs in respect of all of the 66 loads of General Solid Waste for which it claimed a variation (the Additional Costs Representation);
h. Innovative Civil was entitled to be paid $462,000 (excluding GST) as a variation under the Contract for the removal of General Solid Waste material from the Site (the Variation Representation)…"
1. I find that each of the three pleaded representations (the Three Representations) set out immediately above were made or conveyed by the matters pleaded in pars 7 a, b, c, d and e of the Amended Statement of Claim ie the four statements made to the Adjudicator and the redacted invoice provided to the Adjudicator.
Were the Three Representations made in Trade or Commerce?
1. I find that they were. Nothing could be more central to the conduct of any business or profession than being paid. Sending an invoice and requesting payment is an ordinary incident of trade or commerce. In the case of a civil engineering business, delivering a payment claim, seeking an adjudication under the SOP Act and making submissions to an adjudicator are everyday events.
To Whom were the Three Representations made?
1. I find that the Three Representations were made to the Adjudicator. This was admitted by Mr Bhatt in par 16 of his Defence.
2. I also find that the Three Representations were made to YTO. The Three Representations were part of the material which accompanied the original payment claim served upon YTO by Innovative.
Did Mr Bhatt make the Three Representations, or was he involved in making them?
1. I find that Mr Bhatt himself made the Three Representations. I also find that Mr Bhatt was involved in the Three Representations being made by Innovative. He was the sole director and the secretary of Innovative (PX 3, p 3). In par 15 of his Defence he admitted that the Adjudication Application, and the materials contained within it, were prepared by multiple persons, including himself. Mr Bhatt electronically signed the Adjudication Application (PX 3, p 55). In the Supreme Court proceedings, Mr Bhatt gave evidence (set out above) to the effect that he accepted responsibility for preparation of the Adjudication Application. Mr Bhatt acknowledged that as the director of Innovative, he took responsibility for preparation of the payment claim. Ms De Guzman, the assistant accountant who assessed the Elkordi invoices, ultimately took her instructions from Mr Bhatt.
2. Mr Bhatt was involved in Innovative making the Three Representations, when regard is had to the definition of the word "involved" in s 2 of the ACL. I accept the submission of counsel for YTO that Mr Bhatt aided, abetted, counselled or procured the making of the Three Representations.
3. A person is knowingly concerned in a contravention of the ACL if they have knowledge of the essential facts concerning the contravention: Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 670. I also accept the submission of counsel for YTO that Mr Bhatt was directly knowingly concerned in making the representations.
Were the Three Representations Misleading or Deceptive, or Likely to Mislead or Deceive?
1. The principles developed by the courts in relation to s 18 of the ACL (and citation of the relevant authorities) are set out in par 18.20 of Miller, Australian Competition and Consumer Law Annotated (43rd ed, 2021). The relevant principles in relation to s 18 are:
1. The test is objective and the court must determine the question for itself.
2. The relevant conduct must be identified and then consideration given to whether that conduct, considered as a whole and in context, is misleading or deceptive or likely to mislead or deceive. It is wrong to select particular words or acts which, although misleading in isolation, do not have that character when viewed in context.
3. A person's intention or belief concerning the accuracy of the statement of fact is not relevant, unless the statement involves the maker's state of mind. The question is whether the statement conveys a meaning that is false. A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false.
4. Conduct is misleading or deceptive or likely to mislead or deceive if it has the tendency to lead into error. Mere confusion or wonderment will not establish misleading or deceptive conduct.
5. Whether there was a real but not remote chance or possibility that the relevant conduct was misleading or deceptive or likely to mislead or deceive is a relevant question. To assess this, one looks at the potential practical consequences and effect of the conduct.
6. The words "likely to mislead or deceive" demonstrate that it is not necessary to show actual deception. It is not necessary to adduce evidence from persons to show that they were actually misled or deceived. The word "likely" in this context means a real and not a remote chance or possibility.
1. I find that the claims in "Category 1" above, being the claims for 28 and 30 August 2017, were representations which were misleading or deceptive or which were likely to mislead or deceive. Innovative had in its possession an invoice from Elkordi which showed that the four loads for which a claim was made for 28 August 2017, and the one load for which a claim was made for 30 August 2017, were loads of VENM and not GSW. Innovative did not put this Elkordi invoice before the Adjudicator as part of the material in support of its payment claim. Instead, there was an assertion on the Innovative Spreadsheet that these five loads were all GSW loads. That was false to the knowledge of Innovative and Mr Bhatt.
2. To put forward a claim for five loads of GSW, when the Elkordi invoice clearly indicated that the loads were of VENM, was conduct which was misleading or deceptive or likely to mislead or deceive.
3. Counsel for YTO abandoned the s 18 claim in relation to the "Category 2" items relating to 6, 7, 8, 11 and 12 September 2017.
4. The evidence in relation to "Category 3", being the entry on the Innovative Spreadsheet for 28 September 2017 does not enable me to make a finding that such claim was misleading or deceptive. While there is no supporting documentation for that claim, the evidence of Ms De Guzman in the Supreme Court was that Mr Bhatt sometimes authorised payments because he knew that there was a load of GSW, even though there was no document relating to such load. Unlike Category 1, there is no document which contradicts the claim made in Category 3. In those circumstances, I decline to find that there was any misleading or deceptive conduct in relation to the Category 3 claim.
5. In relation to "Category 4", being the claims for 14 loads of GSW on 4 October 2017 and 14 loads of GSW on 7 October 2017, I find that there was misleading or deceptive conduct. Mr Patel deliberately whited-out parts of invoice 243 to give the false impression that there was an invoice supporting the claim for 14 loads of GSW on those dates.
6. In cross-examination Mr Bhatt sought to characterise the conduct of Mr Patel as a "mistake". However, a mistake is an act which is not intentional. The act of Mr Patel in redacting the invoice was a deliberate act designed to provide false evidence in support of the claim for the Category 4 items.
7. At various points in his cross-examination, Mr Bhatt sought to characterise the redaction of the invoice as "just business" and said words to the effect of "this is how such claims are made". I reject both of those assertions. It would not necessarily be misleading or deceptive conduct to make a claim for more than is due. However, it is misleading or deceptive conduct to provide what is essentially a forged invoice, in support of a claim which the claimant knows is not justified by the facts.
8. I therefore find that there was misleading or deceptive conduct, or conduct which was likely to mislead or deceive, in relation to the Category 4 items.
Was there Reliance upon the Three Representations?
Principles Concerning Reasons Provided by an Adjudicator
1. In examining whether there was reliance by the Adjudicator upon the Three Representations, I keep in mind the following principles laid down by the courts in relation to consideration of the reasons provided by an Adjudicator.
1. Regard should be had to the purposes of the SOP Act, namely to provide "a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract": Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd [2017] NSWCA 53; (2017) 94 NSWLR 606 at [2] and [10].
2. The underlying principle of the SOP Act is "pay now, argue later": Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151; (2017) 95 NSWLR 82 at [1], [102] and [145].
3. The Court of Appeal has described the effect of the scheme of the SOP Act as "rough justice": Probuild at [130].
4. It needs to be borne in mind that the rights given by the SOP Act are interim only and an adjudicator's determinations have no force or effect on a final hearing: ss 3 and 32 of the SOP Act.
5. The reasons given by an adjudicator are to be construed generously: Iskra v MMIR Pty Ltd [2019] NSWCA 126 at [49].
6. Adjudicators are very often not legally trained and their reasons should not be viewed through the prism of legal concepts nor analysed too closely: CC Builders (Aust) Pty Ltd v Milestone Civil Pty Ltd [2019] NSWSC 1251 at [8].
7. The whole adjudication process is supposed to be speedy, putting pressure on the adjudicator and discouraging lengthy legal analysis: Southern Cross Electrical Engineering Ltd v Steve Magill Earthmoving Pty Ltd [2018] NSWSC 1027 at [33]-[35].
Consideration of the Reasons of the Adjudicator
1. The reasons of the Adjudicator in relation to Variation 5 – Excavation Work are set out in full above.
2. The reasons of the Adjudicator in relation to quantification of the claim are set out in pars 161-166 of the Determination. In par 163 the Adjudicator said:
"The Claimant provided a summary of cost breakdown and detailed cost breakup and supporting information in the Payment Claim. This included the details of quantification and rate supplied for each line item comprising the claim. The Claimant also provided to the Respondent detailed substantiation in the Payment Claim, including photographic evidence of the works in progress."
1. The reference to a "summary of cost breakdown" and the reference to "each line item" is clearly a reference to the Innovative Spreadsheet. It is quite clear that Innovative did not provide all of the material which it could have supplied in support of its claim. In particular:
1. It did not provide a copy of invoice 242, which would have clearly contradicted the claim made for the Category 1 items.
2. It provided a "redacted" version of invoice 243, which gave a completely false impression as to the validity of the claim for the Category 4 items.
1. The Adjudicator cannot be criticised, having regard to the principles set out above, for expressing the view that there was "supporting information" and "detailed substantiation". It is not the job of an adjudicator to apply a lawyer's analysis to material presented to see whether each and every item is substantiated. This is particularly so in cases such as the present, where YTO did not put on any material in opposition to the quantum claimed by Innovative.
Reliance by the Adjudicator
1. Taking the Three Representations made by Innovative in context, the only basis for the Adjudicator to make a finding that Innovative was entitled to the Category 1 and Category 4 line items was the assertion of entitlement to those items in the Innovative Spreadsheet. In relation to the Category 1 items, there was no paperwork provided to support the claim. In relation to the Category 4 items, there was a false invoice provided to support the claim. There was no other material before the Adjudicator in relation to the Category 4 claims.
2. In those circumstances I find that the Adjudicator did rely upon the misleading and deceptive conduct of Innovative, and Mr Bhatt, in coming to the view that Innovative was entitled to its entire claim in relation to GSW cartage and tipping.
Reliance by YTO
1. It was also submitted that YTO relied upon the misleading or deceptive conduct. I do not accept this submission. YTO simply denied each and every item in the Innovative progress claim (not just those for Variation 5) on contractual and legal grounds. YTO said not one word about the quantification of the Variation 5 claim. It provided no assistance to the Adjudicator by analysing whether or not the purported supporting documentation really did establish the quantum of the claim. The inference which I draw is that YTO did not turn its mind to the quantum of the claim and did not rely upon the misleading or deceptive conduct.
Did YTO Suffer Loss or Damage because of the Three Representations?
1. For a person to recover damages under s 236 of the ACL it must be shown that they suffered loss "because of" the misleading or deceptive conduct. The relevant question is whether or not there is a sufficient connection between the conduct and the damage suffered, for the damages to be regarded as occurring "because of" the conduct: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304.
2. Whether or not that connection exists is a question of fact to be determined by reference to common sense and experience: March v Stramare E & MH Pty Ltd [1991] HCA 12; (1991) 171 CLR 506.
3. I have found that the Adjudicator made the determination on Variation 5 because of the misleading or deceptive conduct of Mr Bhatt, and of Innovative, in which Mr Bhatt was involved.
4. The SOP Act grants a person entitled to receive a progress payment a statutory entitlement to such a payment – s 3(2) of the SOP Act. Once an adjudicator determines that a person must pay an adjudicated amount, that amount must be paid to the claimant – s 23(2) of the SOP Act.
5. In par 166a of the Adjudication Determination, the figure awarded for carting away GSW material was $466,800. This figure was exclusive of GST.
6. The "Category 1" claim for 28 and 30 August 2017 was for five loads of GSW at $7,000 per load, a total of $35,000. The "Category 4" claim for 4 and 7 October 2017 was for 28 loads at $7,000 per load, a total of $196,000.
7. The Adjudication Determination thus included a figure of $231,000 (exclusive of GST) for the Category 1 claim and the Category 4 claim. This amount was awarded by the Adjudicator, as a result of the misleading or deceptive conduct of Mr Bhatt. When GST is added, the figure is $254,100.
8. The amount paid by YTO under the Adjudication Certificate included $508,200 in respect of the removal of 66 loads of GSW material from the Ashfield site. If there had been no misleading and deceptive conduct this figure would have been reduced by 33 loads to $254,100.
9. Once the Adjudicator including this amount in the Adjudication Certificate, YTO was under a statutory obligation to pay this amount to Innovative, and it did. Innovative has subsequently gone into liquidation, which has prevented YTO from arguing in another forum that it should be refunded that amount of money. This is the loss which it has suffered. It has suffered that loss because of the misleading or deceptive conduct of Mr Bhatt and the involvement of Mr Bhatt in the misleading or deceptive conduct of Innovative. I find that YTO, because of the misleading or deceptive conduct of Mr Bhatt, suffered a loss of $254,100.
10. I do not need to consider whether the damages of YTO should be reduced because it failed to take reasonable care: s 137B Competition and Consumer Act 2010 (Cth). This issue was not pleaded in the Defence. While Mr Bhatt represented himself at the hearing, the Defence was prepared and filed by solicitors who then acted for him.
11. There will be judgment for YTO against Mr Bhatt for $254,100 plus interest.
12. Interest at court rates was sought in the Amended Statement of Claim. It runs from 5 April 2018 when YTO paid $1,564,220.34 into the Supreme Court, in respect of the Adjudication and associated matters.
13. The interest calculation is set out in the table below:
Start Date End Date Days Rate Amount Per Day Total
06/Apr/2018 30/Jun/2018 86 5.5% $38.2890 $3292.86
01/Jul/2018 31/Dec/2018 184 5.5% $38.2890 $7045.18
01/Jan/2019 30/Jun/2019 181 5.5% $38.2890 $6930.32
01/Jul/2019 31/Dec/2019 184 5.25% $36.5486 $6724.95
01/Jan/2020 30/Jun/2020 182 4.75% $32.9775 $6001.90
01/Jul/2020 31/Dec/2020 184 4.25% $29.5061 $5429.13
01/Jan/2021 30/Jun/2021 181 4.1% $28.5427 $5166.24
01/Jul/2021 31/Dec/2021 184 4.1% $28.5427 $5251.86
01/Jan/2022 30/Jun/2022 181 4.1% $28.5427 $5166.24
01/Jul/2022 18/Aug/2022 49 4.85% $33.7640 $1654.43
Total 1596 $52663.10
1. The total amount of interest is $52,663.10.
2. There will be judgment for YTO against Mr Bhatt for $254,100 + $52,663.10 = $306,763.10.
Orders
1. My orders are:
1. Judgment for the plaintiff against the defendant for $306,763.10.
2. Order the defendant to pay the plaintiff's costs.
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Decision last updated: 18 August 2022