Supreme Court New South Wales Medium Neutral Citation: Ghafoor v Ryte Homes Pty Ltd [2024] NSWSC 370 Hearing dates: 2 April 2024 Decision date: 11 April 2024 Jurisdiction: Equity - Technology and Construction List Before: Ball J Decision: (1) Declare that the determination of the second defendant issued on 28 November 2023 in respect of Adjudication Application number ABCDRS NSW 561 in favour of the first defendant against the plaintiffs in the amount of $39,725 (the Determination) is void; (2) Order that the first defendant be permanently restrained from taking any steps to enforce the Determination; (3) Order that the first defendant pay the fees and costs charged by the second defendant in relation to the Determination; (4) Order that the amount of $44,149.34 which was paid into Court by the plaintiffs, together with any interest thereon, be paid to the plaintiffs; (5) Order that the first defendant pay the plaintiffs' costs of the proceedings on an indemnity basis. Catchwords: BUILDING & CONSTRUCTION — Adjudication — Application to have adjudication determination made void — Whether parties had entered a 'construction contract' as defined in s 4(1) of the Building and Construction Industry Security of Payment Act 1999 (NSW) CONTRACTS — Formation — Incompleteness — Executed contracts — Whether contract was signed and agreed to by all essential parties Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Cases Cited: Crown Green Square Pty Ltd v Transport for NSW [2021] NSWSC 1557 Lendlease Engineering Pty Ltd v Timecon Pty Ltd [2019] NSWSC 685 Category: Principal judgment Parties: Farhan Ghafoor (First Plaintiff) Sadaf Akram (Second Plaintiff) Mohammad Murtaza Hussain (Third Plaintiff) Areej Aslam (Fourth Plaintiff) Ryte Homes Pty Ltd (First Defendant) Jonathan H Sive (Second Defendant) Australian Building & Construction Dispute Resolution Service Pty Ltd (Third Defendant) Representation: Counsel: F Anwar (Plaintiffs) M Najem (Solicitor for First Defendant) Solicitors: HWL Ebsworth Lawyers (Plaintiffs) St George Lawyers (First Defendant) Submitting Appearance (Second and Third Defendants) File Number(s): 2023/461090 Publication restriction: None JUDGMENT Introduction 1. The plaintiffs jointly own a property in Marsden Street, Carlingford NSW as tenants in common. They agreed to demolish the existing house on the property and to construct in its place two triple storey duplexes (the Project). 2. In these proceedings, the plaintiffs seek a declaration that an adjudication determination of the second defendant issued on 28 November 2023 in the amount of $39,725.00 (including GST) (the Determination) in respect of a payment claim served by the first defendant, Ryte Homes Pty Ltd (Ryte Homes), is void on the ground that the work was not undertaken under a "construction contract" within the meaning of s 4(1) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). The plaintiffs also seek a number of ancillary orders. In addition, they advance an alternative argument that the payment claim was not served on the plaintiffs because it was not served on all of them. Background 1. In or about October 2022, Mr Ali Mehfooz, the husband of the fourth plaintiff, Ms Areej Aslam, provided to Mr Mubin (Ben) Bayat, who in his affidavit evidence describes himself as a representative of Ryte Homes but who at the time appears to have traded under the name "Luxe Custom Homes", the architectural plans for the Project for the purpose of obtaining a quote for the building work. Sometime before then, the first plaintiff, Mr Farhan Ghafoor, had approached Sasha Civil Pty Ltd (SCPL) to undertake the demolition work. It appears that Mr Ghafoor had negotiated a contract price for that work of $40,000 plus GST after SCPL had provided an initial quote of $42,000 plus GST. The demolition work was estimated to take approximately five days. 2. Mr Bayat says that he met with "the Plaintiffs" on 7 November 2022 to discuss the Project. He says that during that meeting "the Plaintiffs" requested a comprehensive quote that encompassed all aspects of the Project. He says that he explained that that was a time-consuming task and that if they chose not to sign the contract "with the first defendant, I would charge them $100 … per hour for all the work performed". 3. That evidence cannot be accepted. Mr Bayat accepted in cross‑examination that he has only ever met Mr Ghafoor and Mr Mehfooz. Mr Ghafoor denies that he was a party to any such conversation. It seems clear that Mr Mehfooz simply asked Mr Bayat to quote for the work. It is not plausible that in that context Mr Bayat said that he would charge for providing the quote if it was not accepted, and there is no document either at the time or subsequently (before the commencement of the proceedings) that evidences any such statement. As will become apparent, the actual payment claim was made by reference to a contract that is said to have come into existence on 13 February 2023 and was said to be for work in supervising the demolition of the existing house on the property. Also as will become apparent, all of Mr Bayat's correspondence up until the time a formal contract was prepared was in the name of Lux Custom Homes, not Ryte Homes. 4. Mr Bayat provided an initial quote for the building work on 21 November 2022. The following day, Mr Ghafoor, Mr Mehfooz and Mr Bayat met at Mr Mehfooz's home to discuss the quote. Mr Bayat says that at the meeting he was told there were four owners of the property and that his principal point of contact would be Mr Ghafoor. On the same day, Mr Ghafoor emailed Mr Bayat the "Demolition Paperwork" for the Property. 5. Following the meeting, Mr Bayat suggested that Mr Ghafoor visit one of his recent projects in North Kellyville, which Mr Ghafoor did on 28 November 2022. 6. On 29 November 2022, Mr Bayat sent Mr Ghafoor a revised quotation and on 30 November 2022, he provided Mr Ghafoor with a breakdown of "added works". 7. On or about 2 December 2022, Mr Ghafoor received a tax invoice from SCPL for payment of the initial 50 percent deposit for the demolition work. Mr Ghafoor arranged for half that amount to be paid on 3 December 2022 and the remaining half to be paid on 6 December 2022. SCPL commenced demolition work in early December 2022. 8. On 6 December 2022, Mr Bayat sent Mr Ghafoor two quotations from Luxe Custom Homes. The covering email relevantly said: Please find the latest revised tenders as per our last meeting. for [sic] lockup+ tender I removed excavation and soil removal and added external wall AAC panels, render and paint replaced by brick veneer as per our meeting. for [sic] turnkey tender I added balcony glass railing and acrylic garage doors total cost of $12,000 free of charge. 1. On 13 December 2022, SCPL issued a further payment claim for $20,000 plus GST for the balance of the demolition work. Mr Ghafoor arranged for that amount to be paid in three instalments between 15 December 2022 and 20 December 2022. 2. On 13 January 2023, Mr Bayat sent Mr Ghafoor and Mr Mehfooz a further quotation in the name of Luxe Custom Homes. The covering email relevantly said: … please find the attached revised tender as our latest agreement on progress payment schedule. Only the payment schedule has been updated and everything else is exactly the same as our last tender. Please advise a suitable time to sign it and start working on the project. 1. Mr Bayat's evidence is that between 23 January 2023 and 10 February 2023, the plaintiffs started demolition of the existing house on the Property and that the "Plaintiffs" asked him to supervise the demolition, rubbish removal and asbestos removal from the site. He says that "I oversaw the entire demolition process from beginning to end, under the impression that the project belonged to the First Defendant". That evidence cannot be accepted. It is inconsistent with the objective evidence relating to the payments to SCPL. It is plain that the demotion work was substantially complete by 13 December 2022. It is unclear what supervision work was necessary. It is not plausible that Mr Bayat would have undertaken any work at the site when he was still negotiating a price with Mr Ghafoor and no contract had been signed. 2. On or about 14 February 2023, asbestos was removed from the property. 3. On 17 February 2023, Mr Bayat sent an email in the name of Luxe Custom Homes to Mr Ghafoor and Mr Mehfooz attaching a copy of "the contract and tender for your lender purpose". Included with the email was a copy of the HIA NSW Residential Building Contract for New Dwellings which identified Ryte Homes as the builder. 4. On or about 20 February 2023, Parramatta City Council issued a post demolition inspection report identifying the following rectification works to be carried out: 1. 1.8m high protective fence to be completed all around the property and provided with dust control measures as per condition 45 of the consent. 2. Provide sediment control measures throughout the site in accordance with The Blue book – see condition 39 of consent. 3. Provide contact details signage on the temporary fencing. 4. Provide photo evidence of temporary toilet being on site. 1. On 23 February 2023, Mr Bayat in the name of Luxe Custom Homes sent an email to Mr Ghafoor and Mr Mehfooz attaching a tender to be signed by the owners. The tender included a progress payment schedule which was in the following terms: 1- Tender acceptance 2.5% 2- Contract signage 7.5% 3- Excavation and soil removal 10% 4- Ground slab and dencil walls 10% 5- Suspended slab completion 10% 6- Timber framing 15% 7- External walls, Windows and Roof (Lock up) 25% 8- Internal lining (gyprock) 15% 9- Practical Completion 5% 1. On 27 February 2023, Mr Bayat and Mr Ghafoor exchanged a series of text messages relating to the payment of the 2.5 percent. Mr Ghafoor asked for an invoice for that amount which, inclusive of GST, was $39,725.00. 2. On or about 1 March 2023, Ryte Homes issued an invoice in the sum of $39,725.00. 3. On 7 March 2023, Mr Bayat sent Mr Ghafoor a text message saying "Hi Farhan, just wondering how did you go with tender signing and the invoice?". Mr Ghafoor replied "me and my wife [the second plaintiff] have signed the tender. Sent to Ali and Umar to sign [sic] couple of days ago." 4. Mr Ghafoor says, and there is no reason to doubt, that in March 2023 he performed a check to confirm whether Mr Bayat or Ryte Homes completed the construction of the North Kellyville property. He says that he found no record of home warranty insurance on the Service NSW HBC check webpage. Subsequently, he and Mr Mehfooz met with Mr Bayat. During that meeting Mr Bayat informed them that he had held a builder's licence, but it had been cancelled and that the works at the North Kellyville property had been completed by him under another entity under the supervision of Ryte Homes. Mr Ghafoor says that following that meeting the plaintiffs decided not to proceed with the proposed contract. 5. Mr Bayat gives evidence that he did extensive work preparing the quotation and tender and making numerous amendments and additions to take account of requests made by "the Plaintiffs". He also says that on a number of occasions he said to the plaintiffs that "if they chose not to proceed with the Project with the first defendant, the Plaintiffs would be responsible for covering all costs associated with preparing the tender and the contract", or words to that effect. There is no written record of any such conversation. Mr Ghafoor denies that any such conversation occurred. I accept Mr Ghafoor's evidence. As I have explained, Mr Bayat accepts that the only plaintiff he spoke with was Mr Ghafoor. There is no objective evidence that supports Mr Bayat's evidence that he raised with Mr Ghafoor that he would be paid for his time if a contract was not signed, and Ryte Homes' claim is not based on the existence of any such agreement or arrangement. It is based on 2.5 percent of the contract price that was payable on acceptance of the tender. 6. Mr Bayat says that on several occasions between April and May 2023 he followed up with the plaintiffs on signing the tender and payment. On a number of occasions Mr Ghafoor did not return his calls. On at least two, Mr Bayat says that Mr Ghafoor promised to send the signed tender and payment shortly. Mr Bayat says that it was not until he visited the site in August 2023 that he discovered that the plaintiffs had engaged another builder. 7. On 19 October 2023, Ryte Homes sent an email to Mr Ghafoor attaching a payment claim for $39,725.00. The payment claim describes the amount claimed as "2.5% payment for tender agreement for … Marsden Street Carlingford …". Mr Ghafoor did not provide a payment schedule in response to that claim. 8. On 21 November 2023, Ryte Homes sent Mr Ghafoor an adjudication application dated 21 November 2023. 9. On 28 November 2023, the adjudicator delivered his determination in the amount of $39,725.00. 10. Ryte Homes submits that a construction contract was formed on 13 February 2023. It relies on the matters referred to by the adjudicator in his determination for that conclusion. The adjudicator in a footnote gave the following details in support of that conclusion: … Annexure AA (Project History) provides the following relevant facts: "13) Between 23 January 2023 to 10 February 2023 respondents started demolition of the existing house in the property at … Marsden Street, Carlingford. [R]espondents asked me to supervise the demolition, rubbish removal and asbestos removal from the site. I supervised the whole demolition from start to finish believing the project to be our project and soon we will start the construction as just all respondents agreed with our prices and forwarded our quotation to their bank for approval of progress payment. We spent 47 hours on supervision of the demolition from 23 January to 10 February 2023. 14) On 17 February 2023 we generate the contract as per the respondent's request and emailed to respondent (Please see Annexure O). [R]espondents advised up to prepare a contract with total amount of $1,400,000 now for their loan purposes and a separate contract of the remaining $158,900 to be signed afterwards. A copy of the contract is attached (Please see Annexure P). We spent 16 hours on preparing the contract. Consideration 1. It is common ground that the adjudication determination is void unless it was the adjudication of an amount claimed to be owing for construction work undertaken or related goods and services supplied under a "construction contract". "Construction contract" is defined in s 4(1) of the Act to mean "a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party". 2. There is a question whether an "arrangement" must be an arrangement which gives rise to legally enforceable rights and obligations: for discussion, see Crown Green Square Pty Ltd v Transport for NSW [2021] NSWSC 1557 at [143]ff per Henry J. For the reasons I gave in Lendlease Engineering Pty Ltd v Timecon Pty Ltd [2019] NSWSC 685, I adhere to the view that I expressed in that case that it must be. In any event, as will become apparent, nothing turns on which view is correct in this case. 3. In my opinion, there was no construction contract between the plaintiffs and Ryte Homes. The parties to the contract were stated to be Mr Ghafoor, Sadaf Akram [Mr Ghafoor's wife], Mohammad Murtaza Hussain and Areej Aslam as "Owner" and Ryte Homes as Builder. It is plain from the terms of the contract that it did not come into effect until it was signed by the Owner and Builder. "Owner" in that context must mean each of the persons named as "Owner". It is clear from the evidence that Mr Bayat sent Mr Ghafoor the relevant contract and that Mr Ghafoor and his wife signed it. However, neither it nor the tender was signed by the other two owners. 4. In my opinion, there was no other contract or arrangement between the plaintiffs and Ryte Homes by which Ryte Homes agreed to carry out construction work for the plaintiffs (or supply related goods and services). I have rejected Mr Bayat's evidence that he said that he would charge for the time he spent in preparing a tender if the tender was not accepted. One reason is that that evidence is inconsistent with the payment claim that was actually made, which claimed the amount that was due on acceptance of the tender. Consequently, no contract or arrangement could arise from that evidence. 5. Mr Bayat also claims that he supervised the demolition work. As I have explained, that evidence cannot be accepted either. Consequently, no contract or arrangement could arise from that evidence. 6. It follows that no contract or arrangement existed by which Ryte Homes agreed to perform construction work for the plaintiffs, with the result that the adjudicator had no jurisdiction under the Act to adjudicate the payment claim. 7. Having regard to the conclusions I have reached, it is unnecessary to consider the plaintiffs' alternative argument. Orders 1. The plaintiffs have been successful. There is no reason why the defendant should not pay their costs. 2. Accordingly, the orders of the Court are: 1. Declare that the determination of the second defendant issued on 28 November 2023 in respect of Adjudication Application number ABCDRS NSW 561 in favour of the first defendant against the plaintiffs in the amount of $39,725 (the Determination) is void; 2. Order that the first defendant be permanently restrained from taking any steps to enforce the Determination; 3. Order that the first defendant pay the fees and costs charged by the second defendant in relation to the Determination; 4. Order that the amount of $44,149.34 which was paid into Court by the plaintiffs, together with any interest thereon, be paid to the plaintiffs; 5. Order that the first defendant pay the plaintiffs' costs of the proceedings on an indemnity basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 April 2024