Civil and Administrative Tribunal New South Wales Medium Neutral Citation: John McMillan v Complete Irrigation (NSW) Pty Ltd [2014] NSWCATCD 75 Hearing dates: 24 April 2014 Decision date: 13 May 2014 Before: J Ringrose, General Member Decision: The interlocutory application by the respondent to have the proceedings struck out is dismissed. The substantive proceedings are stood over to a date to be fixed by the Registrar for a Directions Hearing to ensure that the evidence is complete and that the matter is ready to proceed. Legislation Cited: Building and Construction Industry Security of Payment Act 1999 ss 7, 17, 22 and 32. Civil and Administrative Tribunal Act 2013 Cases Cited: Brodyn Pty Ltd t/as Time Cost and Quality v Davenport and Anor [2004] NSWCA 394 Azriel v NSW Land of Housing Corporation [2006] NSWCA 372 Weal v Bathurst City Council [2000] NSWCA 88 Falgat Constructions Pty Ltd v Equity Australia Corp. Pty Ltd at [2005] NSWCA 49 Category: Principal judgment Parties: John McMillan (applicant) Complete Irrigation (NSW) Pty Ltd (respondent) File Number(s): GEN 14/03093 reasons for decision Application 1By an application filed on 15 January 2014 Mr John McMillan sought orders against the above named respondent requiring it to pay a sum of $20,564.55 arising as a result of what he described as "supply of bore pressure pumps, piping and sprinklers". He claims that the goods were purchased in October of 2010 and that he became aware of defects in September 2011. 2The claim was made up of the following items: (a) cost of rectification of the sprinkler system - $14,815.09 (b) refund of various overcharges allegedly paid on variations - $1,616.62 (c) cost of alternative attendance by another tradesperson for warranty - $524.14 (d) rectification costs of header tank being incorrectly installed by the respondent on bore line rather than on house line - $907.20 (e) cost of legal advice concerning the adjudication process - $1,601.60 (f) cost of adjudication paid to the Adjudicator - $1,100.00 3The matter was listed before the Tribunal on the 12 February 2014 when the respondent sought to have the proceedings struck out on the basis that the claims by the applicant were cross claims which had been raised in previous proceedings before an Adjudicator who was required to determine the amount of a progress payment under the Building and Construction Industry Security of Payment Acts 1999. 4Both parties were directed to file written submissions in relation to the issue of jurisdiction of this Tribunal and the matter was listed before me for hearing to deal with the application made by the respondent. Respondent's Submissions 5Although the respondent was required to provide the Tribunal and the applicant with a copy of its submissions by the 5 March 2014, it is noted that submissions were filed on 3 March 2014 but that further material which replaced incorrect documents was filed on 19 March 2014 and supplementary submissions were provided on 28 March 2014 by Karen Carrier on behalf of the respondent. 6The respondent claims that neither of the Consumer Claims Act 1998 nor the Civil and Administrative Tribunal Act 2013 permit the applicant to bring his claims which, it is said were identical to cross claims made against the respondent more than 2 years earlier in proceedings under The Building and Construction Industry Security of Payment Act 1999. It is alleged that the Adjudicator in those proceedings, an independent industry expert, rejected all of the cross claims and found Mr McMillan liable to pay the whole of the claim together with the Adjudicators costs. 7Mr McMillan did not seek judicial review of any aspect of the Adjudicator's determination and it is submitted that he is therefore not able to bring a claim in any Court or Tribunal, and contend that the Adjudicator did not have jurisdiction to hear and determine his cross claims. 8Ms Carrier referred to the provisions of clause 5 of Schedule 4 of the Civil and Administrative Tribunal Act 2013 and claimed that the Tribunal could not claim jurisdiction if another tribunal had already completed hearing the matter unless it was invoking an appellate jurisdiction under section 31 of the Act. 9These submissions were raised in relation to paragraphs (a), (b) and (c) of the applicants claim whilst in relation to paragraphs (d), (e) and (g) of those claims the respondent disputed various factual matters under paragraph (d) and claimed that neither the legal costs payable following the adjudication nor the Adjudicators costs could be properly recovered in the Tribunal. 10It was further submitted that the proceedings should be dismissed as being frivolous, vexatious, misconceived or lacking in substance within the meaning of section 55 of the Civil and Administrative Tribunal Act 2013. It was also claimed that there had been a failure to prosecute the claim with due diligence because a period of more than 2 years had elapsed since the Adjudicators determination and a period of more than 18 months had elapsed since the applicant had corresponded with the Department of Fair Trading concerning these matters. 11It was submitted that the proceedings should be dismissed pursuant to clause 10 of Schedule 4 on the basis that the applicant was conducting proceedings in a way that caused unreasonable disadvantage to the respondent within the meaning of clause 10 (1). 12Correspondence and other material relevant to the adjudication application by Complete Water Irrigation (NSW Pty Ltd) has been attached to the respondent's submissions and these documents have been considered in detail for the purposes of the present application. 13On 19 March 2014 Ms Carrier, on behalf of the respondent enclosed a replacement attachment 3 to the application noting that an incorrect payment schedule had been included with the original submissions. 14By a letter dated 26 March 2014 which was filed with the Tribunal on 28 March 2014 the respondent sought to provide supplementary submissions which addressed the applicant's submissions relating to the provision of section 32 of the Building and Construction Industry Security of Payments Act 1999 rather than sections 6 and 7 of the Consumer Claims Act 1998 which had been previously relied upon. Reference was again made to the effect of clause 5 of Schedule 4 of the Civil and Administrative Tribunal Act 2013 and factual matter were again referred to in relation to item (d) which was described as the "header tank". Applicant's submissions 15Mr McMillan provided submissions in response to the respondent's application to have the proceedings struck out on 18 March 2014. He referred initially to the fact that documentation provided by the respondent was incorrect and that it related to an earlier application. He then contended that he was not appealing the findings of the Adjudicator and that he had accepted and paid as required by those findings within hours of the decision being handed down. He claimed to be exercising his rights under section 32 of the Building and Construction Industry Security Payment Act 1999 which preserved the rights of a party to a construction contract to bring civil proceedings in respect of anything arising under the contract or things done or omitted to be done under the contract. 16Mr McMillan claimed that the respondent had not set out any basis upon which the "header tank" claim should be dismissed and in relation to his claim for legal costs and Adjudicator costs he contended that the legal costs were necessary to enable him to obtain advice as to jurisdiction concerning the proceedings before the Adjudicator. He claimed that the Adjudicator's costs were only incurred as a result of the respondent's failure to complete the contract as required, resulting in unnecessary additional costs. 17Mr McMillan denied that his arguments and contentions were frivolous or vexatious and he disputed the claim that there was a failure to prosecute with due diligence or that the proceedings were being conducted in a manner which caused unreasonable disadvantage to the respondent. He attached a copy of his submissions to the Adjudicator which were dated 12 January 2012. It is noted that the Adjudicator's determination made on 16 February 2012 was attached to the papers provided by the respondent. Decision 18Section 7 of the Building and Construction Industry Security of Payment Act 1999 provides that the Act applies to any construction contract, whether written or oral, or partly written and partly oral, and so applies even if the contract is expressed to be governed by the Law of a jurisdiction other than New South Wales. Subsection 2 excludes certain types of contracts including (2)(b): (2)(b) a construction contract for the carrying out of residential building work (within the meaning of the Home Building Act 1989) on such part of any premises as the party for the work is carried out resides in or proposes to reside in or ... Mr McMillan contends that the Building and Construction Industry Security of Payment Act does not apply to the present contract because the work undertaken by the respondent was residential building work within the meaning of the Home Building Act 1989. Although there may be some merit in this argument it is noted that the parties submitted to a determination by an Adjudicator under the Building and Construction Industry Security of Payment Act and the applicant did not seek a review of the determination of the Adjudicator within the prescribed time. The opportunity to argue that the Act did not apply to the present contract has in my view been lost through the failure to act within proper time. 19Section 17 of the Act deals with an adjudication application and provides: 17 Adjudication Application (1) a claimant may apply for adjudication of a payment claim (an adjudication application) if: (a) the respondent provides a payment schedule under Division 1 but; (i) the schedule payment indicated in the payment schedule is less than the amount claimed indicated in the payment claim or; (ii) the respondent fails to pay the whole or any part of the scheduled amount to be claimed by the due date for payment of the amount or... 20Section 22 of the Act requires an Adjudicator to determine: (a) the amount of the progress payment (if any) to be paid by the respondents to the claimant and; (b) the date on which any such payment became or becomes payable and; (c) the rate of interest payable on any such amount. Subsection (2) provides; (2) in determining an application, the Adjudicator is to consider the following matters only; (a) the provisions of this Act (b) the provisions of the construction contract from which the application arose, (c) the payment claim to which the application relates together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim, (d) the payment schedule (if any) to which the application relates together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule, (e) the result of any inspection carried out by the adjudicator of any matter to which the claim relates. 21In Brodyn Pty Ltd t/as Time Cost and Quality v Davenport Anor [2004] NSWCA 394 Hodgson JA (with whom Mason P and Giles JA agreed) considered what was required by the Act for there to be a valid and effective determination identifying at 441 what His Honour described to be 5 basic and essential requirements for a valid determination. 22In Azriel v NSW Land of Housing Corporation [2006] NSWCA 372 Basten JA with whom Santow and Ipp JJA agreed said; "the requirement of consideration is not satisfied by formalistic reference. In Weal v Bathurst City Council [2000] NSWCA 88 Giles JA with whom Priestly JA agreed, stated; "taking relevant matters into consideration called for more than simply adverting to them. There had to be an understanding of matters and the significance of the decision to be made about them, and a process of evaluation sufficient to warrant the description of matters being taken into consideration..." 23There is no doubt that submissions from Mr McMillan dated 12 January 2012 were before the Adjudicator when he made his determination. The issues addressed related to a failure to complete the work as a result of which final payment was not due; Some charges for variation were incorrect and excessive. The aerial sprinkler did not perform to specifications advised pre-quotation. The claimant would not provide a warranty. 24Although a claim for completion by another contractor was referred to in the submissions there was very little evidence to enable the Adjudicator to offset any cross claim. In any event the consideration of a potential cross claim is not one of the matters which an Adjudicator is entitled to consider for the purposes of section 22 of the Act. 25It is necessary finally to have regard to the provisions of Section 32 of the Building and Construction Industry Security of Payment Act 1999 which provides as follows; 32 Effect of part on civil proceedings (1) subject to section 34 nothing in this part effects any right that a party to a construction contract; (a) may have under the contract or (b) may have under part 2 in respect of the contract or (c) may have, apart from this Act in respect of anything done or omitted to be done under the contract. (2) nothing done under or for the purposes of this part effects any civil proceedings arising under a construction contract, whether under this part of otherwise except as provided by subsection (iii). (3) in any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the Court or Tribunal; (a) must allow for any amount paid to a party to the contract under or for the purpose of this part in any order or award it makes in those proceedings, and (b) may make such orders as it considers appropriate for the restitution of any amounts they paid and such other orders as it considers appropriate, having regard to its decision as proceedings. 26In Falgat Constructions Pty Ltd v Equity Australia Corp. Pty Ltd at [2005] NSWCA 49 Handley JA (with whom Santow JA and Pearlman AJA agreed) noted that a judgement under s 25 is by reason of s 32 (3)(b) effectively a provisional judgement, both in what it grants and what it refuses. His Honour added (at 21) "a builder can pursue a claim in the courts although it was rejected by the adjudicator and the proprietor may challenge the builder's right to the amount awarded by the adjudicator and obtain restitution of any amount it has overpaid". 27Although the Adjudicator makes reference to matters set out in submissions provided by Mr McMillan I am not satisfied that he was ever required to embark upon a consideration of the cross claim in undertaking the task he was obliged to undertake in accordance with the provisions of s 22 of the Act. He made some observations in relation to a claim that the sprinkler did not perform to specification which simply gave rise to a determination that the respondent was not entitled to withhold payment from the claimant for reasons that the area sprinkler did not perform to specification. He made similar observations about the failure to be entitled to deduct money as a result of a lack of warranty and in addressing the allegation of incomplete works he observed that the claimant had included a deduction of $500.00 which it claimed was a representation of a fair and reasonable estimation of previously unbilled work done under the original contract. The Adjudicator expressed the view that the value deducted for the incomplete works was reasonable. 28I am not satisfied in these circumstances that these observations or determinations operate to preclude the bringing of a cross claim which would otherwise be permitted by the operation of s 32 of the Act. The claim should be determined on its merits in a formal hearing. 29The claim should not however, include a claim for the cost of legal advice relating to the previous proceedings nor should it include a claim for reimbursement of the Adjudicator's fees. These two matters could and should properly have been raised in the original proceedings in 2012 and I am not satisfied that they can be recovered in the present proceedings. J Ringrose General Member Civil and Administrative Tribunal of New South Wales 13 May 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 31 July 2014