Supreme Court New South Wales

• Medium Neutral Citation: Hanave Pty Ltd -v- Nahas Construction (NSW) Pty Ltd [2011] NSWSC 1476
• Hearing dates: 30 November 2011
• Decision date: 30 November 2011
• Jurisdiction: Equity Division - Technology and Construction List
• Before: Hammerschlag J

Decision

Summons dismissed with costs

• Catchwords: BUILDING AND CONSTRUCTION INDUSTRY SECURITY OF PAYMENT ACT 1999 (NSW) - adjudicator finds in favour of first defendant having considered and accepted a quantity surveyor's report relied on by the first defendant which contained a disclaimer to the effect that no one except the plaintiff should rely on it - the plaintiff contended that in relying on the report and in not providing adequate reasons for his reliance on it, the adjudicator failed to make a bona fide attempt to discharge his duties or denied the plaintiff natural justice - held that the adjudicator made no error in relying on the report and that his reasons for doing so were adequate
• Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW)
• Category: Principal judgment
• Parties: Hanave Pty Ltd - Plaintiff; Nahas Construction (NSW) Pty Ltd - First Defendant; Andrew Bruce Wallace - Second Defendant
• Representation: Counsel: G.J. McVay - Plaintiff; S.A. Benson - First Defendant; Solicitors: Gilbert Mane Solicitors - Plaintiff; Colin Biggers & Paisley - First Defendant
• File Number(s): 2011/366651

Judgment

1 HIS HONOUR: The plaintiff ("Hanave") is a property developer. The first defendant ("Nahas") is a builder. They are parties to a written contract dated 30 May 2008 under which Hanave engaged Nahas to develop and complete the design of, and to construct, a mixed use seventeen level building, including commercial and residential components and basement parking, at 61-65 Wentworth Ave, Sydney.

2 On 10 October 2011, Nahas served on Hanave a payment claim pursuant to s 13 of the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"). The payment claim was designated as progress payment no. 25, and was for $1,469,510.87 excluding GST.

3 The payment claim was supported by a report from JPQS Pty Ltd, quantity surveyors, dated 29 September 2011 ("the JPQS Report"). It included a costs summary and trade breakdown.

4 The JPQS Report runs to 18 pages. At the foot of both page 1 and page 17 the following ("the Disclaimer") appears:

DISCLAIMER - This report has been prepared for the exclusive use of the NAHAS CONSTRUCTION PTY LTD and should not be relied on by any other third party for any purposes.

5 By email dated 18 October 2011 Hanave served a payment schedule pursuant to the provisions of s 14 of the Act indicating that it proposed to make a payment of $418,830.87 excluding GST.

6 On 20 October 2011 Nahas lodged an adjudication application pursuant to s 17 of the Act, which resulted in the appointment, on 21 October 2011, of the second defendant as adjudicator.

7 On 26 October 2011 Hanave lodged an adjudication response pursuant to s 20 of the Act. It relied, in challenging the amount claimed by Nahas, on an engineer's report termed the Voss Report which it submitted to the adjudicator should be accepted over the JPQS Report.

8 In the adjudication response Hanave made the following submission:

There is no indication in any evidence or submission that JPQS even inspected the building works. Further, the report contains a general disclaimer at the bottom of its first page. Clearly JPQS did not intend its report to be relied upon by anyone other than the claimant.

9 On 4 November 2011 the second defendant made an adjudication determination (No. 2011 ADJT 539) ("the adjudication determination") pursuant to s 22 of the Act which he delivered to the parties on 8 November 2011. In it he considered the relative merits, as he saw them, of the JPQS Report and the Voss Report respectively. He recorded that the JPQS Report was provided before the payment claim had been served in full. He was satisfied that there was sufficient nexus between the JPQS Report and the payment claim and he concluded as follows:

I am in the premises satisfied that the claimant can rely on the JPQS Report. The respondent does not contend otherwise.

10 The reference to the claimant is a reference to Nahas. The reference to the respondent is a reference to Hanave.

11 The adjudicator preferred the JPQS Report to the Voss Report and adjudicated that Nahas was entitled to payment of $1,542,334.06.

12 By Summons sued out of the Court on 16 November 2011 Hanave seeks a declaration that the adjudication determination was not made bona fide and in good faith and is void and of no effect. It seeks an order quashing or otherwise setting it aside and an injunction restraining Nahas from taking any step to enforce it. On 16 November 2011, against the plaintiff having given the usual undertaking as to damages and having undertaken to pay the adjudication amount into Court, I ordered that Nahas be restrained from taking any steps to enforce the adjudication determination.

13 Hanave submits that the adjudicator failed to make a bona fide attempt to discharge his statutory function and that he denied it natural justice

(a) by "relying" on the JPQS Report notwithstanding the inclusion of the Disclaimer in it, and

(b) by failing to provide adequate reasons why he did so in the light of the inclusion of the Disclaimer.

14 These submissions are unsustainable.

15 The Disclaimer does not here, and did not before the adjudicator, have any relevant role to play.

16 No submission was made to the adjudicator that the JPQS Report could not be taken into account. The only submission was that JPQS did not intend its report to be relied on by anyone other than Nahas.

17 Whatever JPQS' intention might have been, does not affect the admissibility of the JPQS Report. The presence of the Disclaimer does no more than convey to the reader that (for whatever it is worth) JPQS does not accept responsibility arising out of reliance on the JPQS Report by anyone except Nahas.

18 Even if the Disclaimer had some role to play, the adjudicator did not rely on the report in the sense in which that term is used in the Disclaimer. He took no steps based on it. He considered that Nahas' reliance on it was justified and accepted it in preference to the Voss Report in making his determination.

19 Anyway, only Nahas has relied on the JPQS Report, and as the adjudicator recorded, Hanave did not contend that Nahas could not do so.

20 The adjudicator made no error in considering and taking the JPQS Report into account and his reasons for doing so were entirely adequate, particularly in light of the submission made by Hanave.

21 The result is that the proceedings must fail.

22 The Summons is dismissed.

23 I order that the monies paid into Court are forthwith to be paid out to Nahas.

24 The injunction ordered on 16 November 2011 that Nahas be restrained from taking any steps to recover any monies subject of the Adjudication Determination of the second defendant is dissolved.

25 The plaintiff is to pay the costs of the proceedings.

26 These orders are to be entered forthwith.

27 The exhibits are to be returned.

**********

Decision last updated: 30 November 2011