On 25 October 2024, the Supreme Court of New South Wales ruled on Rogers Construction Group Pty Ltd v Mirage Interiors & Construction Pty Ltd [2024] NSWSC 1344. The case was a challenge by Rogers Construction Group Pty Ltd (the Builder) against an adjudication determination in favour of Mirage Interiors & Construction Pty Ltd (Mirage). The case revolved around procedural fairness and the validity of an Oral Contract and was heard in the Equity – Technology and Construction List jurisdiction, with Stevenson J presiding.
A. Case Background:
- The Builder challenged an adjudication determination favouring Mirage under the Building and Construction Industry Security of Payment Act 1999 (NSW). The adjudicator had determined that Mirage was entitled to a sum of $108,451.13.
- The Original Contract was a Lump Sum Contract made in December 2023 for the supply and installation of walls, ceilings, and partitions at the Busby Fire Station. There was a dispute about the precise basis of this Contract, but it was agreed to be a Lump Sum Contract.
- Mirage contended that an Oral Contract was entered into on 16 February 2024, which superseded the Original Contract and was on a cost-plus basis. Mirage argued that all works moving forward would be on this open book basis, whether or not the work was within the scope of the Original Contract. The Builder disputed the existence of an Oral Contract and asserted that under no circumstances was a cost-plus arrangement agreed to or discussed.
- The adjudicator accepted the existence of the Oral Contract and found that it superseded the Original Contract, entitling Mirage to claim progress payments. The adjudicator also considered the Oral Contract as a potential variation of the Original Contract.
- The Adjudicator rejected the Builder’s argument, finding that performing work under an ‘agreement or arrangement’ fits within the definition of ‘construction contract’ under section 4 of the Building and Construction Industry Security of Payment Act 1999 (NSW), thereby entitling Mirage to claim for progress payments.
B. Adjudication Challenge:
- The Builder argued that the adjudicator decided on a basis not advocated by either party, claiming a denial of procedural fairness.
- The Builder challenged the adjudication determination on the grounds of procedural fairness, arguing that the adjudicator decided on a basis not advocated by either party. The Builder contended that the adjudicator made no finding about the scope of works under the Original Contract and proceeded on the basis that the scope of works under the Oral Contract was, relevantly, the same as under the Original Contract.
- The Builder argued that if it had understood this was Mirage’s position, it would have provided evidence of amounts paid under the Original Contract that should be credited against claims made under the Oral Contract.
- However, the Court found that the Builder was aware of the ‘scope overlap’ point and had the opportunity to address it. The Builder’s Adjudication Response showed that it was alive to the contention and made submissions about it. Therefore, the Court concluded that there was no denial of procedural fairness.
- Additionally, the adjudicator considered the Oral Contract as a potential variation of the Original Contract. The Builder argued that neither party contended that the Oral Contract was a variation of the Original Contract. However, the Court found that the Builder was not denied procedural fairness because it had anticipated such an argument and, as with the ‘scope of works’ point, made submissions on that issue.
C. Conclusion
The Supreme Court dismissed the Builders’ challenge, upholding the adjudication determination in favour of Mirage.
D. Takeaway
The contract position would have been significantly clearer had the parties documented the Oral Contract and stipulated that the Original Contract was superseded. If carefully drafted, that new contract would have set out the scope of works and the basis of charging.
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