IN THE COUNTY COURT OF VICTORIA Revised

_{Not Restricted}

AT MELBOURNE CIVIL DIVISION COMMERCIAL LIST BUILDING CASES DIVISION

_{Case No. CI-12-03478}

PRODUCT DEVELOPMENT PROJECTS PTY LTD Plaintiff v

OWNERS CORPORATION PS408909U Defendant

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^{JUDGE :} HIS HONOUR JUDGE GINNANE

^{WHERE HELD :} Melbourne

^{DATE OF HEARING :} 8 August 2012

^{DATE OF JUDGMENT :} 20 September 2012

^{CASE MAY BE CITED AS :} Product Development Projects Pty Ltd v

Owners Corporation PS408909U

^{MEDIUM NEUTRAL CITATION :} [2012] VCC 1335

REASONS FOR JUDGMENT

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CONTRACT - building and construction industry – summary judgment – architectural services for owners corporation – whether construction contract – whether charge rate agreed- whether demand under Act served – application dismissed- Building Industry Security of Payment Act 2002

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COUNTY COURT OF VICTORIA

250 William Street, Melbourne

HIS HONOUR:

1 The plaintiff (“PDP”) seeks summary judgment under s16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 (“the Act”) from the defendant (the Owners Corporation) in the sum of $54,744.30, being the total amount of:

(a) $38,768.75 in unpaid payment claim amounts; and

(b) $15,975.55, being penalty interest calculated in accordance with s12(2)(a) of the Act up to 31 January 2012 and subsequent penalty interest and costs.

2 In accordance with s61 of the Civil Procedure Act 2010, PDP has to establish that the defendant’s defence has no real prospects of success.

3 Mr Guilian AshtonLomax is the director and secretary of PDP. He describes PDP as his service company. He and PDP, are and have been, registered architects in Victoria for more than twenty years. Mr AshtonLomax made the affidavit in support of PDP’s summary judgment application.

4 Although PDP was legally represented, I permitted Mr AshtonLomax to make submissions to explain the basis of its case.

5 The Owners Corporation is registered under the provisions of the Owners

Corporations Act 2006.

PDP’s Claim

6 PDP’s claim is for the recovery of a debt for project architect services provided to the Owners Corporation in respect of a student accommodation building situated at 570 Swanston Street, Carlton, formerly called College House. The building comprises approximately 146 student accommodation units and the Owners Corporation comprises approximately 140 members or lot owners.

7 The project architect services that were comprised the preparation and presentation of a design proposal for capital improvement works to the common property of the building.

8 Mr AshtonLomax described the role of the Project Architect as entailing nine broad categories: establishing the design brief; providing design concept and directions; acting as the executive of the design process; providing consultant team leadership; liaising with the relevant responsible authorities and attending to relevant town planning approvals; obtaining regulatory dispensations to ensure design practicability; overseeing the preparation of the design proposal and presenting and communicating the design proposal.

9 The scope of the design proposal project was to provide the design related services sufficient to enable the members of the Owners Corporation to resolve at a Special General Meeting whether to undertake the proposed works and authorise the next stage. The Project did not include preparing plans and specifications for construction.

10 PDP relied on the following matters to establish a contract. At a meeting of the management committee (the Committee) of the Owners Corporation on 22

May 2007, a motion was passed:

“5. Engage professional Project Architect and Design Architect at standard recommended RAIA rates to co-ordinate the above and consult with the sub-committee.”

11 Mr AshtonLomax was present at the meeting. His wife, Ms M Oldroyd, a committee member of the Owners Corporation, was not present at the meeting. According to Mr AshtonLomax’s affidavit, The manager of the Owners Corporation recommended that PDP be appointed Project Manager. Mr AshtonLomax advised the Committee that PDP would require payment for the earlier familiarisation and preparatory work that had been undertaken. He advised that PDP would charge an hourly charge rate at the standard recommended RAIA for a senior architect in the profession for each part of the

service required.

12 The Committee was in favour of the manager’s recommendation that PDP be appointed Project Architect.

13 To comply with the Architects Regulations 2004, on 5 June 2007 and 25 June

2007, Mr AshtonLomax emailed the manager letters confirming the terms of PDP’s engagement, including the base time charge rate for the consultancy services and the overall strategic goals to be addressed by the design proposal to upgrade the common property: ie, the design brief to:

“significantly upgrade College House and match and/or overtake the competition for mutual benefit of Body Corporate and Services provider.”

14 He also disclosed any potential conflict of interest that he may have in PDP accepting an appointment to provide professional services because of his wife’s membership of the committee.

15 Mr AshtonLomax states that he kept the manager informed at all times as to PDP’s progress in the preparation of the design proposal and in following through with progressive presentations to the Committee and general meetings of the Owners Corporation.

16 Mr AshtonLomax sets out a number of matters to that imply by the course of conduct of the Project by the Owners Corporation that a contract was in place. These include: convening Committee meetings expressly to discuss progress with PDP; appointing other consultants; arranging access for inspection of the site; waiting on the outcome of services of other consultants to inform and document the design; the payment of application fees; requesting preliminary costings of sketch plans by quantity surveyors to confirm budget projections; relying on coordination of the consultant team for the Project; progressive presentations of the Project to the Committee; design proposals prepared by others including in their title block the words –DESIGN CONCEPT AND DIRECTION BY ASHTON LOMAX ARCHITECTS; requests by the Committee

for sets of Project sketch plans; PDP’s compilation of the Project Information Pack; the manager’s mail out of the Pack; the referral of lot owner’s queries regarding the proposal to PDP; the managers follow up mail out to members; the Special General Meeting of lot owners convened especially to consider the Project and pass a resolution as to whether to undertake the Works and the invoices progressively paid by the Owners Corporation for services accepting same and all things giving efficacy to the Project.

17 Mr AshtonLomax refers to eight further payment claims that were promptly paid between 25 June 2007 and 5 May 2008.

18 PDP’s service as Project Architect was completed with the mail out presentation and appropriate information pack in answering the queries of members at a special general meeting convened on 22 July 2008.

19 The outstanding payment claims for which PDP is seeking recovery of debt are as follows:

(a) Payment claim dated 5 May 2008 $14,643.75 (b) Payment claim dated 5 May 2008 $4,125

(c) Payment claim dated 1 September 2008 $20,000

20 The three payment claims detail work to which they relate. In respect of the payment claim contained in the tax invoice of 5 May 2008 the work is described as Property Development Management and Project Architect Services, which include: preparation for, and attendance, at Owners Corporation meetings; follow up on Town Planning Re-submission re formal application and negotiation/liaison with UniLodge and Owners Corporation’s solicitors re improvements to the Deed of Cancellation and the Service Agreement, including revisiting particular terms and conditions in overall review.

21 In the case of the tax invoice for the payment claim of $4,125 also dated 5

May 2008, the work is described as: advice and draft responses re BHA claims and assembling information and attending as requested Saxby’s Lawyers for the Owners Corporation.

22 In the case of the third tax invoice for the payment claim of 1 September 2008, the work is described as Project Architect/Property Development Management services and Follow-through presentation of the CIP proposal to the Owners Corporation. Three of the items listed under those headings refer to “disinformation mail out from the Applicants in VCAT.”

23 Mr AshtonLomax swears as to demands made for these three payments within 3 months of the end of the period for which the payment claim was made. By a letter dated 1 September 2011 to the manager, LR Reed (City) Pty Ltd, PDP made demand for payment of the three outstanding payments.

24 Mr AshtonLomax contends that the contract for the project is a contract within the meaning of the Act, for architectural design stage work carried out by an architect. The solicitors for the Owners Corporation had confirmed in writing that the Owners Corporation has made no payment and no payment schedule. He sets out the penalty interest rate calculations on which he relies.

25 Mr AshtonLomax states that there was a change in the politics of the Committee which followed the 2007 Committee’s authorisation of the Project and the “spoiling action within the Committee” manifest in the frustration of legitimate payment claims for Project Services provided by consultants.

The Owners Corporation’s defence

26 Mr Joseph Camilleri made an affidavit in opposition to the application for summary judgment. He has been a lot owner of the apartments since about

2005. He is a member of the Committee of the Owners Corporation, having

been elected to that position on 14 November 2006.

27 He describes PDP’s application as recovering fees that date back to 2008 and relate to a proposed refurbishment of common property at the property known as the Capital Improvement Program (“the CIP”). He states that the CIP was the catalyst to a significant dispute between rival factions of the Owners Corporation and the Owners Corporation Committee that resulted in protracted litigation in the Victorian Civil and Administrative Tribunal (VCAT).

28 He states that Ms Oldroyd is a lot owner and was between August 2005 and July 2008 a member of the committee of management and inFebruary and July 2008 she was chairperson of the committee.

29 Mr Camilleri states that at a Committee meeting in February 2007, Mr AshtonLomax told him that he was an architect and that he was interested in assisting Ms Oldroyd, who owned an investment property at College House. He says that the manager of the Owners Corporation advised those present that Mr AshtonLomax was an architect and that his services were free of charge.

30 Mr Camilleri states that he did not attend the Committee meeting on 22 May

2007, but did attend the committee meeting on 3 July 2007 and queried why Mr AshtonLomax was being paid, as he had said his services were free. Mr AshtonLomax advised that, while his services were free, there were administrative costs and third party expenses beyond his control. Mr Camilleri questioned the need for a possible future appointment of a project manager and architect. The manager advised him that this role would be tendered out, just like all other works, and if Mr AshtonLomax wished to put forward a tender it would be considered along with all the other tenders.

31 Mr Camilleri states that there were problems with the operation of the

Committee from at least October 2007 and it was dysfunctional. He refers to

a Committee meeting on 5 February 2008, which was the first meeting under the new Owners Corporation Act, and at which Ms Oldroyd was appointed chairperson. He was aware that Ms Oldroyd and Mr AshtonLomax were preparing a “CIP information pack” which was to be sent to all owners prior to the Special General Meeting. He states that the committee was divided between those who were in favour of the CIP and those who were against it. There was a dispute about whether the Special General Meeting was to be an information session on the proposed CIP or a vote on that proposal.

32 Mr Camilleri refers to a Committee meeting of 10 July 2008 at which he says Ms Oldroyd was removed as Chairperson. He says that she and the manager refused to acknowledge the vote and stand down and that the Committee sought a ruling from VCAT. He describes in a detail, that it is unnecessary to repeat in this judgment, the lengthy history of those VCAT proceedings. However it appears that one matter being sought by the “Applicant Owners”, in VCAT, who appear to have included Mr Camilleri, was that the Owners Committee was not liable to make payments for various invoices, including the contract that is relied on in this proceeding. The Applicant Owners’ case was dismissed on the ground that the rule in Foss v Harbottle¹ meant that a lot owner may not bring a claim on behalf of an Owners Corporation and the appropriate claimant was, in fact, the Owners Corporation. I was advised that legislation had since altered that position.

33 Eventually a new manager, LR Reed, was appointed and presented to the

Committee a list of allegedly, unauthorised payments.

34 Mr Camilleri states Mr AshtonLomax did not provide the Owners Corporation with written notice of the conflict of interest. He says that it was never revealed to the Committee the extent to which PDP was purporting to carry out work in respect of the CIP and the expenses that were being incurred.

¹ (1843) 67 ER 189

35 Mr Camilleri refers to the three invoices containing amounts claimed by PDP and says they were issued at a time when the Committee was deeply divided and not functioning. He states that they were not presented to, or considered by, the Committee. The Committee did not authorise the work. Whilst the manager was authorised to engage professionals and make payments, this was not an open-ended authorisation.

36 He states that it was not clear that the September invoice was served on the Owners Corporation and does not believe that it ever was received by the Owners Corporation.

37 Mr Camilleri states that the invoices include a number of items that he believes are matters that PDP has charged for, but that relate to Mr AshtonLomax in his personal capacity and as a member of the sub-committee taking steps to attempt to ensure that the CIP vote succeeded. He says that Mr AshtonLomax’s time was charged at a higher rate in the three invoices than in earlier invoices.

38 Counsel for the Owners Corporation submitted that there was no construction contract between the plaintiff and defendant within the meaning of the Act . Section 4 of the Act defines a construction contract as:

“…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.”

39 The question was whether PDP performed a “related service” pursuant to s

6(1)(b) of the Act. The definition of the term “related goods and services”

includes “services of the following kind”:

“(i) the provision of labour to carry out construction work;

(ii) architectural, design, surveying or quantity surveying services in relation to construction work;

(iii) building, engineering, interior or exterior decoration or landscape advisory services in relation to construction work.”

40 The Owners Corporation contends that PDP did not provide labour to carry out construction work and that there was no written contract signed by the parties. It submitted that the role of PDP was one of project management and that that does not constitute work covered by the Act. PDP was only obliged to co-ordinate and manage others to get the program to a point where members could vote on it. It argued that the payment claims were for amounts that relate to Mr AshtonLomax’s involvement in the battle over the CIP rather than in any professional capacity and says that they were not construction works or related services to which the Act applies.

41 Counsel for the Owners Corporation referred to the decision of the New South

Wales Court of Appeal in Edelbrand Pty Ltd v HM Australia Holdings Pty Ltd.²

Bathurst CJ, with whose judgment the other members of the Court agreed, stated that:

“ In Coastivity supra, McDougall J (at [34]) emphasised that the question of whether a contract is a construction contract requires attention to be focused on the obligations under the contract. A corollary of this is that little assistance will be derived from a consideration of authorities dealing with a different contract imposing different obligations.

Further, once the contractual obligations in question are identified, it is necessary to determine whether these obligations fall within the words of the statute. That requires a focus on the words used by the legislature…” ³

42 Despite Bathurst CJ’s observation about the lack of assistance to be derived from the terms of other contracts, some assistance may be gained in this case in considering what work formed part of a construction contract and what work did not. His Honour, in dealing with a written contract setting out the obligations to be performed, decided that a requirement of co-ordinating the finalisation of the architectural brief and the management and co-ordination of a development application did not give rise to obligations to provide architectural services.

² _{[2012] NSWCA 31}

³ _{(supra) at [28]-[29]}

43 His Honour reached the opposite conclusion in respect of a requirement to manage consultants and contractors and the monitoring and administration of the work. He considered that that implied an obligation to advise as to the progress of the work and any steps which should be taken if problems emerge during the course of construction. He therefore concluded that those services seemed to encompass building advisory services giving those words their ordinary and natural meaning.

44 The Owners Corporation contended that the contract did no more than obligate PDP to co-ordinate and manage others to get the program to a point where others could vote on it.

45 The relevant payment claims did not disclose construction works or related services. There was a significant blurring of the lines between Mr AshtonLomax’s role as an engaged professional, his role on the Owners Corporation sub-committee and his support of his wife in her role as chairperson of the Owners Corporation. The invoices included amounts that related to the battle over the CIP.

46 There was no explanation given as to how PDP’s fees and charges were increased from $250 to $375 per hour.

47 There was an issue about the service of the September payment claim. It was also said that the interest amount claimed should not be awarded because of the delay in making the claim.

48 In reply, PDP pointed to exhibits to Mr AshtonLomax’s affidavit, including the minutes of committee meetings, as establishing the contract. It relied on the authority given to the manager. PDP submitted that it did have a co-ordination role in respect of the contract. It submitted that it was a construction contract and pointed to the design role involved. Mr AshtonLomax contended that he had acted with the manager, who had authority and instructions to employ

people. He referred to the previous payments that had been made to PDP for its work. He referred to the fact that the engagement of the manager with whom he had dealt previously had been terminated as an explanation for Mr Camilleri’s contention that the email was received. PDP was entitled to the interest that it claimed, because of the length of time it had had to wait to be paid.

Consideration of submissions

49 As previously stated, the test the Court is obliged to apply in determining whether to order summary judgment is whether PDP has established that the Owner’s Corporation defence has no real prospects of success.

50 The outcome of the present case depends very much on a close analysis of what agreement for the performance of work PDP reached with the Owners Corporation, including as to the charge rate. Such an analysis cannot appropriately be carried out solely by consideration of contested affidavit evidence. It requires the parties to have the opportunity to cross-examine witnesses and for the Court to assess that evidence. Only then can the Court determine whether work shown to have been the subject of a contract was part of a construction contract as defined in the Act.

51 In issue will be whether PDP was authorised to perform the work at the rates charged. On the present material, there is a conflict of affidavits with Mr Camilleri stating that the Committee was not aware of the work that is the subject of the charges, or payment claims and Mr AshtonLomax contending that the Owners Corporation had entered into a contract with PDP.

52 The outcome of this case is likely to turn on the facts found about the terms of the agreement reached between PDP and the Owners Corporation. It is not an appropriate case for summary judgment.

53 The question of whether the September payment claim was served in

accordance with the requirements of the Act⁴ also requires consideration after the parties have had an opportunity to cross-examine the deponents of affidavits.

54 In view of my conclusion that this is not a case in which to award PDP summary judgment, it is inappropriate that I express a conclusion about the likelihood or otherwise of PDP’s or the Owners Corporation case succeeding, other than to state that PDP has not established that the Owners Coporation’s defence has no real prospects of success.

55 Accordingly, I dismiss the plaintiff’s summons dated 18 July 2012 seeking summary judgment.

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⁴ See s50