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In mid-July 2016, the NSW Supreme Court was required to consider whether installing a weighing machinery amounted to a construction contract under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). The case in question was Suprima Bakeries Pty Ltd v Australian Weighing Equipment Pty Ltd [2016] NSWSC 998. Below, we summarise the facts of this case and its outcome in more detail, as well as highlight the significance of construction contracts in New South Wales.

How Did the Dispute Arise?

Suprima was undergoing a series of upgrades to a site where they manufactured frozen dough. They required further plant and equipment installation at this site. Suprima received many written quotes from a supplier, Australian Weighing Equipment (AWE), for some of the machinery it required. Suprima accepted some of these quoted via email over time.

A dispute arose when Suprima found that the accuracy of the installed equipment was so off that it, in their opinion, rendered it effectively useless. When Suprima refused to pay for this work, AWE served a payment claim under the Act.

Under the Act, Suprima issued an alternative payment schedule setting out what they were willing to pay – excluding the amount for the plant and equipment considered “useless”. AWE filed an application to have an adjudicator determine the amount that was required.

The adjudicator found in favour of AWE and ordered Suprima to make payment. Suprima disputed the adjudicator’s decision and took the matter to court.

What is the Significance of a Construction Contract in NSW?

In recognition of the cost, size and length of construction projects, the NSW government enacted legislation that allows the providers of construction services to require progress payments. If these payments remain unpaid, it also offers numerous options for facilitating payment as quickly as possible.

In this case, the dispute over what was owed meant that AWE sought assistance from an adjudicator to determine what was fair in the circumstances. If the work conducted by AWE didn’t amount to a construction contract, then this option and the protections of the Act would not apply.

Section 5 of the Act defines “construction work” and expectedly, is directed toward work such as:

  • Construction,
  • Demolition,
  • Repair of buildings, and
  • Structures and roads.

It also includes the installation of fittings within a building such as electricity and water supply etc.

The Work Completed

AWE completed three discrete jobs which were subject to the payment dispute:

  1. New flour and bulk bags (but later expanded to include additional work);
  2. The installation of a flour decanting station that was bolted to the factory floor; and
  3. Work related to flow meters at end points, installation, additional solenoids, lagging related to the pipework for chilled water, yeast and canola pipework.

Justice McDougall determined that these three jobs each formed separate contracts. Suprima did not dispute that the first job was a construction contract.

Counsel for Suprima argued that the second job was not a construction contract as it was movable (and therefore not a fitting or a fixture). However, the Court found that Suprima based this argument on a misreading of the type and function of the equipment as the final work was sizeable and bolted to the floor.

Finally, while counsel for Suprima argued that the third job was not construction work, they did not provide reasons. Consequently, the Court also rejected this.

The Result

Justice McDougall determined that all three items of work fell within the definition of construction work under section 5 of the Act. Justice McDougall also stated that even if some of the contracts had included work that was not construction work, this would not stop each of the three contracts from being correctly classified as a construction contract.

However, you should read this decision with caution, as it appears Suprima provided few details regarding the work completed and Counsel for Suprima seemingly missed some opportunities to address the definition of work involved adequately.

As AWE had completed construction work, the court determined that AWE was also entitled to pursue the outstanding debt under the Act.

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Have any further questions about whether your contract is a construction contract? Get in touch with our specialist building and construction lawyers today on 1300 544 755.

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