What is the Meaning of “Other Arrangement” in the Building and Construction Industry Security of Payment Act 1999 (NSW)?

In the recent case of Crown Green Square Pty Ltd v Transport for NSW [2021] NSWSC 1557, the NSW Supreme Court considered the meaning of the words “other arrangement” in the definition of “construction contract” in Section 4 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (‘the Act’), which provides:

“Construction contract?means 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.”

In 2016, Transport for NSW, Sydney Trains, and Rail Corp (the defendants) engaged the Crown Group (the plaintiff) to upgrade a pedestrian tunnel linking the Green Square railway station with their nearby development, the “Infinity” complex.?The development agreement required the plaintiffs to carry out the tunnel works at a cost of $750,000. The Crown Group received the $750,000 for completing the tunnel works. However, the Crown Group issued a payment claim for an additional $866,530 in relation to the design and installation of certain electrical, mechanical and fire safety services. As the defendants did not issue a payment schedule in time, the plaintiffs sought to recover the unpaid amount and commenced proceedings.

The plaintiffs argued that their payment claim was based not on the development agreement, but on an “other arrangement” within meaning of Section 4 of the Act, which arose from later directions given to them by the defendants to carry out the link works. The defendant claimed the payment claim was invalid, as the link works were part of the tunnel works, and thus no separate “arrangement” existed.

The Court held that the development agreement and the dealings and communication between the parties did not support the existence of an “other arrangement”. Instead, the circumstances reflected the parties’ intention that the link works be undertaken as part of the tunnel works. Ultimately, the plaintiffs could not demonstrate that the defendants had agreed to any kind of reciprocity or consideration for the additional work. Therefore, the payment claim was not valid. This decision provides greater clarity on what is required to establish an “other arrangement” for the purposes of the Act.