Part 3 – Procedure for Recovering Progress Payments [s21 - s35]

Division 2 – Adjudication of disputes

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[21.1] MEANING OF ‘SUBMISSIONS’

The better view of s21(3) is that it does not limit the matters that may be put to an adjudicator in an adjudication application. In this context the contrast between the mandatory language of paragraphs (a) to (e), and the discretionary language of paragraph (f), is clear.  In any event, it is s26(2) that governs the situation. That subsection specifies the only matters that an adjudicator may take into account. Those matters include, through paragraph (c), the relevant payment claim “together with all submissions (including relevant documentation) …”. Not only do the parenthesised words show that the legislature had in mind that the word ”submissions” was not to be construed narrowly, they show specifically that the submissions may include relevant documentation in support: Austruc Constructions Ltd v ACA Developments Pty Ltd; ACA Developments Pty Ltd v Sarlos & Anor [2004] NSWSC 131.

It follows that if a claimant chooses to include, as part of the relevant documentation supporting its payment claim, a statutory declaration whereby relevant matters are, in effect, verified, then that statutory declaration will form part of the material to be considered by the adjudicator. Equally, if a claimant includes such a statutory declaration in its adjudication application, that is part of the “submission” to be considered, per McDougall J is Austruc Constructions Pty Ltd v ACA Developments Pty Ltd (supra) @ para 69.

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[21.2] SUBMISSIONS RELEVANT TO THE APPLICATION

The scheme really addresses the issues which have been thrown up once the payment claim has been served and the responsive payment schedule then served. The steps which follow generally concern the materials to be exchanged and most particularly furnished to the adjudicator. The adjudication application will relate to a particular payment claim and payment schedule. The central significance of the entitlement of the applicant to include submissions as part of its adjudication application is because those submissions have to be supportive of the payment claim. Those submissions cannot constitute a payment claim or part of it. The central significance of the entitlement of the respondent to include submissions as part of its adjudication response is because those submissions have to be supportive of the payment schedule. Those submissions cannot constitute a payment schedule or part of it: John Holland Pty Ltd v Cardno MBK (NSW) Pty Limited & Ors [2004] NSWSC 258. See also Musico and Ors v Davenport and Ors [2003] NSWSC 977.

In Minister for Commerce v Contrax Plumbing & Ors [2004] NSWSC 823, McDougall J held that a respondent was able to rely on [s21(3)(f) Qld] to respond to an argument raised in the payment schedule. He said it would be quite extraordinary if the statutory regime, on its proper construction, prevented an applicant for adjudication from dealing with issues raised by the respondent to adjudication in its payment schedule. Such a construction would mean, in effect, that the applicant would be required to anticipate in its payment claim, and deal with at length, every possible argument that the respondent might rely upon.  That would have the effect of increasing enormously the complexity and expense of the statutory procedure: something quite at odds with the statutory objects set out in s3 and reinforced in the Second Reading Speech.

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[21.3] PROVIDES A PAYMENT SCHEDULE

There is provision in the NSW Act, outside Division 1, for a payment schedule to be provided in circumstances other than within 10 business days after a payment claim is served. Section 17(2) of the NSW Act sets out those other circumstances.  Thus, if “under Division 1” is treated as an adverbial phrase which qualifies “provides” or “fails to provide” and is capable of making a real distinction – namely that it is s17(1)(a) which is attracted if the respondent has provided a payment schedule with 10 business days after the payment claim is served, and s17(1)(b) which is attracted if the respondent does not provide a payment schedule within those 10 business days. A construction of the Act which gives the words “under Division 1” work to do is to be preferred to a construction which gives them no work to do.  And there is no strained or artificial use of language if “under Division 1” is construed as an adverbial phrase: Amflo Construction Pty Ltd v Jefferies [2003] NSWSC 856.

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[21.4] SUBMISSIONS PART OF THE RECORD

Section 21(3)(f) in contrast with the preceding paragraphs of the subsection show that the inclusion of submissions is discretionary rather than mandatory.  However, given that the submissions may define, or further define, the issues that the adjudicator is required to determine, the better view seems to be that they should be taken to form part of the record: Abacus Funds Management Ltd v Davenport & Ors [2003] NSWSC 1027.

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[21.5] FURTHER SUBMISSIONS

The adjudicator does not have to give the parties the opportunity of putting together further submissions or the opportunity of a conference with the adjudicator: Transgrid v Walter Construction Group Ltd [2004] NSWSC 21.

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[21.6] AGREEMENT TO APPOINT AN ADJUDICATOR

A recent decision from the Victorian County Court suggests that there may be an obligation on claimants to request agreement from defendants as to the appropriate adjudicator to be appointed.  Under the equivalent Victorian legislation, a request for summary judgement against a defendant was refused on the grounds that a failure to request such agreement provided the courts with “a real question to be tried”:  Shelford Engineering and Construction Pty Ltd v Rescom Constructions Pty Ltd [2005] VCC 361.

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[21.7] ADJUDICATION APPLICATION IS NEW CLAIM

The decision in Energy Australia v Downer Construction (Australia) Pty Ltd and 2 Ors [2005] NSWSC 1042 dealt, in part, with the situation where the adjudication application advanced a new claim from that contained in the payment claim.  In this case, the court concluded that there was a serious question to be tried in relation to this issue.

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[21.8] PREVIOUS ADJUDICATED AMOUNTS

In Veolia Water Solutions & Technologies v Kruger Engineering Australia Pty Ltd [2006] NSWSC 1406, the New South Wales Supreme Court concluded that where an adjudicator makes a decision and the respondent commences proceedings to declare the decision void:

a)    the claimant can include the adjudicated amount in its next payment claim;  and

b)    the claimant may be restrained from making an adjudication application in relation to that payment claim until a decision is made in relation to the validity of the original decision.

The Supreme Court also ordered that the hearing in relation to the validity of the original adjudication decision be heard as a matter of urgency to prevent any prejudice to the claimant which may arise if a decision was not made in relation to the validity or otherwise of the original adjudication decision within a period of 12 months from the date that the work had been undertaken.

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[21.9.1] NOTICE UNDER SUBSECTION 2

The importance of ensuring that notices under section 21(2)(b) are served in accordance with the Act and, further, that evidence is retained of such service was demonstrated in Steel v Beks [2010] NSWSC 1404. In this case, following the alleged service of payment claims by facsimile, to which no payment schedule was provided, the Defendant sought to serve the Plaintiff a notice under s 17(2)(b) (the New South Wales equivalent of s 21(2)(b)) by facsimile. The Plaintiff alleged that it did not receive the s 17(2)(b) notice. The adjudicator had found that service was valid; however, the Supreme Court disagreed and set aside the determination. Referring to Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190, Macready ASJ held [at 33-34]:

“…On the evidence before me the… notices required by section 17(2)(b) were not served on the plaintiff. Accordingly, the plaintiff was not given an opportunity to provide a payment schedule to the claimant pursuant to section 17(2)(b) of the Act. Following the Court of Appeal’s reasoning in Chase Oyster Bar the Court is not bound by the adjudicator’s decision… that the requirements of s 17(2)(a) had been met.

Accordingly, I am satisfied that the application was not properly made in accordance with the Act. As the parties have not addressed the details necessary to apply McDougall J’s reasoning in Chase Oyster Bar at [241], I will not consider the adjudicator’s consideration of the claimant’s evidence as to the service of documents and the reasons of the adjudicator in that regard.”

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[23.1] APPOINTMENT

Once an adjudicator accepts an application from an ANA that person is taken to be appointed for the purposes of s23(2): per McDougall J in Abacus Funds Management Ltd v Davenport & Ors [2003] NSWSC 1027.

In Peekhrst Pty Ltd v Glenzeil Pty Ltd [2007] QSC 159 the Queensland Supreme Court confirmed that acceptance of an adjudication application by an adjudicator can be undertaken by an agent of the adjudicator, or, in that case, an employee of the Authorised Nominating Authority.

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[24.1] ADJUDICATION RESPONSE

In Luchitti t/as Paulluc Enterprises v Tolco Pty Ltd [2003] NSWSC 1070 the adjudicator said that the respondent could not include in the adjudication response: “any reasons for withholding payment unless those reasons had already been included in the payment schedule provided to the claimant”.  It was suggested by the plaintiffs that the adjudicator committed a jurisdictional error in having no regard to a particular submission as to reasons for withholding payments as they were not included in the payment schedule. Bergin J, however, at para [34], decided that the adjudicator effectively had regard to the submission.

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[24.2] IDENTIFY THE ISSUES

The purpose of various sections including s24 is to require the parties to define as early as possible, the issues in dispute between them; the issues so defined are the only issues which the parties are entitled to agitate in their dispute and they are the only issues which the adjudicator is entitled to determine: per Palmer J in Multiplex (supra) followed by Einstein J in John Holland Pty Limited v Cardno MBK (NSW) Pty Limited & Ors [2004] NSWSC 258.

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[24.3] SUBMISSIONS

This section permits no more than additional submissions which clarify earlier submissions: John Holland Pty Limited v Cardno MBK (NSW) Pty Limited & Ors (supra).

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[24.4] REASONS NOT ALREADY INCLUDED IN THE PAYMENT SCHEDULE

Whilst a claimant which provides the most minimal amount of information in its payment claim may even so, be seen to technically comply with the Act, such a claimant will expose itself to an abortive adjudication determination if it be that the respondent is simply unable to discern from the content of the payment claim, sufficient detail of that claim to be in a position to meaningfully verify or reject the claim and the claimant then elects to include the missing detail in the adjudication application with the inexorable consequence that that the respondent is barred by section 24(4) from dealing with that detail/matter in its adjudication response.  The consequence to a claimant which does not include sufficient detail of that claim to permit the respondent to meaningfully verify or reject the claim, may indeed be to abort any determination: John Holland Pty Limited v Cardno MBK (NSW) Pty Limited & Ors (supra).

The deploying for the first time in the adjudication application, of supporting documentation will require careful attention and becomes a matter of degree and detail. However, it is not correct that a respondent which, by reason of insufficient information supplied with the payment claim, is unable to verify that claim, and says as much in the payment schedule [only later to receive as part of the adjudication application, the supporting documentation which should have been earlier supplied in order to permit a meaningful payment schedule response], will be otherwise than barred from section 24(4) from including in its adjudication response reasons for withholding payment arising by reference to the later supporting documentation. It could not be said that those reasons were already included in the payment schedule provided to the claimant. A complaint about inability to verify a claim because of insufficient information is not synonymous with reasons for dealing with a properly supported claim, per Einstein J in John Holland Pty Limited (supra) @ para 30.

A payment claim and a payment schedule are, in many cases, given and received by parties who are experienced in the building industry and are familiar with the particular building contract, the history of construction of the project and the broad issues which have produced the dispute as to the claimant’s payment claim. A payment claim and a payment schedule must be produced quickly; much that is contained therein in an abbreviated form which would be meaningless to the uninformed reader will be understood readily by the parties themselves. A payment claim and a payment schedule should not, therefore, be required to be as precise and as particularised as a pleading in the Supreme Court. Nevertheless, precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in the dispute: Multiplex Constructions Pty Ltd v Luikens (supra).

The proper approach, bearing in mind the time constraints built into the scheme, is to be reasonably strict when enforcing the injunction to be found in s24(4). Precision and particularity is required in the payment schedule to a degree reasonably sufficient to apprise the parties of the real issues in the dispute. If a clause of the contract was to have been relied upon it had to be expressly identified. Insofar as the adjudication response here went outside the reasons for withholding payment which were included in the payment schedule, it was appropriate for the adjudicator to disregard the adjudication response:  Brambles Australia Ltd v Philip Davenport & Ors [2004] NSWSC 120.

In GW Enterprises Pty Ltd v Xentex Industries Pty Ltd & Ors [2006] QSC 399, Justice Lyons of the Queensland Supreme Court noted that an adjudicator is only entitled, under the Act, to consider issues raised in the respondent’s payment schedule and any supporting submissions contained in the adjudication response.

Accordingly, Her Honour stated she was not willing to declare an adjudication decision void, in circumstances where the respondent sought to argue that:

(a)              the payment claim was made in excess of 12 months from when the work was last undertaken;  and

(b)              there was no construction contract between the claimant and the respondent;

despite the fact that such an argument had not been raised in the payment schedule.

In doing so, Her Honour also noted that:

(a)              in any event, she was not of the opinion that it was clearly apparent from the documentation that the payment claim was issued in excess of 12 months from the date work was last undertaken;

(b)              it appeared clear that there was simply a misdescription of the claimant in the payment claim and it was clear that all parties understood which entity was in fact making the payment claim;  and

(c)              she did not consider that a misdescription of a party should defeat the whole adjudication, particularly when such issue was not raised at the time of the adjudication.

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[24.5] PAYMENT SCHEDULE AND ADJUDICATION RESPONSE

It is correct to say that, by [s24(4) Qld], a respondent cannot include in its adjudication response any reason for withholding payment that has not been included in its payment schedule. However, it would be open to a respondent to argue, either in greater detail or with perhaps more supporting evidence, reasons that had been advanced. If it were intended that an adjudication response should do no more than mirror, word for word, a payment schedule, then there is little point to the ability under [s24(1) Qld] for a respondent to lodge an adjudication response: TQM v Dasein [2004] NSWSC 1216 at paragraph 30.

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[25.1] DECIDE WITHIN 10 DAYS

It is unlikely that the legislature intended that an act done in breach of the time limit set out s25(3)(a) would be invalid, because the consequences of invalidity seem to be susceptible of undermining the purpose of the legislation. This is confirmed because where a determination is not made within the relevant time limit, the only relief that a claimant seems to have under the Act is to withdraw the application and make a new application.  However, by s32 that course may only be taken within five business days after the claimant becomes entitled to withdraw the previous adjudication application. Relevantly for present purposes, that means that the application must have been withdrawn within five days of the expiry of the time period. It would be anomalous if the effect of non-compliance with the time period allowed by s25 were to render any subsequent adjudication a nullity, but if because of non-compliance with s32 the claimants were unable to seek adjudication of the dispute, that would not seem to be an outcome consistent with the evident objects of the legislation and, therefore, something to be avoided unless no other view is available:  MPM Constructions Pty Ltd v Trepcha Constructions [2004] NSWSC 103.

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[25.2] ASK FOR FURTHER SUBMISSIONS

It would seem unlikely that the legislature would have intended the provisions of s25(4) to permit a radical departure from the statutory scheme.  Rather, it seems likely that these subsections are to be read as permitting no more than additional submissions which clarify earlier submissions: John Holland Pty Limited v Cardno MBK (NSW) Pty Limited & Ors (supra).

An adjudicator can call for the material on which a party relies pursuant to s25(4) of the Act. However, he was not bound to do so.  Nor does it matter why he did not do so: Transgrid v Walter Construction Group Ltd [2004] NSWSC 21.

It may readily be accepted that the Act provides for a somewhat rough and ready way of assessing a builder’s entitlement to progress claims. It may also be accepted that the procedure is intended not only to be swift, but also to be carried out with the minimum amount of formality and expense. Nonetheless, what an adjudicator is required to do is to decide the dispute between the parties. Under the scheme of the Act, that dispute is advanced by the parties through their adjudication application and adjudication response (which, no doubt, will usually incorporate the antecedent payment claim and payment schedule). If an adjudicator is minded to come to a particular determination, on a particular ground, for which neither party has contended, then the requirements of natural justice require the adjudicator to give the parties notice of that intention so that they may put submissions on it. This is a purpose intended to be served by s25(4) of the Act (although the functions of s25(4) may not be limited to this).  It follows that where an adjudicator determines an adjudication application upon a basis that neither party has notified to the other or contended for, and that the adjudicator has not notified to the parties, there is a breach of the fundamental requirement of natural justice that a party to a dispute have a reasonable opportunity of learning what is alleged against him and of putting forward his own case in answer to it: Musico & Ors v Davenport [2003] NSWSC 977.

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[25.3] DISCRETION OF ADJUDICATOR

Section 25(4) makes it clear that it is within the discretion of the adjudicator whether or not to take any of the steps set out in paras (a) to (d).  Exercise of that discretion one way or another will depend upon the adjudicator’s judgment as to whether or not he or she will be assisted in reaching a decision within the constraints, particularly the time constraints, imposed by the Act.  If the adjudicator commits an error in judgment in making that discretionary decision, it is an error within jurisdiction and is not reviewable: Multiplex Constructions Pty Limited v Luikens & Ors [2003] NSWSC 1140.

The adjudicator’s determination will not be valid if the adjudicator breached s25(1) and purported to make a determination before the date had expired for the respondent to lodge an adjudication response:  Emag Constructions Pty Ltd v Highrise Concrete Contractors (Aust) Pty Ltd [2003] NSWSC 988.

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[25.4] ASK FOR SUBMISSIONS

McDougall J in Musico v Davenport [2003] NSWSC 977 at [107] – [108] as cited in Emergency Services Superannuation Board v Davenport & Anor [2004] NSWSC 697 at paragraph 36 illustrated one intended purpose of this provision [s25(4) Qld] was if an adjudicator is minded to come to a particular determination on a particular ground for which neither party has contended, then the requirements of natural justice require the adjudicator to give the parties notice of that intention so that they may put submissions on it.

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[26.1] ADJUDICATOR’S DETERMINATION IS SUSCEPTIBLE TO REVIEW

The Act does not exclude the power of the Court to review, and where necessary grant relief, under the Supreme Court Act, of the determinations of adjudicators made under s26 of the Act. The determination of an adjudicator made pursuant to s26 of the Act is in principle susceptible to judicial review:  Musico & Ors v Davenport & Ors [2003] NSWSC 977. See also Brodyn Pty Ltd T/as Time and Cost Quality v Philip Davenport & Ors [2002] NSWSC 1019. However, it is only where there is a jurisdictional error rather than an error of law on the face of the record that there might be a right to review.  See: John Holland Pty Limited v Cardno MBK (NSW) Pty Limited & Ors [2004] NSWSC 258 and Quasar Constructions v Demtech Pty Ltd (supra).

The determination of an adjudicator is, in principle, amenable to judicial review if the determination is as a result of jurisdictional error, was given in bad faith,  procured by fraud or was one which the adjudicator had no power to make.  Prerogative relief may be granted where there is a denial of natural justice or jurisdictional error:  Emergency Services Superannuation Board v Davenport and Anor [2004] NSWSC 697.

The grant of prerogative relief against an adjudicator’s decision is discretionary: Multiplex Constructions v Luikens (supra) @ 94.

In Abacus Funds Management Ltd v Davenport & Ors (supra), McDougall J again had to consider this question. His Honour referred to his earlier judgment in Musico where he concluded:

• relief in the nature of prerogative relief would in principle lie against the determination of an adjudicator under the Act;
• relief would lie for jurisdictional error (including refusal to exercise jurisdiction, acting in excess of jurisdiction and jurisdictional error of law on the face of the record) and denial of natural justice (on the basis that the requirements of natural justice had to take into account, not only the circumstances of the particular case, but also the legislative scheme); and
• relief would not lie in the case of non jurisdictional error of law on the face of the record.

The basis upon which the Court can intervene in the determinations of adjudicators made under the Act has been considered by the Court of Appeal in two recent cases: Brodyn Pty Ltd v Davenport [2004] NSWCA 394. Reference may also be made to TransGrid v Siemens [2004] NSWCA 395.

Hodgson JA gave the leading judgment in both appeals. Mason P and Giles JA agreed with his Honour in both. His Honour said that the determination of an adjudicator could be made the subject of judicial intervention in a number of circumstances. They include:

• that the adjudicator has failed to comply with the basic and essential requirements laid down in the Act for there to be a valid determination;
• that the adjudicator has denied natural justice to a party (the content and operation of this depending, of course, upon the relatively limited scheme put forward by the Act for the provision of natural justice); and
• that the adjudication determination is procured by fraud in which the adjudicator is complicit.

Alternatively, Energetech v Sides Engineering and Anor [2005] NSWSC 801 is an example of the circumstances in which the court won’t intervene.  The court stated that a claimant or respondent could not appeal a decision of the adjudicator on the basis that the adjudicator had no jurisdiction to undertake an adjudication because the documents before him did not comply with the Act.  The applicant argued that the purported payment claim did not constitute a payment claim under the Act and as such, the adjudicator did not have jurisdiction to undertake the adjudication.  The court rejected this argument, holding that it was a matter for the adjudicator to decide whether the documentation complies in all respects with the requirements of the Act.

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[26.2] OPERATION OF SECTION

On its proper construction, the command in s26(2) operates in two ways.  Firstly, it specifies matters that an adjudicator “is to consider”, and secondly, and by exception, it stipulates the matters that an adjudicator is not to consider.  Where a determination of the issues before an adjudicator depended on the terms of the contract and their effect – i.e., to what obligations, properly construed, did the contract give rise – an adjudicator must necessarily form a view of these issues in the process of deciding the question of entitlement. In any such case, it would be impossible for an adjudicator to come to a view as to the quantification of a party’s contractual entitlement without understanding that entitlement: Musico and Ors v Davenport and Ors (supra).

“Paras (a) and (b) of s26(2) require the adjudicator to consider the provisions of the Act and the provisions of the construction contract…”.  If an adjudicator comes to know of submissions of a respondent that he or she thinks to be relevant to these questions (and not being submissions based on facts and circumstances of the particular case not otherwise before him or her), he or she can take them into account under paras (a) and (b), even if they cannot be considered under para (d) The Minister for Commerce (Formerly Public Works and Services) v Contrax Plumbing (NSW) Pty Ltd and Ors [2005] NSWCA 142 at [35].

In John Holland Pty Ltd v Walz Marine Services Pty Ltd & Ors [2011] QSC 39 the Supreme Court of Queensland was required to determine whether the adjudicator had erred in his interpretation of the contract and had therefore not complied with s 26(2)(b) of the Act. The relevant clause of the contract (Clause 36.2) provided for delay and disruption costs for delay caused by inclement weather. The clause, however, specified that no entitlement for delay and disruption costs would exist where the delay was concurrent with a delay caused by a Subcontractor, its employees, agents or subcontractors. Whilst the applicant submitted [at 69] “that where the claim with respect to delay after the Date for Substantial Completion has passed, the inclement weather delay is inevitably concurrent with delay caused by the Subcontractor…”, the Supreme Court held that this was not necessarily so. Accordingly, the adjudicator did not err in the construction of the contract.

 

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[26.3] SUBMISSIONS

The statutory regime requires that the claim, to be valid, must be comprehensible by the respondent. The argument is supported by reference to the whole of the statutory scheme and most particularly by reference to section 26(2)(c) which clearly suggests (as does the whole of the environment being dealt with) that there will have been relevant documentation provided by the claimant in support of its claim.  The matter may also be analysed by reference to the power of an adjudicator. An adjudicator does not have the power to consider materials supplied by a claimant in its adjudication application which go outside [ie fall outside the ambit or scope of] the materials which were provided in the payment claim:  John Holland Pty Limited v Cardno MBK (NSW) Pty Limited & Ors [2004] NSWSC 258.

The emphasis upon submissions makes it clear that the scheme really addresses the issues which have been thrown up once the payment claim has been served and the responsive payment schedule then served. The steps which follow generally concern the materials to be exchanged and most particularly furnished to the adjudicator. The adjudication application will relate to a particular payment claim and payment schedule. The central significance of the entitlement of the applicant to include submissions as part of its adjudication application is because those submissions have to be supportive of the payment claim. Those submissions cannot constitute a payment claim or part of it. The central significance of the entitlement of the respondent to include submissions as part of its adjudication response is because those submissions have to be supportive of the payment schedule:  per Einstein J in John Holland Pty Limited v Cardno MBK (NSW) Pty Limited & Ors (supra) @ para 25.

It is apparent from the definitions given by the Oxford and Macquarie dictionaries that the ordinary English meaning is a specific application of the more general meaning, to the effect of “that which is submitted for decision or consideration”.  In any event, s26(2) governs the situation. That subsection specifies the only matters that an adjudicator may take into account. Those matters include, through paragraph (c), the relevant payment claim “together with all submissions (including relevant documentation)…”. Not only do the parenthesised words show that the legislature had in mind that the word “submissions” was not to be construed narrowly, they show specifically that the submissions may include relevant documentation in support. It follows, that if a claimant chooses to include, as part of the relevant documentation supporting its payment claim, a statutory declaration whereby relevant matters are, in effect, verified, then that statutory declaration will form part of the material to be considered by the adjudicator. Equally, if a claimant includes such a statutory declaration in its adjudication application, that is part of the “submission” to be considered:  Austruc Constructions Ltd v ACA Developments Pty Ltd; ACA Developments Pty Ltd v Sarlos & Anor (supra) @ para 66.

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[26.3.1] OPERATION OF s26(2)

The Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd & Ors at [34] confirms that s26(2)(d) limits submissions of the respondent that can be considered under that paragraph to submissions duly made by the respondent in support of the payment schedule; and has the effect of excluding, from consideration under that paragraph, reasons included in the adjudication response that were not included in the payment schedule.

In GW Enterprises Pty Ltd v Xentex Industries Pty Ltd & Ors [2006] QSC 399, Justice Lyons of the Queensland Supreme Court noted that an adjudicator is only entitled, under the Act, to consider issues raised in the respondent’s payment schedule and any supporting submissions contained in the adjudication response.

Accordingly, Her Honour stated she was not willing to declare an adjudication decision void, in circumstances where the respondent sought to argue that:

(a)              the payment claim was made in excess of 12 months from when the work was last undertaken;  and

(b)              there was no construction contract between the claimant and the respondent;

despite the fact that such an argument had not been raised in the payment schedule.

In doing so, Her Honour also noted that:

(a)              in any event, she was not of the opinion that it was clearly apparent from the documentation that the payment claim was issued in excess of 12 months from the date work was last undertaken;

(b)              it appeared clear that there was simply a misdescription of the claimant in the payment claim and it was clear that all parties understood which entity was in fact making the payment claim;  and

(c)              she did not consider that a misdescription of a party should defeat the whole adjudication, particularly when such issue was not raised at the time of the adjudication.

In Veolia Water Solutions v Kruger Engineering [2007] NSWSC, the Supreme Court concluded that an adjudicator who did not consider issues raised in submissions in an adjudication response and a supporting statutory declaration was not in error in circumstances where such submissions could not be said to support issues previously raised in the payment schedule.

In doing so, Justice McDougall noted that an adjudicator is only required to consider submissions supporting issues previously raised in the payment schedule, not those which raise new issues.

However, contrast subparagraphs (a) and (b) which require an adjudicator to consider the provisions of the Act and the provisions of the contract, that entitles and requires the adjudicator to take into account any considerations (other than arising from facts and circumstances) that he or she thinks relevant to the construction of the Act, the construction of the contract and the validity of the contract terms. “If an adjudicator comes to know of submissions of a respondent that he/she thinks relevant to these considerations they may take them into account under paras (a) and (b) if they cannot be considered under (d). Similarly an adjudicator could take into account a contention of an applicant that a term of the contract is void by way of s34 when considering matters under (a) and (b), even if they cannot be mentioned under (c).”

Similarly, in RTA v John Holland [2006] NSWSC 567, the New South Wales Supreme Court concluded that where an adjudicator failed to consider a submission as to the adjudicator’s jurisdiction, which was first raised in the adjudication response and not included in the payment schedule, such failure resulted in the adjudication determination being void.

In this case, the Respondent, in its adjudication response, submitted that the adjudicator had no jurisdiction to determine the application, at least in relation to that portion of the claim involving a claim for an extension of time.  Whilst such a claim was not raised in the payment schedule, the Supreme Court held that it was incumbent upon the adjudicator to consider such a submission on the grounds that the submission involved provisions of the Act and the provisions of the Construction Contract.

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[26.4] JURISDICTIONAL ERROR

It seems clear enough that relief will be granted where the adjudicator’s determination is the result of jurisdictional error. Jurisdictional error will arise where, for example, the adjudicator’s decision:

• was given in bad faith or was procured by fraud;
• was one which the adjudicator had no power under the Act to make;
• was made without complying with the limited requirements of natural justice provided by the Act;
• did not deal with the question remitted for adjudication;
• determined a question not remitted for adjudication;
• did not take into account something which the Act required to be taken into account: See Multiplex Constructions Pty Limited v Luikens & Ors (supra) @ para 34.

The task the adjudicator was required to undertake involved calculation of the value of the construction work carried out, or undertaken to be carried out under the contract, being a calculation made in accordance with the Act. The adjudicator did not embark upon any such determination. Instead, he calculated (subject only to agreed adjustments) what would have been payable to the first defendant had the contract in its entirety been performed by completion (or, perhaps, substantial completion) of all specified work. It follows, that the adjudicator undertook a task and performed a function foreign and irrelevant to those required of him by the Act. Jurisdictional error of the kind grounding relief in the nature of certiorari was therefore shown. Jurisdictional error arises if an adjudicator is seen to have embarked on some course that is foreign or irrelevant to this statutory task. Jurisdictional error does not arise if, having embarked on the right course, an adjudicator comes to a wrong conclusion: Quasar Constructions v Demtech Pty Ltd (supra) @ para 35.

Review of an adjudicator’s decision for jurisdictional error is only available when such a determination is void, where the determination is not a determination within the meaning of the Act, because of non-satisfaction of some pre-condition which the Act makes essential for the existence of such a determination. Relief in the nature of certiorari is not available to quash a determination under the Act that is not void. Where a determination is void, relief is available by way of declaration and injunction, so there is no occasion where relief in the nature of certiorari would be available and required: Hodgson JA in Transgrid v Siemens Ltd & Anor [2004] NSWCA 395 at paragraph 29. See also, Brodyn Pty Ltd v Davenport [2004] NSWCA 394.

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[26.5] WHAT CONSTITUTES THE RECORD?

In Musico & Ors v Davenport & Ors (supra), @ paras 65-70, McDougall J concluded that in proceedings to quash an adjudicator’s determination for error of law on the face of the record, the record would include the reasons for the determination and, in addition, the adjudication application and any adjudication response since, in the absence of pleadings, those documents served to define the issues for determination. If additional written submissions of the parties were provided then such submissions would also form part of the record. If the determination referred to provisions of the contract and expressed views as to their meaning and application, then those provisions would, likewise, form part of the record.

The adjudication application, the adjudication response and further submissions may append or refer to a considerable volume of evidence both oral and in the form of documents. Evidence is not normally part of the record. While the legislature appears to have altered the law so as to include reasons for the decision as part of the record for the purposes of review it has gone no further: it has not included as part of the record all of the material before the Tribunal or decision-maker.  See generally the comments of Palmer J @ para 46 in Multiplex Constructions Pty Limited v Luikens & Ors (supra).

The Queensland Court of Appeal in Intero Hospitality Projects Pty Ltd v Empire Interior (Australia) Pty Ltd [2008] QCA 83 upheld the Supreme Court’s previous decision to dismiss an application to review an adjudicator’s decision on the grounds that, in all of the circumstances, it was inappropriate to allow such application where the difficult question raised could only be dealt with through civil litigation.

This decision can be contrasted with the Queensland Supreme Court decision in Hervey Bay (JV) Pty Ltd v Civil Mining and Construction Pty Ltd & Ors [2008] QSC 58, in which the Supreme Court held that where an adjudicator had committed an error of law in relation to the interpretation of a particular clause of a Contract, it was appropriate for the Court to exercise its discretion pursuant to the Judicial Review Act. Accordingly, the Supreme Court allowed the Applicant’s application for judicial review of the adjudication decision.

The New South Wales Supreme Court in Richard Shorten & Anor v David Hurst Constructions Pty Limited & Anor [2008] NSWSC 546 allowed an application to set aside an adjudicator’s decision as a result of a denial of natural justice.  The decision which was ultimately set aside proceeded on the basis of an incorrect understanding of a court decision by an adjudicator, which was not contended for by either party in the adjudication material.  This constituted a denial of natural justice as the adjudicator made a decision based on submissions which were not before him, without giving either party an opportunity to provide further submissions.

In Trysams Pty Limited v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399 however, the New South Wales Supreme Court dismissed an application by an unsuccessful respondent to have an adjudication decision declared void.  On reviewing the errors complained of the Supreme Court concluded that such errors were not material to the decision and as such, even if they were errors, they did not effect the adjudicator’s decision.  Accordingly the respondent was unable to satisfy the court that the errors complained of were material in any way and as such, the application was dismissed.

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[26.5.1] ESSENTIAL REQUIREMENTS OF A DETERMINATION

In Brodyn Pty Ltd v Davenport [2004] NSWCA 394 at paragraph 53, Hodgson JA laid down 5 essential requirements of an adjudicators determination:

• The existence of a construction contract between the claimant and the respondent, to which the Act applies;
• The service by the claimant on the respondent of a payment claim;
• The making of an adjudication application by the claimant to an authorised nominating authority;
• The reference of the application to an eligible adjudicator, who accepts the application;
• The determination by the adjudicator of this application, by determining the amount of the progress payment, the date on which it becomes or became due and the rate of interest payable and the issue of a determination in writing.

In Vis Constructions Pty Ltd & Anor v Cockburn & Kilfoy Cabinets (Supreme Court file no. 157 of 2006), the Queensland Supreme Court set aside an adjudication decision where the adjudicator had incorrectly determined the existence of a construction contract, in circumstances where there was no valid construction contract.

The Supreme Court noted that as there was no construction contract, the adjudicator had no statutory power to proceed with the adjudication and this resulted in jurisdictional error and non‑compliance with the essential preconditions upon which the adjudicator’s authority depends.

The Supreme Court also noted that where neither party contended for an arrangement of the kind that the adjudicator inferred, each party ought to have been given the opportunity to be heard on the matter and as such, the adjudicator did not bona fide address the requirements of section 26(2) of the Act.

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[26.5.2] AVOIDANCE OF BIAS, LACK OF BONA FIDES AND DENIAL OF NATURAL JUSTICE

In Reiby Street v Winterton [2005] NSWSC 545 an adjudication determination was made on a progress payment pursuant to the Act relating to payments due under a construction contract. A party to the adjudication requested a review of the appointment of the adjudicator on the basis that there was an apprehension of bias.

The application was successful according to the views of Master McCready who granted an estoppel. At para [22] he stated that “the rules of natural justice require that the person making the decision should not be biased”, Broydn Pty Ltd v Davenport (2004) NSACA 394. The test for the appearance of bias was laid down in Johnson v Johnson (2000) 201 CLR 488 at [11].

“Whether a fair minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the Judge is required to decide”

There must be reliance for there to be estoppel based upon representation [42]. The true answer to the question of whether there was a representation by silence lies in the earlier election of waiver.  There have been many debates about the distinction between estoppel, waiver and election [50].  Much of the debate centres on the relationship between these concepts and the doctrine of contract.  Continuing to participate in the adjudication and not immediately commencing proceedings did not have the effect of constituting a waiver of rights on the part of the plaintiff. [56]

s26 does not require the adjudicator to consider the provisions of the Act and the provisions of the contract; but so long as the adjudicator does this, or at least bona fide addresses the requirements of s26(2) as to what is to be considered, an error on these matters does not render the determination invalid. The Minister for Commerce (Formerly Public Works and Services) v Contrax Plumbing (NSW) Pty Ltd and Ors.[2005] NSWCA 142 at [49].

In making their decision, an adjudicator must also act in good faith to exercise the powers given to him by the Act. In Façade Innovation Pty Ltd v Timwin Construction Pty Ltd & Ors [2005] NSWCA 197, McDougall J referred to the equivalent section of the NSW Act and noted that an issue of contractual authorisation had been raised.  The case concerned an adjudication determination of a “trade contract”. Timwin had refused payments claimed by Façade under their contractual agreement.  The matter was referred to adjudication where the adjudicator found in favour of Façade. The adjudicator had turned his mind to the submissions for Timwin, however he did so in the context of dismissing them because of the provision.  Had he read and given consideration to the submissions for Façade, he could not reasonably have done this. [42] The adjudicator seems to have failed to consider the relevant submissions, and did not attempt in good faith to exercise the power given to him by the Act to understand what the real dispute was.  As a result, the determination of the adjudicator was declared void.

In the decision in Tolfab Engineering Pty Ltd v Tie Fabrications Pty Ltd [2005] NSWSC 326, the court was also required to consider whether an adjudicator had acted bona fide and in good faith.  The court in this case found that the adjudicator had not acted bona fide and in good faith as there had been a failure by the adjudicator to consider the submissions of the parties.  Accordingly, the court concluded that this was grounds upon which an appeal could be made against the decision of the adjudicator.  This situation should be compared with the situation where the adjudicator has properly considered the submissions of the parties, but simply failed to give proper reasons for his decision.  It is likely that in these circumstances, the court would not consider that this gave rise to grounds upon which an appeal could be made against the decision of an adjudicator. A further example of an adjudication determination which was declared void can be found in the case of Lanskey Constructions Pty Ltd v Noxequin Pty Ltd (in liquidation) [2005] NSWSC 963.  In this case, the adjudicator reached a conclusion which clearly indicated a failure to consider some, or all of the respondent’s submissions before the adjudicator.  The court concluded that this amounted to a failure by the adjudicator to make a bona fide attempt to determine the matter and a denial of natural justice to the respondent.

When considering whether an adjudication decision is void, a court cannot declare only part of an adjudication invalid.  In Lanskey Constructions Pty Ltd v Noxequin Pty Ltd (in liquidation) [2005] NSWSC 963, a failure by an adjudicator to make a bona fide attempt to determine the matter resulted in the sum of $12,435.39, of a total claim for $160,434.34 being incorrectly decided.  The court however was still required to declare the whole of the adjudication decision as void, as a court cannot declare only part of the adjudication decision void.Where an adjudicator refers to only one, of two separate statutory declarations provided by a respondent, to assert that the adjudicator could not meaningfully have assessed all parts of the payment claim, an inference cannot be drawn that the adjudicator has failed to consider the second statutory declaration and as such, does not mean that the adjudicator has denied natural justice to the respondent:  Errol Investments Pty Ltd v Taylor Projects Group Pty Ltd [2005] NSWSC 1125.

Where an adjudicator accepted the claimant’s calculation of monies owing and did not attempt to examine the merits of the issues raised in the respondent’s submissions because he was not impressed by the respondent’s previous submissions on another issue, this constituted recklessness which amounted to a failure on the part of the adjudicator to bona fide attempt to determine the matter:  Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd [2005] NSWSC 1129.

De Martin and Gasparini Pty Ltd v State Concrete Pty Ltd and Others [2006] NSWCA 31, is a further example of an adjudicator denying natural justice to the parties.  In this case the Supreme Court of New South Wales held that where an adjudicator, without notice to the parties, re-investigated matters previously agreed upon between the parties and determined the value of the amount already paid by the plaintiff to the defendant (such amount being different to the amount agreed between the parties) this constituted a failure on behalf of the adjudicator to afford natural justice to the parties.

The same result occurs if an adjudicator simply allows an applicant’s claim in full, on the grounds that no valid submissions in relation to value of the claim were made by the respondent, the adjudication decision will be null and void: Pacific General Securities Ltd & Anor v Soliman & Sons Pty Ltd & Ors [2006] NSWSC 13 at [88].   The adjudicator had held that “in the absence of any valid submission from the respondent which reputes the claim’ the applicant was entitled to the claimed amount. “ The New South Wales Supreme Court held that such a conclusion constituted a failure to bona fide exercise the power.

However, an adjudication decision will not be considered void merely because it fails to mention particular submissions or issues. Rather, before a court will declare an adjudication void, it must be clearly demonstrated there is an absence of an attempt in good faith to consider the relevant issues: Brookhollow Pty Ltd v R&R Consultants Pty Ltd & Anor [2006] NSWSC 1 at [87].

Energy Australia v Downer Construction (Australia Pty Ltd) and 2 Ors [2006] NSWSC 52 is another example of an adjudication decision in which the parties were denied natural justice.  The New South Wales Supreme Court held that where an adjudicator made an adjudication decision based on considerations which were not referred to in the payment claim, payment schedule, adjudication application or adjudication response, the adjudication decision was void on the grounds that:

(a)              it was not a bona fide exercise of power; and

(b)              there was a denial of natural justice.

It is to be noted however, that this decision was overturned on appeal by the New South Wales Court of Appeal in Downer Construction (Australia) Pty Ltd v Energy Australia & Ors [2007] NSWCA 49 which concluded that it was for the adjudicator to determine the parameters of the payment claim and the adjudication application and if he did this, even erroneously, he did what the Act required. The Court of Appeal also noted that as such, it was not for the Court, by way of judicial review to consider the questions decided by him in doing so.  The Court of Appeal further noted that to do so would be incorrectly imposing the Court’s opinion of the correct outcome as the determinant of the adjudicator’s bona fides.

Accordingly, the Court of Appeal concluded that there was no lack of bona fides of the adjudicator, nor did the adjudicator deny either party natural justice.

Shell Refining (Australia) Pty Limited v AJ Mayr Engineering Pty Limited [2006] NSWSC 94 on the other hand is an example of a situation in which the Courts upheld the adjudication decision.  The New South Wales Supreme Court held that where the respondent, in its adjudication application, alleged that the amounts claimed by the applicant were unsubstantiated, and did not attempt to attribute any value to the claims, an observation by an adjudicator that the applicant’s claims were substantiated, and that the respondent had not provided any information which would enable him to assess the claim at less than the amount claimed, did not amount to a failure to bona fide exercise the power.  The Supreme Court stated that this case was different to the decision in Pacific General Securities v Soliman & Sons Pty Ltd & Ors [2006] NSWSC 13 (“Pacific General”) for in this case, unlike in Pacific General, the adjudicator did address the merits of the applicant’s claim.

Where an adjudicator makes a bona fide attempt to determine the issues, a court will be reluctant to conclude there was a denial of natural justice.  In Wooding v Eastoe [2006] NSWSC 277 the Adjudicator was required to decide who were the parties to the contract under which the second defendant did its work. The respondent alleged that the adjudicator wrongly determined that he was the contracting party and as such the determination was void. The Court held that the adjudicator had made a bona fide attempt to deal with the issues at hand and as such, any error was nothing more than a mistake of fact and not an error which would vitiate his determination.

The Act specifically states that, where an adjudicator requests further submissions from a party, the other party must be given a right to respond.  Accordingly, where an adjudicator requested additional submissions from both parties in relation to an adjudication application and subsequently, in contravention of the Act, did not allow either party an opportunity to comment on the others additional submissions, such conduct constituted a denial of natural justice, the result being that the adjudication decision is void:  Fifty Property Investments Pty Ltd v. Barry J O’Mara & Anor [2006] NSWSC 428.

In accordance with the decision in Brodyn, the existence of a Construction Contract is a basic and essential pre-condition to the existence of a valid adjudication.  Accordingly, where an Adjudicator concluded that there was a Construction Contract in place and this, on appeal, was found to be incorrect, the decision of the Adjudicator was void as the essential pre-conditions to a valid adjudication, including the existence of a Construction Contract did not exist:  Fifty Property Investments Pty Ltd v. Barry J O’Mara Anor [2006] NSWSC 428.

In contrast, in Springs Golf Club Pty Ltd v. Profile Golf Pty Ltd [2006] NSWSC 344, the Court noted, in obiter, that the existence of a payment schedule is not one of the basic and essential pre-conditions to a valid adjudication decision, as identified in Brodyn.  Accordingly, where an adjudicator incorrectly concludes that a document constituted a payment schedule, provided such a decision was made in good faith and following a bona fide attempt by the adjudicator to exercise his/her power, such a decision did not make the adjudication decision void.

When considering the validity of an adjudication decision, the courts have also concluded that the incorrect interpretation of the Act by an adjudicator did not render the adjudication decision void.  In Reiby Street Apartments v Winterton Constructions [2006] NSWSC 375, where an adjudicator incorrectly concluded that if an adjudication response included some items that were not raised in the payment schedule, he was required to disregard the entire adjudication response, such action did not mean that the adjudicator did not act in good faith or bona fide attempt to exercise his power and as such, did not result in the adjudication decision being void.

However, where an adjudicator did not consider all of the reasons indicated in the payment schedule for rejecting a claim, not because he made a conscientious but mistaken assessment of what the payment schedule included, but rather, because he incorrectly thought the site instruction referred to had not been provided, the failure to consider the reasons indicated in the payment schedule resulted in a substantial failure by the adjudicator to afford natural justice and meant that the adjudicator did not act in good faith, rendering the adjudication decision void:  Reiby Street Apartments v. Winterton Constructions [2006] NSWSC 375.

Similarly, in John Goss Projects v Leighton Contractors & Anor [2006] NSWSC 798, the New South Wales Supreme Court noted that where both the Claimant and the Respondent, in their adjudication application and adjudication response, had based their submissions on the basis that the decision in Rothnere v Quasar [2004] NSWSC 1151 was correct and the adjudicator, subsequently, without notice to either party, based his decision on an assumption that the decision of the Court in Rothnere v Quasar [2004] NSWSC 1151 was incorrect, such conduct amounted to a denial of natural justice to the parties by the adjudicator, resulting in the adjudication decision being declared void.

Accordingly, where there has been misleading and deceptive conduct in relation to service of the payment claim itself this may be raised in response to a summary judgment application.  In Bitannia Pty Ltd & Anor v Parkline Constructions Pty Ltd [2006] NSWCA 238, the New South Wales Court of Appeal decided that:

(a)              there is not requirement that the claimant have a bona fide belief in its entitlement to the moneys claimed for a valid payment claim under the Act.  Rather, as with any other issue going to the merit of the claim, the scheme of the Legislation is to require that the assessment be made by the adjudicator;

(b)              a defence raised in relation to misleading and deceptive conduct on the part of a claimant is not a matter arising under the contract.  Section 15(4)(b)(ii) of the New South Wales Act, should not be construed so broadly as to prohibit a defence based upon conduct undertaken in the service of a payment claim for the purposes of creating a statutory right;

(c)              per Basten JA, the Act prevents the respondent to a payment claim, raising, by way of cross‑claim, a complaint about the conduct of the claimant in serving the claim.  The effect is to preclude the respondent from relying upon a complaint which might otherwise have been available in resistance to a claim, even though, if the claim were not payable, the payment may be recoverable in separate proceedings;

(d)              the respondent is injured by the abridgement of its right and, as a result, there is inconsistency between the Act and the Trade Practices Act.  Accordingly, state law will be “inoperative” to the extent of the inconsistency.

In Glen Eight v Home Building [2005] NSWSC 907, the court held that where an adjudicator had himself stated the way in which to go about discharging the statutory function, namely by considering the merits of each of the claims one by one, and did not follow his own prescription, there was a serious question to be tried concerning whether there had been a bona fide attempt by the adjudicator to exercise the power under the Act.

As was noted in Air Dynamics Control & Services Contracting Pty Ltd v Durham (Unreported BC 200506796) the onus of proof rests with the plaintiff to demonstrate to the court that their has been a denial of natural justice.  In this case the plaintiff was not able to satisfy its burden of proof and as such, the application seeking an order that the adjudication was void failed.

Even if the list of essential requirements is not to be regarded as closed, nonetheless the class of matter that, if not satisfied, will make a decision reviewable may be regarded as preconditions to the existence of a valid determination, rather than errors in the determination itself: Coordinated Construction Co v JM Hargreaves (NSW) and Ors [2005] NSWSC 77 at [45].

In Inten Constructions v Refine Electrical Services & Anor [2006] NSWSC 1282, the New South Wales Supreme Court dismissed a challenge to the validity of an adjudicator’s decision on the grounds that he failed to give the respondent a further opportunity to provide submissions in relation to the issues in question.

After reviewing the adjudication application and adjudication response in detail, the Supreme Court concluded that the issues which were ultimately considered and determined by the adjudicator, were issues which had been identified and raised by the respondent in its payment schedule and adjudication response.  Accordingly, this was not a situation where the adjudicator had made a decision on a ground for which neither party had contended.  As such, the adjudicator was not required to give the parties a further opportunity to provide submissions in relation to the adjudication.

In John Holland Pty Ltd v RTA of New South Wales & Anor [2006] NSWSC 1202, the New South Wales Supreme Court concluded that, despite the respondent’s  failure to refer to clause 3.1.3 of the contract in its payment schedule, an adjudicator who considered the relevant clause in determining the claimant’s adjudication application had acted in accordance with the requirements of the Act, which required the adjudicator to consider the terms of the construction contract.

The claimant also alleged that the adjudicator had failed to consider its submissions in relation to that aspect of the payment claim.  The Supreme Court, however, also rejected this argument noting that, the adjudicator had identified the relevance of this clause and made a decision in relation to it.  This clearly indicated that the adjudicator had considered the claimant’s submissions in this regard.

In JBK Engineering Pty Ltd v Brick & Block Company Pty Ltd & Ors [2006] NSWSC 1192, the New South Wales Supreme Court rejected challenges to the validity of three adjudication decisions.

Essentially, the respondent’s allegations were that the adjudicator had departed from the proper approach required for determination of an adjudication under the Act as the adjudicator had allowed each claim on the basis that the respondent’s reasons for withholding payment were rejected and as such, had failed to consider the merits of the claims themselves.

On reviewing the adjudication decisions, the Court noted that in each of the adjudication decisions in question, the adjudicator had stated that:

“The claimant has satisfied me that the invoices represent the amounts (costs plus the agreed percentage) to which the claimant is entitled under the terms of the contract.

I am satisfied that the progress payment to which the claimant is entitled is the whole amount of the payment claim.”

The Supreme Court held that in these circumstances, the adjudicator had not simply “rubber stamped” the claimant’s payment claim, but rather, had considered the merits of the claim and the adjudication application, in accordance with the requirements of the Act.

Further, the Queensland Supreme Court concluded that where a contract specifically prescribed a mechanism for calculating a particular claim, where the adjudicator erroneously failed to follow this mechanism, the decision in relation to that particular part of the adjudication was incorrect as a matter of law and as such, was liable to be set aside.

The Supreme Court was only able to set aside part of the adjudication decision because of the specific provisions of the Judicial Review Act.

In State of Queensland v Epoca Constructions Pty Ltd [2006] QSC 324, the Queensland Supreme Court noted that where the respondent, in its payment schedule, asserted a number of credits and sought to set‑off these amounts against the claimant’s payment claim, a conclusion by the adjudicator that such amounts could not be separated from the respondent’s general claim for damages and as such, could not be set‑off constituted an error of law.

In reaching this conclusion, the Supreme Court noted that the adjudicator failed to appreciate the contractual basis for the set‑off claim and failed to appreciate that such a claim could be separated from the general claim for damages.

Accordingly, the Supreme Court set aside the decision insofar as it applied to the respondent’s claim for “credits”.

The Supreme Court was only able to set aside part of the adjudication decision because of the specific provisions of the Judicial Review Act.

In Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32, the New South Wales Court of Appeal held that where an adjudicator failed to consider the provisions of the construction contract, the subsequent decision was void on the grounds that the adjudicator did not perform the task required by the Act as he failed to comply with section 22 of the Act.

In John Holland v Roads and Traffic Authority of New South Wales and Others [2007] NSWCA 19, the New South Wales Court of Appeal held that where an adjudication response includes submissions as to the jurisdiction of the adjudicator, which were not previously raised in a payment schedule, an adjudicator is only required to consider such submissions if he is of the opinion that they are of substantial relevance to issues arising under the Act and/or the construction contract.

A further decision in which an adjudicator’s failure to consider relevant submissions contained within the adjudication submissions is the New South Wales Supreme Court decision in Siemens v Tolco [2007] NSWSC 257.

In this case it was submitted that the adjudicator had failed to consider the Respondent’s submissions relevant to the quantum of the claim and as such, had failed to bona fide exercise his power under the Act.  The Respondent further submitted that, as such, the adjudication decision was void and of no effect.

The Supreme Court after reviewing the submissions and the decision concluded that it appeared clear that the adjudicator had overlooked the Respondent’s submissions in this regard and as such, had failed to bona fide exercise his power under the Act.

The issue of how an adjudicator should deal with claims for delay and disruption has been clarified by the Queensland Supreme Court decision in ACN 060 559 971 Pty Ltd (formerly Abel Point Marina (Whitsundays) Pty Ltd v John O’Brien & Anor [2007] QSC 91.

The Contract in question contained a clause which provided that the Principal was only required to pay delay and disruption costs for approved extensions of time.  In making his decision, the adjudicator failed to make a determination in relation to the extent of extensions of time which should have been granted, but proceeded to make an award for delay damages in any event.

In setting aside the adjudicator’s decision in relation to delay damages as a result of an error of law, the Supreme Court stated that the adjudicator did not engage in an essential step in the process of determining what extensions of time should have been granted and as such, did not assess the claims for delay and disruption in accordance with the Contract.

A further example of an adjudicator denying natural justice and failing to make a bona fide attempt to exercise his powers under the Act is contained in the NSW Supreme Court decision in Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941.

The application sought a declaration that the adjudication decision be set aside pursuant to the inherent jurisdiction of the Court.  The Supreme Court accepted that the adjudicator had failed to make a bona fide attempt to exercise his power and had failed to afford the Respondent natural justice as the adjudicator had failed to consider all relevant submissions duly made by the Respondent in its adjudication response.  Of particular relevance was the fact that the adjudicator had failed to consider a report provided by the Respondent and foreshadowed in the payment schedule which supported the allegations contained in the payment schedule.  The Supreme Court further noted that whilst not considering it, the adjudicator also did not form a conclusion that the report did not constitute a submission “duly made”.

Accordingly, the adjudication decision was declared void.

Firedam Civil Engineering v KJP Construction [2007] NSWSC 1162 is a further example of this.  In this case the New South Wales Supreme Court also declared an adjudicator’s decision void in circumstances where he had incorrectly concluded that the Respondent had not served a payment schedule and as such, did not consider the Respondent’s adjudication response.

In Hitachi Ltd v O’Donnell Griffin Pty Ltd [2008] QSC 135 the Queensland Supreme Court was required to consider the grounds (if any) upon which an adjudication decision could be set aside pursuant to the Courts inherent jurisdiction.

Relying on the test prescribed in Brodyn the Supreme Court concluded that the adjudicator had committed jurisdictional error, which had been created by Hitachi, as Hitachi, in its adjudication response made submissions which were inconsistent with its previous submissions made to the Court, both orally, and in writing, in a previous interlocutory application before the Court.

Further, Hitachi had also provided a submission to the adjudicator which the Supreme Court held had resulted in a denial of natural justice to ODG.  In doing so the Supreme Court noted that although it was unable to determine whether the correspondence influenced the adjudicator it was clear that apprehended bias did exist.

Accordingly, the Supreme Court set aside the adjudication decision.

In Plaza West Pty Ltd v Simon’s Earthworks (NSW) Pty Ltd [2008] NSWSC 753 the New South Wales Supreme Court confirmed previous decisions of that court which held that even if an adjudicator makes a decision which is incorrect as a matter of law, provided he/she has made a bona fide attempt to exercise the power, the adjudication decision is not susceptible to review.

The Queensland Supreme Court in J Hutchinson Pty Ltd v Galform Pty Ltd [2008] QSC 205 has confirmed its inherent jurisdiction to set aside adjudication decision in circumstances where they constitute an abuse of process.  In this case the Supreme Court held that the new payment claim and adjudication application was oppressive and a means by which Galform sought to evade the conduct of legal proceedings which it had agreed to.

Accordingly, the Supreme Court declared the adjudication decision void pursuant to its inherent jurisdiction.

In Walton Construction (QLD) Pty Ltd v Robert Salce & Ors [2008] QSC 235 the Queensland Supreme Court held that the adjudicator lacked jurisdiction to determine the matter as there was no ‘construction contract’.  Accordingly, the adjudication decision was declared void.  The court held that an agreement between the parties whereby Walton guaranteed payment to Salce of what he was owed by a subcontractor was an agreement which fell under s3(3)(c)(ii) of BCIPA and was therefore excluded from the operation of BCIPA.

It was significant that the contract between Salce and the subcontractor was still on foot, because this meant that the agreement between Salce and Walton was a collateral undertaking to answer for the debt or default of the subcontractor (i.e. a guarantee).

In Richard Shorten and Anor v David Hurst Constructions Pty Limited and Anor; David Hurst Constructions v Richard William Shorten and Anor [2008] NSWSC 546 the Supreme Court of New South Wales determined that a failure by the builder to properly serve a full copy of the adjudication application amounted to a denial of natural justice so as to nullify the adjudicator’s decision. [David Hurst Constructions had not provided a full copy of the adjudication application to Mr and Mrs Shorten (following a breakdown in copying procedures resulting in numerous documents missing from the application). The court held that Mr and Mrs Shorten were entitled to a full copy of the adjudication application and did not receive it, thus, a denial of natural justice had occurred.

In Skinner v Timms & Anor [2009] QSC 46 the Supreme Court of Queensland determined that an adjudication decision in favour of Timms was void as it was based on an invalid payment claim.  Schedule 2 of the Act provides that where the contract is silent the ‘reference date’ is ‘the last day of each later named month’. Timms served the disputed payment claim on 29 October 2008, however the court found that the reference date for the work claimed was 31 October 2008 (as the last day of the month) and therefore the payment claim served on 29 October 2008 was invalid. Accordingly, the adjudication decision based on the invalid payment claim was void.

The Queensland Supreme Court in Austruct Qld Pty Ltd v Independent Pub Group Pty Ltd [2009] QSC 1 has confirmed that those who engage in misleading and deceptive conduct in relation to the service of payment claims under the Act are not entitled to rely on such conduct and the strictures of the Act to obtain a benefit which may not otherwise have existed. In this case, the strict statutory time limit to respond to a payment claim was not enforceable as the applicant intentionally misled the respondent as to the existence of the payment claim.

The respondent received by courier, a box of documents from Austruct at the usual address which Austruct had previously delivered invoices and documents to. That box contained a covering letter, required trade certificates, copies of invoices and supporting documents which had previously been provided. At the same time, Austruct delivered a similar, but not identical bundle to the registered office of the respondent in Sydney. That box included a payment claim under the Act. Following delivery of those boxes a representative of Austruct notified an agent of the respondent that a copy of the documents in the box was also sent to the respondent’s office in Sydney. However, (the court concluded) the Austruct representative deliberately neglected to inform the agent of the existence of the payment claim which was included in the box sent to the Sydney Office.

The court held that it had been represented that the box delivered to the respondent’s office in Sydney was materially the same as the one received at the normal address, resulting in no immediate action taken by the respondent. The court concluded that, as a result of this misleading and deceptive conduct the applicant was precluded from enforcing the strict statutory time limits to respond to a payment claim contained in the Act.

The New South Wales Court of Appeal was reluctant to disturb an adjudicator’s findings in Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69 where an application for judgement based on non receipt of a payment schedule was refused as an adjudicator had previously concluded that the applicant was not entitled to payment of that work. The court held that the principles of res judicata and issue estoppel applied to adjudication decisions such that once an issue is determined it cannot be re-agitated. Thus, after an unfavourable adjudication and a new payment claim for the same work is issued without a payment schedule forthcoming, the applicant is not entitled to summary judgement as this would be inconsistent with determinations of the adjudication.

The decision in Dualcorp was applied in Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd trading as Novatec Construction Systems [2009] NSWSC 416, where an injunction and an application to permanently restrain adjudication proceedings (the subject of which was already determined in a previous adjudication) was granted. The court held that the second adjudication was founded on an incompetent ‘second claim’ as it ventilated issues which had already been decided. Accordingly, as this would be contrary to the objects of the Act as a quick and interim determination process, the Court concluded that it was part of its function to prevent such from occurring.

The question of whether a subsequent payment claim can incorporate part of a claim already determined by adjudication was addressed in The University of Sydney v Cadence Australia Pty Limited & Anor [2009] 635. In determining that the principle in Dualcorp extended to even part of a subsequent claim, Hammerschlag J stated that ‘even though it is not exactly the same as the earlier claim, a substantial and unseverable part of it has already been adjudicated, and the first defendant has exhausted its statutory entitlement to adjudication in respect of that part’. He further held that repetitious use of the Act to re-agitate even part of an already determined claim amounted to an abuse of process.

The New South Wales Court of Appeal in Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd & Anor [2009] NSWCA 157 held that despite an error of fact or law including an error in the construction of the Act’s provisions relating to what a payment schedule indicates (s 14(3)), such an error did not negate an essential precondition for the existence of an adjudicator’s determination. Their honours examined a long line of authority such as Brodyn v Davenport (2004) 61 NSWLR 421 in determining the ‘essential pre-conditions’ for the existence of an adjudicator’s determination and held that despite the adjudicator’s error in the construction of s 14(3) this was not sufficient to invalidate the whole of the determination.

Also relying on the authority of Brodyn v Davenport, the Queensland Supreme Court in Nebmas Pty Ltd v Sub Divide Pty Ltd [2009] QSC 92 determined that the notice requirement under section 21(2) of the Act is not an essential precondition for the validity of an adjudicator’s decision. Accordingly, an incorrect finding by the adjudicator in relation to section 21(2)(a) is not a basis upon which the adjudication decision can be set aside.

The essential pre-condition test in Brodyn v Davenport has also been applied by the Supreme Court of Victoria in Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd [2009] VSC 156. The court was critical of ‘excessive technicality’ and determined that the legislation did not require precise compliance with all of the more detailed requirements of the Act for a valid adjudication determination. Thus, so long as the essential preconditions for a valid determination are not infringed, it is open for the adjudicator to determine matters such as those disputed in the case.

In AJ Lucas Operations Pty ltd v Mac-Attack Equipment Hire Pty Ltd & Anor [2009] NTSC 48 the Northern Territory Supreme Court confirmed the application of the ‘basic and essential requirements’ test set out in Brodyn v Davenport for determining the validity of an adjudication determination. The case involved a challenge by AJ Lucas of an adjudication determination on two grounds. Firstly that the application was improperly made as the invoices attached to the application were different to the invoices served on AJ Lucas, and secondly that the claim had not been served within 90 days of the payment dispute arising in contravention of section 28 of the NT SOP Act. The application was dismissed as the court determined that the first issue was properly a matter for the adjudicator to determine. With regard to the second issue while clearly an error of law had been made by the adjudicator, this was not sufficient to invalidate his determination.

The Supreme Court of Queensland in Queensland Bulk Water Supply Authority v McDonald keen Group Pty Ltd and Anor [2009] QSC 165 dismissed an application to set aside an adjudication determination on the ground that the adjudicator did not exercise the power conferred by BCIPA in a bona fide manner and that the determination was not reasonable. The court dismissed the Authority’s argument that an adjudicator’s decision would be invalid if it is not ‘reasonable’. The court further determined that the adjudicator had acted in good faith, and that he made a bona fide attempt to understand and apply the contract. The court indicated this would not be the case if the adjudicator had failed to consider the contract at all.

In John Holland Pty Ltd v TAC Pacific Pty Ltd & Ors [2009] QSC 205 the Supreme Court of Queensland set aside an adjudication determination on the basis that natural justice had been denied. Due to the adjudicator’s reliance on legal authority which neither party referred to in their submissions and his failure to notify the parties of this reliance or to provide the parties with the opportunity to make further submissions, the court held that this amounted to a substantial denial of natural justice invalidating his determination.

The Supreme Court of Victoria in Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No 2) [2009] VSC 426 handed down an important decision on the ability of parties to an adjudication under the Building and Construction Industry Security of Payment Act 2002 (Vic) to seek judicial review of an adjudicator’s determination. The Court held, that the prerogative writ of certiorari may be invoked without limitation in relation to an adjudicator’s determination under the Act, meaning that parties to adjudications in Victoria may seek judicial review of adjudication determinations on the basis of an error on the face of the record including non-jurisdictional errors of law.

The New South Wales Supreme Court in Robson Civil Projects Pty Ltd v Walter Mining Pty Ltd [2009] NSWSC 1071 dismissed an application to set aside an adjudicator’s decision based on allegations that the adjudicator failed to undertake a bona fide attempt to perform his duties under the Act resulting in a substantial denial of natural justice. The court held that both parties to the adjudication made submissions regarding the relevant clauses of the contract and that the adjudicator rightfully considered the operation of those provisions. The court determined that it was not necessary to examine if the adjudicator’s findings were correct or not, it was sufficient that it was a view that was reasonably open for the adjudicator to take.

In David & Gai Spankie & Northern Investment Holdings Pty Limited v James Trowse Constructions Pty Limited & Ors [2010] QSC 29 the Queensland Supreme Court reaffirmed the decision in Queensland Bulk Water Supply Authority t/a Seqwater v McDonald Keen Group P/L (in liq) & Anor [2010] QCA 7 in applying a narrow approach to setting aside an adjudicator’s determinations. In the challenged adjudication determination, the adjudicator had erroneously determined the reference date, disregarded to an extent a false statutory declaration relied on in the adjudication and incorrectly interpreted key contractual provisions regarding progress payments.  Despite these manifest errors in relation to fact and law, the court refused to invalidate the adjudication determination as there was no evidence to suggest the adjudicator acted other than in good faith.

In Queensland Bulk Water Supply Authority t/a Seqwater v McDonald Keen Group P/L (in liq) & Anor [2010] QCA 7 the Queensland Court of Appeal refused to over turn a judgment based on an adjudicator’s determination on the grounds that the adjudicator did not exercise his functions bona fide. The appellant argued that the adjudicator had not acted in good faith, because rather than applying the construction contract, he had sought to produce an outcome ‘which seemed fair’ and gave prominence to a facsimile, arguably rewriting the obligations of the contract. The appellant submitted that the adjudicator failed to have proper regard to the parties’ submissions and focused on trying to circumvent the contract in order to ensure that the respondent was fairly compensated.

The decision of Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2010] QSC 95 was affirmed on appeal in Northbuild Construction P/L v Central Interior Linings P/L & Ors [2011] QCA 22. White JA (with whom McMurdo P and Chesterman JA agreed) found that the primary judge had not fallen into error in the ways contended for by the appellant. Referring to the comments of the primary judge, White JA held [at 127] that an adjudicator, in discharging their obligations under the Act, was required to “…consider all the material and, in setting out the reasons, should either explicitly or implicitly state that regard has been had to them.” Furthermore, the court [at 3], referring to the cases of Bezzina Developers Pty Ltd v Deemah Stone (Qld) Pty Ltd [2008] 2 Qd R 495 and Intero Hospitality Projects P/L v Empire Interior (Australia) P/L & Anor [2008] QCA 83 held that “the scheme established by the Payments Act… provides for the speedy, interim only determination by adjudicators of disputed claims under construction contracts. These adjudicators are not intended to be scrutinised in the same way as considered final determinations…”. Moreover, White JA stated [at 115], “it is a fundamental mistake to regard the adjudication process as akin to a civil proceeding or to an arbitration. To do so would defeat the point of the Payments Act.”

The court of appeal examined the obligation on the adjudicator to exercise his power bona fide pursuant to Brodyn v Pty Ltd t/a Time Cost and Quality v Davenport (2004) 61 NSWLR 421 concluding that on either a narrow or broad test for good faith, the adjudicator had not demonstrated a want of good faith. The court determined that it was sufficient that the adjudicator had clearly considered the relevant contractual provisions and it was not for the court to over turn interpretations which were validly made by the adjudicator on an interim basis.

In Surfabear Pty Ltd v G J Drainage and Concrete Constructions Pty Ltd [2009] QSC 308 the Supreme Court of Queensland declared void an adjudication determination on the ground that no ‘construction contract’ existed between the parties invalidating the jurisdiction of the adjudicator. The court determined that there existed a construction contract between Surfabear and the property owner, and similarly between the property owner and GJ Drainage, but no contract or arrangement existed between Surfabear and GJ Drainage despite a progress payment of GJ drainage being paid by Surfabear on one occasion. The court concluded that the fact that Surfabear on one occasion paid GJ Drainage was based on an agreement between Surfabear and the property owner which GJ Drainage was not a party to. There was no further factual support for the existence of a contract between the parties and accordingly, as there was no construction contract between Surfabear and GJ Drainage, the adjudication decision was deemed invalid.

The Supreme Court of New South Wales quashed and set aside an adjudicator’s determination in St Hilliers Contracting Pty Limited v Dualcorp Civil Pty Ltd [2010] NSWSC 1468. Firstly, the approach taken by the adjudicator in determining whether any delay had been established, according to the Supreme Court [at 37], “discloses no logical or rational reasoning process.” Secondly, in determining the date upon which the adjudicated amount became payable, the adjudicator, without hearing from the parties on the subject or giving them an opportunity to be heard, determined that the relevant clause in the contract was void. According to the Supreme Court [at 40], “the parties were undoubtedly denied natural justice by not having an opportunity to make submissions on the question.”

Similarly, in  Bauen Constructions v Westwood Interiors [2010] NSWSC 1359, the Supreme Court of New South Wales quashed an adjudication determination because the adjudicator failed to appropriately “consider” the matters required of him and failed to provide sufficient reasons pursuant to s 26. In this case, McDougall J held [at 23]:

“Although adjudicators work under significantly greater time pressures than judges, and their reasons should not be scrutinised with the attention to detail to which the reasons of trial judges and intermediate appellate courts are subjected in ultimate courts of appeal, nonetheless the reasons must indicate why it was that the adjudicator arrived at the determination given in accordance with s 22(1) [the New South Wales equivalent of s 26(1)].”

The court held that the adjudicator had not fulfilled the statutory obligations by virtue of the fact that there was a “failure to indicate anywhere… that he examined… the payment schedule” [at 25]. Further, the adjudicator preferred the assertions of one party over the assertion of the other with “no intellectual justification for the decision that was made.”

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[26.5.3] ABUSE OF PROCESS

In Filadelfia Projects Pty Limited v Entirity Business Services Pty Limited [2009] NSWSC 1468 the New South Wales Supreme Court refused an injunction which sought to prevent Entirity Business Services Pty Ltd from seeking adjudication of a payment claim. The applicant, Filadelfia Projects Pty Ltd was party to a contract with a third party who subcontracted with the respondent, Entirity. The applicant argued that it would be an abuse of process to compel it to serve documents under the act where there existed no contract between the applicant and respondent.

Examining other prominent abuse of process cases in the security of payment context, such as Urban Traders v Paul Michael [2009] NSWSC 1072 and Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd [2009] NSWSc 416, the court held that lodging adjudication documents under the act against parties who may subsequently be non-parties does not in itself amount to an abuse of process.

The New South Wales Supreme Court in Allpro Building Services v Candv Engineering Services [2009] NSWSC 1247 rejected an abuse of process claim by the applicant premised on the fact that the Respondent and a related entity were concurrently claiming for some of the same work in two separate forums, being the District Court and through adjudication. The court held that the ‘essence of the abuse of process is that it is the one person’s actions in prosecuting vexatious or multiple claims that constitute the abuse’. Accordingly, where there are two separate entities instigating proceedings there can be no abuse of process.

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[26.6] RELEVANCE OF THE JUDICIAL REVIEW ACT

The Judicial Review Act applies to decisions made by an adjudicator under the Building and Construction Industry Payments Act.  Accordingly, the grounds of appeal are much wider in Queensland and a decision is “reviewable” if it involves an error of law:   JJ McDonald and Sons Engineering Pty Ltd v Neil Gall and Ors:  Transcript No. BS7417 of 2005.

In Roadtek, Department of Main Roads v Philip Davenport & Anor [2006] QSC 047, the respondent argued that the adjudicator had made an error of law.  The Queensland Supreme Court concluded however, that simply because there was conflicting evidence in relation to whether property in the goods had passed, and the adjudicator concluded that it had, in spite of the existence of some evidence to the contrary, this did not constitute an error of law.  The Supreme Court also found that where the issue of compliance with the specifications could not be resolved because of conflicting evidence, the applicant’s argument that the adjudicator erred in law could not succeed.

Additionally, in making its decision the Queensland Supreme Court noted that just as reasons that are clearly not raised in a payment schedule should be excluded from consideration then nor, in principle, should it be permissible to raise, in judicial review proceedings, an issue of law affecting the value of the claim, which could have been raised during the process under the Act, but was not (even if the adjudicator is arguably wrong).

In Abel Point Marina (Whitsundays) Pty Ltd v Uher and Anor [2006] QSC 295, Wilson J affirmed that the decision of an adjudicator under the Building and Construction Industry Payments Act 2004 (Qld) was an administrative decision for the purposes of the Judicial Review Act 1991 (Qld), and that an adjudicator must accord parties procedural fairness.  In dismissing the application for judicial review His Honour held inter alia:

(a)              The adjudicator’s primary obligation is to make a decision on the material before him or her.  There is no obligation to seek further submissions and such an omission does not necessarily amount to a breach of natural justice.

(b)              A “no evidence” ground of review cannot be made out where an adjudicator makes a decision in relation to facts going to the merits as opposed to a decision in relation to jurisdictional facts.

(c)              The adequacy of an adjudicator’s reasons has to be taken in the context of the Act which requires adjudicators to “provide a speedy interim determination on the papers of disputes about a progress claim.”

In State of Queensland v Epoca Constructions Pty Ltd & Anor [2006] QSC 324, the Queensland Supreme Court rejected an argument that the Building and Construction Industry Payments Act, by necessary implication, excluded the availability of relief under the Judicial Review Act.

In doing so, the Supreme Court noted that as the Judicial Review Act specifically provides a mechanism whereby legislation may be excluded from its scope, if such legislation were to be excluded, one would expect it to be done so in accordance with such a mechanism.  The Building and Construction Industry Payments Act was not so excluded.

The Supreme Court also confirmed that an adjudicator’s decision was a decision of “administrative” character and as such, subject to judicial review and not a decision of “legislative” or “judicial” character.

It is important however to note the Queensland Supreme Court decision in Intero Hospitality Projects Pty Ltd v Empire Interior (Australia) Pty Ltd & Anor [2007] QSC 220 in which the supreme court noted that judicial review may only be appropriate where an adjudicator has erred in law and the court can rectify things once and for all.  Accordingly, in circumstances where the difficult questions raised by the challenge can most helpfully be dealt with through civil proceedings, the better approach is dismiss the application for judicial review.

The decision in Intero was also applied in the Queensland Supreme Court decision in Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333 although it is again to be noted that the decision does not refer to the previous divergent supreme court decisions in relation to this point.

This decision was followed in the Queensland Supreme Court decision in Altys Multi-Services Pty Ltd v Grandview Modular Building Systems [2008] QSC 26 in which the Queensland Supreme Court concluded that where an application for judicial review of an adjudication decision raises complex questions of fact, the interests of justice require that the application for review be dismissed, to enable the parties to proceed with normal curial litigation.

In Northbuild Construction P/L v Central Interior Linings P/L & Ors [2011] QCA 22 the Court said that as a result of the High Court decision in Kirk v Industrial Relations Commission of New South Wales [2010] 239 CLR 531 and that despite the explicit exclusion of the Building and Construction Industry Payments Act 2004 (Qld) from the operation of the Judicial Review Act 1991 (Qld), the exclusion only operates so far as non-jurisdictional errors are concerned. That is, after the exclusion from the Judicial Review Act is limited to review of decisions not affected by jurisdictional error.

In Northbuild Constructions P/L v Central Interior Linings P/L & Ors [2011] QCA 22 the Court of Appeal commented that, to the extent that Brodyn decided that jurisdiction to order relief in the nature of certiorari or prohibition was precluded by the terms of the Payment Act, it has now been reversed by the judgements in Chase Oyster Bar v Hamo Industries [2010] NSWCA 190.  Brodyn remains authority for its first proposition: that adjudications which do not comply with the essential statutory requirements are void and the court may, when non-compliance has been demonstrated, make declarations and/or grant injunctions to prevent a void adjudication being acted on. The second proposition reversed by Chase Oyster Bar, which in turn decided that the court has jurisdiction to grant prerogative relief with respect to adjudication affected by error on the face of the record or jurisdictional error cannot be applied in Queensland, at least without additional analysis, because of the complication, not present in New South Wales, afforded by s 18(2) and the inclusion of the Payments Act in the Schedule to the Judicial Review Act.  The conclusion which now should be accepted in Queensland is that adjudication decisions under the Payments Act are not reviewable under that JR Act does not mean that that court’s supervisory jurisdiction over adjudicators has been removed.

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[26.7] APPELLANT SUBJECT TO CLAIM FOR SECURITY FOR COSTS

In Procorp Civil Pty Ltd v Napoli Excavations and Contracting Pty Ltd & Ors (No.2) [2006] NSWCA 147, the Court held that, as the intention of the Act is that progress claims be dealt with quickly and without Court proceedings, a party commencing Court proceedings to challenge an adjudicator’s determination is to be fairly regarded as being in substance a plaintiff, rather than merely defending a claim made against it.  Accordingly, the Court of Appeal held that as such, such party was prima facIe subject to an application for security for costs.

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[27.1] NON-COMPLIANCE WITH VALUATION

In Rothnere v Quasar & Ors [2004] NSWSC 1151, McDougall J at paragraph 24 reiterated the respective approaches taken by the majority in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 and Hodgson JA in Brodyn Pty Ltd v Davenport [2004] NSWCA 394, that the equivalent NSW section is not to be regarded as a provision, non compliance with which would have the effect of undoing a purported exercise of power by an adjudicator.

In Queensland however, this decision must be contrasted with the decision of the Queensland Supreme Court in Bezzina Developers Pty Ltd ACN 079 373 470 v Deemah Stone (Qld) Pty Ltd ACN 115 129 014 & Ors [2007] QSC in which the Supreme Court quashed an adjudication decision which failed to value part of the work in accordance with a previous adjudication decision.  The Supreme Court noted that whilst the previous adjudication decision had not been provided to the adjudicator, adequate reference to its potential existence had been made in the payment schedule.  The Supreme Court ultimately concluded that in these circumstances, the subsequent adjudicator’s failure to request further submissions in relation to the earlier adjudication decision or make reference to it in the adjudication decision, indicated a failure to by the adjudicator to consider s.27 of the Act and as such, enabled the Supreme Court to exercise its jurisdiction pursuant to section 20(2)(f) of the Act and quash the adjudication decision.

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[27.2] “CONSTRUCTION WORK”

In Rothnere v Quasar & Ors [2004] NSWSC 1151, it was submitted to the Court that where [s27 Qld] refers to the valuation of construction work, it may be interpreted as, the value that the respondent to a payment claim was liable to pay.  McDougall J said that the section itself makes it clear that an adjudication determination need not necessarily include the valuation of construction work: the use of the introductory word “If”. The section only applies where a component of a determination includes a determination of the value of construction work. But there is nothing in these considerations that indicates that the phrase “construction work” when used in [s27 Qld] should be construed in any way other than the way that it is used throughout the Act.

Where however a subsequent adjudication application included a claim for works, the subject of a previous adjudication application, the subsequent adjudicator was not required to prescribe the same value to the work as the previous adjudicator in circumstances where both parties in their adjudication submissions accepted that the value of the work had changed.  As such, an application that the decision of the subsequent adjudicator be declared void for failing to follow the value prescribed by the earlier adjudicator had no merit:  Baseline Constructions Pty Ltd v. Classic Group Painting Services Pty Ltd Anor [2006] NSWSC 397.

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[27.3] PREVIOUSLY ADJUDICATED AMOUNTS
In Urban Traders v Paul Michael [2009] NSWSC 1072 the New South Wales Supreme Court prevented a claimant from re-adjudicating amounts that were already successfully claimed in a previous adjudication. However, the court found that these amounts were severable and thus could be struck out and the remainder of the claim allowed to proceed through to adjudication.

In Watpac Constructions (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168 the New South Wales Supreme Court reaffirmed the application of issue estoppel in relation to adjudication determinations concluding that the respondent was estopped from re-agitating entitlement to amounts previously adjudicated by simply attributing a different legal basis for entitlement in a subsequent adjudication. The court determined that issue estoppel precluded the respondent from seeking to claim amounts in relation to variations on one basis before the first adjudicator and on another basis before the subsequent adjudicator. The court further concluded that this also amounted to an abuse of process as the respondent should have articulated all its grounds for entitlement in the first adjudication.

The New South Wales Supreme Court in Allpro Building Services v Candv Engineering Services [2009] NSWSC 1247 rejected an estoppel claim by the applicant which contended that the adjudication should be stayed as the claim included items which had been previously adjudicated and paid. The court noted that the respondent had given full credit for the amount of the previous adjudication that had already been paid by the applicant. Accordingly, while it was confusing and cumbersome to include amounts in the payment claim which had already been satisfied, it was not asserted that any amount was owing in respect of them and thus no issue estoppel arose.

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[27.4] THE ADEQUACY OF AN ADJUDICATOR’S VALUATION

In John Holland Pty Ltd v Walz Marine Services Pty Ltd & Ors [2011] QSC 39 the Supreme Court of Queensland was required to determine the adequacy of an adjudicator’s valuation of the claims. The applicant submitted that the adjudicator had erred in not applying his mind to the task of valuation of the claims as he was required to do; however, the Supreme Court disagreed. Wilson J outlined the approach taken by the adjudicator [at 55]:

“There were three steps in… [the adjudicator’s] reasoning:

(i) Recognition that the costs were to be calculated in accordance with the matrix in Annexure D;

(ii) Observation that the costs claimed appeared to be based on the rates set out in Annexure D; and

(iii) Resultant satisfaction that the amount claimed was appropriate.

That was the correct approach.”

Her Honour goes on to state [at 56]:

“The conciseness with which the adjudicator described how he reached his conclusion that the amount claimed was appropriate is in contrast with the detailed exposition of his reasoning process in relation to other aspects of his adjudication decision. But it would be wrong to treat his conciseness as indicative of his not having done what was required of him in reaching his decision.”

Accordingly, her Honour concluded that the adjudicator had not erred in his valuation of the claims.

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[28.1] MISTAKE

It is clear that a mistake of the kind referred to in s28(1) would not vitiate a determination made by an adjudicator – the power in the section is permissive rather than mandatory. This is because the legislature recognised that mistakes could be corrected upon a final hearing: Musico and Ors v Davenport and Ors (supra) @ para 121.

Where an adjudicator fails to have regard to a matter, being simply an oversight, the Adjudicator has power, on his own initiative, or on the application of either party to correct the determination. In Procorp Civil Pty Limited v Napoli Excavations and Contracting Pty  Limited & Ors [2006] NSWSC 205, the Court held that such power remained even after a lengthy delay.

The Supreme Court of Queensland in Uniting Church in Australia Property Trust (QLD) v Davenport and Anor [2009] QSC 134 permanently restrained an adjudicator from amending his determination pursuant to section 28 of the Act which allows for the rectification of clerical mistakes. The court held that the adjudicator’s proposed alteration was not merely to correct a calculation but to apply a completely different chain of reasoning resulting in substantive differences to the original determination. Accordingly, the court held that any such exercise would be in excess of the discretionary power conferred by the Act and would constitute an act of jurisdictional error on the adjudicator’s part.

A similar correction provision in the NSW Act was considered by the New South Wales Supreme Court in Holdmark (Aust) Pty Ltd v Melhemcorp Pty Ltd [2009] NSWSC 305. The court granted an injunction to restrain the enforcement of an adjudication determination on the ground that the Adjudicator had failed to exercise the power to correct in a bona fide matter by not providing adequate reasons to an application to correct by Holdmark. As the application to correct dealt with a serious miscalculation of the payment claim amount, the court determined that it was one of the ‘basic and essential requirements’ for a valid determination as set out in Brodyn v Davenport (2004) 61 NSWLR 421. Accordingly, the court granted the injunction restraining Melhemcorp from entering or enforcing the adjudication determination.

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[28.2] FAILURE TO EXERCISE JURISDICTION / SLIP RULE

It might be thought that, in the ordinary case, a proper exercise of the discretion conferred by s28 would favour the correction of mistakes of the kind referred to therein. However, it is a matter for the adjudicator whether or not any such correction is to be made. If an adjudicator declines to make any correction – for example, because he or she thinks there is no mistake – then the error (if any) will be an error within jurisdiction. This is really another way of saying that, under s28 a party to an adjudication has the right to request the adjudicator to consider the exercise of his or her power under s28(2), not the right to have the power exercised in a particular way:  Musico and Ors v Davenport and Ors (supra) @ para 122. See also Austruc Constructions Pty Ltd v ACA Developments @ para [88] for an example of where the slip rule was used.

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[31.1] PROCEEDINGS TO SET ASIDE

In Demir Pty Ltd v Graf Plumbing Pty Ltd [2004] NSWSC 553 a question arose of how the Act interacts with the provisions of the Corporations Act 2001 (Cth) concerning setting aside of statutory demands by reason of offsetting claims. Campbell J followed Master Macready in Max Cooper & Sons (Builders) Pty Ltd v M & E Booth & Sons Pty Ltd [2003] NSWSC 929; in deciding that section 25(4) of the NSW Act only applies to proceedings actually brought to set aside a judgment debt and not where a plaintiff, in separate proceedings, seeks to set aside a statutory demand made in respect of the debt. The fact that there is a judgment debt is no reason to deny a claim the status of being an “offsetting claim” under the Corporations Act. The definition of “offsetting claim” is perfectly general, and it frequently happens that a company is a judgment debtor, but has an offsetting claim arising by reason of transactions separate to those which gave rise to the judgment debt.

In Grosvenor Constructions Pty Ltd v Musico and Ors [2004] NSWSC 344 the Court had to consider the circumstances (if any) in which the Court should grant a stay of the execution or operation of orders or judgments arising from the filing of an adjudication certificate, in circumstances where any moneys paid would in practice be irrecoverable because of the claimant’s insolvency or liquidation. The issue for determination was, in what circumstances (if any) should the Court grant a stay of a judgment following from an adjudication determination, where the claimant is insolvent and would be unable to repay the amount paid, if on the final hearing, the claimant were to fail and the Court were to order restitution upon finding that the Adjudicator had made an error in its determination. Einstein J found that a failure to order the stay would in practice convert an interim arrangement into a final order.

If a person obtains a judgment under the Act and the judgment debtor does not pay it voluntarily, then the judgment creditor can use the range of remedies open to it. It is not possible, however, for the terms of a Commonwealth Act (the Corporations Act 2001 (Cth)) to be construed, or limited, by reference to the intention implicit in a State Act. The provisions of Division 3 of Part 5.4 of the Corporations Act 2001 (Cth) set out a regime whereby a statutory demand is set aside whenever there is an offsetting claim as defined: Demir Pty Ltd v Graf Plumbing Pty Ltd [2004] NSWSC 553.

In Greenaways Australia Pty Ltd v CBC Management Pty Ltd [2004] NSWSC 1186 Barrett J said that the constraints of s[31 Qld] of the Act apply only in proceedings in which it is sought to have a judgment resulting from filing of an adjudication certificate under the Act set aside. It may be ignored in the context of that case as there is no suggestion that pursuit of the offsetting claim that the plaintiff considers itself to have involves any attempt to have the District Court judgment set aside.  The Act deals with proceedings “in relation to any matter arising under a construction contract”.

In Co-ordinated Construction Co Pty Ltd v J M Hargreaves Pty Ltd [2004] NSWSC 1206 Palmer J said that the Act is designed to ensure prompt and timely payments under building contracts. It requires the parties in dispute to act on a very tight timetable. To bring an application of this character at the very last moment before the permitted time for filing of an adjudication certificate deprives the Court and the other party of any reasonable opportunity to consider the questions in issue with any degree of care and attention. In effect, it puts the Court in an impossible position: it requires the Court to act under the suggestion, almost under a threat, that unless the Court grants the injunction irretrievable consequences will follow immediately.

An injunction granted under s31(1) of the Act is not the only chance which a party has to prevent enforcement of an adjudication determination which is said to be void for non-compliance with an essential requirement of the Act.  A party may apply to the court in which a judgment has already been entered pursuant to s31(1) to have judgment set aside on the ground that the adjudication founding it was not in law an adjudication at all: Brodyn Pty Ltd v Davenport.

If an adjudicator erroneously finds a fact essential to jurisdiction and an adjudication certificate issues accordingly, it is always open to a party adversely affected, to seek to set aside any judgment sought to be entered under s31(1) of the Act on the ground that the adjudication was, in truth, a nullity because an essential ingredient of jurisdiction was absent: Lifestyle Retirement Projects No 2 Pty Ltd v Parisi Homes Pty Ltd & Anor [2005] NSWSC 411 at [4].

Phoenix Project Development Pty Ltd v On Hing Pty Ltd [2006] QDC 075 makes it clear that parties can’t simply seek to re-litigate the proceeding in such an application.  On Hing applied to the court for an order setting aside the judgement obtained against it by Phoenix Project, following an adjudication decision.  In rejecting the application the court noted that the challenge relied on claims and evidence which had already been comprehensively considered and explained in the adjudicator’s reasons and that, in these circumstances, the court was not minded to set aside the judgement.

An argument that an adjudication was not a determination according to the Act would not be a challenge to an adjudicator’s determination.  According to the wording of s31(4), there is an assumption that there is a determination that can be challenged. [37] Alan Conolly and Co v Commercial Indemnity [2005] NSWSC 339.

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[31.1.1] FILING OF ADJUDICATION CERTIFICATE AS JUDGMENT DEBT

Statutory adjudication would not frustrate the Court’s task.  The Act contemplates that a court of competent jurisdiction will undertake the task of final adjudication on the merits as determined in those proceedings and will make any necessary adjustments to account for interim payments under the Act and any judgment entered under s31.  Statutory proceedings could however frustrate if carried out close to a trial: Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49 at [27].

In Phoenix International Group Pty Ltd v Resources Combined No 2 Pty Ltd & Ors [2009] VSCA 309 the Supreme Court of Victoria examined now repealed sections of the Victorian security of payment act dealing with recovering payment pursuant to an adjudication determination. The applicant appealed to the court of appeal after the court at first instance rejected its application for judgment based on an adjudication determination as it held that the respondents ‘had demonstrated an arguable case that the determinations of the adjudicator…are null and void’. The court of appeal concurred with the initial ruling stating that the security of payment legislation preserves ‘the ordinary processes for obtaining and resisting a judgment’. It is to be noted that the application of this case is very limited as it deals with sections which are now repealed, mainly s.25 and s.27 of the Victorian Building and Construction Industry Security of Payments Act 2002.

[31.2] INTERIM PAYMENTS

In Demir Pty Ltd v Graf Plumbing (supra) @ para 27 the Court referred to Parist Holdings Pty Ltd v WT Partnership Australia Pty Ltd; Paynter Dixon Construction Pty Ltd v JF & CG Tilston Pty Ltd and Brodyn Pty Ltd t/as Time Cost and Quality v Davenport as authority that a fundamental feature of the Act is to be found in its provision for interim payments only. This is also found in the second reading speech – an order to pay a sum following adjudication is not a final determination of the parties’ rights.

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[31.3] PROHIBITION OF COUNTER CLAIM

Section 31(4) must only apply to the proceedings actually brought to set aside a judgment debt and not where the plaintiff, in separate proceedings, seeks to set aside a statutory demand made in respect of the debt. In such proceedings the plaintiff is simply relying upon the rights that he has under a construction contract to raise an offsetting claim. The raising of an offsetting claim, unlike the raising of a genuine dispute in respect of a debt, does not in any way challenge the existence of the judgment debt and in fact concedes it. It is to be remembered that the scheme in respect of statutory demands comprehends offsetting claims of all descriptions and not only ones in some way connected to the claim in the demand.  Max Cooper & Sons (Builders) Pty Ltd v M & E Booth & Sons Pty Ltd (supra) @ para 26.

The scheme of the Act was to ensure that contractors obtained expeditious payment of progress claims. If there was a dispute as to the amount, a fast adjudication system was provided. The adjudicator’s decision had to be obeyed and judgment could be entered for the adjudicated amount without the opportunity of challenge by way of defence or cross claim. The structure is an interim regime only. The plaintiff is not debarred from claiming any relief to which it is entitled in other proceedings. Integral to the protection of the interim regime is s31 of the Act. If the plaintiff sought to set aside a judgment constituted by the filing of the adjudication certificate, it could not challenge the adjudicator’s determination. The only utility of an order in the nature of certiorari is to ground an application to set aside the judgment, but in such proceedings the plaintiff is debarred from challenging the adjudicator’s determination: Brodyn Pty Ltd T/as Time and Cost Quality v Philip Davenport & Ors [2004] NSWSC 254 @ para 19.

In Musico and Ors v Davenport and Ors (supra) McDougall J said that an adjudicator who is appointed under the Act has the power to make a determination that is binding on the parties to the adjudication. The ultimate enforceability of that determination follows from the provisions of [ss30 and 31] of the Act whereby, if the adjudicated amount is not paid in accordance with [s29], the claimant may obtain an adjudication certificate and file it with the court “as a judgment for a debt” which is “enforceable accordingly”. Certainly, the adjudication is not final, in the sense that, if it later be found that the adjudicated amount was excessive, restitution may be ordered, and, in any event, the adjudicated amount must be taken into account in any proceedings that finally determine the balance due between the parties to the adjudication. However, subject to those provisions, the determination of the adjudicator is binding upon the parties. An adjudication certificate has effect as a judgment when it is filed in a court of competent jurisdiction. That judgment may be set aside in some circumstances but it cannot be set aside by reason of any cross-claim or matter of defence, or any challenge [to] the adjudicator’s determination. It is clear that Parliament has sought to limit challenges to the decisions of adjudicators.

The object of an adjudicator’s determination under the Act is to give effect to the parties’ rights and obligations under the construction contract but, supposedly, only on an interim basis. Nevertheless, the determination, once filed as a judgment, is capable of producing all of the consequences of a final judgment, for good or ill. A respondent may be served with a statutory demand under the Corporations Act founded on the judgment, yet the respondent will have been deprived by s31(4)(a)(i) of the Act of its right under the common law to extinguish or reduce the claimed judgment debt by establishing any cross claim which it might have.  The respondent may be wound up if it does not comply with the statutory demand although it might have been able to demonstrate in litigation conducted in the normal way that, in fact, it was not indebted to the claimant under the construction contract at all: Multiplex Constructions Pty Ltd v Luikens (supra) @ para 20.

Where however, a party seeks to attack an adjudicator’s determination, an interlocutory injunction may be awarded restraining the appointing authority from issuing a certificate in relation to that determination, and restraining the other party subject to the adjudication from filing in the court any certificate which is issued.  Such an injunction will only be granted if the other party can be put back into the same situation as it would have been if the challenge had not been brought.  For example, a fully secured undertaking as to damages may be required:  Australian Remediation Services and Earth Tech Engineering [2005] NSWSC 715.

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[31.4] STAY APPLICATION

In Herscho v. Expile Pty. Limited [2004] NSWCA 468, Hodgson JA in dealing with a stay application said there is merit in what was said by Justice Einstein in Grosvenor Constructions NSW Pty Limited v Musico [2004] NSWSC 344 at para [31] to [32] to the effect that, having regard to the policy of the Act, there is sound reason for making stays less readily available in such cases, and perhaps looking for more than “a real risk of prejudice” if a stay is not granted.

The considerations associated with the policy of the Act do not justify a stay by reason of the existence of a reasonable appeal: Timwin Construction Pty Ltd v Façade Innovation Pty Ltd [2005] NSWSC 548 at [15].

In contrast, in Taylor Projects Group Pty Ltd v Brick Department Pty Ltd and Ors [2005] NSWSC 571, the court stated that where a claimant is clearly insolvent and has obtained an adjudication certificate, it is appropriate to order a stay of the execution of the judgment debt, so long as it can be shown that there is a high risk to the respondent.

The New South Wales Court of Appeal in J&Q Investments Pty Ltd v ZS Constructions (NSW) Pty Ltd [2008] NSWCA 203 has again confirmed the courts unwillingness to order a stay of an adjudication decision pending any appeal, noting that this is entirely inconsistent with the operation of the Act.

In R J Neller Building P/L v Ainsworth [2008] QCA 397 the Supreme Court of Queensland (Court of Appeal) dismissed an application to stay enforcement warrants obtained as a result of an adjudication award. Ainsworth applied to the Supreme Court for a stay of the execution warrant pending the determination of Ainsworth’s action for damages for defective work in the District Court.  Ainsworth argued that there was a risk that his action may be rendered nugatory by the possible inability of Neller to meet a judgment in its favour.

The court determined that one of the primary purposes of BCIPA is to ensure the cash flow of builders, and through adjudication, provide a speedy and effective means of achieving this. Keane JA noted, ‘The BCIP Act proceeds on the assumption that the interruption of a builder’s cash flow may cause the financial failure of the builder before the rights and wrongs of claim and counterclaim between builder and owner can be finally determined by the courts.’ Therefore, the purpose of the Act was to preserve the cash flow to the builder, notwithstanding the risk that the builder may need to refund the cash at a time when it may not be in a position to do so. This is a risk that the Act has assigned to the owner. Accordingly the application to stay execution was dismissed.

In Vadasz v Bloomer constructions (QLD) Pty Ltd [2009] QSC 261 an application for a stay and retention of money paid into court pursuant to an adjudication determination was refused despite a cross-claim and the possible inability of the plaintiff to meet the cross-claim. The plaintiff builder Vadasz owed 3 subcontractors substantial sums and Bloomer argued that if it was successful in its civil action Vadasz would be unable to pay. The court held that despite the troubled financial position of the plaintiff it was not insolvent and the amount of the adjudication decision paid into court by Bloomer should be paid out to Vadasz.

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[31.4.2] PAY INTO COURT

In Digital City v QX Australia [2004] NSWSC 933, the plaintiff was not required to pay into court the claimed amount, as:

• There had been no adjudicated determination (cf: Abacus Funds Management Ltd v Davenport [2003] NSWSC 935); and
• The evidence did not raise concern about the plaintiff’s ability to pay an adjudicated amount.

Where parties have entered into an enforceable agreement that monies paid into court shall be paid to the opposing party in the event that they are successful, courts will recognise the enforceability of that agreement.  The only exception is if it can be shown that payment of that money would cause the payer to suffer “irreparable prejudice”.

For such “irreparable prejudice” to be demonstrated, it will be necessary to show there is either a certainty, or a higher risk, that the money will not be repaid at a later point.  In Taylor Projects Group Pty Ltd v Brick Dept Pty Ltd and Ors [2005] NSWSC 571, the court stated that mere speculation as to the solvency of the party to whom payment was to be made was insufficient to demonstrate such a high risk.

The requirement for the payment of monies into court contained in section 31(4)(b) was confirmed in the decision of Cooper v Veghelyi and Ors [2005] NSWSC 602 where, in interpreting the applicable New South Wales legislation, the court confirmed that the Master of the Consumer Trade and Tenancy Tribunal had not erred in requiring the respondent to pay into court the unpaid portion of the adjudicated amount, pending the final decision in those proceedings.

In Jem Developments Pty Ltd & Anor v Hansen Yuncken Pty Ltd & Anor [2006] NSWSC 1087 the issues before the Court raised the question of whether or not a respondent to an application under the Building Construction Industry Security of Payment Act 1999 (NSW) against whom a judgement debt following a determination has been entered, may albeit eschewing making an application to have the judgement set aside, seek any and if so what form of declaratory and associated relief challenging the validity of the determination.

Einstein J rejected the proposition that the words to be found in 25(4): “commences proceedings to have the judgment set aside” are appropriate to be read as encompassing any proceedings to have the substantial effect of challenging, undermining or limiting the enforcement of a judgment.  Accordingly, the respondent was not required to pay the unpaid portion of the judgment sum into court.

In Hansen Yuncken Pty Ltd v Ian James Ericson trading as Flea’s Concreting & Anor (No 2) [2010] QSC 457, the first respondent was successful at adjudication. Subsequently, the applicant was successful in obtaining an injunction against the enforcement of the adjudication decision upon the provision of bank guarantees to secure the amount the subject of the determination. The first respondent then sought to have the applicant pay into court, pursuant to s 31(4)(b), further security for the interest that would accrue on an adjudicated amount. The Supreme Court applied the balance of convenience test in ordering the applicant to provide a bank guarantee for the interest. While the court acknowledged the delay in bringing the matter to trial on the part of the first respondent, it was held that that delay could not have been anticipated at that stage and, as such, “it is apt that the security provided by the applicant be increased” [at 8]. Furthermore, the strong financial position of the applicant meant that there was no “significant detriment to or difficulty for the applicant in providing that additional security” [at 8].

 

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[31.5] ENFORCEMENT

In MC Projects Pty Ltd v Nigel Farah Trading as The Tiling Crew v Graydon Kline and Kilne Industries International Pty Ltd [2009] QDC 288 an enforcement warrant  authorising redirection of debt from a third person was set aside as it was held there was no debt owing. The subcontractor MC projects was the enforcement creditor pursuant to an adjudication determination against the contractor Nigel Farah. Due to the apparent inability of Farah to pay the debt, MC projects obtained an enforcement warrant for the redirection of specified debts against a third person, Kline and Kilne Industries who was the builder developer. The court set aside the redirection holding that as the developer owed no debt to Farah, there was no debt that could be redirect to MC Projects in satisfaction of the judgement debt.

The Supreme Court of Queensland in All Type Developments Pty Ltd v Hickey [2009] QSC 224 set aside a statutory demand based on the unpaid balance from an adjudication determination. The court noted that while All Type Developments had failed to participate in the adjudication process there was sufficient evidence to establish a genuine offsetting claim. Accordingly, the prohibition to raising a counter-claim or any defence in relation to matters arising under the construction contract contained under section 31(4)(a) does not bar the usual curial processes available, including an offsetting claim pursuant to the Corporations Act.

In Reed Construction (Q) P/L v Dellsun P/L [2009] QSC 263 the Queensland Supreme Court set aside a statutory demand based on an adjudication determination due to a genuine dispute or off-setting claim of the debt. While the court recognised that adjudication gives rise to res judicata and issue estoppel, section 100 of the Act ‘operates to allow a contractor who has been the subject of an adverse adjudication to bring an action, on the building contract, against the builder on matters which include matters the subject of the adjudication’. Thus, the court held that Act did not prevent an offsetting claim in an application under the Corporations Act in circumstances where it is specifically allowed to do so in an action contemplated by the provision of s 100. Satisfied that there was a genuine dispute as to part of the claim and a valid offsetting claim for the balance, the court set aside the statutory demand.

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[32.1] WITHDRAW APPLICATION

Where a determination is not made within the relevant time limit, the only relief that a claimant seems to have under the Act is that for which s32 applies, namely, to withdraw the application and make a new application. However, by s32(3) that course may only be taken within five business days after the claimant becomes entitled to withdraw the previous adjudication application. It would be, to put it mildly, anomalous if the effect of non-compliance with the time period allowed were to render any subsequent adjudication a nullity, but if because of non-compliance of s32(3) the claimants were unable to seek adjudication of the dispute. That would not seem an outcome consistent with the evident objects of the legislation and, therefore, something to be avoided unless no other view is available.  Under section 32(2) the claimant “may withdraw the application“. If the effect of non-compliance with the s25(3) time limit were to render it no longer possible for the adjudicator to proceed to determination, or to render any purported determination a nullity then it must be the case that, effectively, the adjudicator becomes functus officio upon the expiry of the relevant time limit. If that were the case then there would be nothing to withdraw. The application would come to an end as a consequence of the presumed operation of s25(3): MPM Constructions v Trepcha Constructions [2004] NSWSC 103.

 

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[32.2] FAILS TO DETERMINE

An adjudicator may fail to determine an adjudication application for the purposes of s32 for a number of reasons. The adjudicator may become incapable of making the determination within the time required or may, for some reason, refuse to do so, or become disqualified from doing so. An adjudicator may also fail to determine an adjudication within time for the purposes of the subsection if the determination is purportedly delivered within time but is not given according to law. For example, where the adjudicator has given a determination within time but it has been procured by fraud, it could hardly be said that the adjudicator has performed the task which the Act requires of him or her within the time stipulated. The same may be said of a case in which the adjudicator delivers a determination within the time stipulated but the determination has been given without jurisdiction. In such cases, it may be said that the determination is of no effect: it is as if the adjudicator had made no decision at all: Multiplex Constructions Pty Limited v Luikens & Ors (supra) @ para 102.

In John Holland Pty Ltd v Made Contracting Pty Ltd [2008] NSWSC 374 the New South Wales Supreme Court stated that an adjudication application could only be withdrawn in those stated circumstances and that, any purported withdrawal in any other circumstance was invalid.  Consequently where a Claimant had incorrectly withdrawn the application initially, but subsequently correctly withdrew the adjudication application, the claimant was at liberty to make a new adjudication application, following the valid withdrawal, provided they were still within time to do so.

In Cardinal Project Services v Hanave [2010] NSWSC 1367 the New South Wales Court of Appeal engaged in an exercise of statutory construction regarding s 26 (the New South Wales equivalent of s 32); specifically, the construction of the words “fails to determine the application within the time allowed by section 21(3)” [at 19]. In this case, an adjudication determination had been declared void by the Supreme Court. The application was subsequently withdrawn by Cardinal and a second application lodged pursuant to s 26. The question before the court was whether it was open to Cardinal to make the second application.

McDougall J held that the second application was not allowable for the following reasons:

(a)                Firstly, in agreeing with the view of Nicholas J in John Holland Pty Ltd v Made Contracting Pty Ltd [2008] NSWSC 374, McDougall J held that the expression “fails to determine”… means, in effect, “does not determine” [at 24]. As such, “A void determination is no determination at all” [at 22]. That is, “the determination has no legal existence and no legal effect…” [at 23]. “… It follows… that the adjudicator did not “determine the application” for the purposes of s 26(1)(b) of the Act” [at 24].

(b) Secondly, as to whether Cardinal could make a new application pursuant to s 26, this question turned upon an examination of the time limit set out in s 26(3). McDougall J held that “it is the accrual of the entitlement to withdraw [the previous application] that starts time running for the purposes of s 26(3)” [at 31]. However, as McDougall J acknowledged [at 32], the problem with this conclusion is that “a declaration that a determination is void does not give rise to any entitlement under s 26(3).” That is, “a declaration that a determination is void does not avoid the determination… it declares a state of affairs which in law exist already. As a result, the time permitted by s 26(3) to make a fresh application runs from this relevant time (i.e. the time prior to declaration) and, consequently, Cardinal was out of time. Whilst McDougall J acknowledged [at 42] “that there is an element of absurdity in giving the right to withdraw an application, but not giving a right… concomitant with the right to withdraw: to make a fresh application…, [nonetheless], the language of the statute compels no other conclusion.”

Accordingly, the second application was a nullity and the second adjudicator was held to have lacked the jurisdiction to hear and determine the second payment claim. The court considered that this decision did not lead to inconvenient consequences because Cardinal retained the right to serve a fresh payment claim including amounts subject to a previous claim pursuant to s 13(6). Further, if the s 13(4) time limit had expired, Cardinal could still pursue other legal rights under the construction contract.

 

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[32.3] ABILITY TO MAKE A SUBSEQUENT PAYMENT CLAIM FOR AN AMOUNT SUBJECT TO BOID ADJUDICATION DETERMINATION

In Spankie & Ors v James Trowse Constructions Pty Limited [2010] QCA 355, the Court of Appeal was required to decide, inter alia, whether s 32 excluded the respondent’s right to make a subsequent payment claim for an amount subject to a void adjudication determination. Here, after an adjudication determination between the parties had been declared void, the respondent served a second payment claim upon the appellant claiming payment of an unpaid amount that was part of the payment claimed in the first payment claim. The appellant contended that the second payment claim was in contravention of s 17(5) and that the respondent’s only remedy was to withdraw the adjudication application and make a fresh application pursuant to s 32. As the respondent had not done so within the specified time, the appellant submitted that the respondent had no avenue of recourse. Fraser JA (with whom Holmes and Chesterman JA concurred) disagreed [at 29]:

“In relation to s 32 of BCIPA, the decisions cited for the appellant support the view that the respondent was entitled to withdraw the adjudication application for payment claim 14 and make a new adjudication application if and only if the respondent did so within five business days after the declaration by McMurdo J that the adjudication decision was void. Assuming that is so, it does not suggest error in the primary judge’s conclusion that s 32 did not exclude the respondent’s right to make a subsequent payment claim for an amount the subject of the void adjudication determination. As the primary judge held, s 32 does no more than exhaustively define the rights of the respondent in respect of a new adjudication application based upon the earlier payment claim. It does not conflict with the provisions which permit the making of a subsequent payment claim in relation to a difference reference date. In my respectful opinion the primary judge was correct in holding that there was no inconsistency between the remedy conferred by s 32 and the entitlement created by s 17(1) as it was construed by his Honour.”

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Division 3 – Claimant’s right to suspend construction work

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[33.1] ALLOWABLE LENGTH OF SUSPENSION

In Beckhaus v Brewarrina No 2 [2004] NSWSC 1160, Master Macready said at paragraph 74 that the ordinary and natural meaning of the expressions ‘to pay’ and ‘receives payment’ in the present context is the act of a debtor transferring by way of satisfaction whatever is owed by him or her to a creditor.  An analysis of both the general and specific purposes of the Act permits the court to identify an alternative construction to the ordinary meaning of ‘pay’ and ‘payment’. That is that a claimant will not have ‘received payment’ pursuant to [s33(2) Qld], and that a respondent will still have failed ‘to pay’ pursuant to [s19(1)(b) Qld], in circumstances where the claimant is unable to obtain the benefit of that payment due to conditions, such as the provision of a secured bank guarantee, placed on its receipt.

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[33.1] COST OF SUSPENSION

The Supreme Court of New South Wales in Parkview Construction Pty Ltd v Sydney Civil Excavations Pty Ltd & anor [2009] NSWC 61 considered the scope of s 27(2a) of the New South Wales Security of Payments Act, recognising that ‘loss of income’ resulting from a suspension of the construction works can be validly included in an adjudicator’s award. The court concluded that while damages for breach of contract are generally not recoverable within the scope of the Act, loss and expense incurred in suspending construction works may be included in a payment claim as it is expressly authorised in s 13(3)(a). Thus, the adjudication determination awarding a percentage margin for ‘loss of income’ resulting from the purported termination of its contract was held to be valid.

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Division 4 – General

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[35.1] COSTS OF ADJUDICATION

In Queensland Fish Board v Bunney [1979] Qd R 301 Connolly J with whom the other members of the court agreed at p.303 noted that costs were entirely a creation of statute, and that there were older cases suggesting that a power to award costs must be conferred in express terms, although “the better view would seem to be that the power can be conferred expressly or by necessary implication … having regard to this principle, however, the power must at least clearly appear.”

Where there is no jurisdiction under the Act to make an order that one party pay the legal costs incurred by another party in connection with the adjudication, then an adjudicator has no such power: Woodrange Pty Ltd v Le Grande Broadwater Body Corporate [2004] QDC 215.

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